At the ITC, Patent Litigation is Not a Domestic Industry

Patent trolls beware. You won't win a case at the International Trade Commission if the only thing you do with your patent is sue people for infringing it.

That's not a domestic industry.

Still, the six ITC commissioners set a modest threshold for establishing what is a domestic industry under Section 337 of the Tariff Act. Their April 14 decision, Certain Coaxial Cable Connectors and Components Thereof and Products Containing Same, will have an impact on a number of ITC cases going forward, patent lawyers say.

"It clears things up," said Louis Mastriani, a name partner at IP boutique Adduci, Mastriani & Schaumberg, who was not involved in the case. “Now we know what the standard is, and the uncertainty is largely, if not wholly dispelled.”

To bring an ITC case, a patent owner must establish that a domestic industry exists in the United States related to the intellectual property allegedly being infringed.

Just what that means has been an issue in cases brought by non-practicing entities (sometimes called patent trolls) – IP owners who don’t actually make a product based on their patent.

The 337 statute says an industry exists if there is “substantial investment in…exploitation [of the patent], including engineering, research and development, or licensing.”

But the commissioners in the coaxial cable decision point out, “Notably, the provision does not specifically mention litigation.”

The issue arose in the coaxial cable case because the patent owner, John Mezzalingua Associates dba PPC Inc. of East Syracuse, NY, argued that its expenses associated with patent infringement suits filed in U.S. district courts satisfied the ITC domestic industry requirement.

The cable connectors are used in the telecommunications, satellite and cable television industries to mechanically and electrically connect coaxial cables to electronic devices.

The administrative law judge, James Gildea, ruled in October 2009 that PPC met the domestic industry requirement, in large part based on its litigation expenses.

The ITC commissioners elected to review the judge’s initial decision and asked for comments from the public on the question. It received submissions from Hogan & Hartson, Tessera Inc., a joint filing from Cisco Systems, Inc., Google Inc. and Verizon Communications Inc., and a joint filing from Samsung Electronics, Hewlett Packard Co., Dell Inc., ASUS Computer International Inc., and Transcend Information Inc.

In the April 14 decision, the commission found that “allowing patent infringement litigation alone to constitute a domestic industry would place the bar for establishing a domestic industry so low as to effectively render it meaningless.”

The key question was whether litigation specifically related to licensing counts as a domestic industry. The commission ruled litigation costs related to licensing could – but the complainant “must show each asserted litigation activity is related to licensing.”

PPC did not do this, and the commission remanded the case to the administrative judge for further proceedings.

Steptoe & Johnson partner Steven Barber, who has followed the case, said, “The practical effect is that patent trolls who want to pursue a complaint at the ITC need to do a little bit of work beforehand to establish a link to litigation and licensing activities. But it’s not a particularly great burden.”

The respondents in the case, Gem Electronics Inc. and Fu-Ching Technical Industry Co. were represented by John Horvack Jr. of Carmody & Torrance in New Haven. PPC retained Patrick Gill of Rode & Qualey in New York.

Comments

[Air Jordans]

Thank you for all the great posts from last year! I look forward to reading your blog, because they are always full of information that I can put to use. Thank you again, and God bless you in future.

[Atticus]

Patent Litigation isn't a domestic industry...and the Eastern District of Texas isn't a Federal Court??

[Ronald J Riley]

Invention is a domestic industry and if foreign or domestic patent pirating companies are allowed to misappropriate inventions in their infancy it is inevitable that the business which the inventions would span will be stillborn.

Most certainly systematic theft of small entity inventions is a huge industry which kills job creation in America.

Ronald J. Riley,

Speaking only on my own behalf.
President - www.PIAUSA.org - RJR at PIAUSA.org
Executive Director - www.InventorEd.org - RJR at InvEd.org
Senior Fellow - www.PatentPolicy.org
President - Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Washington, DC
Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

[Joseph Marchelewski]

I don't see how anyone can be confused as to the difference between actually manufacturing a product and simply suing people for infringement of a product you don't produce.