Patent Litigation Does Not Create “Domestic Industry”


United_States_International_Trade_Commission_sealSeveral weeks ago, the Federal Circuit issued another decision relating to the “domestic industry” requirement.

Motiva, LLC appealed the decision of the International Trade Commission that Nintendo Co., Ltd. and Nintendo of America, Inc. did not violate § 337 of the Tariff Act of 1930 by importing, selling for importation, or selling certain video game systems and controllers. Ultimately, the Federal Circuit determined that the ITC properly determined that a domestic industry does not exist nor is in the process of being established for U.S. Patent Nos. 7,292,151 (“the ‘151 patent”) and 7,492,268 (“the ‘268 patent”). Thus, the decision of the ITC was affirmed.

The dispute between the parties started n 2008, when Motiva filed suit against Nintendo in the United States District Court for the Eastern District of Texas accusing Nintendo’s Wii video game system (“Wii”) of infringing the ’151 patent. The case was later transferred to the United States District Court for the Western District of Washington. In June 2010, that district court stayed the case pending completion of reexamination of the ’151 patent by the U.S. Patent and Trademark Office.

Subsequent to the stay order, in September 2010, Motiva filed its complaint with the ITC that gave rise to this appeal to the Federal Circuit. Motiva asserted that the Wii infringed the ’151 and ’268 patents and, therefore, Nintendo’s importation into, selling for importation into, and selling of the Wii in the United States violated Section 337 of the Tariff Act of 1930. Based on Motiva’s complaint, the Commission initiated an investigation into whether Nintendo had violated Section 337.

Shortly after the Commission began its investigation, Nintendo moved for summary determination that the domestic industry requirement of Section 337 was not satisfied at the time Motiva filed its complaint with the Commission.  In order for the ITC to have jurisdiction, there must be a domestic industry involved.

Section 337 details how that domestic industry requirement can be satisfied.

[A]n industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned—

(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.

19 U.S.C. § 1337(a)(3).

Nintendo argued that Motiva’s domestic activities failed to satisfy any of those requirements.

In February 2011, the administrative law judge (“ALJ”) granted Nintendo’s motion. The ALJ agreed that the patent litigation suit against Nintendo was Motiva’s only activity that could be related to commercializing the technology covered by the ’151 and ’268 patents at the time the complaint was filed. That activity, as the ALJ saw it, was insufficient to satisfy the domestic industry requirement because it was not adequately directed toward licensing activities related to the practical application of the patents’ claimed inventions.

On appeal, the ITC vacated the ALJ’s summary determination and remanded for additional fact-finding regarding Motiva’s activities related to developing a domestic industry.  In November 2011, after briefing and a five-day evidentiary hearing, the ALJ once again ruled that Motiva had not shown that the economic prong of the domestic industry requirement of Section 337 was satisfied. On appeal, the Commission adopted the ALJ’s decision as its final determination on the investigation.

Writing for the Federal Circuit panel, Judge Prost explained initially that the question of whether the domestic industry requirement is satisfied presents issues of both law and fact, but because the appeal raised only factual issues, the ITC determination would be reviewed using the “substantial evidence” standard.

Judge Prost explained that the ALJ found that Motiva’s litigation against Nintendo was not directed at developing a broader licensing program, which may have been sufficient to establish a domestic industry. In reaching this finding, the ALJ relied on extensive documentary evidence and witness testimony. Thus, with the standard being “substantial evidence,” the Federal Circuit had little difficulty in finding that there was substantial evidence to support the findings of fact made by the ALJ.

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