Chip Law : Semiconductor Lawyer & Attorney : Perkins Coie Law Firm : Intellectual Property, Patent Litigation

We've written quite a bit about ITC 337 proceedings. One of the issues to watch out for is collateral damage from your general exclusion orders. General exclusion orders usually prohibit the importation of all infringing articles, regardless of their owner, importer, and place of origin, and whether or not the owner or importer participated in the investigation.

Imagine your client, patentee A, wins a general exclusion order against foreign manufacturer B. The order is implemented, and the next thing you know patentee A receives an irate call from a customer or licensee asking why their products are being excluded at the US border. The licensee can be importing a legitimately licensed product manufactured by manufacturer B. The customer can be importing a downstream product excluded on the basis of including a component covered by the exclusion order.

When you receive an exclusion order, you'll need thorough due diligence to ensure current customers and licensees aren't impacted.
 

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We've written before about the increasing popularity of the ITC as a patent litigation forum, particularly for semicon companies.  However, success at the ITC is turning out to be a bit more elusive than hoped for by patent owners.  In the latest setback for a semicon company at the ITC, Qimonda last week lost the first round to LSI and Seagate.  Last year, Qimonda asked the ITC to investigate LSI's and Seagate's importation of certain chips.  Of the four patents asserted (USP 6495918, USP 5851899, USP 5646434, and USP 5213670), three were found to be not infringed and one was invalid. 

Perhaps more interesting is that Judge Rogers found that a domestic industry doesn't exist - i.e., Germany based Qimonda doesn't have enough activity in the U.S. to qualify for protection under Section 337. 

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US companies will increasingly find themselves as respondents in Section 337 actions. Given the advantages to the complainant in such actions (fast docket, lower threshold for standing, and exclusion orders), the advice we previously gave foreign companies now also applies to US companies. React quickly when you receive a complaint, and ideally, have a short list of counsel familiar with your industry and market. Given the fast docket, you want to minimize the amount of time spent obtaining counsel and getting counsel up to speed.

Foreign companies are increasingly initiating Section 337 actions to protect their US market share and intellectual property. Over one-third of the Section 337 cases instituted in 2009 to-date named foreign complainants. In part, this can be attributed to the importance of the US market in the global economy and the growing patent portfolios held by foreign companies.

Section 337 actions were originally intended to protect American industry from foreign competition by allowing US manufacturers to bar imports infringing US patents. Previously, Section 337 required a complainant's product to be made in whole or significant part within the US to satisfy the domestic industry requirement. The domestic industry requirement was later changed to include "sufficient investments" in US activities related to the asserted patents. With the lower threshold for standing, foreign companies are finding it easier to pursue Section 337 actions, against both foreign and domestic competitors in the US market.
 

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The US ITC staff has endorsed a proposed settlement between Multitest Electronic Systems Inc. and Cognex Corp. in a patent infringement case over machine vision software. Multitest was the first the nearly 20 named respondents to reach a settlement with Cognex.

Interestingly, several of the other respondents, including MVTec and Delta Design Inc., filed confidential partial oppositions to the motion. Some possible reasons for opposition can include keeping as many respondents in the case as possible to dilute complainant's efforts moving forward, overbroad language in the proposed settlement, or other tactical and strategic considerations.

The complaint alleges that MVTec Software GmbH manufactures machine vision software that infringes Cognex patents. The software is then sold to third parties, including Multitest, who incorporate the software into their manufacturing equipment products. The case is In the matter of Certain Machine Vision Systems, Software and Products Containing Same, investigation number 337-TA-680, in the U.S. International Trade Commission.

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On Aug. 31, Advanced Ion Beam Technology ("AIBT") had its antitrust counterclaims dismissed without prejudice from a patent infringement suit for failing to properly allege specific antitrust injury. On the same day, AIBT filed a new Sherman Act suit refining its antitrust allegations against Varian Semiconductor Equipment Associates Inc. ("Varian"), attempting to rectify the problems with its previous counterclaims.

Antitrust counterclaims are frequently raised by the defendant in patent infringement cases. A patent, by definition, is a monopoly providing the patentee with power to exclude others from making, using, selling, or offering to sell the patented invention. Such claims can be Walker Process fraud claims, alleging the asserted patent was procured by fraud in an effort to create or gain monopoly power in a market. Antitrust claims can also be "sham litigation" claims, alleging the patentee sought to create or maintain a monopoly by enforcing a patent knowing it to be invalid and by filing and maintaining an objectively baseless lawsuit.

Fortunately for the patentee, successfully asserting an antitrust counterclaim requires a high level of proof. Before initiating a patent infringement suit, it would be wise to review the asserted patents with an eye towards possible antitrust issues.

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As a follow up on our earlier post on Tessera's ITC action, the Administrative Law Judge (ALJ) recently made an Initial Determination that respondents TwinMOS Technologies Inc. and TwinMOS Technologies USA Inc. (collectively "TwinMOS") are in default for failure to respond. Given the speed of ITC actions, it is crucial to bring your attorneys into the loop as soon as possible. This decision is a reminder that burying your head in the sand will not make the problem go away.

On March 12, 2008, the ALJ issued an order to show cause regarding entry of default against TwinMOS. TwinMOS replied in a letter to the ALJ, asserting it replied to Tessera's Complaint on January 8, 2008 and stating it is "a memory module house" and is "not in a position to involve in the patent litigation matters or to be liable to the charge."

The ALJ found that since TwinMOS' letter, TwinMOS has failed to participate in the investigation, including failing to participate in discovery, appear at evidentiary hearings, and filing any requested briefings. As a result of the entry of default, TwinMOS have waived their right to appear, to be served with further documents, and to contest the allegations at issue in the investigation.

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The Federal Circuit's recent decision in Cardiac Pacemakers represents a shift in method patent protection scope. Generally, activities outside the U.S. do not trigger U.S. patent liability. But 35 U.S.C. Section 271(f) creates patent liability for certain import and export activities, such as exporting components of a patented invention and actively inducing the combination of the components outside of the US, if such combination would infringe within the US.

Under previous case law, the Federal Circuit found that 271(f) applied to method claims, and a defendant's export of a catalyst needed to perform a patented method could result in liability. Union Carbide Chemicals & Plastics Technology Corp. v. Shell Oil Co. (Fed. Cir. 2005).

In Cardiac Pacemakers, the Federal Circuit reversed its previous position and ruled that the section does not apply to method patents. Cardiac Pacemakers had sued over a patent claiming a method of using an implantable stimulator that detects heart arrhythmias. The Federal Circuit held that the defendant's implantable cardioverter defibrillators practicing the method of Cardiac’s patent outside the U.S. cannot constitute infringement under that statute. Because method or process patents do not include the required "physical components" of a patented invention and because one cannot "supply the step of a method," the statute cannot apply to method or process patents.

It is now more important than ever to ensure your patent portfolio protects not only the methods of producing semiconductor products, but also the products themselves if at all possible.
 

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We've covered the value of ITC 337 actions in prior posts, and the recent events have continued the trend. MagnaChip has settled its patent dispute before the ITC with LSI and Agere Systems. On July 21, the Administrative Law Judge issued an initial determination terminating the investigation against MagnaChip after it reached a settlement and patent licensing agreement. Just the previous week, two respondents, Microchip Technology and Dongbu HiTek Semiconductor were also dropped from the suit based on a settlement with the complainants.

The settlement terms are all confidential, which makes it difficult to analyze any settlement trends. With flat to sequential growth in the semiconductor industry, respondents may be more open to settlement in order to conserve resources and capitalize on market opportunities. On the other hand, complainants may be more open to settlement in light of the fact that many competitors are struggling and are unable to pay out large settlements.
 

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Digitimes reports that Qimonda has sold its technology licenses and patents related to GDDR memory to Elpida.  Businessweek reports the same thing. 

Recall that Germany based Qimonda entered bankruptcy in 2009 due to the difficult DRAM pricing environment.  Interesting to note that Elpida is simply acquiring the technology and some employees, but not any of the capital equipment or plants of Qimonda.  Anyone still doubting where the true value of a tech company lies?!?!?

(Hint:  Engineers and IP)

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