InterDigital Communications, LLC v. International Trade Commission , 707 F.3d 1295 ( 2013 )

United States Court of Appeals
for the Federal Circuit
__________________________
INTERDIGITAL COMMUNICATIONS, LLC AND
INTERDIGITAL TECHNOLOGY CORPORATION,
Appellants,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee,
AND
NOKIA INC. AND NOKIA CORPORATION,
Intervenors.
__________________________
2010-1093
__________________________
On appeal from the United States International Trade
Commission in Investigation No. 337-TA-613.
__________________________
ON PETITION FOR PANEL REHEARING
AND REHEARING EN BANC
__________________________
PATRICK J. FLINN, Alston & Bird LLP, of Atlanta,
Georgia, filed a combined petition for panel rehearing and
rehearing en banc for intervenors. With him on the peti-
tion were JOHN HAYNES, of Atlanta, Georgia, and ROSS R.
BARTON, of Charlotte, North Carolina. Of counsel on the
petition was PAUL D. CLEMENT, Bancroft PLLC, of Wash-
ington, DC.
INTERDIGITAL COMMUNICATIONS v. ITC 2
DONALD R. DUNNER, Finnegan, Henderson, Farabow,
Garrett & Dunner, LLP, of Washington, DC, filed a
response to the petition for appellants. With him on the
response were ALLEN M. SOKAL, DON O. BURLEY, SMITH R.
BRITTINGHAM IV, and HOUTAN KHALILI ESFAHANI, of
Washington, DC, and CHRISTOPHER P. ISAAC, of Reston,
Virginia. Of counsel on the response were SETH P.
WAXMAN and WILLIAM G. MCELWAIN, Wilmer Cutler
Pickering Hale and Dorr LLP, of Washington, DC, and
MARK C. FLEMING and LAUREN B. FLETCHER, of Boston,
Massachusetts.
MEGAN M. VALENTINE, Attorney Advisor, Office of
General Counsel, United States International Trade
Commission, of Washington, DC, filed a response to the
petition for appellee. With her on the response were
DOMINIC L. BIANCHI, Acting General Counsel, and
ANDREA C. CASSON, Assistant General Counsel for Litiga-
tion.
DARYL JOSEFFER, King & Spalding LLP, of Washing-
ton, DC, filed a response to the petition for amici curiae
Hewlett-Packard Co., et al. With him on the response
were JEFFREY TELEP and ADAM CONRAD.
__________________________
Before RADER, Chief Judge, NEWMAN, MAYER, LOURIE,
BRYSON, DYK, PROST, O’MALLEY, REYNA, and WALLACH,
Circuit Judges.
PER CURIAM.
* Judge Bryson assumed senior status on January 7,
2013. Circuit Judge Moore did not participate in the vote.
3 INTERDIGITAL COMMUNICATIONS v. ITC
ORDER
A combined petition for panel rehearing and for re-
hearing en banc was filed by Intervenors, and responses
to the petition were invited by the court and filed by
Appellants and Appellee. By leave of court, a response to
the petition was filed by Hewlett-Packard Co., et al., as
amici curiae. The petition for rehearing and responses
were considered by the panel that heard the appeal, and
thereafter the petition for rehearing en banc and re-
sponses were referred to the circuit judges who are in
regular active service.
Upon consideration thereof,
IT IS ORDERED THAT:
(1) The petition for panel rehearing is denied, and a
panel opinion and dissent are attached herewith.
(2) The petition for rehearing en banc is denied.
(3) The mandate of the court shall issue on January
17, 2013.
FOR THE COURT
January 10, 2013 /s/ Jan Horbaly
Date Jan Horbaly, Clerk
United States Court of Appeals
for the Federal Circuit
__________________________
INTERDIGITAL COMMUNICATIONS, LLC, AND
INTERDIGITAL TECHNOLOGY CORPORATION,
Appellants,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee,
AND
NOKIA INC. AND NOKIA CORPORATION,
Intervenors.
__________________________
2010-1093
__________________________
Appeal from the United States International Trade
Commission in Investigation No. 337-TA-613.
___________________________
Decided: January 10, 2013
___________________________
ON PETITION FOR REHEARING
__________________________
INTERDIGITAL COMMUNICATIONS v. ITC 2
Before NEWMAN, MAYER, and BRYSON,* Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON.
Dissenting opinion filed by Circuit Judge NEWMAN.
BRYSON, Circuit Judge.
Intervenors Nokia Inc. and Nokia Corporation (collec-
tively, “Nokia”) have petitioned for rehearing on one of
the issues presented in this case: whether InterDigital’s
patent licensing activities satisfied the “domestic indus-
try” requirement of section 337 of the Tariff Act of 1930,
19 U.S.C. §§ 1337(a)(2) and 1337(a)(3). Because Nokia
has made a much more detailed argument with respect to
that issue on rehearing than it did in its brief on the
merits, a response to Nokia’s expanded submission is
appropriate.
1. In its textual argument, Nokia focuses on the
phrases “relating to the articles protected by the patent”
and “with respect to the articles protected by the patent”
in paragraphs 337(a)(2) and 337(a)(3). Paragraph
337(a)(2) provides that the bar to importation of infring-
ing goods established by section 337 applies “only if an
industry in the United States, relating to the articles
protected by the patent . . . exists or is in the process of
being established.” Paragraph 337(a)(3) then states that
an 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” significant investment in
plant or equipment, significant employment of labor or
capital, or “substantial investment in its exploitation,
including engineering, research and development, or
licensing.” The parties agree that the word “its” in the
* Judge Bryson assumed senior status on Janu-
ary 7, 2013.
3 INTERDIGITAL COMMUNICATIONS v. ITC
last clause of paragraph 337(a)(3) refers to the intellectual
property at issue.
Nokia argues that the International Trade Commis-
sion and this court have not properly construed the
phrases “relating to the articles protected by the patent”
and “with respect to the articles protected by the patent”
that appear in those two subsections. The Commission
and the court construed those phrases to define the sub-
ject matter that is within the statute’s protection. With
respect to subparagraph (A) of paragraph 337(a)(3), the
“significant investment in plant or equipment” that is
required to show the existence of a domestic industry
must exist “with respect to the articles protected by the
patent” in question. That requirement will typically be
met if the investment in plant and equipment is directed
at production of articles protected by the patent. Simi-
larly, with respect to subparagraph (B) of paragraph
337(a)(3), the “significant employment of labor or capital”
that is required to show the existence of a domestic indus-
try must exist “with respect to the articles protected by
the patent.” That requirement will likewise typically be
met by a showing that significant labor or capital is being
expended in the production of articles protected by the
patent. Applying the same analysis to subparagraph (C)
of paragraph 337(a)(3) produces a parallel result that is
consistent with the Commission’s and this court’s statu-
tory construction: The “substantial investment in [the
patent’s] exploitation, including engineering, research and
development, or licensing” must be “with respect to the
articles protected by the patent,” which means that the
engineering, research and development, or licensing
activities must pertain to products that are covered by the
patent that is being asserted. Thus, just as the “plant or
equipment” referred to in subparagraph (A) must exist
with respect to articles protected by the patent, such as by
INTERDIGITAL COMMUNICATIONS v. ITC 4
producing protected goods, the research and development
or licensing activities referred to in subparagraph (C)
must also exist with respect to articles protected by the
patent, such as by licensing protected products. This
accords with the common description of the domestic
industry requirement as having two “prongs”: the “eco-
nomic prong,” which requires that there be an industry in
the United States, and the “technical prong,” which
requires that the industry relate to articles protected by
the patent. See Certain Stringed Musical Instruments
and Components Thereof (“Stringed Musical Instru-
ments”), Inv. No. 337-TA-586, USITC Pub. 4120, Comm’n
Op., at 13-14 (Dec. 2009); Certain Variable Speed Wind
Turbines and Components Thereof, Inv. No. 337-TA-376,
USITC Pub. 3003, Comm’n Op., at 14-18 (Nov. 1996).
As noted in the panel opinion in this case, the Com-
mission has consistently construed subparagraph (C) in
that manner. See Certain Multimedia Display and Navi-
gation Devices and Systems, Components Thereof, and
Products Containing Same (“Multimedia Display and
Navigation Devices”), Inv. No. 337-TA-694, USITC Pub.
4292, Comm’n Op., at 7-8 (Nov. 2011) (to satisfy the
domestic industry requirement by proof of investment in
patent licensing requires a showing (1) that the invest-
ment relates to the exploitation of the asserted patent, (2)
that it relates to licensing, (3) that it is domestic, and (4)
that it is substantial). In addition to the cases cited in the
panel opinion, earlier Commission decisions adopting the
same statutory interpretation include Certain Digital
Processors and Digital Processing Systems, Components
Thereof, and Products Containing Same, Inv. No. 337-TA-
559, Initial Determination (May 11, 2007), 2007 WL
7597610, at *53-*57; Certain Semiconductor Chips with
Minimized Chip Package Size and Products Containing
Same, Inv. No. 337-TA-432, Order No. 13 (Jan. 24, 2001),
5 INTERDIGITAL COMMUNICATIONS v. ITC
2001 WL 1877710, at *6-*8; Certain Digital Satellite
System (DSS) Receivers and Components Thereof, Inv. No.
337-TA-392, USITC Pub. 3418, Initial and Final Recom-
mended Determinations, at 8-10 (Apr. 2001); Certain
Dynamic Sequential Gradient Compression Devices and
Component Parts Thereof, Inv. No. 337-TA-335, USITC
Pub. 2575, Initial Determination, at 58-61 (Nov. 1992);
and Certain Microcomputer Memory Controllers, Compo-
nents Thereof and Products Containing Same, Inv. No.
337-TA-331, Order No. 6 (Jan. 8, 1992), 1992 WL 811299,
at *3-*4 (“Where the patented products are manufactured
is not relevant to the subsection (C) issue.”). The two
Commission decisions from the 1990s cited by Nokia are
inapposite, as they do not involve licensing, and they do
not purport to interpret subparagraph (C). The two
Commission decisions from the 1990s cited by the dissent
are also inapposite, as they involve cases in which the
complainants were not exploiting the asserted patents,
contrary to paragraph 337(a)(2), which “requires that the
domestic industry relate to the articles protected by the
patent.” See Certain Integrated Circuit Telecommunica-
tion Chips and Products Containing Same Including
Dialing Apparatus, Inv. No. 337-TA-337, USITC Pub.
2670, Initial Determination, at 99 n.87 (Aug. 1993).
This is a classic case for the application of subpara-
graph (C). The evidence before the Commission showed
that InterDigital is a large, publicly traded company
(NASDAQ ticker symbol IDCC). Since 1993, the adminis-
trative law judge found, InterDigital “has been engaged in
research, development, engineering, and licensing of Code
Division Multiple Access (CDMA) technology in the
United States which work later transitioned into re-
search, development, engineering, and licensing of Wide-
band CDMA technology (WCDMA).” InterDigital’s
proprietary technology is incorporated in the communica-
INTERDIGITAL COMMUNICATIONS v. ITC 6
tions standards referred to as 3G. InterDigital has en-
gaged in some production of products, but it is principally
dedicated to research and licensing intellectual property
in the cellphone industry. As the administrative law
judge found, InterDigital “licenses its wireless technology
and patents to significant handset and device manufac-
turers throughout the world.” Between 1993 and 2006,
the evidence showed, InterDigital invested a total of
approximately $7.6 million in salaries and benefits for
employees engaged in its licensing activities, and it re-
ceived almost $1 billion in revenues from portfolio li-
censes (including the patents in suit) relating to its
cellphone technology, which includes about $400 million
attributable to licenses to its 3G technology. The admin-
istrative law judge found (and there is no argument to the
contrary) that InterDigital’s activities involve “substantial
investment in . . . licensing.” 19 U.S.C. § 1337(a)(3)(C).
The record also reveals substantial investment by Inter-
Digital in the research and development that led to the
patents in suit. The only question is whether the Inter-
Digital’s concededly substantial investment in exploita-
tion of its intellectual property is “with respect to the
articles protected by the patent.” That requirement is
satisfied in this case because the patents in suit protect
the technology that is, according to InterDigital’s theory
of the case, found in the products that it has licensed and
that it is attempting to exclude.
Nokia argues that more is required by the phrase
“with respect to the articles protected by the patent,” but
it is notably vague about what exactly that is. Nokia
concedes that it is not necessary that the “articles” in
question be manufactured in the United States (Pet. 9
7 INTERDIGITAL COMMUNICATIONS v. ITC
n.1),1 and it does not assert that the articles in question
must be produced by licensees of the patentee. Instead,
Nokia variously asserts that “there must be ‘articles
protected by the patent’” (Pet. 4), that the only licensing
activity that matters is “activity ‘with respect to the
articles protected by the patent’” (Pet. 4), that “the licens-
ing activity must be tethered to a tangible good” (Pet. 6),
and that the technology covered by the patent must be
“put into practical use” (Pet. 6). At another point, Nokia
asserts that subparagraph 337(a)(3)(C) was designed to
allow the Commission “to take action to protect those who
do not themselves produce goods practicing their patents,
but who work with others to do so” (Pet. 9). But that is
the very definition of licensing, and as of the time this
case was tried, InterDigital had 24 revenue-producing
licenses to its U.S. patents, including the patents at issue,
with major manufacturers of wireless devices, including
Samsung, LG, Matsushita, Apple, and RIM. Whatever
Nokia means by the expression “work[ing] with others” to
produce goods practicing the patents, it is unclear why
that description of the statutory test would not apply to a
licensor such as InterDigital.2
1 Although Nokia disclaims that argument, it is the
centerpiece of the dissent.
2 To the extent Nokia’s argument is based on con-
cern that the statute will be used to grant a remedy to
any domestic patent owner, no matter what the scale of
its activities in exploiting the patent, both this court and
the Commission have made clear that the investment in
engineering, research and development, or licensing must
be sufficiently substantial to constitute a domestic indus-
try. See John Mezzalingua Assocs. v. Int’l Trade Comm’n,
660 F.3d 1322 (Fed. Cir. 2011) (upholding Commission
decision that complainant’s licensing activities were
insufficiently substantial to constitute a domestic indus-
try); Multimedia Display and Navigation Devices, at 23-
INTERDIGITAL COMMUNICATIONS v. ITC 8
2. The statutory language at issue in this case was
added to section 337 in 1988. The legislative history of
the 1988 amendment to section 337 supports the plain
reading of the statute set out above. Nokia attempts to
cobble together support for its position from portions of
the legislative history, but a fair and comprehensive
examination of the legislative background of the amend-
ment makes clear that cases such as this one were pre-
cisely the kinds of cases that Congress wanted to bring
within the purview of section 337.
Prior to the 1988 amendment, section 337 required
proof that that the challenged importation of articles into
the United States had the effect or tendency “to destroy or
substantially injure an industry, efficiently and economi-
cally operated, in the United States, or to prevent the
establishment of such an industry.” 19 U.S.C. § 1337(a)
(1982). The Commission interpreted that language to
require proof of the existence (or prospect) of a domestic
industry that was manufacturing the articles protected by
intellectual property before the Commission could bar the
import of infringing products. See, e.g., Certain Minia-
ture, Battery-Operated, All-Terrain, Wheeled Vehicles, Inv.
No. 337-TA-122, USITC Pub. 1300 (Oct. 1982), aff’d,
Schaper Mfg. Co. v. U.S. Int’l Trade Comm’n, 717 F.2d
1368 (Fed. Cir. 1983). Objections were raised that sec-
25 (holding complainant’s activities relating to licensing
too limited to constitute a “substantial investment” under
subparagraph 337(a)(3)(C)); Stringed Musical Instru-
ments, at 16-17, 25-27 (complainant “has not provided
sufficient evidence of substantial investment of the type
described in section 337(a)(3)(C) to show that an industry
in the United States exists”; “‘mere ownership of a patent
. . . would not be sufficient to satisfy this test’”). Here,
furthermore, InterDigital's investment included substan-
tial research and development leading to the patents in
suit as well as licensing activity.
9 INTERDIGITAL COMMUNICATIONS v. ITC
tion 337, construed in that manner, did not provide pro-
tection for innovators who did not actually produce goods
in this country, but who were injured by the importation
of goods that incorporated the technology that they had
invented or sought to license. Accordingly, proposals were
introduced in Congress to expand the coverage of section
337 so that it would provide protection for American
industries that did not manufacture products but were
engaged in engineering, research and development, or
licensing of the technology that others used to make
products. Those proposals matured into a statutory
change that provided protection for industries that were
based on the creation and exploitation of intellectual
property even if they did not produce the ultimate prod-
ucts that embodied that technology.
The background of that statutory change and the con-
temporaneous explanations of why it was made are highly
illuminating. Because of certain Commission decisions
applying the “industry” requirement of the pre-1988
version of section 337 restrictively, proposals were intro-
duced in Congress to modify or eliminate that require-
ment. When introducing his bill to amend section 337,
Senator Lautenberg explained that the new legislation
was designed to “keep out of the U.S. market products
that steal American innovations,” and to “strengthen our
ability to exclude products that infringe patents, copy-
rights, trademarks, and semiconductor designs.” 99
Cong. Rec. 2904 (1986). The amendment was directed at
“foreign firms [that] pirate American inventions, and then
ship those products back here.” Id. To exclude foreign
goods, he added, “proof of piracy should be enough. . . . If
a[n] import infringes U.S. intellectual property rights, it
ought to be excluded. And this amendment would make
that clear.” Id. He explained that it was not appropriate
to require production in the United States in order for
INTERDIGITAL COMMUNICATIONS v. ITC 10
section 337 to be available as a remedy: “Today in order
to get relief inventors must exploit their invention by
production in the United States. For better or worse, we
are more and more an information based economy. For
those who make substantial investments in research,
there should be a remedy. For those who make substan-
tial investments in the creation of intellectual property
and then licensing, there should be a remedy.” Id.In parallel remarks to the House of Representatives,
Representative Kastenmeier noted that an objection had
been raised to amending section 337 if it would allow
“foreign patent holders . . . to use the ITC to seek to
exclude either their foreign or American competition from
obtaining access to the U.S. market.” That objection
would be addressed, he explained, by modifying the
domestic injury requirement in the statute “by allowing
complaints to be filed by persons who have made a sub-
stantial investment in facilities or activities relating to
the exploitation of a patent, copyright, trademark, or
mask work, including research and development, licens-
ing, sales, and marketing.” 132 Cong. Rec. 7119 (1986).
That adjustment, he added, “will assure continued access
to the ITC by entities, including universities, who have a
substantial stake in the United States,” and it would
avoid the result of denying ITC relief “notwithstanding
the existence of a larger service industry exploiting the
intellectual property right within the United States.” Id.Such a change would “enable universities and small
businesses who do not have the capital to actually make
the good in the United States to still have access to the
ITC forum for the protection of their rights.” Id.At the hearings on the legislation to amend section
337, there was opposition to the complete elimination of
the industry requirement, on the ground that to do so
11 INTERDIGITAL COMMUNICATIONS v. ITC
would convert the Commission’s mission from a trade
forum into an intellectual property court, and that elimi-
nating the industry requirement would allow foreign
owners of U.S. patents to bring exclusion actions before
the Commission even though they had no substantial U.S.
connections. See Intellectual Property and Trade: Hear-
ings before the Subcomm. on Courts, Civil Liberties, and
the Administration of Justice of the H. Comm. on the
Judiciary (“House Judiciary Hearings”), 99th Cong. 6, 23,
470-72 (1986) (statements of Paula Stern, Chairwoman,
Int’l Trade Comm’n); Intellectual Property Rights: Hear-
ings before the Subcomm. on Int’l Trade of the S. Finance
Comm. (“Senate Hearings”), 99th Cong. 57, 65 (1986)
(statements of Paula Stern, Chairwoman, Int’l Trade
Comm’n). Those who favored the administration’s pro-
posal to eliminate the industry requirement altogether
pointed out that the industry requirement in then-current
law “prevents intellectual property owners such as uni-
versities and research institutions from using the ITC for
enforcing their patents.” House Judiciary Hearings at 48,
61 (statements of Harvey E. Bale, Jr., Assistant U.S.
Trade Representative); Trade Reform Legislation: Hear-
ings before the Subcomm. on Trade of the H. Comm. on
Ways and Means (“1986 House Ways and Means Hear-
ings”), 99th Cong. 354 (1986) (statement of Clayton Yeut-
ter, U.S. Trade Representative); Senate Hearings at 92
(statement of Harvey E. Bale, Jr., Assistant U.S. Trade
Representative). Others favored a compromise in which
the industry requirement would be retained but amended
to cover “U.S. organizations, universities or private, or
even individuals whose function it is to do and license
research whether or not they actually manufacture.” 1986
House Ways and Means Hearings at 670 (statement of
Richard C. Witte, Vice President, Intellectual Property
Owners, Inc.).
INTERDIGITAL COMMUNICATIONS v. ITC 12
In the end, a compromise approach along the lines
proposed by Representative Kastenmeier was adopted.
The compromise bill retained the industry requirement
but made clear that it would not be necessary for a com-
plainant to prove that patent-protected goods were being
produced in this country. Instead, the bill provided that
the industry requirement could be met even in the ab-
sence of domestic production if there was substantial
domestic investment in engineering, research and devel-
opment, or licensing.
Various private parties, including industry represen-
tatives and the Intellectual Property Owners organization
expressed support for the compromise bill. See Senate
Hearings at 175, 179-80 (statements of Donald H. Swan,
Corporate Group Vice President, Monsanto Co.); id. at
188, 193-94 (statements of Richard C. Witte, Vice Presi-
dent, Intellectual Property Owners, Inc.); Comprehensive
Trade Legislation: Hearings before the Subcomm. On
Trade of the H. Comm. on Ways and Means, 100th Cong.
275 (1987) (statement of William T. Archey, Vice Presi-
dent, U.S. Chamber of Commerce).3
The similarly worded House and Senate committee
reports on the compromise bill explained that the
amendment to section 337 was intended “to strengthen
the effectiveness of section 337 in addressing the growing
problems being faced by U.S. companies from the impor-
tation of articles which infringe U.S. intellectual property
rights.” H.R. Rep. No. 100-40, Pt. 1, at 155 (1987) (“House
Report”); S. Rep. No. 100-71, at 128 (1987) (“Senate
3 The background and history of the legislation is
summarized in detail at several places in the congres-
sional hearings that led to the 1988 amendment to section
337. See House Judiciary Hearings at 497-508; Senate
Hearings at 5-20.
13 INTERDIGITAL COMMUNICATIONS v. ITC
Report”). The legislation achieved that objective by
eliminating the requirement to show injury to (or the
prevention of the establishment of) a domestic industry as
a result of the importation in question. House Report at
155; Senate Report at 128. Nonetheless, Congress re-
tained the requirement that “a U.S. industry relating to
the articles or intellectual property right concerned ‘exists
or is in the process of being established.’” House Report
at 156-57; Senate Report at 129. That requirement was
being retained, the reports explained, “in order to pre-
clude holders of U.S. intellectual property rights who
have no contact with the United States other than owning
such intellectual property rights from utilizing section
337.” House Report at 157; Senate Report at 129. While
seeking to bar the use of section 337 by patent holders
with no connection to the U.S. other than their ownership
of a U.S. patent, however, the report made clear that it
was intended to protect domestic industries that were
exploiting patents through means such as engineering,
research and development, or licensing. Those domestic
industries, even if not actually producing goods, would
nonetheless be beneficiaries of section 337, thus preserv-
ing “[t]he purpose of the Commission [which] is to adjudi-
cate trade disputes between U.S. industries and those
who seek to import goods from abroad. Retention of the
requirement that the statute be utilized on behalf of an
industry in the United States [including a licensing
industry] retains that essential nexus.” House Report at
157; Senate Report at 129.
Importantly for this case, the reports explained that
the new statutory provision “does not require actual
production of the article in the United States if it can be
demonstrated that significant investment and activities of
the type enumerated are taking place in the United
States.” House Report at 157; Senate Report at 129. The
INTERDIGITAL COMMUNICATIONS v. ITC 14
new statute, the reports added, would “encompass univer-
sities and other intellectual property owners who engage
in extensive licensing of their rights to manufacturers.”
House Report at 157; Senate Report at 129. The reports
again emphasized that the committees did not “want to
see this language used as a loophole to the industry
requirement,” but intended the new language “to protect
from infringement those holders of U.S. intellectual
property rights who are engaged in activities genuinely
designed to exploit their intellectual property within a
reasonable period of time,” exploitation which, by the
statutory definition, included substantial investment in
engineering, research and development, or licensing.
House Report at 157-58; Senate Report at 130.4
4 In arguing that proof of a licensing industry under
subparagraph 337(a)(3)(C) requires proof that the li-
censed products are manufactured domestically, the
dissent interprets the term “domestic industry” to mean
“domestic manufacturing industry.” The statute, how-
ever, does not say that, nor does the legislative history.
When Congress modified the domestic industry require-
ment in 1988, it expanded the “industry” category by
providing that a licensing business could qualify as a
domestic industry if it involved “substantial investment in
[a patent’s] exploitation.” To read subparagraph
337(a)(3)(C) as if it required proof of domestic manufac-
ture would ignore that the three subparagraphs of para-
graph 337(a)(3) are in the disjunctive and that the
required elements of a domestic industry under subpara-
graphs 337(a)(3)(A) and (B) do not apply to the domestic
industry requirement of subparagraph 337(a)(3)(C).
The dissent also interprets references to the word
“manufacturer” in the legislative history and Commission
decisions to mean “domestic manufacturer,” e.g., dissent
at 10, 15, 26-27, but there is no basis either in the lan-
guage or the context of the cited references for reading
that qualification into the term. The cited materials
merely acknowledge that a sufficiently substantial domes-
15 INTERDIGITAL COMMUNICATIONS v. ITC
3. Nokia and the dissent cite three of this court’s de-
cisions in support of its claim that the panel’s decision in
this case departs from prior circuit precedent, Alloc, Inc.
v. Int’l Trade Comm’n, 342 F.3d 1361 (Fed. Cir. 2003);
Osram GmbH v. Int’l Trade Comm’n, 505 F.3d 1351 (Fed.
Cir. 2007), and Crocs, Inc. v. Int’l Trade Comm’n, 598
F.3d 1294 (Fed. Cir. 2010). Those cases deserve only brief
attention, as they do not address the issue presented in
this case. In each case, the question before the court was
whether the domestic industry requirement was met
based on domestic production, and the question on which
the court focused was whether the products of the claimed
domestic production were covered by the asserted patent
claims. There was no question in those cases as to the
scope of subparagraph 337(a)(3)(C), and there was cer-
tainly no holding (or even dictum) in any of those cases
suggesting that a domestic licensing industry could qual-
ify under subparagraph 337(a)(3)(C) only if goods pro-
tected by the patent or patents in suit were produced
domestically. This court’s decision in John Mezzalingua
Associates v. International Trade Commission, 660 F.3d
1322 (Fed. Cir. 2011), also does not support Nokia or the
dissent. In that case, the Commission and the court held
that the complainant’s litigation expenses did not consti-
tute a substantial investment in exploitation of the as-
serted patents through licensing; the court did not hold
that products covered by the patents had to be manufac-
tured in this country.
* * * * *
tic licensing industry will need to license its technology to
a manufacturer somewhere; they do not say that the
manufacturer must be domestic.
INTERDIGITAL COMMUNICATIONS v. ITC 16
Here’s where all this leaves us: Under the clear in-
tent of Congress and the most natural reading of the 1988
amendment, section 337 makes relief available to a party
that has a substantial investment in exploitation of a
patent through either engineering, research and devel-
opment, or licensing. It is not necessary that the party
manufacture the product that is protected by the patent,
and it is not necessary that any other domestic party
manufacture the protected article. As long as the patent
covers the article that is the subject of the exclusion
proceeding, and as long as the party seeking relief can
show that it has a sufficiently substantial investment in
the exploitation of the intellectual property to satisfy the
domestic industry requirement of the statute, that party
is entitled to seek relief under section 337.
When enacting the 1988 amendment to section 337,
Congress recognized the development in the United
States of industries that devoted substantial investment
to the exploitation of patent rights through engineering,
research and development, and licensing, but not entail-
ing domestic production of the goods that were protected
by those patents. Through subparagraph 337(a)(3)(C),
Congress provided for the International Trade Commis-
sion to offer a remedy to those industries upon proof that
imported goods infringed valid patent rights, and the
Commission has consistently interpreted the statute to
authorize it to do so. To the argument that Nokia
makes—that the result reached by the Commission would
convert the Commission from a trade forum into an
intellectual property forum—Congress has already given
its response, which is that section 337 protects American
industries, including American industries that are built
on the exploitation of intellectual property through engi-
neering, research and development, or licensing.
United States Court of Appeals
for the Federal Circuit
__________________________
INTERDIGITAL COMMUNICATIONS, LLC AND
INTERDIGITAL TECHNOLOGY CORPORATION,
Appellants,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee,
AND
NOKIA INC. AND NOKIA CORPORATION,
Intervenors.
__________________________
2010-1093
__________________________
Appeal from the United States International Trade
Commission in Investigation No. 337-TA-613.
__________________________
NEWMAN, Circuit Judge, dissenting from denial of pe-
tition for rehearing.
Nokia requests rehearing, and again raises the question
of whether InterDigital has the statutory right to bring this
exclusion action, for InterDigital does not manufacture the
patented invention in the United States, and no domestic
industry produces the items for which exclusion is sought.
The license that InterDigital seeks to impose on Nokia, on
INTERDIGITAL COMMUNICATIONS v. ITC 2
threat of exclusion of importation, is not a license to manu-
facture any patented product in the United States; it is a
license to import products made in foreign countries. The
panel majority errs in holding that Congress intended to
authorize access to the ITC exclusion remedy in such cir-
cumstances. That is not the purpose of the "licensing"
amendment to Section 337 of the Tariff Act.
The licensing amendment did not eliminate the domes-
tic industry requirement for access to the ITC remedy of
exclusion. Indeed, the amendment confirmed that require-
ment. The panel majority erred in holding that the domes-
tic industry requirement is met by licensing the importation
of foreign-made products. The purpose of the licensing
amendment to Section 337 was to enlarge the benefit and
incentive to domestic industry by giving licensors access to
ITC exclusionary procedures; the purpose was not to elimi-
nate the requirement of domestic manufacture of the li-
censed articles. The panel majority continues to err, in
reinforcing its theory that
Section 337(a)(3) makes clear that the required
United States industry can be based on patent li-
censing alone; it does not require that the articles
that are the objects of the licensing activities (i.e.,
the “articles protected by the patent”) be made in
this country.
InterDigital Commcn’s, LLC v. Int’l Trade Comm’n, 690
F.3d 1318, 1329 (Fed. Cir. 2012) (majority opinion).1 To the
1 The majority now argues that “a sufficiently sub-
stantial domestic licensing industry will need to license its
technology to a manufacturer somewhere,” but not necessar-
ily in the United States. Rehearing Op. 14-15 n.4. This
contrasts with the panel’s previous holding in this case that
a “domestic industry” can be based on licensing activity
3 INTERDIGITAL COMMUNICATIONS v. ITC
contrary, the legislative record of Section 337(a)(3) does not
“make clear,” or suggest, or even hint, that "articles pro-
tected by the patent," Section 337(a)(2), need not be made in
this country in order for the patentee to obtain exclusion of
foreign-made infringing products.
The purpose of the 1988 amendments to Section 337 was
to permit patentees that do not themselves manufacture
their patented products, such as universities and others
that perform research or engineering, to have access to the
Section 337 remedy. The 1988 amendments did not remove
the requirement that "articles protected by the patent" must
be produced in the United States; the amendments were
designed to enlarge the incentive for domestic production,
not to eliminate it.
The panel majority insists that Congress intended to
make the ITC remedy of exclusion available to exclude
foreign manufactures in the absence of domestic production,
although the patentee in this case does not want to exclude
the foreign product, but only to obtain a fee for its importa-
tion. My colleagues hold that it is irrelevant that no domes-
tic industry is producing, or planning to produce, the
patented articles, directly or under license, stating that
alone. 690 F.3d at 1329. Both of the majority’s inconsistent
holdings are incorrect. Indeed, the majority’s new position
is unsupported by the record, for InterDigital does not
assert that these patents are licensed to Nokia for use by
industry in Finland (or any other country). As I discuss
post, the legislative history shows no contemplation, much
less ratification, of providing access to the ITC’s remedy of
exclusion based on licensing of foreign manufacture. The
statute requires “an industry in the United States, relating
to the articles protected by the patent [to] exist[] or [be] in
the process of being established.” 19 U.S.C. §1337(a)(2).
The purpose is to protect United States industry, not as an
incentive to industry in foreign countries.
INTERDIGITAL COMMUNICATIONS v. ITC 4
Congress "clearly" intended to abandon the purpose of
Section 337 to serve domestic production. However, that is
the purpose of Section 337. The legislative record is clear
that the "licensing" amendment to Section 337 was enacted
to encourage and support domestic production of patented
products. It is time for the court to correct its error, not to
reinforce it.
I
THE "LICENSING" AMENDMENT
Section 337 was enacted in the Tariff Act of 1930, to
provide an expedited and efficient remedy against foreign-
made infringing products by authorizing exclusion of such
products from importation, as an additional or alternative
remedy for infringement, but with certain caveats. Thus
the statute originally required that in order to obtain the
remedy of exclusion there must not only be a domestic
industry practicing the patent, but also that the domestic
industry must be "efficiently and economically operated,"
and must be injured by the importation. The 1988 amend-
ments facilitated access to exclusion by eliminating the need
to prove injury and efficient and economic operation of the
domestic industry, and extended the exclusion remedy to
patentees such as universities and research institutions
that do not themselves manufacture goods.
The legislative history of the 1988 amendments cannot
be read as proposed by the panel majority. The Tariff Act of
1930, in its current codification at 19 U.S.C. §1337 as
amended, declares unlawful:
***
5 INTERDIGITAL COMMUNICATIONS v. ITC
§1337(a)(1)(B) The importation into the United States,
the sale for importation, or the sale within the United
States after importation by the owner, importer, or con-
signee, of articles that—
(i) infringe a valid and enforceable United
States patent or a valid and enforceable United
States copyright . . . ;
***
(a)(2) Subparagraphs (B) [patent and copyright],
(C) [trademark], (D) [mask work], and (E) [design]
of paragraph (1) apply only if an industry in the
United States, relating to the articles protected by
the patent, copyright, trademark, mask work, or de-
sign concerned, exists or is in the process of being
established.
(a)(3) For purposes of paragraph (2), an industry in
the United States shall be considered to exist if
there is in the United States, with respect to the ar-
ticles 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 exploita-
tion, including engineering, research and
development, or licensing.
The 1988 amendments arose from an ITC copyright decision
in 1986, Certain Products With Gremlin Character Depic-
tions, Inv. No. 337-TA-201, USITC Pub. 1815 (March 1986)
(Final Determination), 1986 ITC LEXIS 313. The com-
plainant Warner Brothers sought exclusion of products that
INTERDIGITAL COMMUNICATIONS v. ITC 6
infringed its copyrighted Gremlin characters. The ALJ held
that the domestic industry requirement of Section 337 was
met, stating that Warner Brothers “licensed 48 domestic
companies to produce a wide variety of goods containing
GREMLINS character depictions [including] hats, lunch
boxes, painter caps, jerseys, posters, ‘Colorforms,’ playsets,
toy cars, card games, patterns for costumes, blankets, baby
sleepers, records, pajamas, and puffy stickers, to name just
a few.” Gremlins, Inv. No. 337-TA-201 (Sept. 12, 1985)
(Initial Determination), 1985 WL 303620, at *10. The full
Commission reversed, holding that “the licensing activities
of Warner with respect to the ‘Gremlins copyrights’ do not
constitute a domestic industry under section 337.” 1986 ITC
LEXIS 313, at *158.
Congressional hearings were held to consider this and
other issues that had arisen concerning Section 337. The
record shows general agreement among industry, govern-
ment, and legislators, as they cooperated to adapt the ITC
exclusion provision to circumstances such as in the Grem-
lins case, where the owner of the copyright was not itself a
manufacturer of the products licensed to use the copyright.
The legislative purpose was to assist United States industry
in protecting against infringing foreign-made goods, by
providing a ready remedy against importation, rather than
obliging the owner of the property right to wait to act
against infringing goods after they reach the marketplace.
House Judiciary Subcommittee Chairman Kastenmeier,
the primary sponsor of the legislative changes, initiated
extensive study and hearings. Reported at Intellectual
Property and Trade: Hearings Before the Subcomm. on
Courts, Civil Liberties, and the Administration of Justice of
the House Comm. on the Judiciary (“House Judiciary Hear-
ings”), 99th Cong. 551 (1986); 132 Cong. Rec. H1783 (Apr.
10, 1986), he stated that legislation was needed to
7 INTERDIGITAL COMMUNICATIONS v. ITC
modify the domestic industry requirement by allow-
ing complaints to be filed by persons who have made
a substantial investment in facilities or activities re-
lating to the exploitation of a patent [or other intel-
lectual property], including research and
development, licensing, sales, and marketing. This
adjustment will assure continued access to the ITC
by entities, including universities, who have a sub-
stantial stake in the United States.
This change would also avoid the unfortunate re-
sults which have occurred in some recent cases,
such as Gremlins, where—because of pertinent leg-
islative history explaining the current law—the ITC
has denied relief notwithstanding the existence of a
large service industry exploiting the intellectual
property right within the United States. Finally,
such a change will enable universities and small
businesses who do not have the capital to actually
make the good in the United States to still have ac-
cess to the ITC forum for the protection of their
rights.
Id.Chairman Kastenmeier stated that his “modest” pro-
posal does not “delete the domestic industry requirement.”
Trade Reform Legislation: Hearings Before the Subcomm. on
Trade of the House Comm. on Ways and Means (“House
Ways and Means Hearings”), 99th Cong. 818 (1986). He
objected to simply removing the domestic industry require-
ment from the statute:
Without the “domestic industry” requirement, this
access [to ITC exclusion] would not be predicated on
any investment in the United States. This change
INTERDIGITAL COMMUNICATIONS v. ITC 8
cannot be said to be an attempt to protect American
jobs, quite the contrary is true.
Id. at 824. During the same hearings, Representative
Carlos J. Moorhead explained why amendment to the exist-
ing statutory text was needed:
The industry test . . . prevents universities and re-
search institutions from using the ITC for enforcing
their patents, copyrights and trademarks because
they are not in business.
Id. at 849. Representative Moorhead did not suggest that
Section 337 had any purpose other than to support domestic
manufacture.
ITC Chair Paula Stern stressed the role of intellectual
property rights in production and in economic growth:
I am concerned that the proposed legislation can be
read to elevate the protection of intellectual prop-
erty rights—regardless of whether they are ulti-
mately commercially exploited—over other
important public interest goals. After all, society
benefits even more from the fruits of the inventor
when intellectual property rights are exploited
through the efforts and capital of the entrepreneur.
It is this production-related activity which in turn
spawns economic growth. Society does not benefit
directly from protecting a particular invention
unless that idea is ultimately exploited . . . .
I therefore believe that to be consistent with the
public-interest purpose of section 337, the domestic
industry and injury standard should be maintained,
and should continue to require more than mere
9 INTERDIGITAL COMMUNICATIONS v. ITC
ownership of a U.S. intellectual property right . . . .
Universities are not domestic industries.
House Judiciary Hearings at 5-6, 69. Representative Moor-
head agreed, but pointed out the role of university inven-
tions in potential industrial activity:
But the university really does not have a very good
remedy anyplace at the present time . . . . [Courts]
hear them, but there is so much time that passes
before they actually get into court that the purpose
of the invention and the profit has been reaped
abroad and it is too late to do anything about it.
What do you do about a new cancer treatment in the
biotech area like interferon or something of that
kind? There is no industry yet at this time, it is
something that there will be a great industry.
Id. at 70.
As the legislative process progressed, the hearing re-
cords contain testimony and statements of representatives
of industry, government, the academic community, and
legislators. I present a sampling of testimony specific to the
proposal to provide licensors with access to ITC exclusionary
procedures; no witness disputed that Section 337 is in-
tended to support domestic manufacture, not imports of
foreign manufacture.
Michael H. Stein, for Corning Glass Works and the
Semiconductor Industry Association, House Ways and
Means Hearings at 655:
[T]he requirement that a complainant establish that
there is a U.S. industry exploiting the intellectual
property should remain. The purpose of the ITC is
INTERDIGITAL COMMUNICATIONS v. ITC 10
to adjudicate trade disputes between U.S. industries
and those that seek to import. Moreover, the issu-
ance of an exclusion order makes little sense if it
does not protect an industry within U.S. borders.
Richard C. Witte, Proctor & Gamble Co., testifying as
Vice President of Intellectual Property Owners, Inc. (IPO),
explained that including “licensing” could facilitate use of
the patented technology:
Owners of patents in rapidly changing high-
technology industries should not be denied relief
against foreign competition if steps are being taken
to establish an industry in the U.S. Some indus-
tries in the U.S. built on new technologies may
never come into existence if patent owners cannot
fend off free riders.
We believe if an intellectual property owner has
made a significant investment in the United States,
that should satisfy the industry requirement. Sig-
nificant investments in research and development
should qualify. It should be made clear also that
universities and other intellectual property owners
who license their rights to manufacturers are eligi-
ble to obtain relief.
Intellectual Property Rights: Hearings Before the Subcomm.
on Int’l Trade of the S. Finance Comm. (“Senate Hearings”),
99th Cong. 193-94 (1986). IPO therefore supported access to
ITC remedy for domestic organizations whose function it is
to do research, and license the use of that research to manu-
facturing industries in the United States. Id. at 188.
11 INTERDIGITAL COMMUNICATIONS v. ITC
Similar positions were presented on behalf of many
technology-based corporations. E.g., Thomas D. Kiley, Vice
President, Genentech, Inc.:
Under current ITC jurisprudence, it is open whether
relief is available to a patentee who does not himself
manufacture and sell the goods involved. Under
present law the rights of universities and individual
inventors before the International Trade Commis-
sion are unresolved.
House Judiciary Hearings at 87.
Roy H. Massengill, General Patent Counsel, Allied Sig-
nal, Inc.:
We do not object to having some sort of business en-
tity or a type of industry where there is an invest-
ment. Universities I think are a special case that
would have to be an exception.
Id. at 91.
All witnesses stated that the purpose of extension of the
Section 337 remedy to entities such as universities and
research institutions is to accommodate their role as licen-
sors to domestic industry—not to authorize ITC exclusion of
foreign-made products when no domestic industry exists or
is “in the process of being established.” Section 337(a)(2).
Senator Frank Lautenberg, a co-sponsor of the correspond-
ing Senate bill, stated:
The current law throws up barriers that have
blocked relief for a range of firms, from the New
York inventor of fiber optic waveguide to a Tennes-
see maker of softballs, to the California movie stu-
dio that licenses the Gremlin character.
INTERDIGITAL COMMUNICATIONS v. ITC 12
House Ways and Means Hearings at 572.
The panel majority states that Senator Lautenberg “ex-
plained that it was not appropriate to require production in
the United States in order for section 337 to be available as
a remedy.” Rehearing Op. 9-10. That is incorrect. Senator
Lautenberg stated that he sought to provide protection
under Section 337 for “[r]esearch-based firms [that] are
plowing millions of dollars into the development of new
products and processes,” and companies that spend hun-
dreds of millions of dollars “to develop and bring a new
pharmaceutical product to market” or create a “new family
of semiconductor chips.” 133 Cong. Rec. S9937 (July 15,
1987). Senator Lautenberg did not propose elimination of
the domestic production requirement of Section 337; he
stated that “[f]or those who make substantial investments
in the creation of intellectual property and then license their
creations, there should be a remedy,” and that domestic
industries should be protected from piracy. Id.U.S. Trade Representative Clayton Yeutter presented the
Administration position, that it should be made easier for
domestic industry and universities to have access to the
Section 337 remedy by eliminating the industry test of
“efficient and economic operation”:
The Administration also supports elimination of the
industry test provision of the current law, another
source of needless uncertainty . . . . The industry
test also prevents universities and research institu-
tions from using the ITC for enforcing their patents,
copyrights and trademarks because they are not in
business.
House Ways and Means Hearings at 354.
13 INTERDIGITAL COMMUNICATIONS v. ITC
Witnesses explored the trade policy aspects of Section
337. Professor Robert E. Hudec of the University of Minne-
sota Law School discussed the relation of the proposed
changes in Section 337 to the GATT (General Agreement on
Tariffs and Trade), stating his “views of what the GATT
problems are with regard to the present section 337 and the
proposed reforms.” House Judiciary Hearings at 172-73.
Chairman Kastenmeier made clear that the purpose of
the licensing amendment was to benefit entities "who have
a substantial stake in the United States." Id. at 551. The
final legislative reports of both Houses of Congress are
explicit: H.R. Rep. No. 100-40 (House Report), at 157 (the
amendments “encompass universities and other intellectual
property owners who engage in extensive licensing of their
rights to manufacturers.”); S. Rep. No. 100-71 (Senate
Report), at 129 (the amendments “encompass universities
and other intellectual property owners who engage in exten-
sive licensing of their rights to manufacturers.”).
Other amendments deleted the requirements of estab-
lishing injury to the domestic industry, and that the indus-
try must be shown to be efficiently and economically
operated, as I discuss post. However, the requirement that
there must be a domestic industry, in existence or in the
process of being established, was not touched. After two
years of hearings, deliberation, and interaction among the
concerned communities, Section 337 was amended to these
effects.
Despite this legislative record, the panel majority held
that the legislative history “strongly support[s]” the view
that the 1988 amendments eliminated the requirement of
domestic production. InterDigital, 690 F.3d at 1329. The
panel majority now repeats that error. However, there is no
support for their statement that the legislation "made clear
INTERDIGITAL COMMUNICATIONS v. ITC 14
that it would not be necessary for a complainant to prove
that patent-protected goods were being produced in this
country." Rehearing Op. 12. Domestic manufacture, actual
or in the process of being established, is explicitly required
in the present statute. No contrary position was "made
clear" in the legislation.2
Section 337(a)(2) requires that there be “articles pro-
tected by the patent,” that is, articles made or in prepara-
tion to be made in the United States. The amended statute
authorizes a licensor to bring an ITC exclusion action, for
the purpose of the amendment is to give a licensor access to
the remedy of exclusion of foreign-made infringing products,
as an alternative to district court litigation after importa-
tion of the infringing products.3 The purpose is to protect
the licensor’s income and its licensees. The purpose is not to
facilitate importation of foreign-made products.
2 The panel majority makes the statement that Chair-
man Kastenmeier “compromised” away the requirement
that a domestic industry is practicing or intending to prac-
tice the patented invention. Rehearing Op. 12. The major-
ity states that the legislators intended, by explicit
compromise, to eliminate any domestic manufacture re-
quirement. The legislative record contains no reference to
such a compromise, no proposal for such a compromise, no
suggestion that such a compromise was achieved, no expla-
nation that Section 337 is no longer concerned with domes-
tic manufacture as a ground for excluding foreign
manufacture. No witness commented on such a far-
reaching compromise. It would be remarkable indeed if it
were made, silently, without comment or reportage – un-
known until today.
3
A statutory amendment in 1994 renders it obliga-
tory for a district court to stay a co-pending infringement
action until the ITC proceeding is completed. 28 U.S.C.
§1659.
15 INTERDIGITAL COMMUNICATIONS v. ITC
The domestic industry requirement is satisfied only if
“[t]he owner of the property right [is] actively engaged in
steps leading to the exploitation of the intellectual property,
including application engineering, design work, or other
such activities.” Senate Report at 130 (“Because this statute
is not intended to protect holders of U.S. intellectual prop-
erty who have only limited contact with the United States,
the Committee does not want to see this language used as a
loophole to the industry requirement.”); House Report at 157
(same). Section 337 does not depart from the requirement
that there be a domestic industry to produce the patented
articles, whether under its own patents or by license.
The panel majority plucks out of context a statement
that the amended statute “does not require actual produc-
tion of the article in the United States if it can be demon-
strated that substantial investment and activities of the
type enumerated are taking place in the United States.”
Senate Report at 129; House Report at 157. The majority
omits the ensuing sentence, that “[t]he definition could
encompass universities and other intellectual property
owners who engage in extensive licensing of their rights to
manufacturers.” Senate Report at 129; House Report at 157.
The Reports state that when the licensor does not itself
manufacture the patented articles, the licenses are “to
manufacturers.” Manufacture under a licensed United
States patent is manufacture in the United States.
As I discuss in Part III, implementation of this "licens-
ing" amendment became erratic in the ITC and in this court,
as the terse statutory language led to imprecision of inter-
pretation. At the time of consideration of these amend-
ments the major issue was not the "licensing" aspect, which
was uncontroversial, but the other proposals, particularly
whether to eliminate the long-standing requirements that
the domestic industry is injured by the importation, and is
INTERDIGITAL COMMUNICATIONS v. ITC 16
efficiently and economically operated. I turn briefly to this
aspect of the 1988 amendments.
II
"EFFICIENTLY AND ECONOMICALLY OPERATED" DOMESTIC
INDUSTRY
Section 337 as enacted in 1930 contained the require-
ment that the complainant must establish both that the
domestic industry is injured by the infringing imports, and
that the domestic industry is efficiently and economically
operated. The proposal to eliminate these requirements
occasioned diverse views, as patent policy interacted with
trade policy and competition policy. These aspects occa-
sioned independent discussion, with somewhat less unanim-
ity than for the licensing amendment. Following is a
sampling of the hearing record:
ITC Chair Paula Stern: “The present efficient and eco-
nomic operation requirement may enlarge the discovery
record and the hearing record with concomitant additional
costs to the parties and the Commission. It may also place
large amounts of confidential information at risk. However,
using our trade statutes . . . in a situation where the domes-
tic industry is inefficient and will not be economically viable
is a waste of resources.” House Judiciary Hearings at 26.
Chairman Stern proposed modifying, but not eliminating,
the "efficiency" requirement for the domestic industry.
Senator William V. Roth, Jr.: “As I see it, the priority for
us in the committee in this effort to amend section 337 is
the injury issue. Right now the law requires that infringing
imports threaten an efficient and economically operated
domestic industry with ‘destruction or substantial injury.’
But why should an owner of an intellectual property right
17 INTERDIGITAL COMMUNICATIONS v. ITC
like a patent have to demonstrate destruction or substantial
injury if the patent is infringed?” Senate Hearings at 2.
Senator Frank Lautenberg: “The main problem is this:
it isn’t enough to prove piracy. One has to prove it hurts.
One has to prove that imports would destroy or injure a U.S.
industry . . . an industry that is efficient and economically
operated.” Id. at 38.
Senator John C. Danforth: “My own view is that—and I
am a cosponsor of the bill—if counterfeited material is being
shipped into the United States it should be very easy to get
relief. I view that as really a per se type violation of funda-
mental standards of how we want to do business in this
country, and that it should not be a lengthy process of trying
to prove whether you are injured and whether your industry
is operating efficiently and whether your industry is im-
pacted.” Id. at 128.
Representative Moorhead discussed the difficulty of
proving injury:
It is very, very difficult to prove damage to an in-
dustry where you have a great invention, one that is
obviously going someplace, going to develop a great
industry, where the industry has not been devel-
oped as yet, because there has not been time, and
before that industry can get off the ground here,
they are selling the same product from abroad.
House Judiciary Hearings at 69. Representative Moorhead
stated: “Also an inventor would not have to prove that its
industry is efficiently and economically operated. Some
small high-technology firms may not have a chance to get
started and to become economical before they are challenged
by pirates. They are unable to seek relief before the ITC
INTERDIGITAL COMMUNICATIONS v. ITC 18
just as universities and individual inventors are unable to
seek relief before the ITC.” Id. at 2.
Harvey Bale, Assistant U.S. Trade Representative, for
the Administration: “[I]n our opinion the need to establish
an efficiently and economically operating industry imposes a
burden on U.S. intellectual property owners which makes it
harder for them to enforce their rights . . . . The time,
energy, and money of the patent owner, the respondent, and
the Commission are expended to determine whether a real
‘efficiently and economically operated’ industry exists.” Id.
at 48.
Thomas D. Kiley, Vice President, Genentech: “The ne-
cessity of demonstrating injury to an efficient and economi-
cally operated industry . . . is a burden beyond those present
in conventional patent actions. It is a burden not shared by
process patent holders in many other countries . . . . And
foreign industry will invariably be more efficiently and
economically operated if it can forego the burden and ex-
pense of original research.” Id. at 87.
Roy H. Massengill, Allied Signal: “I think that the re-
quirements that industry establish injury through showing
they have an efficient and economically operated industry is
too burdensome on a patentee. Moreover, there are a lot of
research projects as well as universities that cannot meet
that requirement.” Id. at 93.
Michael H. Stein, Corning Glass and the Semiconductor
Industry Association: “Section 337 should also be amended
to eliminate the requirement that a complainant prove that
the U.S. industry is ‘efficiently and economically operated.’
This element is vague, highly subjective, and to its credit,
the U.S. International Trade Commission has never denied
relief on this basis. This element adds additional needless
19 INTERDIGITAL COMMUNICATIONS v. ITC
cost to the already high price of section 337 relief, and
subject[s] U.S. industries to extensive discovery by counsel
for foreign respondents.” Id. at 244. “The injury and effi-
cient and economic operation requirements of section 337,
designed for the antidumping context originally intended in
the statute, make no sense in the intellectual property
arena.” Id. at 246. “For example, how does one establish
that a new, emerging industry is efficiently and economi-
cally operated?” Id. at 251. “We are aware of little or no
opposition to the removal of this requirement.” Id. at 252.
Richard C. Witte, for IPO: “We support eliminating
completely the requirement that the ITC must find the U.S.
industry to be efficiently and economically operated. For
example, it may be difficult for a newly established technol-
ogy based industry to show that it is efficient.” Senate
Hearings at 187-88.
William T. Archey, for the United States Chamber of
Commerce: “We support eliminating the requirement that
the ITC must find the U.S. industry to be ‘efficiently and
economically operated’ as a condition for relief in intellec-
tual property cases particularly since it may be difficult for
a newly established, technology-based industry to show that
it is efficient.” Id. at 247-48.
Representative Kastenmeier initially advocated modify-
ing, but not eliminating, the “efficiently and economically
operated” requirement: “Third, transfer the economically
and efficiently operated criteria from being an element of
the complainant’s case to a public interest factor to be
evaluated by the ITC only in determining whether to ap-
prove a remedy. This change alone should limit the real and
potential discovery abuse which can occur under current
law.” House Judiciary Hearings at 551.
INTERDIGITAL COMMUNICATIONS v. ITC 20
To the extent that there was any difference of opinion at
the Hearings, it related to the requirements of showing
injury and efficient and economical operation. Although the
panel majority makes much of what they call "the compro-
mise," they do not explain what was compromised. The
statement on behalf of the Monsanto Company, cited by the
panel majority to illustrate the purported “compromise,”
shows no proposal that the domestic industry requirement
should be removed. Donald H. Swan, Vice President, Mon-
santo Co., testified:
We believe that you should retain the requirement
that U.S. industry be involved. That is, that the
complainant has substantial investment in U.S.
manufacturing, R&D, creative development or mar-
keting development facilities. This would include
universities and pure research facilities.
Senate Hearings at 175. However, Monsanto supported
eliminating the requirement of proving injury and efficient
and economical operation:
We strongly support proposed improvements to Sec-
tion 337 to make it more practical to bring cases in
the ITC to exclude imports which infringe U.S. pat-
ents, trademarks, and copyrights. When this type
of action is applied to an infringement case, as op-
posed to the more usual injurious import of goods,
clearly issues such as whether the complainant is
“efficiently and economically operated” or whether
“injury” can be proven are irrelevant. Infringement
is by definition an injury to intellectual property
rights and whether the innovator’s operation is effi-
ciently run is meaningless in an intellectual prop-
erty rights case, as opposed to a commodity
manufacturing case.
21 INTERDIGITAL COMMUNICATIONS v. ITC
Id. at 179-80. My colleagues' statement that the legislators
compromised away the domestic industry requirement is
without foundation.
III
INCONSISTENT PRECEDENT
The panel majority states that “the Commission has
consistently construed subparagraph (C)” so that licensing
alone is deemed to be a domestic industry, with no need for
domestic licensed manufacture. Rehearing Op. 4. That is
incorrect, for the Commission has often held that licensing
alone does not satisfy the domestic industry requirement,
even as the Commission has also reached inconsistent
holdings.
In Certain Methods of Making Carbonated Candy Prod-
ucts, Inv. No. 337-TA-292, USITC Pub. 2390 (June 1991),
the Commission addressed the then-recently enacted Sec-
tion 337(a)(3). The complainants included the patent
holder, its exclusive licensee, and “a partnership established
to manufacture, sell, and distribute” the patented carbon-
ated candy. Comm. Op. at 1. The complainants argued that
their commercial production of carbonated candy practiced
the “essential element” of the patent and therefore satisfied
the domestic industry requirement. In rejecting this argu-
ment, the Commission ruled that the statutory language
“with respect to the articles protected by the patent” “re-
flects the Commission’s long-standing practice of holding
that a domestic industry does not exist if the complainant,
or its licensees, is not exploiting the asserted patent.” Id. at
34-35. The Commission “adopt[ed] the ALJ’s finding that
the domestic industry does not practice” the asserted pat-
ent, id. at 31, and denied exclusion under Section 337.
INTERDIGITAL COMMUNICATIONS v. ITC 22
It is suggested that Certain Dynamic Sequential Gradi-
ent Compression Devices and Component Parts Thereof, Inv.
No. 337-TA-335, USITC Pub. 2575 (Nov. 1992), is an early
example of the Commission’s elimination of the domestic
production requirement. Rehearing Op. 5. While the ALJ
stated that “a complainant in a Section 337 investigation
need not manufacture the product covered by the claims of
the patent in order to establish that a domestic industry
exists,” the ALJ also stressed the need for “articles protected
by the patent”:
Therefore, the activities set forth in [Section
337(a)(3)] may constitute a domestic industry only if
they are sufficiently related to articles protected by
the patent as to constitute an exploitation thereof.
Initial Determination at 59-61 (May 15, 1992). The ALJ
held that the complainant’s investments in research and
development, engineering, and educational programs did
not constitute a domestic industry. Id. at 61. Licensing was
not discussed because the complainant had “not engaged in
licensing under the [asserted] patent.” Id. at 60 n.30.
In Certain Integrated Circuit Telecommunication Chips
and Products Containing Same, Including Dialing Appara-
tus, Inv. No. 337-TA-337, USITC Pub. 2670 (Aug. 1993), the
Commission rejected the argument “that to the extent that a
domestic industry with respect to the [asserted] patents is
based on complainant’s licensing or research and develop-
ment activities, the domestic industry requirement is satis-
fied even if it is found that complainant . . . do[es] not
practice the [asserted] patents.” Initial Determination, 1993
ITC LEXIS 859, at *87 n.87. The ALJ stated that “Section
337(a)(2) requires that the domestic industry relate to the
articles protected by the patent,” and that the requirement
of domestic production “reflects the Commission’s long-
23 INTERDIGITAL COMMUNICATIONS v. ITC
standing practice of holding that a domestic industry does
not exist if the complainant, or its licensees, is not exploit-
ing the asserted patent.” Id. The Commission adopted the
ALJ’s “thorough and well reasoned” analysis. 1993 ITC
LEXIS 854, at *25-26 n.2.
The panel majority states that some of these decisions
are “inapposite.” Rehearing Op. 5. However, they all apply
and interpret Section 337(a)(3). In Dialing Apparatus the
ALJ, approved by the full Commission, stated:
[T]he administrative law judge has found no author-
ity for the conclusion that a mere license under a
patent, where the licensee has not fabricated any
product which a complainant contends embodies the
invention described in said patent, is adequate to
establish a domestic industry.
1992 WL 811431, at *11-12 n.25. This statement is directly
apposite.
However, the Commission has been inconsistent. A con-
flicting Commission decision is Certain Digital Satellite
System (DSS) Receivers and Components Thereof, Inv. No.
337-TA-392 (Oct. 20, 1997). The ALJ found that the com-
plainant’s licensing activities were sufficient to satisfy the
domestic industry requirement because the complainant (1)
employed five people to “identify[], approach[], and nego-
tiat[e] with prospective licensees,” and (2) had “incurred
substantial expenditures relating to litigation of its patent
rights.” Initial Determination, 1997 WL 696255, at *8. The
ALJ stated that “the statute does not require a complainant
to manufacture the patented product nor does it require
that a complainant show that a product covered by the
[asserted] patent is made by complainant’s licensees.” Id.,
at *8. The full Commission did not discuss this aspect of the
INTERDIGITAL COMMUNICATIONS v. ITC 24
Initial Determination. Certain DSS Receivers, Notice (May
13, 1999) (vacating only the ALJ’s invalidity rulings).
The panel majority states that Section 337 requires the
investment in licensing to be “substantial” to constitute a
domestic industry, and therefore that there is no “concern
that the statute will be used to grant a remedy to any do-
mestic patent owner, no matter what the scale of its activi-
ties in exploiting the patent.” Rehearing Op. 7 n.2. For this
proposition, the majority cites Certain Stringed Musical
Instruments and Components Thereof, Inv. No. 337-TA-586
(May 16, 2008) (Final Determination). But this case merely
illustrates the uncertainty engendered by the majority’s
inconsistent statutory interpretation. In Certain Stringed
Musical Instruments the Commission denied an independ-
ent inventor’s request for Section 337 remedy, although he
had spent thousands of dollars to manufacture five different
prototypes of his patented tuning device and devoted many
years attempting to license his patented tuning technology
for domestic manufacture. Comm. Op. at 9-10, 25-27. The
Commission held that the inventor had not shown “substan-
tial investment,” although the context showed that the
inventor had persistently sought licensees.
A recent ITC decision concerned whether the combina-
tion of licensing and litigation expenses could meet the
domestic industry requirement, and held that it might,
depending on the particular facts. In Certain Coaxial Cable
Connectors, Inv. No. 337-TA-650, 2011 WL 7463395 (Apr.
2010) the ITC stated that "Congress contemplated that the
requirement would cover small companies, such as biotech
startups, that license their patents in order to generate
sufficient capital to manufacture a product in the future.”
Id., at *38. The Commission quoted the statement of Sena-
tor Lautenberg, who had explained:
25 INTERDIGITAL COMMUNICATIONS v. ITC
For those who make substantial investments in re-
search, there should be a remedy. For those who
make substantial investments in the creation of in-
tellectual property and then license creations, there
should be a remedy. Let me give one example,
there's a start-up biotech firm in my state. Its
product is its patents. It hasn't reached the stage of
manufacture. It doesn't have the money. But it will
reach that point, by licensing its patents to others.
Should we deny that firm the right to exclude the
work of pirates? Our legislation would say no. A
party could get relief if it has made significant in-
vestment in R & D, engineering, or licensing.
Id. (quoting 132 Cong. Rec. H1782 (Apr. 10, 1986)) (empha-
ses in original). The Commission stated that "licensing" in
Section 337 covers not only licensing to "bring a patented
technology to market," but also activities that “take advan-
tage of the patent, i.e., solely derive revenue" from the
patent. Id., at *39. On further determination, the ALJ held
that the domestic industry requirement had not been met.
Id., at *5 (July 12, 2010) (Commission notice declining to
review ALJ’s determination of no domestic industry). This
court affirmed, holding in John Mezzalingua Associates v.
International Trade Commission, 660 F.3d 1322 (Fed. Cir.
2011), that the patentee's investment in licensing and
enforcement activities did not satisfy §1337(a)(3)(C).
In its brief on the Mezzalingua appeal to the Federal
Circuit, the Commission, responding to amici’s argument
that only “productive” licensing should be considered rele-
vant to the establishment of a domestic industry, stated
that “there is no evidence that Congress considered . . .
NPEs [Non Practicing Entities] when it amended the Com-
mission’s statute in 1988 . . . . Indeed, the emergence of
NPEs in the last 15 years is too recent for Congress to have
INTERDIGITAL COMMUNICATIONS v. ITC 26
considered when it amended the Commission’s statute over
twenty years ago.” Commission Brief at 59-60 (Mar. 21,
2011). The Commission stated that “the legislative history
and the design of the statutory scheme indicates that Con-
gress intended section 337 to cover ‘licensing’ that encour-
ages the productive use of the patented technology.” Id. at
57. This court agreed, stating that "it is clear that Congress
had no intention of disposing of the domestic industry
requirement altogether." Mezzalingua, 660 F.3d at 1327.
The panel majority's current ruling in InterDigital contra-
dicts our own precedent.
A recent decision cited by my colleagues to show the
Commission’s “consistency” actually shows inconsistency.
Certain Multimedia Display and Navigation Devices and
Systems, Components Thereof, and Products Containing
Same, Inv. No. 337-TA-694, USITC Pub. 4292 (Aug. 8,
2011). The panel majority states that the Commission holds
that investment in licensing alone may satisfy the domestic
industry requirement. Rehearing Op. 4. The panel majority
does not mention the Commission’s statement that the
purpose of the licensing amendment is to benefit patentees
that license their patents “to manufacturers” or for “produc-
tion-related activities”:
Section 337(a)(3)(C) was added to benefit domestic
entities with limited resources like universities and
start-up companies that license their inventions to
manufacturers, as well as large entities that pro-
duce intellectual property through design and re-
search and development activities in the United
States, but outsource production-related activities
through licensing.
Comm. Op. at 13 n.9. The Commission “reverse[d] the
ALJ’s finding that a domestic industry exists.” Id. at 25.
27 INTERDIGITAL COMMUNICATIONS v. ITC
Yet another recent ITC ruling is consistent with the re-
quirement for domestic manufacture by license. In Certain
Integrated Circuits, Chipsets, & Products, Inv. No. 337-TA-
786, 2012 WL 3610787 (July 12, 2012) (Initial Determina-
tion), the ALJ had stated that “where a complainant is
relying on licensing activities, the domestic industry deter-
mination does not require a separate technical prong analy-
sis and the complainant need not show that it or one of its
licensees practices the patents-in-suit.” Id., at *79. How-
ever, the ALJ also held that the investment in licensing was
not “substantial” within the meaning of Section 337. Id., at
*87. On October 10, 2012, the Commission affirmed,4
denying access to Section 337 exclusion.
It is plainly inaccurate to state that the Commission has
"consistently" held that licensing alone satisfies the domes-
tic industry requirement. Rehearing Op. 4. The conflicting
rulings of the Commission itself underscore the need for
resolution. And the InterDigital court’s interpretation of
Section 337 conflicts with the weight of this court’s prece-
dents, which require domestic production, or preparation to
produce, articles protected by the patent. See Crocs, Inc. v.
Int’l Trade Comm’n, 598 F.3d 1294, 1306-07 (Fed. Cir. 2010)
(domestic industry requires “the industry [to] produce[]
articles covered by the asserted claims.”); Osram GmbH v.
Int’l Trade Comm’n, 505 F.3d 1351, 1359 (Fed. Cir. 2007)
(there must be a “domestic product” to satisfy the domestic
industry requirement); Alloc, Inc. v. Int’l Trade Comm’n,
342 F.3d 1361, 1375 (Fed. Cir. 2003) (considering whether
the “industry relates to the protected articles.”). The panel
majority’s statutory interpretation is a distortion of Section
337. See InterDigital, 690 F.3d at 1330 (holding that Inter-
4
No appeal has been filed as of this date.
INTERDIGITAL COMMUNICATIONS v. ITC 28
Digital satisfies §337 because a domestic industry may
consist “purely of licensing activities.”).5
The burgeoning inconsistencies reinforce the need for
resolution. At a congressional hearing in July 2012 wit-
nesses pointed out that the ITC forum is often used not to
protect domestic manufactures, but to facilitate importation
of foreign manufactures. See International Trade Commis-
sion and Patent Disputes: Hearings Before the Subcomm. on
Intellectual Property, Competition and the Internet of the
House Comm. on the Judiciary (“2012 Hearings”) (July 18,
2012). Neal A. Rubin, Vice President of Cisco Systems,
testified that:
patent assertion entities often rely upon the domes-
tic activities of their unwilling licensees [to satisfy
the domestic industry requirement] . . . . But this
5 InterDigital reports that “substantially all of [its]
revenue was derived from a limited number of licensees
based outside of the United States, primarily in Asia.”
InterDigital, Inc., Annual Report (Form 10-K), at 21 (Feb.
27, 2012). The majority now states that “[t]he record also
reveals substantial investment by InterDigital in the re-
search and development that led to the patents in suit.”
Rehearing Op. 6. This is inaccurate. While the ALJ made a
general statement that InterDigital has been involved in
research and development of wireless technology since 1993,
InterDigital argued that it “satisfies the domestic industry
requirement based on its licensing activities alone.” Inter-
Digital did not provide evidence of research and develop-
ment related to the patents in suit, and the record describes
no relationship between research and development and
licensing of the patents in suit. The only relationship as-
serted in this case is that the imported items, manufactured
abroad by foreign industry, infringe United States patents.
The licensing of foreign imports—whether by research
institutions or universities—does not satisfy Section 337’s
domestic industry requirement.
29 INTERDIGITAL COMMUNICATIONS v. ITC
statutory language, added by Congress in 1988,
should not apply to the ‘revenue-driven licensing’
model.
2012 Hearings (statement of Neal A. Rubin).
At the same hearings, David B. Kelley, IP Counsel of
Ford Global Technologies, testified that the purpose of the
licensing amendment was to help American jobs and pro-
duction:
Licensing is permitted in the domestic industry test
to allow innovators who don’t make products, like
universities, to use Section 337 . . . . This helps cre-
ate American jobs in product development and
manufacturing. On the other hand, [patent asser-
tion entities] obtain and license their patents after a
product has come to market, and seek to share in
the value already created by others . . . . While a
PAE may have a claim in district court, it should
have no place in the ITC, which is intended to pro-
tect U.S. industries and jobs, not to allocate existing
value among claimants by awarding damages.
Id. (statement of David B. Kelley).
We offer no view on the role of non-practicing entities in
innovative advance, taking note of the complex positions on
all sides. The issue before the court is simpler, for it relates
solely to the purpose and application of Section 337,
whether the licensor is a research establishment such as
InterDigital, or any other licensing patent owner. The
larger policy aspects are properly before the legislators. It is
the judicial obligation to understand the law, to appreciate
its purposes as enacted, and to apply the law correctly, in
implementation of the legislation:
INTERDIGITAL COMMUNICATIONS v. ITC 30
The purpose of the Commission is to adjudicate
trade disputes between U.S. industries and those
who seek to import goods from abroad. Retention of
the requirement that the statute be utilized on be-
half of an industry in the United States retains that
essential nexus.
House Report at 157.
The ITC is to adjudicate trade disputes between
U.S. industries and those who seek to import goods
from abroad. Retention of the requirement that the
statute be utilized on behalf of an industry in the
United States retains that essential nexus.
Senate Report at 129.
My colleagues depart from the statutory text and pur-
pose, in holding that the statutory requirement of domestic
industry does not require domestic manufacture. Rehearing
Op. 14 n.4. The statute says, twice, that there must be
“articles protected by the patent,” §1337(a)(2), (a)(3),
whether produced by the patentee, or under license from the
patentee. The domestic industry requirement is not met by
foreign manufactures. That is the issue requiring judicial
attention. From the panel’s denial of the petition for rehear-
ing, I respectfully dissent.