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By Aaron Dulles – Edited by Stephanie Weiner
Epistar Corp. v. International Trade Commission, May 22 2009, No. 2007-1427 (slip opinion) (hosted by PatentlyO)

On May 22, the Federal Circuit affirmed in part, reversed in part, and remanded an ITC decision in Philips Lumileds Lighting Company (Lumileds)’s infringement action against Epistar and the United Epitaxy Company (UEC). The ITC had held that Epistar infringed Lumileds’s US Patent no. 5,008,718, concerning certain types of light-emitting diodes (LEDs), and issued a Limited Exclusion Order that broadly excluded the importation of the LEDs and LED arrays, regardless of manufacturer. The Federal Circuit reversed and refined the ITC’s summary determination that Epistar was estopped from challenging the validity of the patent, affirmed the patent construction, vacated the Limited Exclusion Order, and remanded the case.

Business Wire emphasized the Federal Circuit’s application of its recent holding in Kyocera Wireless Corp. v. International Trade Commission, 545 F.3d 1340 (Fed. Cir. 2008), while LEDinside and EETimes focused on the court’s analysis of two settlement agreements at issue. AGIPNEWS highlighted the fact that Lumileds has apparently expressed confidence in its ability to succeed in any future contests. PatentlyO indicated that the Court could have relied on the policy statement in Lear, Inc. v. Adkins, Inc., 395 U.S. 653 (1969) that there is a “strong federal policy favoring the full and free use of ideas in the public domain.”

The ‘718 patent concerns a particular type of light-emitting diode (LED) which attempts to solve an LED problem known as “current-crowding,” wherein the LED generates most of its light behind an opaque electrical conduct. According to the patent, transparent indium-tin oxide (ITO) contacts did not solve the current-crowding problem because current was not spread through the LED properly. The claimed invention solves the problem by using a “window layer” in the LED that has better conductivity and lower resistivity.

The Administrative Law Judge had ruled that Epistar was estopped from challenging the validity of the patent because during the course of the ITC proceeding, UEC had merged into Epistar, and was therefore bound by a previous patent dispute settlement UEC had made with Lumileds, wherein UEC agreed that neither it nor its successors would challenge the validity of the ‘718 patent.  However, before its merger with UEC, Epistar itself had also settled a previous dispute with Lumileds, in which Epistar explicitly retained the right to challenge the validity of the ‘718 patent in situations where Lumileds sued Epistar for infringement.

Writing for a unanimous panel, Judge Rader reversed the ITC’s summary determination, finding that Epistar indeed retained its contractual right to challenge the ‘718 patent’s validity with respect to products not inherited in its merger with UEC.  The court found that the Administrative Law Judge had not acknowledged the two separate licensing agreements before issuing its summary determination that the merged Epistar-UEC corporation was precluded from challenging the ‘718 patent’s validity.  Said the Court, “Lumileds cannot fortuitously gain rights against Epistar that it could not secure pre-merger.”

In making this determination, the court cited the contract reasoning of Medtronic AVE, Inc. v. Advanced Cardiovascular Systems, Inc., 247 F.3d 44, 60 (3d Cir. 2001), wherein an arbitration agreement between two corporations similarly survived when one of the parties merged with a third, though only with respect to particular products. The court also noted that such reasoning has previously applied not only to patent arbitration agreements but also to agreements not to sue patent licensees for infringement.

Reviewing the claim construction de novo, the court upheld the ITC’s constructions -including, notably, its construction of the term “transparent window layer” as not disclaiming the use of ITO. While Epistar argued that because the patent’s purpose was to address problems with the use of ITO, it “disclaimed” or “disavowed” ITO use, the court found that the patent merely “disparaged” the use of ITO. Moreover, even though the patent did not “disclose a means of using” ITO, this was acceptable because the use was “already known to those of skill in the art.”

The court vacated the ITC’s Limited Exclusion Order because under its decision in Kyocera Wireless, which came down after the ITC decision, the ITC “lacks statutory authority to issue a LEO that excludes imported products by entities not named as respondents before the ITC.” The case was remanded for further consideration.

Posted On Jun - 1 - 2009 Comments Off

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