Chief Administrative Law Judge Bullock issued the public version of his Initial Determination in Certain Air Mattress Systems, Components Thereof, and Methods of Using Same, Inv. No. 337-TA-971, wherein he found that one of two asserted patents was valid and infringed.  However, there was no violation of Section 337 because Complainants failed to properly allocate domestic expenses between the asserted patents.

The Case

On October 16, 2015, Complainants Select Comfort Corporation and Select Comfort SC Corporation filed a Complaint alleging violations of Section 337 based upon the importation into the United States, the sale for importation, and the sale within the United States after importation of products that infringe U.S. Patent Nos. 5,904,172 and 7,389,554.  See 80 Fed. Reg. 72,738 (Nov. 20, 2015).  The named Respondents are Sizewise Rentals LLC, American National Manufacturing Inc., and Dires LLC (d/b/a Personal Comfort Bed).

In his Initial Determination, Judge Bullock found that both patents are not invalid and that certain of Respondents products infringe the ‘172 Patent.  He further found that Respondents’ accused products do not infringe the ‘554 Patent.

Judge Bullock held, however, that there was no domestic industry for either asserted patent because the economic prong was not established.  Specifically, Complainants’ evidence of domestic expenditures was found to be inadequate due to improper allocation between the asserted patents.  Complainants argued that 100% of their rent payments and employee compensation should be allocated to the ‘172 patent covering an air controller because all of their products contain an air controller.  With respect to the ‘554 Patent, which covers split top mattresses, Complainants asserted that an allocation based upon its percentage of sales of split top mattresses was appropriate.  Thus, Complainants contended that 100% of their domestic expenditures were for products protected by the ‘172 Patent and that a lesser (and confidential) percentage of its domestic expenditures related to products protected by the ‘554 Patent.

Judge Bullock rejected this argument holding that Complainants made “no attempt to allocate what portion of the [expenditures] is attributable to the ‘172 DI products and what portion of the [expenditures] is allocable to the ‘554 DI products…While the Commission has stated that a precise allocation of expenses among various DI products is not necessary, that precedent cannot mean that Select Comfort’s proposed allocation is acceptable; i.e. allocating 100 % of the rental expenses to the ‘172 patent, and then a portion of those same expenses to the ‘554 patent DI products.”  Initial Determination at 89.

It is not clear from the heavily redacted Initial determination whether there is overlap between DI products that practice the ‘172 Patent and the ‘554 Patent (i.e. whether the ‘554 Patent DI products are a subset of the ‘172 Patent DI Products).  If there is overlap in the DI products—which appears to be Complainants’ argument—the Initial determination does not explain why there cannot also be overlap in the allocation of domestic expenditures.

Takeaway

Complainants seeking to establish the economic prong of the domestic industry requirement should endeavor to allocate their domestic expenditures as definitively as practicable.  While the Commission has stated that a complainant need not provide a “precise allocation” between products or patents, Complainants have the burden to establish a nexus between domestic expenditures and each asserted patent.

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