LSI Corp. v. ITC: Federal Circuit Affirms "Articles" Requirement for Domestic Industry

On March 20, 2015, the Court of Appeals for the Federal Circuit issued an opinion in LSI Corp. v. ITC, No. 2014-1410 (Fed. Cir. Mar. 20, 2015), affirming the Commission’s finding of no violation based on a failure by Complainant LSI to establish that its licensing activities, used to satisfy the domestic industry requirement, related to an actual article practicing the asserted patents.  The court also concluded that the Commission did not abuse its discretion in declining to vacate the Administrative Law Judge’s finding of non-infringement of a patent that expired during the course of the investigation.  This case highlights the potential impact of changes in the law that occur during an investigation and the need to supplement the record, when possible, to respond to such changes.  The decision also serves as a reminder that determinations of the ITC and its ALJs on patent issues have no preclusive effect in subsequent litigation and that other tribunals have discretion to decide what, if any, effect those determinations may have in litigation involving the same patents.

By way of background, the underlying ITC investigation, Certain Audiovisual Components and Products Containing the Same, Inv. No. 337-TA-837, is based on LSI’s March 2012 complaint concerning several U.S. patents, including U.S. Patent Nos. 6,452,958 and 6,707,867, which were the subject of the appeal.  A month before the close of discovery, in January 2013, the Federal Circuit issued an opinion in InterDigital Communications, LLC v. ITC, in which the court held that to satisfy the domestic industry requirement under §1337 (a)(3)(C) based on investments in licensing activities, the complainant must show that its licensing activities pertain to products that are covered by the asserted patent.  707 F.3d 1295, 1296 (Fed. Cir. 2013) (denying a combined petition for panel rehearing and rehearing en banc concerning the domestic industry requirement) (“InterDigital II”).  After a hearing in April 2013, the presiding ALJ issued a final initial determination (ID) in July 2013, finding that the accused products did not infringe the ‘958 or ‘867 patents.  With regard to the economic aspect of the domestic industry requirement, the ALJ found that LSI had established the existence of a domestic industry by virtue of its investment in licensing activities.  The ALJ did not address the issue of whether any licensee’s products practiced the asserted patents.

In March 2014, the Commission affirmed the ALJ’s finding of non-infringement of the ’958 patent.  However, the Commission reversed the ALJ’s determination that a domestic industry had been shown, because there was no evidence that LSI’s licensing activities related to any article practicing the ’958 patent.  In reversing the ALJ’s domestic industry finding, the Commission explained that the ALJ’s determination conflicted with the Commission’s recent decision in Certain Computers and Computer Peripheral Devices, and Components Thereof, and Products Containing Same, lnv. No. 337-TA-841, Comm’n Op. at 32 (Jan. 9, 2014), which imposed an “articles” requirement on licensing-based domestic industry in accordance with the Federal Circuit’s InterDigital II decision.

The ’867 patent was set to expire approximately ten days before the target date for completion of the Audiovisual Components investigation.  LSI therefore sought to terminate the investigation as to the ’867 patent on grounds of mootness and vacate the ALJ’s finding of non-infringement with respect to the patent.  The Commission granted LSI’s motion to terminate the ’867 patent, but took no position on the final ID’s findings regarding that patent.

On appeal, the Federal Circuit affirmed both the Commission’s decision regarding LSI’s failure to establish a domestic industry and its refusal to vacate the ALJ’s findings regarding non-infringement of the ‘867 patent.  With respect to the domestic industry issue, the court rejected LSI’s sole argument that the Commission retroactively applied a “brand new legal standard” announced by the Commission in its 2014 decision to an evidentiary record produced in early 2013.  The court noted that LSI did not challenge the domestic industry standard set forth in InterDigital II, but only the purported “retroactive application” of the standard.  On that point, the court questioned whether retroactivity was actually at issue given that the Commission’s remedies are prospective, but concluded it need not reach that issue given that the InterDigital II decision issued prior to the close of discovery and LSI’s submission of evidence at the hearing.  Under these circumstances, LSI had notice of §1337 (a)(3)(C)’s “articles” requirement for licensing-based domestic industry at a time when it could have presented evidence necessary to meet the requirement.  In rejecting LSI’s arguments, the court further observed that “LSI did not seek to rely on the accused products as satisfying the domestic-industry requirement” and that whether accused articles might be relied upon in that regard “may be addressed in future cases if the issue is properly raised.”  LSI Corp. v. ITC, No. 2014-1410, slip op. at 9 (Fed. Cir. Mar. 20, 2015) (emphasis in original).

With respect to the expired ’867 patent, the court found that the Commission had not abused its discretion in declining to vacate the ALJ’s non-infringement findings.  In reaching this conclusion, the court noted that “the ALJ’s final initial determination, even if it were treated as a final Commission determination on the patent, would be subject to the well-settled rule that ‘decisions of the ITC involving patent issues have no preclusive effect in other forums.’”  Id. at 11 (citations omitted).  Thus, the ALJ’s decision has no preclusive effect, and it was not unreasonable for the Commission to allow other tribunals to decide what, if any, effect the ALJ’s decision should have in subsequent litigation.  Moreover, the fact that LSI was unable to obtain review of the non-infringement determination because of mootness would lessen the weight that could be accorded to the ALJ’s decision by another tribunal.