Earlier this month, the Federal Circuit heard oral arguments in Apple Inc. v. International Trade Commission, a patent case we have been following because it attracted several amicus briefs. In this case, Apple appealed from a judgment of the International Trade Commission, arguing the Commission erred in concluding that Masimo established an existing domestic industry, in concluding that five patent claims are infringed and not invalid, and in rejecting Apple’s prosecution laches defense. Judges Lourie, Reyna, and Stark heard the oral arguments. This is our argument recap.
Joseph J. Mueller argued for Apple. He began by arguing that “the exclusion order is predicated on an underlying decision that suffers from a series of interrelated errors, all of which center on the lack of a proper domestic industry and the lack of valid claims that would cover a pulse oximeter on the wrist.”
A judge questioned Apple’s stance, suggesting the Federal Circuit had never said for purposes of patent infringement litigation at the ITC “that you are limited to either the specific thing you say in the complaint or the specific thing you turn over in discovery.” In response, Mueller indicated Apple’s “position is that we need to know the article that [19 U.S.C. §§] 337(a)(3) and (a)(2) require.” Moreover, he argued, “the article needs to be the same for the technical prong . . . and economic prong.” Anyway, Mueller explained, Apple’s “appeal does not rise or fall on the complaint.” Instead, he argued, “this particular issue turns on whether we knew as of the conclusion of the record [that] a particular article . . . is protected by the patents.”
A judge noted that infringement and domestic industry “can be alleged with some degree of generality.” In response, Mueller suggested “the nature of the critical analysis on blood oxygen” is whether there were “articles [that existed] as of the filing of the complaint.” And, as for the technical prong, Mueller argued, ” there would need to be a remand for consideration of that issue by the Commission in the first instance.”
Mueller then transitioned to the economic prong and noted that “the judge and the commissioner adopting the administrative law judge’s analysis defined the [relevant] touchstone differently.” He urged this is important to note because one of the definitions is not rigorous or precise enough.
In response to the position that prototypes should be treated more charitably, Mueller argued “there is no logical or policy reason” for doing so, and, “if anything, to the contrary.” He argued “the . . . approach of rigor and precision in assessing the significance of economic expenditures applies with even greater force when we’re at the nascent research and development stage as opposed to the commercial product stage.”
He noted “each of the asserted patent families should be assessed separately with respect to the domestic industry requirement and the technical prong as well.” Finally, he agued, “there needs to be . . . identification of the touchstone for the technical prong [and] the touchstone for the economic prong,” which “should match.”
Ronald A. Traud argued for the International Trade Commission. A judge restated his view of Apple’s argument, that “you are limited by the language used in the complaint or limited by the physical samples that you provided.” He requested Traud’s response. Traud disagreed on both points. He noted that “the purpose of the complaint is to allege a violation of Section 337 so that an investigation can be instituted.” Moreover, he said, “the Commission’s findings for a determination are consistent” with the Administrative Procedures Act. And, he argued, there is a “statutory duty to consider all the evidence presented by the parties, not limited to just certain subsets.”
A judge then brought up the argument that “there needs to be symmetry between what the patent practicing articles are at the technical prong and . . . at the economic prong.” Traud answered by arguing that, for “the economic prong analysis, . . . the inquiry is centered on the article that practices the patent, but it is not limited to just that.” Traud continued by arguing the analysis “includes investments that are with respect to or relating to the patent practicing” product.
Truad suggested the Commission “require[s] a clear connection between the research [and] labor that’s credited and the investments directed to the patent practicing article.” He maintained “in this very investigation Masimo alleged a lot of investments even in very recent designs in wrist pulse oxymeters, and the Commission rejected that because there wasn’t a clear relationship to the articles protected by the patent.”
Joseph R. Re argued for interveners Masimo Corp. & Cercacor Laboratories, Inc. He began by noting that “many of the questions asked today are answered by the statute.” For example, he said, “there is not symmetry between the technical prong and the economic prong. As for why, he explained that “the economic prong is broader because of the language . . . ‘with respect to’ or ‘relating to,’ whereas the article must meet the limitations of the claim.”
He suggested “Apple is really trying to rewrite the law.” He demonstrated how this is so with a quote from Apple’s brief, where, he said, it argued that “Section 337 requires a finished ‘article’ . . . not a nascent development project.” He explained that this “argument was rejected by the Commission before the trial even started.” Re emphasized that “the Commission noted” Masimo’s argument “that the statute does not require a finished product.”
Re noted that Masimo had “a physical product” even if it wasn’t “a finished product.” He explained that “there is no dispute that Masimo watch physical items existed at the time of the amended complaint.” He then brought up Federal Circuit precedent in which, he said, the court “said components can be part of the industry.”
A judge then asked about the economic prong and Apple’s argument that the prong would be rendered “toothless” under the Commission’s approach. Re responded by arguing that, “with the facts of this case, that clearly doesn’t apply because Apple isn’t even challenging the significance of the quantity of our expenditures” and Applie is “not alleging that our quantity is not enough or significant.” He argued Masimo “clearly showed the industry with respect to the articles.” He said Masimo “actually had an article,” indeed “many revisions of the article.” And, he said, “the findings of the Commission repeatedly [showed] they are representative.”
A judge then introduced the topic of prosecution latches, noting, “these patents were filed” in 2008, and it “seems like there was a continuation filed every two years until 2019. This judge asked why prosecution latches was not relevant here. Re responded by arguing “that issue has been waived.” As a result, he said, “the Commission did not even touch the issue of prosecution latches.” He noted, moreover, that “the ALJ correctly found, with no dispute, that there was no delay in the prosecution, there was nothing unfair, [and] everything was done publicly.” He also argued “there was no factual support for the allegations, and this is why the judge rejected outright all of the prosecution latches defenses.”
We will continue monitoring this case and report on developments.