ITC Monthly Wrap-Up: May 2023

Authored by: Daniela Glaser

In May, there were two new complaints filed at the U.S. International Trade Commission, including complaints filed by Efficient Power Conversion Corp. (Semiconductor Devices and Products Containing the Same) and Shoals Technologies Group, LLC (Photovoltaic Connectors and Components Thereof). The Commission also instituted four new investigations in May.

On May 18, Congressional Reps. David Schweikert (R-Ariz.) and Don Beyer (D-Va.) reintroduced the Advancing America's Interests Act, which was originally introduced in August 2020 and reintroduced in September 2021. The AAIA seeks to limit petitions in the ITC through two amendments to Title 19 of the U.S. Code, Section 1337. The first proposed amendment would change Section 1337(a) to mandate that only licenses/licensing activities that lead to the adoption and development of articles that incorporate the claimed patent, copyright, trademark, mask work, or design can support a domestic industry. The second proposed amendment would change Section 1337(b) to require that, for a complainant to rely on a third-party licensee to establish a domestic industry, the licensee must willingly join the investigation as a co-complainant.

This month’s ITC wrap-up reviews a Commission opinion in Smart HVAC Systems, and Components Thereof, Inv. No. 337-TA-1185, which reviews an initial determination related to induced and contributory infringement, as well as domestic industry.

Smart HVAC Systems, and Components Thereof, Inv. No. 337-TA-1185, Comm’n Op. (May 24, 2023)

In Smart HVAC Systems, the complainant, EcoFactor, filed a petition for review of various portions of an initial determination, including findings that EcoFactor had not established the economic prong of the domestic industry requirement and that respondents do not infringe EcoFactor’s patents. Comm’n Op. at 6. The three respondents also filed their own petitions for review of the initial determination. The Commission decided to review three issues: (1) indirect infringement by a respondent; (2) the economic prong of the domestic industry requirement; and (3) two of the initial determination’s conclusion of law and fact to correct certain clerical errors. Id. at 16.

The Commission affirmed the final initial determination that the respondent induced infringement of EcoFactor’s smart HVAC system patents through its willful blindness, noting that EchoFactor’s expert testified that the respondent “and its employees operate with willful blindness toward the intellectual property of other companies that are in [the respondent’s] space,” and that the respondent “would have known there was a high probability that [complainant] had patents covering [its] technology.” Id. at 21, 24. Despite this testimony, the respondent “did not contest its willful blindness before the ALJ.” Id. at 23-24. The Commission also affirmed the administrative law judge’s final initial determination that the respondent contributorily infringed EchoFactor’s smart HVAC system patents: “⁠[T]estimony [by EchoFactor’s expert] concerning willful blindness constitutes substantial evidence to support a finding of the requisite knowledge with respect to contributory infringement as well.” Id. at 28.

Despite the finding of induced and contributory infringement, the Commission affirmed the ALJ’s final initial determination that there was no violation of Section 337 because EchoFactor failed to satisfy the economic prong of the domestic industry requirement for its smart HVAC system patents under Section 337(a)(3)(A) and (B). The Commission rejected EchoFactor’s argument that the ALJ required it to allocate its research and development investments to specific patented features, rather than the domestic industry product, noting that the ALJ’s finding on that point related to Section 337(a)(3)(C), “which requires that investments in the recited activities must be ‘in the exploitation’ of the patent.” Comm’n Op. at 29-32. The Commission thus struck portions of the final initial determination related to exploitation of the patent because “there is no requirement that the recited investments and activities exploit the patent” under subparagraphs (A) and (B). Id. at 32.

This decision highlights the importance of responding to all arguments made by the opposing party, as well as the nuances of Section 337’s economic domestic industry requirement—although exploitation of asserted patents is required for Section 337(a)(3)(C), the analysis for subparagraphs (A) and (B) do not require exploitation of the patent at issue, and instead focus on the domestic industry product(s).