Motorola Escapes Microsoft by Ducking Under ITC Domestic Industry Requirement

In Microsoft Corp. v. International Trade Commission, the Federal Circuit upheld the ITC’s determination that Microsoft had failed to establish that there was a “domestic industry” relating to three of four patents asserted to be infringed by Motorola Mobility LLC. This case underscores the additional requirement that must be proven when bringing an infringement action in the ITC under 19 USC § 1337.

The ITC Proceedings

Microsoft commenced this case in 2010, by filing a complaint in the ITC alleging that Motorola had violated 19 USC § 1337 (“Section 337″) by “importing mobile phones and tablets that infringe a number of Microsoft’s patents.” The case on appeal focused on four Microsoft patents: U.S. Patent No. 6,578,054, U.S. Patent No. 6,826,762, U.S. Patent No. 7,644,376, and U.S. Patent No. 5,664,133. For three of the four patents, the ITC found that Microsoft had not proven “the existence of a domestic industry ‘relating to the articles protected by the patent,’” as required by 19 USC §§ 1337(a)(2), (3). Microsoft appealed.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Taranto and joined by Chief Judge Rader and Judge Prost.

In affirming the ITC’s finding on the domestic industry requirement, the court explained:

There is no question about the substantiality of Microsoft’s invest­ment in its operating system or about the importance of that operating system to mobile phones on which it runs. But that is not enough under the statute. Section 337, though not requiring that an article protected by the patent be produced in the United States, unmistakably requires that the domestic company’s substantial invest­ments relate to actual “articles protected by the patent.” 19 U.S.C. §§ 1337(a)(2), (3). A company seeking section 337 protection must therefore provide evidence that its substantial domestic investment—e.g., in research and development—relates to an actual article that practices the patent, regardless of whether or not that article is manufactured domestically or abroad.

We conclude that there is substantial evidence to sup­port the Commission’s determination that Microsoft failed to meet that requirement. …. The Commission did not lack substantial evidence to support its finding that Microsoft simply failed to identify any actual phones with the required components performing as required [by the patent claims].

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Because the Commission could find insufficient proof that the … patent covers the articles on which Microsoft relied to prove a domestic industry, it could properly find no section 337 violation. We therefore affirm that finding without reaching the issue of infringement.

Thus, the Federal Circuit affirmed the ITC on three of the four patents.

Section 337 Strategies

Bringing a 337 action in the ITC is an additional or alternative strategy for enforcing patents against infringing products that are imported into the U.S. By statute, ITC proceedings must be completed expeditously, and can result in an exclusion order that will stop the infringing products at the border. As this case demonstrates, a 337 action requires that “an industry in the United States” that relates “to the articles protected by the patent … exists or is in the process of being established.” The statue provides that the requirement is satisfied if there is, in the U.S.:

• a significant investment in plant and equipment
• a significant employment of labor or capital or
• a substantial investment in its exploitation, including engineering, research and development, or licensing.