Tessera, Inc. (“Tessera”) filed a complaint with the United States International Trade Commission (the “Commission” or “ITC”) on December 21, 2007, under section 337 of the Tariff Act of 1980, 19 U.S.C. § 1337, alleging that eighteen respondents infringed U.S. Patent Nos. 5,663,106 (the “'106 patent”); 5,679,977 (the “'977 patent”); 6,133,627 (the “'627 patent”); and 6,458,681 (the “'681 patent”) through the importation of certain semiconductor chips.
See Certain Semiconductor Chips With Minimized Chip Package Size and Products Containing Same,
No. 337-TA-630,
Of the eighteen respondents, ten remain in the case and have intervened in this
I. Background
The patents-in-suit relate to innovations in semiconductor chip packaging.
A. Technology
A semiconductor chip (“chip”) is a widely used miniaturized electronic circuit. A semiconductor package (“package”) protects these delicate chips from mechanical and thermal damage. Most modern packages protect the chip by encapsulating it with a molded plastic, generally referred to as “encapsulant.” One problem with using encapsulant, however, is that it tends to contaminate the delicate, miniature electrical terminals on the exterior of those packages. These terminals serve as an endpoint for electrically connecting the package to another device, such as a printed circuit board. These terminals become contaminated when encapsulant obstructs the terminals, preventing an effective and reliable electrical connection. The '106 patent is directed toward innovations preventing the contamination of exposed terminals on packages during encapsulation.
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Figure 1 provides an illustration of the invention described and claimed in the '106 patent. The claimed invention is directed to protecting the terminals (26) of the chip (12) from encapsulant (40). During encapsulation, the patent describes using an encapsulant barrier (28) and a protective barrier (30) to define an encapsulation area. The preferred embodiment uses a material known as “solder mask” for the protective barrier, but also permits the use of “any other means which protects the exposed terminals on the top layer.” Id. col.211.25-26, 59-61. The protective barrier protects the terminals from coming in contact with encapsulant (40) when it is injected into the encapsulation area through a fill hole (36).
Tessera asserted claims 1-4, 9-10, and 33-35 of the '106 patent. Claim 1, from which the other asserted claims depend, is set forth below with emphasis added to show the key limitation on appeal:
1. A method of encapsulating a semiconductor chip assembly having a top layer with an array of exposed terminals thereon, the terminals being electrically connected to the chip, said method comprising the steps of:
placing an encapsulant barrier adjacent the semiconductor chip assembly, said encapsulant barrier at least partially defining an encapsulation area;
providing a protective barrier in contact with said top layer for protecting the terminals on the top layer from an encapsulation material; and
introducing an encapsulation material into at least a portion of the encapsulation area so that the encapsulation material flows to fill the encapsulation area and then cures to a substantially solid condition, the protective barrier preventing the encapsulation material from contacting the terminals on the top layer. Id. col.9 11.32 — 48 (emphases added).
B. Accused Products
Each package accused of infringing the '106 patent includes a chip and a package substrate layer. The accused products fall into two categories: a first group with a polyimide-based package substrate (“|LBGA”) and a second group with a laminate-based package substrate (“wBGA”). Despite using different materials for the package substrate layer, the accused products are similar in most respects. Only Elpida imports the accused p,BGA products, whereas all intervenors import the accused wBGA products. Because the infringement determination as to the pJBGA is not challenged on appeal, this discussion will focus on the accused wBGA products.
The accused wBGA products consist of a stack of layers. The bottom-most relevant layer is the laminate substrate layer. This layer can be thought of as a solid foundational layer. A copper wiring layer is applied on top of this laminate substrate layer. This conductive copper wiring layer provides for the controlled flow of electrical signals. To prevent corrosion of the copper and the inadvertent shorting of the electrical paths, a solder mask layer is applied on top of the copper wiring layer. The solder mask layer covers both the copper wiring layer and the underlying laminate substrate layer, leaving exposed only the endpoints of each copper conductive path. These exposed copper endpoints — holes in the solder mask layer where the underlying copper wiring layer is exposed — are the terminals of the accused wBGA products. During encapsulation, a “protective barrier” comes in contact with the solder mask layer and prevents encapsulant from flowing into the holes on the solder mask layer and contaminating those terminals — the exposed areas of the underlying copper wiring layer.
C. Tessera’s Licensees
Tessera’s primary business is licensing its technology. Since the late 1990s, Tess-era has licensed the patents-in-suit to more than sixty semiconductor technology companies, including nine of the ten largest. Tessera often licenses its patents to suppliers through agreements called “TCC Licenses.”
While the terms of each TCC License vary from licensee to licensee, these TCC Licenses share several characteristics. Each TCC License calls for an upfront license fee along with running royalties to be paid at the end of a reporting period for products sold. Each TCC License also contains a grant clause substantially identical to the following: “Subject to the terms and conditions [of this agreement], Tessera hereby grants Licensee a ... license to the Tessera Patents ... and to sell ... and/or offer for sale such TCC Licensed Products.”
Appellant’s Br.
56.
All of the intervenors purchase some portion of their accused packages from parties to the TCC Licenses. Elpida asserts, and the Commission agreed, that 100% of its products came from Tessera licensees. The remaining intervenors concede that at least a small portion of their accused products are made from unlicensed suppliers. It is undisputed that some licensees had fallen behind on their obligations to pay royalties on sales made under the TCC Licenses.
D. Procedural History
On August 28, 2009, the presiding administrative law judge (“ALJ”) issued the Initial Determination, finding no section 337 violation. In reaching this conclusion, the ALJ determined: (1) Tessera failed to meet its burden to show that the accused products infringed the '106, '977, and '627 patents; (2) the '106 patent was not invalid for anticipation, obviousness, or indefiniteness; (3) the '977 and '627 patents were not invalid for anticipation or indefiniteness; and (4) Tessera’s patent rights are exhausted as to those accused products purchased from Tessera’s licensees. Id.
On October 30, 2009, the Commission decided to review, among other issues, the ALJ’s findings regarding claim construction of two terms recited in claim 1 of the '106 patent: “top layer” and “thereon.”
In the Matter of Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same,
Notice of Commission Determination To Review in Part a Final Initial Determination Finding No Violation of Section 337,
After briefing by the parties, the Commission issued its final determination on January 4, 2010. In affirming the ALJ’s determination of no section 337 violation, the Commission: (1) modified the ALJ’s construction of “top layer” and “thereon” in claim 1 of the '106 patent; (2) reversed the ALJ’s finding of noninfringement for the |xBGA products, but affirmed his finding of patent exhaustion; and (8) affirmed the ALJ’s finding that the accused wBGA products do not infringe the asserted claims of the '106 patent. Final Determination. Thus, the Commission found that the (jiBGA products infringe, but are exhausted, and that the wBGA products do not infringe.
Tessera appeals from the Final Determination on multiple grounds. First, Tessera challenges the Commission’s claim construction of claim 1 of the '106 patent. Second, Tessera challenges the Commission’s finding of no infringement by the accused wBGA products. Third, Tessera challenges the Commission’s finding of patent exhaustion. Finally, Tessera seeks a vacatur of the Commission’s decision as it pertains to the now expired '977 and '627 patents. On appeal, a few intervenors have also challenged the validity of the '106 patent as being anticipated by numerous prior art references. This court has jurisdiction under 28 U.S.C. § 1295(a)(6).
II. Discussion
A. Standard of Review
This court reviews the Commission’s legal determinations
de novo
and the Commission’s factual findings for substantial evidence.
Alloc, Inc. v. Int’l Trade Comm’n, 342 F.3d
1361, 1368 (Fed.Cir.2003). This court “must affirm a Commission determination if it is reasonable and supported by the record as a whole, even if
B. Claim Construction
Tessera argues that the Commission initially adopted a correct claim construction, but “halfway through its infringement analysis, the ITC inexplicably switched to an incorrect claim construction.” Appellant’s Br. 25. According to Tessera, this court should therefore review the Commission’s finding of non-infringement de novo, as an error in claim construction. Intervenors and the Commission respond that Tessera “attempts to transform the Commission’s factual infringement finding into a claim construction issue in order to receive de novo review.” Appellee’s Br. 20.
“Patent infringement is a two step inquiry. First, the court must construe the asserted claim.... Second, the court must determine whether the accused product or process contains each limitation of the properly construed claims.”
Freedman Seating Co. v. Am. Seating Co.,
Tessera does not, nor could it, argue that the Commission adopted an incorrect claim construction. This is because the Commission adopted Tessera’s proposed claim construction. See Final Determination at 16-24. Tessera’s contention at best is a disagreement over the Commission’s application of Tessera’s construction to the accused wBGA devices. This court therefore agrees with Intervenors and the Commission that Tessera is challenging the Commission’s infringement determination, which this court reviews for substantial evidence.
C. Infringement
Tessera argues that the Commission erred in finding that the accused wBGA products do not infringe claim 1 of the '106 patent. Specifically, Tessera argues that the Commission erred when it found that the “top layer” of claim 1 cannot include the solder mask layer of the accused wBGA products. In doing so, according to Tessera, the Commission improperly modified its construction of “top layer.” The Commission construed “top layer” to mean “a layer disposed on the active side of the chip and which carries the terminals.” Final Determination at 20. Because the construction does not explicitly exclude “solder mask,” Tessera argues that the Commission erred by refusing to consider the accused solder mask layer as part of the claimed “top layer.”
According to Tessera, the Commission should have found the top layer to be either: (1) the solder mask layer, or (2) a composite “layer” that includes both the laminate substrate and solder mask layers. Tessera argues that the “top layer” must include the solder mask layer of the accused wBGA products because the terminals are on the bottom edge of the solder mask layer. Tessera goes on to argue that because the “protective barrier” comes in contact with the solder mask during production of the accused wBGAs, had the Commission found that the solder mask was part of the “top layer,” the accused wBGA products would infringe.
Intervenors and the Commission respond that substantial evidence supports the Commission’s finding. The Commission found that the laminate substrate lay
Substantial evidence supports the Commission’s determination that the laminate substrate layer of the accused wBGA products is the “top layer” and, as such, these products do not infringe the asserted claims of the '106 patent. The issue of infringement ultimately turns upon which layer is identified as the “top layer.” The ALJ issued a detailed opinion, citing expert testimony, explaining how the terminals are formed on the laminate substrate layer and how the laminate substrate layer is that layer which carries the terminals, or, the “top layer.” Initial Determination at 50 (“[T]he evidence clearly shows that the [terminals] are formed from the copper metallization layer that is [thereon] the [laminate] substrate for wBGA products.”).
In applying the modified construction to the accused wBGA products, the Commission found “the ALJ correctly concluded that for the wBGA packages, the laminate-based substrate core layer represents the claimed ‘top layer,’ and that because the ‘protective barrier’ does not come into contact with that layer, the wBGA packages do not infringe the asserted claims of the '106 patent.” Final Determination at 28. We see no basis to question the factual finding that the laminate substrate layer is the layer that “carries the terminals.”
For further support, the Commission noted that throughout the specification, “solder mask” is depicted as a component separate and distinct from the “top layer.”
Final Determination
at 27-28 (stating “[n]owhere does the '106 patent describe or suggest that the top layer includes the solder mask layer”). Tessera argues that the Commission, in doing so, improperly imported a “no solder mask” limitation into its claim construction. This court remains unconvinced. The Commission did not modify its claim construction or import limitations from the specification. Instead, the Commission simply noted that Tess-era’s theory of infringement, requiring the claimed “top layer” to include the solder mask layer, was flatly inconsistent with the preferred embodiment depicted in the '106 patent. Indeed, the specification describes using “solder mask” as the preferred material for the protective barrier, not the top layer, and, at times, even uses the term “solder mask” interchangeably with “protective barrier.” '106 patent at eol.2 11.25-26 (“Preferably, the protective barrier utilized in the present invention is a solder mask.”). It is disingenuous for
Tessera fails to cite any record evidence supporting its contention that the solder mask layer “carries the terminals.” Substantial evidence supports the Commission’s finding that the claimed “top layer,” the layer that “carries the terminals,” corresponds to the laminate substrate layer on the accused wBGA products. See Final Determiantion at 28. In light of this finding, the accused wBGA products do not infringe the asserted claims of the '106 patent. This court therefore affirms the Commission’s finding of no infringement as to the accused wBGA products.
D. Anticipation
Intervenors argue that the Commission incorrectly found that the asserted claims of the '106 patent were not anticipated by U.S. Patent Nos. 5,136,336 (“Worp”), 5,218,759 (“Juskey”), and 4,868,349 (“Chia”). Tessera responds that numerous claim elements are absent from each reference.
Anticipation is a question of fact that must be established by clear and convincing evidence.
Sanofi-Synthelabo v. Apotex, Inc.,
Worp fails to disclose at least a “protective barrier in contact with said top layer,” as required by claim 1 of the '106 patent. Although the ALJ found a “strong possibility” that this limitation may be present in Worp, the Intervenors fail to cite any disclosure in Worp that describes the configuration of the “protective barrier” and whether it actually contacts the top layer.
Juskey also fails to disclose at least a “protective barrier in contact with said top layer,” as required by claim 1 of the '106 patent. Instead, the ALJ found that Juskey discloses the use of glue between the top layer and the protective barrier, preventing the protective barrier from coming in contact with the top layer. Intervenors fail to cite any disclosure in Juskey that shows a protective barrier in contact with the top layer.
Chia fails to disclose at least “exposed terminals,” as required by claim 1 of the '106 patent. Intervenors argue that the pins in Chia serve as the exposed terminals. The ALJ, on the other hand, found that the pins in Chia are neither “terminals,” because they are not an endpoint of the package, nor “exposed” to contamination, because the pins are slid into the plated-through holes prior to encapsulation. Instead, the ALJ found the plated-through holes in Chia were the terminals because they serve as the endpoint for electrical and mechanical connection from the package to the outside world. Intervenors fail to cite any disclosure in Chia of terminals exposed to contamination from encapsulant.
To invalidate the asserted claims of the '106 patent on the grounds of anticipation, the Intervenors must prove by clear and convincing evidence that a single prior art reference discloses each and every limitation of the '106 patent. The ALJ’s detailed and well reasoned analysis of the asserted prior art and his determination that the '106 patent is not anticipated is supported by substantial record evidence. This court therefore affirms the Commission’s determination that the '106 patent is not anticipated by Worp, Juskey, or Chia.
This court’s affirmance of the Commission’s finding of noninfringement as to the wBGA products leaves the accused ixBGA products as the only products found to infringe the '106 patent. The finding of infringement is not challenged on appeal, but the Commission’s determination of patent exhaustion is. Because Elpida is the only importer of the accused ixBGA products, it is the only party affected by this determination.
As a preliminary matter, the Commission and Elpida challenge this court’s jurisdiction to hear the appeal regarding patent exhaustion. Accordingly, this court will first address the jurisdictional challenge before addressing the merits of the underlying patent exhaustion defense.
1. Jurisdiction
The Commission and Elpida argue that this court lacks jurisdiction to hear Tessera’s appeal as to patent exhaustion because Tessera did not timely appeal that issue. The ALJ issued the Initial Determination on August 28, 2009. At that time, the ALJ determined that Tessera’s patent rights were exhausted with respect to all accused products sold by Tessera’s licensees. Initial Determination. Because the ALJ found that intervenor Elpida purchased 100% of its accused products from Tessera’s licensees, Elpida could no longer be subject to an exclusion order and was terminated from the investigation. On October 30, 2009, the Commission issued its Notice to Review announcing its decision not to review the ALJ’s determination on patent exhaustion. The Commission subsequently issued its Final Determination on December 29, 2009.
Tessera filed a notice of appeal on January 28, 2010, within sixty days from the Final Determination, but more than sixty days from the Notice to Review. The Commission argues that when it decided not to review the ALJ’s determination on patent exhaustion, the ALJ’s decision then became the final decision of the Commission. Because Tessera did not file a notice of appeal within sixty days of the Commission’s decision not to review the ALJ’s patent exhaustion determination, the Commission argues that Tessera’s appeal of that issue was not timely and, therefore, should be dismissed for lack of jurisdiction.
The Commission cites this court’s decision in
Allied Corporation v. International Trade Commission,
for the proposition that a Commission decision is final when “there was no provision for ... review ... following a determination that does not lead to an exclusion order.”
Tessera responds that this court’s jurisdiction over appeals from the Commission is governed by § 1337(c), which requires that “[a]ny person adversely affected by a final determination of the Commission ... may appeal such determination, within 60 days after the determination becomes final.” 19 U.S.C. § 1337(c). Under ITC regulations, an initial determination becomes the determination of the Commission “unless the Commission ... shall have ordered review of the initial determination or
certain issues
therein....” 19 C.F.R. § 210.42(h)(2) (emphasis added). According to Tessera, when the Commission decided to review “certain issues therein,” such as claim construction of the '106 pat
Tessera distinguishes
Broadcom
and
Allied
as both involving undisputedly final determinations finding some patents infringed and others not infringed or invalid. In those cases, the only question was whether the patentee should appeal noninfringement or invalidity immediately or wait for the Presidential review period to pass as to the patent held valid and infringed.
Broadcom,
Allied
is easily distinguished. There, the ALJ found one patent not invalid and infringed but held the other two asserted patents invalid.
Allied,
Broadcom
was factually analogous. There, Qualcomm asserted that Broadcom appealed too early, because it did not wait for the Presidential review period to pass.
Broadcom,
Here, unlike in
Broadcom
or
Allied,
the Commission issued a
Notice to Review
certain issues of the
Initial Determination. Cf. Broadcom,
For the foregoing reasons, this court agrees with Tessera that this court possesses jurisdiction over the Commission’s patent exhaustion determination. Under the Commission’s own regulations, the
Initial Determination
did not become final because the
Notice to Review
ordered re
2. Exhaustion
Tessera argues that the Commission improperly found patent exhaustion without an authorized sale. Tessera contends that under the terms of the TCC Licenses, sales by its licensees are not licensed, and are therefore unauthorized until royalties have been paid. Because royalties were not paid or were paid late by some licensees, Tessera asserts that sales by those licensees did not trigger exhaustion of its patent rights. Noting that patent exhaustion is designed to prevent a double recovery, Tessera asserts that a finding of patent exhaustion here would deprive it from receiving even a single recovery.
The Commission and Elpida respond that patent exhaustion is triggered “by a sale
authorized
by the patent holder.”
Quanta Computer, Inc. v. LG Elecs., Inc.,
“The longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item.”
Quanta,
The Supreme Court held that LG’s patent rights were exhausted upon Intel’s authorized sale to Quanta. Although Intel was not licensed to practice the patents using non-Intel parts, “[njothing in the License Agreement restricts Intel’s
right to sell
its microprocessors and chipsets to purchasers who intend to combine them with non-Intel parts.”
Id.
at 636,
Here, as in
Quanta,
Tessera’s licensees were authorized to sell the accused prod
Tessera spends considerable time arguing about the effect of the “Exclusion for License” provision in the TCC Licenses and the fact that the grant clause quoted above was “[sjubject to ... Licensee’s payment of the fees and royalties.... ” These arguments add unnecessary complexity to a rather straightforward analysis. The proper focus is on whether the sales were authorized. Tessera overlooks important aspects of the structure of its TCC Licenses. These agreements expressly authorize licensees to sell the licensed products and to pay up at the end of the reporting period. Thus, in these agreements, Tess-era authorizes its licensees to sell the licensed products on credit and pay later. That some licensees subsequently renege or fall behind on their royalty payments does not convert a once authorized sale into a non-authorized sale. Any subsequent non-payment of royalty obligations arising under the TCC Licenses would give rise to a dispute with Tessera’s licensees, not with its licensees’ customers.
Tessera’s argument that the sale is initially unauthorized until it receives the royalty payment is hollow and unpersuasive. The parties do not dispute that the TCC Licenses permit a licensee to sell licensed products before that licensee pays royalties to Tessera. But according to Tessera, that licensee’s sale, permitted under the TCC License, would later become unauthorized if that licensee somehow defaulted on a subsequently due royalty payment. That absurd result would cast a cloud of uncertainty over every sale, and every product in the possession of a customer of the licensee, and would be wholly inconsistent with the fundamental purpose of patent exhaustion — to prohibit postsale restrictions on the use of a patented article.
See, e.g., Bloomer v. McQuewan, 55
U.S. (14 How.) 539, 549,
Finally Tessera challenges the ALJ’s finding that Elpida purchased 100% of its accused products from Tessera’s licensees. Tessera complains that two of Elpida’s suppliers, both of which are affiliates of Tessera’s licensees, were not licensed under the TCC Licenses and that there is no evidence they agreed to the terms of the TCC License in writing. Elpida responds that a written acceptance was not necessary, and besides, these suppliers packaged products accused of infringing only the '977 and '627 patents, not the '106 patent. Tessera has no response in its reply brief and fails to point to any contrary record evidence. This court sees no basis on which to overturn the Commission’s finding that 100% of Elpida’s purchases of products accused of infringing the '106 patent were from Tessera’s licensees.
Thus, this court affirms the Commission’s determination that Tessera’s patent rights are exhausted as to all products accused of infringing the '106 patent pur
F. The '977 and '627 Patents
The Commission found no violation of section 337 with regard to the '977 and '627 patents because of its finding of non-infringement. Both patents have since expired. Because the ITC has a limited statutory mandate and can only issue an exclusion order barring future conduct, nothing remains before the Commission with respect to the '977 and '627 patents. Accordingly, the portion of the appeal pertaining to the '977 and '627 patents is now moot.
Tex. Instruments, Inc. v. Int’l Trade Comm’n,
Tessera requests that this court not only dismiss the appeal as moot but also vacate the Commission’s determinations regarding the '977 and '627 patents. Intervenors respond that this court should do no more than dismiss Tessera’s appeal as to these patents because Tessera caused the mootness by choosing to bring the action so close to patent expiration. We are not persuaded by Intervenors’ argument. It is apparent that this appeal became moot through happenstance, not of Tessera’s voluntary actions.
See Tafas v. Kappos,
Conclusion
Based on the foregoing, this court finds that the Commission provided a sufficient basis for finding no section 337 violation and its actions were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Because the Commission’s decision regarding the '106 patent was supported by substantial evidence and contained no errors of law, this court affirms that portion of the Final Determination. Because the '977 and '627 patents have now expired, this court vacates that portion of the Final Determination and remands with instructions to dismiss as moot the portion of the complaint relating to those patents.
AFFIRMED-IN-PART, VACATED-IN-PART, AND REMANDED
Costs
This court awards costs to Intervenors.