Further to our December 17, 2013 post, on January 9, 2014, ALJ Theodore R. Essex issued the public version of his Initial Determination on Violation of Section 337 and Recommended Determination of Remedy and Bond (“ID”) (dated December 13, 2013) in Certain Optoelectronic Devices for Fiber Optic Communications, Components Thereof, and Products Containing the Same (Inv. No. 337-TA-860).  Due to the large size of the ID, we have split the document into part 1, part 2, part 3, and part 4.

By way of background, this investigation is based on a complaint filed by Avago Technologies Fiber IP (Singapore) Pte. Ltd., Avago Technologies General IP (Singapore) Pte. Ltd., and Avago Technologies U.S. Inc. (collectively, “Avago”) alleging violation of Section 337 in the importation and sale of certain optoelectronic devices for fiber optic communications, components thereof, and products containing the same that infringe one or more claims of U.S. Patent Nos. 6,947,456 (the ‘456 patent) and 5,596,595 (the ‘595 patent).  See our September 26, 2012 and October 30, 2012 posts for more details about the complaint and Notice of Investigation, respectively.

The ‘595 Patent

Avago asserted claims 14 and 19 of the ‘595 patent against Respondents IPtronics A/S; IPtronics, Inc.; FCI SA; FCI Deutschland GmdH;  FCI USA, LLC; Mellanox Technologies, Ltd.; and Mellanox Technologies, Inc. (collectively, “Respondents”).  As an initial matter, ALJ Essex determined that the ‘595 was not a “subject invention” within the Parallel Optical Link Organization (“POLO”) Consortium agreement.  Furthermore, ALJ Essex held that even if the POLO agreement vested ownership with one or more of the consortium members, Avago was a bona fide purchaser for value of the ‘595 patent and, therefore, has standing.  ALJ Essex then construed several claim terms.  Specifically, the parties disputed whether the term “layer” was limited to a single material layer or not.  Based upon his review of the intrinsic and extrinsic evidence, ALJ Essex held that a “layer” was not limited to a single material layer.

ALJ Essex divided his infringement determination into four parts based on different Vertical Cavity Surface Emitting Laser (VCSEL) manufacturers because the structures of the VCSELs vary by manufacturer.  ALJ Essex determined that the first, third, and fourth groups of products infringed both claims 14 and 19 of the ‘595 patent.  However, ALJ Essex held that second group of products only infringed claim 19 of the ‘595 patent.  ALJ Essex determined that the second group of products failed to meet the “top mirror and said bottom mirror each having a plurality of quarter wavelength thick layers having alternating indices of refraction”  limitation of claim 14 of the ‘595 patent.

Regarding invalidity, ALJ Essex held that none of Respondents’ prior art references anticipated or rendered obvious the asserted claims of the ‘595 patent.  Furthermore, ALJ Essex determined that Respondents failed to prove by clear and convincing evidence that the “current-spreading layer” and “approximately equal to” limitations of the ‘595 patent are indefinite.

As to the technical prong of the domestic industry requirement, ALJ Essex determined that Avago’s domestic industry products practice each of the claim limitations of claims 14 and 19 of the ‘595 patent.  Accordingly, ALJ Essex held that Avago has satisfied the technical prong of the domestic industry requirement.

The ‘456 Patent

Avago asserted claims 1, 2, 4, 6–8, 11–13, 15, and 20–24 of the ‘456 patent against Respondents.

ALJ Essex first construed the claim term “wherein the drive waveform includes a negative peak[ing] portion.”  ALJ Essex rejected Respondents’ construction, which added a limitation that the drive waveform includes a negative peak portion for every logic 1 to logic 0 transition.  Instead, ALJ Essex held that the claim term should take on its plain and ordinary meaning.

Regarding infringement, ALJ Essex determined that the accused products fail to meet the “negative peak portion” and “parameter for affecting” limitations and, therefore, fail to directly infringe the asserted claims of the ‘456 patent.  Based on his finding of no direct infringement, ALJ Essex held that Avago failed to show that Respondents indirectly infringe the asserted claims of the ‘456 patent.

As to validity, ALJ Essex determined that the cited prior art references did not anticipate or render obvious the asserted claims of the ‘456 patent because Respondents failed to prove that the references either taught all the claim limitations or were actual prior art to the ‘456 patent.  Additionally, ALJ Essex held that Respondents failed to prove by clear and convincing evidence that the “wherein the drive waveform includes a negative peak(ing) portion” limitation of the ‘456 patent is indefinite.

ALJ Essex determined that Avago failed to prove that its domestic industry products meet the “negative peak portion” and the “parameter for affecting” limitations of the ‘456 patent.  Accordingly, Avago failed to satisfy the technical prong of the domestic industry requirement for the ‘456 patent.

Economic Prong Of The Domestic Industry Requirement

ALJ Essex held that Avago met the economic prong of the domestic industry requirement.  Specifically, ALJ Essex determined that Avago satisfied 19 U.S.C. § 1337(a)(3)(B) by making significant investments in labor and capital.  Furthermore, ALJ Essex held that Avago satisfied 19 U.S.C. § 1337(a)(3)(C) by making substantial investments in domestic research and development.  However, ALJ Essex ruled that Avago failed to satisfy 19 U.S.C. § 1337(a)(3)(A) by making significant investments in plant and equipment because Avago failed to show that their investments were related to the articles protected by the asserted patent claims.

Remedy and Bond

ALJ Essex recommended that the Commission issue a limited exclusion order and a cease and desist order.  Specifically, ALJ Essex recommended that the limited exclusion be issued without any exemption for replacement parts.  ALJ Essex further recommended a cease and desist order based on a finding that Mellanox and FCI possess commercially significant amounts of infringing products in the United States.  Regarding bond, ALJ Essex recommended bond be set at “a reasonable royalty rate of the entered value of the accused products based on previous Avago license agreements with unaffiliated companies.”  To the extent that such agreements do not exist, ALJ Essex recommended that the royalty rate be set at 0%.