IP Litigation Before the ITC IP... · 09-Sep-14 1 IP Litigation Before the ITC An Overview of...

09-Sep-14

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IP Litigation Before the ITC

An Overview of §1337(a)(3)(C) and the

“Domestic Industry” Requirement

Troy A. Groetken, RPh, JD, LLM

Shareholder/Board Member

McAndrews, Held & Malloy, Ltd.

[email protected]

Troy is a shareholder with McAndrews, Held & Malloy and over 17 years of experience in the intellectual

property field and over 20 years of experience in his technical discipline.

As a registered U.S. patent practitioner, Troy regularly counsels international and Fortune 100 and 500

clients regarding advanced patent litigation and procurement matters; analyzes and implements global

licensing programs coordinated with client-centered business modeling; addresses complex global

intellectual property transactional issues, including due diligence analysis and valuation; and prepares

freedom to operate and/or invalidity opinion strategy with a litigation focus.

Recent representative cases in which Troy has been involved include:

•Polyguard Products, Inc. v. W R. Meadows, Inc., U.S.D.C. N.D. TX, 3-11-CV-0391-L

(2/28/11 – 03/2012)

•Shire LLC v. Travis C. Mickle, Ph.D. and KemPharm, Inc., U.S.D.C. W.D. VA, 7:10-CV-00434

(09/29/10 – 05/12/12)

•Bausch & Lomb, Inc. v. CIBA Vision Corp., U.S.D.C. W.D. NY, 6:01-cv-06540-DGL-MWP

(07/14/04 – 11/06)

•Johnson & Johnson Vision Care, Inc. v. CIBA Vision, U.S.D.C. M.D. FL, Jacksonville Division,

3:03-cv-00800 (09/17/03 – 08/27/04)

•CIBA Vision – Wesley Jessen Corp. v. Bausch & Lomb, Inc., U.S.D.C. DE, 01-294 (RRM)

(5/31/01 – 5/09/05)

•CIBA Vision Corp. v. Bausch & Lomb, Inc., U.S.D.C. N.D. GA, Gainesville Div., 2:99-CV-0034

(03/08/99 – 08/27/04)

Troy was recently selected by his peers for inclusion in the 2015-2012 editions of “The Best Lawyers in

America” and was also selected as a “Rising Star” by the Illinois Super Lawyers independent survey for

2008 and 2009. Further, in 2009, Troy was selected by his peers as one of 40 Illinois Attorneys Under

Forty to Watch, which is an independent selection process conducted by Law Bulletin Publishing.

Troy A. GroetkenShareholder

Phone: 312.775.8000 Fax: 312.775.8100

Email: [email protected]

Education

Drake University

B.S., Pharmacy, cum laude, 1994

Drake University, J.D., cum laude, 1997

John Marshall Law School

LL.M., Intellectual Property Law, with

Honors, 1998

Bar Admissions

U.S. District Courts for the Northern District of

Illinois and the Southern District of Iowa

U.S. Court of Appeals for the Federal Circuit

U.S. Supreme Court

Registered to practice before the U.S. Patent

and Trademark Office

Core Experience

Patent Litigation

Global Patent Portfolio Management

Complex Global IP Transactions/Licensing

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Overview of Presentation

The Section 337 Investigation: Domestic Industry

Requirement Overview

A Discussion of Recent ITC Decisions Regarding “DI”

Requirement

– The “InterDigital Communications” decision

– The “Optical Disc Drives” decision

– The “Early DI Determination-Inv. No 337-TA-874” decision

Conclusion

Questions

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Section 337

19 U.S.C. § 1337 (a)(2)


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Domestic Industry Requirement

– Complainant must demonstrate that there exists an industry in the

U.S. exploiting the patent-in-suit

– Two elements:

• (1) “Economic prong,” and

• (2) “Technical prong”

“. . . only if an industry in the United States, relating to

the articles protected by the patent, copyright, trademark,

mask work or design concerned, exists or is in the process

of being established.” 19 U.S.C. § 1337(a)(2)

§337 Investigations – “DI”

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Economic Prong

– Is there an industry in the U.S. to protect?

Technical Prong

– Does the U.S. industry practice the patent?

§337 Investigations – “DI”

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Satisfying the Economic Prong

A complainant satisfies the economic prong by demonstrating that there

exists in the United States with respect to the products protected by the

asserted patent(s):

(A)significant investment in plant and equipment;

(B)significant employment of labor or capital; or

(C)substantial investment in the exploitation of the asserted patents through

engineering, research and development, or licensing.

Certain Optical Disc Drives, Components Thereof, & Prods. Containing Same, Inv. No. 337TA-897, Order No. 95 (July 17, 2014) (Lord, ALJ) ("Optical Disc

Drives"); § 1337(a)(3)(A)-(C).

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Satisfying the Technical Prong

A complainant satisfies the technical prong by

demonstrating that its own products, or the products of

one or more of its licensees, practice at least one claim

of the asserted patent(s).

Certain Optical Disc Drives, Components Thereof, & Prods. Containing Same, Inv. No. 337TA-897, Order No. 95

(July 17, 2014) (Lord, ALJ) ("Optical Disc Drives").

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InterDigital Communications Decision

19 U.S.C. § 1337 (a)(3)(C)

“Domestic Industry” Requirement & NPEs

The InterDigital Communications Decision:

Satisfying the Economic Prong by NPEs

i.NPEs/PAEs often base the domestic industry requirement under § 337

based upon the activities of their licensing and/or licensees’ production of

licensed articles

ii.The Federal Circuit, in InterDigital Communications held, “As long as the

patent covers the article that is the subject of the exclusion proceeding, and

as long as the party seeking relief can show that it has a sufficiently

substantial investment in the exploitation of the intellectual property to satisfy

the domestic industry requirement of the statute, that party is entitled to seek

relief under section 337.”

InterDigital Communications, LLC v. International Trade Commission, 707 F.3d 1295 (Fed. Cir. 2013); Top 10 ITC Developments of 2013,

http://www.law360.com/articles/497526.

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Satisfying the Economic Prong

by NPEs Continued

The Court based its holding upon InterDigital’s substantial investment in

licensing activities:

i. approximately $7.6 million in salaries and benefits for employees

engaged in licensing activities in the United States

ii. receipt of almost $1 billion in revenue from patents-in-suit based

portfolio licenses).

InterDigital illustrates how NPEs/PAEs can satisfy the economic prong of

§337 based solely upon a revenue driven patent portfolio licensing campaign

and the investments of their licensees

InterDigital Communications, LLC v. International Trade Commission, 707 F.3d 1295 (Fed. Cir. 2013); Top 10 ITC Developments of 2013,

http://www.law360.com/articles/497526.

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BUT WAIT,

Contrast InterDigital Communications with

Optical Disc Drives

Can NPEs/PAEs satisfy the economic prong

under §1337(a)(3)(C) based solely upon the

investments of their licensees?

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Optical Disc Drives Decision

19 U.S.C. § 1337 (a)(3)(C)

“Domestic Industry” Requirement & NPEs

Overview of “Optical Disc Drives” Decision

In Optical Disc Drives, ALJ Lord recently held:

“[a] purely revenue-driven nonpracticing entity did not

prove that it satisfied the domestic industry requirement,

because it relied solely on the activities of its licensees

without also proving that it exploits the asserted patents

under § 1337(a)(3)(C).” (emphasis added)

Certain Optical Disc Drives, Components Thereof, & Prods. Containing Same, Inv. No. 337TA-897, Order No. 95

(July 17, 2014) (Lord, ALJ) ("Optical Disc Drives").

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ALJ Lord based her decision upon the following:

i. The complainant, an NPE called Optical Devices LLC, "exists

solely" to engage in revenue-driven licensing practices

ii. The business plan of Optical Devices LLC “lacked any discussion

of production-driven licensing”

iii. The NPE’s licenses with Sony and Sharp were “unambiguously

revenue driven in nature and have no relationship of any kind to

exploitation of the patented technology through production”


Drives").

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ALJ Lord then reasoned:

i.a complainant who seeks to establish a DI based solely on revenue-driven licensing

must proceed under subsection (C), which explicitly references licensing, as opposed to

subsections (A) and (B), which make no mention of licensing

ii.licensing can form the basis of a DI under subsections (A) and (B) only where the

patentee's licenses are related to product development

iii.the legislative history of §1337 confirms subsection (C) was enacted by Congress in

1988 to protect entities seeking to exploit patented technology

iv.reasoning is in accord with the Commission's opinion in Certain Multimedia Display &

Navigation Devices, Inv. No. 337-TA-694 (Aug. 8, 2011), which [per ALJ Lord] requires

revenue-driven licensing entities to rely also on their own patent-related expenditures


Drives").

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“Optical Disc Drives” Potential Effects

Upon NPEs

If ALJ Lord’s ID in Optical Disc Drives is affirmed by the Commission,

such an outcome would continue the trend of recent decisions

heightening the DI requirement for NPEs/PAEs

An affirmance by the Commission would also potentially stifle ITC

filings by NPEs/PAEs

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Proving the Economic Prong of DI

Practical Guidance

i. A purely revenue-driven nonpracticing entity MAY NOT satisfy

the domestic industry requirement based solely on the activities

of its licensees

ii. A purely revenue-driven NPE/PAE MAY HAVE to prove that it

exploits the asserted patents under § 1337(a)(3)(C)

iii. The Optical Disc Drives decision is an ID by an ALJ and not a FD

by the Commission

iv. The Optical Disc Drives decision runs counter to the InterDigital

decision of the Federal Circuit

v. The economic prong of the DI requirement continues to receive a

higher scrutiny at the ITC


Drives").

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Inv. No. 337-TA-874 Decision

“Early Determination” of the


The

“Early ‘DI’ Assessment” Decision

In ITC Investigation No. 337-TA-874, the ITC

Commission requested the ALJ to issue an initial

determination within 100 days of the investigation’s

institution assessing if the NPE complainant met the

economic prong of the domestic industry requirement.

(emphasis added)

ITC Inv. No. 337-TA-874

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The

“Early ‘DI’ Assessment” Decision Continued

ALJ Initial Determination, “ID”, finding 1: the Commission lacked authority

to require the early assessment of the economic prong of the DI

requirement.

The ALJ ID finding 2: the complainant (an “NPE”) failed to satisfy the

economic prong through its own or its licensees activities.

ITC Inv. No. 337-TA-874 21

The

“Early ‘DI’ Assessment” Decision Continued

Commission, Final Determination, “FD”, Finding 1: Commission has

authority to require early assessment of the DI requirement by the ALJ

Commission, FD, Finding 2: An early assessment of the economic prong

of the DI requirement is helpful and dispositive

Commission, FD, Finding 3: Affirmed the ALJ’s finding of no domestic

industry requirement by the NPE being met


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The “Early ‘DI’ Assessment” Decision

Practical Guidance

The Commission can require an ALJ to make an “early determination”

of Complainant meeting the DI requirement

The “early determination” of the DI requirement is substantive and

dispositive

An “early determination” of the DI requirement offers ITC respondents

an opportunity for early resolution of an ITC Complaint due to NPE

petitioner’s inability to satisfy the economic prong of the DI

requirement


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Conclusion

19 U.S.C. § 1337 (a)(2)


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Conclusion: Practical Guidance

i.The Commission can require an ALJ to make an “early

determination” of Complainant meeting the DI requirement

ii.An “early determination” of the DI requirement offers ITC

respondents an opportunity for early resolution of an ITC Complaint

due to NPE petitioner’s inability to satisfy the economic prong of the

DI requirement

iii.A purely revenue-driven NPE MAY NOT satisfy the domestic

industry requirement by relying solely on the activities of its licensees

without also proving that it exploits the asserted patents under §

1337(a)(3)(C)

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Why Choose the ITC as a Forum?

- ITC vs. District Court

ITC

Jurisdictional:

– (1) name multiple respondents (domestic/foreign)

– (2) in rem jurisdiction

Importation Requirement


Complaint must lay out fundamental initial

infringement: detailed pleading

Expedited proceedings –

– Usually 12-16 months

– No counterclaims by respondents

– Discovery:

• (1) nationwide subpoena power

• (2) discovery against foreign respondents

• (3) sanctions available against foreign

respondents who fail to comply with discovery

No jury

“Science” Savvy ALJs

No Monetary Damages

Exclusion orders enforced by U.S. Customs

District Court

Jurisdictional:

– (1) potential difficulty naming/joining multiple

defendants

– (2) stay potential in light of related ITC proceeding

No importation requirement

No domestic industry requirement

Complaint need not lay out fundamental initial

infringement: notice pleading

Lengthy proceedings

– discovery process

– time to decision

– appellate process

Jury

Costly

Potential “science” teaching of jury/bench

Monetary Damages

Ability to seek injunctive relief

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09-Sep-14

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QUESTIONS?

Thank You

Troy Groetken, Raphe, JD, LLM

Shareholder/Board Member

McAndrews, Held & Malloy, Ltd.

[email protected]

+1-312-775-8259

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