ITC Section 337 Update - March 2015 #2

by King & Spalding

Commission Declines MEGA Brands’ Request For Early Disposition Of Domestic Industry – As reported in the March 12, 2015 edition of the ITC Section 337 Update, proposed Respondent MEGA Brands filed public interest comments seeking early adjudication under the Commission’s Pilot Program For Early Disposition Of Certain Section 337 Investigations of complainant LEGO’s domestic industry allegations in the complaint filed on Certain Toy Figurines And Toy Sets Containing Same, Inv. Docket No. 337-3054. Under the Commission’s pilot program, the presiding ALJ has 100 days to adjudicate and decide threshold, dispositive issues in a Section 337 investigation while other portions of the investigation are placed on hold. In its Response, LEGO took issue with MEGA Brands’ public interest comments, describing them as “nothing more than an attempt to gain a one-sided tactical advantage to focus not on its infringements, but rather only on domestic industry proof.” In particular, LEGO noted that the comments do not address the statutory public interest factors and fail to recognize the substantial licensing operations conducted in the United States by LEGO. LEGO’s response also distinguished the only investigation that has been placed in the pilot program to date – Certain Products Having Laminated Packaging, Laminated Packaging, And Components Thereof, Inv. No. 337-TA-874. On March 11, 2015, the Commission issued a Notice of Institution of Investigation that did not direct the ALJ to conduct an early adjudication of LEGO’s domestic industry under the pilot program.

TPL Refutes Barnes & Noble’s Motion To Dismiss District Court Action Based On ITC Non-Infringement Determination – Technology Properties Limited, LLC (“TPL”) filed its Opposition to Barnes & Noble’s Motion to Dismiss TPL’s district court infringement action based on an ITC determination of non-infringement (see prior coverage). TPL rebuts Barnes & Noble’s purported use of Kessler, noting that the “gap filler” doctrine is unnecessary because collateral estoppel would normally apply, but Congress and the Federal Circuit “unequivocally declared that such ITC decisions do not bind this Court,” referring to a 1974 Senate Report addressing Commission findings and preclusion and Federal Circuit precedent citing the same. In its Reply, Barnes & Noble argues that the Senate Report is not Congressional or statutory authority prohibiting issue preclusion nor does it address non-infringement. Barnes & Noble states that Kessler should apply in the limited context of (1) a judgment of non-infringement and (2) where the patentee chose not to appeal, noting that appeals from ITC decisions are binding and TPL should not be allowed to evade an adverse Commission judgment by choosing not to appeal. The Federal Circuit recently addressed the “well-settled rule” that Commission decisions involving patent issues have no preclusive effect in other forums in a non-precedential order in LSI Corporation v. Int’l Trade Comm’n, 2014-1410 (March 20, 2015). However, the Supreme Court’s decision on March 24, 2015 in B&B Hardware v. Hargis Industries, No. 13-352 reiterated that issue preclusion is not limited to issues before two courts (when “Congress has authorized agencies to resolve disputes, ‘courts may take it as a given that Congress has legislated with the expectation that the principle [of issue preclusion] will apply except when a statutory purpose to the contrary is evident.’” Slip op. at 9). This Update will continue to monitor the district court’s decision in the TPL v. Barnes & Noble action.

Commission Institutes Investigation Under 100-Day Early Disposition Pilot ProgramOn March 12, 2015, the Commission issued a Notice of Investigation (“NOI”) in Certain Audio Processing Hardware and Software and Products Containing Same, ITC Inv. No. 337-TA-949 pursuant to a complaint filed by Andrea Electronics Corporation (“Andrea”). The NOI orders the ALJ to hold an early evidentiary hearing, find facts, and issue an Initial Determination (“ID”) within 100 days of institution as to whether Andrea has standing to assert each of the asserted patents. This is only the second time the Commission has ordered early disposition; the first instance was in June 2013 in Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof, Inv. No. 337-TA-874, resulting in an ID finding insufficient domestic industry-economic prong. In a letter to the Commission pre-institution, Respondents Hewlett Packard and Dell requested that the Commission use the 100-day pilot program to analyze Andrea’s standing and domestic industry based primarily on statements in Andrea’s SEC filings indicating that Andrea does not hold all right, title, and interest in the asserted patents following assignment of substantial ownership interest in the patents to Fortress Investment Group, an investment management firm. Per the NOI, an early ID finding that complainant does not have standing pertaining to the asserted patents will stay the investigation unless the Commission orders otherwise, but any other decision shall not stay the investigation. The investigation has been assigned to ALJ Pender.

Recent Orders By ALJs On Motions To Stay – On December 1, 2014, ALJ Lord issued Order No. 26: Granting Joint Motion to Stay all procedural deadlines in Certain Navigation Products, Inv. No. 337-TA-900. The parties filed a joint motion to stay because “they have entered into a settlement memorandum of understanding [MOU] and are in the process of finalizing and executing the settlement agreement.” The MOU was not attached to the motion. The parties represented that after finalizing and executing the settlement agreement, they will file a joint motion for termination of the investigation. Staff did not oppose the motion. In granting the motion, ALJ Lord directed the parties to “submit a joint status report on the progress of settlement negotiations” within two weeks. In a separate unrelated enforcement proceeding, Certain Incremental Dental Positioning Adjustment Appliances, Inv. No. 337-TA-562, ALJ Shaw issued Order No. 75 denying Complainant’s joint motion to stay all remaining dates in the Procedural Schedule pending the Federal Circuit’s decision on Appeal Nos. 14-1533 and 14-1577 of related Inv. No. 337-TA-833. In the 833 Investigation, the same Complainant had opposed Respondents’ motion to stay the cease and desist orders issued by the Commission pending the same Federal Circuit appeals, arguing that Respondents could not meet the four prong test applied by the Commission that is used by the courts in determining whether to grant a preliminary injunction. ALJ Shaw noted in Order No. 75, Complainant’s “switch in position regarding a stay.”

ALJ Lord Strikes Portions Of Expert Report On Public Interest – On January 5, 2014, ALJ Lord issued Order No. 25 in Certain Non-Volatile Memory Chips and Products Containing the Same, Inv. No. 337-TA-916, granting in part the motion of Complainant Spansion LLC to strike portions of Respondents’ expert report because it contained public interest theories not previously disclosed during discovery by Respondents Macronix International Co, Ltd., Macronix America, Inc., Macronix Asia Limited, and Macronix (Hong Kong) Co., Ltd. (“Macronix”). ALJ Lord noted that while Commission policy favors the admission of evidence regarding the public interest, Commission Rule 210.10(b) authorizes an ALJ to “limit public interest discovery appropriately,” and Commission Rule 210.27(f) imposes “a duty seasonably to amend a prior response to an interrogatory … if the party learns that the response is in some material respect incomplete or incorrect.” ALJ Lord held that she would not allow Macronix to introduce contentions and evidence for the first time during expert discovery that should have been disclosed during fact discovery. In determining whether the public interest theories contained in the expert report had been previously disclosed, ALJ Lord looked at the public interest statements that had been made by Macronix and the Downstream Respondents, as well as Macronix’s interrogatory responses concerning the statutory public interest factors.

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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