On July 12, 2013, the International Trade Commission (“the Commission”) issued the public version of its opinion reversing ALJ Thomas B. Pender’s finding of no violation of Section 337 in the Initial Determination (“ID”) in Certain Kinesiotherapy Devices and Components Thereof (Inv. No. 337-TA-823).

By way of background, this investigation is based on a December 2, 2011 complaint filed by Standard Innovation Corporation and Standard Innovation (US) Corp. (collectively, “Standard Innovation”) alleging violation of Section 337 in the importation into the U.S. and sale of certain kinesiotherapy devices and components thereof that infringe one or more claims of U.S. Patent Nos. 7,931,605 and D605,779.  See our December 6, 2011 post for more details on Standard Innovation’s complaint.

In the ID, ALJ Pender found that the accused products infringed the asserted claims and that the claims were not invalid.  However, he found that Standard Innovation was unable to meet the economic prong of the domestic industry requirement, and thus there was no violation of Section 337.  See our February 11, 2013 post for more details.  As explained in our March 27, 2013 post, the Commission determined to review the ID in its entirety, requesting briefing on the economic prong of the domestic industry requirement and remedy.  We now provide additional details on the opinion.

Claim Construction

The Commission affirmed the ALJ’s claim construction determinations except for the phrase “generally tear drop shaped.”  In the ID, ALJ Pender determined that this phrase should simply be given its plain and ordinary meaning without limitation, dismissing Respondents’ argument that Standard Innovation had disclaimed bulbous, hook, or round shapes.  The Commission agreed that this phrase should be given its plain and ordinary meaning, and also agreed that Standard Innovation had not disclaimed bulbous or hook shapes.  However, the Commission held that Standard Innovation disclaimed round shapes based on its discussion of the problems with round shapes during prosecution. 

Infringement

Although the ALJ found that Standard Innovation had waived infringement by providing only a cursory page of citations, the Commission disagreed.  The Commission “recognize[d] the importance of the ALJ’s ground rules,” but since infringement was largely uncontested, brief citations to the record were sufficient in this case.  Furthermore, in light of the Commission’s modified interpretation of what shapes could be encompassed by “generally tear drop shaped,” one of Respondents’ products was found no longer to infringe the ‘605 patent.

Validity

The Commission agreed with the ALJ that Respondents had failed to prove anticipation or obviousness by clear and convincing evidence as none of the three references disclosed the preamble limitation of a device “dimensioned to be worn by a woman during intercourse.”   Although Respondents raised a new argument regarding obviousness in their contingent petition for review, the Commission simply noted that “arguments not raised below may not be raised in a petition for review,” and this argument was therefore waived.

Domestic Industry

The ALJ found that the economic prong of the domestic industry requirement was not met, partially because Standard Innovation’s primary argument was that it purchased components for its products in the U.S. (although the products were assembled in China) and the ALJ found that these expenditures did not relate to an investment in plant or equipment by Standard Innovation or its manufacturer.  On review, Standard Innovation urged that foreign production can satisfy the economic prong of the domestic industry requirement if “coupled with activities and investments in the United States.”  This position was supported by the Commission Investigative Staff, who also stated that the ALJ “applied an overly rigid standard in assessing the domestic industry requirement.” 

The Commission reversed the ALJ’s determination that the economic prong was not met, citing case law where purchases from U.S. subcontractors have been allocated to the domestic industry, and holding that Standard Innovation’s investments in its subcontractors and/or manufacturers can be considered to meet the economic prong of the domestic industry requirement.  The Commission also specifically noted that “the reality of today’s marketplace is that many products are assembled overseas.”   

Since the technical prong of the domestic industry requirement was essentially uncontested, the Commission also determined that the technical prong was met.  

Remedy, Public Interest, and Bond

The Commission determined to issue a general exclusion order, noting that Standard Innovation adequately documented the difficulty in identifying the source of infringing goods.  The Commission also held that a cease and desist order directed to the remaining domestic respondents was appropriate, and that these remedies would have no adverse effects on the public health and welfare.  Lastly, the Commission determined that if a bond is set, it should be set at zero percent because the infringing product is actually sold at a higher average price than Standard Innovation’s primary product.