ITC Litigation


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variety of industries and private practitioners attend this event for worthwhile benchmarking and networking with the “who’s who” of the 337 bar, including senior decision-makers from the ITC, companies and practitioners involved in some of the most high profile cases to date.

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ITC Litigation

  1. 1. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP NPEs and the Domestic Industry Licensing Requirement Chester Day (Google) Richard Rainey (GE) Kathleen Zylan (Cisco) Tom Jarvis (Finnegan/Moderating) 1
  2. 2. ITC Statistics • ITC makes distinction between categories of NPEs – Category 1 NPEs • do not make a product practicing the asserted patents • Investments in research, development, or engineering • Includes universities, companies that failed to commercialize – Category 2 NPE/PAEs • do not manufacture products that practice the asserted patents • business models focused on purchasing and asserting patents • secondary market for IP rights 2
  3. 3. ITC Statistics From “FACTS AND TRENDS REGARDING USITC SECTION 337 INVESTIGATIONS” Prepared by the U.S. International Trade Commission (June 18, 2012) 3
  4. 4. ITC 337 Investigations Instituted Per Year ITC Patent Infringement Investigations 56 30 2006 35 37 2007 2008 62 38 29 2009 2010 2011 2012 Source: RPX Proprietary Research © 2006 Cisco Systems, Inc. All rights reserved. Cisco Restricted – Attorney Client Privileged; Attorney Work Product 4
  5. 5. NPE CASES INCREASING IN THE ITC Respondents in NPE ITC Investigations NPE ITC Investigations 232 16 201 14 97 6 4 4 4 38 2 2006 8 2007 2008 2009 2010 2011 2012 15 2006 2007 2008 2009 22 2010 2011 2012 Source: RPX Research and EDIS © 2006 Cisco Systems, Inc. All rights reserved. Cisco Restricted – Attorney Client Privileged; Attorney Work Product 5
  6. 6. ITC 337 Investigations Instituted Per Year 4 NPE Cases 16 Non-NPE Cases 4 2 6 6 28 31 31 2006 2007 2008 © 2006 Cisco Systems, Inc. All rights reserved. 14 52 46 25 2009 24 2010 2011 2012 Cisco Restricted – Attorney Client Privileged; Attorney Work Product 6
  7. 7. Statutory Question • Domestic industry: – A. significant investment in plant and equipment; – B. significant employment of labor or capital; or – C. substantial investment in its exploitation, including engineering, research and development, or licensing. • Difference between a “traditional” DI based on manufacturing and a DI based on licensing? 7
  8. 8. Issues • Manufacturing, Research & Development, and Engineering Analysis – Economic Prong: significant investments – Technical Prong: products practice asserted patent • Licensing analysis: – Economic Prong: substantial investments – Technical Prong: investments related to the asserted patents 8
  9. 9. Certain Multimedia Display and Navigation Devices, Inv. No. 694 – Pioneer asserted 3 patents of a portfolio of more than 1,600 patents. – The ALJ found no violation, but that the economic prong of DI was satisfied. – The Commission reversed the ALJ on DI, holding that: • US investments relate to the asserted patents and licensing • For a portfolio license, complainant must show that its investments are focused on: – the asserted patent or – the relative importance or value of the asserted patent 9
  10. 10. Certain Electronic Devices Including Handheld Wireless Communication Devices, Inv. Nos. 667/673 – NPE complainant alleged DI based on licensee activities. – The ALJ found on MSD that a DI existed through licensee R&D, even though that activity was not directly related to patented features of the products at issue. – ID non-reviewed by the Commission – Investigations settled. 10
  11. 11. John Mezzalingua Assocs., Inc. v. ITC, 660 F.3d 1322 (Fed. Cir. Oct. 4, 2011) • Licensor appealed from the Commission decision in Inv. No. 650 that it failed to show DI. • Federal Circuit affirmed, finding expenses incurred in asserting and defending validity of its design patent did not constitute a “substantial investment in exploitation” of its patent through licensing. • Judge Reyna dissented that the Commission erred in rejecting litigation expenses. 11
  12. 12. Certain Video Game Systems & Controllers, Inv. No. 743 • The ALJ found no DI, Commission non-reviewed the ID in relevant part. • ALJ found no existing DI at the time of the complaint and no DI in the process of being established – complainant had ceased any exploitation of the patent well before filing the complaint at the ITC – litigation expenses found insufficient to establish a DI. • Federal Circuit Appeal pending. 12
  13. 13. Certain Liquid Crystal Display Devices, Including Monitors, Televisions, and Modules, and Components Thereof, Inv. Nos. 741/749 • 5 patents asserted against multiple parties • ALJ found a DI, Commission affirmed, finding: • Ongoing licensing programs related to the asserted patents; • Licensing negotiations focused on the asserted patents • Only a subset of the patents in the portfolio had accompanying “claim charts,” including the asserted patents • Despite apportioning the licensing with respect to other patents, Commission found investments substantial • Settled 13
  14. 14. Certain Integrated Circuits, Chipsets, & Products, Inv. No. 786 • 1 patent asserted against multiple respondents. • ALJ found no DI; the Commission affirmed, finding: – Failure to show what proportion of expenses were foreign versus domestic – Failure to show how expenses related to the asserted patent – Failed to provide sufficient information as to how the asserted patent fit into overall licensing program. 14
  15. 15. InterDigital Communications, LLC v. Int'l Trade Comm'n, 2010-1093, 2013 WL 124064 (Fed. Cir. Jan. 10, 2013) • Appeal from Commission decision in Inv. No. 613, finding no violation - no infringement and no DI. • The Federal Circuit reversed and remanded on claim construction, but affirmed on DI. • Respondent filed a combined petition for panel rehearing and for rehearing en banc on DI. 15
  16. 16. InterDigital Communications, LLC v. Int'l Trade Comm'n, 2010-1093, 2013 WL 124064 (Fed. Cir. Jan. 10, 2013) • Federal Circuit denied combined petition; held that substantial investment in R&D of intellectual property was with respect to the articles protected by the patent, within the meaning of Tariff Act’s “domestic industry” requirement. • Judge Newman dissented that complainant does not make the patented invention in the US, and seeks to impose on respondent that is “not a license to manufacture any patented product in the United states; it is a license to import products made in foreign countries.” 16
  17. 17. Nexus between licensing and asserted patents – Whether the patents at issue are directly connected to a licensing domestic industry – Whether the licensee’s efforts relate to a protected article – Number of patents in the portfolio – Relative importance/value of asserted patents to the portfolio – Successfully litigated by complainant – Relates to a technology industry standard – Considered a “base patent” or “pioneering patent” – Prominence of the asserted patents in licensing discussions 17
  18. 18. Policy Objectives of 337 & Licensing Issues • Is there a distinction between revenue-driven and production-driven (industry creating) licensing, and is such a distinction useful? • Largest USA companies are selling patents into the secondary market that will obviously be used for licensing and litigation • Licensing market has changed since statute amended; what actually constitutes a licensing industry now? 18
  19. 19. Policy Objectives of 337 & Licensing Issues • Licensing based in research & development spurs adoption of technology • Does the value of patents sold (or purchased) in the secondary market funnel back to the original entity who performed the research, and thereby spur further R&D? • Originally, ITC focused on threats of foreign competition 19
  20. 20. Policy Objectives of 337 & Licensing Issues • Are there articles to be protected in a licensing DI, and does there need to be? • Has a requirement been read out of the statute? • What connection to a “real” DI exists in licensing? • Do the justifications underpinning 337 make sense in the licensing context, with no connection to protected articles? 20
  21. 21. Disparity of leverage litigating before the ITC? • Licensing entities typically have no products, usually not risk of counter claims or counter suits • Licensing profit from settlements, not market exclusivity. 21
  22. 22. Distinctions between NPEs and PAEs • Distinctions between PAEs and NPEs – Legal – Economic – Is a company who makes products, but not in the U.S., but depends on licensing for a DI an NPE or PAE? • Has the PAE/NPE issue become politicized? • Have any PAEs obtained an exclusion order? • Have any NPEs obtained an exclusion order? 22
  23. 23. High Costs of DI Economic Prong Defenses • Defending against PAE/NPE DI claims – Expensive – Risky – Rarely resolved on summary determination • Procedural solutions? 23
  24. 24. Possible Procedural Solutions: Pre-Institution • Ask Commission allow the ALJ to take evidence on Public interest Issues of licensing DI • Ask Commission find the complaint deficient if a licensing DI is insufficiently supported • Commission could require more details in complaint, possibly supported by third-party affidavits 24
  25. 25. Public Interest Issues Implicated by Licensing DI • Identify injury to the “real” licensing DI • Evaluate nexus to: – licensing – exploitation (revenue driven v. production driven) – articles (emerging or established industry) • Consult with other government agencies responsible for trade policy, protecting competition and jobs in US economy, and protecting consumers. 25
  26. 26. Possible Procedural Solutions • Summary determination often delayed or precluded by unsubstantiated claims of on activities of licensees • requiring subpoenas to third parties • Ask the ALJ to accelerate discovery of claims of investments of licensees, and to stay other discovery until complete 26
  27. 27. Possible Procedural Solutions • Early Summary Determination motions on DI Economic prong issues • Request oral arguments (mini-hearing) • Request an accelerated decision • Require details on allocation of investment per patent; no allocation, insufficient information to show DI. 27
  28. 28. Possible Procedural Solutions • Limiting Response to MSD to evidence set forth in the complaint • Complainants know their own domestic industry • Technical prong and/or other technology-related issues would be minimized, as a pure licensing claim requires no technical prong of DI. 28
  29. 29. Possible Legislative Solutions • Redefine the statute to distinguish between revenue driven and production driven licensing • Mandate the adequacy of monetary damages (eBay) • Irreparable harm + Causal nexus (eBay) 29
  30. 30. Questions/Comments 30