ITC Investigates University of California Complaint Against Amazon and Other Major Retailers

U.S. International Trade Commission

In late August, the U.S. International Trade Commission published a notice of institution of a Section 337 investigation on behalf of the Regents of the University of California (UC), which is now underway. The University filed a complaint in July alleging that a series of major retailers including Amazon.com, Bed Bath & Beyond, IKEA, Target and Walmart have infringed patents through the importation of certain filament light-emitting diodes (LEDs) and products containing the same. The ITC action is part of an enforcement campaign that is being hailed by the firm representing the university as a “first-of-its-kind university-led effort” to vindicate patent rights owned by the institution.

There are four UC patents involved in the Section 337 investigation:

• S. Patent No. 7781789, Transparent Mirrorless Light Emitting Diode. It claims an opto-electronic device comprising an LED that emits light from multiple sides and wherein all LED layers are transparent for an emission wavelength except for an emitting layer.
• S. Patent No. 9240529, Textured Phosphor Conversion Layer Light Emitting Diode. The claimed invention minimizes the internal reflection of the phosphor layer by preferential patterning the emitting surface to direct more light away from the absorbing chip structure.
• S. Patent No. 9589464, Light Emitting Diode With Light Extracted From Front and Back Sides of a Lead Frame. It discloses an LED combined with a shaped phosphor conversion which results in a combined structure that extracts more light out of the white LED.
• S. Patent No. 10217916, Transparent Light Emitting Diodes. The claimed invention similarly addresses a need in the art for LED structures that more effectively extract light.

As the Section 337 complaint filed with the ITC  shows, the filament LED technology covered by the asserted patents was developed by researchers at the UC Santa Barbara’s Solid State Lighting and Energy Electronics Center (SSLEEC), especially through the work of the SSLEEC’s co-director Shuji Nakamura, a co-recipient of the 2014 Nobel Prize in Physics. Also listed as inventors on the asserted patents are SSLEEC co-director Steven DenBaars and research center co-founder James Speck. A background webpage on the patent enforcement campaign on the UC Santa Barbara website notes that the filament LED bulbs, which may vary in terms of filament number or filament length, can be installed in residential, commercial and industrial settings and the market for the bulbs is expected to reach $1 billion in sales in 2019.

First University Before the ITC as Sole Complainant

“This is essentially the first time that an academic institution has appeared as a sole complainant before the ITC,” said Seth Levy, Partner at Nixon Peabody. Levy is co-chair of the firm’s Life Sciences Center and co-lead counsel for UC in this case along with fellow Nixon Peabody Partner Shawn Hansen. “When you consider how much intellectual property is created at universities, there’s a very small fraction that is actually enforced by the institution,” he said, adding that in most patent litigation campaigns involving universities, suit would be brought by the licensee and the university would be added as a third-party for reasons of standing.

The Wisconsin Alumni Research Foundation (WARF), Boston University and Carnegie Mellon University are two academic institutions that have engaged in high-profile litigation campaigns over the past decade. However, some commentators have pointed to the seeming inconsistencies between the educational goals of a research institution and the profit motive of patent litigation for infringement damages. Further, as with any plaintiff in a patent case, universities asserting patents may risk implementing a legal strategy that doesn’t pass muster, as was the case in the Federal Circuit’s recent decision that sovereign immunity principles didn’t allow the University of Texas to bring an infringement suit in an improper venue.

Tech transfer offices at American universities have grown significantly in the four decades since the passage of the Bayh-Dole Act, transforming from smaller administrative programs on university campuses to contemporary programs with incubators, accelerators and other resources that are reflective of the scientific pursuits of the university. Levy acknowledged that recent reforms to the patent system, including passage of the America Invents Act (AIA) and the U.S. Supreme Court’s 2006 decision in eBay v. MercExchange, have posed challenges to tech transfer offices looking to vindicate their patent rights. However, the fundamental issue in UC’s case deals with the views of the private sector on the value of licensing university IP. While patents may be incredibly valuable in pharmaceutical spaces, where a single blockbuster drug may be covered by only a handful of patents, universities pursuing research in semiconductor or consumer electronics fields deal with a different industry reality wherein companies amass large portfolios for defensive purposes and don’t typically see individual patents as having much inherent value. “From a university perspective, it’s difficult to get companies to license patents even if they’re infringing,” Levy said. “They tend to infringe with impunity as there’s very little risk that a university will actually enforce patent rights against them. That industry environment is among the issues that this enforcement campaign addresses.”

Enforcement Campaign Encompasses ITC, District Court

UC has also filed patent infringement suits in the Central District of California against Amazon.com , Walmart  and the other retailers in the ITC action. The accused products targeted by UC’s infringement complaints mirror those identified in the ITC complaint. Levy noted that the district court litigation and the Section 337 investigation were two valuable prongs of the same campaign because of the different remedies available. Injunctive relief in district court has been limited post-eBay so the ITC’s ability to issue limited exclusion or cease-and-desist orders can be incredibly valuable to parties fighting infringers who are importing products from overseas. The district court litigation, however, enables parties asserting patent rights to seek money damages that aren’t available at the ITC. “Our sincere hope and belief is that we will be settling these cases and licensing the patents long before there’s a dispositive outcome in any of these cases,” Levy said, noting that the University isn’t in the business of litigation but pursued legal action as a method of last resort to achieve licensing.

One unusual aspect of this enforcement campaign is the fact that the University of California is using an outside source of funding from investment firm Longford Capital Management to pay the legal expenses of the ITC and district court suits. “We felt that it was appropriate to be public about this,” Levy said. “The University is proud to have done this and find an innovative way to pursue the matter.” Longford Capital has offered funding in return for an agreed-upon portion of the proceeds from the campaign’s outcome. By using this outside funding source, Levy pointed out that UC won’t have to divert university resources from other academic priorities at the institution, including education and research.

The value of UC’s patented filament LED light technology—the ITC complaint notes that the LEDs use less energy than traditional incandescent bulbs and can last up to 20 years—is a major reason why retailers have entered the market with infringing products. “The speed with which these products became ubiquitous in the market is an indicator of the importance of the technology and the need for a larger-scale campaign to enforce the patents,” Levy said.

“The more pioneering an innovation is, the more likely it will have widespread applicability to many industry players,” said Ryan Marshall, patent lawyer and shareholder at Brinks Gilson & Lione. In this situation, the filament LED technology developed by a Nobel laureate inventor has been integrated into a wider range of products than just those targeted in the Section 337 investigation and district court suits. Marshall noted that, usually, a patent owner would go after many smaller infringers to build a successful case record, but he was curious whether the retailers in this case might look to the OEMs to indemnify them from infringement claims. “Whether or not indemnities are in place is an issue that would be fact-specific to each retailer,” he said, noting that it could be possible that some retailers approached their private label manufacturers with the idea of making filament LED products or vice versa. In either case, there would be a question of whether anyone did due diligence to make themselves aware of UC’s patent portfolio, which could open them up to a finding of willful infringement and treble damages.

“Universities are always resource limited when it comes to funding litigation,” Marshall said, pointing out that the use of litigation funding was a creative way to address the cost of patent enforcement for an academic institution. Marshall also was not aware of other cases at the ITC involving a university as a sole complainant.

Levy added that the five retailers targeted in the ITC and district court suits aren’t the only infringers on the market but were selected as the first round of respondents and defendants for tactical reasons. “Hopefully other retailers will take this opportunity to learn about the patents, understand the  landscape and reach out to us for licensing so that we can avoid litigation like this in the future,” he said.