The Federal Circuit's recent affirmance of the Commission's Final Determination in Spansion, Inc. v. International Trade Commission, Appeal Nos. 2009-1460, -1461, -1462, -1465, 2010 U.S. App. LEXIS 25900 (Fed. Cir. December 21, 2010) ("Spansion v. ITC, 2010 U.S. LEXIS 9311 (Nov. 29, 2010) (No. 10-290).") sets forth the various appellate standards of review for a wide variety of issues arising from administrative litigation of a patent dispute by the U.S. International Trade Commission ("ITC") under Title 19, Section 1337 ("Section 337 litigation"). The opinion outlines the standard for reviewing petitions to stay the ITC proceedings (or to vacate an ITC order denying a stay), petitions to reverse ITC claim construction, infringement, and validity determinations, petitions to stay ITC's remedial determinations pending appellate review, and petitions to reverse the ITC's public interest analysis and remedial determinations. Practitioners may find the opinion a useful reference for the wide variety of appellate issues that may arise in an ITC adjudication, both during the ITC case and after the ITC has completed a case. As more fully explained below, the opinion specifically addresses:
- denying a petition for a writ of mandamus to vacate the Commission's denial of a stay of the ITC proceeding pending reexamination in the United States Patent & Trademark Office ("USPTO");
- denying a stay of the limited exclusion order issued by the Commission pending appeal to the Federal Circuit;
- affirming the Commission's determination that the asserted patent claims are not invalid for indefiniteness;
- affirming the Commission's construction of the patent claim limitation "bonding wires extending downwardly alongside said edges of said chip" to embrace conventional bonding wires extending up, out and down;
- affirming the Commission's reliance upon industry-accepted modeling and expert testimony to establish direct infringement;
- affirming the Commission's finding of contributory infringement because: 1) the Federal Circuit stated that evidence showed the accused semiconductor chip packages are mounted in printed circuit boards into products that directly infringe; 2) there is no dispute that the accused semiconductor chip packages have been imported, sold for importation or sold after importation in the U.S. by or on behalf of Respondents; 3) the Federal Circuit stated that evidence also showed that the accused semiconductor chip packages did not have substantial non-infringing uses; and 4) the Commission's presumption of the requisite knowledge of contributory infringement was not erroneous;
- affirming the Commission's finding that two prior art patents did not anticipate the asserted claims under 35 U.S.C. §102(e) because the claimed inventions were conceived before the reference patents were filed; and
- affirming the Commission's issuance of a limited exclusion order and finding that the Commission's action was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law as the Commission properly considered the public interest factors prior to issuing the exclusion order.
The impact of the Federal Circuit's handling of each of these important issues on practice and procedure before the ITC in Section 337 investigations is discussed in more detail below. The Federal Circuit applied de novo review to the Commission's legal determinations on the issues of claim construction, namely indefiniteness and the meaning of the term "extending downwardly alongside", and conception, which is a question of law based on factual underpinnings; reviewed the remaining factual findings, including on the issues of direct and contributory infringement, for substantial evidence; and reviewed the Commission's action in awarding injunctive relief as to whether it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
The Federal Circuit noted that the ALJ, in the Initial Determination, and the Commission, in the Final Determination, came to contrary conclusions on several technical issues and ultimate conclusion. However, the Federal Circuit stated that "we do not 'review' the correctness of the ALJ's initial decision or the correctness of the Commission's 'reversal'" and that on appeal the Federal Circuit "must review the final determination of the Commission" under the Administrative Procedure Act ("APA") where factual findings, such as its finding of infringement, are reviewed for substantial evidence. While the ALJ's opinion may be probative, the Federal Circuit stated that "this court may not substitute its judgment for the Commission's final determination on the ground that the court believes the ALJ's. . . review is 'more reasonable.'" Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *35-36.
Complainant Tessera, Inc. ("Tessera") filed a Complaint with the ITC on April 17, 2007 under Section 337 of the Tariff Act of 1930, 19 U.S.C. §1337(a)(1)(B), alleging that seven Respondents infringed U.S. Patents Nos. 5,852,326 ("the '326 patent") and 6,433,419 ("the '419 patent") through the importation for sale of certain semiconductor chips or products containing such chips. Tessera named as Respondents Spansion, Inc. and Spansion, LLC (collectively, "Spansion"); Freescale Semiconductor, Inc. ("Freescale"); ATI Technologies, ULC ("ATI"); STMicroelectronics N.V. ("STMicro"); Qualcomm, Inc. ("Qualcomm"); and Motorola, Inc. ("Motorola"). Motorola subsequently settled its dispute with Tessera and was dismissed from the case. All other Respondents appealed the Commission's Final Determination to the Federal Circuit.
The dispute centered around Respondents alleged direct infringement of the '326 patent and contributory infringement of the '419 patent through the importation and sale of semiconductor chip packages, as well as whether the asserted claims were invalid for indefiniteness and anticipation under 35 U.S.C. §102(e). The Federal Circuit affirmed the Commission's Final Determination in all respects, upholding the validity of the asserted claims, finding direct infringement of the '326 patent and contributory infringement of the '419 patent, and issuing a limited exclusion order.
Denying Stay Of ITC Proceeding Pending Reexamination
Based on an ex parte reexamination requested by a non-party and granted by the USPTO before Tessera filed its Complaint in the ITC, Respondents filed a joint motion to stay the ITC proceedings pending the reexamination. The ALJ granted the motion but was reversed by the Commission which denied Respondents' stay motion. Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-605, 2008 WL 2223426 (ITC May 27, 2008). Respondents then sought a writ of mandamus from the Federal Circuit to vacate the Commission's denial. The Federal Circuit denied the petition because petitioners had not shown that their right to the writ was clear and indisputable and because the Commission's explanation, "that reexamination proceedings were at an early state, that the reexamination proceedings might not reach completion before patents' expiration, and that the Commission investigation was at an advanced stage," was a sufficient basis for denial of a stay. Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *19.
Denying Stay Of Limited Exclusion Order Pending Appeal
Respondents Spansion and Freescale sought a stay pending appeal to the Federal Circuit of the Commission's limited exclusion order. The Federal Circuit denied that motion, concluding that Respondents Spansion and Freescale had neither met their burden of showing a strong likelihood of success on the merits nor shown that the harm factors militated in movant's favor. Spansion, Inc. v. Int'l Trade Comm'n, Nos. 2009-1460, -1461, -1462, -1465, 2009 WL 2876448 (Fed. Cir. Sept. 8, 2009).
Affirming Commission's Determination That The Asserted Claims Are Not Invalid For Indefiniteness
The Federal Circuit addressed the issue of whether the asserted claims of the '326 and '419 patents are invalid because the claimed "moveable" limitation is indefinite based on the ALJ's interpretation of the movable limitation, adopted by the Commission. The ALJ's construction of the "moveable" limitation required that "in the operation of the assembly, the terminals are capable of being displaced relative to the chip by external loads applied to the terminals, to the extent that the displacement appreciably relieves mechanical stresses, such as those caused by differential thermal expansion which would be present in the electrical connections absent such displacement." Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *23.
"Indefiniteness requires a determination whether those skilled in the art would understand what is claimed." Id. at *22, quoting, Enzo Biochem, Inc. v. Applera Corp., 599 F.3d 1325, 1332 (Fed. Cir. 2010). In addressing this issue, the Federal Circuit applied several fundamental principals of the law of claim definiteness.
First, the Federal Circuit rejected Respondents argument that the claims do not provide a way to determine how much movement constitutes infringement, finding that the patent specification provides guidance on both the mechanical stresses that cause the problem and the kind of movement that relieves those stresses. The Federal Circuit also relied upon the expert testimony of both Complainant and Respondents that one of ordinary skill in the art would have been able to determine the boundaries of the claims. For example, Respondents expert stated that he was "able to conduct a noninfringement analyses" and that he was "able to find out the movement due to external forces alone." Id. at *24-26.
Moreover, the Federal Circuit found that the claims were intended to cover the use of the invention with semiconductor packages made of a number of materials, each having different coefficients of thermal expansion and differing thermal expansion rates. Thus, the Federal Circuit concluded that interpreting the claimed term "moveable" in terms of appreciable relief of mechanical stress is as precise as need be and "reasonably apprise[s] those skilled in the art both of the utilization and scope of the invention." Id. at *27, quoting, Shatterproof Glass Corp. v. Libbey-Owens Ford Co., 758 F.2d 613, 624 (Fed. Cir. 1985).
Second, the Federal Circuit stated that whether a patent clearly differentiates itself from specific prior art "is an important consideration in the definiteness inquiry." Id. at *27-28, quoting, Halliburton Energy Servs., Inc. v. M-I LLC, 514 F.3d 1244, 1252 (Fed. Cir. 2008). The Federal Circuit found that based on arguments made to distinguish the prior art, the "prosecution history makes clear that claimed movement is limited to movement caused by external loads as opposed to movement caused by internal loads." Id. at *28.
Third, although determining whether claimed movement was present in the accused packages required an expert using detailed computer simulations, this alone does not indicate that the claims are indefinite. The Federal Circuit held that "[t]he difficulty or complexity of the infringement analysis does not necessarily speak to whether a claim is definite or not." Id. at *29.
Affirming Commission's Construction Of The Claim Limitation "Extending Downwardly Alongside"
The Federal Circuit affirmed the Commission's construction of the claim limitation "bonding wires extending downwardly alongside said edges of said chip" included in claim 1 of the '326 patent. This limitation was construed to mean "along the side of the semiconductor chip, with the caveat that one of ordinary skill in the art would understand that through the wire bonding process, the bonding wires may extend up, outward and then downward toward the backing element." Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *29-35.
This construction was based on the patent specification's description of the bonding wires as conventional and the understanding of one of skill in the art that the conventional wire bonding process may cause bonding wires to extend up, out, and then down. The Federal Circuit found that the specification discloses only conventional wires that are connected between elements using conventional wire bonding process and that Figure 14 demonstrates conventional bonding wires extending up, out, and then down. Id. at *31-32.
The Federal Circuit also rejected Respondents argument that the inventors disclaimed bonding wires not in close proximity to the semiconductor chip in the prosecution of the '159 parent patent because the '159 patent claims disclose leads and flaps rather than bonding wires for electrically connecting one side of the semiconductor chip to the other. Thus, the Federal Circuit held that any disclaimers in the '159 patent prosecution directed to specific claim terms "do not apply" to the '326 patent which uses different language. Id. at *33-34, citing, Saunders Group, Inc. v. Comfortrac, Inc., 492 F.3d 1326, 1333 (Fed. Cir. 2007) ("When the purported disclaimers are directed to specific claim terms that have been omitted or materially altered in subsequent applications (rather than to the invention itself), those disclaimers do not apply.") The Federal Circuit further held that the inventor's statement during prosecution of the '159 patent "was not sufficiently clear to establish that a disclaimer occurred." Id. at *34-35, citing, Omega Eng'g, Inc. v. Raytek Corp., 334 F.3d 1314, 1325 (Fed. Cir. 2003) ("To balance the importance of public notice and the right of patentees to seek broad patent coverage, we have thus consistently rejected prosecution statements too vague or ambiguous to qualify as a disavowal of claim scope.")
Affirming Commission's Finding Of Direct Infringement
The direct infringement issue with respect to both the '326 and '419 patents was narrowed by the Court to a single question of fact: whether the accused products meet the moveable limitation found in all the asserted claims of both patents. The dispute centered upon two different testing models and a "Moiré" analysis to validate the testing models performed by Complainant's expert, which were interpreted differently by the ALJ and the Commission, and the Commission's findings were subsequently reviewed under the substantial evidence standard by the Federal Circuit. Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *36-47.
The ALJ found that Test 1 was ineffective to demonstrate that the accused products practiced the claimed invention because Complainant's expert "could not quantify the changes in internal behavior of the baseline properties due to his substitutions of materials and their corresponding properties." The ALJ also found that Test 2 did not demonstrate the claimed movement due to external loads because Complainant's expert did not: (1) quantify the margin of error inherent in his assumption of linearity; (2) measure displacement at the top of the solder balls but instead measured displacement at the bottom of the solder balls; and (3) Test 2 did not show how much of the total displacement was due to "CTE matching" as opposed to external forces and therefore would not show appreciable stress relief. Finally, the ALJ found that the Moiré analysis did not appropriately validate the testing models because it was performed over a narrower temperature range than such models tested and it could not distinguish claimed movement from other movement. Id. at *37-38.
The Commission agreed with the ALJ that Test 1 was defective because of inability of Complainant's expert to determine how much movement was due to "CTE matching" and how much, if any, was due to external loads. However, the Commission stated that the ALJ's criticism of Test 2 was misplaced because Respondents expert acknowledged the appropriateness of using the linearity assumption and there is no evidentiary support for the conclusion that the linearity assumption is inherently flawed. The Commission also decided that it was unnecessary to validate Test 1 or Test 2 with the Moiré analysis, but stated further that the Moiré analysis provided additional evidence that the methodology of Test 2 was accurate. Id. at *38-40.
On appeal, Respondents asserted that Test 2 was technically flawed because: (1) loads were applied at the bottom of the solder balls instead of the top; (2) the Commission improperly assumed that all observed stress relief was attributed to claimed movement; (3) the linearity assumption was a fatal defect; and (4) Test 2 was inherently unreliable because it was used only for the purpose of legal proceedings. Id. at *40.
The Federal Circuit stated that it was not unreasonable for the Commission to conclude that, since it was undisputed that the Printed Circuit Board ("PCB") applies all of its force to the bottom of the solder balls, Complainant's expert properly simulated the external load being applied to the packages by determining displacement at the bottom of the solder balls, at least some of which is transferred to the terminals. The Federal Circuit also concludes that because the claim construction did not require quantifying the amount of the external load, Complainant's expert's linearity approximation was sufficient to show infringement. The Federal Circuit further ruled that the Commission's thorough analysis of the expert evidence and finding that Test 2, based on industry-accepted modeling, was reliable evidence of infringement, was not invalidated simply because the test model was specifically tailored to the unique claim construction at issue. Id. at *43-44.
In addition, the Federal Circuit found that it was not improper for the Commission to rely on Test 2 as independent evidence of infringement. Test 2 was not simply a confirmation of Test 1. The Commission relied on Complainant's expert's testimony that he believes the results of his second testing method show infringement. The Federal Circuit further found that there was substantial evidence supporting the Commission's finding that the Moiré analysis properly validated the results of Test 2. Id. at *46-47.
One further argument presented by Respondents was that Complainant failed to show by a preponderance of the evidence that the 52 chosen models used in Test 1 and Test 2 were representative of all the accused products. The Federal Circuit found that substantial evidence supports the ALJ's finding adopted by the Commission that the modelled and non-modelled products operate similarly with respect to the claimed invention, including detailed evidence describing the model selection process based on parameters particularly important to terminal displacement and based on selecting packages that have values of those parameters that are at or near the extreme among the pool of accused products to fairly represent the entire pool of accused products. Id. at *41-42.
Affirming Commission's Finding Of Contributory Infringement
The issue of contributory infringement with respect to the '419 patent was preserved for appeal because the Commission investigative attorney preserved the issue in his post-hearing brief. Initially, the ALJ found that Complainant Tessera had waived any argument that the accused products indirectly infringe the asserted patents. On review, the Commission "reversed the finding of waiver because the commission investigative attorney preserved the issue in his post-hearing brief." Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *47-48.
The Federal Circuit then went on to agree with the Commission's findings that "Tessera had shown all three elements necessary for a finding of contributory infringement": 1) the Commission found that "the evidence shows that Motorola incorporates the accused devices into its products" and thus directly infringes the '419 patent; 2) the Commission stated that "[t]here is no dispute that the accused products have been imported, sold for importation, or sold after importation in the United States by or on behalf [of] all of the Respondents"; and 3) the Commission found that Tessera successfully made a prima facie showing that the accused packages did not have any substantial non-infringing uses with evidence that Respondents instruct their customers to connect the accused packages to PCBs using solder." Id. at *48-50.
Respondents argued that Motorola subsequently signed a license agreement specifically authorizing use of the accused packages and therefore the Federal Circuit should vacate all Commission findings concerning the '419 patent and the resulting orders as moot and remand to the ITC. However, the Federal Circuit did not agree, stating that the Commission specifically considered evidence of direct infringement by additional customers. The Federal Circuit also pointed out that to the extent Respondents "believe the remedial orders should be modified to reflect changed circumstances, they can seek modification of the Commission order from the ITC." Id. at *50-51.
The Federal Circuit also remarked that the Commission acknowledged Respondents arguments that the accused packages have substantial non-infringing uses because they can be mounted using underfill or sockets to restrict or prevent the claimed movement, including Qualcomm's "evidence that its customers have actually used underfill in mounting Qualcomm's accused chip packages." However, the Federal Circuit simply expressed its agreement with the Commission that "[t]his evidence [w]as not enough to overcome Tessera's showing that the accused device, which consists of an accused BGA package, a PCB, and solder balls connecting the accused BGA package to the PCB, has no substantial non-infringing use in and of itself." The Federal Circuit cited in support of its position Golden Blount, Inc. v. Robert H. Peterson Co., 438 F.3d 1354, 1363-64 (Fed. Cir. 2006) ("it matters not that the assembled device can be manipulated into a non-infringing configuration, because the instructions packaged with each device teach the infringing configuration" and thus "[t]he burden of production then shifted to [the accused infringer] to introduce some evidence that end-users actually assembled the [accused devices] in a non-infringing way"). Id. at *51-53.
Finally, the Federal Circuit ruled that the Commission did not err in presuming the requisite knowledge in finding contributory infringement based on license negotiations indicating Respondents were aware of the '419 patent and Tessera's showing that the accused devices did not have any substantial non-infringing uses. Id. at *54-55.
Affirming Commission's Finding That The Asserted Claims Are Not Invalid For Anticipation Under 35 U.S.C. §102(e)
The Federal Circuit affirmed the Commission's finding that two prior "Lin" and "Mullen" patents did not anticipate the asserted patent claims under 35 U.S.C. §102(e) because the reference patents were not filed before the date of invention. The Federal Circuit held that the Commission did not err in finding that the inventions of the '326 and '419 patents were conceived in June 1990, several months before the Lin and Mullen patents were filed. Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *56-61.
"Conception is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is therefore to be applied in practice." Id. at *57, quoting, Singh v. Brake, 317 F.3d 1334, 1340 (Fed. Cir. 2003). Because it is a mental act, an inventor's oral testimony regarding conception must be corroborated "by evidence that shows that the inventor disclosed to others his completed thought expressed in such clear terms as to enable those skilled in the art to make the invention." Id., quoting, Coleman v. Dines, 754 F.2d 353, 359 (Fed. Cir. 1985). Conception "may be corroborated even if no single piece of evidence shows complete conception." Instead, "all of the evidence of record must be collectively evaluated in determining when the invention was conceived." Id., citing, Price v. Symsek, 988 F.2d 1187, 1196 (Fed. Cir. 1993).
The Federal Circuit affirmed the Commission's finding of a June 1990 conception date based on the testimony of one of the inventors of the '326 and '419 patents corroborated by the testimony of a non-inventor involved in the work with the inventors and engineering notebook entries. Id. at *61.
Affirming Commission's Consideration Of The Statutorily Mandated Public Interest Factors And Issuance Of A Limited Exclusion Order
Respondent Spansion argued that even if Respondents were liable for infringement, the Commission failed to give meaningful consideration to the public interest consequences of the injunction. According to Spansion, the Commission in keeping with eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), should have considered the following equitable factors: (1) the USPTO rejected some of the asserted claims as unpatentable in the reexamination; and (2) Complainant Tessera could be made whole by damages because Tessera is simply a licensor and does not actually practice the invention. Spansion v. ITC, 2010 U.S. App. LEXIS 25900, *61-62.
The Commission responded that it properly considered the public interest factors prior to issuing its limited exclusion order and that eBay does not apply to Commission remedy determinations. The Commission issued its limited exclusion order after finding that "there are no public health and safety concerns since Tessera has chosen not to seek exclusion of two-way radios imported for use by first responders." Id. at *62-63.
The Federal Circuit held that by statute (19 U.S.C. §1337(d)(1)), the Commission is required to issue an exclusion order upon the finding of a Section 337 violation absent a finding that the effects of one of the statutorily-enumerated public interest factors counsel otherwise. The enumerated public interest factors include: "(1) the public health and welfare; (2) competitive conditions in the United States economy; (3) the production of like or directly competitive articles in the United States; and (4) United States consumers." Id. at *63-64. The Federal Circuit went on to hold that the legislative history of the amendments to Section 337 indicates that Congress intended injunctive relief to be the normal remedy for a Section 337 violation, that eBay does not apply to Commission remedy determinations under Section 337 and that a showing of irreparable harm is not required to receive such injunction relief. Id. at *64-67.
In this case, the Federal Circuit concluded that the Commission addressed the statutorily mandated public interest factors of "competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers" by stating that "there are multiple, licensed sources for semiconductor chips with minimized chip package size" and "there is no evidence that Tessera's licensees would be unable to adequately supply the United States market if Respondents' products were excluded." Id. at *62-63. With respect to the ongoing USPTO reexamination, the Federal Circuit stated that such proceeding is not explicitly listed as a public interest factor in Section 337. Nevertheless, the Commission found that, although a final rejection has been issued against the asserted claims of the '419 patent and prosecution has been closed in the reexamination proceeding, it would be premature to give dispositive weight to such proceedings until all appeals have been exhausted. In view of the foregoing, the Federal Circuit concluded that while it is not accurate to say that the Commission gave the reexamination no weight at all, "it was not erroneous for the Commission to omit any discussion of such issues from its analyses of the public interest factors when fashioning a remedy" to a Section 337 violation. Id. at *69.
Based on the foregoing, the Federal Circuit found that the Commission provided a sufficient basis for issuance of the limited exclusion order and that its actions were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Id. at *69-70.