On July 5, 2013, the International Trade Commission (the “Commission”) issued the public version of its opinion in Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794).  Due to the large size of the opinion and the attachments thereto, we have separated it into part 1, part 2, and part 3.  

By way of background, the Complainants in this investigation are Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC (collectively, “Samsung”).  On September 14, 2012, ALJ E. James Gildea issued an Initial Determination (“ID”) finding no violation of Section 337 with respect to U.S Patent Nos. 7,706,348 (the ‘348 patent); 7,486,644 (the ‘644 patent); 7,450,114 (the ‘114 patent); and 6,771,980 (the ‘980 patent) by Respondent Apple Inc. (“Apple”).  Specifically, ALJ Gildea found that the ‘348, ‘644, and ‘980 patents were valid but not infringed and that the ‘114 patent was both invalid and not infringed.   The ALJ also found that the economic prong of the domestic industry requirement was satisfied with respect to each of the patents, but that the technical prong was not satisfied for any of the patents.

On November 19, 2012, the Commission determined to review the ID in its entirety and issued a notice requesting written submissions from the parties and the public on certain issues, including the assertion of FRAND-related patents at the Commission, and on the issues of remedy, public interest and bond.  See our November 20, 2012 post for more details.  On March 13, 2013, the Commission issued another notice requesting written submissions from the parties and the public on various additional topics, including some FRAND-related topics.  See our March 21, 2013 post for more details. 

As set forth in its notice reporting the opinion, the Commission determined that Apple had violated Section 337 in connection with the importation and sale of wireless communication devices, portable music and data processing devices, and tablet computers that infringe certain claims of the ‘348 patent, but not with regard to the other patents.  The Commission issued a limited exclusion order and a cease and desist order directed at Apple, and terminated the investigation.  See our June 6, 2013 post for more details on the notice and submissions received.  We now provide additional details on the opinion.

The ‘348 Patent

The Commission modified ALJ Gildea’s claim construction of several terms.  More particularly, the ALJ relied on the dictionary definition of “puncture” as “to pierce with as if with a pointed instrument or object” to construe the term “puncturer.”  However, the Commission determined that this construction is “incorrect and unhelpful in resolving the dispute between the parties,” since it was inconsistent with how the term was used in the ‘348 patent.  Rather, the Commission adopted the construction proposed by Samsung and the Commission Investigative Staff (“OUII”) where “puncturer” means hardware or software used for excluding, suppressing, ignoring, or skipping bits from a codeword, explaining that this construction is based on the specification of the ‘348 patent. 

The modified construction of “puncturer” and “punctured” adopted by the Commission was instrumental in the finding that Apple infringes the ‘348 patent.  The Commission adopted the ALJ’s findings with regard to the remaining elements of the claims, which was that Apple failed to refute the allegations of infringement with all other elements.

Although the Commission reviewed the validity arguments independently, it agreed with the ALJ that Apple had failed to prove by clear and convincing evidence that any of the asserted references either anticipated the ‘348 patent or rendered it obvious.  The Commission relied on the “machine or transformation” test in concluding that the ‘348 patent was not invalid under 35 U.S.C. § 101.

Apple also asserted affirmative defenses based on Samsung’s participation in standards-setting organizations, alleging that (1) Samsung forfeited its rights to exclusion or cease-and-desist orders based on its FRAND commitments, and (2) Samsung failed to disclose the ‘348 and ‘644 patents, rendering them unenforceable.

The Commission solicited additional comments on the first FRAND affirmative defense and considered this issue at length, ultimately determining that Apple was unable to prove by a preponderance of the evidence that its FRAND defense precludes the Commission from finding a violation of Section 337.  The opinion includes an appendix of select submissions received in response to the Commission’s request for comments on the relationship between a FRAND undertaking and the right to obtain an exclusion and/or cease-and-desist order.

In order for the second FRAND affirmative defense to be successful, it would have been necessary for Apple to prove that (1) Samsung had a duty to disclose essential patents; (2) the ‘348 and ‘644 patents are essential patents; (3) that Samsung breached its disclosure duty by failing to disclose these patents in a timely manner; and (4) appropriate circumstances exist to hold these patents unenforceable.  The Commission rejected this defense, noting that Apple itself has questioned whether or not the ‘348 and ‘644 patents are actually essential.  The Commission also noted that it is unclear what the requirements of a “timely disclosure” are, and that the policy concerns underlying this defense do not apply here, as Samsung has already licensed its declared-essential patents (including the ‘348 and ‘644 patents) to more than 30 companies.

In light of the revised construction of the terms “puncturer” and “puncturing,” the Commission held that Samsung was able to meet the technical prong of the domestic industry requirement based on at least two groups of products.

The ‘644 Patent

The Commission agreed with the ALJ’s determination that the Apple products do not infringe the ‘644 patent because they do not “extract[ ] a 60-bit rate-matched block.”  The Commission also adopted the ALJ’s findings with regard to invalidity in their entirety, concluding that Apple had not shown that the ‘644 patent was obvious by clear and convincing evidence.

Apple also alleged that the’644 patent was unenforceable due to inequitable conduct at the U.S. Patent Office and based on Samsung’s FRAND commitments (discussed above in relation to the ‘348 patent).  The Commission affirmed the ALJ’s finding that Apple had not demonstrated inequitable conduct by clear and convincing evidence because it had not proved that the allegedly withheld references were material to patentability.  The Commission also agreed with the ALJ that Apple had not sufficiently shown its additional challenges based on inventorship and patent exhaustion.

Lastly, the Commission also agreed with the ALJ that Samsung had not demonstrated that its products met the technical prong of the domestic industry requirement in relation to the ‘644 patent.

The ‘980 Patent

The Commission modified the ALJ’s construction of the phrase “executing a dialing program…,” but this modification had no effect on the Commission’s conclusion that Apple did not meet this element of the ‘980 patent and thus there was no infringement.  Since the Commission adopted the ALJ’s findings of no infringement, it declined to address validity of the ‘980 patent.  Lastly, the Commission determined that Samsung did not prove that the technical prong of the domestic industry requirement was met in relation to the ‘980 patent.

The ‘114 Patent

The Commission adopted the ALJ’s findings with regard to no infringement of the ‘114 patent, noting that Samsung’s expert testimony was not persuasive.  The Commission also adopted the ALJ’s determinations in relation to validity, with the ultimate conclusion that the ‘114 patent was invalid as anticipated and obvious.  Lastly, the commission also adopted the ALJ’s determination that Samsung did not prove that the technical prong of the domestic industry requirement was met in relation to the ‘114 patent.

Economic Prong of the Domestic Industry Requirement

The Commission considered the economic prong of the domestic industry requirement for all four asserted patents.  Although Apple challenged whether the cost of foreign repair and replacement parts and repackaging costs could properly be considered in the domestic industry analysis, the Commission concluded that this “does not negate the fact that Samsung has invested millions of dollars domestically relating to protected articles.”  As such, the Commission found that the economic prong of the domestic industry requirement for each of the four patents was met.

Remedy, Public Interest, and Bond

The Commission determined to issue a limited exclusion order and cease-and-desist order against Apple in relation to articles that infringe the ‘348 patent.  The Commission concluded that these remedies would have no adverse effect on the public health and welfare or competitive conditions in the United States.  However, the Commission included a provision that allows Apple to provide replacement parts for a period of two years.  The Commission determined that, if a bond is set, it should be set at zero percent because Samsung did not show a need for protection by bond.

Commissioner Pinkert Dissent

Commissioner Pinkert dissented on public interest grounds from the determination to issue an exclusion order and cease and desist order.  Specifically, Commissioner Pinkert considered that Samsung’s FRAND obligations are relevant to public interest considerations and weigh against issuing a limited exclusion order and cease-and-desist order.