By: Andrew W. Schultz
`Pepper Hamilton LLP
`125 High Street
`19th Floor, High Street Tower
`Boston, MA 02110
`(617) 204-5100 (telephone)
`(617) 204-5150 (facsimile)
`schultza@pepperlaw.com
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`___________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`
`APPLE INC.
`Petitioner,
`
`v.
`
`ANDREA ELECTRONICS CORPORATION
`Patent Owner.
`___________________
`
`Case No. IPR2017-00626
`U.S. Patent 6,363,345
`___________________
`
`PUBLIC VERSION OF INITIAL DETERMINATION ON VIOLATION OF
`SECTION 337 IN THE MATTER OF CERTAIN AUDIO PROCESSING
`HARDWARE, SOFTWARE, AND PRODUCTS CONTAINING THE SAME
`(INV. NO. 337-TA-1026)
`
`
`
`
`
`
`
`
`

`

`.
`
`PUBLIC VERSION
`
`UNITED STATES INTERNATIONAL TRADE COMMISSION
`
`Washington, D.C.
`
`In the Matter of
`
`CERTAIN AUDIO PROCESSING
`HARDWARE, SOFTWARE, AND
`PRODUCTS CONTAINING THE SAME
`
`.
`
`_
`Im,_ N0_ 337_TA_1026
`
`INITIAL DETERMINATION ON VIOLATION OF SECTION 337
`
`Administrative Law Judge Dee Lord
`
`(October 26, 2017)
`
`Appearances:
`
`For Complainant Andrea Electronics Corp.:
`
`'
`
`William D. Belanger, Esq., Frank D. Liu, Esq., and Brittanee L. Friedman, Esq., of Pepper
`Hamilton LLP in Boston, MA; Goutam Patnaik, Esq., Bradley T. Lennie, Esq., Tuhin Ganguly,
`Esq., and David J. Shaw, Esq., of Pepper Hamilton LLP in Washington, DC
`
`For Resgondeni Aggie Inc. :
`
`David T. Pritikin, Esq., of Sidley Austin LLP in Chicago, IL; Ching-Lee Fukuda, Esq., and
`Ketan V. Patel, Esq., of Sidley Austin LLP in New York, NY; Michael R. Franzinger, Esq.,
`Thomas A Broughan, III, Esq., and Lauren C. Cranford, Esq., of Sidley Austin LLP in
`Washington, DC; Steven S. Baik, Esq. and Nathan A. Greenblatt, Esq., of Sidley Austin LLP in
`Palo Alto, CA
`
`For the Commission Investigative Slaffl _
`
`R. Whitney Winston, Esq., and Jeffrey Hsu, Esq., of the Office of Unfair Import Investigations,
`U.S. Intemational Trade Commission, of Washington, D.C.
`
`

`

`' PUBLIC VERSION
`
`Pursuant to the Notice of Investigation (Oct. 19, 2016) and Commission Rule 210.42, this
`
`is the administrative law judge’s final initial determination on violation and recommended
`
`determination on remedy and bonding in the matter of Certain Audio Processing Hardware,
`
`Software, and Products Containing the Same, lnv. No. 337-TA-1026. 19 C.F.R. § 2l0.42(a)(1).
`
`For the reasons discussed herein, it is my final initial detennination that there is no
`
`1
`
`violation of section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337, in the
`
`importation into the United States, the sale for importation, andjor the sale within the United
`
`States after importation of certain audio processing hardware, software, and products containing
`
`the same by reason of infringement of U.S. Patent No. 6,363,345 (“the ’34S patent”).
`
`ii
`
`

`

`PUBLIC VERSION
`
`TABLE OF CONTENTS
`
`I.
`
`II.
`
`A.
`B.
`C.
`
`A.
`B.
`C.
`
`A.
`B.
`C.
`IV.
`
`V.
`
`VI.
`
`I.
`
`IX.
`A.
`B.
`
`X.
`
`BACKGROUND ................................................................................................................
`Procedural History ......................................................... ..
`ThePrivateParties
`Witness Testim0ny.............
`JURISDICTION ...........
`SubjectMatterJurisdiction
`Personal Jurisdiction .....
`InRemJurisdiction
`STANDING .........
`Legal Standards ..................................
`Applying Standing Analysis To Andrea ......................................................................... ..
`Andrea’s arguments are unavailing. ............................................................................... ..
`TECHNOLOGY AND PATENT AT ISSUE.........
`Technological Background ............................................................................................. ..
`The ’345 Patent ............................................................................................................... ..
`LevelOfOrdinarySkillInTheArt
`Claim Construction .....................
`INFRINGEMENT ..............
`Legal Standards......................
`Accused Products .................
`Independent Claims l And 38.......
`Dependent Claims ................
`INVALIDITY ......
`Legal Standards...............
`Priority Date .........................
`Prior Art Status Of References
`Anticipation..................................................................................................................... ..
`Obviousness .................................................................................................................... ..
`UNENFORCABILITY
`..
`lnequitableConduct..............................................................................................
`Equitable Estoppel .......................................................................................................... ..
`DOMESTIC INDUSTRY
`Legal Standards ......................................................................... ..
`Domestic Industry Products ......................................................... ..
`Technical Prong ................
`Economic Prong .........
`REMEDY & BONDlNG..........
`PublicInterestandRemedy
`Bond .....................................
`CONCLUSIONS OF LAW ..............................................................................................
`
`16
`20
`20
`24
`28
`29
`30
`30
`31
`33
`43
`43
`44
`48
`48
`49
`59
`61
`61
`79
`80
`80
`81
`82
`91
`92
`92
`95
`96
`
`iii
`
`

`

`PUBLIC VERSION
`
`The following abbreviations may be used in this Initial Detennination:
`
`Tr.
`WS
`DWS
`RWS
`JX
`CX
`CPX
`CDX
`RX
`RPX
`RDX
`CPHB
`CIB
`CRB
`RPHB
`RIB -
`RRB
`SPHB
`SIB
`SRB
`
`.
`
`Transcript
`Witness Statement
`Direct Witness Statement
`Rebuttal Witness Statement
`Joint Exhibit
`C0mplainant’s exhibit
`Complainant’s physical exhibit
`Complainant’s demonstrative exhibit
`Respondent’s exhibit
`Respondent’s physical exhibit
`Respondent’s demonstrative exhibit
`Complainant’s pre-hearing brief
`Complainant’s initial post~hearing brief
`Con1plainant’sreply post-hearing brief
`Resp0ndent’s pre-hearing brief
`Respondenfs corrected initial post-hearing briefl
`Respondenfs reply post-hearing brief
`Staff pre-hearing brief
`Staff initial post-hearing brief
`Staff reply post-hearing brief
`
`1Apple filed an initial post-hearing brief on September 8, 2017. As originally filed, Apple’s
`initial post-hearing brief included “four references to non-admitted evidence.” Letter from M.
`Franzinger to Secretary Barton (Sept. l4, 2017). On September 14, 2017, Apple filed a corrected
`version of its post-hearing brief in which the references to non-admitted materials were removed.
`Id. References herein to Apple’s initial post-hearing brief are to the corrected version.
`
`iv
`
`

`

`PUBLIC VERSION
`
`I.
`
`BACKGROUND
`
`A.
`
`Procedural History
`
`The Commission instituted this investigation in response to a complaint alleging
`
`violations of section 337 of the Tariff Act of 1930, as amended, by reason of infringement of
`
`U.S. Patent Nos. 6,049,607 (“the ’607 patent”); 6,363,345 (“the ’345 patent”); and 6,377,637
`
`(“the ’637 patent”). Notice of Investigation (Oct. 19, 2016). The Commission ordered that an
`
`investigation be instituted to determine
`
`whether there is a violation of subsection (a)(l)(B) of section 337 in the
`importation into the United States, the sale for importation, or the sale Within the
`United States after importation of certain audio processing hardware, software,
`and products containing the same by reason of infringement of one or more of
`claims 1-12 and 25-37 of the ’607 patent; claims 1-25, 38-40, and 42-47 ofthe
`’345 patent; claims 1-14 of the ’637 patent, and whether an industry in the United
`States exists as required by subsection (a)(2) of section 337. . . .
`
`Id. at 2. The Commission further ordered, pursuant to Commission Rule 210.50(b)(1), that
`
`the presiding administrative law judge shall take evidence or other information
`and hear arguments from the parties or other interested persons with respect to the
`public interest in this investigation, as appropriate, and provide the Commission
`with findings of fact and a recommended determination on this issue, which shall
`be limited to the statutory public interest factors set forth in 19 U.S.C. §§
`K
`1337(<1)(1),(0(1),
`(s)(l)- ~- ­
`
`Id. The Notice of Investigation was published in the Federal Register, instituting the
`
`investigation on Tuesday, October 25, 2016. 81 Fed. Reg. 73418-19 (2016); see 19 C.F.R. §
`
`210.10(b).
`
`The complainant is Andrea Electronics Corporation (“Andrea”). The Notice of
`
`Investigation named Apple Inc. (“Apple”) and Samsung Electronics Co., Ltd. and Samsung
`
`Electronics America, Inc. (collectively, “Samsung”) as respondents. Pursuant to Order No. 68
`
`(Aug. 22, 2017), Samsung was terminated from the investigation on the basis of a settlement
`
`agreement. See Comm’n Notice (Sept. 13, 2017). Pursuant to Order No. 31 (May 10, 2017), the
`
`1
`
`

`

`PUBLIC VERSION
`
`investigation was terminated as to the ’637 patent based on Andrea’s withdrawal of its
`
`allegations. See Comm’n Notice (May 25, 2017). Pursuant to Order No. 37, the ’607 patent was
`
`terminated in its entirety based on Andrea’s withdrawal of its allegations. See Comm’n Notice
`
`(June 30, 2017).2 On July 28, 2017, I granted in part Apple’s motion for summary determination
`
`of no infringement, finding that Andrea was precluded under the F esto doctrine from asserting
`
`infringement under the doctrine of equivalents. Order No. 47, unreviewed, Comm’n Notice
`
`(Aug. 29, 2017). A Markman hearing was held on April 11, 2017, and a Markman Order (Order
`
`No. 34) issued on June 1, 2017 construing certain claim terms. A four-day evidentiary hearing
`
`was held on August 21, 2017 through August 24, 2017.
`
`B.
`
`The Private Parties
`
`1.
`
`Complainant
`
`.
`
`Andrea is the complainant in this investigation. Andrea is a publicly held company with
`
`its corporate headquarters locatcd in Bohemia, New York. Complaint (Sept. 19, 2016), 1]7.
`
`2.
`
`Respondent
`
`Apple is the remaining respondent in this investigation. Apple is organized and exists
`
`under the laws of California and its principal place of business is located in Cupertino,
`
`Califomia. Apple’s Answer to the Complaint (Nov. 21, 2016), 1125.
`
`C.
`
`Witness Testimony
`
`I received testimonial evidence in this investigation in the fonn of Witness statements,
`
`live testimony, and deposition designations.
`
`2 Pursuant to Order No. 35 (June 1, 2017), claims 2-4 and 8-ll ofthc ’607 patent were
`terminated from the investigation as being invalid as indefinite. Because Order No. 37_
`terminated the ’607 patent from the investigation in its entirety, the Commission formd that
`Order No. 35 had been rendered moot.
`
`2
`
`

`

`PUBLIC VERSION
`
`1.
`
`Fact Witnesses
`
`At the hearing, Andrea presented the testimony of Douglas I. Andrea, the president, chief
`
`executive officer, and corporate secretary of Andrea. CX-0001C (Andrea DWS) at Q/A 3; Tr. at
`
`78:4-13l :20. Andrea also called Corisa Guiffre, the vice president, chief financial officer, and
`
`assistant corporate secretary of Andrea. CX-0002C (Guiffre DWS) at Q/A 3; Tr. at l32:l -206:6.
`
`Andrea also called Leonard Shoell, Stephan Auguste, and Benjamin Mahonri Faber. Mr. Shoell
`
`is a senior software engineer at Andrea. CX-0004C (Shoell DWS) at Q/A 3; Tr. at 236:4-258:2.
`
`Mr. Auguste is an electrical engineer and supervisor at Andrea. CX-0005C (Auguste DWS) at
`
`Q/A 3; Tr. at 258:3-281 :10. Mr. Faber is an independent contractor who Works for Andrea. CX­
`
`O006C (Faber DWS) at Q/A 6, 8; Tr. at 281 :24-300115. Andrea also called David Gough, a third
`
`party Witness. Tr. at 664123-683:3. Mr. Gough had been previously employed as a senior audio
`
`engineer at HP. Tr. at 666:9-13.
`
`.
`
`Apple called Vasu Iyengar and Michael Jaynes.
`
`l\/Lr.Iyengar is an engineering manager
`
`at Apple and manages the team of engineers responsible for telephony signal processing in Apple
`
`products. RX-0009C (Iyengar DWS) at Q/A 3; Tr. at 428:l4-446:3. Mr. Jaynes is a financial
`
`manager at Apple. RX-OOlOC(Jaynes DWS) at Q/A 4; Tr. at 592:3~600:25. Apple also called
`
`John Probst and Joseph Marash as adverse witnesses. Tr. at 206: l 7-220:28 (Probst); Tr. at
`
`463:4-522:22. Mr. Probst is the director of product development at Andrea. Tr. at 207: l 9-21.
`
`Mr. Marash is first named co-inventor on the ’345 patent. JX-0001.
`
`.
`
`2.
`
`Expert Witnesses
`
`The private parties also rely on several outside experts to render opinions on
`
`infringement, invalidity, domestic industry, and remedy. Andrew Delaco is a technical expert
`
`for Andrea, and his testimony was admitted as that of an expert in digital signal processing, with
`
`3
`
`.
`
`

`

`PUBLIC VERSION
`
`a particular emphasis in noise suppression. CX-0007C (Delaco DWS); Tr. at 302:6-399:5; see
`
`id. at 303:1 1-23 (expert qualification). Dr. Michael P. Akemann, Ph.D., is an economic expert
`
`for Andrea, and his testimony was admitted as that of an expert in economics, competition, and
`
`intellectual property issues. CX-0008C (Akemann DWS); Tr. at 399:1l-427119; see id. 401118­
`
`40213 (expert qualification). Dr. Scott Douglas, Ph.D., is a technical expert for Andrea, and his
`
`testimony was admitted as that of an expert in adaptive signal processing, acoustics, and speech
`
`processing. CX-1888C (Douglas RWS); Tr. at 824:8—839:9;see id. at 825:1 1-25 (expert
`
`qualification).
`
`Dr. Jordan Cohen, Ph.D., is a technical expert for Apple, and his testimony was admitted
`
`as that of an expert in signal processing, with particular expertise in audio and noise processing.
`
`RX-0011C (Cohen RWS); Tr. 523:6-588217; id. at 526:lO-21 (expert qualification). Dr. Michael
`
`Spencer, Ph.D., is a technical expert for Apple, and his testimony was admitted as that of an
`
`expert in signal processing, with particular expertise in audio and noise processing. RX-0005C
`
`(Spencer RWS); Tr. at 1'/02:3-777:ll; id. at 703:8-25 (expert qualification). Dr. Christos
`
`Kyriakakis, Ph.D., is a technical expert for Apple, and his testimony was admitted as that of an
`
`expert in signal processing, with particular expertise in audio signal processing and noise
`
`processing. RX-0003C (Kyriakakis DWS); Tr. at 777125-823:2; id. at 779119-780:6 (expert
`
`qualification). Dr. Thomas D. Vander Veen, Ph.D., is an economics expert for Apple, and his
`
`testimony Wasadmitted as that of an expert in the field of economic analysis and intellectual
`
`property matters. RX-0006C (Vander Veen DWS); RX-0008C (Vander Veen RWS); Tr. at
`
`601 :3-664:18; id. at 603:1-ll
`
`(expert qualification).
`
`4
`
`

`

`PUBLIC VERSION.
`
`3.
`
`Deposition Designations
`
`The private parties submitted additional testimony through deposition designations
`
`pursuant to Commission Rule 210.28(g). These include designations from deposition transcripts
`
`of Apple witnesses Arvindh Krishnaswamy (JX-0010C), Lalin Thevarapperuma (JX-0012C),
`
`Vasu Iyengar (JX~OO14C),Sharon Liu (JX-0015C), Michael Jaynes (IX-0016C), Sharon O’Mara
`
`(JX-0018C) and Andrea witnesses Douglas Andrea (JX-0019C), Corisa Guiffre (JX-0020C),
`
`John Probst (JX-0021C), Leonard Shoell (IX-0022C), and Benjamin Faber (JX-0023C). In
`
`addition, during the hearing, Apple played videotape excerpts from the deposition of third party
`
`Witness Thomas J. Kowalski, Esq., of the firm Vedder Price P.C., who prosecuted the ’345
`
`patent. Tr. at 683223-694:6. 1
`
`II.
`
`JURISDICTION
`
`In order to have the power to decide a case, a court or agency must have both subject
`
`matter jurisdiction and jurisdiction over either the parties or the property involved. 19 U.S.C.
`
`§ 1337; Certain Steel Rod Treating Apparatus and Components Th€T€0f,Inv. No. 337-TA-97,
`
`Commission Memorandum Op., 215 U.S.P.Q. 229, 231 (1981).
`
`A.
`
`Subject Matter Jurisdiction
`
`Section 337 confers subject matter jurisdiction on the International Trade Commission to
`
`investigate, and if appropriate, to provide a remedy for, unfair acts and unfair methods of
`
`competition in the importation, the sale for importation, or the sale after importation of articles
`
`into the United States. See 19 U.S.C. §§ 133.7(a)(1)(B) and (a)(2). Apple does not contest
`
`subject matter jurisdiction, and Apple has stipulated to importing the following accused devices
`
`between January 1, 2016 and May 15, 2017:
`
`0
`
`iPhone 7 (A1660, A1778, A1779), iPhone 7 Plus (A1661, A1784, A1785),
`iPhone:
`iPhone 6s (A1633, A1688, A1700), iPhone 6s Plus (A1634, A1687, A1699), iPhone SE
`
`5
`
`

`

`'
`
`PUBLIC VERSION
`
`(A1723, A1662, A1724), 117116666 (A1549, A1586, A1589), and iPhone 6 Plus (A1522,
`A1524, A1593);
`
`0
`
`iPad Pro (12.9”) (A1584, A1652), iPad Pro (9.7”) (A1673, A1674, A1675), iPad
`iPad:
`Air 2 (A1566, A1567), iPad Air (A1474, A1475), iPad mini 4 (A1538, A1550), and iPad
`mini 2 (A1489, A1490);
`
`9
`
`iMac: iMac 27” (A1419) and iMac 21.5” (A1418);
`
`0 MacB00k: MacBook Air (A1465, A1466), MacBook (A1534), MacBook Pro 15”
`(A1707), MacBook Pro 13” (A1706), MacBook Pro 13” (A1708), MacBool<Pro
`15”(A1398), and MacBook Pro 13” (A1502);
`
`- Apple Watch: Watch (A1604), Watch Series 1 (A1802, A1803), Watch Series 2 (A1757,
`A1758, A1816, A1817); and
`
`0 Apple Headphones: AirPods (B1888).
`
`JX-0024C (Amended Joint Stipulation Regarding Importation and Inventory Between Andrea
`
`and Apple (Aug. 18, 2017)); see also RIB at 15 (“Apple does not contest the importation and in
`
`rem aspects of the Comrnission’s jurisdiction in this investigation”).
`
`Thus, I find that the Commission has subject matter jurisdiction over the articles accused
`
`in this investigation under section 337 of the Tariff Act of 1930. See /Imgen Inc. v. Int’! Trade
`
`Comm ’n, 565 F.3d 846, 854 (Fed. Cir. 2009) (“In this case, the Commission had jurisdiction as a
`
`result of Amgen’s allegation that Roche imported an article . . . covered by the claims of a valid
`
`and enforceable United States patent”).
`
`B.
`
`Personal Jurisdiction
`
`Apple responded to the Complaint and Notice of Investigation, participated in the
`
`investigation, appeared at hearings, and submitted pre- and post-hearing briefs. Thus, I find that
`
`Apple has submitted to the personal jurisdiction of the Commission. See Certain Miniature
`
`Hacksaws, Inv. No. 337-TA-237, USITC Pub. No. 1948, Initial Deterniination at 4, 1986 WL
`
`379287, *1 (Oct. 15, 1986), unreviewed in relevant part, Comm’n Action and Order, 1987 WL
`
`450871 (Jan. 15, 1987).
`
`6
`
`

`

`PUBLIC VERSION
`
`C.
`
`In Rem Jurisdiction
`
`i The Commission has in rem jurisdiction over the accused products by virtue of Apple’s
`
`concession that they have been imported into the United States. See Sealed Air Corp. v. U.S.
`
`Int’l Trade Comm’n, 645 F.2d 976, 985-86 (C.C.P.A. 1981) (holding that the ITC’sjurisdiction
`
`over imported articles is sufficient to exclude such articles).
`
`lll.
`
`STANDING
`
`Apple argues that Andrea lacks standing to bring this suit without joining AND34
`
`Funding LLC (“AND34”), a collateral agent for investors that gave money to Andrea in a
`
`common plan to monetize Andrea’s patent portfolio, including the ’345 patent. See RX-1158C,
`
`at 0001 T l; RX-0181C, Schedule 1(a). For the reasons discussed below, I agree that Andrea
`
`lacks standing to assert the ’345 patent as the sole complainant in this investigation, and I find
`
`that there is no violation of section 337 on that ground.
`
`A.
`
`Legal Standards
`
`Commission Rule 210.12 requires that intellectual property based complaints “include
`
`a showing that at least one complainant is the owner or exclusive licensee of the subject
`
`intellectual property.” 19 C.F.R. § 2l0.12(a)(7).
`
`In determining whether this requirement is
`
`met, the Commission has applied the standing law established by courts in patent
`
`infringement cases. See Certain Catalyst Components and Catalystsfor the Polymerization
`
`0f0lefins, Inv. No. 337-TA-307, Commin Op., 1990WL 710614, at *15 (June 7, 1990) (“[W]e
`
`see little basis for inferring a different standing requirement under section 337 than the courts
`
`have established in patent infringement cases”). A complainant hears the burden to prove
`
`standing. Certain Semiconductor Chips withMinimized ChipPackage Size and Products
`
`Containing Same, Inv. No. 337-TA-605, Initial Determination,2008 WL 5626937, at *l0, *l4
`
`7
`
`

`

`PUBLIC VERSION
`
`(December 1,2008) (citing Ortho Pharm. Corp. v. Genetics Institute, Inc, 52 F.3d 1026, 1033
`
`(Fed. Cir. l995)),reviewed on othergrounds, C0mm’n Op., 2009 WL 1520119 (May 20, 2009).
`
`The standing issue involves determining the owner of all substantial rights in the patent.
`
`See Certain Optical Disc Drives, Components Thereof And Products Containing the Same
`
`(“Optical Disc Drives ”), Inv. No. 337-TA-897, C0mm’n Op. at 4~10 (Jan. 7, 2015).3 Int11is
`
`case, there is no dispute that Andrea holds title to the patent. Merely holding title is not dispositive,
`
`however. The courts and the Commission look beyond title to determine whether the
`
`plaintiff/complainant possess all substantial rights. Sec, e.g. , Diamond Coating Techs., LLC v.
`
`Hyundai Motor America, 823 F.3d 615, 618 (Fed. Cir. 2016) (stating that the question is
`
`whether the plaintiff/transferee received “all substantial rights in the patents-in-suit or, instead,
`
`whether [the transferorj retained substantial rights”). A plaintiff or complainant who lacks all
`
`substantial rights cannot sue Withoutjoining the party or parties who share the rights in the
`
`patent, and when those parties cannot be joined, the ease will be dismissed. See Alps South,
`
`LLC v. Ohio Willow Wood Co., 787 F.3d 1379, 1383 (Fed. Cir. 2015) (holding that plaintiff
`
`lacked standing where license agreement limited the “right to ‘develop, make, have made, use,
`
`sell, offer to sell, distribute, lease, and import’ products covered” by the patent); Pt’-NetInt’l,
`
`Inc. v. Focus Bus. Bank, Case No. 5:12-cv~04958-PSG, 2015 WL 1538259 at *4 (N.D. Cal.
`
`Apr. 6, 2015) (“Pi-Net therefore lacks legal capacity to maintain these actions because it does
`
`3There were two initial determinations in the 897 investigation that ultimately resulted in the
`entire investigation being terminated for lack of standing. Optical Disc Drives, Comm’n Op. at 5
`(June 15, 2015). On review of the first 1D,the ALJ’s decision on standing was affirmed with
`respect to some patents and remanded with respect to others. Optical Disc Drives, Comm’n Op.
`at 3 (Jan. 7, 2015). On review of the ALJ’s decision on remand, the Commission approved the
`ALJ’s analysis concerning lack of standing with respect to the remaining patents and terminated
`the investigation. Optical Disc Drives, Comm’n Op. at 5 (June 15, 2015). In the remainder of
`this discussion of standing, “Conim’n Op.” refers to the January 7, 2015 decision.
`
`8
`
`

`

`PUBLIC VERSION ‘
`
`not hold ‘all substantial rights’ to the asserted patents . . . .”) (citing Morrow‘ v. Microsoft
`
`Corp., 499 F.3d 1332, 1340-41 (Fed. Cir. 2007)); Optical Disc Drives, Comm°n Op. at 11
`
`(“[I]n section 337 investigations based on patent infringement all parties necessary to establish
`
`the standing requirement must be joined”) (citing Alfied E. Mann Foundation for Scientific
`
`Research v. Cochlear C0rp., 604 F.3d 1354, 1360 (Fed. Cir. 2010)). What matters, moreover,
`
`is not the label that is attached to one party or the other, but the substance of the rights in the
`
`patent held by each party. Optical Disc Drives, Co1nm’n Op. at 9 (citing Morrow v. Microsoft
`
`Corp, 499 F.3d 1332, 1340 n.7 (Fed. Cir. 2007). See Diamond Coating, 823 F.3d at 618 (“We
`
`have not ‘allowed labels to control.
`
`. . .”).4
`
`i
`
`In Azure Networks v. CSR PLC, the Federal Circuit enumerated a non-exhaustive list of
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`factors to be considered to decide whether a plaintiff has standing to sue under the Patent Act.
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`l)
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`the nature and scope of the right to bring suit;
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`2)
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`the exclusive right to make, use, and sell products or services
`under the patent;
`_
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`3)
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`the scope of the licensee's right to sublicense;
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`4) the reversionary rights to the licensor following termination or
`expiration of the license;
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`‘
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`5) the right of the licensor to receive a portion of the proceeds
`from litigating or licensing the patent;
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`6) the duration of the license rights;
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`7)
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`the ability of the licensor to supervise and control the licensee's
`activities;
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`4As the Federal Circuit explained, a patent “is, in effect, a bundle of rights which may be
`divided and assigned, or retained in Whole or part.” Vaupel Textilmaschinen KG v. Meccanica
`Euro llalia SPA, 944 F.2d 870, 875 (Fed. Cir. 1991).
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`9
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`PUBLIC VERSION '
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`8) the obligation of the licensor to continue paying maintenance
`fees; and
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`9) any limits on the licensee's right to assign its intercsts in the
`patent.
`.
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`771 F.3d 1336, 1343 (Fed. Cir. 2014) (citing Mann, 604 F.3d at 1360-61),judgmeni vacated on
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`other grounds, CSR PLC et.aZ.v. Azure Networks, 135 S. Ct. 1846, 2015 WL 582818 (Apr. 20,
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`2015). The Federal Circuit continues to cite Azure in analyzing patent standing, see Diamond
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`Coating Technologies, LLC v. Hyundai Motor America, 823 F.3d 615, 620 (Fed. Cir. 2016),
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`and the Azure factors were adopted by the Commission in the 897 investigation. See Optical
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`Disc Drives, Comm’n Op. at 10.
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`'
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`The case law shows that standing issues have arisen in a variety of factual c0ntexts.5
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`The doctrine that a plaintiff or complainant must possess all substantial rights to sue on its own
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`applies not only where there is a license agreement or other formal transfer of rights, but in
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`other circumstances Wherepatent rights have been divided or diminished by contractual
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`obligations. Thus, in Enhanced Security Research, LLC v. Juniper Networks, Inc, the district
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`court held that a plaintiff who entered into a “purchase Agreement” with a litigation
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`finance/ investment firm gave away too many rights to sustain standing on its own. Case No.
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`09—871-JJF,2010 WI. 2898298, at *1-5 (D. Del. July 20, 2010), a)j”dper curiam, 433 -Fed.
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`Appx. 902 (Fed. Cir. June 14, 2011). The investment firm’s authority “to make decisions
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`5As the Circuit stated in Mann, regardless of the direction of the transaction, the pertinent
`question is whether the plaintiff/complainant has sufficient rights to enforce the patent. Mann,
`604 F.3d at 1359 (“Typically, we are confronted with cases in which an exclusive licensee sues
`an accused infringer, and we must decide whether the licensee has been granted rights sufficient
`to confer standing. This case presents a converse scenario in which the patent owner seeks to
`bring suit, requiring us to determine whether the patent owner transferred away sufficient rights
`to divest it of any right to sue.”).
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`10
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`

`PUBLIC VERSION
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`concerning licensing and assignments, whether to initiate enforcement proceedings and/or
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`settlement discussions, how to conduct litigation, and the approval of anysettlements”
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`deprived the plaintiff of standing to sue. Ia’.
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`Similarly, in Optical Disc Drives, the Commission tenninated an investigation for lack
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`of standing because the complainant/assignee did not possess all substantial patent rights. The
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`Commission explained that “in evaluating the substance of the [plaintiff/comp1ainant’s] right, a
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`court may find that an exclusive licensee was not afforded sufficient rights to confer standing;
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`that an assignee transferred away too many rights, thus divesting it of its right to sue; or that an
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`assignee never received sufficient rights to sue alone.” Optical Disc Drives, Cornm’n Op. at 9.
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`The Commission cited Certain Devices with Secure Commc ’n Capabilities, Components
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`Thereof and Products Containing Same, Inv. No. 337-TA-818, Order No. 15, 2012 WL
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`7857467, at *1-2 (Jul. 18, 2012), where the “ALI found that, although complainant obtained
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`rights to a patent pursuant to an agreement, it lacks standing to sue in its own name because it
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`lacked all substantial rights.” Id. at 9. The Commission noted that the ALJ found that the
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`licensor “ ‘retain[ed] the right to review and object to any proposed license, assignment, or
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`settlement involving’ the patent, and retained ‘an equity interest in any proceeds from
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`licensing’ the patent and proceedings from related litigation.” Id. at 9-10. The Commission
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`terminated the 818 investigation based on lack of patent standing. Id. at 10.
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`The factors pertinent to the Cornmission’s decision in Optical Disc Drives were the
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`nature and scope of the complainant’s rights to bring suit, the scope of the complainant’s right
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`to sublicense, the non-pa1ty’s right to receive a portion of the recovery infringement suits, the
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`non-party’s ability to supervise and control the comp1ainant’s activities, and the nature of any
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`limits on the complainant’s right to assign its interest in the patent. Id. at 17-18. The question
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`1 1
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`PUBLIC VERSION
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`that must be decided in this case, therefore, is whether Andrea has retained all substantial rights
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`in the asserted patents or whether, like the Complainant in the 897 investigation, Andrea has
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`transferred substantial patent rights to AND34. For the reasons discussed below, I conclude
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`that Andrea lacks all substantial rights due to the restrictions set forth in its agreements with
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`AND34.
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`B.
`
`Applying Standing Analysis to Andrea
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`_
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`V
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`In 2014, Andrea entered into a revenue sharing and note purchase agreement (the
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`“revenue sharing agreement”) under which Andrea received substantial funds from financial
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`institutions using AND34 as the collateral agent. The currently operative revenue-sharing
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`agreement is RX-0181C.6 The revenue-sharing agreement on its face and in all of its particulars
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`meets Azure factor number 5, concerning the right “to receive a portion of the proceeds from
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`litigating or licensing the patent.” AND34 unquestionably has the right to receive a portion of
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`the litigation and licensing proceeds related to the patent. See RX-0181C at 0016-17, ll 2.1.2.
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`Further, under the revenue-sharing agreement, Andrea is required to monetize the ’345
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`patent by seeking to enforce it against leading mobile device companies,
`
`See
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`RX-0309C; Tr. 1l3:l4~l14:8.7 This requirement significantly diminishes Andrea’s exclusive
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`right as patentee to sue infringers and license the patent. Andrea may enforce the patent against‘
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`others not named in RX-0309C, but it must sue (or threaten to sue) the entities listed there. See
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`6A rider to the revenue sharing agreement dated August 10, 2016 increases the funding of
`Andrea’s patent monetization efforts but does not materially change the pertinent terms of the
`parties’ agreement. See RX-0146C.
`
`RX-0309C.
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`12
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`

`PUBLIC VERSION
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`RX~Ol8lC at 0026, '] 6.2. Similarly, Andrea must license to those entities, if they agree to take a
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`license as a result of Andrea’s enforcement efforts. While this provision does not prevent
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`Andrea from enforcing the patent against other parties, it deprives Andrea of the unfettered right
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`to choose whom to sue and license to by requiring that the patent be enforced against the listed
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`companies. See Azure factor number l (nature and scope of the right to bring suit); Diamond
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`Coating, 823 F.3d at 62l (finding lack of standing where non-party “retained significant control
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`over [plaintiff s] enforcement and litigation activities”).
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`In addition, if Andrea wished to engage in a collaboration with one of the 22 companies
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`listed on RX-0309C to develop a product using the patent, it could not do so. With respect to the
`
`I
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`leading mobile device companies listed, Andrea is contractually obligated to monetize the
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`patents, not to develop them. See RX-Ol8lC at 26, 1]6.2 (“The Company shall use commercially
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`reasonable efforts to pursue the monetization of the Patents, and shall use best efforts to
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`diligently pursue the monetization of the Patents through pursuit of Monetization Revenues from
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`the Potential Business Partners . . . .”). Andrea’s potential “business partners” are the companies
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`listed in RX-O309C. Monetization activities are limited to “any activities necessary or desirable
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`In generate revenue ~~~by means
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`RX-01816 en@054wenninnn of
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`“Monetization Activities”). Indeed, Andrea is barred expressly under the revenue-sharing
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`agreement from practicing the ’345 patent to manufacture or sell certain products to the targets
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`of the monetization program without AND34’s eonscnt. Id at 0032, 1]6.13; Tr. ll4:l6-l
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`l 5:4,
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`ll5:2O-116:6 (“I would have to get consent for anything new.”).8
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`8Paragraph 6.13 of the agreement states: “Agreements with Potential Business Partners. The
`Company shall not enter into any agreement to manufacture and sell any new physical hardware
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`l3
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`

`

`PUBLIC VERSION
`
`Andrea is severely restricted in its ability to dispose of or convey rights in the ’345
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`patent. Paragraph 6.9.1 of the revenue sharing agreement states: “Dispositions. The Company
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`shall not make any Disposition of any Patents other than (i) entering into settlement agreements
`
`or non-exclusive licensing arrangements with respect to the patents in connection with the
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`performance ofits obligations under Section 6.2. . . .” RX-0181C at 0029, 1]6.9.1. Andrea’s
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`right to sublicense the patents is subject to many conditions dictated by AND34. See id. at 0030,
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`1[v6.9.l(prohibiting sublicenses