On January 27, 2011, ALJ E. James Gildea issued the public version of Order No. 33 (dated January 11, 2011) in Certain Digital Set-Top Boxes and Components Thereof (Inv. No. 337-TA-712) granting Complainants Verizon Communications Inc. and Verizon Services Corp.’s (collectively, “Verizon”) motion for summary determination that Verizon satisfied the economic prong of the domestic industry requirement under 19 U.S.C. § 1337(a)(3).

In support of its motion, Verizon asserted that the domestic industry requirement was satisfied in view of the fact that, inter alia, (1) “the technologies in the Verizon patents are embodied in set-top boxes, software, and network equipment used to provide Verizon’s FiOS TV services,” (2) Verizon employees “were involved in the design, development and creation of the first FiOS TV service offering,” (3) “Verizon has now deployed FiOS TV services in 14 states and the District of Columbia,” (4) “FiOS TV video services cannot operate without set-top boxes,” (5) “software programs on FiOS set-top boxes . . . ‘are critical elements in Verizon’s FiOS TV services,’” (6) “Verizon is investing $23 billion to deploy a fiber-optic network through which it provides FiOS TV video services,” (7) “employees have been involved in the ‘development, deployment, and enhancement of FiOS TV services,” (8) “Verizon ‘devotes substantial resources’ to testing, installing, supporting, and marketing these set-top boxes,” and (9) “Verizon’s software investment enables it to exploit [the patents-in-suit].”

Opposing Verizon’s motion, Respondent Cablevision Systems Corporation (“Cablevision”) asserted three main objections.  In particular, Cablevision asserted that Verizon (1) “did not clearly articulate which statutory subsection it [relied] upon for its domestic industry,” (2) “has not shown a sufficient connection between its expenditures and the patented technology at issue in this Investigation,” and (3) “has not allocated its expenditures with sufficient detail,” which precludes any determination that Verizon’s investments are “‘substantial,’ as required by Section 337(a)(3)(C).”  The Commission Investigative Staff filed a response in support of Verizon’s motion, but “reject[ed] Verizon’s reliance on its $23 billion investment in deploying the FiOS network in general, and [its] reliance on investment in network equipment specific to video services.”

According to the order, ALJ Gildea rejected all of Cablevision’s assertions.  First, ALJ Gildea rejected as having no merit, the assertion that Verizon did not adequately identify the statutory authority upon which it relied.  Second, ALJ Gildea found Cablevision’s assertion that a sufficient connection between Verizon’s expenditures and the patented technology had not been shown was based on an incorrect assumption, namely, that “the only relevant activities in this Investigation are those devoted to designing the inner workings of a set-top box.”  Rather, ALJ Gildea concluded that “Verizon’s investments will satisfy the economic prong under Section 337(a)(3)(C) if those investments are for engineering or research and development within the United States that fosters propagation or use of the technology covered by the asserted patents.”  Thus, ALJ Gildea determined that it was “appropriate to consider Verizon’s domestic investments in portions of that [FiOS TV video] system” because “Verizon brings the technology in the asserted patents to the market place through development of [that system].”  Accordingly, because Verizon presented several undisputed facts regarding its domestic development activities, ALJ Gildea determined that Verizon had satisfied the standard under Section 337(a)(3)(C).  Third, ALJ Gildea found the assertion that Verizon did not allocate its expenditures with sufficient detail to determine whether they are “substantial,” “imposes a burden beyond the requirement of the statute.”  Instead, ALJ Gildea determined that “Verizon has put forth a sufficiently focused effort in exploiting the patented technology through domestic investments.”  In view of the above, ALJ Gildea determined “that Verizon’s domestic activities directed at exploiting the asserted patents are substantial” and granted Verizon’s motion.