United States: Marine Sonar: Commission Finds Domestic Industry Based On Ongoing Support Of Discontinued Products

Last Updated: May 9 2016
Article by Jessica Roberts, Daniel Muino and Lynn I. Levine

On January 6, 2016, the Commission found a Section 337 violation in Investigation No. 337-TA-921 involving high-resolution sonar devices that commercial fishermen use to scan for fish under their boats. The Commission determined that certain sonar devices imported by Garmin International Inc. and Garmin (Asia) Corp. (collectively, "Garmin") infringe two patents owned by Navico Holding AS and its U.S.-based subsidiary, Navico, Inc. (collectively, "Navico"). The Commission issued cease-and-desist and limited exclusion orders blocking Garmin from importing its infringing sonar devices. The decision may be most notable for its finding that ongoing expenditures (e.g., customer support, updates, and repairs) for discontinued products can satisfy the domestic industry requirement.

Background

The ITC instituted the underlying investigation in July 2014 based on a Section 337 complaint filed by Navico. Certain Marine Sonar Imaging Devices, Including Downscan and Sidescan Devices, Products Containing the Same, and Components Thereof, Inv. No. 337-TA-921. Navico's complaint alleged that Garmin marketed devices capable of generating detailed, picture-like images of underwater topography and structures using the technology described in three Navico patents. The asserted patents were U.S. Patents 8,305,840 ("the '840 patent"), 8,300,499 ("the '499 patent"), and 8,605,550 ("the '550 patent").

The ITC's jurisdiction under Section 337 depends on the complainant establishing that a domestic 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." This requirement is met if there is "(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, or licensing."

Navico alleged that all its DownScan products practiced the '840 patent, but it alleged a domestic industry for the '550 patent based on domestic expenditures between 2009 and the filing of the complaint in 2014 for the design, development, service, repair, and support of its LSS-1 marine sonar product. Although sales of the LSS-1 were discontinued in February 2012, its investments in the LSS-1 product continued after 2012 in the form of technical customer support, warranty and repair work, research and development of software updates, and the sale and support of components for replacing damaged or defective parts.

On July 2, 2015, Administrative Law Judge David Shaw issued a final ID finding no Section 337 violation with respect to all three asserted patents. Specifically, Judge Shaw found that the asserted claims were not infringed and were not invalid for anticipation or obviousness. He also found that the domestic industry requirement for the '550 patent had not been satisfied because investment in the LSS-1 product ended in 2012 when the product was discontinued.

Navico and OUII petitioned for review of certain of the ID's claim constructions and the findings of non-infringement for all three of the asserted patents. On September 3, 2015, the Commission determined to review (1) the ID's construction of the limitation "single linear downscan transducer element" recited in claims 1 and 23 of the '840 patent (and its variants in the '499 and '550 patents); (2) the ID's construction of the limitation "combine" (and its variants) recited in claims 1, 24, and 43 of the '499 patent; (3) the ID's findings of noninfringement with respect to the three asserted patents; (4) the ID's findings of validity with respect to the three asserted patents; and (5) the ID's finding regarding the economic prong of the domestic industry requirement with respect to the '550 patent.

The Commission's Opinion

Infringement and Validity

The Commission determined that Navico proved a violation of Section 337 based on the infringement of claims of the '840 and '550 patents but not the '499 patent.

The Commission modified the ALJ's construction of certain terms in the claims of the asserted patents, including "single linear downscan transducer element" recited in the '840 patent and its variants recited in the '550 and '499 patents. A key issue in claim construction was whether the single linear downscan transducer element extended to multi-crystal transducers. The Commission adopted the following construction:  "a single downwardly pointed transducer that is formed from a single crystal or a plurality of crystals that act simultaneously and in phase as if they were a single crystal." The Commission found Garmin's argument that the crystals must "act as if they were one substantially rectangular monolithic crystal" was not supported by the prosecution history or the specification of the patents.

Based on this modified claim construction, the Commission found that the accused products infringed certain of the '840 patent claims. In turn, Garmin argued that, in light of the claim construction, the '840 patent was invalid as anticipated and obvious. While the Commission found that a "single linear downscan transducer element" was disclosed in the prior art, the Commission found that other elements were not present, and Garmin did not show by clear and convincing evidence that the '840 patent was anticipated. The Commission was also unpersuaded that the '840 patent was obvious in light of the prior art.

Domestic Industry

The parties' arguments on claim construction, infringement, and validity for the '550 patent greatly mirrored the arguments on those issues for the '840 patent. In addition, however, the Commission considered whether Navico had established a domestic industry for the '550 patent, which (unlike for the '840 patent) had been found lacking by the ALJ in the ID. The Commission found that the ALJ erred in holding that investments between 2009 and 2012 could not be credited towards Navico's domestic industry requirement, even if those investments went in part towards a discontinued product. Citing authorities such as Certain Television Sets, Television Receivers, Television Tuners, and Components Thereof (Inv. No. 337-TA-910) ("Television Sets"), the Commission stated that a domestic industry can properly be "based on a complainant's past activities relating to a discontinued product where the complainant has shown continuing qualifying investments." (See previous article on Television Sets here.)

In addition, the Commission found that Navico's expenditures from 2009 to 2014 in the domestic design, development, service, repair, and support of products covered by the '550 patent qualified as a significant employment of labor and capital under subsection 337(a)(3)(B). The ALJ had rejected Navico's post-2012 research and development expenditures because it was not "directly attributable" to the LSS-1. But the Commission found that the case law did not require the complainant to show that the investments are "directly attributable." Citing to Certain Integrated Circuit Chips and Products Containing the Same ("Integrated  Circuit Chips"), the Commission found that investment related to other products in addition to the domestic industry product does not diminish the investment attributable to the domestic industry product.

In addition, the Commission also considered whether Navico's investment in labor and capital under subparagraph (B) was "significant." In answering this question, the Commission noted that the recent Federal Circuit decision in Lelo Inc. v. Int'l Trade Comm'n, 786 F.3d 879 (Fed. Cir. 2015), addressed whether qualitative factors alone are sufficient to satisfy the "significant investment" and "significant employment" requirements of subsections 337(a)(3)(A) and (B). The Commission held that nothing in Lelo requires, as the ID and Garmin suggest, that the complainant's domestic industry investment at the time of the filing of the complaint be increasing compared to past years. The Commission also observed that the complainant in Lelo relied on expenditures on component purchases that represented a "relatively modest proportion of domestic content." In contrast, all of the expenditures relied upon by Navico were attributable to Navico's domestic labor and capital investment.

Under this framework, the Commission found domestic industry under subparagraphs (B) and (C) and did not reach the issue of domestic industry under subparagraph (A).

With respect to the third asserted patent, the Commission determined that Navico had not proven a violation. The Commission adopted on modified grounds the ALJ's construction of the term "combining" (and its variants) recited in the asserted claims of the '499 patent. Under that construction, the Commission determined that the asserted claims are not invalid and not infringed.

Ultimately, the Commission determined that the appropriate remedy is a limited exclusion order and a cease-and-desist order prohibiting Garmin from importing into the United States, or selling or distributing within the United States, certain marine sonar imaging devices, including downscan and sidescan devices, products containing the same, and components thereof that infringe the asserted claims of the '840 and '550 patents.

Subsequent Developments

The Commission's determination has been appealed to the Federal Circuit, and Navico has filed an enforcement complaint with the ITC.

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

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Lynn I. Levine
 
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