Addressing the “substantial investment” aspect of the domestic industry requirement under § 337, the U.S. International Trade Commission (ITC) issued a public version of a final opinion, reversing an administrative law judge’s (ALJ’s) initial determination concerning domestic industry, and finding that the Complainant Rambus did not meet its burden under 19 U.S.C. 1337(a)(3)(C).  In re Certain Semiconductor Chips and Products Containing Same, Inv. No. 337-TA-753 (ITC, Aug. 17, 2012).

In this investigation, Rambus relied on its total investments in its entire patent licensing program pursuant to 1337(a)(3)(C).  The ITC found that Rambus did not provide “sufficient evidence for us to identify or reasonably estimate the portion of its overall investments in licensing that have a nexus to the asserted patents, and, accordingly, that there is also insufficient evidence for the Commission to determine whether Rambus's relevant licensing investments are ‘substantial.’”  The ITC opinion noted that “[t]he total amount of licensing expenditures and total number of licensing-related employees … does not allow the Commission to qualitatively or quantitatively determine what portion of the [dollar amount] expended by Rambus, or what portion of the expenses associated with the activities of the 30 Rambus employees that work on the overall licensing program, could be allocated in some fashion to licensing the [asserted] patents.”

The ITC rejected the ALJ’s approach of using the royalty revenues derived from the licensed portfolios that included the asserted patents as circumstantial evidence of Rambus’ investments.  In particular, the ITC declined to adopt the reasoning set forth in the ALJ’s determination, which relied entirely on the relative amount of Rambus’s licensing revenues and the number of licenses executed as an adequate proxy for the “investments” made in licensing the asserted patents.  Although the ITC recognized that licensing revenues can indeed be circumstantial evidence used to support a domestic industry, the ITC noted that Rambus’ licensing revenues for the asserted patents “do not constitute the investment[s]” themselves.  Furthermore, while mathematical precision was not required, “only Rambus was in a position to come forth with some analysis of its own licensing operations from which its investments could be apportioned to the [asserted] patents,” and the ITC found that Rambus did not meet its burden.

The Commission acknowledged that “Rambus was not required to provide a precise allocation of its licensing investments on a patent-by-patent basis in this investigation in order to make a sufficient evidentiary showing,” but nonetheless found that it could not determine “what portion of the [amount] in total licensing expenditures incurred by Rambus, or what portion of time or expenses incurred by the 30 Rambus employees, might be allocated to the [asserted] patents.”

Practice Note:  In a prior investigation involving Rambus (337-TA-661), the Commission chose not to review the ALJ’s determination finding that Rambus had satisfied the domestic industry requirement.