United States: Television Sets: Commission Clarifies When Past Domestic Industry Investments No Longer Count And When Post-Complaint Activities May Be Considered

Last Updated: January 4 2016
Article by Rose S. Lee and Lynn I. Levine

The Commission has once again addressed the economic prong of the domestic industry requirement in a final determination issued in Certain Television Sets, Television Receivers, Television Tuners, and Components Thereof (Inv. No. 337-TA-910) ("Television Sets") on October 30, 2015. Notably, the Commission clarified (1) when past investments are no longer relevant and (2) when post-complaint activities are relevant.

Background

On January 28, 2014, Cresta Technology Corporation ("Cresta") filed a Section 337 complaint, alleging infringement of three patents in the importation and sale of certain television sets, television receivers, television tuners, and components thereof. Presiding Administrative Law Judge Dee Lord conducted a hearing in December 2014, and issued the final initial determination ("final ID") on February 27, 2015, finding no violation of Section 337. Specifically, the final ID found that Cresta had failed to satisfy the economic prong of the domestic industry requirement in accordance with 19 U.S.C. § 1337(a)(3) with respect to both of the two remaining patents in the investigation. The final ID also found that some of the accused products infringed claims of both patents in the investigation, and that all asserted claims of one patent and some asserted claims of the other patent were invalid.

On April 30, 2015, the Commission determined to review the final ID in part. This review encompassed the economic prong of the domestic industry requirement as well as issues of patent validity and infringement. However, the Commission only requested additional briefing on questions relating to validity and infringement. The Commission issued the public version of its final opinion on October 30, 2015, terminating the investigation with a finding of no violation of Section 337. (Our prior blog post regarding the Commission's clarification in Television Sets of whether service of the complaint meets the knowledge requirement for contributory infringement can be found here.)

The Economic Prong of the Domestic Industry Requirement

The economic prong of the domestic industry requirement is satisfied when "there is in the United States, with respect to the articles protected by the patent . . . (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." 19 U.S.C. § 1337(a)(3). Subparagraphs (A), (B), and (C) provide alternative bases for satisfaction of the economy prong requirement. With respect to subparagraphs (A) and (B), Cresta relied upon the development and support of its television tuners and, with respect to subparagraph (C), Cresta relied upon engineering and research and development. The final ID held that the evidence relied upon by Cresta to establish its investments in the domestic industry was unreliable and that Cresta's claimed domestic industry ceased to exist at least six months prior to the filing of the complaint.

The Commission affirmed the final ID's determination that the economic prong was not met, both because of the unreliability of Cresta's domestic industry evidence and, independently, because Cresta's alleged domestic industry did not exist at the time the complaint was filed. While Commissioner Rhonda Schmidtlein agreed with the Commission's determination regarding the unreliability of the domestic industry evidence, she took issue with the majority's additional determination that the alleged industry had ceased to exist before the filing of the complaint.

  1. Insufficient Evidence of Investments

The Commission found that Cresta's evidence of payments to domestic suppliers was insufficient to meet the requirements set out by the Federal Circuit in Lelo Inc. v. ITC, 786 F.3d 879 (Fed. Cir. 2015). (Our prior blog post regarding the Lelo decision can be found here.) In Lelo, the Federal Circuit found that it was necessary for the complainant to demonstrate the "share of labor or capital cost attributable solely to purchases made by" the complainant. Id. at 884-85. In Television Sets, no evidence was offered concerning the relevant investments of suppliers in Cresta's products. Television Sets, Comm'n Op. at 64 (Oct. 30, 2015). As to Cresta's own investments, the Commission affirmed the ALJ's findings that the evidence submitted by Cresta was unreliable, noting that "[i]nconsistencies, contradictions and unsupported assertions, such as those discussed by the ALJ, militate against reliance on Cresta's testimony in regard to the alleged investments and allocations." Id. at 65-66.

  1. Failure to Establish that a Domestic Industry Existed at the Time of the Complaint

Cresta alleged that its domestic industry was based on the fabless design, engineering, and support of tuners using the asserted patented technology. The Commission, however, found that the record did not support Cresta's contention that such a domestic industry existed at the time of the filing of the complaint. In particular, the Commission addressed (1) when past investments are no longer relevant and (2) when post-complaint activities are relevant.

  1. When Are Past Investments No Longer Relevant?

In concluding that the existence of a domestic industry had not been shown, the Commission explained that "[p]ast expenditures may be considered to support a domestic industry claim so long as those investments pertain to the complainant's industry with respect to the articles protected by the asserted IP rights and the complainant is continuing to make qualifying investments at the time the complaint is filed." Id. at 68. The Commission found that the evidence did not support Cresta's contention that its activities and investments directed to TV-tuner development and software/firmware support had continued until the filing of the complaint. Rather, as found in the final ID, by the time the complaint was filed, "Cresta's tuner business was in rapid decline . . . and Cresta undertook to end operations and investments in the protected articles." Id. at 68. By that time, "all that remained of the tuner-based business was at best a modicum of sales for products . . . ." Id.

The Commission distinguished the circumstances in the Television Sets investigation from those in past investigations where "the complainant continues to maintain ongoing qualifying activities under section 337(a)(3) at the time the complaint is filed." Id. at 69. Examples cited by the Commission in this regard included Certain Battery-Powered Ride-On Toy Vehicles and Components Thereof, Inv. No. 337-TA-314, Order No. 6 at 18-21 (Dec. 5, 1990) (unreviewed in relevant part), where the Commission held that when a complainant continues its operations and improves its products, past expenditures linked to those products are cognizable for purposes of domestic industry; and Certain Electronic Digital Media Devices and Components Thereof, Inv. No. 337-TA-796, Comm'n Op. at 99-102 (Sept. 6, 2013), where the Commission found a domestic industry existed where complainant had substantial past investments in engineering and research and development related to discontinued protected articles and continued to exploit the patent through further development of existing products at the time of the complaint.

  1. When Are Post-Complaint Activities Relevant?

Generally, a domestic industry must exist or be in the process of being established at the time a Section 337 complaint is filed. Thus, the Commission will only consider evidence regarding domestic industry activities that occur subsequent to the filing of the complaint in extraordinary circumstances, i.e., "when a significant and unusual development has occurred after the complaint has been filed." Television Sets, Comm'n Op. at 56 (Oct. 30, 2015). Extraordinary developments cited by the Commission prompting an analysis of post-complaint activities included bankruptcy and changes in patent ownership, manufacturing, or licensing activity. Id. at 56-57.

The Commission found no significant and on unusual development after the Television Sets complaint was filed that warranted consideration of post-filing activities. Indeed, the significant and unusual development occurred there prior to the filing of the complaint "when Cresta phased out its tuners, shifted its business focus to patent monetization, laid off its staff, and discontinued investments in developing and supporting protected articles." Id. at 73. The Commission deemed Cresta's post-complaint activities to be de minimis, and noted that marketing and sales activities alone cannot satisfy the domestic industry requirement.

  1. Separate Views of Commissioner Schmidtlein

Commissioner Schmidtlein agreed with the Commission's determination regarding the unreliability of the domestic industry evidence and, on that basis, concurred in the Commission's determination that Cresta had not satisfied the domestic industry requirement. However, Commissioner Schmidtlein disagreed with the majority's additional determination that Cresta's sales of domestic industry products at the time of the complaint were not "qualifying activities" that allowed for consideration of Cresta's pre-complaint domestic industry investments. In Commissioner Schmidtlein's view, Cresta's ongoing activities, which included the continued employment of engineers engaged in technical support of domestic industry products, as well as Cresta's sales of those products, were sufficient to allow the Commission to consider the domestic industry investments made prior to the filing of the complaint. In this regard, Commissioner Schmidtlein interpreted prior Commission precedent to permit a finding that a domestic industry existed based on a combination of past activities and some current activities related to the domestic industry. Moreover, Commissioner Schmidtlein maintained that Cresta's shift to a business model focused upon patent monetization, discussed in the majority's opinion, was irrelevant to the question of whether a combination of past and current activities satisfied the domestic industry requirement.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Rose S. Lee
Lynn I. Levine
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions