On July 29, 2009, the International Trade Commission issued the public version of its Opinion in Certain Semiconductor Chips With Minimized Chip Package Size and Products Containing Same (Inv. No. 337-TA-605) denying a motion to stay enforcement of a limited exclusion order and cease and desist orders pending appeal of the Commission’s final determination of a violation of section 337 by Spansion, Inc. and Spansion, LLC (“Spansion”); Qualcomm, Inc. (“Qualcomm”); ATI Technologies (“ATI”); STMicroelectronics N.V. (“ST”); and Freescale Semiconductor, Inc. (“Freescale”) (collectively “Respondents”).

As explained in our July 21 post, on July 17, the Commission issued an order denying Respondents’ motion for a stay.  In the July 29 Opinion, the Commission applied the four-prong test used by courts to determine whether to grant a preliminary injunction (as applied by the Federal Circuit) in considering whether to issue a stay pending appeal.  The four-prong test requires that the movant demonstrate: (1) a likelihood of success on the merits of the appeal; (2) irreparable harm to the movant absent a stay; (3) that the issue of a stay would not substantially harm the other parties; and (4) that the public interest favors a stay.  The Commission noted with respect to the first prong that it may find it satisfied if “the Commission has ruled on ‘an admittedly difficult question.’”

With respect to the first prong, the Respondents argued that the issues of validity and infringement present admittedly difficult questions.  Regarding the validity issue, Respondents argued that this case presents a difficult legal question because the Commission’s determination that the asserted claims are not invalid is in conflict with the USPTO’s final rejection of all the claims of the asserted patents during reexamination proceedings.  In the Opinion, the Commission disagreed, stating that although the USPTO has rejected the claims, “none of the claims of either patent have been cancelled,” and until all appeals from the reexamination proceedings have been exhausted and the USPTO issues a certificate canceling the claims, “the patents are presumed valid and enforceable.”  The Commission noted that it is unlikely that the full examination process will be completed before the patents expire.  The Commission further disagreed with Respondents’ assertion that the USPTO’s final rejections are inconsistent with the Commission’s determination that the claims are not invalid since the USPTO applies a “preponderance of the evidence” standard, while the Commission applies a “clear and convincing evidence” standard when determining the validity of claims.

Regarding infringement, the Commission disagreed with Respondents’ argument that the Commission’s reversal of the ALJ’s finding of non-infringement meant that the issue of infringement was “an admittedly difficult legal question.”  The Commission explained that “[i]t is the Commission, not the ALJ, that is tasked with making any final decisions regarding whether or not there is a violation of Section 337 in a given investigation.”  Thus, as set forth in the Opinion, the fact that the Commission reversed the ALJ on the issue of infringement “cannot, in and of itself, lead to a conclusion that there is an ‘admittedly difficult legal question.’”

With respect to the second prong, the Commission acknowledged that Respondents will suffer some harm from the exclusion order, but went on to state “[w]e do not believe, however, that this harm rises to the level of irreparable harm.”  The Commission’s determination in this regard was based on the fact that the limited exclusion order will not bar any downstream products, and the “vast majority of Respondents’ infringing semiconductor chips are imported into the U.S. inside downstream products, which are manufactured overseas.”  The Commission further stated that “any harm that Respondents would suffer due to the limited exclusion order and cease and desist orders could be avoided if Respondents take a license from Tessera, as respondent Motorola has already done.”

With respect to the third prong, the Commission found that, if a stay were granted, Tessera will be seriously harmed because “Tessera would essentially be denied the relief to which it is entitled under Section 337 during the pendency of the appeal” and the ‘326 and ‘419 patents expire on September 24, 2010, which will be just a few months after the expected completion of the appeal.

With respect to the fourth prong, the Commission found that the public will not be harmed by the lack of competition because “there are many licensed sources for the packaged semiconductor chips of the type at issue and there is no evidence that Tessera’s licensees would be able to adequately supply the U.S. market once Respondents’ products are excluded.”  The Commission further stated that, contrary to Respondents’ argument, there is “no harm caused by conflicting rulings between the USPTO and the Commission because the Commission does not make final binding rulings on any action relating to patents, including determining their validity.”

Upon consideration of the four-prong test, the Commission denied Respondents’ motion for a stay pending the outcome of any appeal of the Commission’s final determination.