Federal Circuit Affirms Finding of No Domestic Industry in Motiva v. ITC; U.S. Supreme Court Affirms in Bowman v. Monsanto

Further to my post from yesterday on the International Trade Commission (ITC), section 337 of the U.S. Tariff Act of 1930 declares unlawful, among other things, “the importation into the United States, the sale for importation, or the sale within the United States after importation . . . of articles that . . . infringe a valid and enforceable United States patent”, but “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."  Furthermore, “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. . . (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing."  A question that has arisen in some recent cases is whether a firm that only licenses its patents within the United States satisfies the "domestic industry" requirement for invoking the ITC's jurisdiction.  In some instances, the courts and the ITC have answered this question affirmatively.  See InterDigital Comm’ns, LLC v. ITC, 707 F.3d 1295 (Fed. Cir. 2013).  In Motiva, LLC v. ITC, however, the Federal Circuit today distinguished InterDigital and affirmed the ITC's finding that Motiva, a nonpracticing entity that had sued Nintendo for patent infringement and commenced parallel ITC proceedings, did not satisfy the domestic industry requirement.  From the opinion:

The Commission found—and Motiva does not dispute—that Motiva’s investments in developing a domestic industry for the ’151 and ’268 patents were limited after 2007 to the litigation against Nintendo. Indeed, Motiva argues on appeal that its investment in that litigation satisfies the economic prong of the domestic industry requirement of Section 337. It asserts that removing the Wii from the market through litigation was essential to developing a successful “product-driven licensing business” that would encourage partners to develop and adopt its patented technology, which was “ready for a manufacturer to pick it up and incorporate it into a successful product.” Appellant’s Br. 44, 47.

Motiva’s investment in the litigation against Nintendo could indeed satisfy the economic prong of the domestic industry requirement if it was substantial and directed toward a licensing program that would encourage adoption and development of articles that incorporated Motiva’s patented technology. See InterDigital Commc’ns, LLC v. Int’l Trade Comm’n, 707 F.3d 1295, 1299 (Fed. Cir. 2013) (clarifying that efforts directed toward licensing a patent can satisfy the domestic industry requirement where they would result in the production of “goods practicing the patents”); cf. John Mezzalingua, 660 F.3d at 1328-29 (discussing how the “Commission is fundamentally a trade forum, not an intellectual property forum” and holding that litigation expenses directed at preventing instead of encouraging manufacture of articles incorporating patented technology does not satisfy the domestic industry requirement of Section 337).  However, the ALJ found that Motiva’s litigation against Nintendo was not directed at developing such a licensing program. Relying on extensive documentary evidence and witness testimony, the ALJ concluded that the presence of the Wii in the market had no impact on Motiva’s commercialization efforts or ability to encourage partners to invest in and adopt its patented technology. And Motiva was never close to launching a product incorporating the patented technology—nor did any partners show any interest in doing so, for years before or any time after the launch of the Wii. Motiva’s only remaining prototype was a product far from completion, and a multitude of development and testing steps remained prior to finalizing a product for production. Moreover, the evidence demonstrated that Motiva’s litigation was targeted at financial gains, not at encouraging adoption of Motiva’s patented technology. The inventors looked forward to financial gains through Motiva’s litigation, not hopes of stimulating investment or partnerships with manufacturers. Motiva also never asked for a preliminary injunction from the district court, and it waited three years before seeking relief from the Commission—even though the importation of the Wii was allegedly the only obstacle to adoption of its patented technology in the market. Thus, on the record here, substantial evidence supports the Commission’s finding that Motiva’s litigation against Nintendo was not an investment in commercializing Motiva’s patented technology that would develop a licensing program to encourage adoption and development of articles that incorporated Motiva’s patented technology. See John Mezzalingua, 660 F.3d at 1328 (discussing how litigation expenses should not automatically be considered a substantial investment in licensing, even where litigation leads to a license). There is simply no reasonable likelihood that, after successful litigation against Nintendo, Motiva’s patented technology would have been licensed by partners who would have incorporated it into “goods practicing the patents.” See InterDigital, 707 F.3d at 1299.

In other news, this morning the U.S. Supreme Court in Bowman v. Monsanto affirmed the Federal Circuit's decision that the doctrine of patent exhaustion does not immunize the unauthorized reproduction of Monsanto's patented seeds through harvesting and replanting.  No big surprise, in my view.