ITC Section 337 Update—October 21, 2013

by King & Spalding

Federal Circuit Confirms That A Substantial Domestic Industry Investment Under 19 U.S.C. §1337(a)(3)(C) Must Relate To An Actual Article That Practices The Patent Manufactured Domestically Or Abroad On October 3, 2013, in Microsoft v. Int’l Trade Comm’n, 2012-1445,-1535, the Federal Circuit upheld a Commission decision that Microsoft failed to prove a domestic industry existed for products protected by two of its asserted patents, because it did not establish that its substantial domestic industry investments in research and development relate to an actual article protected by the patent.  The Federal Circuit noted that “[t]here is no question about the substantiality of Microsoft’s investment in its operating system or about the importance of that operating system to mobile phones on which it runs.”  But the Federal Circuit cautioned that “Section 337, though not requiring that an article protected by the patent be produced in the United States, unmistakenly requires that the domestic company’s substantial investments relate to actual ‘articles protected by the patent.’  19 U.S.C. §§1337(a)(2), (3).”  Citing to its earlier decision in InterDigital v. Int’l Trade Comm’n, 707 F.3d 1295, 1299, 1304 (Fed. Cir. 2013), the Federal Circuit emphasized that a company seeking Section 337 protection “must therefore provide evidence that its substantial domestic investment – e.g., in research and development – relates to an actual article that practices the patent regardless of whether or not that article is manufactured domestically or abroad.”  Microsoft failed to meet this requirement by not showing that any Microsoft supported products actually practiced the patents. 

Second Judicial Determination Of FRAND Rate In Innovatio IP Ventures Patent LitigationIn an 89 page Memorandum Opinion issued on September 27, 2013 in Innovatio IP Ventures Patent Litigation, MDL 2303 (N.D. Ill.), Judge James Holderman determined, after a September 9-12, 17-20, 2013 bench trial limited to the issue of finding a FRAND rate to be paid to Innovatio for licensing Innovatio’s portfolio of nineteen 802.11 standard-essential patents (“SEPs”), that a FRAND rate is “9.56 cents for each Wi-Fi chip used or sold by the Manufacturers in the United States, subject to. . . a finding of infringement.”  Judge Holderman noted that “only one other court has previously undertaken a judicial determination” of a FRAND rate for SEPs, citing to Judge James Robart’s decision in Microsoft v. Motorola, 2013 WL 2111217 (W.D. Wash. Apr. 25, 2013).  He also noted that the Court’s 9.56 cents FRAND rate “is comfortably within Judge Robart’s reasonable range for a [F]RAND rate. . . between 0.8. . . and 19.5 cents per unit” and is “three times Judge Robart’s [F]RAND rate of 3.471 cents per unit. . . a reasonable difference between the two royalties to account for the greater importance of Innovatio’s patents to the 802.11 standard.”  He further noted that the 9.56 cents FRAND rate “is close” to the 15 cents per unit FRAND rate based on a Jury finding that 3 of Ericsson’s 802.11 SEPs “were infringed” in Ericsson v. D-Link, 2013 WL 4046225 (E.D. Tex. Aug. 6, 2013).

White House Declines Overturning Commission Exclusion Order In 796 Investigation – On October 8, 2013, U.S. Trade Representative Michael Froman, acting on authority from the President, issued a statement declining Samsung’s Submission of August 28, 2013 seeking disapproval of a limited exclusion order and cease and desist order issued by the Commission in Certain Electronic Digital Media Devices And Components Thereof, Inv. No. 337-TA-796.  Apple’s ’949 “touch screen” patent and ’501 patent directed to a receptacle switch for plug detection, that provided the basis for the Commission’s remedial orders excluding certain Samsung smartphones, are not standard-essential patents subject to a FRAND commitment – the impetus behind the President’s recent disapproval of the Commission’s remedial orders in the 794 Investigation.  Nevertheless, Samsung requested disapproval of the remedial orders on the grounds, inter alia, that:  (i) “the patents cover small insignificant features of complex electronic devices” and “USTR has a strong policy interest in assuring that the scope of any remedial order is commensurate with the scope of the invention at issue”; and (ii) a Complainant should be subject to the same “causal nexus” standard and eBay factors applied by the U.S. District Courts.  However, USTR responded by stating that the Commission’s “order expressly states that these devices and any other Samsung electronic media devices incorporating the approved design-around technologies are not covered.  Thus, I do not believe that concerns with regard to enforcement related to the scope of the order, in this case, provide a policy basis for disapproving it.”

Commission Reopens After Government Shutdown Concluded (Tolling of Pending Deadlines) All deadlines for filing papers with the Commission during the period of the Government shutdown will be tolled sixteen (16) days, according to Juliana M. Cofrancesco, Commission Attorney Advisor, and Margaret D. McDonald, newly appointed Director of Office of Unfair Import Investigations (“OUII”), who spoke at the ITC Trial Lawyers Association monthly meeting held October 17.  In a pending Section 337 investigation before an assigned Administrative Law Judge (“ALJ”), for deadlines that occurred during the period of the shutdown, both Ms. Cofrancesco and Ms. McDonald advised that a party should call an assigned OUII Investigative Attorney and/or the Attorney Advisor for the assigned ALJ to address scheduling issues.  In addition, Ms. Cofrancesco advised that the Commission will issue shortly a revised target date schedule for pending investigations in view of the shutdown.  

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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