Tessera, Inc. v. International Trade Commission

United States Court of Appeals
for the Federal Circuit
__________________________

TESSERA, INC.,
Appellant,

v.
INTERNATIONAL TRADE COMMISSION,
Appellee,

AND

ELPIDA MEMORY, INC. AND ELPIDA MEMORY
(USA) INC.,
Intervenors,

AND

SMART MODULAR TECHNOLOGIES, INC.,
Intervenor,

AND

ACER, INC., ACER AMERICA CORPORATION,
NANYA TECHNOLOGY CORPORATION, NANYA
TECHNOLOGY CORPORATION U.S.A.,
AND POWERCHIP SEMICONDUCTOR
CORPORATION (now known as Powerchip Tech-
nology Corporation),
Intervenors,

AND

RAMAXEL TECHNOLOGY LTD.,
Intervenor,
2 TESSERA INC. v. ITC

AND

KINGSTON TECHNOLOGY COMPANY, INC.,
Intervenor.
__________________________

2010-1176
__________________________

On appeal from the United States International Trade
Commission in Investigation No. 337-TA-630.
__________________________

Decided: May 23, 2011
__________________________

BENJAMIN W. HATTENBACH, Irell & Manella LLP, of
Los Angeles, California, argued for appellant. With him
on the brief were MORGAN CHU, JONATHAN H. STEINBERG,
KENNETH J. WEATHERWAX and MARK A. KRESSEL; and
WAYNE M. BARSKY, of Gibson, Dunn & Crutcher LLP, of
Los Angeles, California; and MARK N. REITER and STEVEN
M. GEISZLER, of Dallas, Texas.

PANYIN A. HUGHES, Office of the General Counsel,
United States International Trade Commission, of Wash-
ington, DC, argued for appellee. With him on the brief
were JAMES M. LYONS, General Counsel, and MICHELLE
W. KLANCNIK, Acting Assistant Counsel.

ERIC L. WESENBERG, Orrick, Herrington & Sutcliffe,
LLP, of Menlo Park, California, argued for intervenors
Acer, Inc., et al. With him on the brief were KENNETH J.
HALPERN, G. HOPKINS GUY III, KAI TSENG, MICHAEL F.
HEAFEY and BRIAN H. VANDERZANDEN, of Menlo Park,
California. Of counsel was STEVEN E. ADKINS, of Wash-
ington, DC; and SANJEET K, DUTTA, MATTHEW J. HULT,
HSIANG HONG LIN, DENISE MARIE MINGRONE, and
TESSERA INC. v. ITC 3

MICHAEL C. TING, of Menlo, California; and CYNTHIA
ALISON LOCK, of Irvine, California.

KENNETH E. KROSIN, Foley & Lardner, LLP, of Wash-
ington, DC, argued for intervenors Elpida Memory, et al.
With him on the brief were GREGORY C. BECK, MARY M.
CALKINS; and GINA A. BIBBY of Palo Alton, California; and
MICHAEL R. HOUSTON, of Chicago, Illinois. Of counsel
was RICHARD S. FLORSHEIM, of Milwaukee, Wisconsin.

JOSEPH V. COLAIANNI, Fish & Richardson, P.C., of
Washington, DC, for intervenor Ramaxel Technology Ltd.
With him on the brief was TIMOTHY W. RIFFE. Of counsel
on the brief was RUIXUE RAN, Jun He Law Offices, Bei-
jing, China.

MICHAEL R. LEVINSON, Seyfarth Shaw LLP, of Chi-
cago, Illinois, for intervenor Kingston Technology Com-
pany, Inc. With him on the brief were ALAN L. UNIKEL,
JOSEPH R. LANSER and MATTHEW A. WERBER. Of counsel
on the brief was CHRISTINE YANG, Law Offices of S.J.
Christine Yang, of Fountain Valley, California.

JONATHAN M. JAMES, Perkins Coie LLP, of Perkins
Coie LLP, of Phoenix, Arizona, for intervenor SMART
Modular Technologies Inc. Of counsel was DAVID JOHN
PALMER.
__________________________

Before LOURIE, LINN, and DYK, Circuit Judges.
LINN, Circuit Judge.

Tessera, Inc. (“Tessera”) filed a complaint with the
United States International Trade Commission (the
“Commission” or “ITC”) on December 21, 2007, under
section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337,
alleging that eighteen respondents infringed U.S. Patent
4 TESSERA INC. v. ITC

Nos. 5,663,106 (the “’106 patent”); 5,679,977 (the “’977
patent”); 6,133,627 (the “’627 patent”); and 6,458,681 (the
“’681 patent”) through the importation of certain semi-
conductor chips. See Certain Semiconductor Chips With
Minimized Chip Package Size and Products Containing
Same, No. 337-TA-630 (Int’l Trade Comm’n Aug. 28, 2009)
(“Initial Determination”). The ’681 patent was terminated
from the investigation prior to hearing. Tessera appeals
from the Commission’s final determination finding no
section 337 violation. Certain Semiconductor Chips With
Minimized Chip Package Size and Products Containing
Same, No. 337-TA-630 (Int’l Trade Comm’n Feb. 24, 2010)
(“Final Determination”).

Of the eighteen respondents, ten remain in the case
and have intervened in this appeal. The intervenors
include Elpida Memory, Inc. and Elpida Memory (USA)
Inc. (collectively, “Elpida”); Smart Modular Technologies,
Inc.; Acer, Inc., Acer America Corporation, Nanya Tech-
nology Corporation, Nanya Technology Corporation USA,
and PowerChip Semiconductor Corporation; Ramaxel
Technology Ltd.; and Kingston Technology Company, Inc.
(collectively, “Intervenors”). Because the Commission’s
decision is supported by substantial evidence and is not
contrary to law, this court affirms the determination of no
violation with respect to the ’106 patent, and vacates as
moot the Commission’s decision regarding the ’977 and
’627 patents, which have now expired.

I. BACKGROUND

The patents-in-suit relate to innovations in semicon-
ductor chip packaging.

A. Technology

A semiconductor chip (“chip”) is a widely used minia-
turized electronic circuit. A semiconductor package
(“package”) protects these delicate chips from mechanical
TESSERA INC. v. ITC 5
and thermal damage. Most modern packages protect the
chip by encapsulating it with a molded plastic, generally
referred to as “encapsulant.” One problem with using
encapsulant, however, is that it tends to contaminate the
delicate, miniature electrical terminals on the exterior of
those packages. These terminals serve as an endpoint for
electrically connecting the package to another device,
such as a printed circuit board. These terminals become
contaminated when encapsulant obstructs the terminals,
preventing an effective and reliable electrical connection.
The ’106 patent is directed toward innovations preventing
the contamination of exposed terminals on packages
during encapsulation.

Figure 1 provides an illustration of the invention de-
scribed and claimed in the ’106 patent. The claimed
invention is directed to protecting the terminals (26) of
the chip (12) from encapsulant (40). During encapsula-
tion, the patent describes using an encapsulant barrier
(28) and a protective barrier (30) to define an encapsula-
tion area. The preferred embodiment uses a material
known as “solder mask” for the protective barrier, but also
permits the use of “any other means which protects the
exposed terminals on the top layer.” Id. col.2 ll.25-26, 59-
61. The protective barrier protects the terminals from
6 TESSERA INC. v. ITC

coming in contact with encapsulant (40) when it is in-
jected into the encapsulation area through a fill hole (36).

Tessera asserted claims 1-4, 9-10, and 33-35 of the
’106 patent. Claim 1, from which the other asserted
claims depend, is set forth below with emphasis added to
show the key limitation on appeal:

1. A method of encapsulating a semiconductor
chip assembly having a top layer with an array of
exposed terminals thereon, the terminals being
electrically connected to the chip, said method
comprising the steps of:

placing an encapsulant barrier adjacent the semi-
conductor chip assembly, said encapsulant barrier
at least partially defining an encapsulation area;

providing a protective barrier in contact with said
top layer for protecting the terminals on the top
layer from an encapsulation material; and

introducing an encapsulation material into at
least a portion of the encapsulation area so that
the encapsulation material flows to fill the encap-
sulation area and then cures to a substantially
solid condition, the protective barrier preventing
the encapsulation material from contacting the
terminals on the top layer.

Id. col.9 ll.32-48 (emphases added).

B. Accused Products

Each package accused of infringing the ’106 patent in-
cludes a chip and a package substrate layer. The accused
products fall into two categories: a first group with a
polyimide-based package substrate (“μBGA”) and a second
TESSERA INC. v. ITC 7
group with a laminate-based package substrate (“wBGA”).
Despite using different materials for the package sub-
strate layer, the accused products are similar in most
respects. Only Elpida imports the accused μBGA prod-
ucts, whereas all intervenors import the accused wBGA
products. Because the infringement determination as to
the μBGA is not challenged on appeal, this discussion will
focus on the accused wBGA products.

The accused wBGA products consist of a stack of lay-
ers. The bottom-most relevant layer is the laminate
substrate layer. This layer can be thought of as a solid
foundational layer. A copper wiring layer is applied on
top of this laminate substrate layer. This conductive
copper wiring layer provides for the controlled flow of
electrical signals. To prevent corrosion of the copper and
the inadvertent shorting of the electrical paths, a solder
mask layer is applied on top of the copper wiring layer.
The solder mask layer covers both the copper wiring layer
and the underlying laminate substrate layer, leaving
exposed only the endpoints of each copper conductive
path. These exposed copper endpoints—holes in the
solder mask layer where the underlying copper wiring
layer is exposed—are the terminals of the accused wBGA
products. During encapsulation, a “protective barrier”
comes in contact with the solder mask layer and prevents
encapsulant from flowing into the holes on the solder
mask layer and contaminating those terminals—the
exposed areas of the underlying copper wiring layer.

C. Tessera’s Licensees

Tessera’s primary business is licensing its technology.
Since the late 1990s, Tessera has licensed the patents-in-
suit to more than sixty semiconductor technology compa-
nies, including nine of the ten largest. Tessera often
licenses its patents to suppliers through agreements
called “TCC Licenses.”
8 TESSERA INC. v. ITC

While the terms of each TCC License vary from licen-
see to licensee, these TCC Licenses share several charac-
teristics. Each TCC License calls for an upfront license
fee along with running royalties to be paid at the end of a
reporting period for products sold. Each TCC License also
contains a grant clause substantially identical to the
following: “Subject to the terms and conditions [of this
agreement], Tessera hereby grants Licensee a . . . license
to the Tessera Patents . . . and to sell . . . and/or offer for
sale such TCC Licensed Products.” Appellant’s Br. 56.
Finally, each also contains an “Exclusion from License”
provision stating that “Licensee is licensed only to Li-
censed Products for which Licensee or a third party has
satisfied a royalty obligation of Tessera.” Id. at 57.

All of the intervenors purchase some portion of their
accused packages from parties to the TCC Licenses.
Elpida asserts, and the Commission agreed, that 100% of
its products came from Tessera licensees. The remaining
intervenors concede that at least a small portion of their
accused products are made from unlicensed suppliers. It
is undisputed that some licensees had fallen behind on
their obligations to pay royalties on sales made under the
TCC Licenses.

D. Procedural History

On August 28, 2009, the presiding administrative law
judge (“ALJ”) issued the Initial Determination, finding no
section 337 violation. In reaching this conclusion, the
ALJ determined: (1) Tessera failed to meet its burden to
show that the accused products infringed the ’106, ’977,
and ’627 patents; (2) the ’106 patent was not invalid for
anticipation, obviousness, or indefiniteness; (3) the ’977
and ’627 patents were not invalid for anticipation or
indefiniteness; and (4) Tessera’s patent rights are ex-
hausted as to those accused products purchased from
Tessera’s licensees. Id.
TESSERA INC. v. ITC 9
On October 30, 2009, the Commission decided to re-
view, among other issues, the ALJ’s findings regarding
claim construction of two terms recited in claim 1 of the
’106 patent: “top layer” and “thereon.” In the Matter of
Certain Semiconductor Chips with Minimized Chip Pack-
age Size and Products Containing Same, Notice of Com-
mission Determination To Review in Part a Final Initial
Determination Finding No Violation of Section 337 (Oct.
30, 2009) (“Notice to Review”). Among the issues the
Commission decided not to review was the ALJ’s finding
of patent exhaustion. Id.

After briefing by the parties, the Commission issued
its final determination on January 4, 2010. In affirming
the ALJ’s determination of no section 337 violation, the
Commission: (1) modified the ALJ’s construction of “top
layer” and “thereon” in claim 1 of the ’106 patent; (2)
reversed the ALJ’s finding of noninfringement for the
μBGA products, but affirmed his finding of patent ex-
haustion; and (3) affirmed the ALJ’s finding that the
accused wBGA products do not infringe the asserted
claims of the ’106 patent. Final Determination. Thus, the
Commission found that the μBGA products infringe, but
are exhausted, and that the wBGA products do not in-
fringe.

Tessera appeals from the Final Determination on
multiple grounds. First, Tessera challenges the Commis-
sion’s claim construction of claim 1 of the ’106 patent.
Second, Tessera challenges the Commission’s finding of no
infringement by the accused wBGA products. Third,
Tessera challenges the Commission’s finding of patent
exhaustion. Finally, Tessera seeks a vacatur of the
Commission’s decision as it pertains to the now expired
’977 and ’627 patents. On appeal, a few intervenors have
also challenged the validity of the ’106 patent as being
anticipated by numerous prior art references. This court
has jurisdiction under 28 U.S.C. § 1295(a)(6).
10 TESSERA INC. v. ITC

II. DISCUSSION

A. Standard of Review

This court reviews the Commission’s legal determina-
tions de novo and the Commission’s factual findings for
substantial evidence. Alloc, Inc. v. Int’l Trade Comm’n,
342 F.3d 1361, 1368 (Fed. Cir. 2003). This court “must
affirm a Commission determination if it is reasonable and
supported by the record as a whole, even if some evidence
detracts from the Commission’s conclusion.” Nippon Steel
Corp. v. United States, 458 F.3d 1345, 1352 (Fed. Cir.
2006) (internal quotation marks omitted).

B. Claim Construction

Tessera argues that the Commission initially adopted
a correct claim construction, but “halfway through its
infringement analysis, the ITC inexplicably switched to
an incorrect claim construction.” Appellant’s Br. 25.
According to Tessera, this court should therefore review
the Commission’s finding of non-infringement de novo, as
an error in claim construction. Intervenors and the
Commission respond that Tessera “attempts to transform
the Commission’s factual infringement finding into a
claim construction issue in order to receive de novo re-
view.” Appellee’s Br. 20.

“Patent infringement is a two step inquiry. First, the
court must construe the asserted claim . . . . Second, the
court must determine whether the accused product or
process contains each limitation of the properly construed
claims.” Freedman Seating Co. v. Am. Seating Co., 420
F.3d 1350, 1356-57 (Fed. Cir. 2005). Claim construction is
an issue of law this court reviews de novo. Cybor Corp. v.
FAS Techs., Inc., 138 F.3d 1448, 1456 (Fed. Cir. 1998) (en
banc). Because the second step, applying a proper con-
struction to the accused products in reaching a determi-
nation as to infringement, is a question of fact, this court
TESSERA INC. v. ITC 11
reviews for substantial evidence. Freedman, 420 F.3d at
1357.

Tessera does not, nor could it, argue that the Com-
mission adopted an incorrect claim construction. This is
because the Commission adopted Tessera’s proposed
claim construction. See Final Determination at 16-24.
Tessera’s contention at best is a disagreement over the
Commission’s application of Tessera’s construction to the
accused wBGA devices. This court therefore agrees with
Intervenors and the Commission that Tessera is challeng-
ing the Commission’s infringement determination, which
this court reviews for substantial evidence.

C. Infringement

Tessera argues that the Commission erred in finding
that the accused wBGA products do not infringe claim 1 of
the ’106 patent. Specifically, Tessera argues that the
Commission erred when it found that the “top layer” of
claim 1 cannot include the solder mask layer of the ac-
cused wBGA products. In doing so, according to Tessera,
the Commission improperly modified its construction of
“top layer.” The Commission construed “top layer” to
mean “a layer disposed on the active side of the chip and
which carries the terminals.” Final Determination at 20.
Because the construction does not explicitly exclude
“solder mask,” Tessera argues that the Commission erred
by refusing to consider the accused solder mask layer as
part of the claimed “top layer.”

According to Tessera, the Commission should have
found the top layer to be either: (1) the solder mask layer,
or (2) a composite “layer” that includes both the laminate
substrate and solder mask layers. Tessera argues that
the “top layer” must include the solder mask layer of the
accused wBGA products because the terminals are on the
bottom edge of the solder mask layer. Tessera goes on to
12 TESSERA INC. v. ITC

argue that because the “protective barrier” comes in
contact with the solder mask during production of the
accused wBGAs, had the Commission found that the
solder mask was part of the “top layer,” the accused
wBGA products would infringe.

Intervenors and the Commission respond that sub-
stantial evidence supports the Commission’s finding. The
Commission found that the laminate substrate layer of
the accused wBGA products corresponded to the “top
layer” in claim 1 of the ’106 patent. Under the adopted
construction, the “top layer” is the layer that “carries the
terminals.” Intervenors’ expert testified that the copper
wiring layer overlays the substrate core layer. The “ter-
minals” are simply the exposed areas of the copper wiring
layer. Only after the copper wiring layer is applied on top
of the laminate substrate layer is the solder mask layer
applied to the assembly. Thus, according to Intervenors
and the Commission, the solder mask layer does not
“carry the terminals” and cannot be the “top layer.” Even
though the terminals may be “thereon,” i.e., adjacent to
the bottom surface of, the solder mask layer, the solder
mask layer does not “carry the terminals.” See Final
Determination at 20-21. Rather, under Tessera’s own
construction, the “top layer” must “carry the terminals.”
In the accused wBGA products, Intervenors contend that
substantial evidence supports the Commission’s conclu-
sion that the layer which “carries the terminals” is the
laminate substrate layer. They conclude by arguing that
because it is undisputed that the “protective barrier”
comes in contact not with the laminate substrate layer,
but instead with the solder mask layer, the limitation
“providing a protective barrier in contact with said top
layer” is not satisfied, and the accused wBGA products do
not infringe.

Substantial evidence supports the Commission’s de-
termination that the laminate substrate layer of the
TESSERA INC. v. ITC 13
accused wBGA products is the “top layer” and, as such,
these products do not infringe the asserted claims of the
’106 patent. The issue of infringement ultimately turns
upon which layer is identified as the “top layer.” The ALJ
issued a detailed opinion, citing expert testimony, ex-
plaining how the terminals are formed on the laminate
substrate layer and how the laminate substrate layer is
that layer which carries the terminals, or, the “top layer.”
Initial Determination at 50 (“[T]he evidence clearly shows
that the [terminals] are formed from the copper metalliza-
tion layer that is [thereon] the [laminate] substrate for
wBGA products.”).

In applying the modified construction to the accused
wBGA products, the Commission found “the ALJ correctly
concluded that for the wBGA packages, the laminate-
based substrate core layer represents the claimed ‘top
layer,’ and that because the ‘protective barrier’ does not
come into contact with that layer, the wBGA packages do
not infringe the asserted claims of the ’106 patent.” Final
Determination at 28. We see no basis to question the
factual finding that the laminate substrate layer is the
layer that “carries the terminals.”

For further support, the Commission noted that
throughout the specification, “solder mask” is depicted as
a component separate and distinct from the “top layer.”
Final Determination at 27-28 (stating “[n]owhere does the
’106 patent describe or suggest that the top layer includes
the solder mask layer”). Tessera argues that the Com-
mission, in doing so, improperly imported a “no solder
mask” limitation into its claim construction. This court
remains unconvinced. The Commission did not modify its
claim construction or import limitations from the specifi-
cation. Instead, the Commission simply noted that
Tessera’s theory of infringement, requiring the claimed
“top layer” to include the solder mask layer, was flatly
inconsistent with the preferred embodiment depicted in
14 TESSERA INC. v. ITC

the ’106 patent. Indeed, the specification describes using
“solder mask” as the preferred material for the protective
barrier, not the top layer, and, at times, even uses the
term “solder mask” interchangeably with “protective
barrier.” ’106 patent at col.2 ll.25-26 (“Preferably, the
protective barrier utilized in the present invention is a
solder mask.”). It is disingenuous for Tessera to argue
that the solder mask layer on the accused wBGA products
is part of the “top layer” when the patent describes “solder
mask” as the preferred material for the “protective bar-
rier” and depicts the “protective barrier” as separate and
distinct from the “top layer.” See, e.g., id. at Fig.1.

Tessera fails to cite any record evidence supporting its
contention that the solder mask layer “carries the termi-
nals.” Substantial evidence supports the Commission’s
finding that the claimed “top layer,” the layer that “car-
ries the terminals,” corresponds to the laminate substrate
layer on the accused wBGA products. See Final Deter-
miantion at 28. In light of this finding, the accused
wBGA products do not infringe the asserted claims of the
’106 patent. This court therefore affirms the Commis-
sion’s finding of no infringement as to the accused wBGA
products.

D. Anticipation

Intervenors argue that the Commission incorrectly
found that the asserted claims of the ’106 patent were not
anticipated by U.S. Patent Nos. 5,136,336 (“Worp”),
5,218,759 (“Juskey”), and 4,868,349 (“Chia”). Tessera
responds that numerous claim elements are absent from
each reference.

Anticipation is a question of fact that must be estab-
lished by clear and convincing evidence. Sanofi-
Synthelabo v. Apotex, Inc., 550 F.3d 1075, 1082 (Fed. Cir.
2008). This court agrees with Tessera that substantial
TESSERA INC. v. ITC 15
evidence supports the Commission’s determination that
the asserted claims of the ’106 patent are not anticipated
by Worp, Juskey, or Chia.

Worp fails to disclose at least a “protective barrier in
contact with said top layer,” as required by claim 1 of the
’106 patent. Although the ALJ found a “strong possibil-
ity” that this limitation may be present in Worp, the
Intervenors fail to cite any disclosure in Worp that de-
scribes the configuration of the “protective barrier” and
whether it actually contacts the top layer.

Juskey also fails to disclose at least a “protective bar-
rier in contact with said top layer,” as required by claim 1
of the ’106 patent. Instead, the ALJ found that Juskey
discloses the use of glue between the top layer and the
protective barrier, preventing the protective barrier from
coming in contact with the top layer. Intervenors fail to
cite any disclosure in Juskey that shows a protective
barrier in contact with the top layer.

Chia fails to disclose at least “exposed terminals,” as
required by claim 1 of the ’106 patent. Intervenors argue
that the pins in Chia serve as the exposed terminals. The
ALJ, on the other hand, found that the pins in Chia are
neither “terminals,” because they are not an endpoint of
the package, nor “exposed” to contamination, because the
pins are slid into the plated-through holes prior to encap-
sulation. Instead, the ALJ found the plated-through holes
in Chia were the terminals because they serve as the
endpoint for electrical and mechanical connection from
the package to the outside world. Intervenors fail to cite
any disclosure in Chia of terminals exposed to contamina-
tion from encapsulant.

To invalidate the asserted claims of the ’106 patent on
the grounds of anticipation, the Intervenors must prove
by clear and convincing evidence that a single prior art
16 TESSERA INC. v. ITC

reference discloses each and every limitation of the ’106
patent. The ALJ’s detailed and well reasoned analysis of
the asserted prior art and his determination that the ’106
patent is not anticipated is supported by substantial
record evidence. This court therefore affirms the Com-
mission’s determination that the ’106 patent is not antici-
pated by Worp, Juskey, or Chia.

E. Patent Exhaustion

This court’s affirmance of the Commission’s finding of
noninfringement as to the wBGA products leaves the
accused μBGA products as the only products found to
infringe the ’106 patent. The finding of infringement is
not challenged on appeal, but the Commission’s determi-
nation of patent exhaustion is. Because Elpida is the only
importer of the accused μBGA products, it is the only
party affected by this determination.

As a preliminary matter, the Commission and Elpida
challenge this court’s jurisdiction to hear the appeal
regarding patent exhaustion. Accordingly, this court will
first address the jurisdictional challenge before address-
ing the merits of the underlying patent exhaustion de-
fense.

1. Jurisdiction

The Commission and Elpida argue that this court
lacks jurisdiction to hear Tessera’s appeal as to patent
exhaustion because Tessera did not timely appeal that
issue. The ALJ issued the Initial Determination on Au-
gust 28, 2009. At that time, the ALJ determined that
Tessera’s patent rights were exhausted with respect to all
accused products sold by Tessera’s licensees. Initial
Determination. Because the ALJ found that intervenor
Elpida purchased 100% of its accused products from
Tessera’s licensees, Elpida could no longer be subject to
an exclusion order and was terminated from the investi-
TESSERA INC. v. ITC 17
gation. On October 30, 2009, the Commission issued its
Notice to Review announcing its decision not to review the
ALJ’s determination on patent exhaustion. The Commis-
sion subsequently issued its Final Determination on
December 29, 2009.

Tessera filed a notice of appeal on January 28, 2010,
within sixty days from the Final Determination, but more
than sixty days from the Notice to Review. The Commis-
sion argues that when it decided not to review the ALJ’s
determination on patent exhaustion, the ALJ’s decision
then became the final decision of the Commission. Be-
cause Tessera did not file a notice of appeal within sixty
days of the Commission’s decision not to review the ALJ’s
patent exhaustion determination, the Commission argues
that Tessera’s appeal of that issue was not timely and,
therefore, should be dismissed for lack of jurisdiction.

The Commission cites this court’s decision in Allied
Corporation v. International Trade Commission, for the
proposition that a Commission decision is final when
“there was no provision for . . . review . . . following a
determination that does not lead to an exclusion order.”
782 F.2d 982, 983-84 (Fed. Cir. 1986); see also Broadcom
Corp. v. Int’l Trade Comm’n, 542 F.3d 984, 986 (Fed. Cir.
2008). Because the Commission decided not to review the
patent exhaustion issue, nothing in the Commission’s
Final Determination could result in an exclusion order as
to Elpida. Thus, the Commission argues, Tessera should
have filed a notice of appeal, at least as to Elpida, when
the Commission refused to review an issue dispositive of
the investigation for Elpida.

Tessera responds that this court’s jurisdiction over
appeals from the Commission is governed by § 1337(c),
which requires that “[a]ny person adversely affected by a
final determination of the Commission . . . may appeal
such determination, within 60 days after the determina-
18 TESSERA INC. v. ITC

tion becomes final.” 19 U.S.C. § 1337(c). Under ITC
regulations, an initial determination becomes the deter-
mination of the Commission “unless the Commission . . .
shall have ordered review of the initial determination or
certain issues therein . . . .” 19 C.F.R. § 210.42(h)(2)
(emphasis added). According to Tessera, when the Com-
mission decided to review “certain issues therein,” such as
claim construction of the ’106 patent, the ALJ’s Initial
Determination did not become final as to the ’106 patent.

Tessera distinguishes Broadcom and Allied as both
involving undisputedly final determinations finding some
patents infringed and others not infringed or invalid. In
those cases, the only question was whether the patentee
should appeal noninfringement or invalidity immediately
or wait for the Presidential review period to pass as to the
patent held valid and infringed. Broadcom, 542 F.3d at
894; Allied, 782 F.2d at 983-84. Tessera further argues
that requiring an immediate appeal from the Commis-
sion’s Notice to Review in this case, where the Commission
decided not to review certain affirmative defenses to
patent infringement, would result in piecemeal appeals.
See, e.g., United States v. Hollywood Motor Co., 458 U.S.
263, 265 (1982) (disfavoring piecemeal appeals disfa-
vored).

Allied is easily distinguished. There, the ALJ found
one patent not invalid and infringed but held the other
two asserted patents invalid. Allied, 782 F.2d at 983.
The Commission subsequently adopted the ALJ’s findings
and issued an exclusion order as to the valid and in-
fringed patent. Id. The issue was whether Allied should
have appealed the invalidity determination when the
Commission adopted the ALJ’s findings or, instead, after
the Presidential review period passed for the patent held
valid and infringed. Id. This court held that Allied
should have appealed from the Commission’s adoption of
the ALJ’s findings. Id. at 984. The court so held because
TESSERA INC. v. ITC 19
had the President approved the exclusion order, Allied
would have prevailed as to that patent and could not have
appealed. Id. at 983. Likewise, had the President not
approved of the exclusion order, Allied could not have
appealed the President’s decision. Id. Thus, “[t]hat
determination was final as of [the date the Commission
adopted the ALJ’s findings], there being no provision for
Presidential review, or for other administrative proceed-
ings, following a determination that does not lead to an
exclusion order.” Id. at 984.

Broadcom was factually analogous. There, Qualcomm
asserted that Broadcom appealed too early, because it did
not wait for the Presidential review period to pass.
Broadcom, 542 F.3d at 896. This court disagreed and
held that Broadcom did not prematurely file an appeal.
Id. at 897.

Here, unlike in Broadcom or Allied, the Commission
issued a Notice to Review certain issues of the Initial
Determination. Cf. Broadcom, 542 F.3d at 896; Allied,
782 F.2d at 983. Also, unlike in Broadcom or Allied,
Tessera filed its appeal within sixty days of the Commis-
sion’s Final Determination. Cf. Broadcom, 542 F.3d at
896; Allied, 782 F.2d at 983. Finally, here, unlike in
Broadcom or Allied, whether Tessera could obtain an
exclusion order on the ’106 patent was still before the
Commission. Cf. Broadcom, 542 F.3d at 896; Allied, 782
F.2d at 983. Had Tessera appealed from the Commis-
sion’s Notice to Review, Tessera would still have been
unable to obtain an exclusion order until, at the earliest,
the Commission finished its review of the ALJ’s findings
on claim construction and infringement. See, e.g., Vast-
fame Camera, Ltd. v. Int’l Trade Comm’n, 56 Fed. App’x
494, 495 (Fed. Cir. 2003) (dismissing some appeals as
premature and staying others where a notice of appeal
was filed immediately after notice that the ITC would
partially review an initial determination).
20 TESSERA INC. v. ITC

For the foregoing reasons, this court agrees with
Tessera that this court possesses jurisdiction over the
Commission’s patent exhaustion determination. Under
the Commission’s own regulations, the Initial Determina-
tion did not become final because the Notice to Review
ordered review of certain issues therein pertaining to the
’106 patent. 19 C.F.R. § 210.42(h)(2). Until the Commis-
sion had rendered a final determination or appealable
order, this court lacked jurisdiction. The Commission’s
Final Determination issued on December 29, 2009.
Tessera filed a timely notice of appeal on January 28,
2010, within sixty days from that date.

2. Exhaustion

Tessera argues that the Commission improperly
found patent exhaustion without an authorized sale.
Tessera contends that under the terms of the TCC Li-
censes, sales by its licensees are not licensed, and are
therefore unauthorized until royalties have been paid.
Because royalties were not paid or were paid late by some
licensees, Tessera asserts that sales by those licensees did
not trigger exhaustion of its patent rights. Noting that
patent exhaustion is designed to prevent a double recov-
ery, Tessera asserts that a finding of patent exhaustion
here would deprive it from receiving even a single recov-
ery.

The Commission and Elpida respond that patent ex-
haustion is triggered “by a sale authorized by the patent
holder.” Quanta Computer, Inc. v. LG Elecs., Inc., 553
U.S. 617, 636 (2008). They argue that Tessera authorized
these sales when it granted its TCC Licensees the author-
ity to sell and whether or not Tessera’s licensees are
current on their royalty payments or were late in making
payments has nothing to do with whether the sales were
initially authorized by Tessera. The Commission and
Elpida further contend that as far as Tessera’s ability to
TESSERA INC. v. ITC 21
obtain a single recovery is concerned, Tessera still may
pursue any number of other avenues to enforce its con-
tractual right to receive royalties. These include an
action for breach of contract or arbitration.

“The longstanding doctrine of patent exhaustion pro-
vides that the initial authorized sale of a patented item
terminates all patent rights to that item.” Quanta, 553
U.S. at 625. At issue here, as in Quanta, is whether the
patentee has authorized certain sales of products embody-
ing the asserted patent. Id. at 636. In Quanta, patent
holder LG licensed a portfolio of patents to Intel. Id. at
623. Under the License Agreement, Intel could sell its
own products practicing the LG patents. Id. The License
Agreement did not, however, grant Intel the right to
practice the patents in conjunction with non-Intel prod-
ucts. Id. Quanta purchased, from Intel, products sub-
stantially embodying the LG patents and combined them
with non-Intel products to practice the licensed patents.
Id.

The Supreme Court held that LG’s patent rights were
exhausted upon Intel’s authorized sale to Quanta. Al-
though Intel was not licensed to practice the patents
using non-Intel parts, “[n]othing in the License Agree-
ment restricts Intel’s right to sell its microprocessors and
chipsets to purchasers who intend to combine them with
non-Intel parts.” Id. at 636 (emphasis added). Rather,
the agreement “broadly permit[ted]” Intel to make, use, or
sell products free of LG’s patent claims. Id. Indeed, the
agreement “authorized Intel to sell products that prac-
ticed the [asserted patents]. No conditions limited Intel’s
authority to sell products substantially embodying the
patents.” Id. at 637 (emphasis added). Because Intel was
authorized to sell its products to Quanta, the doctrine of
patent exhaustion prevented LG from further asserting
its patent rights against those products purchased from
Intel. Id.
22 TESSERA INC. v. ITC

Here, as in Quanta, Tessera’s licensees were author-
ized to sell the accused products. Nothing in the TCC
Licenses limited the licensee’s ability to sell the accused
products. Each of the TCC License agreements contains
an unconditional grant of a license “to sell . . . and/or offer
for sale” the accused products. These agreements call for
running royalty obligations which accrue on products
sold. In some cases, the payments are not due to Tessera
until the end of a reporting period. Consequently, in some
cases, royalty obligations do not accrue until eight months
after the licensed products are sold. But there is nothing
in any of the license agreements to even remotely suggest
that the existence of a condition subsequent, namely, the
payment of royalties, operates to convert initial author-
ized sales into unauthorized sales for purposes of patent
exhaustion.

Tessera spends considerable time arguing about the
effect of the “Exclusion for License” provision in the TCC
Licenses and the fact that the grant clause quoted above
was “[s]ubject to . . . Licensee’s payment of the fees and
royalties . . . .” These arguments add unnecessary com-
plexity to a rather straightforward analysis. The proper
focus is on whether the sales were authorized. Tessera
overlooks important aspects of the structure of its TCC
Licenses. These agreements expressly authorize licensees
to sell the licensed products and to pay up at the end of
the reporting period. Thus, in these agreements, Tessera
authorizes its licensees to sell the licensed products on
credit and pay later. That some licensees subsequently
renege or fall behind on their royalty payments does not
convert a once authorized sale into a non-authorized sale.
Any subsequent non-payment of royalty obligations
arising under the TCC Licenses would give rise to a
dispute with Tessera’s licensees, not with its licensees’
customers.
TESSERA INC. v. ITC 23
Tessera’s argument that the sale is initially unauthor-
ized until it receives the royalty payment is hollow and
unpersuasive. The parties do not dispute that the TCC
Licenses permit a licensee to sell licensed products before
that licensee pays royalties to Tessera. But according to
Tessera, that licensee’s sale, permitted under the TCC
License, would later become unauthorized if that licensee
somehow defaulted on a subsequently due royalty pay-
ment. That absurd result would cast a cloud of uncer-
tainty over every sale, and every product in the possession
of a customer of the licensee, and would be wholly incon-
sistent with the fundamental purpose of patent exhaus-
tion—to prohibit postsale restrictions on the use of a
patented article. See, e.g., Bloomer v. McQuewan, 55 U.S.
(14 How.) 539, 549 (1852) (stating “when the machine
passes to the hands of the purchaser, it is no longer
within the limits of the monopoly”).

Finally Tessera challenges the ALJ’s finding that
Elpida purchased 100% of its accused products from
Tessera’s licensees. Tessera complains that two of
Elpida’s suppliers, both of which are affiliates of Tessera’s
licensees, were not licensed under the TCC Licenses and
that there is no evidence they agreed to the terms of the
TCC License in writing. Elpida responds that a written
acceptance was not necessary, and besides, these suppli-
ers packaged products accused of infringing only the ’977
and ’627 patents, not the ’106 patent. Tessera has no
response in its reply brief and fails to point to any con-
trary record evidence. This court sees no basis on which
to overturn the Commission’s finding that 100% of
Elpida’s purchases of products accused of infringing the
’106 patent were from Tessera’s licensees.

Thus, this court affirms the Commission’s determina-
tion that Tessera’s patent rights are exhausted as to all
products accused of infringing the ’106 patent purchased
from Tessera’s licensees. Because Elpida’s μBGA prod-
24 TESSERA INC. v. ITC

ucts are the only accused products found to infringe the
’106 patent, and Elpida acquired 100% of its accused
μBGA products from TCC Licensees, patent exhaustion
serves as a complete defense for Elpida.

F. The ’977 and ’627 Patents

The Commission found no violation of section 337
with regard to the ’977 and ’627 patents because of its
finding of non-infringement. Both patents have since
expired. Because the ITC has a limited statutory man-
date and can only issue an exclusion order barring future
conduct, nothing remains before the Commission with
respect to the ’977 and ’627 patents. Accordingly, the
portion of the appeal pertaining to the ’977 and ’627
patents is now moot. Tex. Instruments, Inc. v. Int’l Trade
Comm’n, 851 F.2d 342, 344 (Fed. Cir. 1988).

Tessera requests that this court not only dismiss the
appeal as moot but also vacate the Commission’s deter-
minations regarding the ’977 and ’627 patents. Interve-
nors respond that this court should do no more than
dismiss Tessera’s appeal as to these patents because
Tessera caused the mootness by choosing to bring the
action so close to patent expiration. We are not persuaded
by Intervenors’ argument. It is apparent that this appeal
became moot through happenstance, not of Tessera’s
voluntary actions. See Tafas v. Kappos, 586 F.3d 1369,
1371 (Fed. Cir. 2009) (“Vacatur . . . is appropriate if the
mootness arises from external causes over which the
parties have no control” (citing U.S. Bancorp Mortg. Co. v.
Bonner Mall P’ship, 513 U.S. 18 (1994))). That being the
case, we therefore hold moot that portion of the appeal
directed to the ’977 and ’627 patents, vacate that portion
of the Commission’s Final Determination relating to the
’977 and ’627 patents, and remand with instructions to
dismiss as moot the portion of the complaint relating to
those patents.
TESSERA INC. v. ITC 25

CONCLUSION

Based on the foregoing, this court finds that the
Commission provided a sufficient basis for finding no
section 337 violation and its actions were not arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law. Because the Commission’s decision
regarding the ’106 patent was supported by substantial
evidence and contained no errors of law, this court affirms
that portion of the Final Determination. Because the ’977
and ’627 patents have now expired, this court vacates that
portion of the Final Determination and remands with
instructions to dismiss as moot the portion of the com-
plaint relating to those patents.

AFFIRMED-IN-PART, VACATED-IN-PART, AND
REMANDED

COSTS

This court awards costs to Intervenors.