The Administrative Law Judge in this case chose to apply the EPROMs factors to LG's downstream products, and found that they weighed against exclusion.

In what may be the first decision of its kind since the U.S. Court of Appeals for the Federal Circuit's decision in Kyocera Wireless Corp. v. Int'l Trade Comm'n,¹ U.S. International Trade Commission (ITC) Administrative Law Judge (ALJ) David P. Shaw denied complete relief to the complainant where it could not satisfy the EPROMs factors for the respondent's own downstream goods.² If affirmed or otherwise not reviewed by the Commission, this decision has the potential to significantly alter prevailing assumptions in ITC practice.

In this case, OSRAM sued LG Electronics and affiliated entities over light-emitting diode (LED) technology. OSRAM sought a limited exclusion order (LEO) against LG to prevent importation of LEDs and products containing those LEDs. As most LEDs in the case were imported to the United States as components of other products, an LEO would not be valuable if it did not include the downstream products containing the LEDs.

In Kyocera, the Federal Circuit held that an LEO could not bar the importation of the products of downstream infringers that had not been named respondents. Prior to Kyocera, an LEO could cover downstream infringers not included as respondents if the complainant could make a sufficient showing under the EPROMs factors, derived from a case involving that technology.³

The nine EPROMs factors weighed are:

1. the value of the infringing articles compared to the value of the downstream products in which they are incorporated;
2. the identity of the manufacturer of the downstream products;
3. the incremental value to the complainant of the exclusion of the downstream products;
4. the incremental detriment to respondents of exclusion of the downstream products;
5. the burdens imposed on third parties resulting from exclusion of downstream products;
6. the availability of alternative downstream products that do not contain the infringing articles;
7. the likelihood that the downstream products actually contain the infringing articles and are subject to exclusion;
8. the opportunity for evasion of an exclusion order that does not include downstream products; and
9. the enforceability of an order by Customs.

An unanswered question post-Kyocera was whether or not the EPROMs factors would have any continuing viability where the infringing component was produced by a named respondent and incorporated by the named respondent into one of its own downstream products. At least one ALJ has explicitly held that EPROMs was "obviated" by Kyocera.⁴ This decision, however, answers the question quite differently.

The ALJ in this case chose to apply the EPROMs factors to LG's downstream products, and found that they weighed against exclusion. Although OSRAM won an LEO, it can be viewed as a pyrrhic victory because the overwhelming majority of the allegedly infringing articles that it sought to exclude are not subject to that LEO.

Whole categories of cases are likely to be affected if the EPROMs factors are applicable to respondents' own downstream products. Among them are where the asserted patents read on the semiconductors or chip sets or, potentially affecting an even broader category of cases, where method claims read on the operating system of a telephone handset or tablet computer. According to statistics recently published by the ITC, in the first half of fiscal year 2012, more than 20 Section 337 cases were filed involving smartphones or tablet computers.⁵

For Further Information

If you have any questions about this Alert, please contact Rodney R. Sweetland III, Michael G. McManus, any member of the ITC Section 337 Litigation Practice Group or any attorney in the firm with whom you are in regular contact.

Notes

1. 545 F.3d 1340 (Fed. Cir. 2008).
2. Certain Light-Emitting Diodes and Products Containing the Same, Inv. No. 337-TA-784, Recommended Determination on Remedy and Bonding (July 23, 2012).
3. Certain Erasable Programmable Read Only Memories (EPROM), Inv. No. 337-TA-276, USITC Pub. No. 2196 (May 1989), aff'd sub nom., Hyundai Elec. Indus. Co. v. U.S. Int'l Trade Comm'n, 899 F.2d 1204 (Fed. Cir. 1990).
4. Certain Flash Memory Chips and Products Containing Same, Inv. No. 337-TA-735, Order No. 32 at 8–9 (May 9, 2011).
5. Facts and Trends Regarding USITC Section 337 Investigations (June 18, 2012).

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.