ITC Patent Docket Update: Early Disposition Requests Filed In Three New Domestic Industry by Subpoena Cases
The purpose of the ITC early disposition program is to save time and resources by resolving an obvious weakness in the complainant’s case before committing the parties to full discovery and an evidentiary hearing on all elements of a Section 337 violation. The agency has said that potentially appropriate issues for early disposition include domestic industry, importation, and standing. The process has also been used to determine whether the asserted patents are directed to ineligible subject matter. If an issue is designated for early proceedings, the administrative law judge is instructed to conduct a special hearing and issue an early determination within 100 days.
In the last five weeks, the ITC has received three requests for early disposition from proposed respondents named in three separate complaints filed by licensing companies hoping to establish domestic industry based on the investments of a third-party licensee. This practice of establishing domestic industry by subpoena—forcing an actual domestic industry to participate in the investigation against their will—is the most common way non-practicing entities gain access to Section 337’s trade-based remedies in their effort to secure outsized licensing royalties through settlement. But the ITC still requires NPE complainants to prove that their licensee actually satisfies the test.
In Video Processing Devices, the complainant is DivX, a video software company that is now owned by SoftBank’s Fortress Investment Group and appears to be primarily in the business of licensing its patent portfolio. DivX’s Section 337 complaint argues that a domestic industry exists because of the investments of Element, a licensee that assemble televisions in the United States. Respondents include chipmakers Realtek and MediaTek as well some smart TV brands (LG, Samsung, and TCL) that use those chips.
In a request for early disposition on the issue of domestic industry, Realtek claims that Element’s assembly operations are a minimal “screwdriver operation” and that Element actually imports all the key components necessary to practice the patents. Those components, Realtek notes, are designed and manufactured abroad by the respondents.
In Active Matrix OLED Display Devices, an Ireland-based patent assertion entity is seeking to block imports of various consumer devices made by Apple, Dell, LG, Motorola, Samsung, and Sony. This is the fourth ITC complaint filed in the last two years by an offshore entity associated with the hedge fund Magnetar Capital. The licensee relied on for domestic industry is a U.S. company called eMagin that makes OLED displays in the United States for use in military applications.
Multiple respondents filed requests for early disposition on the issue of domestic industry, noting that the license agreement between the complainant and eMagin was completed “fairly recently.” Because any investments made by the licensee prior to the completion of a license do not count, respondents argue the complainant is unlikely to be able to prove domestic industry.
And in Routers, Access Points, Controllers, Network Management Devices, Other Networking Products, and Hardware and Software Components Thereof, the ITC is being asked to block products made by CommScope, HP, and Netgear. The complainant is Q3, a subsidiary of IP Edge, an impressively prolific patent assertion entity. The asserted patents are part of a group of at least 50 U.S. patents IP Edge purchased from Germany-based Siemens in late 2018. That purchase included a license-back provision, which the complainant is relying on to use Siemens as a licensee for domestic industry purposes.
In their request for early disposition on the issue of domestic industry, respondents take issue with the lack of evidence presented in the complaint regarding Siemens’s investments:
Q3’s whole domestic industry case is based on publicly available, online information. Siemens provided no information to assist Q3 in setting out a claimed domestic industry, and there is no evidence that Siemens is willing to cooperate in doing so; it is not clear that Siemens is even aware of the Complaint. The Complaint does not include a declaration or any sort of verification to confirm the veracity of the domestic industry claims. Q3’s domestic industry allegations are simply conjecture, and it is impossible to have any assurance that Q3 has, or can even ever prove up, a domestic industry.
Unfortunately for all these respondents, the Commission has demonstrated a strong aversion to designating cases for early disposition. Only 2 early proceedings have been initiated at the ITC in the last two years, in response to 17 requests. And there has not been much guidance from the Commission on what types of cases or issues it will be willing to use the program for. The most common reason given for denying a request is short and vague: “because the issues raised may be too complex to be decided within 100 days of institution.”
What’s more, the Commission recently signaled that domestic industry by subpoena cases may all be ineligible for early disposition. In its most recent denial of an early disposition request—in Mobile Electronic Devices (Inv. 1215)—the Commission’s order specifically mentioned “third-party discovery” as a reason why the case “may be too unwieldy to resolve within 100 days.”
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