Further to our March 25 post, on April 6, 2010, ALJ Robert K. Rogers, Jr. issued the public version of the Initial Determination on Complainant’s Motion for Temporary Relief (“ID”) (dated March 24, 2010) in Certain Silicon Microphone Packages and Products Containing the Same (Inv. No. 337-TA-695).

By way of background, the Complainant in this investigation is Knowles Electronics LLC (“Knowles”), and the Respondent is Analog Devices, Inc. (“ADI”).  On November 12, 2009, Knowles filed a complaint requesting that the ITC commence an investigation pursuant to Section 337 concerning certain ADI silicon microphone packages and products containing the same that allegedly infringe U.S. Patent No. 6,781,231 (the ‘231 patent) and U.S. Patent No. 7,242,089 (the ‘089 patent).  On the same day, Knowles also filed a motion for temporary relief seeking a temporary exclusion order and a temporary cease and desist order against ADI.  See our November 17, 2009 post for more details.  The investigation was formally instituted on December 17, 2009, and an evidentiary hearing regarding Knowles’s motion for temporary relief was held from February 17-19, 2010.

The ‘231 patent is entitled “Microelectromechanical System Package With Environmental and Interface Shield” and the ‘089 patent is entitled “Miniature Silicon Condenser Microphone.”  The ‘231 and ‘089 patents were asserted against MEMS Technology Berhad (“MemsTech”) in Inv. No. 337-TA-629, where ALJ Rogers found a violation of Section 337 that was affirmed with some modifications by the Commission.  See our February 19, 2009, June 15, 2009, and August 21, 2009 posts for more details.

In the 695 investigation, ALJ Rogers issued the ID on Knowles’s motion for temporary relief on March 24, 2010, finding that Knowles was not entitled to temporary relief.  According to the ID, ALJ Rogers held that Knowles had failed to carry its burden under the four-factor test used for determining entitlement to temporary relief at the ITC:  (1) the likelihood of the complainant’s success on the merits; (2) irreparable harm if the temporary relief is not granted; (3) the balance of hardships between the parties; and (4) the public interest.

According to the ID, ALJ Rogers found that Knowles had failed to demonstrate a likelihood of success on the merits because ADI had raised substantial questions of invalidity as to all of the asserted claims of the ‘231 and ‘089 patents except claim 15 of the ‘089 patent, and as to that claim, Knowles had failed to show a likelihood of success on the issue of infringement by ADI’s accused products.  Additionally, ALJ Rogers found that Knowles had not demonstrated that it would suffer irreparable harm if the requested temporary relief were not granted.  ALJ Rogers did find that the balance of hardships weighed in favor of granting temporary relief and that the public interest did not preclude temporary relief, but that these factors could not overcome Knowles’s failure to demonstrate a likelihood of success on the merits or irreparable harm.

Claim Construction

In order to perform his infringement and invalidity analyses for purposes of determining Knowles’s likelihood of success on the merits, ALJ Rogers construed several critical terms in the claims of the ‘231 and ‘089 patents.

The construction of the claim term “package” in claim 1 of the ‘231 patent was heavily disputed by the parties.  Both parties agreed that a “package” is a product that includes (1) protection from the environment, (2) a first-level connection between a device located inside the package and the package itself, and (3) a second-level connection between the package and another circuit outside the package.  However, Knowles argued that limitation (3) should be further limited to a connection between the package and a printed circuit board.  Knowles relied on the testimony of its expert witness, Dr. Gilleo, to support its proposed construction.  However, ALJ Rogers found that Dr. Gilleo’s opinion on the issue lacked credibility, in part because his narrow proposed construction for “package” was inconsistent with the broader construction for the same term that he had proposed in the 629 investigation.  Accordingly, ALJ Rogers dismissed Dr. Gilleo’s opinion and agreed with ADI that the claim term “package” did not require a connection specifically to a printed circuit board.

Another disputed claim term was “acoustic port” in claim 1 of the ‘231 patent.  ADI argued that an “acoustic port” must allow acoustic energy to enter the chamber of the package.  However, ALJ Rogers found that allowing acoustic energy to enter the chamber was not required in all cases, and was only described in one section of the ‘231 specification.  Accordingly, he construed the term to mean “a port that allows the passage of an acoustic signal.”

In the ‘089 patent, the claim term “surface mountable package” was at issue.  The “package” part of the term was construed as described above for the ‘231 patent’s term – it was found not to require a connection specifically to a printed circuit board.  As to “surface mountable,” Knowles and Dr. Gilleo again argued that the “surface mountable package” had to be compatible with “pick and place robots” commonly used to install packages onto printed circuit boards.  ALJ Rogers again found Dr. Gilleo’s credibility lacking and construed “surface mountable” only to require that the package be “capable of being physically directly bonded to a separate substrate.”

The claim term “volume” in the ‘089 patent was also disputed.  ADI argued that the volume must be “closed.”  ALJ Rogers rejected this proposed limitation on the grounds that is was inconsistent with certain embodiments disclosed in the specification and with the doctrine of claim differentiation.  Accordingly, he construed the term as “a space defined by the transducer and one of the first member or the second member.”

Invalidity

With respect to invalidity, ADI focused heavily on the fact that the ‘231 and ‘089 patents are currently involved in inter partes reexamination proceedings at the U.S. Patent and Trademark Office (“PTO”).  ADI argued that since in granting the requests for reexamination the PTO had necessarily already found a “substantial new question of patentability” as to the ‘231 and ‘089 patents, Knowles could not possibly show a likelihood of success on the merits on the invalidity issue.  However, ALJ Rogers did not accept this argument and cited Federal Circuit precedent that distinguished the “substantial new question of patentability” standard that the PTO uses in determining whether to grant a request for reexamination from the “substantial question of invalidity” standard that is used by district courts to determine whether there is a likelihood of success on the merits on invalidity at the preliminary injunction stage.  Thus, ALJ Rogers decided to analyze ADI’s invalidity contentions for himself.

ADI asserted that claim 1 of the ‘231 patent is anticipated by U.S. Patent No. 6,324,907 to Halteren (“Halteren”).  Halteren discloses what is referred to as a “flexible substrate transducer assembly.”  Knowles’s only basis for distinguishing Halteren from claim 1 of the ‘231 patent was an argument that Halteren does not disclose a “package” because its second-level electrical connection comes in the form of four electrical conducting elements, rather than in a direct connection to a printed circuit board.  However, based on ALJ Rogers’s construction of “package” (discussed above), this was not sufficient to patentably distinguish Halteren.  Accordingly, ALJ Rogers found that Analog had raised a substantial question of invalidity regarding claim 1 of the ‘231 patent based on anticipation by Halteren.

ADI also asserted that claim 1 of the ‘231 patent is anticipated by U.S. Patent No. 4,533,795 to Baumhauer (“Baumhauer”).  Baumhauer discloses an “integrated electroacoustic transducer.”  Again, the dispute between the parties was over whether Baumhauer discloses a “package.”  Here, ALJ Rogers determined that there was no second-level connection between the package and another circuit outside the package.  Accordingly, even given his construction of “package” in claim 1 of the ‘231 patent, the claim did not read on Baumhauer, and ALJ Rogers found that ADI had not raised a substantial question of invalidity based on anticipation by Baumhauer.

ADI further asserted that claims 1, 2, 7, 15, 16, 17, 18, and 20 of the ‘089 patent are anticipated by Halteren.  Here, the dispute was over whether Halteren discloses a “surface mountable package.”  Dr. Gilleo first testified that Halteren did not disclose a package that was “surface mountable,” but later agreed that one could laminate the invention in Halteren to a surface.  Accordingly, the only real dispute was over whether Halteren discloses the required second-level electrical connection.  As with his analysis of Halteren vis-à-vis claim 1 of the ‘231 patent, ALJ Rogers found that Halteren did in fact disclose the second-level connection, and, accordingly, that ADI had raised a substantial question of invalidity as to claims 1, 2, 7, 16, 17, 18, and 20 of the ‘089 patent based on anticipation by Halteren.

However, ALJ Rogers found that ADI had not demonstrated a substantial question of invalidity as to claim 15 of the ‘089 patent.  According to the ID, given ALJ Rogers’s construction of “volume,” claim 15 includes the additional requirement that the transducer reside within the chamber and the volume at the same time.  ADI argued that the claim is indefinite under this construction because it is physically impossible for the transducer to be in both the chamber and the volume.  However, ALJ Rogers rejected this argument and pointed out that the fact that the claim might describe a physical impossibility does not make it incapable of understanding, and thus does not make it indefinite.

In addition to anticipation by Halteren, ADI also argued that claims 1, 2, 15, 16 and 17 of the ‘089 patent are anticipated by U.S. Patent No. 6,594,369 to Une (“Une”).  According to the ID, the dispute here centered on whether Une discloses “that the transducer is attached to a surface formed on one of the first member or the second member, said surface being formed with at least one patterned conductive layer.”  Based on wavering testimony from Dr. Gilleo on this issue, ALJ Rogers found that ADI had raised a substantial question of invalidity as to claims 1, 2, 16 and 17 of the ‘089 patent based on anticipation by Une.  However, ALJ Rogers found that claim 15 is not anticipated under his claim construction.

Lastly ADI argued that U.S. Patent No. 7,080,442 to Kawamura anticipates claims 1, 2, and 16 of the ‘089 patent.  Here again, the dispute centered on whether Kawamura discloses “that the transducer is attached to a surface formed on one of the first member or the second member, said surface being formed with at least one patterned conductive layer.”  After considering the evidence, ALJ Rogers could not find any references to a patterned conductive layer in Kawamura, and, accordingly, determined that ADI had failed to demonstrate a substantial question of invalidity of claims 1, 2, and 16 of the ’089 patent based on anticipation by Kawamura.

Thus, in sum, ALJ Rogers determined that ADI had raised a substantial question of invalidity as to all of the asserted claims of the ‘231 and ‘089 patents except for claim 15 of the ‘089 patent.

Infringement

As to infringement, ALJ Rogers found that Knowles had demonstrated a likelihood of success on the issue of whether ADI’s products infringe claim 1 of the ‘231 patent.  The only dispute here was whether or not the housing of the accused products includes an acoustic port.  Based on ALJ Rogers’s construction of “acoustic port” as simply “a port that allows the passage of an acoustic signal” (described above), he found that the housing of ADI’s accused products does in fact include an acoustic port, and thus that Knowles had a likelihood of success on the issue of infringement of claim 1 of the ‘231 patent.

With respect to the asserted claims of the ‘089 patent, the issue was whether ADI’s accused products included a “volume.”  Based on ALJ Rogers’s holding that a “volume” did not need to be closed but is instead properly construed as “a space defined by the transducer and one of the first member or the second member,” he found that ADI could not refute Knowles’s showing of a likelihood of success on the issue of infringement of the asserted claims of the ‘089 patent other than claim 15.  However, with respect to claim 15, ALJ Rogers determined that Knowles had failed to show a likelihood of success on infringement because it failed to show that the transducer was “within the volume” as required by claim 15.

Thus, in sum, ALJ Rogers determined that Knowles had demonstrated a likelihood of success as to infringement of all of its asserted claims except claim 15.

Domestic Industry

As to domestic industry, Knowles and ADI agreed for purposes of Knowles’s motion for temporary relief to jointly stipulate that Knowles has satisfied the economic and technical prongs of the domestic industry requirement.

Likelihood of Success on the Merits

In view of the above, ALJ Rogers found that Knowles had failed to demonstrate a likelihood of success on the merits because ADI had raised substantial questions of invalidity as to all of the asserted claims of the ‘231 and ‘089 patents except claim 15 of the ‘089 patent, and as to that claim, Knowles had failed to show a likelihood of success on the issue of infringement by ADI’s accused products.

Irreparable Harm

ALJ Rogers next considered whether Knowles would suffer irreparable harm if its motion for temporary relief were denied.  Knowles first argued that irreparable harm should be presumed based on Knowles’s alleged likelihood of success on the merits, and then cited six different ways in which it has allegedly been irreparably harmed:  (1) lost sales; (2) damage to building relationships; (3) unwarranted reputation for ADI; (4) lost funding for research and development; (5) need for Knowles to censure its existing or potential customers; and (6) likely price erosion.

ALJ Rogers rejected Knowles’s argument that irreparable harm should be presumed based on an alleged likelihood of success on the merits.  He held that under the Supreme Court’s eBay decision, each of the four factors in the test for a preliminary injunction (or for temporary relief at the ITC) must be evaluated independently.

ALJ Rogers then found that none of Knowles’s six alleged instances of irreparable harm constitute the sort of irreparable harm that would justify temporary relief.  This section of the ID is heavily redacted, but in any event, ALJ Rogers determined that Knowles had failed to demonstrate irreparable harm under any of its theories.

Balance of Hardships

As to the balance of hardships between the parties, ALJ Rogers first stated that “[b]ecause Knowles has not demonstrated both of the first two preliminary injunction factors, I find that the balancing of the hardships analysis will not affect the outcome of Knowles’ motion.”  Nevertheless, ALJ Rogers went on to say that if the Commission were to reverse his findings on the first two factors, he would find that the balance of hardships analysis weighs in favor of issuing Knowles’s requested temporary relief.  This was based on ALJ Rogers’s findings that MEMS microphones are a very small part of ADI’s overall business, but a relatively large part of Knowles’s overall business.

Public Interest

With respect to the public interest factor, ALJ Rogers stated that “[b]ecause Knowles has not demonstrated both of the first two preliminary injunction factors, I find that the public interest analysis will not affect the outcome of Knowles’ motion.”  Nevertheless, as with the balance of hardships analysis, ALJ Rogers went on to analyze the public interest factor and state that if the Commission were to reverse his findings on the first two factors, he would find that the fourth factor does not preclude the issuance of temporary relief.  ALJ Rogers determined that there is no “critical public interest” that would be injured if Knowles were awarded temporary relief.

Bonding

With regard to bonding, ALJ Rogers held that if the Commission were to find that Knowles is entitled to temporary relief, then no bond should be imposed during the period of relief.  ALJ Rogers held that it was ADI’s burden – as the party seeking the bond – to provide a rational basis for the amount of the proposed bond.  However, in this instance, ADI’s expert merely stated that the amount of the bond should be related to ADI’s lost sales, without providing any actual analysis of the amount of those sales.  Accordingly, ALJ Rogers found that ADI had not met its burden to provide a rational basis for the amount of the proposed bond, and determined that no bond should be required if the Commission determines that Knowles is entitled to temporary relief.