On July 3, 2013, ALJ David P. Shaw issued the public version of his recommended determination (“RD”) on remedy and bond (dated June 13, 2013) in Certain Products Containing Interactive Program Guide and Parental Control Technology (Inv. No. 337-TA-845).
By way of background, the investigation is based on a May 1, 2012 complaint filed by Rovi Corporation; Rovi Guides, Inc.; Rovi Technologies Corporation; Starsight Telecast, Inc.; United Video Properties, Inc.; and Index Systems, Inc. (collectively, “Rovi”) alleging violation of Section 337 by, inter alia, Respondents Netflix, Inc. (“Netflix”) and Roku, Inc. (“Roku”) in the importation into the U.S. and sale of certain products containing interactive program guide and parental control technology that infringe one or more claims of U.S. Patent Nos. 6,701,523; 6,898,762; 7,065,709; 7,103,906; 7,225,455; 7,493,643; and 8,112,776. See our May 3, 2012 post for more details.
On June 7, 2013, ALJ Shaw issued a final initial determination (“ID”) finding no violation of Section 337 based upon findings of invalidity and non-infringement of the asserted patents. See our June 11, 2013 post for more details. Even in the absence of a finding of violation, the ALJ must issue a recommended determination concerning the appropriate remedy in the event that the Commission, on appeal, finds a violation of Section 337.
According to the RD, Rovi argued that the proper remedy in this investigation should include a permanent limited exclusion order against Netflix covering any product containing infringing software that Netflix might import during the term of the patent, and against Roku covering all infringing streaming media players imported by the Respondent. Although ALJ Shaw determined that Roku’s importation activities do not violate Section 337, he found that a limited exclusion order against Roku should issue if the Commission reverses his initial findings. However, as to Netflix, because Rovi admits that any exclusion order would cover only prospective importations, and because the ALJ could not deduce any facts relating to such prospective importations, ALJ Shaw determined not to recommend the issuance of an exclusion order against Netflix.
Rovi also argued that the Commission should issue cease and desist orders against both Roku and Netflix if a violation of Section 337 is found. ALJ Shaw denied Rovi’s request. As to Roku, the ALJ found that the Respondent maintains a quantitatively small amount of inventory in the U.S. and, therefore, that Rovi failed to show a commercially significant inventory in the U.S. As to Netflix, because the Respondent currently imports no accused devices, the ALJ found that a cease and desist order could not aid in the administration of Section 337.
Regarding the amount of bond required if the Commission should find a violation of Section 337 and issue a remedy, ALJ Shaw determined that an amount of 100% of the entered value of imported infringing products would be appropriate. Specifically, the ALJ found that Respondents’ argument that lost revenue should be considered in setting the appropriate bond amount was unsupported under current law and that Respondents selective choice of license agreements to calculate a reasonably royalty rate inappropriately ignored certain Rovi licenses that would have supported a higher bond value. Accordingly, because no appropriate price differential could be calculated and no reasonable royalty or alternative bond theory was presented, ALJ Shaw recommended that any bond eventually entered should be set at 100% of the product’s entered value.