On May 13, 2013, the U.S. Court of Appeals for the Federal Circuit in Motiva, LLC v. ITC and Nintendo, Case No. 12-1252, affirmed a decision by the International Trade Commission (“ITC”) finding that Nintendo Co., Ltd and Nintendo of America, Inc. (collectively “Nintendo”) did not violate Section 337 of the Tariff Act of 1930 by importing, selling for importation or selling Wii video game systems and controllers in the United States. The Federal Circuit concluded that Motiva did not meet the economic prong of the domestic industry requirement under Section 337.
The Federal Circuit’s ruling gives the domestic industry requirement some teeth, particularly as it applies to non-practicing entities (“NPEs”). According to the Federal Circuit, Motiva did not demonstrate any investment in commercializing its patented technologies, an element under Section 337. Among other things, Motiva did not develop a commercial product or a licensing program, and its old development activities predating the Complaint by several years were irrelevant. According to the Court, it is proper to use the date of the Complaint in determining whether the plaintiff’s commercial activities met the domestic industry requirement. The Court also rejected Motiva’s claim that the cost of litigation against Nintendo constituted a substantial investment. As a result, the Court concluded that Section 337 was not violated.
In September 2010, Motiva filed a complaint with the ITC asserting that Nintendo’s Wii infringed two of Motiva’s patents and therefore, that Nintendo’s importation into, selling for importation into, and selling of the Wii in the United States violated Section 337 of the Tariff Act of 1930. Under Section 337, it is unlawful to import articles that infringe a valid and enforceable United States patent if “an industry in the United States, relating to the articles protected by the patent … exists or is in the process of being established.” 19 U.S.C. § 1337(a)(2).
Section 337 consists of a domestic industry requirement. This requirement can be satisfied as follows:
[A]n industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work or design concerned -
- significant investment in plant and equipment;
- significant employment of labor or capital; or
- substantial investment in its exploitation, including engineering, research and development, or licensing.
Nintendo moved for summary determination that the domestic industry requirement of Section 337 was not met at the time Motiva filed its complaint with the ITC. The ALJ granted Nintendo’s motion. According to the ALJ, Motiva had no commercialized products incorporating its patented technology. Nor was Motiva’s patented technology even close to being “production-ready” at any point. Rather, Motiva’s only remaining prototype of its patented technology had “exposed circuit boards, wiring, and sensors.”
Motiva had argued that it had made substantial investments to commercialize the patented technology between the period of 2003 to 2007, and that despite its discontinuation of these efforts, these activities met the domestic industry requirement. The ALJ rejected Motiva’s argument finding that those activities were “far too remote to be considered for purposes of demonstrating that a domestic industry exists.” The ALJ thus concluded that the proper point of consideration was at the date of the Complaint and not discontinued activities predating the Complaint by several years.
The ALJ also pointed to the fact that Motiva was not engaged in any licensing activities. According to the record, Motiva never offered to license, never received a request to license, and never in fact licensed the patents at issue. Motiva argued instead that the litigation against Nintendo was a necessary step to preserve and hasten its licensing opportunities. The ALJ rejected that argument.
Lastly, the ALJ rejected Motiva’s claim that the costs of litigation constituted a substantial commercial investment. According to the ALJ, the litigation itself was not “in any way related to the exploitation of the patents.”
On appeal, the Commission adopted the ALJ’s decision as its final determination on the investigation. The Commission did not address the domestic industry holding in detail. However, it did state that the ALJ did not erroneously rely on the filing date of the complaint to determine whether a domestic industry existed under Section 337.
The Federal Circuit affirmed the ALJ and the Commission’s decision finding “substantial evidence support[ing] the Commission’s finding that Motiva’s litigation against Nintendo was not an investment in commercializing Motiva’s patented technology that would develop a licensing program to encourage adoption and development of articles that incorporated Motiva’s patented technology.” The Court further stated that there was “no reasonable likelihood that, after successful litigation against Nintendo, Motiva’s patented technology would have been licensed by partners who would have incorporated it into ‘goods practicing the patents.” The Federal Circuit also affirmed the Commission’s use of the filing date of the complaint as the appropriate measuring stick in determining whether the economic prong of the domestic industry requirement was met.
Implications of the Federal Circuit’s Nintendo Decision
Patent practitioners litigating in the ITC for or against NPEs and other plaintiffs would be well advised to consider the Federal Circuit’s Motiva, LLC v. ITC and Nintendo decision in determining whether the economic prong of the domestic industry requirement of Section 337 has been met. This requires consideration of the criteria set forth in Section 337. For example, one should consider whether the plaintiff was making substantial investments to commercialize the patented technology at the time of the Complaint. Under the Federal Circuit’s Nintendo decision, where the commercialization occurred years prior to the Complaint but then ceased before the Complaint, the domestic industry requirement may not be satisfied absent other evidence that an industry exists. Additionally, the plaintiff’s cost of litigation does not alone constitute a substantial commercial investment under the domestic industry requirement. Lastly, if no licensing program existed at the time of the Complaint, it should be considered whether a reasonable likelihood exists that the patentee’s technology would be licensed by others in the industry assuming a successful litigation.