ITC Section 337 Update - December 2013

by King & Spalding

Federal Circuit Limits Exclusionary Remedy For Inducing Infringement In Suprema v. ITCOn December 13, the Federal Circuit issued a split panel Opinion in Suprema v. ITC, Appeal No. 2012-1170, vacating the exclusionary remedy in Certain Biometric Scanning Devices, Inv. No. 337-TA-720, and holding that “an exclusion order based on a violation of 19 U.S.C. §1337(a)(1)(B)(i) may not be predicated on a theory of induced infringement under 35 U.S.C. §271(b) where direct infringement does not occur until after importation of the articles the exclusion order would bar.”  The majority (Judges Frost and O’Malley) found “that Section 337(a)(1)(B)(i), by tying the Commission’s authority to the importation, sale for importation, or sale within the U.S. after importation of articles that infringe a valid and enforceable U.S. patent, leaves the Commission powerless to remedy acts of induced infringement in these circumstances.”  In Dissent, Judge Reyna argued, inter alia:  (i) “Section 337 is a trade statute designed to provide relief from specific acts of unfair trade, including acts that lead to the importation of articles that will result in harm to a domestic industry by virtue of infringement”; (ii) for decades, the Commission has found Section 337 violations based on induced infringement, where infringement did not occur until after importation; and (iii) the Federal Circuit recently recognized en banc in Akamai v. Limelight, 692 F.3d 1301 that there is no reason to immunize an inducer from liability “simply because the parties have structured their conduct so that no single defendant has committed” direct infringement.

Federal Circuit Affirms Domestic Industry Relying On Separate Parts Of An Article For Technical And Economic Prongs In Motorola v. ITCOn December 16, the Federal Circuit issued an Opinion by Chief Judge Rader in Motorola Mobility, LLC v. ITC, Appeal No. 2012-1535, affirming the ITC’s determination in Certain Mobile Devices Associated Software And Components Thereof, Inv. No. 337-TA-744, that Motorola violated Section 337 by infringing Microsoft’s ’566 patent, and that the ’566 patent was not shown by Motorola to be invalid and was shown by Microsoft to satisfy the domestic industry requirement.  A notable aspect of this Opinion is the Federal Circuit’s affirmance of the Commission’s determination that Microsoft proved a domestic industry by relying on separate parts of its product protected by the patent for the technical and economic prongs of the domestic industry requirement.   Specifically, Microsoft relied on “its operating system” to satisfy the technical prong and the “hardware” of its mobile devices to satisfy the economic prong.  The Commission found that “[t]he operating system is a part of the entire mobile device (or computer) whereas the hardware is another part of such device.”  The Federal Circuit held that “nothing in §337 precludes a complainant from relying on investments or employment directed to significant components, specifically tailored for use in an article protected by the patent. . . .  An investment directed to a specifically tailored, significant aspect of the article is still directed to the article.”

Update On The Federal Circuit Appeal In The 794 Investigation And Commission Review In The 837 Investigation – The ITC filed a motion for an extension of time to file their Brief from December 13, 2013 until January 27, 2014 in Federal Circuit Appeal No. 2013-1519 of the Commission’s determination that Apple did not infringe Samsung’s asserted ’980, ’514 and ’644 patents in the 794 Investigation.  As pointed out in our ITC Section 337 Update of August 21, 2013, the ’644 patent has been declared essential to wireless telecommunication standards.  Thus, if the Federal Circuit reverses the Commission’s non-infringement determination with respect to the ’644 patent, a remand is likely so that the Commission can thoroughly examine the public interest issues to determine whether an exclusionary remedy would be in the public interest as “underscored” in the August 3, 2013 USTR notice letter.  On November 20, 2013, the Commission determined to extend the target date from December 9, 2013 until February 3, 2014 in the 837 Investigation.  As pointed out in our ITC Section 337 Update of November 14, 2013, the 837 Investigation is one of the Commission’s first reviews of whether to issue an exclusion order involving a standard-essential patent since the President’s disapproval in the 794 Investigation on August 3, 2013.  We shall keep you apprised of further developments in these investigations.

Proposed Patent Litigation Reform For Federal District CourtsIs The ITC Next? – By a vote of 325-91, the U.S. House of Representatives, passed a bill attempting to curb litigation abuses by patent assertion entities (“PAEs”) in federal district court.  The Innovation Act (H.R. 3309) would make it harder for PAEs to send vague infringement letters to companies, who frequently choose to settle rather than defend against patent infringement allegations in court.  It also would require plaintiffs to identify the products or processes alleged to infringe the asserted patents, among other things. The potentially lengthy and expensive discovery process in a suit would also be postponed until the court has had an opportunity to construe the claims of the patents.  Finally, the bill discourages abusive lawsuits by requiring losing PAEs to pay court costs and the prevailing party’s legal fees in some instances.  The Senate version of patent litigation reform legislation – the Leahy-Lee bill (S.1720) – is working its way through the Senate Judiciary Committee.  The potential effect of the Innovation Act on Section 337 investigations is unclear.  Because it is not directly applicable to unfair trade practice actions under Section 337, the Innovation  Act, if enacted into law, could steer more patent suits to the ITC.  Alternatively, the Innovation Act may encourage Congress to pursue similar patent litigation reform of Section 337 actions at the ITC.  Click here for more information about the Innovation Act and other patent reform initiatives in Congress.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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