Michael J. Lennon
`Direct 212.908.6439
`mlennon@kenyon.com
`
`Kenyon & Kenyon LLP
`One Broadway
`New York, NY 10004-1007
`212.425.7200
`Fax 212.425.5288
`
`April 29, 2016
`
`VIA ELECTRONIC FILING
`The Honorable Lisa R. Barton
`Secretary to the U.S. International Trade Commission
`500 E Street, S.W., Room 112
`Washington, D.C. 20436
`
`Re: Docket No. 3141: Certain Hybrid Electric Vehicles and Components Thereof; Proposed
`VW Respondents’ Request for Early Disposition of Domestic Industry
`
`
`Dear Secretary Barton:
`
`As set forth in their concurrently-filed Public Interest Comments, it is the position of
`Volkswagen AG, Volkswagen Group of America, Inc., Audi AG, and Audi of America, LLC
`(collectively, “Proposed VW Respondents”) that the U.S. International Trade Commission
`(“Commission” or “ITC”) should decline to institute an investigation under Section 337 of the
`Tariff Act of 1930, as amended, 19 U.S.C. § 1337 (“Section 337”), based on the April 15, 2016
`complaint filed by Complainants Paice LLC (“Paice”) and the Abell Foundation, Inc. (“Abell”),
`Dkt. No. 3141.
`
`Should the Commission determine to institute an investigation, Proposed VW
`Respondents respectfully request, pursuant to the Commission’s Pilot Program for Early
`Disposition of Certain Section 337 Investigations (“Pilot Program”),1 that the Commission also
`direct the Administrative Law Judge (“ALJ”) to find facts, hold an early evidentiary hearing, and
`issue an early initial determination (“ID”) regarding whether an industry in the U.S., relating to
`articles protected by U.S. Patent Nos. 7,104,347, 7,237,634, and 8,214,097 (“Asserted Patents”),
`exists or is in the process of being established, as required by Sections 337(a)(2) and (a)(3).
`
`Sparse, conclusory allegations in the complaint raise questions regarding Complainants’
`ability to demonstrate they satisfy the “economic prong” of domestic industry.
`
`Reliance on claims held invalid in inter partes review (“IPR”) final decisions by the
`Patent Trial and Appeal Board (“PTAB”) (pending appeal) to satisfy the “technical prong” of
`domestic industry raises questions regarding Complainants’ ability to demonstrate a violation of
`Section 337.
`
`
`1 See https://www.usitc.gov/press_room/featured_news/pilot_program_will_test_early_disposition_certain.htm
`
`
`
`Kenyon & Kenyon LLP | kenyon.com
`
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`

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`The Honorable Lisa R. Barton
`April 29, 2016
`Page 2
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`Domestic industry is a case dispositive issue and, in launching the Pilot Program, the
`Commission stated:
`
`… the complainant controls the timing of the complaint’s filing and should be
`prepared to prove its case, including such elements as domestic industry,
`importation, and standing, without extensive discovery on these issues. While some
`complainants rely on licensees’ activities to satisfy the domestic industry
`requirement, such complainants should have acquired the necessary information
`from licensees prior to filing the complaint and have a well-developed plan for
`obtaining any necessary discovery immediately upon institution.2
`
`This case is an ideal candidate for inclusion in the Pilot Program. The dearth of information in
`the complaint, Complainants’ reliance on “information and belief” and the hope that “further
`discovery” will reveal the requisite facts and nexus, and Complainants’ reliance on invalid
`claims (pending appeal) – as explained below – are insufficient to meet the pleading standard of
`Rule 210.12 and/or indicate Complainants are not prepared to prove their case. An early
`determination of no domestic industry and/or no violation of Section 337 will save the ALJ,
`Commission, and parties, considerable time and resources.
`
`As an initial matter, Proposed VW Respondents note that Rule 210.12(a)(9)(iv) requires
`that a complaint based on patent infringement shall include “[a] copy of each license agreement
`(if any) for each involved U.S. patent that complainant relies upon … to support its contention
`that a domestic industry as defined in section 337(a)(3) exists or is in the process of being
`established as a result of the domestic activities of one or more licensees.” Complainants rely on
`licensees Hyundai and Kia to establish that they satisfy both prongs of the domestic industry
`requirement with respect to each Asserted Patent. (Compl., ¶¶ 90, 98, 107, 128-34, 136; Exs. 60-
`62.) Thus, Complainants’ failure to provide the Hyundai/Kia license to the Commission with the
`complaint is improper. (See Compl., ¶ 90 n. 11 (implying that the Rule permits a complainant to
`wait to provide copies “upon entry of a protective order or in compliance with an order.”).)
`
`I.
`
`Technical Prong: Alleged Domestic Industry Products
`
`Complainants allege that the Hyundai Sonata Hybrid and Kia Optima Hybrid (“Domestic
`Industry Products”) each practice one claim of each Asserted Patent: claim 30 of the ‘097 patent,
`claim 23 of the ‘347 patent, and claim 241 of the ‘634 patent. (Id. at ¶ 136; Exs. 60-62.)
`However, close to seven months prior to Complainants filing the complaint, the PTAB found two
`of those three claims unpatentable in final IPR decisions. (See IPR2014-00570 (Sept. 28, 2015)
`(invalidating claim 30 of the ‘097); IPR2014-00571 (Sept. 28, 2015) and IPR2014-00579 (Sept.
`
`
`2 See https://www.usitc.gov/press_room/featured_news/pilot_program_will_test_early_disposition_certain.htm
`(emphasis added); see also Light-Emitting Diodes & Prods. Containing Same, Inv. No. 337-TA-802, Order No. 15
`at 4 (May 21, 2012) (“Domestic industry focuses on the complainant’s own activities in the United States.
`Therefore, the complainant has the luxury of being able to fully prepare its domestic industry case even before filing
`the complaint.”).
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`The Honorable Lisa R. Barton
`April 29, 2016
`Page 3
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`28, 2015) (both invalidating claim 23 of the ‘347 patent).)3
`
`Although the invalidating IPRs are presently on appeal at the Federal Circuit, (Compl., ¶
`140), there is no guarantee that the Court will rule in their favor. Complainants chose to rely on
`only these claims for domestic industry, knowing that the Federal Circuit may affirm the PTAB
`decisions, possibly before the end of this year.
`
`Section 337 requires a domestic industry in “articles protected by the patent.” 19 U.S.C.
`§ l337(a)(2). Invalid patent claims cannot protect articles. Audiovisual Components, Inv. No.
`337-TA-837, Comm’n Op. at 33 (Mar. 26, 2014) (Pub. Ver.). All three subsections of the
`economic prong require the presence of protected articles. See Computers and Computer
`Peripheral Devices, Inv. No. 337-TA-841, Comm’n Op. at 32 (Jan. 9, 2014) (Pub. Ver.). If
`Complainants cannot prove that a valid patent claim protects a Domestic Industry Product with
`respect to a particular Asserted Patent, they cannot prove a violation of Section 337 for that
`patent. Id.; see also Integrated Circuit Chips, Inv. No. 337-TA-859, Comm’n Op. at 52 n. 27
`(Aug. 22, 2014).
`
`II.
`
`Economic Prong: Complainants’ Licensees’ Alleged Investments
`
`Complainants identify two sources of U.S. investment in the Domestic Industry Products
`by Hyundai and Kia: authorized dealerships and R&D facilities. (Compl. ¶¶ 129-134.)4
`
`Complainants allege, “on information and belief,” that the authorized dealerships invest
`in U.S. labor and capital, plant facilities, and equipment dedicated to sales, R&D, distribution,
`product/customer support, testing/QC, and warranty/repair services for the Domestic Industry
`Products. (Id. at ¶ 129.) Support for this belief consists solely of the following: the dealerships
`allegedly repair and service Domestic Industry Products per manufacturer-backed warranty
`programs. (Id. at ¶¶ 130-32.) More specifically:
`• The powertrain, hybrid starter/generator, hybrid power control unit, automatic
`transmission, and traction motor of the Domestic Industry Products are allegedly
`warrantied for 10 years or 100,000 miles, and the hybrid batteries are warrantied
`for life. (Id. at ¶ 130.)
`• Based on numbers gathered from publicly available reports, Hyundai and Kia
`allegedly spent approximately $59 million and $7.4 million, respectively,
`reimbursing dealerships for the cost of repairs of Domestic Industry Products. (Id.
`at ¶¶ 131-32.)
`
`The foregoing is the entirety of Complainants’ description of Hyundai’s and Kia’s
`authorized dealerships’ alleged significant investment in the U.S. with respect to Domestic
`Industry Products. “Discovery will further reveal the extent to which these activities relate to
`
`
`3 The claim relied on for the ‘634 patent has not yet been invalidated, but is the subject of three instituted IPRs. (See
`IPR2015-00785 (Oct. 26, 2015); IPR2015-00787 (Oct. 26, 2015); IPR2015-00801 (Oct. 26, 2015).
`4 Hyundai and Kia manufacture the alleged Domestic Industry Products abroad. (Compl., ¶ 129.)
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`The Honorable Lisa R. Barton
`April 29, 2016
`Page 4
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`[and these amounts are attributable to] the Domestic Industry Products.” (Id. at ¶¶ 130-31
`(emphasis added).)
`
`Complainants also allege that Hyundai and Kia maintain a joint research and design
`facility in Superior Township, Michigan. (Id. at ¶ 133.)5 Again “on information and belief,”
`Hyundai and Kia allegedly perform “extensive research and testing of the Domestic Industry
`Products at this facility.” (Id.)6
`
`The foregoing is the entirety of Complainants’ description of Hyundai’s and Kia’s R&D
`facilities’ alleged significant investment in the U.S. with respect to Domestic Industry Products.
`Again, “[d]iscovery will further reveal the extent to which the investment into this facility and its
`operation are attributable to the Domestic Industry Products.” (Id. (emphasis added).)
`
`Statements that discovery will further reveal facts essential to prove domestic industry do
`not comply with the requirements of Rule 210.12(a)(6)(i) for a properly pled complaint of a
`“detailed description of” or “facts showing” the significant and/or substantial investment needed
`to satisfy the domestic industry requirement. There is also no guarantee that Complainants will
`be able to obtain the information during discovery. For example, in the 560 investigation, the
`presiding ALJ denied enforcement of a subpoena where the complainant failed to obtain the
`requisite information needed from a licensee to meet its burden of proof on domestic industry
`before filing the complaint. NOR & NAND Flash Memory Devices, Inv. No. 337-TA-560, Order
`No. 21 at 6 (Aug. 15, 2006) (“Complainant had complete control of the timing of filing the
`complaint and it could have waited to file the complaint after it received information from [its
`licensee] in order to have a good faith basis to assert a domestic industry in the [patent in suit].”).
`
`Complainants should have acquired this information prior to filing the complaint.
`
`II.
`
`Economic Prong: Complainants’ Alleged Investments
`
`Complainants are also relying on their own alleged licensing investments from August
`
`2010 to present to establish that they satisfy the economic prong of the domestic industry
`requirement. (Compl., ¶¶ 128, 135; Ex. 59.) While Proposed VW Respondents have identified
`several inconsistencies between facts alleged by Complainants and what appears in the public
`record, in light of the problems identified above, they decline to describe those inconsistencies at
`this time. Facts supporting Complainants’ alleged licensing investments should be entirely
`within Complainants’ own control. An early ID determining that those facts – do or do not –
`establish that Complainants meet the economic prong of the domestic industry requirement based
`on licensing investments will equally conserve the resources of the Commission and the parties
`by removing it from the disputed issues in the case.
`
`
`5 The Hyundai America Technical Center, Inc. (See Ex. 58.)
`6 Proposed VW Respondents found no readily apparent support for that statement on the HATCI website. See
`www.hatci.com/company. A search for “hybrid” revealed three results, none of which discuss research and testing
`of hybrid electric vehicles (though one relates to wireless charging of an all-electric vehicle).
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`The Honorable Lisa R. Barton
`April 29, 2016
`Page 5
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`III. Conclusion
`
`
`
`Proposed VW Respondents respectfully request that, in a Notice of Institution of
`Investigation based on the complaint, the Commission direct the ALJ to hold an early evidentiary
`hearing and issue an early ID on the issue of domestic industry within 100 days of institution,
`and that an early ID finding Complainants do not meet the domestic industry requirement stay
`the investigation pending Commission review.
`
`Respectfully submitted,
`
`/s/ Michael J. Lennon
`
`
`
`Michael J. Lennon
`Counsel for Volkswagen AG, Volkswagen Group of America, Inc., Audi AG, and Audi of
`America, LLC
`
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`
`

`
`Certain Hybrid Electric Vehicles and
`Components Thereof
`
`
`
`
`
`337-TA-____
`Docket No. 3141
`
`CERTIFICATE OF SERVICE
`
`I hereby certify that copies of the foregoing Proposed Respondents Volkswagen AG, Volkswagen
`Group of America, Inc., Audi AG, and Audi of America, LLC’s Request for Early Disposition of
`Domestic Industry was served upon the following parties as indicated on this 29th day of April, 2016.
`
`
`
`The Honorable Lisa R. Barton
`Secretary to the Commission
`U.S. International Trade Commission
`500 E Street, S.W., Room 112
`Washington, D.C. 20436
`
` Via Hand Delivery
` Via Overnight Federal Express Delivery
` Via First Class Mail
` Via Facsimile
` Via Electronic Filing
`
`
`
`
`
` Via Hand Delivery
` Via Overnight Federal Express Delivery
` Via First Class Mail
` Via Facsimile
` Via Electronic Mail
`
` Via Hand Delivery
` Via Overnight Federal Express Delivery
` Via First Class Mail
` Via Facsimile
` Via Electronic Mail
`
`/s/ Liberty Quan
`Case Manager/Litigation Paralegal
`
`Margaret MacDonald, Esq.
`Office of Unfair Import Investigations
`U.S. International Trade Commission
`500 E Street, S.W., Suite 401
`Washington, D.C. 20436
`margaret.macdonald@usitc.gov
`
`
`Ruffin B. Cordell
`Linda Liu Kordziel
`Ahmed J. Davis
`Thomas S. Fusco
`Brian J. Livedalen
`FISH & RICHARDSON P.C.
`1425 K Street NW, Suite 1100
`Washington, D.C. 20005
`cordell@fr.com
`kordziel@fr.com
`adavis@fr.com
`fusco@fr.com
`livedalen@fr.com
`
`Counsel for Complainants Paice LLC and Abell Foundation, Inc.