United States Court of Appeals
for the Federal Circuit
__________________________
JOHN MEZZALINGUA ASSOCIATES, INC. (DOING
BUSINESS AS PPC, INC.),
Appellant,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee.
__________________________
2010-1536
__________________________
On appeal from the United States International Trade
Commission in Investigation No. 337-TA-650.
__________________________
Decided: October 4, 2011
___________________________
JOHN F. SWEENEY, Locke Lord Bissell & Liddell, LLP,
of New York, New York, argued for appellant. With him
on the brief were HARRY C. MARCUS, KATHRYN A. BARRETT
and JOSEPH A. FARCO. Of counsel was JAMES HWA.
DANIEL E. VALENCIA, Attorney, Office of the General
Counsel, United States International Trade Commission,
of Washington, DC, argued for appellee. With him on the
brief were JAMES M. LYONS, General Counsel, and
MICHELLE W. KLANCNIK, Assistant General Counsel.
JOHN MEZZALINGUA ASSOCIATES v. ITC 2
MICHELLE K. LEE, Google, Inc., of Mountain View,
California, for amici curiae, Google, Inc. and Verizon
Communication Inc. With her on the brief was
CATHERINE C. LACAVERA. Of counsel were MICHAEL K.
KELLOGG, Kellogg, Huber, Hansen, Todd, Evans & Figel,
P.L.L.C., of Washington, DC, and JOHN THORNE and GAIL
LEVINE, Verizon Communications Inc., of Arlington,
Virginia.
__________________________
Before BRYSON, LINN, and REYNA, Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON.
Dissenting-in-part opinion filed by Circuit Judge REYNA.
Bryson, Circuit Judge.
The appellant, which we refer to as PPC, challenges a
determination by the International Trade Commission
that PPC failed to prove that the importation of certain
coaxial cable connectors violated section 337 of the Tariff
Act of 1930, 19 U.S.C. § 1337. The Commission ruled that
PPC failed to satisfy one of the elements of a violation of
section 337—the so-called “domestic industry” require-
ment. We affirm.
I
PPC manufactures cable connectors that are used to
connect coaxial cables to electronic devices, such as cable
television receivers. PPC filed a complaint with the
Commission asserting that the importation, sale for
importation, and sale after importation of certain coaxial
cable connectors infringed four of PPC’s patents and
therefore violated section 337. Of the four PPC patents,
3 JOHN MEZZALINGUA ASSOCIATES v. ITC
two are design patents and two are utility patents. This
case involves one of the design patents, U.S. Patent No.
D440,539 (“the ’539 design patent”). That patent issued
in 2001 and describes an ornamental design for a coaxial
cable connector. The ’539 design patent is a continuation
of U.S. Patent Application No. 08/910,509 (“the ’509
application”). One of the two utility patents, U.S. Patent
No. 6,559,194 (“the ’194 utility patent”), is also a con-
tinuation of the ’509 application.
Section 337 makes unlawful the importation of arti-
cles that infringe a valid and enforceable United States
patent, but only if a domestic industry “relating to the
articles protected by the patent . . . exists or is in the
process of being established.” 19 U.S.C. § 1337(a)(2). The
complainant can satisfy the domestic industry require-
ment in one of three ways prescribed by 19 U.S.C. §
1337(a)(3), which provides:
[A]n industry in the United States shall be con-
sidered to exist if there is in the United States,
with respect to the articles protected by the pat-
ent, copyright, trademark, mask work, or design
concerned—
(A) significant investment in plant and
equipment;
(B) significant employment of labor or capi-
tal; or
(C) substantial investment in its exploi-
tation, including engineering, re-
search and development, or licensing.
In contending that it established the existence of a
domestic industry relating to the ’539 design patent, PPC
relies on subparagraph (C). The issue in this case is
whether expenses PPC incurred in asserting and defend-
JOHN MEZZALINGUA ASSOCIATES v. ITC 4
ing the validity of that patent constituted a “substantial
investment in exploitation” of the ’539 design patent
through licensing.
PPC has granted only one license for the ’539 design
patent. That license was executed in early 2004 between
PPC and Arris International, Inc. (formerly Antec Corpo-
ration), at the conclusion of years of litigation involving
the two parties and Arris’s distributor, International
Communications Manufacturing, Inc. (“ICM”). PPC
contends that money it spent during the years of litiga-
tion leading up to the execution of the 2004 license should
be treated as an investment in licensing.
In presenting that argument, PPC relies principally
on a 2001 lawsuit alleging infringement of the ’539 design
patent that PPC brought against Arris in the Middle
District of Florida (“the Florida action”). In 2002, a jury
found the ’539 design patent valid and infringed, and it
awarded PPC $1.35 million in damages. The court
granted PPC’s request for injunctive relief. Also in 2001,
PPC sued ICM in the District of Colorado, again alleging
infringement of the ’539 design patent (“the Colorado
action”). Finally, in 2003, PPC sued Arris in the Western
District of Wisconsin, asserting only the ’194 utility
patent (“the Wisconsin action”). A jury in that case found
the ’194 utility patent valid and infringed. In 2004,
following judgment in the Florida and Wisconsin actions,
and before the Colorado action went to judgment, the
parties entered into a settlement that included a license
agreement. The agreement permitted Arris to practice all
the patents that claim priority to the ’509 application, one
of which is the ’539 design patent.
Based on the evidence of PPC’s expenditures in that
series of lawsuits, an International Trade Commission
5 JOHN MEZZALINGUA ASSOCIATES v. ITC
administrative law judge found that PPC had satisfied
the domestic industry requirement by establishing a
“substantial investment in [the] exploitation” of the
design patent by licensing. The administrative law judge
ruled that at least some part of the legal expenses that
PPC had incurred in enforcing the ’539 design patent in
the Florida action should be treated as an investment in
licensing, because a portion of PPC’s expenses were likely
directed to settlement and licensing negotiations. The
administrative law judge did not address the Colorado or
the Wisconsin lawsuits. He also rejected PPC’s argument
that it had made a substantial investment in research
and development related to the EX connector, a cable
connector that PPC manufactures and distributes. As to
that issue, the administrative law judge ruled that PPC
had abandoned that argument and that, in any event, the
argument was without merit because the EX connector
was not covered by the design claimed in the ’539 design
patent.
The Commission reviewed the initial determination
and reversed the administrative law judge’s ruling that
PPC had established a domestic market. The Commis-
sion noted that the term “licensing” in section
1337(a)(3)(C) encompasses not only “pre-litigation” li-
censes that are intended to spur production of the pat-
ented article in the first instance, but also licenses that
are issued after litigation and capture royalties from
existing production. The Commission acknowledged that
in some circumstances enforcement-related litigation
expenses may support a finding that a domestic licensing
industry exists. In this case, however, the Commission
found that PPC had not met its burden to show that its
litigation expenses relating to the ’539 design patent were
related to licensing.
JOHN MEZZALINGUA ASSOCIATES v. ITC 6
The Commission ruled that to permit litigation costs
not shown to be licensing-related to satisfy the domestic
industry requirement would effectively render the domes-
tic industry requirement a nullity for patentees who
choose to enforce their patent rights in the district courts.
The consequence of so doing, the Commission stated,
would be to dilute the Commission’s role as a forum for
resolving trade disputes.
The Commission explained that in a case such as this
one, deciding whether particular litigation expenses were
related to licensing and whether those expenditures were
“substantial” is a fact-intensive inquiry that depends on
factors such as the nature of the industry and the size of
the complaining party. That inquiry would also require
the fact-finder to determine whether the incurred ex-
penses “serve to encourage practical applications of the
invention or bring the patented technology to the market.”
The Commission remanded the case to give PPC an
opportunity to show what portions of its enforcement-
related expenses were related to licensing and to demon-
strate that its investment in licensing was substantial.
On remand, the administrative law judge ruled that
PPC had not sufficiently tied its litigation costs to licens-
ing and that any investment that PPC had made in
licensing was not substantial. While acknowledging that
the issue was “a close one,” the administrative law judge
based his ruling on findings that PPC had received only
one license, of which only a part related to the ’539 design
patent, that PPC had no established licensing program,
and that it had made no other efforts to procure licenses
for the ’539 design patent. The Commission adopted the
administrative law judge’s remand opinion without modi-
fication, and that order became final.
7 JOHN MEZZALINGUA ASSOCIATES v. ITC
II
Before turning to the merits of PPC’s legal argument,
we address the Commission’s argument that PPC does
not have standing to appeal. The Commission argues
that because the only imported product that was found to
infringe the ’539 design patent, the Fei Yu Model No. 43
connector, was also found to infringe the ’194 utility
patent, PPC has suffered no injury from the Commission’s
decision and therefore lacks standing to appeal.
The Commission relies on our opinion in Yingbin-
Nature (Guangdong) Wood Industry Co. v. International
Trade Commission, 535 F.3d 1322 (Fed. Cir. 2008), in
which we held certain claims on appeal to be moot. In
Yingbin, the Commission found that the respondent had
imported a flooring product that infringed two groups of
claims in the complainant’s patents, the “snap action”
claims and the “lower lip” claims, each of which related to
the joint between adjacent planks. Finding all other
statutory requirements satisfied, the Commission entered
a general exclusion order with respect to both groups of
claims. The respondent appealed as to the “lower lip”
claims, but not as to the “snap action” claims. We noted
that because both groups of claims expired on the same
day, the respondent would be in the same position regard-
less of how we ruled on the “lower lip” claims, so we held
that the appeal as to those claims was moot. The respon-
dent’s real concern, we explained, was that the finding of
infringement as to the “lower lip” claims might interfere
with the respondent’s subsequent efforts to redesign its
product to avoid infringement. We held those concerns
about the possible future effects of the Commission’s
ruling as to the “lower lip” claims to be too hypothetical to
confer standing on the respondent to press an appeal that
would have no immediate practical effect.
JOHN MEZZALINGUA ASSOCIATES v. ITC 8
PPC is in a different position. It is true that the only
product that the Commission found to infringe the ’539
design patent was also found to infringe the ’194 utility
patent. But PPC’s concerns are not related to possible
future effects of the Commission’s decision, as was the
case for the appellant in Yingbin. PPC has sought a
general exclusion order relating to the ’539 design patent.
The fact that a particular model of connectors—the Fei Ye
Model No. 43 connectors—will be excluded regardless of
the outcome of this appeal does not moot PPC’s interest in
obtaining the much broader relief that would be provided
by a general exclusion order, which would cover all prod-
ucts deemed to infringe the ’539 design patent. A favor-
able judicial decision could therefore significantly enhance
PPC’s legal rights with respect to imported connectors. 1
III
The question whether a complainant has satisfied the
domestic industry requirement typically presents issues
of both law and fact, but PPC’s appeal raises only factual
issues relating to the link between various litigation
expenditures and licensing. In reviewing the Commis-
sion’s factual findings as to whether particular expenses
were related to licensing and whether those expenses,
when viewed in the aggregate, were “substantial,” we
apply the “substantial evidence” test. See Finnigan Corp.
v. Int’l Trade Comm’n, 180 F.3d 1354, 1361-62 (Fed. Cir.
1999); cf. Akzo N.V. v. Int’l Trade Comm’n, 808 F.2d 1471,
1 PPC acknowledged before the Commission that in
its experience connectors that infringed the ’539 design
patent also infringed the ’194 utility patent, but it did not
suggest that cable connectors having the ornamental
design of the ’539 design patent would necessarily have
the cable-locking mechanism claimed in the ’194 utility
patent.
9 JOHN MEZZALINGUA ASSOCIATES v. ITC
1486-87 (Fed. Cir. 1986) (holding that the former re-
quirement to prove an injury to the domestic industry,
which was “wed[ded] to the particular facts of each case”
and was “precisely the type of question which Congress
has committed to the expertise of the Commission,” was
subject to substantial evidence review).
A
The domestic industry requirement appears in the
original Tariff Act of 1930. The original Act, however, did
not describe how a complainant could go about establish-
ing the existence of a domestic industry. The original Act
also required the complainant to show that the unfair
method of competition at issue caused injury to the do-
mestic industry and that the industry was efficiently run.
In 1988, Congress disposed of the last two requirements
and added what is now 19 U.S.C. § 1337(a)(3), which
provides three different ways that a complainant can
satisfy the domestic industry requirement. Omnibus
Trade and Competitiveness Act of 1988, Pub. L. No. 100-
418, § 1342, 102 Stat. 1107, 1213.
The reports accompanying both the House and Senate
versions of the 1988 amendment state that the first two
ways of showing the existence of a domestic industry—by
showing a significant investment in manufacturing facili-
ties or a significant employment of labor or capital—were
already being considered by the Commission. S. Rep. No.
100-71, at 129 (1987); H.R. Rep. No. 100-40, at 157 (1987).
But Congress, believing the Commission’s application of
the domestic industry requirement had been too rigid,
liberalized the domestic industry requirement by allowing
that requirement to be satisfied by proof of non-
manufacturing activity, such as licensing and research.
H.R. Rep. No. 100-40, at 157. Nonetheless, it is clear that
JOHN MEZZALINGUA ASSOCIATES v. ITC 10
Congress had no intention of disposing of the domestic
industry requirement altogether; Congress recognized
that the Commission is fundamentally a trade forum, not
an intellectual property forum, and that only those intel-
lectual property owners who are “actively engaged in
steps leading to the exploitation of the intellectual prop-
erty” should have access to the Commission. Id. (“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 behalf of an industry in the United
States retains that essential nexus.”).
The statute does not specify whether litigation ex-
penses incurred in enforcing a patent may later be used
as evidence that the required domestic industry require-
ment exists. In light of the purpose underlying the 1988
amendment to section 337, the Commission reasonably
concluded that expenses associated with ordinary patent
litigation should not automatically be considered a “sub-
stantial investment in . . . licensing,” even if the lawsuit
happens to culminate in a license. To support its conclu-
sion, the Commission pointed out that “[a]llowing patent
infringement litigation activities alone to constitute a
domestic industry would place the bar for establishing a
domestic industry so low as to effectively render it mean-
ingless.”
We agree with the Commission that expenditures on
patent litigation do not automatically constitute evidence
of the existence of an industry in the United States estab-
lished by substantial investment in the exploitation of a
patent. We therefore disagree with the dissent’s per se
rule that “patent infringement litigation is an investment
in the exploitation of a patent” within the meaning of
section 337(a)(3)(C). Indeed, even PPC does not challenge
11 JOHN MEZZALINGUA ASSOCIATES v. ITC
the requirement that it demonstrate a nexus between its
litigation expenses and licensing. Instead, PPC contends
that, based on its showing before the administrative law
judge, it satisfied that requirement. The administrative
law judge, however, disagreed and found that PPC failed
to show that its litigation expenses reflected a significant
investment in licensing. With respect to the Florida
action, the administrative judge noted that there was no
evidence that PPC had offered to license the patent to
Arris before commencing litigation, no evidence that PPC
had sent a cease and desist letter mentioning the possibil-
ity of a settlement, and no evidence that PPC had con-
ducted either settlement or licensing negotiations during
the lawsuit itself.
PPC argues that the administrative law judge erred
in finding that it had not engaged in pre-litigation licens-
ing efforts. In support of that contention, however, PPC
merely points to vague testimony by one of its executives
to the effect that PPC made efforts to settle the case.
That evidence does not undermine the administrative law
judge’s finding that PPC failed to show that it sought to
license the ’539 design patent to Arris before commencing
the Florida action and thus that it failed to show that the
litigation expenses in that case were related to licensing.
The administrative law judge was likewise entitled to
disregard the statement by PPC’s witness that members
of the industry are generally reluctant to accept a license
to a design patent and that PPC therefore viewed litiga-
tion as a necessary precursor to licensing the ’539 design
patent. Regardless of the state of mind of competitors in
the connector industry, which may have made pre-
litigation licensing more difficult, the question before the
administrative law judge was whether PPC made a
substantial investment in licensing, and the administra-
JOHN MEZZALINGUA ASSOCIATES v. ITC 12
tive judge reasonably concluded that PPC failed to show
that it did.
PPC sought and received a permanent injunction in
the Florida case, and that injunction remained in place
for nearly two years until PPC licensed the ’539 design
patent to Arris in 2004. As the Commission recognized,
that delay suggests that PPC’s purpose in litigating was
not to obtain a license but, rather, was to stop Arris from
manufacturing infringing connectors. The fact that
litigation adversaries eventually enter into a license
agreement does not, as PPC suggests, mean that all of the
prior litigation expenses must be attributed to the licens-
ing effort. Contrary to PPC’s suggestion, the Commission
did not rule that a request for or receipt of injunctive
relief will always bar a patentee from later seeking to
establish the existence of a domestic industry through an
investment in licensing. It merely ruled that the form of
relief requested is one factor that could be considered.
The administrative law judge was entitled to conclude
that the Florida action expenses should not be credited as
expenses related to licensing. The record evidence on pre-
litigation communication regarding licensing is thin at
best; PPC sought an injunction and allowed that injunc-
tion to remain in place for nearly two years, and it was
not until after the Wisconsin action, which involved a
different patent, that PPC granted a license to Arris. For
similar reasons, the administrative law judge concluded
that PPC had not shown that the expenses it incurred
during the Colorado action were directed to licensing the
’539 patent, and for similar reasons, we will not disturb
that finding.
The Wisconsin action is fundamentally different from
either the Colorado action or the Florida action because it
13 JOHN MEZZALINGUA ASSOCIATES v. ITC
involved only the ’194 utility patent. The administrative
law judge ruled that in PPC’s situation, expenses associ-
ated with the enforcement of a different patent should not
be credited as an investment in licensing the ’539 design
patent. PPC argues that the Wisconsin jury verdict was
necessary to force Arris to sign a license and that the
administrative law judge should have credited more of
PPC’s expenses in that lawsuit toward its investment in
licensing the ’539 design patent. We disagree. Although
the license agreement was executed after the verdict in
the Wisconsin case, it does not follow that PPC’s actions
in the Wisconsin case were directed toward licensing the
’539 design patent. In any event, the administrative law
judge did not disregard the expenses of the Wisconsin
litigation. He explained that once settlement and licens-
ing negotiations began, the three actions became inextri-
cably linked and that it made sense to consider the
settlement and licensing negotiations related to all three
cases in deciding whether PPC had made a substantial
investment in licensing. The administrative law judge
therefore examined PPC’s legal bills in all three cases and
credited entries that had a work description related to
“licensing” or “settlement” toward PPC’s investment in
licensing.
PPC argues that on remand the administrative law
judge failed to follow the Commission’s directive that
“PPC’s litigation activities and costs, including any rele-
vant costs associated with conducting settlement negotia-
tions and then drafting and negotiating the license, may
be related to licensing.” Because that directive uses
permissive language, such as “including” and “may,” PPC
argues that the administrative law judge could have
credited other expenses that PPC generated during litiga-
tion and was not limited to those costs “associated with
conducting license negotiations and preparing the li-
JOHN MEZZALINGUA ASSOCIATES v. ITC 14
cense.” The Commission directed the administrative law
judge to decide which of PPC’s many expenses were truly
related to licensing of the ’539 patent and which were not,
and it suggested a flexible framework by which the ad-
ministrative law judge could make that decision. In so
doing, the administrative law judge reasonably relied on
attorney work descriptions as he identified which ex-
penses related to PPC’s litigation activities and which
related to its investment in the domestic industry through
licensing.
Although the administrative law judge found that
PPC had, in fact, incurred some legal expenses related to
the negotiation and drafting of the licensing agreement
and therefore had made at least some investment with
respect to licensing of the ’539 design patent, he found
that the investment was not substantial. He acknowl-
edged PPC’s argument that the 2004 agreement was not
reached until after PPC had filed several lawsuits against
Arris and ICM on several different patents. PPC contin-
ues to press that argument on appeal and states that its
expenses are sufficient to establish a significant invest-
ment in licensing. But because those cases had multiple
objectives and were not all based on the ’539 design
patent, the administrative law judge reasonably con-
cluded that it would be inappropriate to treat most of the
incurred legal fees as an investment in licensing of the
’539 design patent. We decline to disturb that ruling.
Finally, the administrative law judge pointed out that
PPC had no formal licensing program and that there was
no evidence it had offered to license the patent to any
party other than its litigation opponents. To be sure,
there is no rule that a single license—such as an exclusive
license—cannot satisfy the domestic industry require-
ment based on a substantial investment in licensing. But
15 JOHN MEZZALINGUA ASSOCIATES v. ITC
the administrative law judge was entitled to view the
absence of other licenses issued or negotiated for the ’539
design patent as one factor supporting his conclusion that
PPC’s expenditures related to licensing were not substan-
tial. Based on the administrative law judge’s thorough
review of the pertinent evidence, adopted in full by the
Commission, we conclude that the Commission’s conclu-
sion as to the licensing issue is supported by substantial
evidence.
B
PPC also argues that the Commission should have
credited at least a portion of the salary that PPC paid to
the named inventor on the ’539 design patent as an
investment in “engineering, research and development,”
together with PPC’s investment in the equipment and
facilities that the inventor used as he developed the
patented design. Although the administrative law judge
had credited the inventor’s salary as an investment in
research and development in the initial decision, the
Commission disagreed. The Commission noted that the
evidence that PPC introduced as to its investment in
research and development related generally to the ’509
application and the ’194 utility patent in addition to the
’539 design patent. The Commission found that PPC had
presented no evidence of any investment in research and
development that related specifically to the ’539 design
patent, nor did it offer any allocation of its investment to
that patent. In the absence of any such evidence, the
Commission concluded that the most reasonable inference
was that the resources that PPC invested in the inventor
should be attributed nearly entirely to the “development
of the structural and functional design of the connector
embodied in the ’509 utility application and the ’194
utility patent,” rather than to the development of the
JOHN MEZZALINGUA ASSOCIATES v. ITC 16
ornamental design embodied in the ’539 design patent.
Accordingly, the Commission concluded that any time and
resources spent by PPC in researching or developing the
ornamental design of the ’539 design patent were minimal
and insufficient to constitute the “substantial” investment
required by section 337(a)(3)(C).
PPC acknowledges that it had the burden of proof on
that issue. It had the opportunity to identify how much of
its investment in research and development related to the
design protected by the ’539 design patent, as opposed to
the ’509 family more generally, and it failed to do so. The
dissent’s contention that “there are no facts in the record
before us sufficient to support the ITC’s conclusion that
time and resources spent by PPC in researching or devel-
oping the ornamental design of the ’539 patent are ‘mini-
mal’” ignores that the Commission based its ruling on
PPC’s failure to offer evidence sufficient to satisfy its
burden of proof on that issue. There is no error in the
Commission’s conclusion that PPC failed to carry its
burden, nor is there any reason to remand for further
findings on that issue, as suggested by the dissent.
AFFIRMED
United States Court of Appeals
for the Federal Circuit
__________________________
JOHN MEZZALINGUA ASSOCIATES, INC. (DOING
BUSINESS AS PPC, INC.),
Appellant,
v.
INTERNATIONAL TRADE COMMISSION,
Appellee.
__________________________
2010-1536
__________________________
On appeal from the United States International Trade
Commission in Investigation No. 337-TA-650
__________________________
REYNA, Circuit Judge, dissenting-in-part.
I join part II of the majority’s opinion finding that
PPC has standing to seek a general exclusion order with
respect to the ’539 patent. I respectfully dissent from the
remainder of the majority opinion because I believe that
additional fact-finding is needed to determine whether
PPC’s research and development expenditures were a
substantial investment in exploitation, and because the
Commission erred in its interpretation and application of
§ 337(a)(3)(C) resulting in its wholesale rejection of
litigation expenses—except in very limited circum-
stances—for the purpose of meeting the “domestic indus-
try” requirement in § 337 cases.
JOHN MEZZALINGUA ASSOCIATES v. ITC 2
I. BACKGROUND
John Mezzalingua Associates, Inc., d/b/a PPC, Inc.
(“PPC”) is a domestic producer of coaxial cable connectors
used in the telecommunications, satellite, and cable
television industries. PPC is headquartered in East
Syracuse, New York, where a substantial portion of its
employees are located, and where a substantial portion of
its research, development, and commercial production
take place. Innovations within its field have enabled PPC
to obtain a portfolio of utility and design patents in the
United States.
PPC is a successful business that has grown and ex-
panded in recent years, but its business has been nega-
tively impacted by significant competition from imports of
“a flood of copy-cat products” by manufacturers in China
and Taiwan. A20142-43, A20354-55, A20379-80. For a
variety of reasons, the copy-cat imports are sold at prices
that severely undercut PPC’s pricing.
Noah Montena joined PPC’s Syracuse facility in 1997
as a product engineer and worked to develop a new prod-
uct for PPC called the “EX” connector. PPC invested a
considerable sum of money in research and development
that resulted in the EX connector product. Mr. Montena’s
work on the EX connector also resulted in both a utility
invention and an ornamental design, each of which were
separately patented as U.S. Patent No. 6,558,194 (“the
’194 patent” or “the utility patent”) and U.S. Patent No.
D440,539 (“the ’539 patent” or “the design patent”), with
Mr. Montena as the sole named inventor on each patent.
The patented ornamental design was for a coaxial cable
connector having the following appearance:
3 JOHN MEZZALINGUA ASSOCIATES v. ITC
The record shows that PPC’s attempts to license pat-
ents in its portfolio were “generally ignored” and “weren’t
taken seriously.” A02146-99, A30043. PPC’s Vice Presi-
dent testified that “[t]here was a general feeling in the
connector industry that there was a tremendous reluc-
tance to take any licenses.” A30043. There was even
more skepticism of design patents, which were previously
“nonexistent in the connector industry,” especially those
that had never been tested in court. A30021, A00326.
On May 5, 2001, PPC sued its competitor Arris Inter-
national, Inc. in the Middle District of Florida, alleging
that Arris’ “Digicon” connector infringed the ’539 patent.
The parties engaged in settlement discussions during the
pendency of the Florida action, but no settlement was
reached. PPC ultimately obtained a jury verdict that the
’539 patent was valid and infringed by Arris, and was
awarded damages and an injunction. That judgment was
appealed by Arris and affirmed by this court. John Mez-
zalingua Associates, Inc. v. Antec Corp., 81 Fed. Appx. 309
(Fed. Cir. 2003). Arris next sought to circumvent the
injunction by adding labels to its Digicon connectors to
conceal the infringing design, and PPC filed a contempt
motion, which was denied. On December 21, 2001, PPC
also sued Arris’ distributor, International Communica-
tions Manufacturing Corporation (“ICM”) and its owner
Randall Holiday in the District of Colorado for infringe-
JOHN MEZZALINGUA ASSOCIATES v. ITC 4
ment of the ’539 patent by its “F-Conn” connectors sup-
plied by Arris. Considerable sums were spent by PPC in
legal fees and costs pursuing the Florida and Colorado
infringement actions.
On July 1, 2003, less than two months after PPC’s
’194 utility patent issued, PPC sued Arris in the Western
District of Wisconsin for infringement of the ’194 patent
by its Digicon connectors. In December of 2003, PPC
received a jury verdict that Arris’ Digicon connectors
infringed the ’194 patent, and that the infringement was
willful. Within a week of the jury verdict, negotiations
began to settle the outstanding lawsuits. Those negotia-
tions resulted in a settlement agreement and separate
license agreement which encompassed the ’539 patent,
and under which Arris, ICM, and Holliday agreed to pay
money to PPC.
PPC next filed a complaint with the International
Trade Commission (“ITC”) under 19 U.S.C. § 337(a)(3)(C)
to prevent the importation of connectors that were alleged
to infringe the ’539 patent, the ’194 patent, and other
patents owned by PPC. 1 The ITC issued its Notice of
Investigation on May 30, 2008. 73 Fed. Reg. 31145.
Because PPC requested a general exclusion order with
respect to the ’539 patent, PPC was required to make out
a prima facie case of such entitlement, which included
establishing that a domestic industry existed under
Section 337. After a seven-day evidentiary hearing, the
1 The eight named Respondents were Aska Com-
munication Corp., Edali Industrial Corp., Fu Ching
Technical Industrial Co., Ltd., Gem Electronics, Hanjiang
Fei Yu Electronics Equipment Factory, Zhongguang
Electronics, Yangzhou Zhongguang Electronics Co., Ltd.,
and Yangzhou Zhongguang Foreign Trade Co., Ltd.
5 JOHN MEZZALINGUA ASSOCIATES v. ITC
Administrative Law Judge (“ALJ”) initially determined
that the ’539 patent was valid and infringed by four
Chinese Respondent companies that failed to participate
in the investigation, 2 and that a Section 337 violation had
occurred. Certain Coaxial Cable Connectors and Compo-
nents Thereof and Products Containing Same, No. 337-
TA-650, at 115-117 (Int’l Trade Comm’n October 13, 2009)
(“Initial Determination”).
The ALJ also found that PPC satisfied the domestic
industry requirement based on: (1) PPC’s considerable
litigation expenses incurred in asserting the ’539 patent
against Arris in the Florida action; (2) the substantial
sum of money received from Arris under the ultimate
settlement and license agreement with PPC, a portion of
which was attributable to the ’539 patent; (3) PPC’s
considerable research and development costs that re-
sulted the EX connector product, whereby “at least some
portion of Mr. Noah Montena’s salary, plus his time,
effort and use of PPC's equipment and facilities, is attrib-
utable to his development of the design that became the
’539 patent.” Id. at 112-13.
After finding that a limited exclusion order would
likely be circumvented, the ALJ recommended the issu-
2 The four Respondents located in China, Hanjiang
Fei Yu Electronics Equipment Factory, Zhongguang
Electronics, Yangzhou Zhongguang Electronics Co., Ltd.,
and Yangzhou Zhongguang Foreign Trade Co., Ltd., were
all held in default for failing to answer the Complaint,
and their products formed the basis for the ALJ’s deter-
minations of infringement of the ’539 patent. Only Fu
Ching Technical Industrial Co., Ltd. and Gem Electronics
participated throughout the investigation, but the ’539
patent was not asserted against them. Aska Communica-
tion Corp. and Edali Industrial Corp. were terminated
from the investigation pursuant to a consent order.
JOHN MEZZALINGUA ASSOCIATES v. ITC 6
ance of a general exclusion order. Id. at 143. The record
shows that this recommendation was based largely on the
business practices utilized by the Chinese Respondents,
such as having overlapping locations, personnel, and
operations. The ALJ explained that “in China, the licens-
ing system makes it very common and inexpensive for
individuals or families to operate Chinese companies
under a number of different names.” Id. at 122. The ALJ
observed that lack of clarity as to the precise relationship
among the four Respondents having demonstrated com-
monalities was indicative of the ease with which Chinese
entities could establish new companies and continue to
import infringing compression connectors if barred only
by a limited exclusion order. Id. at 142-43. A PPC corpo-
rate representative testified that if PPC were able to
identify and assert its patent rights against one such
Chinese importer, it would be easy for that company to
circumvent patent enforcement efforts: “In many cases,
they would just pick up the operation and move, change
the name of the company, take out a new business license,
and be manufacturing within a relatively short period” of
about two weeks. Id. at 123. PPC’s counsel characterized
this predicament as follows:
These [Respondents] are defaulters that we en-
gaged in the ITC . . . companies that didn’t even
appear, and the district courts are not too helpful
for such infringers. They won’t show up. They
won’t obey injunctions. They will appear in a dif-
ferent guise with a different name, with a knock-
off product.
Oral Arg. at 13:28 – 14:27.
Upon review of the ALJ’s initial determination the
ITC reversed, finding that the simultaneous investment
7 JOHN MEZZALINGUA ASSOCIATES v. ITC
in engineering, research, and development of PPC’s EX
connector was not attributable to the design of the con-
nector, but rather was directed to the underlying func-
tionality. Certain Coaxial Cable Connectors and
Components Thereof and Products Containing Same, No.
337-TA-650, at 52-53 (Int’l Trade Comm’n March 31,
2010) (“Without a showing to the contrary, we find that
Mr. Montena’s salary, time, effort, and use of PPC’s
equipment and facilities are more likely attributable to
his development of the structural and functional design of
the connector . . . than to his development of the orna-
mental design.”) (“Comm’n Op.”). Regarding litigation
and licensing activities in general, the ITC determined
that
We conclude that patent infringement litigation
activities alone, i.e., patent infringement litigation
activities that are not related to engineering, re-
search and development, or licensing, do not sat-
isfy the requirements of section 337(a)(3)(C).
However, litigation activities (including patent in-
fringement lawsuits) may satisfy these require-
ments if a complainant can prove that these
activities are related to licensing and pertain to
the patent at issue, and can document the associ-
ated costs.
Id. at 43-44. As to PPC’s asserted litigation expenses and
licensing activities in particular, the Commission found
that the record was insufficient to determine whether the
required nexus had been shown and what the associated
litigation costs were, and remanded to the ALJ for addi-
tional fact finding. Id. at 54.
On remand the ALJ concluded that PPC’s settlement
and license agreement had a sufficient nexus with the
JOHN MEZZALINGUA ASSOCIATES v. ITC 8
litigation, but that only the attorney time billed specifi-
cally for settlement negotiations and license agreement
preparation could constitute “investments” in licensing
under Section 337(a)(3)(C). Certain Coaxial Cable Con-
nectors and Components Thereof and Products Containing
Same, No. 337-TA-650, at 8-13, 19, 24 (Int’l Trade
Comm’n May 27, 2010) (“Remand Determination”). The
sum of those particular legal expenditures was considera-
bly smaller than the total litigation expenses, and would
need to be further discounted to reflect the portion of the
billable time that was spent on the ’539 patent as opposed
to other patents or other matters. Id. at 19-25. The ALJ
found this lesser amount to be an insufficient investment
in patent licensing activities to show the existence of a
domestic industry, and therefore no § 337(a)(3)(C) viola-
tion was found. Id. at 25. The ITC declined to review the
ALJ’s determinations on remand, and this appeal fol-
lowed. Certain Coaxial Cable Connectors and Compo-
nents Thereof and Products Containing Same, No. 337-
TA-650, at 1-2 (Int’l Trade Comm’n July 12, 2010).
II. DISCUSSION
The ITC's Final Determination is reviewed in accor-
dance with the Administrative Procedure Act. See Hon-
eywell Int’l, Inc. v. ITC, 341 F.3d 1332, 1338 (Fed. Cir.
2003). This court must set aside any findings or conclu-
sions of the ITC that are “arbitrary, capricious, or other-
wise not in accordance with law.” 5 U.S.C. § 706(2)(A).
The ITC’s legal conclusions are reviewed de novo. Hon-
eywell, 341 F.3d at 1338.
Statutory interpretation by the ITC is a legal issue
reviewed de novo, except to the extent deference to the
ITC’s construction of a statute it administers is required
under the two-step analysis set forth in Chevron U.S.A.
Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
9 JOHN MEZZALINGUA ASSOCIATES v. ITC
837 (1984). NSK Ltd. v. United States, 390 F.3d 1352,
1354 (Fed. Cir. 2004). The ITC’s interpretation must be
set aside if is it is “arbitrary, capricious, or manifestly
contrary to the statute.” Chevron, 467 U.S. at 844.
A. PPC’s Investment in Engineering, Research, and
Development
The ITC determined that although PPC had made
considerable investments in the engineering, research,
and development of its EX connector, the investment was
directed solely to the underlying functionality of the
connector, and therefore could not support a finding of
domestic industry with respect to a patented design that
arose out of the very same effort. No apportionment or
weight was given to PPC’s research and development
regarding the design. See Comm’n Op. at 52-53.
The ITC emphasized the following findings: the ’539
design patent and the ’194 utility patent include the same
drawing figures; both patents were filed as continuations
of a single prior application; and PPC has not made any
product covered by its ’539 patent. Id. Based on these
findings, the ITC concluded that “Mr. Montena’s salary,
time, effort, and use of PPC’s equipment and facilities are
more likely attributable to his development of the struc-
tural and functional design of the connector . . . than to
his development of the ornamental design.” Id. This
conclusion was arbitrary and capricious.
First, the ITC’s analysis regarding PPC’s research
and development expenditures was cursory and arbitrary.
The ITC suggests that “without a showing to the con-
trary,” a design patent that was based on an underlying
utility application having the same drawing figures
renders the design a mere incidental afterthought to
which no amount of investment or effort can be attrib-
JOHN MEZZALINGUA ASSOCIATES v. ITC 10
uted. Id. Since the ITC does not base its reasoning on
any evidence or testimony as to the work done by the
inventor of the connector and creator of the design, its
determination that such a patent application filing strat-
egy must reveal that the design was essentially valueless
was speculative. This decision arbitrarily diminishes the
availability of section 337 relief with respect to design
patents and undermines the value of design patents
generally. Design patents possess unique and valuable
properties long ago recognized by the Supreme Court. See
Gorham Co. v. White, 81 U.S. 511, 524-25 (1871) (“The
law manifestly contemplates that giving certain new and
original appearances to a manufactured article may
enhance its salable value, may enlarge the demand for it,
and may be a meritorious service to the public.”). Design
patents protect fundamentally different subject matter
than that which is encompassed by a utility patent, and
can be used to effectively and efficiently combat knock-off
products that can be easily identified by visual inspection
alone.
Second, that PPC has not made and sold products
covered by the ’539 patent is not a reasonable basis to
entirely discount PPC’s research and development of the
design. It is clear that Mr. Montena’s work yielded a
functional connector invention and an ornamental design
for it. Some non-zero portion of Mr. Montena’s time and
effort was necessarily devoted to the ornamental aspects
of the connector. It was arbitrary for the ITC to assume
that this portion was de minimis and insubstantial be-
cause PPC did not ultimately put the design into one of its
commercial products. PPC may have had good business
reasons for not including the patented design in its prod-
ucts. The mere non-use of the design cannot justify a
total disregard of the related underlying investment in
research and development of it.
11 JOHN MEZZALINGUA ASSOCIATES v. ITC
Third, the ITC should be wary of diminishing the con-
tribution of an ornamental design particularly where, as
here, the inventor/designer’s effort yields both functional
and ornamental features applicable to the same underly-
ing article. The result may be greater than the sum of its
parts, and the parts may not be easily separable. See
Perry J. Saidman & Theresa Esquerra, A Manifesto on
Industrial Design Protection: Resurrecting the Design
Registration League, 55 J. COPYRIGHT SOC’Y USA 423, 425
(2008) (“Since a good industrial design ideally inseparably
blends form and function, the designer is penalized [by
the functionality doctrine] because her design embodies
functional qualities.”). Patentable designs are by defini-
tion embodied in underlying utilitarian articles. See 35
U.S.C. § 171 (“Whoever invents any new, original, and
ornamental design for an article of manufacture may
obtain a patent therefore . . . .”) (emphasis added).
Whether or not that underlying article embodies a sepa-
rately patentable utility invention, the utility of the
article itself cannot be presumed to completely over-
shadow the investment in research and development of
the article’s design.
The majority argues that no remand is necessary be-
cause the ITC found PPC failed to meet its burden of
proof on the issue of investment in research and develop-
ment of the patented design. See Comm’n Op. at 52
(“PPC presented no evidence of any investment in re-
search and development related to the ’539 patent.”).
While PPC did not affirmatively apportion out its invest-
ment as it pertained to the ’539 design patent only, PPC
introduced substantial evidence showing its considerable
investment in the EX connector research project as a
whole, which necessarily included the work that yielded
the patented design. The ALJ considered all the evidence
and found it sufficient to show that “at least some portion
JOHN MEZZALINGUA ASSOCIATES v. ITC 12
of Mr. Montena’s salary, plus his time, effort, and use of
PPC’s equipment and facilities, is attributable to his
development of the design that became the ’539 patent.”
Initial Determination at 113. The ITC rejected “[t]his
inference,” and instead would have required some better
or more precise allocation of investment costs to show
direct attribution to the design. Comm’n Op. at 52-53.
Without first verifying the possibility and extent to which
such an allocation can be made, there are no facts in the
record before us sufficient to support the ITC’s conclusion
that time and resources spent by PPC in researching or
developing the ornamental design of the ’539 patent are
“minimal” and could not constitute a substantial invest-
ment. Comm’n Op. at 52-53. This conclusion is not a cost
allocation but mere conjecture. The ITC’s determination
that PPC’s research and development with respect to the
design patent failed to meet a substantial investment
threshold was therefore arbitrary and capricious. Re-
mand is necessary to conduct further fact finding as to the
extent to which PPC’s research and development efforts
may be allocated between the functional and ornamental
features created by Mr. Montena.
B. PPC’s Investment in Exploitation
Section 337(a)(3)(C)’s applicability to litigation ex-
penses is an issue of first impression before the ITC and
before this court. The ITC correctly characterized PPC’s
asserted litigation expenses as “rais[ing] an important
issue of statutory interpretation,” namely, “whether
litigation activities can constitute ‘exploitation’ under
section 337(a)(3)(C)” so as to support a finding of a domes-
tic industry. Comm’n Op. at 41, 43. As noted above, the
ITC answered that question as follows:
13 JOHN MEZZALINGUA ASSOCIATES v. ITC
We conclude that patent infringement litigation
activities alone, i.e., patent infringement litigation
activities that are not related to engineering, re-
search and development, or licensing, do not sat-
isfy the requirements of section 337(a)(3)(C).
However, litigation activities (including patent in-
fringement lawsuits) may satisfy these require-
ments if a complainant can prove that these
activities are related to licensing and pertain to
the patent at issue, and can document the associ-
ated costs.
Id. at 44. This interpretation of § 337(a)(3)(C) is to be
reviewed de novo, since no deference is owed to the ITC
under Chevron in this instance. 3
3 Statutory construction was well briefed at ITC,
and was a critical and dispositive element of the ITC’s
decision. Comm’n Op. at 41-51. PPC’s declining to af-
firmatively raise this issue again on appeal therefore does
not foreclose this court from addressing this “pure ques-
tion of law that cries out for resolution.” See Rybarczyk v.
TRW, Inc., 235 F.3d 975, 984 (6th Cir. Ohio 2000) (“Fail-
ure to raise an issue on appeal would normally constitute
a waiver of that issue. Here, however, we have a pure
question of law that cries out for resolution - and in such
a situation we are not foreclosed from considering the
issue.”) (citation omitted); see also United States v. Carl-
son, 900 F.2d 1346, 1349 (9th Cir. 1990) (explaining that a
court may reach questions otherwise not properly before
it where “the issue presented is purely one of law and
the opposing party will suffer no prejudice as a result of
the failure to raise the issue”). While the majority frames
the issue before this court as “relat[ing] to the sufficiency
of its evidence linking various litigation expenditures to
licensing,” that view assumes that the ITC correctly
interpreted section 337(a)(3)(C) to require such a nexus
between litigation and licensing. It is therefore necessary
to address the ITC’s interpretation of section 337(a)(3)(C),
JOHN MEZZALINGUA ASSOCIATES v. ITC 14
The original Tariff Act of 1930 required a showing of
domestic industry, as well as an independent showing of
injury to that domestic industry, to bring a successful
claim under section 337. See, e.g., Akzo N.V. v. ITC, 808
F.2d 1471, 1486-87 (Fed. Cir. 1986) (“[T]o prove a viola-
tion of § 337, the complainant must show both an unfair
act and a resulting detrimental effect or tendency.”). In
1988 Congress eliminated the injury requirement and
added what is now section 337(a)(3) to specify how a
domestic industry may be established. At that time the
ITC was already finding a domestic industry to be shown
via manufacturing activity such as investment in manu-
facturing infrastructure or employment of labor or capital.
S. REP. NO. 100-71, at 129 (1987); H.R. REP. NO. 100-40, at
157 (1987). Believing that the ITC was too rigidly requir-
ing such manufacturing activity, Congress considerably
lowered the domestic industry requirement threshold by
permitting non-manufacturing activity such as licensing
and research to show the existence of a domestic industry.
H.R. REP. NO. 100-40, at 157. Thus, the following text of
section 337(a)(3) was enacted:
an industry in the United States shall be
considered to exist if there is in the United
States, with respect to the articles pro-
tected by the patent, copyright, trade-
mark, mask work, or design concerned—
(A) significant investment in plant and
equipment;
(B) significant investment in labor or
capital; or
as the statutory construction question forms the true
basis of the dispute before this court.
15 JOHN MEZZALINGUA ASSOCIATES v. ITC
(C) substantial investment in its exploita-
tion, including engineering, research
and development, or licensing.
19 U.S.C. § 1337(a)(3).
Under Chevron we must first look to whether Con-
gress has directly spoken to the issue of whether litigation
activities can alone support a finding of a substantial
investment in exploitation under § 337(a)(3)(C). 467 U.S.
at 842-43. Neither party contends that Congress has
directly addressed this precise issue. Indeed, the plain
language of § 337 is silent as to how litigation or patent
enforcement expenses should be treated.
In the legislative history of the 1988 amendment to
section 337, Congress was clear that “[t]he mere owner-
ship of a patent . . . would not be sufficient to satisfy [the
domestic industry requirement]. The owner of the prop-
erty right must be actively engaged in steps leading to the
exploitation of the intellectual property, including appli-
cation engineering, design work, or other such activities.”
S. REP. NO. 100-71, at 130. Congress gave examples of
universities or small startup companies “licensing their
rights to manufacturers” as acceptable kinds of domestic
industries. Id. at 129; Comm’n Op. at 47-48. Although
Congress clearly intended to require something more than
mere ownership of a patent, it did not exclude litigation
activities as indicia of being actively engaged in the
exploitation of the patent. The question then becomes
whether the ITC’s interpretation to exclude litigation
expenses not tied to licensing was a permissible construc-
tion, i.e., one which is not “arbitrary, capricious, or mani-
festly contrary to the statute.” Chevron, 467 U.S. at 842-
44.
JOHN MEZZALINGUA ASSOCIATES v. ITC 16
The ITC conceded that the plain language of section
337(a)(3)(C) does not limit the kinds of activities that can
be considered exploitation, but rather provides an exem-
plary listing of activities that can constitute exploitation.
Comm’n Op. at 45; 19 U.C.C. § 1337(a)(3)(C). Neverthe-
less, the ITC “decline[d] . . . to venture beyond these three
examples because we are not convinced that patent in-
fringement litigation activities unrelated to engineering,
research and development, or licensing constitute ‘exploi-
tation’ for purposes of the statute.” Comm’n Op. at 45. It
emphasized that “Congress could have easily included
patent infringement litigation [in the list], but did not.”
Id. at 45. Furthermore, the ITC believed that “[a]llowing
patent infringement litigation activities alone to consti-
tute a domestic industry would place the bar so low as to
effectively render it meaningless,” and Congress plainly
intended for more than mere ownership of patent right to
suffice. Id. at 46. Hence, the ITC announced a litigation-
licensing nexus rule. Id. at 50.
The ITC’s interpretation of section 337(a)(3)(C) is un-
duly narrow, and is “manifestly contrary to the statute.”
Chevron, 467 U.S. at 842-44. Congress did not enact
language that limited the term “exploitation” to activity
only related to one of the named examples listed in the
statute. Congress left the list open-ended to provide
flexibility for what may be deemed to constitute exploita-
tion, expressing that criteria other than the examples
would appropriately qualify for consideration. See
§ 337(a)(3)(C) (“exploitation, including engineering,
research and development, or licensing”) (emphasis
added); see also S. REP. NO. 100-71, at 130 (1987) (discuss-
ing the consideration of “engineering, design work, or
other such activities”) (emphasis added). The ITC failed to
articulate any reasonable basis in the legislative history—
let alone an “extraordinary showing of contrary inten-
17 JOHN MEZZALINGUA ASSOCIATES v. ITC
tions”—to justify such a departure from the plain mean-
ing of the statutory language. See Garcia v. United
States, 469 U.S. 70, 75 (1984). The legislative history
compels that “exploitation” be read broadly in accordance
with the statutory text. See S. REP. NO. 100-71, at 130.
The ITC’s construction artificially and arbitrarily nar-
rowed the domestic industry requirement.
The majority misapprehends the threshold domestic
industry requirement through its perception that the ITC
is “fundamentally a trade forum, not an intellectual
property forum.” This view ignores the statutory role of
the ITC and the legislative purpose of section 337, and
tends to place an undue expectation of trade-related or
production-related activity when analyzing the domestic
industry requirement. The ITC took a similar view of
itself and of section 337, suggesting that “exploitation” is
shown only by “taking steps to foster propagation or use
of the underlying intellectual property” or by engaging in
“activities that serve to encourage practical applications
of the invention or bring the patented technology to
market.” Comm’n Op. at 49. As this court has observed,
however, “[w]hen Congress amended section 337 of the
Tariff Act of 1930 in 1988 to provide the definition of
domestic industry now found in subsection (a)(3), it stated
that its purpose was ‘to make [section 337] a more effec-
tive remedy for the protection of United States intellec-
tual property rights.’” Texas Instruments Inc. v. ITC, 988
F.2d 1165, 1181 (Fed. Cir. 1993) (quoting Omnibus Trade
and Competitiveness Act of 1988, Pub. L. No. 100-418, §
1341(b), reprinted in 1988 U.S.C.C.A.N. (102 Stat.) 1107,
1212 (codified at 19 U.S.C. § 1337)) (emphasis added).
Thus when Congress amended § 337 it revised the stand-
ing requirement to eliminate the need to show material
injury, a factor that is plainly trade-related, and thereby
charged the ITC with administering a statute having a
JOHN MEZZALINGUA ASSOCIATES v. ITC 18
primary purpose of enforcing valid intellectual property
rights. See Thomas A. Broughan, III, Modernizing § 337’s
Domestic Industry Requirement for the Global Economy,
19 FED. CIR. B.J. 41, 79 (2009) (“The statute requires the
ITC to consider the health and public welfare and com-
petitive conditions in balancing the interests of U.S.
consumers against those of owners of intellectual property
. . . .”). Subsequent to the 1988 amendment, the number
of actions for enforcement of intellectual property rights
against infringing imports have increased and become the
most prominent of complaints brought before the ITC.
See William P. Atkins & Justin A. Pan, An Updated
Primer on Procedures and Rules in 337 Investigations at
the U.S. International Trade Commission, 18 U. BALT.
INTELL. PROP. L.J. 105, 107 (2010) (“Section 337 has
evolved almost exclusively into an intellectual property
enforcement statute.”); Joel W. Rogers & Joseph P.
Whitlock, Is Section 337 Consistent with the GATT and
TRIPS Agreement?, 17 AM. U. INT'L L. REV. 459, 470-471
(2002) (“Section 337 is a powerful border enforcement
mechanism to be used against imports that infringe a
U.S. patent . . . . Section 337 is often used for intellectual
property claims instead of other ‘unfair methods of com-
petition’ claims.”). I disagree with both the ITC and the
majority in that with regard to section 337 investigations,
I view the ITC as an intellectual property enforcement
forum.
In its capacity as an administrator of an important in-
tellectual property enforcement statute, it is error for the
ITC to limit the scope of its section 337 investigations to
those where the complainant is involved in traditional
trade-based or goods-based activities. The ITC must
understand that patentees have no affirmative right to
practice their inventions, but only the right to exclude
others from doing so. TransCore, LP v. Elec. Transaction
19 JOHN MEZZALINGUA ASSOCIATES v. ITC
Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009).
A patent right is therefore empty without the ability to
meaningfully enforce it against infringers. Congress
recognized this fact when it added section 337(a)(3)(C) to
give patentees “more effective” means to enforce their
rights. Tex. Instruments, 988 F.2d at 1181. By permit-
ting patent rights to be more effectively enforced at the
border, Congress again advanced the axiom that enforce-
able patent rights are good for innovation and for the
economy. See Hilton Davis Chem. Co. v. Warner-
Jenkinson Co., Inc., 62. F.3d 1512, 1529 n.1 (Fed. Cir.
1995) (Newman, J., dissenting) (“Technologic innova-
tion has driven the American economy, over the past
century, to the exclusion of virtually all other growth
factors . . . . [P]atent-based innovation has a positive
impact on the economic system as new industries and new
goods displace the old.”); Andrew Beckerman-Rodau,
Patents are Property: A Fundamental But Important
Concept, 4 J. BUS. & TECH. L. 87, 93 (2009) (“Absent the
ability to assert patent property rights, fewer inventions
will be patented and the public storehouse of knowledge
will decrease without the public disclosure from those
patents.”); see also 35 U.S.C. § 271(a) (deeming importa-
tion of a patented article to constitute infringement).
Conversely, the incentive for domestic producers to inno-
vate is all but destroyed if their patents are being in-
fringed by foreign companies that vanish at the first sign
of legal opposition to their importation or domestic sales,
only to later resurface under a new name with more
infringing products. For such situations, Congress made
meaningful relief available to patentees by enabling the
ITC to issue exclusion orders to stop infringement at the
border. As shown in PPC’s case, there exists strong
motivation for infringers to circumvent U.S. patent en-
forcement efforts, a circumstance that can only be effec-
JOHN MEZZALINGUA ASSOCIATES v. ITC 20
tively addressed through the issuance of a general exclu-
sion order. Initial Determination at 143.
Although standing for such exclusionary relief re-
quires activity beyond “mere ownership” of a patent, S.
REP. NO. 100-71, at 130, Congress deemed that standing
could exist via any “exploitation” of the patent—i.e., any
activity that puts the patent to a productive use or other-
wise takes advantage of it. See Williams v. Taylor, 529
U.S. 420, 431 (2000) (explaining that Congress is pre-
sumed to have intended each word in a statute would be
given its “ordinary, contemporary, common meaning”);
Comm’n Op. at 49 (finding that when Congress amended
section 337 in 1988, to “exploit” meant “to put to a produc-
tive use” or “to take advantage of”). This threshold is
intentionally very low, in keeping with Congress’ goal to
make section 337 a more effective patent enforcement
statute. Indeed, a patentee need not even be engaged in
the exploitative activity per se as long as its activity is an
“investment in [the patent’s] exploitation.” § 337(a)(3)(C)
(emphasis added). A domestic industry can be shown to
exist by those “actively engaged in steps leading to the
exploitation of the intellectual property.” S. REP. NO. 100-
71, at 130 (emphasis added). Under the broad language
of section 337(a)(3)(C), patent infringement litigation is
an investment in the exploitation of a patent.
Securing a judgment of validity and infringement
substantially strengthens and increases the value of the
patent. See John R. Allison et al., Valuable Patents, 92
Geo. L.J. 435, 439-440 (2004) (“[L]itigated patents tend to
be much more valuable than others on average . . . .”).
Stronger patent rights are also better able to attract
investment to support an industry and provide higher
returns on those investments. See Mark A. Lemley, The
Economics of Improvement in Intellectual Property Law,
21 JOHN MEZZALINGUA ASSOCIATES v. ITC
75 TEX. L. REV. 989, 994 (1997) (“[I]ndividuals will not
invest in invention or creation unless the expected return
from doing so exceeds the cost of doing so—that is, unless
they can reasonably expect to make a profit from the
endeavor.”). In these ways, infringement litigation can be
a productive and advantageous use of patent rights which
better fortify the patentee’s position in the marketplace.
Indeed, it appears that absent PPC’s infringement actions
the ’539 patent would never have become sufficiently
valuable or marketable for PPC to have obtained the
license agreement that it did. The infringing competitors
only stopped infringing and licensed PPC’s patents at the
point of a sword forged and tempered in the district
courts.
When faced with a flood of infringing “copy-cat” im-
ports able to undercut their prices, it is unreasonable that
entities like PPC be discouraged from first enforcing a
patent in litigation in lieu of producing the patented
article to compete in the marketplace while at a clear
economic disadvantage. Likewise, when an industry is
highly reluctant to license patents in the relevant techno-
logical field, a patentee should be able to pursue litigation
as an alternative or precursor to licensing negotiations
without diluting its patent rights. Litigation in these
contexts constitutes an investment in exploitation. Enti-
ties that are or can become market participants in the
field of the patented technology should not be deemed to
lack standing for a section 337 action if those entities
have substantially staked out their claim to the technol-
ogy via infringement litigation.
Litigation undertaken to enforce patent rights and
enhance the value of a patent or pave the way for a
stronger competitive advantage constitutes an investment
in exploitation under section 337(a)(3)(C), regardless of
JOHN MEZZALINGUA ASSOCIATES v. ITC 22
that activity’s relationship to licensing, engineering,
research, or production. Here, the ITC’s determination to
exclude litigation costs untethered to licensing from
consideration has impermissibly and arbitrarily limited
the reach of section 337 for patent owners.
III. CONCLUSION
For the foregoing reasons, I would reverse the ITC de-
termination and remand for additional fact finding as to
how much investment PPC made into the research and
development of the design, and to determine whether
PPC’s infringement litigation costs, alone or in combina-
tion with its research and development costs, are substan-
tial enough to give rise to the existence of a domestic
industry.