On December 10, 2015, ALJ David P. Shaw issued the public version of Order No. 44 (dated November 19, 2015) in Certain Electronic Devices, Including Wireless Communication Devices, Computers, Tablet Computers, Digital Media Players, and Cameras (Inv. No. 337-TA-952).
By way of background, this investigation is based on a February 26, 2015 complaint filed by Ericsson Inc. and Telefonaktiebolaget LM Ericsson (collectively, “Ericsson”) alleging violation by Apple Inc. a/k/a Apple Computer Inc. of Section 337 in the importation into the U.S. and sale of certain electronic devices, including wireless communication devices, computers, tablet computers, and digital media players that infringe one or more claims of U.S. Patent Nos. 6,633,550, 6,157,620, 6,029,052, 8,812,059, 6,291,966, and 6,122,263 (collectively, “the Asserted Patents”). See our March 2, 2015 and April 2, 2015 posts for more details on the complaint and Notice of Investigation, respectively.
According to the Order, Ericsson filed a motion for summary determination that it had satisfied “the economic prong of the domestic industry requirement under Section 337(a)(3)(A), Section 337(a)(3)(B), and/or Section 337(a)(3)(C).” Ericsson argued that it had made significant investment in plant and equipment and significant employment of labor and capital with respect to articles protected by the Asserted Patents. It also argued that it had made a substantial investment in its U.S.-based licensing activities, and that as a result of its licensing efforts it had licensed its implementation patent portfolio to seven leading industry participants and was involved in numerous ongoing license negotiations.
In response, Apple argued that Ericsson had failed to show any actual investments in domestic industry products and instead relied on investments in a plant (and associated labor) for process nodes making wafers that may result in chips, which may result in components, which may end up in domestic industry products, which may end up in the United States. Thus, Apple argued that there were genuine disputes of material fact for the Asserted Patents including that (1) Ericsson offered no proof that its investments were attributable to alleged domestic industry products; (2) Ericsson had not properly allocated investments and employment to the protected articles; and (3) Ericsson had not shown that such investments and employment were significant. Additionally, Apple noted that Ericsson largely relied on a declaration and late-produced documents that defied Order No. 18, and that once these untimely-produced documents were set aside, the shortcomings with Ericsson’s proof of domestic industry became more apparent. Apple also argued that Ericsson’s licensing activities weighed against a finding of domestic industry.
With respect to plant and equipment (subparagraph (A)), ALJ Shaw found that genuine dispute existed as to whether the investments Ericsson relied on were in the allegedly protected articles and whether the investments were significant. ALJ Shaw stated that while Ericsson’s domestic industry expert relied on a wafer production facility to satisfy the economic prong of domestic industry and analyzed the total investments for each process node size, a process node size only corresponds to the size of the components on the chips, not to any particular end products. ALJ Shaw also noted that Apple’s expert explained that a wafer fabrication facility can manufacture any number of different types of wafers. ALJ Shaw additionally found that genuine issues of material fact existed concerning whether Ericsson’s expert’s analysis using a snapshot of wafer production at a specific point in time provided a sufficient basis to allocate investments in an entire wafer fabrication facility to specific wafers for specific chips. Particularly, ALJ Shaw noted that there was a genuine issue regarding whether the facilities were constructed to make wafers for the production of a particular kind of chip and whether the facilities were devoted to the production of components for use in the protected articles. Accordingly, ALJ Shaw found that Ericsson had not shown it was entitled to summary determination as a matter of law with respect to investments in plant and equipment.
With respect to employment of labor and capital (subparagraph (B)), ALJ Shaw found that there was a genuine issue of material fact as to how many employees in Ericsson’s expert’s analysis could be allocated for the manufacture of the wafers used in the protected articles. Additionally, ALJ Shaw found that a genuine issue of material fact existed as to whether the amount paid in salaries and benefits in view of the total employment of labor and capital and in view of the marketplace represented a “significant” investment. Accordingly, ALJ Shaw found that Ericsson had not shown it was entitled to summary determination as a matter of law with respect to employment of labor and capital.
With respect to Ericsson’s domestic licensing activities (subparagraph (C)), ALJ Shaw found that there were genuine issues of material fact as to whether Ericsson’s investment in the implementation portfolio represented a sufficient nexus to the asserted patents, and whether Ericsson’s litigation-related expenses should be included in the investigation as an investment in the exploitation of the asserted patents. Accordingly, ALJ Shaw found that Ericsson had not shown it was entitled to summary determination as a matter of law with respect to its domestic licensing activities.