[Federal Register Volume 72, Number 27 (Friday, February 9, 2007)]
[Notices]
[Pages 6286-6288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2196]


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INTERNATIONAL TRADE COMMISSION

[Inv. No. 337-TA-474]


In the Matter of Certain Recordable Compact Disc And Rewritable 
Compact Discs; Notice of Issuance of General Exclusion Order and Cease 
and Desist Orders; Termination of the Investigation

AGENCY: U.S. International Trade Commission.

ACTION: Notice.

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SUMMARY: Notice is hereby given that the U.S. International Trade 
Commission has determined to reverse-in-part the presiding 
administrative law judge's (``ALJ's'') final initial determination of 
October 24, 2003, in the above-captioned investigation and has 
determined that the patents in issue are not unenforceable for patent 
misuse. Having found a violation of section 337 of the Tariff Act of 
1930, 19 U.S.C. 1337, in the above-captioned investigation, the 
Commission has issued a general exclusion order and cease and desist 
orders directed to four domestic respondents, and has terminated the 
investigation. In its discretion, the Commission has also determined to 
grant Philips' motion for leave to reply and to deny respondents' 
request to reopen the record for further discovery.

FOR FURTHER INFORMATION CONTACT: Clara Kuehn, Esq., Office of the 
General Counsel, U.S. International Trade Commission, 500 E Street, 
SW., Washington, DC 20436, telephone (202) 205-3012. Copies of the 
Commission's orders, the public version of its opinion, the public 
version of the ALJ's ID, and all other non-confidential documents filed 
in connection with this investigation are or will be available for 
inspection during official business hours (8:45 a.m. to 5:15 p.m.) in 
the Office of the Secretary, U.S. International Trade Commission, 500 E 
Street, SW., Washington, DC 20436, telephone 202-205-2000. General 
information concerning the Commission may also be obtained by accessing 
its Internet server (http://www.usitc.gov). The public record for this 
investigation may be viewed on the Commission's electronic docket 
(EDIS) at http://edis.usitc.gov. Hearing-impaired persons are advised 
that information on

[[Page 6287]]

this matter can be obtained by contacting the Commission's TDD terminal 
on 202-205-1810.

SUPPLEMENTARY INFORMATION: The Commission instituted this investigation 
on July 26, 2002, based on a complaint filed by U.S. Philips 
Corporation of Tarrytown, New York (``Philips'' or ``complainant''). 67 
FR 48,948 (2002). The complaint, as supplemented, alleged violations of 
section 337 of the Tariff Act of 1930 in the importation into the 
United States, the sale for importation, and the sale within the United 
States after importation of certain recordable compact discs and 
rewritable compact discs by reason of infringement of certain claims of 
six U.S. patents: claims 1, 5, and 6 of U.S. Patent No. 4,807,209; 
claim 11 of U.S. Patent No. 4,962,493; claims 1, 2, and 3 of U.S. 
Patent No. 4,972,401; claims 1, 3, and 4 of U.S. Patent No. 5,023,856; 
claims 1-5, and 6 of U.S. Patent No. 4,999,825; and claims 20, 23-33, 
and 34 of U.S. Patent No. 5,418,764. 67 FR 48,948 (2002).
    The notice of investigation named 19 respondents, including 
Gigastorage Corporation Taiwan of Hsinchu, Taiwan; Gigastorage 
Corporation USA of Livermore, California (collectively, 
``Gigastorage''); Linberg Enterprise Inc. (``Linberg'') of West Orange, 
New Jersey; and DiscsDirect.Com of Campbell, California. 67 FR. 48,948 
(2002). On August 14, 2002, the ALJ issued an initial determination 
(ALJ Order No. 2) granting a motion to intervene as respondents by 
Princo Corporation of Hsinchu, Taiwan, and Princo America Corporation 
of Fremont, California (collectively, ``Princo''). The Commission 
determined not to review Order No. 2.
    On October 24, 2003, the ALJ issued his final initial determination 
(``ID'') of no violation of section 337. When the ID issued, 
Gigastorage, Linberg, and Princo (collectively, ``respondents'') were 
the only remaining active respondents in the investigation. See ALJ 
Order No. 6 (an unreviewed initial determination terminating eight 
respondents on the basis of a consent order); ALJ Order No. 17 (an 
unreviewed initial determination terminating each of three respondents 
on the basis of a consent order and settlement agreement); ALJ Order 
No. 18 (an unreviewed initial determination terminating one respondent 
on the basis of a consent order and settlement agreement); and ALJ 
Order No. 21 (an unreviewed initial determination finding four 
respondents, including DiscsDirect.Com, in default). In his final ID, 
the ALJ found that none of the asserted claims are invalid, that the 
accused products infringe the asserted patent claims,\1\ and that the 
domestic industry requirement of section 337 had been satisfied. 
Nonetheless, the ALJ found no violation of section 337 because he 
concluded that all of the asserted patents were unenforceable by reason 
of patent misuse by Philips.
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    \1\ In his final ID, the ALJ identified claims 1, 2, 4, 5, and 6 
of U.S. Patent No. 4,999,825 as asserted by Philips. ID at 111-116.
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    On November 5, 2003, complainant Philips petitioned for review of 
the portion of the final ID that found the asserted patents 
unenforceable due to patent misuse. On the same day, respondents filed 
a paper entitled ``Statement of Respondents Princo Corp., Princo 
America Corp., Gigastorage Corp. Taiwan, Gigastorage Corp. USA, and 
Linberg Enterprises, Inc. Regarding the Initial Determination,'' in 
which respondents urged the Commission to adopt the ID in its entirety. 
Respondents and the Commission investigative attorney (``IA'') filed 
responses to Philips' petition for review.
    On December 8, 2003, the ALJ issued his recommended determination 
on remedy and bonding.
    On December 10, 2003, the Commission determined to review all of 
the ID's findings of fact and conclusions of law concerning patent 
misuse. The Commission determined not to review the remainder of the 
ID, thereby adopting the unreviewed portions. The Commission issued a 
notice dated December 10, 2003, in which it requested briefing on the 
issues under review, and invited interested persons to file written 
submissions on the issues of remedy, the public interest, and bonding. 
68 FR 70036 (2003). In accordance with that notice, all parties to the 
investigation filed timely written submissions, and timely reply 
submissions, regarding the issues under review.
    In the final ID, the ALJ found the asserted patents to be 
unenforceable for patent misuse per se, and he also found patent misuse 
under a ``rule of reason'' standard. On review, the Commission affirmed 
the ALJ's conclusion that the asserted patents are unenforceable for 
patent misuse per se, but on the ground that Philips' practice of 
mandatory package licensing constituted patent misuse per se as a tying 
arrangement between (1) licenses to patents that are essential to 
manufacture CD-Rs or CD-RWs according to Orange Book standards and (2) 
licenses to four other patents that are not essential to that activity, 
viz., U.S. Patent No. 5,001,692 (``the Farla '692 patent''), U.S. 
Patent No. 5,060,219 (``the Lockhoff '219 patent''), U.S. Patent No. 
5,740,149 (``the Iwasaki '149 patent''), and U.S. Patent No. Re. 34,719 
(``the Yamamoto '719 patent''). 69 FR 12711, 12712 (March 17, 2004); 
Commission opinion at 23-25 (issued March 25, 2004).\2\ The Commission 
took no position on the ALJ's conclusion that the asserted patents are 
unenforceable for patent misuse per se based on theories of price 
fixing and price discrimination. 69 FR at 12712 n.1; Commission opinion 
at 5 n.3.
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    \2\ The ALJ identified twelve patents included in the CD-R or 
CD-RW package licenses as non-essential to manufacture CD-Rs or CD-
RWs according to Orange Book standards. ID at 196-213. The 
Commission took no position on the ALJ's analysis of eight of those 
patents, viz., U.S. Patent Nos. 4,962,493 (``the Kramer '493 
patent''); 4,807,209 (``the Kramer '209 patent''); 4,942,565 (``the 
Lagadec '565 patent''); 5,126,994 (``the Ogawa '994 patent''); 
5,978,351 (``the Spruit '351 patent''); 5,835,462 (``the Mimnagh 
'462 patent''); 4,990,388 (``the Hamada '388 patent''); and 
5,090,009 (``the Hamada '009 patent''). Commission opinion at 43 
n.28, 50-51 (March 25, 2005).
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    The Commission also adopted the ALJ's conclusion that the asserted 
patents are unenforceable for patent misuse under a rule of reason 
standard based on the ALJ's analysis of and findings as to the tying 
arrangement. 69 FR at 12712; Commission opinion at 50-52. The 
Commission took no position on the ALJ's conclusion that the royalty 
rate structure of the CD-R/RW patent pools is an unreasonable restraint 
of trade. 69 FR at 12712 n.2; Commission opinion at 5, 51. The 
Commission also affirmed the ALJ's conclusion that the patent misuse 
has not been shown to have been purged. 69 FR at 12712; Commission 
opinion at 63. Based on these determinations, the Commission found no 
violation of section 337 in this investigation. Id.
    Philips appealed the Commission's final determination to the United 
States Court of Appeals for the Federal Circuit (``the Federal 
Circuit''), and respondents intervened. On September 21, 2005, the 
Federal Circuit reversed the Commission's final determination of no 
violation of section 337 in this investigation, and remanded the case 
for further proceedings consistent with the Court's opinion. U.S. 
Philips Corp. v. Int'l Trade Comm'n, 424 F.3d 1179 (Fed. Cir. 2005). 
The Court issued its mandate on December 27, 2005, returning 
jurisdiction over this investigation to the Commission. The Supreme 
Court denied respondents' petition for a writ of certiorari on June 19, 
2006.
    On January 17, 2006, the Commission issued an order seeking 
comments from the parties as to how to proceed on remand. The 
Commission specifically

[[Page 6288]]

requested comments as to how it should proceed with those portions of 
the October 24, 2003, final ID upon which the Commission did not take a 
position.
    On February 21, 2006, Philips filed comments pursuant to the 
Commission's January 17, 2006, order. On the same day, respondents 
jointly filed comments. On February 23, 2006, the IA filed his 
comments, in which he requested, inter alia, that all parties be given 
the opportunity to respond to the comments filed by the private 
parties. On March 10, 2006, Philips filed a memorandum in reply to 
respondents' February 21, 2006, comments.
    On March 21, 2006, the Commission issued an order directing the 
parties to file responses to the comments of the private parties filed 
on February 21, 2006. The Commission also denied Philips' motion to 
file its March 10, 2006, reply memorandum without prejudice to its re-
submission as part of Philips' response. On April 18, 2006, all parties 
filed response comments pursuant to the Commission's March 21, 2006, 
order.
    On April 25, 2006, Philips filed a motion for leave to reply, with 
attached reply, to the response comments filed by the IA on April 18, 
2006. On May 2, 2006, respondents filed an opposition to Philips's 
motion for leave to reply to the IA's response comments. In its 
discretion, the Commission has determined to grant Philips' motion for 
leave to reply and to deny respondents' request to reopen the record 
for further discovery.
    Having reviewed the record in this investigation, including the 
parties' written submissions, the Commission has determined to reverse 
the ALJ's findings of patent misuse per se on theories of price fixing 
and price discrimination, has determined to reverse the ALJ's findings 
of patent misuse under the rule of reason standard, and has found a 
violation of section 337 of the Tariff Act of 1930, 19 U.S.C. 1337. The 
Commission has further determined that the appropriate form of relief 
is a general exclusion order prohibiting the unlicensed entry for 
consumption of recordable and rewritable compact discs that infringe 
the claims in issue of the six patents asserted by Philips in this 
investigation. The Commission has also determined to issue four cease 
and desist orders directed to domestic respondents Princo America 
Corporation; Gigastorage Corporation USA; Linberg; and DiscsDirect.Com.
    The Commission has also determined that the public interest factors 
enumerated in subsections (d), (f), and (g) of section 337 of the 
Tariff Act of 1930 (19 U.S.C. 1337(d), (f), and (g)) do not preclude 
the issuance of the aforementioned general exclusion order and cease 
and desist orders, and that the recordable and rewritable compact discs 
in question may be imported into the United States during the period of 
Presidential review under bond in the amount of US$0.06 per such 
article. The general exclusion order, cease and desist orders, and 
Commission opinion supporting its determination were delivered to the 
United States Trade Representative on the date of issuance.
    This action is taken under the authority of section 337 of the 
Tariff Act of 1930, as amended (19 U.S.C. 1337), the Administrative 
Procedure Act, 5 U.S.C. 551 et seq., and sections 210.45-210.51 of the 
Commission's Rules of Practice and Procedure (19 CFR 210.45-210.51).

    By order of the Commission.

    Issued: February 5, 2007.
Marilyn R. Abbott,
Secretary to the Commission.
 [FR Doc. E7-2196 Filed 2-8-07; 8:45 am]
BILLING CODE 7020-02-P