variety of industries and private practitioners attend this event for worthwhile benchmarking and networking with the “who’s who” of the 337 bar, including senior decision-makers from the ITC, companies and practitioners involved in some of the most high profile cases to date.

1. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
NPEs and the Domestic Industry
Licensing Requirement
Chester Day (Google)
Richard Rainey (GE)
Kathleen Zylan (Cisco)
Tom Jarvis (Finnegan/Moderating)
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Tom.Jarvis@Finnegan.com

2. ITC Statistics
• ITC makes distinction between categories of NPEs
– Category 1 NPEs
• do not make a product practicing the asserted patents
• Investments in research, development, or engineering
• Includes universities, companies that failed to commercialize
– Category 2 NPE/PAEs
• do not manufacture products that practice the asserted patents
• business models focused on purchasing and asserting patents
• secondary market for IP rights
2

3. ITC Statistics
From “FACTS AND TRENDS REGARDING USITC SECTION 337
INVESTIGATIONS” Prepared by the U.S. International Trade
Commission (June 18, 2012)
3

4. ITC 337 Investigations Instituted Per Year
ITC Patent Infringement Investigations
56
30
2006
35
37
2007
2008
62
38
29
2009
2010
2011
2012
Source: RPX Proprietary Research
© 2006 Cisco Systems, Inc. All rights reserved.
Cisco Restricted – Attorney Client Privileged; Attorney Work Product
4

5. NPE CASES INCREASING IN THE ITC
Respondents in NPE ITC Investigations
NPE ITC Investigations
232
16
201
14
97
6
4
4
4
38
2
2006
8
2007
2008
2009
2010
2011
2012
15
2006
2007
2008
2009
22
2010
2011
2012
Source: RPX Research and EDIS
© 2006 Cisco Systems, Inc. All rights reserved.
Cisco Restricted – Attorney Client Privileged; Attorney Work Product
5

6. ITC 337 Investigations Instituted Per Year
4
NPE Cases
16
Non-NPE Cases
4
2
6
6
28
31
31
2006
2007
2008
© 2006 Cisco Systems, Inc. All rights reserved.
14
52
46
25
2009
24
2010
2011
2012
Cisco Restricted – Attorney Client Privileged; Attorney Work Product
6

7. Statutory Question
• Domestic industry:
– A. significant investment in plant and equipment;
– B. significant employment of labor or capital; or
– C. substantial investment in its exploitation, including
engineering, research and development, or licensing.
• Difference between a “traditional” DI based on
manufacturing and a DI based on licensing?
7

8. Issues
• Manufacturing, Research & Development, and
Engineering Analysis
– Economic Prong: significant investments
– Technical Prong: products practice asserted patent
• Licensing analysis:
– Economic Prong: substantial investments
– Technical Prong: investments related to the asserted
patents
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9. Certain Multimedia Display and Navigation Devices, Inv. No. 694
– Pioneer asserted 3 patents of a portfolio of more than
1,600 patents.
– The ALJ found no violation, but that the economic prong
of DI was satisfied.
– The Commission reversed the ALJ on DI, holding that:
• US investments relate to the asserted patents and licensing
• For a portfolio license, complainant must show that its
investments are focused on:
– the asserted patent or
– the relative importance or value of the asserted patent
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10. Certain Electronic Devices Including Handheld Wireless
Communication Devices, Inv. Nos. 667/673
– NPE complainant alleged DI based on licensee activities.
– The ALJ found on MSD that a DI existed through licensee
R&D, even though that activity was not directly related to
patented features of the products at issue.
– ID non-reviewed by the Commission
– Investigations settled.
10

11. John Mezzalingua Assocs., Inc. v. ITC, 660 F.3d 1322
(Fed. Cir. Oct. 4, 2011)
• Licensor appealed from the Commission decision
in Inv. No. 650 that it failed to show DI.
• Federal Circuit affirmed, finding expenses incurred
in asserting and defending validity of its design
patent did not constitute a “substantial investment
in exploitation” of its patent through licensing.
• Judge Reyna dissented that the Commission erred
in rejecting litigation expenses.
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12. Certain Video Game Systems & Controllers, Inv. No. 743
• The ALJ found no DI, Commission non-reviewed
the ID in relevant part.
• ALJ found no existing DI at the time of the
complaint and no DI in the process of being
established
– complainant had ceased any exploitation of the patent
well before filing the complaint at the ITC
– litigation expenses found insufficient to establish a DI.
• Federal Circuit Appeal pending.
12

13. Certain Liquid Crystal Display Devices, Including Monitors, Televisions, and
Modules, and Components Thereof, Inv. Nos. 741/749
• 5 patents asserted against multiple parties
• ALJ found a DI, Commission affirmed, finding:
• Ongoing licensing programs related to the asserted patents;
• Licensing negotiations focused on the asserted patents
• Only a subset of the patents in the portfolio had accompanying
“claim charts,” including the asserted patents
• Despite apportioning the licensing with respect to other patents,
Commission found investments substantial
• Settled
13

14. Certain Integrated Circuits, Chipsets, & Products,
Inv. No. 786
• 1 patent asserted against multiple respondents.
• ALJ found no DI; the Commission affirmed, finding:
– Failure to show what proportion of expenses were
foreign versus domestic
– Failure to show how expenses related to the asserted
patent
– Failed to provide sufficient information as to how the
asserted patent fit into overall licensing program.
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15. InterDigital Communications, LLC v. Int'l Trade Comm'n,
2010-1093, 2013 WL 124064 (Fed. Cir. Jan. 10, 2013)
• Appeal from Commission decision in Inv. No. 613,
finding no violation - no infringement and no DI.
• The Federal Circuit reversed and remanded on
claim construction, but affirmed on DI.
• Respondent filed a combined petition for panel
rehearing and for rehearing en banc on DI.
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16. InterDigital Communications, LLC v. Int'l Trade Comm'n,
2010-1093, 2013 WL 124064 (Fed. Cir. Jan. 10, 2013)
• Federal Circuit denied combined petition; held that
substantial investment in R&D of intellectual
property was with respect to the articles protected
by the patent, within the meaning of Tariff Act’s
“domestic industry” requirement.
• Judge Newman dissented that complainant does
not make the patented invention in the US, and
seeks to impose on respondent that is “not a
license to manufacture any patented product in the
United states; it is a license to import products
made in foreign countries.”
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17. Nexus between licensing and asserted patents
– Whether the patents at issue are directly connected to a
licensing domestic industry
– Whether the licensee’s efforts relate to a protected article
– Number of patents in the portfolio
– Relative importance/value of asserted patents to the
portfolio
– Successfully litigated by complainant
– Relates to a technology industry standard
– Considered a “base patent” or “pioneering patent”
– Prominence of the asserted patents in licensing
discussions
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18. Policy Objectives of 337 & Licensing Issues
• Is there a distinction between revenue-driven and
production-driven (industry creating) licensing, and
is such a distinction useful?
• Largest USA companies are selling patents into
the secondary market that will obviously be used
for licensing and litigation
• Licensing market has changed since statute
amended; what actually constitutes a licensing
industry now?
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19. Policy Objectives of 337 & Licensing Issues
• Licensing based in research & development spurs
adoption of technology
• Does the value of patents sold (or purchased) in
the secondary market funnel back to the original
entity who performed the research, and thereby
spur further R&D?
• Originally, ITC focused on threats of foreign
competition
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20. Policy Objectives of 337 & Licensing Issues
• Are there articles to be protected in a licensing DI,
and does there need to be?
• Has a requirement been read out of the statute?
• What connection to a “real” DI exists in licensing?
• Do the justifications underpinning 337 make sense
in the licensing context, with no connection to
protected articles?
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21. Disparity of leverage litigating before the ITC?
• Licensing entities typically have no products,
usually not risk of counter claims or counter suits
• Licensing profit from settlements, not market
exclusivity.
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22. Distinctions between NPEs and PAEs
• Distinctions between PAEs and NPEs
– Legal
– Economic
– Is a company who makes products, but not in the U.S.,
but depends on licensing for a DI an NPE or PAE?
• Has the PAE/NPE issue become politicized?
• Have any PAEs obtained an exclusion order?
• Have any NPEs obtained an exclusion order?
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23. High Costs of DI Economic Prong Defenses
• Defending against PAE/NPE DI claims
– Expensive
– Risky
– Rarely resolved on summary determination
• Procedural solutions?
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24. Possible Procedural Solutions: Pre-Institution
• Ask Commission allow the ALJ to take evidence
on Public interest Issues of licensing DI
• Ask Commission find the complaint deficient if a
licensing DI is insufficiently supported
• Commission could require more details in
complaint, possibly supported by third-party
affidavits
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25. Public Interest Issues Implicated by Licensing DI
• Identify injury to the “real” licensing DI
• Evaluate nexus to:
– licensing
– exploitation (revenue driven v. production driven)
– articles (emerging or established industry)
• Consult with other government agencies
responsible for trade policy, protecting competition
and jobs in US economy, and protecting
consumers.
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26. Possible Procedural Solutions
• Summary determination often delayed or
precluded by unsubstantiated claims of on
activities of licensees
• requiring subpoenas to third parties
• Ask the ALJ to accelerate discovery of claims of
investments of licensees, and to stay other
discovery until complete
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27. Possible Procedural Solutions
• Early Summary Determination motions on DI
Economic prong issues
• Request oral arguments (mini-hearing)
• Request an accelerated decision
• Require details on allocation of investment per
patent; no allocation, insufficient information to
show DI.
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28. Possible Procedural Solutions
• Limiting Response to MSD to evidence set forth in
the complaint
• Complainants know their own domestic industry
• Technical prong and/or other technology-related
issues would be minimized, as a pure licensing
claim requires no technical prong of DI.
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29. Possible Legislative Solutions
• Redefine the statute to distinguish between
revenue driven and production driven licensing
• Mandate the adequacy of monetary damages
(eBay)
• Irreparable harm + Causal nexus (eBay)
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30. Questions/Comments
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