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No. 2012-1677
IN THE
United States Court of Appeals

FOR THE FEDERAL CIRCUIT
RAMBUS, INC. Appellant, v. INTERNATIONAL TRADE COMMISSION, Appellee, and GARMIN INTERNATIONAL, INC., Intervenor, and LSI CORPORATION AND SEAGATE TECHNOLOGY LLC, Intervenors, and STMICROELECTRONICS N.V. AND STMICROELECTRONICS INC., Intervenors, and CISCO SYSTEMS, INC., Intervenor, and HGST, INC., Intervenor, and HEWLETT-PACKARD COMPANY, Intervenor. Appeal from the United States International Trade Commission in Investigation No. 337-TA-753 NONCONFIDENTIAL BRIEF FOR APPELLANT RAMBUS INC.
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Doris Johnson Hines FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP 901 New York Avenue, N.W. Washington, D.C. 20001 (202) 408-4000 Jason E. Stach FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP 3500 Sun Trust Plaza, Suite 3500 303 Peachtree Street, N.E. Atlanta, GA 30308 (404) 653-6400
John M. Whealan 4613 Merivale Road Chevy Chase, MD 20815 (202) 994-2195 Jeffrey A. Lamken Counsel of Record Michael G. Pattillo, Jr. MOLOLAMKEN LLP The Watergate, Suite 660 600 New Hampshire Avenue, N.W. Washington, D.C. 20037 (202) 556-2010
Counsel for Appellant Rambus Inc.
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CERTIFICATE OF INTEREST Counsel for Appellant Rambus Inc. certifies the following: 1. 2. 3. 4. The full name of every party represented by me is: Rambus Inc. The name of the real party in interest represented by me is: Rambus Inc. All parent corporations and any publicly held companies that own 10 percent or more of the stock of the party represented by me are: None The names of all law firms and the partners or associates that appeared for the party now represented by me in the trial court or agency or are expected to appear in this Court are: John M. Whealan MOLOLAMKEN LLP: Jeffrey A. Lamken Michael G. Pattillo, Jr. Benoit Quarmby FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP: Doris Johnson Hines Jason E. Stach J. Michael Jakes Christine E. Lehman Kathleen A. Daley Naveen Modi Luke J. McCammon Michael J. McCabe Brannon C. McKay May 23, 2013 /s/ Jeffrey A. Lamken Jeffrey A. Lamken
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TABLE OF CONTENTS Page JURISDICTIONAL STATEMENT ............................................................... 1 ISSUES PRESENTED ................................................................................... 1 STATEMENT OF THE CASE ...................................................................... 2 STATEMENT OF FACTS ............................................................................. 4 I. The Dally Patents ................................................................................. 4 A. B. C. II. High-Speed Digital Communication Systems And Frequency-Dependent Signal Attenuation ................................. 4 The Invention: On-Chip Digital Signal Equalization ............... 8 The Technologys Development And Commercialization ...... 13
The Decisions Below.......................................................................... 15 A. The ALJs Initial Determination .............................................. 15 1. 2. B. Invalidity / Claim Construction ..................................... 15 Domestic Industry.......................................................... 19
The Commissions Final Determination .................................. 21
SUMMARY OF ARGUMENT.................................................................... 24 STANDARD OF REVIEW .......................................................................... 27 ARGUMENT................................................................................................ 28 I. The Dally Patents Claim Of A Pre-Emphasizing Transmitter Circuit That Can Operate At An Output Frequency Of At Least 1 GHz Is Unmatched In The Prior Art ............................................. 28
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A. B.
No Prior Art Of Record Expressly Discloses The Dally Patents Output Frequency Of At Least 1 GHz.................... 29 The Dally Patents Claimed Output Frequency Does Not Equal the Data Rate Because The Data Rate Is Twice The Frequency ................................................................................. 31 1. The Claims Demonstrate That The Output Data Rate Equals Twice The Claimed Output Frequency (D=2F)............................................................................ 31 The Specification Supports Rambuss Construction Of D=2F ......................................................................... 34 Witness Testimony Confirms That The Output Data Rate Is Twice The Claimed Output Frequency (D=2F)............................................................................ 37 The ALJs Rationale For Rejecting That Construction Does Not Withstand Scrutiny ........................................ 39
2. 3.
4. C.
The ALJ Erred In Reading The Patents To Equate Output Frequency (Cycles-Per-Second) With Data Rate (Bits-PerSecond)..................................................................................... 43
II.
Rambus Established A Domestic Industry For The Dally Patents .... 51 A. B. The Domestic Industry Requirement ....................................... 51 Rambus Established A Domestic Industry For The Dally Patents ...................................................................................... 52 1. 2. C. Rambuss Dally-Specific Investments ....................... 53 Rambuss Firm-Wide Investments In Licensing ....... 56
The ALJ Correctly Found That Rambus Established A Domestic Industry Under Commission Precedent................... 56
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D.
The Commissions Reversal Of The ALJs Domestic Industry Finding Defies The Evidence, Commission Precedent, And Congresss Intent............................................ 59 1. 2. The Commission Failed To Consider Rambuss Dally-Specific Evidence............................................. 59 The Commissions Allocation Requirement Is An Unjustified Reversal Of Agency Precedent................... 61 a. The Commission Reached The Opposite Result, Based On Similar Evidence, In The Related Rambus 661 Investigation...................... 62 Prior Commission Precedent Required Only A Nexus Between The Patent And Licensing Expenses, Not Allocation ................................ 65
b.
3.
The Commissions Change In Standard Undermines Congresss Intent ........................................................... 67
CONCLUSION............................................................................................. 70 CONFIDENTIAL MATERIAL OMITTED Material has been redacted in the Nonconfidential Brief for Appellant Rambus Inc. This material is confidential business information pursuant to 19 C.F.R. 210.5 and the Protective Order entered by the United States International Trade Commission on January 4, 2011, and amended on March 17, 2011. Redacted material on pages 2, 14, 20, 22, 23, 26, 55, 56, 57, 59, 60, and 62 contains confidential information regarding licensing terms, revenues, and/or expenses. Redacted material on pages 2, 13, 22, 53, and 60 contains confidential information regarding a business acquisition.
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TABLE OF AUTHORITIES Page(s) CASES Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (1998)............ 61 Alloc, Inc. v. ITC, 342 F.3d 1361 (Fed. Cir. 2003), cert. denied, 541 U.S. 1063 (2004)...................................................................................... 27 Bancorp Servs., LLC v. Hartford Life Ins. Co., 359 F.3d 1367 (Fed. Cir. 2004) ................................................................................................. 36 Baran v. Med. Device Techs., Inc., 616 F.3d 1309 (Fed. Cir. 2010), cert. denied, 131 S. Ct. 1607 (2011)........................................................ 36 CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359 (Fed. Cir. 2002)........................................................................................ 35 Changzhou Wujin Fine Chem. Factory Co., Ltd. v. United States, 701 F.3d 1367 (Fed. Cir. 2012) ............................................................... 27 Clifton Power Corp. v. FERC, 88 F.3d 1258 (D.C. Cir. 1996) .................... 60 Dominion Res., Inc. v. United States, 681 F.3d 1313 (Fed. Cir. 2012) ........ 61 El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. U.S. Dept of Health & Human Servs., 396 F.3d 1265 (D.C. Cir. 2005) ...................... 60 Honeywell Intl, Inc. v. ITC, 341 F.3d 1332 (Fed. Cir. 2003) ...................... 64 In re Sang-Su Lee, 277 F.3d 1338 (Fed. Cir. 2002) ..................................... 60 InterDigital Commcns, LLC v. ITC, 707 F.3d 1295 (Fed. Cir. 2013)............................................................................ 51, 52, 67 M.M.&P. Mar. Advancement, Training, Educ. & Safety Program v. Dept of Commerce, 729 F.2d 748 (Fed. Cir. 1984) ............................... 67 Microsoft Corp. v. i4i Ltd. Pship, 131 S. Ct. 2238 (2011).................... 30, 37 Modine Mfg. Co. v. ITC, 75 F.3d 1545 (Fed. Cir. 1996), abrogated on other grounds, Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 234 F.3d 558 (Fed. Cir. 2000) .................................. 30, 50 v
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Motor Vehicle Mfrs. Assn v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983).................................................................................... 66, 67 Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359 (Fed. Cir. 2008).......... 29 OSRAM Sylvania, Inc. v. Am. Induction Techs., Inc., 701 F.3d 698 (Fed. Cir. 2012)........................................................................................ 29 Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), cert. denied, 546 U.S. 1170 (2006) ................................................... 31, 34 Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296 (Fed. Cir. 2011), cert. denied, 133 S. Ct. 833 (2013).............................. 39 Schucker v. FDIC, 401 F.3d 1347 (Fed. Cir. 2005) ......................... 62, 65, 67 SKF USA Inc. v. United States, 630 F.3d 1365 (Fed. Cir. 2011) ................. 62 Wang Labs., Inc. v. Am. Online, Inc., 197 F.3d 1377 (Fed. Cir. 1999)........ 50 STATUTES AND REGULATIONS 19 U.S.C. 1337 .................................................................................... passim 19 U.S.C. 1337(a) (1982) ........................................................................... 51 19 U.S.C. 1337(a)(1)(B)(i)......................................................................... 19 19 U.S.C. 1337(a)(2) ............................................................................ 19, 51 19 U.S.C. 1337(a)(3)(C)...................................................................... passim 19 U.S.C. 1337(c)......................................................................................... 1 28 U.S.C. 1295(a)(6) .................................................................................... 1 35 U.S.C. 282 ............................................................................................. 30 19 C.F.R. 210.42(h)(2) ............................................................................... 64 ADMINISTRATIVE AGENCY DECISIONS Certain Integrated Circuits, Chipsets, and Products Containing Same Including Televisions, Inv. No. 337-TA-786, Commn Op. (Oct. 10, 2012) .................................................................................................. 66 vi
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Certain Liquid Crystal Display Devices, Including Monitors, Televisions, and Modules, and Components Thereof, Inv. Nos. 337TA-749, -741, USITC Pub. 4383 (July 6, 2012) ..................................... 66 Certain Multimedia Display and Navigation Devices and Systems, Components Thereof, and Products Containing Same, Inv. No. 337-TA-694, USITC Pub. 4292 (Aug. 8, 2011)............................... passim ALJ Order No. 21, Certain Semiconductor Chips Having Synchronous Dynamic Random Access Memory Controllers and Products Containing Same, Inv. No. 337-TA-661 ........................................... 63, 64 Certain Stringed Musical Instruments and Components Thereof, Inv. No. 337-TA-586, USITC Pub. 4120 (May 16, 2008) ............................. 68 OTHER AUTHORITIES Sinclair, The HarperCollins Dictionary of Electronics (1991) ................ 5, 32 USITC, Facts and Trends Regarding USITC Section 337 Investigations, http://www.usitc.gov/press_room/documents/ featured_news/sec337factsupdate.pdf (Apr. 15, 2013) ........................... 69 Websters Third New Intl Dictionary (2002) .............................................. 41
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STATEMENT OF RELATED CASES Appellant Rambus Inc. is unaware of any other appeals taken in connection with U.S. International Trade Commission Inv. No. 337-TA-753. Rambus Inc. v. STMicroelectronics NV, et al., No. 3:10-cv-05449 (N.D. Cal.), involves the same patents at issue in this appealU.S. Patent Nos. 7,602,857 and 7,715,494and may be affected by the Courts decision in this appeal.
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JURISDICTIONAL STATEMENT This appeal arises from an investigation by the United States International Trade Commission (the Commission). The Commission had
jurisdiction under 19 U.S.C. 1337. The Commission issued its final determination on July 31, 2012. Rambus timely filed a notice of appeal on September 21, 2012. This Court has jurisdiction under 28 U.S.C. 1295(a)(6) and 19 U.S.C. 1337(c). ISSUES PRESENTED Although the case below encompassed myriad issues and produced over 400 pages of rulings, this appeal involves just two issuesone issue of claim construction, on which the validity issues turn, and another concerning the domestic industry requirement under 19 U.S.C. 1337(a)(3)(C). The issues presented are: 1. Does the claim phrase output frequency of at least 1 GHz in
the Dally patents correspond to (i) 2 gigabits-per-second, where (a) the claim language and
electrical engineering principles indicate that two bits of data are transmitted per Hertz; and (b) every time the specification discusses both a data signals frequency in Hertz and its data rate in bits-per-second, it states that the data rate is twice the frequency; or
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(ii) 2.
1 gigabit-per-second, as the ALJ and Commission found?
Did the Commission err in reversing the ALJs finding of a
domestic industry in the Dally patents where, among other things, (i) Rambus paid over to acquire certain assets of
an operating company for the purpose of commercializing the Dally patents, which included a North Carolina research facility, a staff of engineers who were designing products based on the Dally patents, and the rights to the Dally patents from MIT; (ii) Rambus employed licensing personnel who negotiated
numerous licenses covering Dally-based technology, yielding over ; and (iii) for those licenses? STATEMENT OF THE CASE Rambus filed a complaint with the Commission under Section 337 of the Tariff Act of 1930, 19 U.S.C. 1337, alleging that several companies had imported, sold for importation, and/or sold within the United States after importation, semiconductor chips that infringe U.S. Patent Nos. 7,602,857 Rambus paid MIT over in royalty payments
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and 7,715,494 (the Dally patents).1 The Commission instituted Investigation No. 337-TA-753, naming Broadcom Corporation, Freescale Semiconductor, Inc., LSI Corporation, MediaTek Inc., nVidia Corporation, STMicroelectronics N.V. and STMicroelectronics Inc., and 27 of their customers (including Cisco Systems, Garmin International, and Seagate Technology) as respondents. Administrative Law Judge Essex held an evidentiary hearing and issued an Initial Determination (ID). A70-453.2 Judge Essex found that a domestic industry exists for the Dally patents. He found that the accused products infringed the Dally patents. He ruled, however, that the asserted Dally claims were anticipated or obvious. The Commission affirmed in part and reversed in part. A1-69. It affirmed Judge Essexs relevant infringement findings, claim-construction rulings, and invalidity determinations. Essexs domestic-industry ruling. Rambus settled with Freescale and with supplier-respondents Broadcom, MediaTek and nVidia, terminating them from the investigation along The Commission reversed Judge
Rambus also asserted patents in the Barth patent family and another patent in the Dally patent family. Those patents are not relevant to this appeal.
A__ refers to the addendum to this brief. JA__ refers to the joint appendix. 3
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with appropriate customers. After filing its notice of appeal, Rambus settled with LSI. Only supplier-respondent STMicroelectronics (and its customers Cisco, Garmin, and Seagate) remain as intervenors in this appeal. STATEMENT OF FACTS The Commission investigation below was a massive proceeding involving myriad issues of claim construction, infringement, and validity for 61 asserted claims from five patents. This appeal is narrow, presenting only two questions relating to two patents. The first is a validity issue that turns on the Commissions construction of claims reciting a transmitter circuit that pre-emphasizes the output signal at an output frequency of at least 1 GHz. The second involves the Commissions new test for the domestic industry requirement under 19 U.S.C. 1337(a)(3)(C), and its application here. I. The Dally Patents A. High-Speed Digital Communication Systems And Frequency-Dependent Signal Attenuation
The invention at issue here dramatically increased the speed of digital communication systems in consumer electronics, such as personal computers, gaming systems, and mobile phones, JA9753it was a game changer. JA4835-36. When data is transferred from one integrated circuit chip to another, the transmitter on the sending chip uses an interface to send data (in the form of a signal) across a physical channel (e.g., copper 4
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wire) to a receiver on the receiving chip. JA9753. Examples include sending data from a PC to a monitor, or from memory to a graphics card. The performance of digital systems is limited by the speed at which one chip can reliably send information to another. A639, 1:25-27. For years, one of the greatest obstacles to increasing the speed of chip-to-chip signaling was frequency-dependent attenuation. Id., 1:34-37. As ex-
plained below, attenuation is a phenomenon where a signal sent by the transmitterfor example, a digital 1 or 0degrades as it crosses the transmission line so that it might not be read as a 1 or 0 when it reaches the receiver. That degradation is most pronounced at higher frequencies. In general, frequency is the rate at which a waveform action repeats, typically measured in HERTZ. Sinclair, The HarperCollins Dictionary of Electronics 123 (1991) (JA17308). The figure below illustrates this concept:
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JA17284 (annotated). Frequency, expressed in Hertz, is the rate at which the signal completes one cycle, transitioning from the midline (A) to one high level (B), to one low level (C), and back to the midline (D). In digital systems, transmitted signals typically will have multiple frequency components. Figure 2A from the Dally patents depicts a hypothetical data signal as sent by the transmitter:
A630; A639, 2:26; JA9756. In the Dally patents, each high swing of the signal above the dashed line represents a bit of data, a 1, and each swing below the dashed line represents another bit, a 0. JA9755; A644, 11:2729. When the signal remains above or below the dashed line for a sustained period, it represents a series of consecutive 1s or 0s. JA9755. When the signal transitions from the midline to one high level, to one low level, and back to the midline, that represents one cycle, as in the sinusoidal wave on p. 5. The rate at which the signal completes those cycles is its frequency. When the waveform cycles quickly (e.g., 010), it is a high-
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frequency component of the signal. JA9756. By contrast, when the signal maintains a single level for a longer period (e.g., 000 or 111), it is a lowfrequency component. Id. Attenuation is the loss of strength as a signal crosses a physical line between the transmitter and the receiver. JA9754. Attenuation creates problems for digital signaling. Receivers require a minimum swing between the high and low signal levels that represent 1 and 0. JA9756-57. Attenuation reduces the swing between signal levels, making it harder for the receiver to interpret the signal as a 1 or 0. JA9756-58; A640, 3:58-67. Figure 2B shows the data signal from Figure 2A as it appears at the receiver after attenuation:
A630; A639, 2:26; JA9756-57. The dashed line represents the same midpoint of the sent signal in Figure 2A, but attenuation lessened the signals swing across the midpoint, reducing the receivers ability to correctly detect the signal levels and the bit values they represent. A640, 3:58-67.
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As Figure 2B illustrates, the high-frequency components (the portions that rapidly transition from high to low or low to high) are more susceptible to attenuation than low-frequency components (which sustain a single signal level for longer). JA9754. Because of attenuation, the high-frequency components of the signal in Figure 2B may barely cross the midpoint. Attenuation thus is frequency-dependent. JA9754. Degradation increases with signal speed and frequency. Id. That phenomenon posed severe problems. For years, the processing speed of semiconductor chips increased steadily, but the speed of signaling between chips lagged. See A639, 1:25-31. Before the invention here,
frequency-dependent attenuation made most digital systems unsuited for data with frequencies over 100 MHz. Id., 1:32-39. Chips could process data at high speed, but attenuation prevented them from reliably transmitting data to other chips at corresponding speeds. B. The Invention: On-Chip Digital Signal Equalization
Dr. William Dally was a professor at MIT when he solved the problem of frequency-dependent attenuation in chip-to-chip signaling. JA6043. Dr. Dally invented an on-chip mechanism in the transmitter that mitigates frequency-dependent attenuation using a form of signal equalization called emphasis or pre-emphasis. JA9760.
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In the invention, the transmitter pre-emphasizes (increases the relative magnitude of ) portions of the signal to offset the degrading effects of attenuation; as a result, the signal that reaches the receiver better approximates the signal that was intended. JA9760; A642, 8:48-55. Because high-frequency components of the signal are more susceptible to attenuation than lowfrequency components, the transmitter pre-emphasizes high-frequency components, using a larger amplitude than for low-frequency components. Consequently, despite attenuation, the high-frequency parts of the signal can be reliably detected by the receiver. JA6041; JA9761. The invention uses bit history to ensure that high-frequency components receive greater emphasis than low-frequency components. See A639, 1:61-67. The transmitter looks to whether the particular bit value is the same as the preceding output bit signal (e.g., 00), in which case it is identified as a low-frequency component of the signal, or whether the particular bit value is different from the preceding output bit signal (e.g., 01), in which case it is identified as a high-frequency component. A642, 8:56-63. The transmitter uses that information to emphasize high frequency components of the output signal relative to low frequency components of the output signal by assigning them different signal levels. A642, 8:52-
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55. The Dally patents thus claim a transmitter that utilizes bit history to perform that selective pre-emphasis: 1. A component comprising: a semiconductor chip; a processor within the chip; and a transmitter circuit within the chip, the transmitter circuit being coupled to the processor to accept a digital input signal including a plurality of digital values from the processor, the transmitter circuit being operable to send an output signal including a series of signal levels representing the digital values and to emphasize high frequency components of the output signal relative to low frequency components of the output signal so that: (i) an output bit signal of the output signal representing a particular bit value has one signal level when the bit value is the same as a bit value represented by a predetermined preceding output bit signal; and (ii) the output bit signal representing the particular bit value has another signal level when the bit value is different from the bit value represented by the predetermined preceding output bit signal. A642, 8:45-63 (emphasis added). By pre-emphasizing the signal at the transmitter based on its frequency, Dr. Dally achieved a largely unattenuated signal at the receivera 1 sent by the transmitter had sufficient magnitude for the receiver to interpret it as a 1. The following pair of diagrams from the Dally patents illustrate the benefits of the invention.
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Absent pre-emphasis, the signal sent by the transmitter (Figure 2A, A630) would be heavily attenuated by the time it reaches the receiver (Figure 2B, A630). Indeed, the 1s and 0s transmitted at high frequency may barely cross the midline:
By pre-emphasizing the high-frequency components of that same data signal (Figure 7A, A634), the Dally transmitter produces signal swings that are far enough above and below the midline to be reliably detected by the receiver despite attenuation (Figure 7B, A634). A641, 5:45-47; JA9761.
Dr. Dally did not invent signal pre-emphasis; techniques existed in analog telecommunications systems. JA6042. His invention, however,
comprised a novel way of applying on-chip transmitter pre-emphasis to chip-to-chip signaling in digital systems. Id. As Dr. Dally explained, he
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invented many particular techniques about how to make a system that had originally been developed to work at kilohertz rates [1,000 cycles-per-second] in telecommunications systems to work at gigahertz rates [1,000,000,000 cycles-per-second] in digital systems. It was a nontrivial movement of the technology by . . . six orders of magnitude in frequency that required a different set of techniques in how to build the actual circuits. Id. Working with Dr. John Poulton, a professor at the University of North Carolina, Dr. Dally built a chip that embodied his inventions. JA6011. As Dr. Poulton testified, Dr. Dallys inventions were a game changerthe foundation of an industry. JA4835-36. They enabled unprecedented speed for chip-to-chip data transmission, JA4835, multiples of times faster than what people were using, JA4840. Dr. Poulton explained that, previously, you would have been lucky to get a . . . 400 megabit per second signaling system working, whereas Dallys chip was performing pre-emphasis and running at 4 gigabits per second. JA4839. Dr. Dallys invention thus enabled chip-to-chip transmission of data signals with much higher frequencies than previously possible. Accordingly, the Dally patents claim transmitters with the capability to transmit preemphasized signals at very high frequencies: 2. The component as claimed in claim 1 wherein the transmitter circuit is operable to send the output signal with an output frequency of at least 1 GHz and a bandwidth greater than 100 MHz.
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857 patent, claims 2, 31, and 49, A642-44, 8:64-67, 10:64-67, 12:53-56; 494 patent, claim 3, A662, 9:5-8 (emphasis added). The validity issue in this appeal turns on the proper construction of that limitation of an output frequency of at least 1 GHz. C. The Technologys Development And Commercialization
Dr. Dally assigned the patentsthe fruit of his academic researchto MIT. JA8049-54; A628; A647. In 1999, Dr. Dally founded a company called Chip2Chip to commercialize the patents. JA6003; JA6030-31.
Chip2Chip obtained an exclusive license from MIT, JA8055-78, and developed serializer/deserializer (SerDes) circuits for high-speed chip-to-chip interfaces utilizing Dr. Dallys technology, JA6003.3 Chip2Chip, later
renamed Velio, JA6003, had a research facility in Chapel Hill, North Carolina, where a team of engineers designed circuits, JA4796; JA6001. In 2003, Rambus acquired many of Velios assets, paying over for Velios research facility, the engineers in its circuit design team, and its license from MIT for the Dally patents. JA8825; JA8869; JA8897; JA8931-39; JA12628-29; JA4795; JA6001. Until at least 2009, Rambus employed 15-20 engineers at that facility and continued developing SerDes A serializer/deserializer accepts parallel data inputs, serializes the data into a single bit stream, and transmits it at high speed to another chip, where it deserializes the bit stream again into parallel data. 13
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technology. JA4796-97. Rambus incorporated that work into cell designs schematics for semiconductor circuitrythat practice the Dally patents. JA3593-94; JA3607; JA12661-62. Rambus developed data sheets and
technical guides to implement those designs for semiconductor chip fabricators. JA3607-08; JA8462-512; JA8513-59; JA8560-615; JA8616-73. Rambus commercialized the Dally technology through licensing, typically as part of a larger SerDes portfolio. Rambus employed roughly 30 individuals who made presentations to and negotiated licenses with potential customers. See JA12625-27; JA9346-49; JA12656-57; JA8324-94; JA8395461; JA8768; JA8764; JA8765; JA8766. Rambus has entered into six
SerDes technology license agreements covering products Rambus designed that incorporate Dally technology. JA12641-46; JA8079-116; JA8150-57; JA8158-208; JA8209-31; JA8232-58; JA8259-76. yielded over Those licenses have
in royalties to Rambus. JA12646-47. Rambus also
negotiated a separate patent license with Samsung covering the Dally patents. JA8277-302. Under Rambuss license from MIT, Rambus must pay MIT on has paid MIT over 31. received by Rambus. JA8124. Rambus under that agreement. JA12646; JA12630-
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II.
The Decisions Below A. The ALJs Initial Determination
After an evidentiary hearing, the ALJ (Judge Essex) issued his Initial Determination (ID), finding no violation of Section 337. A70-453. 1. Invalidity / Claim Construction
The Dally output-frequency claims recite a transmitter circuit that not only pre-emphasizes high-frequency components of the output signal relative to low frequency components, but also is operable to send the output signal with an output frequency of at least 1 GHz. A642, 8:64-67. The ALJ found that respondents infringe those claims. A153. But he found the claims invalid as obvious and anticipated based on his construction of the term output frequencyspecifically, based on his equating output frequency (in Hertz) with output data rate (in bits-per-second). A226-29;
A268-69. That was pivotal: The Dally claims recite the signals output frequency (F)the rate at which the signal can transition from the midline to one high level, to one low level, and back to the midline. A642, 8:66; see pp. 5-7, supra. The cited prior art, however, did not reference output frequency. Instead, it quantified an output signal as a data rate (D) expressed in bits-per-second (b/s). See A227-28; A268.
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The ALJs validity analysis thus turned on the data rate in the prior art that corresponded to the claimed output frequency of at least 1 GHz. The ALJ found that the output data rate achievable by the relevant prior art was 1.0625 Gb/s. A228; A268. Consequently, the ALJ ruled that the Dally output-frequency claims would read on the prior art if they corresponded to an output data rate encompassing 1.065 Gb/s. The ALJ rejected Rambuss argument that the claimed output frequency of at least 1 GHz corresponds to an output data rate of twice the frequency, such that a frequency of 1 GHz corresponds to an output data rate of at least 2Gb/s.4 In electrical engineering, one cycle corresponds to two signal levelsi.e., the signal moving from the midpoint, to the high point, to the low point, and then back to the midpoint. A99-100. Moreover, the Dally patents claim a signaling type in which each high signal level represents one bit of data (a 1), and each low signal level separately represents another (a 0). See, e.g., A643-44, 10:39-41, 11:27-29; A100. Because two signal levels, and thus two bits of data, are represented in a single cycle or Hertz, Rambus urged, the output data rate equals twice the
Before the Commission, Rambus urged that the output frequency equaled one-half the data rate. Rambus takes the same position here, but believes it simpler to express the relationship as data rate = 2 x output frequency, or D=2F. 16
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output frequencyi.e., D=2F. A100. Concomitantly, an output frequency of 1 GHz corresponds to a data rate of 2 Gb/s. That was consistent with the fact that, when the specification addresses both signal frequency and data rate, the data rate was twice the frequency (D=2F). For example, the specification discusses an operating frequency of 2 GHz corresponding to a bit rate of 4 Gb/s. A640, 4:18-19 (emphasis added). Similarly, the specification discloses that for a data signal of 4 Gb/s, the highest frequency of interest is 2 GHz. Id., 3:60-62. In both instances, a signal with a data rate of 4 Gb/s is equated with a frequency of 2 GHz, i.e., D=2F. Rejecting Rambuss reliance on electrical engineering principles, the ALJ stated that Rambuss position requires a number of assumptions that may or may not be true and certainly are not mandated without review of the other intrinsic evidence. A101. Rambuss arguments might be valid in light of the other intrinsic evidence. A102. The ALJ, however, never analyzed Rambuss arguments in light of the other intrinsic evidence. With respect to the specification, the ALJ did not dispute that it repeatedly expresses a 2-to-1 ratio between data rate and frequency. But he dismissed those portions as not particularly persuasive because they are discussing the relationship between data rate and operating frequency, not
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output frequency, which do not appear to be the same thing, or at the very least, Rambus has not presented evidence that they are the same thing. A108-09. The ALJ cited no intrinsic evidence to the contrary. And he did not explain what the specifications reference to operating frequency means if it differs from output frequency. Instead, the ALJ concluded that the claimed output frequency is equal to the output data rate. A109. He based his decision primarily on Figures 1 and 12 of the Dally patents, both of which reference 400 MHz with regard to parallel data inputs (equivalent to a 4 GHz serial input), and show a 4 Gb/s serial data output. A106-07. The ALJ concluded that those figures both appear to use a 1:1 ratio between bits-per-second and Hertz. A107. The ALJ disputed that the references to 400 MHz address not the data signals frequency, but the clock operating on the signal (which operates at twice the highest frequency of the data signal). See A108. The specifications discussion of Figure 1 distinguishes between the data signal and the 400 MHz clocks operating on that signal: The receiver accepts the signal and its own 400 MHz clock. A640, 3:24-25 (emphasis added). The
receiver also generates 4 GHz [i.e., the 1-bit serial equivalent of 10-bit parallel at 400 MHz] timing signals aligned to the received data, samples the noisy signal, decodes the signal, and produces synchronous 8-bit data out.
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Id., 3:26-28 (emphasis added).
The ALJ nevertheless stated, without
citation, that Rambus is simply incorrect that these examples are merely referring to clock rate. A108. Having equated the claimed output frequency in Hertz with the output data rate in bits-per-second, the ALJ concluded that the Dally patents recited output frequency of at least 1 GHz corresponds to a data rate of at least 1 Gb/s. Because prior art allegedly could achieve an output data rate of 1.0625 Gb/s, the ALJ held that the claims were anticipated or obvious. A228-29; A268-69. 2. Domestic Industry
Section 337 makes it unlawful to import, or to sell after importation, articles that infringe a valid and enforceable United States patent. 19 U.S.C. 1337(a)(1)(B)(i). That prohibition is subject to the domestic industry requirement, i.e., proof that an industry in the United States, relating to the articles protected by the patent, . . . exists or is in the process of being established. 19 U.S.C. 1337(a)(2). Applying Commission precedent, Judge Essex concluded that the evidence shows that a licensing-based domestic industry . . . exists as to the asserted Dally Patents. A434. Judge Essex found that Rambus had made substantial investments specifically related to the Dally patents. Rambus
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had paid over patents. A439; A435.
in royalties to MIT for licensees use of those Judge Essex also found that was
attributable to royalties from technology license agreements which license technology related to the Dally patents; under Commission precedent, that was further evidence of significant investments. A436. Judge Essex also found that Rambus had made substantial firm-wide investments in licensing. It was undisputed that Rambus ha[d] over 30 employees involved in its U.S. based licensing practice at an expense of over from 2006 through the first half of 2010. A439. The Commission, in a prior Section 337 investigation relating to the Barth patents, had found a domestic industry based on similar firm-wide evidence, and had stood by that finding before this Court. A423 n.40; see pp. 62-65, infra. Judge Essex rejected respondents contention that Rambuss firmwide investments were not specific to the Dally patents. The Commission does not require . . . strict mathematical proof of the investment in licensing certain patents among others in a portfolio. A433 (quotation marks omitted). Rather, the complainant need only show a nexus between the licensing activity and the asserted patent. A421. When the asserted patent is part of a patent portfolio, and the licensing activities relate to the portfolio as a whole, the Commission requires that the facts be examined to determine
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the strength of the nexus between the asserted patent and the licensing activities. Id. Examining that nexus under Certain Multimedia Display and Navigation Devices and Systems, Components Thereof, and Products Containing Same, Inv. No. 337-TA-694, USITC Pub. 4292 (Aug. 8, 2011) (final) (Navigation Devices), Judge Essex considered the size of the licensed portfolio; the relative value contributed by the Dally patents; the prominence of the Dally patents in licensing negotiations; and the scope of the technology covered by the portfolio compared to the scope of the Dally patents. A42122; A435-38. Judge Essex found that those factors demonstrated a strong nexus between the Dally patents and Rambuss licensing activities; he therefore concluded that Rambuss firm-wide expenses could be considered when evaluating Rambuss investment in licensing the Dally patents. A439. The evidence, he stated, shows that Rambuss investments in licensing the asserted Dally Patents were and continue to be substantial. A439. Judge Essex ruled that the domestic industry requirements have been satisfied. A418. B. The Commissions Final Determination
On review, the Commission affirmed the construction of output frequency as equaling output data rate, adopting the ALJs analysis. A11-12.
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The Commission, however, reversed Judge Essexs finding that Rambus had established a domestic industry for the Dally patents. A44-51. The Commission stated that what is wanting . . . is evidence specifically demonstrating investment made in the licenses upon which Rambus relies. A47 n.19. The Commission, however, never mentioned Rambuss specific investments in the Dally patents. It did not address: the in royalties Rambus paid to MIT for licensees use of those patents, which the ALJ had cited, A435; A439; the Rambus paid to acquire a research facility, the rights to the Dally patents from MIT, and a staff of engineers at the facility who were designing products based on the patents; the engineers Rambus employed to develop Dally-based SerDes technology; or Rambuss efforts to negotiate licenses covering the Dally patents. The Commission acknowledged that Rambus had received over in royalties for licenses encompass[ing] the Dally patents, A46 and that, under Commission precedent, royalties are circumstantial evidence that an investment was made, A48but it gave that evidence no weight. It also ignored Rambuss license to Samsung, and that Rambus paid MIT in royalties for that license alone. A436. The Commission instead focused solely on Rambuss firm-wide expenditures. The Commission acknowledged that, with respect to that firm-
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wide evidence, Rambus was not required under Commission precedent to provide a precise allocation of its licensing investments on a patent-bypatent basis. A49 (emphasis added). But the Commission ruled that Rambuss proof failed because the Commission [did] not know what portion of the in total licensing expenditures incurred by Rambus, or what
portion of time or expenses incurred by the 30 Rambus employees, might be allocated to the Dally . . . patents. Id. Without proof to support such an allocation, the Commission claimed, it was unable to find grounds upon which these unknown investments could be considered substantial. A50. The Commission did not dispute that, under its decision in Navigation Devices, Rambus ha[d] demonstrated a nexus between the . . . Dally patents and the portfolios that include them, A46 n.19, or that, as the ALJ found, a nexus exists between the Dally patents and Rambuss licensing activities, A439. The Commission did not dispute that, three years before, it had found that Rambus established a domestic industry for the Barth patents based on the same type of firm-wide licensing expenses. A50. The Commission nevertheless concluded that Rambus did not provide sufficient evidence of its investments in licenses specific to the Dally patents to establish a domestic industry. A51.
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SUMMARY OF ARGUMENT I. The Dally claims at issue recite a chip with a transmitter that
pre-emphasizes output signals and is operable to send the output signal with an output frequency of at least 1 GHz. A642, 8:64-67 (emphasis added). It is undisputed that no prior art in this case expressly discloses a transmitter that sends a pre-emphasized output signal with an output frequency of at least 1 GHz. Indeed, all of the cited prior art discloses signals in terms of a data rate expressed in bits-per-second, not frequency expressed in Hertz. In finding the Dally patents limitation of an output frequency of at least 1 GHz anticipated and obvious, the Commission relied upon prior art that discloses an output signal with a data rate of approximately 1 Gb/s. For that finding to stand, it must be shown that the data rate equals the claimed frequency (D=F). The Dally patents, however, disclose something different. Frequency expressed in Hertz means cycles per second. In electrical engineering, a single cycle includes two different signal levelsone high and one low: The signal begins at the midpoint, moves to the high point, moves to the low point, and then finishes at the midpoint where it started. As set forth in the patent, those two signal levels correspond to two bits of data, not one. Thus, a frequency of 1 GHz (1 billion cycles-per-second) corresponds to 2 Gb/s (2
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billion bits-per-second), not 1 Gb/s. The specification makes that clearer still. Every time the specification discusses the data signals frequency in terms of a data rate, it states that the data rate is twice the frequency (D=2F). Thus, the claimed output frequency of 1 GHz equals an output data rate of 2 Gb/s. That data rate was not achieved by the prior art. The ALJ relied on figures in the patents that, in his view, appear to use a 1:1 ratio between output frequency and output data rate. But the ALJ mistook the clock rate for the output frequency. Only Rambuss construction reconciles the figures in the Dally patents with the language of the specification. II. After an 8-day hearing, the ALJ determined that Rambus had
established a domestic industry in the Dally patents. The domestic industry requirement is satisfied if the complainant has made a substantial investment in the exploitation of the patents, including investments in engineering, research and development, or licensing. 19 U.S.C.
1337(a)(3)(C). Rambus presented investments specific to the Dally patents. Rambus invested millions of dollars to acquire and maintain research facilities and a staff of engineers for designing chips that utilized Dally technology, and to acquire the exclusive rights to the Dally patents from MIT. Rambus also invested in negotiating licenses for Dally-based tech-
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nology. And Rambus paid MIT over successfully licensed its Dally-based technologies.
in royalties when Rambus
Rambus also showed substantial firm-wide investments in licensing. It employed over 30 individuals in its licensing department and spent over on licensing operations. As required under Commission precedent regarding portfolio licensing, Rambus also demonstrated a nexus between those firm-wide licensing activities and the Dally patents. The ALJ thus properly found that Rambus established a domestic industry. In reversing the ALJs finding, the Commission never addressed Rambuss Dally-specific investments. That alone is grounds for reversal. The Commission also refused to accept Rambuss evidence of firm-wide licensing expenses as proof of substantial investment in the Dally patents. The Commission did so even though, in a related Section 337 investigation three years earlier, it had found that Rambus established a domestic industry based on the same type of firm-wide evidence. The Commission simply changed its rules and, with no notice or explanation of its reasoning, declared that its former nexus standard was no longer sufficient; instead, the complainant now must present evidence showing how its firm-wide expenditures can be allocated to the asserted patents. That is arbitrary and capricious agency action. It also contravenes Congresss intent. Congress
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amended Section 337s domestic industry requirement to make clear that universities and companies that license, rather than manufacture, their patented technology may enforce their rights before the Commission. Yet the Commissions new allocation requirement would bar the Commissions doors to anyone who licenses its patents as part of a portfolio. Entities that license patentswhether universities, small research firms, or large technology companies that hold tens of thousands of patentssimply do not track employee time and expenses in terms of particular patents and cannot provide the proof of allocation the Commission now requires. STANDARD OF REVIEW This Court reviews the Commissions legal determinations, including claim construction, de novo. Alloc, Inc. v. ITC, 342 F.3d 1361, 1367 (Fed. Cir. 2003), cert. denied, 541 U.S. 1063 (2004). It reviews the Commissions factual determinations for substantial evidence, but the Commissions reasoning . . . is reviewed under the arbitrary and capricious (or contrary to law) standard. Changzhou Wujin Fine Chem. Factory Co. v. United States, 701 F.3d 1367, 1377 (Fed. Cir. 2012).
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ARGUMENT I. The Dally Patents Claim Of A Pre-Emphasizing Transmitter Circuit That Can Operate At An Output Frequency Of At Least 1 GHz Is Unmatched In The Prior Art Before Dr. Dallys invention, the speed of chip-to-chip signaling was greatly restricted by frequency-dependent attenuationthe degradation of high-frequency components of a data signal as they cross a physical line between the transmitter and receiver, which makes those signals difficult to interpret. See pp. 7-8, supra. Dally solved that problem by inventing a digital transmitter that enabled unprecedented new speeds, JA4835; a game chang[ing] advance, id. Claim 1 of the Dally 857 patent recites a transmitter that uses bit history to identify high-frequency components of the signal and emphasize[s] those high frequency components of the output signal relative to low frequency components of the output signal, offsetting the effects of frequency-dependent attenuation. A642, 8:48-55. The representative claim of the Dally patents at issue here, which depends on Claim 1, adds a frequency-based limitation in view of the inventions ability to pre-emphasize at an extraordinary rate. For example, Claim 2 of the 857 patent recites a speed limitation such that the transmitter circuit is operable to send the output signal with an output frequency of at
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least 1 GHz and a bandwidth greater than 100 MHz. (emphasis added).
A642, 8:64-67
The validity issue in this appeal turns on the proper construction of that output-frequency limitation. As explained below, the output frequency of at least 1 GHz claimed in the Dally patents corresponds to a data rate of at least 2 Gb/s, as each cycle transmits two bits. The Commission erred in holding that the limitation was met by a data rate of half that speed. A. No Prior Art Of Record Expressly Discloses The Dally Patents Output Frequency Of At Least 1 GHz
Anticipation exists only where a reference discloses within the four corners of the document . . . all of the limitations of the challenged claim. Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1371 (Fed. Cir. 2008). Obviousness similarly requires an analysis of the scope and content of the prior art to determine whether a skilled artisan would have been motivated to combine the teaching of the prior art references to achieve the claimed invention, and whether he would have had a reasonable expectation of success in doing so. OSRAM Sylvania, Inc. v. Am. Induction Techs., Inc., 701 F.3d 698, 706 (Fed. Cir. 2012). In this case, respondents asserted that the Dally claims are anticipated and obvious because prior-art references disclosed digital transmitters that performed the signal pre-emphasis claimed in the Dally patents and were 29
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operable to send the output signal with an output frequency of at least 1 GHz, as recited in the Dally output-frequency claims. A642, 8:64-67. But the respondents did not identify a single prior-art reference purporting to disclose such a transmitter with an output frequency of at least 1 GHz. Instead, respondents relied on prior-art references that described their output data signal in terms of a data rate expressed in bits-per-second. Patents, however, are presumed valid, 35 U.S.C. 282, and anyone asserting invalidity must prove it by clear and convincing evidence, Microsoft Corp. v. i4i Ltd. Pship, 131 S. Ct. 2238, 2242 (2011). Respondents fell short of meeting that burden. To the contrary, their effort to equate the limitation of 1 GHz (1 billion cycles per second) with prior art operating at 1 Gb/s (1 billion bits per second) defies the text of the claim and the specification, which repeatedly expresses the data rate as twice the frequency. It contravenes basic electrical engineering principles as embodied in the operation of the patents, under which (a) two signal levels may be transmitted per cycle (or Hertz); (b) each signal level corresponds to one bit; and consequently (c) one cycle corresponds to two bits. And it contravenes the rule that claims should when reasonably possible be interpreted so as to preserve their validity. Modine Mfg. Co. v. ITC, 75 F.3d 1545, 1557 (Fed.
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Cir. 1996), abrogated on other grounds, Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 234 F.3d 558 (Fed. Cir. 2000). B. The Dally Patents Claimed Output Frequency Does Not Equal the Data Rate Because The Data Rate Is Twice The Frequency
The ALJ ruled that the highest output data rate in the prior art is 1.0625 Gb/s. See A228 (discussing Widmer and Ewen); A268 (discussing the SL500 art). The invalidity challenges to the output-frequency claims thus hinged entirely on whether the claimed output frequency of at least 1 GHz exceeds an output data rate of 1.0625 Gb/s. Because it doesthe claimed output frequency of 1 GHz corresponds to a data rate of 2 Gb/sthe prior art does not satisfy the claim limitation. The Commissions invalidity findings must therefore be reversed. 1. The Claims Demonstrate That The Output Data Rate Equals Twice The Claimed Output Frequency (D=2F)
[T]he words of a claim are generally given their ordinary and customary meaning, as a person of ordinary skill in the art in question at the time of the invention would have understood them. Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (en banc) (quotation marks omitted), cert. denied, 546 U.S. 1170 (2006). Here, the text of the Dally patents claims, and ordinary electrical engineering principles, make clear that the
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output data rate, in gigabits-per-second, is twice the recited output frequency, in gigahertz. They demonstrate that: (a) (b) (c) Two signal levels are transmitted per Hertz (the unit by which the Dally patents express frequency); Each signal level represents one bit of data in the Dally patents; and consequently Two bits are transferred per cycle or Hertz.
Thus, at least 2 Gb/s of data corresponds to an output frequency of at least 1 GHzi.e., D=2F. The Dally patents recite an output frequency of at least 1 GHz. A642, 8:66. As a dictionary definition cited by the Commission Staff makes clear, frequency, measured in HERTZ, is the rate at which a waveform action repeatsi.e., the rate at which the signal transitions from the midline to one high level, down to one low level, and back up to the midline. Sinclair, The HarperCollins Dictionary of Electronics 123 (1991) (JA17308). Thus, one Hertz corresponds to one full high-low transition, or one cycle, per second. JA3786-87. The text of Claim 1 (on which Claim 2 depends) demonstrates that each of the two signal levels constituting a cycle corresponds to one bit of dataand that, as a result, one full cycle corresponds to two bits. In
describing how pre-emphasis operates, Claim 1 specifies that an output
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signal representing a particular bit value [i.e., a 1 or 0] has one level when its value is the same as a preceding bit value, and it is given another signal level when it differs from the preceding value. A642, 8:56-63 (emphasis added). That the signal for a particular bit value has one level forecloses the notion that it takes a full cycle to represent a single bit. A full cycle has two signal levels (one high and one low). It simply makes no sense to refer to a particular bit value having one signal level if it in fact is communicated by the two different signal levels that together make up a cycle. If the inventor had meant to communicate otherwise, he would have referred to the signal representing the bit value as having a set of signal levels, or he would have referred to the bit value as having signal levels of a particular magnitude. That he did not speaks volumes. Other claims likewise demonstrate that, in the Dally patents, two signal levels, comprising a single cycle, represent two bits of data. For example, Claims 24 and 35 of the 857 patent recite that each digital value in the digital input signal [1 or 0] is represented by one of the signal levels in the output signal. A643-44, 10:39-41, 11:27-29 (emphasis added). Thus, because each signal level represents one bit in the Dally patentsthe high signal level representing a 1 and the low signal level representing a 0, JA9755-56one high-low cycle corresponds to two bits of data. In
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terms of frequency (cycles-per-second) and data rate (bits-per-second), that means that one cycle per second corresponds to two bits per second. Thus, 1 GHz corresponds to 2 Gb/s. 2. The Specification Supports Rambuss Construction Of D=2F
The specification makes that clearer still. Usually, [the specification] is dispositive; it is the single best guide to the meaning of a disputed term. Phillips, 415 F.3d at 1315 (quotation marks omitted). Here, every time the specification expressly correlates the frequency of the output signal with a data rate, it confirms that the output data rate equals twice the output frequency (D=2F)conversely, that one cycle corresponds to two bits. First, the specification discusses Figures 2A and 2B, which illustrate the effects of frequency-dependent attenuation on a hypothetical data signal. A640, 3:58-62. The specification describes the data signal in terms of a particular data rate4 Gb/s. Id., 3:60. It then describes the highest frequency of interest in that signal as 2 GHz. Id., 3:62 (emphasis added). That discussion expressly confirms that the rate of data being output in that signal (4 Gb/s) is equal to twice the frequency of the data signal (2 GHz); i.e., D=2F. Second, the discussion of Figures 3A and 3B makes the same correlation. Those figures demonstrate the phenomenon of frequency-dependent 34
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attenuation by charting resistance-per-meter of wire and attenuation-permeter of wire as a function of the frequency of the data signal. A640, 4:1119. The specification explains that the example in those figures is at our operating frequency of 2 GHz corresponding to a bit rate of 4 Gb/s. Id., 4:18-19 (emphasis added). That confirms that, in the Dally patents, the output data rate (in that example, 4 Gb/s) is twice the output frequency (2 GHz); again, D=2F. Those statements in the specification should be dispositive. See CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366 (Fed. Cir. 2002) (patentee may act[ ] as his own lexicographer). But the ALJ rejected them without meaningful analysis. The ALJ dismissed the statements as not particularly persuasive because they are discussing the relationship between data rate and operating frequency, not output frequency, which do not appear to be the same thing, or at the very least, Rambus has not presented evidence that they are the same thing. A108-09. With respect to Figures 2A and 2B, the ALJ simply erred. The
accompanying discussion refers to the highest frequency of interestnot operating frequency, as the ALJ supposed. A640, 3:62. And the frequency of interest discussed is the frequency of a component[ ] of the [data] signal output by a transmitter to a receiver across a transmission
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line. Id., 3:50-62, 4:1-9. It thus refers to the same output frequency of the output signal sent by a transmitter circuit recited in the asserted claims. A642, 8:64-66. The specification did refer to an operating frequency in connection with Figures 3A and 3B. But even there, the specification used that term interchangeably with the claim term output frequency. Another patent in the Dally family incorporated by reference in the 857 patentU.S. Patent No. 7,099,404makes that clear. The 404 patent shares a specification with the asserted Dally patents and likewise references an operating frequency of 2 GHz corresponding to a bit rate of 4 Gb/s. JA17372, 4:24-25. Claim 1 of the 404 patent, however, recites an output operating frequency of at least 1 GHz, JA17374, 8:57-61 (emphasis added), showing that the Dally patents regularly use the phrases operating frequency, output frequency, and output operating frequency to refer to the same concept. Cf. Baran v. Med. Device Techs., Inc., 616 F.3d 1309, 1316 (Fed. Cir. 2010) (patentee may use different terms interchangeably to refer to the same concept), cert. denied, 131 S. Ct. 1607 (2011); Bancorp Servs., LLC v. Hartford Life Ins. Co., 359 F.3d 1367, 1373 (Fed. Cir. 2004) (similar). The ALJs conjecture that the references to frequency in those parts of the specification do not mean output frequency is unfounded.
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The ALJ in any event inverted the burden. It was respondents burden to prove invalidity by clear and convincing evidence, i4i, 131 S. Ct. at 2242, not Rambuss burden to present[ ] evidence demonstrating validity, A10809. Any disputes should have been resolved by the specifications plain termsand any residual doubts resolved in favor of a construction that preserves the claims validity. 3. Witness Testimony Confirms That The Output Data Rate Is Twice The Claimed Output Frequency (D=2F)
Respondents counsel and witnesses confirmed Rambuss construction. Respondents counsel illustrated the nature of frequency, and that one cycle encompasses two signal levels, with the following exhibit:
JA17284. Respondents then asked Rambuss expert, Dr. Singer, to confirm that exhibits accuracy: 37
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Q: A: ... Q:
[I]n this example . . . the frequency is one cycle per second or one Hertz. Did I illustrate that right? Yes, you did.
So when you are saying the frequency, how many of those high/lows are there within a given period of time, right? Right, within a given period of time, one Hertz corresponds to one high [signal level] and one low [signal level].
A:
JA3786-87 (emphasis added). Respondents own witnesses agreed that, consistent with electrical engineering principles, 2 bits of data are transferred for every Hertz. One of respondents engineers testified: Q: What do you see as the distinction between a link running at 800 megabits per second versus 800 megahertz, if there is one? Megabit is the data sent per second. Megahertz is the cycles per second. Do those happen to be the same in the links you were working on? No. And why not? It requires . . . two bits of data to make a full cycle.
A: Q: A: Q: A:
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JA6320-21 (emphasis added). Similarly, Dr. PoultonDr. Dallys collaborator and now an nVidia scientistconfirmed that [t]he maximum frequency in a four gigabit data stream is two gigahertz. JA6287 (emphasis added). As each of those witnesses understood, a cycle includes two signal levels; each signal level corresponds to one bit; so each cycle per second corresponds with two bits per second. 4. The ALJs Rationale For Rejecting That Construction Does Not Withstand Scrutiny
The ALJ rejected all of that proof. With respect to the nature of a cycle and the fact that it comprises two different signal levels, the ALJ dismissed that as assumptions that may or may not be true and certainly are not mandated without review of the other intrinsic evidence. A101. But they are fundamental electrical engineering principlesconfirmed by respondents exhibits and witnessesnot assumptions. And the ALJ never performed a review of the other intrinsic evidence to confirm or refute them. That alone renders the ALJs reasoning arbitrary and unsupportable. Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1305 (Fed. Cir. 2011), cert. denied, 133 S. Ct. 833 (2013). The ALJ faulted Rambus for assum[ing] that the signal is a simple sinusoidal wave that transitions from high to low and back again. A101. The ALJrelying on the following (incorrectly) annotated version of Figure 39
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2Anoted that data signals will not always simply alternate between high and low signal levels (e.g., 101010), but will sometimes maintain a high signal level (e.g., 111111) or low signal level (e.g., 000000) for a period of time:
A102. That misses the point. Data patterns are infinitely variable and will contain both high-frequency components that rapidly transition between 1 and 0, and low-frequency components that transmit multiple consecutive 1s or 0s. See pp. 5-8, supra. Because of that variability, it makes no sense to analyze the output-frequency claims in terms of one particular hypothetical data signal. Rather, it is the highest frequency achievablethat is, how fast the signal is capable of transitioning from 1 to 0 or from 0 to 1that matters. That is why the claims recite transmitters that are operable to send
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the output signal with an output frequency of at least 1 GHz. A642, 8:6566 (emphasis added). The word operable indicates that the transmitter is capable of transmitting a pre-emphasized signal at a 1 GHz frequency transitioning from high to low and back 109 times per secondwhile recognizing that the device will generally operate at a lower frequency with fewer transitions per second when it transmits consecutive 1s or 0s. See Websters Third New Intl Dictionary 1580 (2002) (defining operable as fit or possible to use). Another figure invoked by the ALJ illustrates the point. The ALJ cited the following diagramwhich is not from the Dally patents, but was produced by the Commission Stafffor the proposition that a one-Hertz signal could also be generated using 4 bits:
A101. That particular signal represents a 1100 data pattern with a single high level and a single low level, corresponding to one Hertz, that transmits 4 bits of data. But the device is capable of transmitting a 1010 data pattern 41
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in the same time span, in which case 4 bits are transmitted in 2 cycles per second or 2 Hertz:
Because the actual data pattern (1100 or 1010) can vary, what matters is the maximum frequency in the example, 2 Hertz for 4 bits. Indeed, if one accepted the ALJs argumentthat a one-Hertz signal could also be generated using 4 bits, A101the figure he cited would represent a data rate that was four times the output frequency. The claimed output frequency of at least 1 GHz thus would yield a 4 Gb/s data rate in the example (D=4F) placing the Dally patents even further beyond the prior art. Finally, the ALJ questioned whether, in the Dally patents, each signal level represents one bit of data. Referencing the figure belowagain, not found in the Dally patentsthe ALJ stated that the evidence at the hearing established that in other coding schemes that exist within the art, such as Manchester or bi-phase coding, a single bit is represented by two signal levels, a low followed by a high. A102.
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A103. While other coding schemes exist within the art, the ALJ cited nothing to suggest the Dally patents utilize such schemes. To the contrary, in the Dally claims, each digital value in the digital input signala 1 or 0is represented by one of the signal levels in the output signal, not two signal levels as in the ALJs diagram or Manchester encoding. A643-44, 10:39-41, 11:27-29 (emphasis added). That is clear from the claims at issue here. See pp. 31-34, supra. The ALJ offered no answer. C. The ALJ Erred In Reading The Patents To Equate Output Frequency (Cycles-Per-Second) With Data Rate (Bits-PerSecond)
Invoking two figures and one passage in the Dally specification, the ALJ concluded that the term output frequency should be construed to equal the output data rate. A99; A11-12 (affirming without discussion). But those examples do not support the ALJs conclusion. The ALJ never explained why his view of those examples should receive greater weight than
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the portions of the specification directly addressing the correlation between the data signals frequency and data rate, which support a 1-to-2 ratio. See pp. 34-37, supra. Figures 1 and 12 of the Dally patents both reference (a) parallel data inputs accepted at 400 MHz, which the ALJ found to be equivalent to a 4 GHz serial input, and (b) a 4 Gb/s serial data stream. Based on that, the ALJ found that the figures appear to use a 1:1 ratio between bits-per-second and Hertz. A107. The ALJ, however, failed to heed the specifications explanation of those figures. Figure 1 shows:
A630. The specification explains that the transmitter module 22 in Figure 1 accepts 8-bit parallel data at 400 MHz, and code[s it] into 10 bits before outputting it serially. A640, 3:16-19. Without further referencing the specifications text, the ALJ assumed that the 400 MHz in the figure (repro-
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duced in red) refers to the frequency of the input data signals at the transmitter. The ALJ then extrapolated that 8-bit parallel data signals at a frequency of 400 MHz would be the equivalent of a 1-bit serial data signal at a frequency of 3.2 GHz (8 x 400 MHz = 1 x 3.2 GHz). A106. The ALJ next assumed that transmitter module 22 is processing and outputting the equivalent of 10-bit parallel data at a signal frequency of 400 MHz, or the equivalent of a 4 GHz 1-bit serial signal. A106. Because transmitter module 22s serial output is labeled as 4 Gb/s in the figure (reproduced in green), the ALJ assumed that 4 GHz must equal 4 Gb/s, and thus that the claimed output frequency equals the output data rate. A107. The ALJ erred at the outset. The specification shows that Figure 1s references to 400 MHz are not to the frequency of the data signals. Rather, 400 MHz is the frequency of the clocks used to process the input data signals. The specification does not say a 400 MHz data signal is sent to the transmitter module; it says that the module acceptsi.e., processes the data at 400 MHz. A640, 3:16-17 (emphasis added). The discussion of the receiver is clearer still: The receiver accepts the signal and its own 400 MHz clock. Id., 3:24-25 (emphasis added). The receiver also generates 4 GHz [i.e., the 1-bit serial equivalent of 10-bit parallel at 400 MHz] timing signals aligned to the received data, samples the noisy signal, decodes
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the signal, and produces synchronous 8-bit data out. Id., 3:26-28 (emphasis added). The specifications explanation of Figure 1 thus distinguishes between the received data signal and the clocks or timing signals that operate on the data signal. And it indicates that the references to 400 MHz are to those clocks or timing signals, not the data signal. That explains why Figure 1 uses the different units of MHz and Gbpsif all references were to the data rate, as the ALJ assumed, the Figure would have uniformly referred to bits-per-second everywhere. The ALJ misread Figure 1 because he divorced his analysis from the specifications explanation. The ALJ made the same mistake regarding Figure 12, which appears as follows:
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A637. The ALJ mistook the frequency of the clock that accepts and operates on the data signal, A642, 7:5-6, for the frequency of the data input signal itself, A107. As a result, the ALJ again mistakenly interpreted the 400 MHz reference in Figure 12 (which, with a 10-bit parallel input, would be the equivalent of a 4 GHz 1-bit serial input) as proof that the frequency of the data signal has a one-to-one correspondence with the 4 Gbps output data rate labeled in Figure 12. A107. The ALJ stated that Rambus is simply incorrect that these examples are merely referring to clock rate. A108. But he offered no explanation why that was so. Nor did he attempt to reconcile his interpretation with the specifications text. The ALJs confusion of the clock rate with the output frequency of the data signal on which it operates was fatal to his interpretation. Properly considered, both Figures 1 and 12 support Rambuss construction. As explained above (and as the specification states), a 4 Gb/s data signal corresponds to a 2 GHz output frequency (D=2F). See pp. 34-37, supra. Applying the ALJs math correctly, the 10-bit parallel data in Figures 1 and 12 is processed using 400 MHz clocks, or the equivalent of a 4 GHz clock. A clock signal has a rising edge and a falling edge. When only one clock edge is used to sampleas was common when the Dally applications
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were filedthe clocks frequency is twice the maximum frequency of the data signal. Thus, the equivalent of a 4 GHz clock in the figures corresponds to a maximum signal frequency of 2 GHz.5 For that reason, Figures 1 and 12which could have a maximum data signal frequency of 2 GHz given the clock speed and show a data rate of 4 Gb/ssupport Rambuss position. Finally, the ALJ relied on the specifications reference to a 4 Gbs serial channel in which a single serial channel (two pins) replaces 40 100 MHz pins. A108 (quoting A642, 8:13-16). The ALJ concluded that
[f]orty parallel channels at 100 MHz equates to one serial channel at 4 GHz, and then equated a 4 GHz output frequency with a 4 Gb/s data rate. Id. But the ALJ assumed that the 40 100 MHz pins configuration refers Literature contemporaneous with the Dally patents notes that a digital signal is first sampled at a rate fs Hz (or samples/sec), which must be greater than twice the highest frequency component in the signal. JA14990. As the figure below illustrates, a 4 GHz clock is required to sample a 2 GHz data signal on only the rising edge (shown in red):
5
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to single-ended signaling, which requir[es] one pin for a given channel. A108. That assumption is unfounded. Single-ended signaling is nowhere mentioned in the Dally patents. Rather, as the ALJ noted, the Dally patents examples refer to differential signaling, which requir[es] two pins for a given channel, not one. A108. The ALJ acknowledged that the 4 Gbps single channel described in this embodiment he invoked is itself a two pin implementation that uses differential signaling. Id. For those reasons, one of ordinary skill in the art would have understood the cited 40 100 MHz pins to be configured in pairs for differential signaling. That would yield 20 two-pin differential interfaces, not 40 onepin interfaces for single-ended signaling as the ALJ assumed. Applying the ALJs math, 20 differential interfaces x 100 MHz = 2 GHz. The serial channel thus supports D=2F: A 2 GHz signal frequency again correlates with a 4 Gb/s data rate. The ALJ hedged that, even if Rambus is correct, the fact that one embodiment is inconsistent is not fatal to his effort to equate an output frequency of 1 GHz with a data rate of 1 Gb/s. A108. But the ALJ nowhere explained why that embodiment would exhibit a different and unique relationship between output frequency and data rate present nowhere else in
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the patent. All of the evidence is to the contrary. See pp. 31-39, supra.6 And, even if ambiguity remained, that ambiguity should be resolved in favor of the construction that renders the claims validnot the ALJs invalidating construction. See Modine, 75 F.3d at 1557; Wang Labs., Inc. v. Am. Online, Inc., 197 F.3d 1377, 1383 (Fed. Cir. 1999). * * * * *
For the reasons above, the Dally patents claimed output frequency of at least 1 GHz equals an output data rate of at least 2 Gb/s. According to the ALJ, the highest output data rate in the relevant prior art is 1.0625 Gb/s, about half the claimed rate for the invention here. See A228 (discussing Widmer and Ewen), A268 (discussing the SL500 art). Because no prior art reference discloses the claimed output frequency or corresponding data rate, the Commissions invalidity findings must be reversed. Respondents also argued that Rambuss construction of output frequency would render another limitation in the claimsa bandwidth greater than 100 MHz, A642, 8:66-67superfluous. A103. That argument was based on the fact that nonmodulated signals have a bandwidth equal to twice the highest frequency. JA3825. Consequently, if the output frequency is at least 1 GHz, as claimed, the bandwidth of the nonmodulated signal will always be greater than 100 MHz, leaving no need for the bandwidth limitation. The superfluity argument fails on the merits, for reasons Rambus explained below. See A104. In any event, the ALJ acknowledged the issue is not dispositive on the claim-construction question. Id. If respondents view were correct, it would render the 100 MHz bandwidth limitation superfluous under either constructionwhether the data rate equals the output frequency, or is twice the output frequency. 50
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II.
Rambus Established A Domestic Industry For The Dally Patents A. The Domestic Industry Requirement
Although the Commission has authority to exclude from the United States any articles that infringe a U.S. patent, its focus is not intellectual property but trade: The Commissions purpose is to adjudicate trade disputes between U.S. industries and those who seek to import goods from abroad. InterDigital Commcns, LLC v. ITC, 707 F.3d 1295, 1302 (Fed. Cir. 2013) (quotation marks omitted). Accordingly, the Commission can grant relief only if an industry in the United States, relating to the articles protected by the patent, . . . exists or is in the process of being established. 19 U.S.C. 1337(a)(2). That is the domestic industry requirement. InterDigital, 707 F.3d at 1297. Originally, Section 337 required proof that importation of infringing articles had the effect or tendency . . . to destroy or substantially injure an industry, efficiently and economically operated, in the United States. 19 U.S.C. 1337(a) (1982). The Commission interpreted that language as requiring proof of a domestic industry that was manufacturing the articles protected by [the patent]. InterDigital, 707 F.3d at 1300 (emphasis added). Congress became concerned that such a construction would not provide protection for innovators who, although not engaged in manufacturing,
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nonetheless were injured by the importation of goods that incorporated the technology that they had invented or sought to license. Id. [I]ntellectual property owners such as universities and research institutions might be precluded from using the ITC for enforcing their patents merely because they did not engage in manufacturing. Id. at 1301 (quotation marks omitted). Accordingly, Congress amended Section 337 in 1988 to provide that a patentee can establish a domestic industry by showing that it has made substantial investment in [the patents] exploitation, including engineering, research and development, or licensing. 19 U.S.C. 1337(a)(3)(C). It is now clear that Section 337 protects American industries that are built on the exploitation of intellectual property, even if the industry is researching, developing, and licensing that property rather than manufacturing products incorporating it. InterDigital, 707 F.3d at 1304. B. Rambus Established A Domestic Industry For The Dally Patents
Rambusa company founded by engineers, and a leading designer of semiconductor interface technologiesinvests heavily in developing and licensing groundbreaking technologies, precisely the activities Congress meant to cover when it amended Section 337. Rambuss investments in the Dally patents at issue here are a prime example. The record demonstrates that Rambus has made a substantial investment in the Dally patents 52
exploitation, including engineering, research and development, or licensing within the meaning of 19 U.S.C. 1337(a)(3)(C). 1. Rambuss Dally-Specific Investments
Before the Commission, Rambus presented evidence of its substantial investment directly in the Dally patents exploitation. 19 U.S.C. 1337(a)(3)(C). Indeed, Rambus demonstrated specific investments in engineering and research and development of technology utilizing the Dally patents, and further investments in licensing that technology to others, satisfying each facet of the domestic industries identified in 1337(a)(3)(C). Rambuss substantial investment in the Dally patents pervades the record. Having assigned his licenses to MIT, JA8049-54; A628; A647, Dr. Dally founded a company called Chip2Chip (later renamed Velio) to develop serializer/deserializer (SerDes) circuits for high-speed chip-tochip interfaces utilizing the patented Dally technology; Chip2Chip obtained an exclusive license for the Dally patents from MIT. JA6003; JA8055-78. When Rambus acquired many of that companys assets in 2003, it made a substantial investment in engineering, research and development, [and] licensing, 19 U.S.C. 1337(a)(3)(C), relating to the Dally patents. For over it acquired the companys Chapel Hill, North Carolina
research facility, the exclusive license from MIT for the Dally patents, and
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the team of engineers that were designing circuits utilizing the technology. JA4796; JA6001; JA8825; JA8869; JA8897; JA8931-39; JA12628-29. That investment in an ongoing research and development operation should be sufficient to establish a domestic industry. But Rambus continued investing in researching, developing, and licensing technology based on the Dally patents. From 2003 until at least 2009, Rambus employed 15-20 engineers at its research facility to continue developing SerDes technology. JA4796-97. Rambus incorporated that work into cell designsschematics for semiconductor circuitrythat practice the Dally patents. JA3593-94; JA3607; JA12661-62. Rambus developed data sheets and technical guides for implementing those designs for customers who would fabricate them into semiconductor chips. JA3607-08; JA8462512; JA8513-59; JA8560-615; JA8616-73. Those investments in research and development were in service of licensing SerDes technology that incorporated innovations from the Dally patents. See JA12641-45; JA12659-707; JA10222-23. The Commission did not dispute that, under its precedent, Rambus had demonstrated a nexus between the asserted . . . Dally patents and the [SerDes] portfolios that include them. A46 n.19. Rambus also invested substantially in negotiating licenses for the Dally patents, typically as part of the SerDes portfolio. Rambus employed
54
dozens of licensing personnel, and its licensing department made many presentations to, and engaged in extensive negotiations with, potential customers for licenses for technology covered by the Dally patents. See JA1264849; JA12656-57; JA8324-94; JA8395-461; JA8560-8615; JA8764; JA8765; JA8766. As the ALJ explained, even where the negotiations involved a license for the SerDes portfolio, the Dally Patents were prominent in those licensing discussions and negotiations. A437. Indeed, the Dally patents were singled out in presentations as Exemplary Consumer Serial Links Patents of Interest. See, e.g., JA12656-67; JA9366; JA9379. Those efforts yielded results. Rambus has entered into six SerDes technology license agreements, providing licenses for products designed by Rambus that incorporate the Dally-patented technology. JA12641-46;
JA8079-116; JA8150-57; JA8158-208; JA8209-31; JA8232-58; JA8259-76. Many specifically identify the Dally patents (often called Rambuss MIT Patents). See JA12641-46. Those license agreements have yielded over in royalties to Rambus. JA12646-47. Rambus also successfully negotiated a patent license with Samsung covering the Dally patents. JA12646; JA8277-302. Rambus has also paid MIT of the , including a percentage
received by Rambus, as a condition of its contin-
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ued exploitation of the patents. JA8124. Rambus has paid MIT over , including for the Samsung license alone. A436; A439;
JA12630-31. Those payments too represent a substantial investment in the exploitation of the technology within the meaning of 19 U.S.C. 1337(a)(3)(C). 2. Rambuss Firm-Wide Investments In Licensing
Beyond that Dally-specific evidence, Rambus presented evidence of large company-wide investments in licensing. Rambus employed roughly 30 employees to market and negotiate licenses for Rambuss technology. JA12625-27; JA9346-49. Between 2006 and the first half of 2010, Rambus invested 27; JA9346-49. in salaries and benefits for those employees. JA12625In that same period, Rambus invested on
marketing in connection with licensing. JA12627; JA9347; JA9349. In conjunction with Rambuss significant efforts to negotiate licenses covering the Dally patents, that firm-wide evidence makes clear that Rambuss investments in licensing the Dally patents is substantial. 1337(a)(3)(C). C. The ALJ Correctly Found That Rambus Established A Domestic Industry Under Commission Precedent 19 U.S.C.
Evaluating both Rambuss Dally-specific and firm-wide investments under established Commission standards for licensing-based domestic 56
industries under 19 U.S.C. 1337(a)(3)(C), Judge Essex correctly concluded that the evidence shows that a licensing-based domestic industry . . . exists as to the asserted Dally Patents. A434. Judge Essex found that Rambus had made substantial investments specific to the Dally patents. He recognized that Rambus had paid over in royalties to MIT for licensees use of those patents. A439; A435. And he found that Rambus had received in
royalties from technology license agreements which license technology related to the Dally patents, which, under Commission precedent, was also evidence of significant investments. A436. Judge Essex further concluded that, under Commission precedent, Rambuss firm-wide investments in licensingincluding maintaining over 30 employees involved in its U.S. based licensing practice at an expense of over from 2006 through 2010, A439demonstrated substantial
investment in licensing for the Dally patents. Judge Essex observed that the Commission had previously found a domestic industry in Rambuss Barth patents based on similar firm-wide evidence, and that the Commission had stood by that finding before this Court. A423 n.40. Judge Essex rejected respondents contention that Rambuss firmwide investments were not sufficiently specific to the Dally patents.
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A433. The Commission, he observed, does not require . . . strict mathematical proof of the investment in licensing certain patents among others in a portfolio. Id. (quotation marks omitted). Rather, the complainant need only show a nexus between the licensing activity and the asserted patent. A421. When the asserted patent is part of a patent portfolio, and the licensing activities relate to the portfolio as a whole, the Commission requires that the facts be examined to determine the strength of the nexus between the asserted patent and the licensing activities. Id. Examining the strength of that nexus here under the Commissions framework in Certain Multimedia Display and Navigation Devices and Systems, Components Thereof, and Products Containing Same, Inv. No. 337TA-694, USITC Pub. 4292 (Aug. 8, 2011) (final) (Navigation Devices), Judge Essex considered the size of the licensed portfolio; the relative value contributed by the Dally patents to that portfolio; the prominence of the Dally patents in licensing negotiations; and the scope of the technology covered by the portfolio compared to the scope of the Dally patents. A42122; A435-38. Judge Essex found that the evidence on those factors established a strong nexus between the Dally patents and Rambuss licensing activities. A439. That evidence, he stated, shows that Rambuss investments in licensing the asserted Dally Patents were and continue to be sub-
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stantial. A439. He thus correctly ruled that the domestic industry requirements have been satisfied under Navigation Devices. A418. D. The Commissions Reversal Of The ALJs Domestic Industry Finding Defies The Evidence, Commission Precedent, And Congresss Intent
The Commissions reversal of Judge Essexs finding of a domestic industry for the Dally patents, A44-51, cannot be sustained. 1. The Commission Failed To Consider Rambuss DallySpecific Evidence
The Commission held that Rambus had not established a domestic industry because the Commission could not determine how much of Rambuss general expenditures (of ) on licensing could be allocated
to the Dally patents. A47. [W]hat is wanting, the Commission claimed, is evidence specifically demonstrating investment made in the licenses upon which Rambus relies, as opposed to overall firmwide licensing expenses. A47 n.19. Even if such proof were requiredand it is not, see pp. 65-67, infrathe record shows that Rambus provided ample evidence of Dally-specific investments, see pp. 53-56, supra. The Commission simply ignored extensive evidence of substantial investments specific to the exploitation, including engineering, research and development, or licensing, 19 U.S.C. 1337(a)(3)(C), of the Dally patents. It did not address: 59
the Rambus invested to acquire Velio assets relating to the Dally patents, including its research facility, its engineers, and the exclusive license from MIT; the in ongoing royalties that Rambus paid MIT under that licensing agreement; Rambuss employment of 15-20 engineers at its research facility to develop SerDes cell designs and products based on the Dally patents, which were offered as part of technology license agreements; or evidence that Rambuss licensing personnel invested significant time and energy making presentations to customers and seeking to negotiate licenses that covered the Dally patents.7 See pp. 53-56, supra. The Commission did not reject that evidence or downplay its significance. The Commission simply ignored it. That is reversible error. An administrative agencys ruling is arbitrary and capricious where, as here, the agency failed adequately to address relevant evidence before it. El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. U.S. Dept of Health & Human Servs., 396 F.3d 1265, 1278 (D.C. Cir. 2005); Clifton Power Corp. v. FERC, 88 F.3d 1258, 1268 (D.C. Cir. 1996) (same); In re Sang-Su Lee, 277 F.3d 1338, 1344 (Fed. Cir. 2002) (Reasoned findings are critical to . . . judicial reliance on agency compe7
While the Commission acknowledged that Rambus had received over for SerDes technology licenses, which encompass the Dally patents, A46a type of proof the Commission had previously considered circumstantial evidence that an investment was made, Navigation Devices, at 24it gave that evidence no weight. 60
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tence.); Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998). Ignoring the evidence is the epitome of failing adequately to address it. The Commissions decision was also arbitrary and capricious on the merits: The Commissions explanation for its decision plainly runs
counter to the evidence before the agency. Dominion Res., Inc. v. United States, 681 F.3d 1313, 1319 (Fed. Cir. 2012). If Rambuss evidence in this case does not establish substantial investment in engineering, research and development, [and] licensing the Dally patents, 19 U.S.C. 1337(a)(3)(C), it is difficult to imagine what would. 2. The Commissions Allocation Requirement Is An Unjustified Reversal Of Agency Precedent
The Commissions domestic industry ruling fails for a secondand independentreason: The new allocation standard the Commission imposed for investments in licensing cannot be reconciled with the Commissions precedent. In the paragraph before the Commission imposed its new allocation requirement in this case, the Commission acknowledged that, under its precedent, Rambus was not required to provide a precise allocation of its licensing investments on a patent-by-patent basis . . . in order to make a sufficient evidentiary showing. A49 (emphasis added). Yet the Commission here reversed course without acknowledging that 61
change or providing any reason for doing so. Where, as here, an agency engages in conduct that is inconsistent with its precedent and fails to explain why it departed from that precedent, its decision is arbitrary and capricious. Schucker v. FDIC, 401 F.3d 1347, 1354 (Fed. Cir. 2005); SKF USA Inc. v. United States, 630 F.3d 1365, 1373 (Fed. Cir. 2011). a. The Commission Reached The Opposite Result, Based On Similar Evidence, In The Related Rambus 661 Investigation
Having ignored evidence of Rambuss investments specific to developing and licensing Dally-based technology, the Commission deemed evidence of Rambuss efforts to license portfolios that included the patents insufficient. The evidence, the Commission declared, would not allow it to determine what portion of the in total licensing expenditures
incurred by Rambus, or what portion of time or expenses incurred by the 30 Rambus employees, might be allocated to the Dally . . . patents. A49
(emphasis added). Absent that allocation, the Commission claimed, it was unable to find grounds upon which these unknown investments could be considered substantial. A50. That cannot be reconciled with the Commissions determination, just three years earlier, that Rambus had established a domestic industrythat it had established a nexus between the asserted patents and firm-wide
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licensing expenseson indistinguishable facts. In Certain Semiconductor Chips Having Synchronous Dynamic Random Access Memory Controllers and Products Containing Same, Inv. No. 337-TA-661 (the 661 Investigation), Rambus had asserted the same Barth patents it asserted, together with the Dally patents, in this investigation. In that case, Rambus presented the same type of firm-wide evidence the Commission faulted here: its total investments in licensing activities; the number of its employees involved in licensing; its expenditures on salaries and benefits for those employees; and its licensing-related marketing expenses. Compare 661 Investigation, ALJ Order No. 21, at 5-8, with A45-47.8 In the 661 Investigation, the ALJagain Judge Essexfound a nexus between the asserted [Barth] patents and Rambuss licensing activities. 661 Investigation, ALJ Order No. 21, at 7. The same is true here: Judge Essex found a strong nexus between both the Barth and Dally patents and Rambuss licensing activities. A423-39. In the 661 Investigation, the ALJ found that Rambuss firm-wide licensing expenses were sufficient to establish a domestic industry for the Barth patents, ALJ Order No. Rambuss patent-specific evidence in the 661 Investigation was the number of licenses it had negotiated that covered the Barth patents and the amount of revenue received from those licenses, 661 Investigation, ALJ Order No. 21, at 5-6evidence that Rambus also provided here with respect to the Dally patents, see A46. 63
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21, at 8, and the Commission declined to review Judge Essexs determination. See A50 n.20. As such, the administrative law judges initial determination became the final determination of the Commission. Honeywell Intl, Inc. v. ITC, 341 F.3d 1332, 1337 (Fed. Cir. 2003); 19 C.F.R. 210.42(h)(2). The Commissions finding of a domestic industry in the 661 Investigation should have been dispositive here, as Rambus produced similar evidence of firm-wide licensing expenses in both casesand, indeed, more evidence of investment specific to the Dally patents in this case than it did with respect to the Barth patents in the 661 Investigation. See pp. 53-56, supra. But the Commission refused to follow its precedent in the 661 Investigation. The Commission instead held that Rambuss evidence did not satisfy the domestic industry requirement with respect to the very same Barth patents in which it had previously found a domestic industry in the 661 Investigation. It then refused to find a domestic industry for the Dally patents for the same reasonbecause Rambus had not provided sufficient evidence of how those firm-wide expenses could be allocated . . . to licensing the Dally and Barth patents. A47. Nowhere did the Commission attempt to explain how the same proof that established a domestic industry for the Barth patents was sufficient in the 661 Investigation, but was not sufficient here. JA1519-20.
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Instead, the Commission stated that the respondents petition for Commission review in the 661 Investigation did not squarely challenge the adequacy of Rambuss firm-wide showing. A50. But respondents in the 661 Investigation appealed the Commissions domestic industry determination to this Court, arguing that general licensing activity does not satisfy the domestic industry inquiry, and urging that Rambus was required to tie its licensing activity to the Barth I patents. Br. of Appellants 32, nVidia v. ITC, Nos. 2010-1556, 2010-1557 (Fed. Cir. Dec. 13, 2010). The Commission specifically defended the standard it now seeks to abandon, urging that its domestic industry determination should stand because it satisfied the nexus requirement of the 694 opinion, i.e., Navigation Devices. JA17355. Because the Commissions finding of no domestic industry here is flatly inconsistent with [the Commissions] precedent finding a domestic industry in the 661 Investigation, it is arbitrary and capricious. Schucker, 401 F.3d at 1354. b. Prior Commission Precedent Required Only A Nexus Between The Patent And Licensing Expenses, Not Allocation
Even aside from the 661 Investigation, the Commissions demand for proof of the portion of the expenses associated with overall licensing activities that could be allocated to the Dally patents, A47, represents a
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dramatic change in legal requirements. As the Commission concedes, see A47-50, it previously had recognized that [i]t may be challenging, if not impossible, to allocate a particular dollar amount to each asserted patent, and yet allowed that [t]his does not preclude a complainant from establishing a domestic industry. Certain Liquid Crystal Display Devices, Including Monitors, Televisions, and Modules, and Components Thereof, Inv. Nos. 337-TA-749, -741, USITC Pub. 4383, at 115 (July 6, 2012) (final). Instead, the Commission required the complainant to show that there is a nexus between its alleged licensing activities and an asserted patent. Navigation Devices, at 12. Tellingly, the Commission here did not cite one prior
decision in which it had gone beyond the nexus analysis and required proof of allocation. Since deciding this case, however, the Commission has cited it as guidance on the new issue of how to apportion . . . investments in licensing. Certain Integrated Circuits, Chipsets, and
Products Containing Same Including Televisions, Inv. No. 337-TA-786, Commn Op. 28 (Oct. 10, 2012) (finding no domestic industry where the Commission previously had found one). An agency is not absolutely prohibited from changing its course on an issue. Motor Vehicle Mfrs. Assn v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983). When it does, however, it is obligated to supply a
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reasoned analysis for the change. Id. Here, the Commission had previously disavowed any allocation requirement, instead holding that it was sufficient to show the requisite nexus between the asserted patent and portfolio-licensing activities. See pp. 65-67, supra. By taking a position inconsistent with this longstanding practice, without any explanation for the shift, the [Commissions] action is not reasoned decision-making and is arbitrary. Schucker, 401 F.3d at 1356; see M.M.&P. Mar. Advancement, Training, Educ. & Safety Program v. Dept of Commerce, 729 F.2d 748, 754-55 (Fed. Cir. 1984) (vacating agency decision that arbitrarily imposed a new requirement without justification). 3. The Commissions Change In Standard Undermines Congresss Intent
The Commissions abrupt imposition of an allocation standard for investments in patents that are licensed in a larger portfolio is also inconsistent with statutory intent. Far from effectuating Congresss intent, it will effectively close the Commissions doors to the very universities and smaller research companies Congress sought to protect when it amended Section 337 to recognize domestic industries based on engineering, research and development, or licensing. 19 U.S.C. 1337(a)(3)(C); InterDigital, 707 F.3d at 1301. Indeed, the effects of the Commissions decision threaten to close the doors to a broad swath of industry. No entityincluding the 67
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United States largest technology companies, many of which hold tens of thousands of patentswill be able to vindicate its rights before the Commission with respect to patents in portfolios that the company commercializes through licensing rather than manufacture. The reason is simple. As the Commission itself explained when it adopted the nexus requirement, an allocation standard is unworkable because most people do not document their daily affairs in contemplation of possible litigation. Certain Stringed Musical Instruments and Components Thereof, Inv. No. 337-TA-586, USITC Pub. 4120, at 26 (May 16, 2008) (final). Universities and technology companies previously had no reason to have their professors, researchers, licensing personnel, and other employees record what portion of their daily activities relates to specific patents. Nor do they typically track research and development expenses in terms of particular patents. Thus, the records that would be required to satisfy the Commissions allocation standard simply will not existeven where, as here, the Commission acknowledges that the complainant almost certainly made investments in licensing the patents at issue. A50. In most cases, any attempt to perform an allocation retrospectively would be mere guesswork. And on a going-forward basis, technology research companies would have to assume a tremendous new burden of tracking and allocating employee
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time and research costseven though it is irrelevant to their business missionsjust to preserve their rights before the Commission. Before this case, the Commission had never imposed such a burden. It should not be applied for the first time, with no explanation for the change, here particularly against a party that, in prior proceedings, had prevailed before the Commission on the same type of evidence. The Commission has recently expressed concern whether certain nonpracticing entities (NPEs)i.e., entities that do not manufacture products practicing their patentsshould be permitted to obtain relief against infringing imports at the USITC. USITC, Facts and Trends Regarding
USITC Section 337 Investigations, at 2, http://www.usitc.gov/press_room/ documents/featured_news/sec337factsupdate.pdf (Apr. 15, 2013). The
Commissions abrupt imposition of an allocation standard for licensingbased domestic industries may be aimed at curtailing NPEs access to the Commission. Such an effort would defy Congresss intent, which was to protect universities and research institutions that by definition do not practice their inventions. And the Commissions new standardadopted without notice and commentis too blunt an instrument to address whatever concerns it may reflect. It impacts not only NPEs whose business model primarily focuses on purchasing and asserting patents, id., but also entities,
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like universities and like Rambus here, who perform research and development and advance the state of technology. Congress has expressly granted such entities access to the Commission under 19 U.S.C. 1337(a)(3)(C), and the Commission cannot defeat Congresss intent by adopting an insurmountable domestic industry standard. CONCLUSION For the foregoing reasons, the Commissions final determinations (1) that claims 2, 31, and 49 of the 857 patent and claim 3 of the 494 patent are invalid, and (2) that Rambus did not establish a domestic industry in the Dally patents, should be vacated. May 23, 2013 Doris Johnson Hines FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP 901 New York Avenue, N.W. Washington, D.C. 20001 (202) 408-4000 Jason E. Stach FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, LLP 3500 Sun Trust Plaza, Suite 3500 303 Peachtree Street, N.E. Atlanta, GA 30308 (404) 653-6400 Respectfully submitted, John M. Whealan 4613 Merivale Road Chevy Chase, MD 20815 (202) 994-2195 /s/ Jeffrey A. Lamken Jeffrey A. Lamken Counsel of Record Michael G. Pattillo, Jr. MOLOLAMKEN LLP The Watergate, Suite 660 600 New Hampshire Avenue, N.W. Washington, D.C. 20037 (202) 556-2010
Counsel for Appellant Rambus Inc.
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REPRESENTATIVE CLAIMS 1. A component comprising: a semiconductor chip; a processor within the chip; and a transmitter circuit within the chip, the transmitter circuit being coupled to the processor to accept a digital input signal including a plurality of digital values from the processor, the transmitter circuit being operable to send an output signal including a series of signal levels representing the digital values and to emphasize high frequency components of the output signal relative to low frequency components of the output signal so that: (i) an output bit signal of the output signal representing a particular bit value has one signal level when the bit value is the same as a bit value represented by a predetermined preceding output bit signal; and (ii) the output bit signal representing the particular bit value has another signal level when the bit value is different from the bit value represented by the predetermined preceding output bit signal. 2. The component as claimed in claim 1 wherein the transmitter circuit is operable to send the output signal with an output frequency of at least 1 GHz and a bandwidth greater than 100 MHz. U.S. Patent No. 7,602,857, 8:45-63 (A642) (emphasis added).
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CERTIFICATE OF SERVICE I certify that on May 23, 2013, the foregoing Nonconfidential Brief for Appellant Rambus Inc. was filed electronically with the Clerk of the Court for the U.S. Court of Appeals for the Federal Circuit using the CM/ECF system and served electronically by ECF on the following counsel: Sidney A. Rosenzweig U.S. International Trade Commission 500 E Street, S.W., Suite 707 Washington, D.C. 20436 (202) 708-2532 Counsel for Appellee United States International Trade Commission Louis Stefan Mastriani Adduci, Mastriani & Schaumberg, L.L.P. 1133 Connecticut Avenue, N.W. 12th Floor Washington, DC 20036 (202) 467-6300 Counsel for Intervenor Garmin International, Inc. Andrew Kopsidas Fish & Richardson, P.C. 1425 K Street, N.W., Suite 1100 Washington, DC 20005 (202) 783-5070 Victoria Fishman Maroulis Quinn Emanuel Urquhart & Sullivan, L.L.P. 555 Twin Dolphin Drive Redwood Shores, CA 94065 (650) 801-5100 Counsel for Intervenor Cisco Systems, Inc. David E. Sipiora Kilpatrick Townsend & Stockton LLP 1400 Wewatta Street, Suite 600 Denver, CO 80202 (303) 405-8525 Counsel for Intervenors LSI Corporation and Seagate Technology LLC
Sean S. Pak Quinn Emanuel Urquhart & Sullivan, L.L.P. 50 California Street, 22nd Floor San Francisco, CA 94111 Counsel for Intervenor Hewlett-Packard (415) 875-6600 Company Counsel for Intervenors STMicroelectronics NV and STMicroelectronics, Inc.
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Alexander J. Hadjis Morrison & Foerster L.L.P. 2000 Pennsylvania Ave. N.W. Washington, DC 20006 (202) 887-1560 Counsel for Intervenor HGST, Inc.
/s/ Jeffrey A. Lamken Jeffrey A. Lamken
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CERTIFICATE OF COMPLIANCE 1. X This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7) because: This brief contains 13,875 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii) and Local Rule 32(b). This brief uses a monospaced typeface and contains [state the number of ] lines of text, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. X This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because: this brief has been prepared in a proportionally spaced typeface using Microsoft Word in Times New Roman 14 point font, or this brief has been prepared in a monospaced typeface using [state name and version of word processing program] with [state number of characters per inch and name of type style]. /s/ Jeffrey A. Lamken Jeffrey A. Lamken

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Case: 12-1677

United States Court of Appeals

Counsel for Appellant Rambus Inc.

The Commissions Final Determination .................................. 21

The Commissions Change In Standard Undermines Congresss Intent ........................................................... 67

1 gigabit-per-second, as the ALJ and Commission found?

Did the Commission err in reversing the ALJs finding of a

in royalties to Rambus. JA12646-47. Rambus also

The Decisions Below A. The ALJs Initial Determination

Id., 3:26-28 (emphasis added).

The ALJ nevertheless stated, without

had paid over patents. A439; A435.

in royalties when Rambus

describing how pre-emphasis operates, Claim 1 specifies that an output

received by Rambus, as a condition of its contin-

Counsel for Appellant Rambus Inc.

/s/ Jeffrey A. Lamken Jeffrey A. Lamken

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