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.
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
09-Sep-14
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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)
“Domestic Industry” Requirement
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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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09-Sep-14
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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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Overview of “Optical Disc Drives” Decision
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”
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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Overview of “Optical Disc Drives” Decision
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
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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“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
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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Inv. No. 337-TA-874 Decision
“Early Determination” of the
Domestic Industry Requirement
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
ITC Inv. No. 337-TA-874
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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
ITC Inv. No. 337-TA-874
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Conclusion
19 U.S.C. § 1337 (a)(2)
“Domestic Industry” Requirement
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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
Domestic Industry 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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QUESTIONS?
Thank You
Troy Groetken, Raphe, JD, LLM
Shareholder/Board Member
McAndrews, Held & Malloy, Ltd.
+1-312-775-8259
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