Evidence of Examples of Software Provided to Third Parties for Implementation in Products Held Insufficient to Satisfy the ITC Domestic Industry Requirement

Authored by D. Brian Kacedon, John C. Paul, and Benjamin T. Sirolly

In recent years, some patent owners have turned to the ITC, with its fast-paced proceedings, as a way to quickly protect their product market. But before excluding infringing products from entering the United States, the ITC requires patent owners to show that they meet the ITC domestic-industry requirement under 19 U.S.C. § 337, a hurdle that is not required for relief in district courts. A patent holder may satisfy the domestic-industry requirement by showing that it, or its licensee, produces protected products representing a significant investment in the domestic marketplace.

In Microsoft v. ITC,¹ the Federal Circuit affirmed the ITC's dismissal of Microsoft's suit against Motorola for several of the patents-in-suit. Specifically, the ITC found that Microsoft had not offered sufficient evidence to support a finding that it, or its licensees, operated a domestic industry protected by the patents. The Federal Circuit reviewed the ITC's findings and affirmed.

The Microsoft v. ITC Decision

In reviewing the ITC's decision, the Federal Circuit noted that "[t]here is no question about the substantiality of Microsoft's investment in its operating system or about the importance of that operating system to mobile phones on which it runs." But the ITC's governing statute requires more than simply showing operations in the United States. Instead, the focus under section 337 is on whether a company can show that its domestic investments include products covered by the asserted patents in order to merit statutory protection.

Microsoft failed to provide sufficient evidence at the ITC that domestic cell phones actually practiced the patents asserted. One evidentiary problem, the Federal Circuit explained, was that while Microsoft offered expert testimony regarding example programs and source code, it did not introduce any evidence regarding the final implementation of the software. Specifically, Microsoft did not provide any direct evidence that these example programs were actually implemented by third parties. Moreover, Microsoft's expert had not examined the third-party software to determine whether it in fact used the patented systems.

The Commission faulted Microsoft for not offering expert examination of third-party software, because it left the Administrative Law Judge ("ALJ") unable to confirm how these devices "actually operate." The ALJ explained that, although Microsoft had provided hypothetical examples, it had not proven that actual devices used the patented system. And without that evidence, the ALJ found, Microsoft lacked proof that its patents covered a domestic industry.

The first patent the Federal Circuit considered for the domestic-industry requirement related to software architecture for notifying applications of changes to the state of mobile-device components. Specifically, the patent discloses a "notification broker," and the ALJ construed the claims to require this notification broker to directly communicate with applications outside the broker.

For evidence on domestic industry, Microsoft's expert examined an example application that Microsoft provided to third-party application developers and concluded that the application used the patented structure. But, standing alone, that example application could not establish that end users actually use similar applications. Such a showing would have required proof that the code was implemented on third-party mobile devices, which Microsoft did not introduce into evidence. Thus, according to the Federal Circuit, the ALJ lacked sufficient evidence about how client applications on actual "articles" operated and in turn could not conclude that Microsoft practiced the patent domestically.

Similarly, the Federal Circuit upheld the Commission's determination that Microsoft had not proven a domestic industry practicing its patent directed to a radio interface layer (RIL) between radio hardware and software applications in a cell phone. As with the "notification broker" patent, the ALJ found that Microsoft's evidence failed to prove users actually operated phones in a way that was practicing the patent because Microsoft presented evidence of an example driver layer that practiced the patent but did not offer any direct evidence of third-party mobile devices that implement the software. This failure to show actual implementation of the patent-containing code defeated Microsoft's claim to section 337 protection.

Microsoft also offered evidence of phones implementing its Windows Mobile operating system, code that practices the patent. While discussing the operating system, however, Microsoft's expert relied on the sample code rather than actual code from the implemented systems. Here again, the evidence failed to prove users actually bought phones implementing the patented system. Applying a deferential standard—whether substantial evidence supported the Commission's findings—the Federal Circuit refused to reverse the Commission's finding that Microsoft failed to show a domestic industry protected by the patent.

Strategy and Conclusion

This case addresses evidentiary considerations pertaining to the ITC's domestic-industry requirement. In particular, this case demonstrates the importance of showing how the asserted patents are connected to actual products in the domestic marketplace. By only showing how the patents are connected to example products that may or may not be in the domestic marketplace, a patentee will likely not meet the domestic-industry requirement.

Endnotes
¹ The Microsoft decision can be found at http://www.finnegan.com/files/Publication/828f6225-cc1e-4bb7-93d2-e1a16bf24689/Presentation/PublicationAttachment/3c33ce9d-ecaa-4398-a60e-e1e2d94c6a48/12-1445%2010-3-13.pdf.

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