• ITC Issues Opinion Reviewing and Vacating Initial Determination Granting Motion for Summary Determination of No Domestic Industry in Certain Video Game Systems and Controllers (Inv. No. 337-TA-743)
  • April 21, 2011 | Author: Alexander E. Gasser
  • Law Firm: Oblon, Spivak, McClelland, Maier & Neustadt, L.L.P. - Alexandria Office
  • Further to our April 1, 2011 post, on April 14, 2011, the International Trade Commission (the “Commission”) issued the public version of its Opinion reviewing and vacating ALJ Robert K. Rogers, Jr.’s February 11, 2011 Initial Determination (“ID”) in Certain Video Game Systems and Controllers (Inv. No. 337-TA-743).

    By way of background, the Complainant in this matter is Motiva, LLC (“Motiva”) and the Respondents are Nintendo Co., Ltd. and Nintendo of America Inc. (collectively “Nintendo”).  On February 11, 2011, ALJ Rogers granted Nintendo’s motion for summary determination that the economic prong of the domestic industry requirement is not satisfied and terminated the investigation.  More specifically, the ID by ALJ Rogers determined that (1) “Motiva’s engineering and research and development activities shall not be considered in the domestic industry analysis, because they ended prior to the issuance of either of the patents in suit”; (2) Motiva’s efforts to attract investments, manufacturers, or licensees, were characterized as “sales and marketing activities,” and were therefore not considered, (3) Motiva’s efforts to “bring the technology of the Asserted Patents to market” ended in January 2007, more than three years before the section 337 complaint was filed, and therefore, “[t]hese non-contemporaneous activities ... cannot serve as the basis for a finding that Motiva satisfies the domestic industry requirement”; (4) Motiva’s district court litigation could not be an investment in exploitation of the asserted patents through licensing because (a) Motiva never tried to license the asserted patents, (b) these litigation activities were not related to engineering or research or development, and (c) Motiva’s allegation that its litigation against Nintendo is intended to allow Motiva to enter the marketplace is “not sufficient to create a factual dispute regarding whether or not Motiva’s litigation activities are related to engineering, research and development”; and (5) Motiva’s patent prosecution activities, including the inventors’ time and associated legal costs, expenses, and fees would not be considered in the domestic industry analysis, because this “would render the domestic industry requirement a nullity because every patent requires time and fees to prosecute.”  See our March 1, 2011 post for more details.

    The Commission initially found that the ALJ erred in declining to consider Motiva’s activities that occurred prior to issuance of the asserted patents.  The Commission specifically held, “Neither the language of the statute [19 U.S.C. §§ 1337(a)(2), (a)(3)] nor the legislative history preclude from consideration engineering and research and development investments that precede the issuance of the patent in determining whether a domestic industry exists or is in the process of being established.”  However, the Commission clarified that, depending on the facts and evidence, patent prosecution activities alone may be insufficient to establish the domestic industry requirement under section 337(a)(3)(C), because all United States patents must be prosecuted in the United States Patent and Trademark Office before they can issue as a patent.

    With respect to Motiva’s litigation activities, the Commission found that Motiva raised a genuine issue of material fact as to whether its district court litigation activities between 2007 and the present are related to licensing and/or product development.  Although Motiva admitted that it conducted absolutely no licensing activities at any time, the Commission indicated that this fact is more relevant to licensing that is “revenue driven,” i.e., derived from existing production, rather that “production driven” licensing, which encourages adoption of the technology by bringing a product to market.  The Commission held that Motiva raised a factual dispute as to whether its activities resemble the production-driven licensing model by actively presenting its technology to potential manufacturers, investors, and licensees not already involved in existing production, and so it was error for the ALJ to conclude that the litigation against Nintendo clearly does not relate to licensing because Motiva never engaged in any sort of licensing activities.  Motiva alleged that Nintendo’s Wii caused all interest in Motiva’s technology to fade and that Motiva’s district court action against Nintendo was a necessary step to establish its claim to the technology, embodied in the asserted patents, in order to bring its technology to market.  Viewed in a light most favorable to Motiva, the Commission stated that “it may be that Motiva’s only recourse was to sue Nintendo to bring its product to market and that its litigation activities may in fact be related to ‘licensing’ under section 337(a)(3)(C),” although evidence on this issue should be further developed at the final hearing.

    On remand, the Commission directed the ALJ to address in the final ID the following questions with respect to establishing a domestic industry:

    1. What was the level of interest from potential manufacturers, investors, and licensees in Motiva’s technology prior to release of the Wii?  Did Nintendo’s release of the Wii cause this interest to decrease?  To what extent would the product(s) being developed by Motiva compete with Nintendo’s Wii?

    2. How close was Motiva’s technology to being commercialized and/or production-ready?

    3. To what extent was Motiva’s shift in product-oriented activities to litigation-oriented activities a strategic business decision not caused by Nintendo’s activities?  Could Motiva have continued its commercialization efforts without resorting to litigation?  Was Motiva taking the “necessary tangible steps to establish” a domestic industry?  See Stringed Instruments, at 13 (quoting S. Rep. 100-71 at 130)?

    4. Do the steps “taken [by Motiva] indicate a significant likelihood that the industry requirement will be satisfied in the future?”  See Stringed Instruments, at 13 (quoting H. Rep. 100-40 at 157).  How likely is it that Motiva will have a domestic industry in the future (1) if no relief is issued against Nintendo or, alternatively, (2) if relief is issued against Nintendo?