United States: ALJ: Complainant Can Rely Entirely On Licensee's Activities For DI Requirement

As a follow up to our previous post, Judge McNamara has issued the public version of her Initial Determination pursuant to the 100-day Pilot Program proceeding on domestic industry in Certain Silicon-On-Insulator Wafers, Inv. No. 337-TA-1025. Judge McNamara held that Complainant Silicon Genesis Corp. has contingently established the economic prong of domestic industry based solely on its licensee's domestic activities.

The Case

On May 26, 2016, Silicon Genesis filed a complaint alleging a violation of Section 337 by Soitec, S.A. pursuant to the importation of silicon-on-insulator wafers that infringe U.S. Patent Nos. 6,458,672 and 6,171,965.

This is the second Section 337 complaint filed by Silicon Genesis against Soitec. In the first investigation, Certain Silicon-On-Insulator Wafers, Inv. No. 337-TA-966, Judge McNamara struck domestic industry evidence that Silicon Genesis produced after the deadline in the procedural schedule (Order 15). With its domestic industry case unsupported by sufficient evidence, on May 18, 2016, Silicon Genesis withdrew its first complaint against Soitec.

Eight days later, Silicon Genesis filed its second complaint against Soitec. The Commission, pursuant to Rule 210.10(a)(l), twice postponed a decision regarding institution of the investigation citing "exceptional circumstances." On October 19, 2016, the Commission determined to institute an investigation. The Commission instructed the presiding ALJ to "hold an early evidentiary hearing, find facts, and issue an early decision, as to whether the complainant has satisfied the economic prong of the domestic industry requirement."

On March 1, 2017, Judge McNamara issued the public version of her Initial Determination ("ID") finding that Silicon Genesis, through its licensee, SunEdison Semiconductor Limited, has contingently established the economic prong of the domestic industry requirement has been met under subsections A, B, and C of the statute. The portions of the ID that address SunEdison's domestic activities are heavily redacted.

An interesting portion of the ID addresses Silicon Genesis' reliance upon its licensee to meet the domestic industry requirement. Soitec argued that Silicon Genesis, as a non-practicing entity, should not be permitted to rely upon the activities of its licensee without that licensee joining the investigation as a co-complainant. The ALJ rejected this argument noting that it is settled ITC law that a complainant can prove compliance with the domestic industry requirement based entirely on a licensee's activities. The ALJ further held that the Commission rules require the owner of the patent at issue to be named as complainant, but that licensees, even those whose activities make up some or all of the domestic industry, need not be a party to the investigation.

Takeaway

Much of the precedent establishing the ability to rely on a licensee for domestic industry holds that the domestic industry runs with the asserted intellectual property and not with the party that brought suit. In the context of the ITC, an administrative agency tasked with protecting the Unites States from unfair trade, this makes sense. But on the other hand, a Section 337 investigation is in many ways an "investigation" in name only. The ITC itself does not initiate an investigation, but rather each investigation is an adversarial proceeding brought by an IP holder. In the context of an adversarial proceeding, requiring a licensee whose domestic industry would ultimately be protected by ITC remedial orders to be a party also makes sense.

For now, it appears to be settled ITC precedent that a complainant that does not practice the asserted patents can meet the domestic industry requirement by relying entirely on the activities of its licensees. Furthermore, a licensee does not need to be a named party in the investigation. Absent the Commission amending its Rules, it does not appear likely that this will change.

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