By Eric Schweibenz
On April 16, 2009, Chief ALJ Paul J. Luckern issued the public version of Order No. 17 in Certain Video Game Machines and Related Three-Dimensional Pointing Devices (337-TA-658).  In the order, ALJ Luckern found respondents Nintendo Co., Ltd. and Nintendo of America, Inc.’s (“Nintendo”) license agreements relating to the accused products are not relevant for calculating the appropriate bond.

On March 2, 2009, complainant Hillcrest Laboratories, Inc. (“Hillcrest”) moved for an order compelling Nintendo to produce their license agreements relating to the accused products, and, if necessary, to produce a witness to provide testimony on those agreements.  Nintendo and the Commission Investigative Staff opposed Hillcrest’s motion.

Although ALJ Luckern acknowledged that the scope of discovery in Section 337 investigations “has been held to be broad,” he noted that Hillcrest “has been unable to locate any publicly available information identifying specific investigations in which a respondent has produced its license agreements [for purposes of calculating the appropriate bond].”  ALJ Luckern further noted that unlike a district court’s calculation of a reasonable royalty damages award, a bond set by the Commission for the sixty-day Presidential review is temporary and intended to establish a fund to protect the complainant from potential injury incurred as a result of continued importation of infringing products during the review period. 

According to the order, the Commission has looked to an industry-wide or median royalty rate in calculating the appropriate bond, however, “it has looked to a complainant’s license agreements for the patents at issue because the rate at which the complainant has licensed the patents at issue to others provides some indication of what the complainant views as appropriate compensation for any injury caused by the use of its intellectual property.”  Accordingly, ALJ Luckern determined that because he found no precedent where the Commission has ordered a respondent to produce licensing agreements as evidence of industry-wide or median royalty rates, Nintendo met their burden in establishing that the requested information at issue was beyond the scope of discovery.