Further to our April 14, 2014 post, on April 28, 2014, the International Trade Commission (the “Commission”) issued the public version of its opinion finding a violation of Section 337 by Respondents Carsem (M) Sdn Bhd, Carsem Semiconductor Sdn Bhd, and Carsem, Inc. (collectively, “Carsem”) in Certain Encapsulated Integrated Circuit Devices and Products Containing Same (Inv. No. 337-TA-501).

By way of background, the Commission instituted the investigation based on a complaint filed by Amkor Technology Inc. (“Amkor”) alleging violation of Section 337 in the importation and/or sale of certain encapsulated integrated circuit devices that infringe claims of U.S. Patent Nos. 6,433,277; 6,630,728 and 6,455,356.  The investigation also concerned a third-party, ASAT, Inc. (“ASAT”), and its invention (the “ASAT invention”) that Carsem argued was invalidating prior art to the asserted patents.

In the opinion, the Commission affirmed the ALJ’s remand initial determination (“Remand ID”) of November 9, 2005 and first supplemental initial determination (“First Supplemental ID”) of October 30, 2009 finding a violation of Section 337.  Specifically, the Commission affirmed the ALJ’s determination that claims 2-4 and 21-23 of the ‘277 patent are not invalid over the ASAT invention; affirmed the ALJ’s determination that Carsem failed to show that equitable estoppel applied in the investigation; affirmed that Carsem failed to prove that Amkor had deceived the Joint Electron Device Engineering Council (“JEDEC”) or that the’277 patent is necessary to practice that standard-setting body’s standards; affirmed the ALJ’s determination that Carsem failed to show that legal estoppel applied in the investigation; affirmed, with modifications, the ALJ’s finding that Amkor satisfied the economic prong of the domestic industry requirement under Section 337(a)(3)(A); and affirmed, with modifications, the ALJ’s finding that Amkor failed to satisfy the economic prong under Section 337(a)(3)(B).

Equitable Estoppel

According to Carsem, under the Commission’s claim construction, the ‘277 patent is a standard-essential patent that Amkor was obligated to disclose to JEDEC.  Carsem argued that Amkor should be equitably estopped from asserting the ‘277 patent because (1) Amkor failed to disclose its patent rights when it introduced its MO-220 proposal in January 1999 and affirmatively misrepresented that there were no applicable patents; (2) Carsem reasonably relied on Amkor’s misleading statements in voting on the proposal and subsequent revisions for the MO-220 and MO-229 standards, and designing its products to comply with those standards; and (3) Carsem was materially prejudiced by Amkor filing its complaint in the investigation.  The Commission, however, agreed with the ALJ that Carsem failed to show that a license is required under the ‘277 patent to practice the MO-220 and MO-229 standards.  In particular, the Commission noted that Carsem’s expert based his opinion on Amkor’s claim interpretations (not all of which were adopted), did not reference particular claim terms in specific patents, and did not discuss the implications of adopting Carsem’s claim construction.

Legal Estoppel

Carsem argued that the ‘277 patent is a standard-essential patent that Amkor was obligated under the JEDEC rules to license to Carsem on fair, reasonable and non-discriminatory (“FRAND”) terms consistent with those previously agreed to and offered by Amkor, but that Amkor refused.  Amkor countered that Carsem’s legal estoppel defense fails for the same reason that its equitable estoppel fails, i.e., because Carsem failed to prove that Amkor breached its duty to disclose its patents to JEDEC or that the patents are actually necessary to practice the JEDEC standard.  The Commission agreed with Amkor that although the ALJ did not expressly address Carsem’s legal estoppel defense, the ALJ’s findings on equitable estoppel also resolved the issue of legal estoppel.  The Commission also found no evidence that Amkor had licensed or assigned its patents to JEDEC or Carsem, or that Amkor received any consideration for a license from JEDEC or Carsem.

Economic Prong

Carsem asserted that the legal framework for evaluating the existence of a domestic industry had changed since the ALJ’s final initial determination (“Final ID”) on November 18, 2004, warranting reversal of the ALJ’s finding that Amkor satisfied the economic prong with respect to the ‘277 patent under Section 337(a)(3)(A).  The Commission agreed with Amkor, however, that the ALJ’s analysis of whether Amkor’s domestic investments in plant and equipment are “significant” complied with Certain Printing and Imaging Devices and Components Thereof, Inv. No. 337-TA-690, Comm’n Op. (Feb. 17, 2011) (“[U]nder the statute, whether the complainant’s investment and/or employment activities are ‘significant’ is not measured in the abstract or absolute sense, but rather is assessed with respect  to the nature of the activities and how they are ‘significant’ to the articles protected by the intellectual property right.”), which the parties agreed is the most relevant precedent on the economic prong of domestic industry among the Commission’s decisions rendered after the Final ID issued in this investigation in 2004.  That said, the Commission noted that the ALJ’s recitation of the applicable law pertaining to the economic prong could be read to require a comparative analysis of domestic to foreign activity, whereas Commission precedent provides that such an analysis is only one of the factors that may be employed, and is not mandatory.  The Commission modified the ALJ’s determination accordingly.

Regarding Section 337(a)(3)(B), the Commission affirmed the ALJ’s determination that Amkor did not show significant employment of labor and capital, with similar modifications reflecting that a comparative analysis is not the only way to evaluate the context of the domestic investments.

Remedy, Public Interest and Bonding

The Commission determined that the appropriate form of relief in the investigation was a limited exclusion order (“LEO”) directed to encapsulated integrated circuit devices covered by claims 2-4 and 21-23 of the ‘277 patent that are manufactured abroad by or on behalf of, or imported by or on behalf of, Carsem.  The Commission also found that the public interest factors did not preclude issuing the LEO, rejecting Carsem’s arguments that (1) there are no comparable non-infringing alternatives for the products subject to the LEO; (2) Amkor is not capable of expanding to meet a larger production capacity to replace the volume of articles subject to exclusion and fulfill future demand; and (3) the ‘277 patent is standard-essential and subject to FRAND commitments, and therefore exclusion would harm competition and U.S. consumers.  Finally, the Commission determined that Amkor is required to post a bond in the amount of a reasonable royalty rate of $0.00025 per contact per covered encapsulated integrated circuit device imported during the period of Presidential review.