07
Apr
On April 1, 2011, ALJ E. James Gildea issued the public version of Order No. 29 (dated March 11, 2011) granting Complainants S3 Graphics Co., Ltd. and S3 Graphics, Inc.’s (collectively, “S3G”) motion for summary determination that the economic prong of the domestic industry requirement had been met in Certain Electronic Devices With Image Processing Systems, Components Thereof, and Associated Software (Inv. No. 337-TA-724).

According to the Order, S3G argued that its domestic expenditures and activities supported a finding that S3G satisfied the economic prong of the domestic industry requirement.  Specifically S3G relied on its domestic activities and expenditures relating to support and repair of S3G’s domestic industry products; engineering, research and development, and design of S3G’s domestic industry products; and licensing of the asserted patents.  Respondent Apple Inc. (“Apple”) and the Commission Investigative Staff (“OUII”) opposed the motion.

In the Order, ALJ Gildea first rejected several of Apple’s “general objections.”  These general objections included Apple’s argument that S3G’s foreign made products could not constitute a domestic industry.  ALJ Gildea rejected this argument, stating that the focus with respect to domestic industry is not whether an article is manufactured overseas, but whether significant investment and activities are taking place in the U.S.  The ALJ also rejected Apple’s arguments that S3G could not rely on interrogatory responses to support its summary determination motion and that only S3G’s licensing activities in the five years leading up to the Complaint could be considered. Apple additionally asserted that S3G should be required to present “compelling evidence” to support its alleged investments. In rejecting this assertion, ALJ Gildea noted that this disregarded the “preponderance of the evidence” standard to be applied. Next, Apple contended that S3G could not rely on an unidentified source for the purpose of establishing economic domestic industry. The ALJ rejected this idea as well, stating that an evaluation of the totality of S3G’s licensing activities must be made. The ALJ next rejected Apple’s contentions that S3G failed to document its domestic investments and expenditures and that it must use the depreciated value of its assets for a domestic industry analysis.  Finally, ALJ Gildea rejected Apple’s argument that S3G could not rely on evidence it failed to identify in response to Apple’s contention interrogatories. The ALJ noted that Apple did not allege that S3G failed to produce the evidence in discovery, only that it belatedly identified the discovery as relevant to domestic industry.

Regarding S3G’s evidence of domestic industry, ALJ Gildea stated that Apple only facially denied S3G’s statements of fact, and Apple and Staff did not cite any actual evidence showing a material dispute. Thus, the ALJ deemed admitted, for purposes of this determination, all S3G’s statements of fact against which Apple and Staff did not cite opposing evidence. After considering this evidence, the ALJ determined that the engineering, research and development, design, and support and repair expenditures for S3G’s relevant products, as well as S3G’s licensing expenditures and activities, demonstrated a substantial investment in the exploitation of the asserted patents. ALJ Gildea therefore granted S3G’s motion for summary determination with respect to an economic domestic industry for the asserted patents.