ITC Patent Docket Update: Expedited Hearing Set to Investigate Foreign Licensing Company’s Domestic Industry
On October 22, the ITC initiated Active Matrix OLED Display Devices and Components Thereof (Inv. 1225) and took the unusual step of designating the case for early disposition. This mean an administrative law judge will conduct a special hearing and make a determination within 100 days on the issue of whether the complainant satisfies the domestic industry requirement of Section 337. The decision is noteworthy for a few reasons.
The complainant in the case is an Ireland-based patent licensing company called Solas OLED, which was apparently created by Magnetar Capital to assert a portfolio of LED patents purchased from Casio in 2016. Solas is asking the ITC to block imports of various smartwatches, phones, laptops, and televisions made by Apple, Dell, LG, Motorola, Samsung, and Sony.
For domestic industry, Solas is relying on the investments of a third-party licensee, eMagin—a company that manufactures OLED displays in the United States for use in military applications and does not compete with respondents. That license was granted very recently, prompting respondents and Commission staff to question whether Solas’s domestic industry argument depends on counting pre-license investments that are ineligible under Section 337.
Early Disposition Program
In a normal ITC case, there is only one evidentiary hearing conducted late in the investigation, and any contested questions of fact cannot be resolved by the ALJ until after that hearing. So even in cases that hinge on relatively simple threshold issues, the default procedural arrangement requires full discovery, testimony, and briefing from all parties on a host of complex issues. This can be frustrating and wasteful, especially since ITC determinations on patent matters have no preclusive effect in federal court. It also enables gamesmanship by complainants with bad cases seeking to secure licensing settlements through the threat of needlessly costly litigation.
The ITC’s early disposition program was created to conserve party and Commission resources by allowing the adjudication of a single, potentially dispositive issue before committing the parties to a full evidentiary hearing on all claims. Potential issues for early determination include domestic industry, standing, importation, and patentability.
Since it inaugurated the early disposition program in 2013, however, the ITC has been exceedingly reluctant to use it, granting fewer than 2 requests per year on average. So far in 2020, the agency has received 11 requests for early disposition but granted none until now with Active Matrix OLED .
The most common reasons for denying early disposition requests are that the issue is “too complex to be decided within 100 days” or that the identified issue is not dispositive of all claims against all respondents. That’s exactly what happened in the two most recent denials in Artificial Eyelash Extension Systems, Products, and Components Thereof (Inv. 1226) and Routers, Access Points, Controllers, Network Management Devices, Other Networking Products, and Hardware and Software Components Thereof (Inv. 1227).
Twice this year, the Commission also cited the need for “third-party discovery” as a reason to deny an early disposition request. In Mobile Electronic Devices (Inv. 1215), the ITC denied entry into the early disposition program “because the issues raised, and third-party discovery required, may be too unwieldy.” In that case, complainant Maxell named five different licensees in its domestic industry argument, four of which are the U.S. subsidiaries of major multinational device makers with foreign headquarters.
And in Video Processing Devices, Components Thereof, and Digital Smart Televisions Containing the Same, (Inv. 1222), respondent Realtek requested early disposition on whether complainant DivX’s licensee Element satisfied the domestic industry requirement. Even though this case involved only one licensee, the ITC again denied the request “because the suggested issues for resolution appear likely to require significant third party discovery.”
This raised the question of whether the Commission would refuse to conduct early hearings in any case involving domestic industry by subpoena, an increasingly common tactic patent-assertion entities use to commandeer genuine domestic industries, forcing licensees to testify against their will about their U.S. business operations. In many cases, these companies are only licensees because they chose to settle or avoid an infringement lawsuit (like eMagin) or because they had a broad cross-licensing agreement with a previous owner of the patent.
A blanket rule against early disposition requiring third-party discovery would give some of the worst abusers of Section 337 an easy way to immunize themselves from the early disposition program.
By designating Active Matrix OLED for early disposition, however, the ITC has shown that at least some domestic-industry-by-subpoena cases are not “too unwieldy” for the program.