Federal Circuit Affirms Loss for Roku in ITC Case

The Federal Circuit has affirmed the International Trade Commission (ITC) 's decision in a dispute involving smart TVs between Universal Electronics, Inc. and Roku.

At issue was US Patent No. 10,593,196 for a System and Method for Optimized Appliance Control, owned by Universal, which refers to itself as “the global leader in wireless universal control solutions for home entertainment and smart home devices.”

In 2021, the ITC made a final determination that led to an order barring the import and sale of the Roku products at issue in the US.

As the court explained:

Different television and video devices (smart TVs, DVD, or Blu-ray players) use different communication protocols. There are two broad categories of communication protocols: wired communication protocols, such as HDMI connections, and wireless communication protocols, such as Wi-Fi or Bluetooth connections. Many of these communication protocols are incompatible with each other, but consumers might have multiple devices they want to use together, such as a wireless smart TV connected to a DVD player. The ’196 patent purports to address this incompatibility with a “universal control engine,” referred to in the claims as a “first media device,” that can connect to and scan various target devices (called “second media devices” in the patent) to determine which kind of communication protocols they use. The first media device essentially translates between the different types of devices.

Universal developed a collection of technologies called “QuickSet,” used in smart TVs.

Roku has various TV streaming technologies, including the Roku streaming channel and the Roku stick. Roku also works with third parties to make Roku-branded TVs and licenses its operating system to third parties.

Universal filed a complaint with the ITC against Roku for importing TV products that allegedly infringed the ’196 patent. The ITC launched an investigation, and the administrative law judge found that Roku had violated Section 337 by importing infringing articles.

For a party to file a complaint under Section 337, it must show that it has an economic domestic industry in the United States, as set forth in 19 U.S.C. § 1337(a)(3)(A)–(C):

…an industry in the United States shall be considered to exist if there is one in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned—

1. significant investment in plant and equipment;
2. significant employment of labor or capital; or
3. substantial investment in its exploitation, including engineering, research and development, or licensing.

The complainant needs to show only one of these three things.

Universal claimed that it met the requirements of (a)(3)(C) because of its investment in engineering and research and development (R&D) related to QuickSet in the US.

The ITC affirmed the administrative judge’s finding and found that:

(1) Universal had ownership rights to assert the ’196 patent;

(2) Universal satisfied the economic prong of the domestic industry requirement; and

(3) the asserted claims were not invalid as obvious.

The ITC found that Universal had made substantial investments in domestic engineering and R&D related to QuickSet. It also found that this investment in domestic R&D accounted for a substantial portion of its total investments in engineering and R&D.

The Commission also found that Universal showed a connection between its engineering and R&D investments, the ’196 patent, and the Samsung TVs that were Universal’s domestic industry products.

Although the administrative judge initially found that Roku made a “marginal prima facie case” that claim 1 of the ’196 patent was obvious over two prior art references, the judge said that “a certain amount of cherry-picking is required” to find all claim limitations disclosed in the combination of the references and that Roku’s case was at best “marginal.”

The ITC affirmed this finding, found that the combination of the prior art references wasn’t even “marginal,” and found that Roku failed to present clear and convincing evidence of a motivation to combine the prior art references.

Roku challenged the ITC’s determinations that:

1. Universal had ownership rights to assert the ’196 patent;
2. Universal’s QuickSet technology satisfied the economic prong of the domestic industry requirement; and
3. Roku failed to establish that claim 1 of the ’196 patent is obvious over the combination of prior art references.

The first issue related to agreements between a Universal employee, Mr. Barnett, and Universal that Roku argued didn’t constitute an assignment of patent rights to Universal.

Initially, the administrative judge found that a 2004 agreement between Barnett and Universal was a “mere promise to assign rights in the future, not an immediate transfer of expectant rights.”

However, the ITC found that in a separate 2012 agreement, Barnett assigned to Universal all his rights to a series of provisional applications, including the one to which the ’196 patent claims priority.

The assignment stated that Barnett:

hereby sell[s] and assign[s] . . . [his] entire right, title, and interest in and to the invention,” including “all divisions and continuations thereof, including the subject-matter of any and all claims which may be obtained in every such patent.

The court agreed with the ITC that this was a valid assignment.

As for the second issue, the court found that:

a complainant can satisfy the economic prong of the domestic industry requirement based on expenditures related to a subset of a product, if the patent(s) at issue only involve that subset.

Here, said the court:

there is no dispute that the “intellectual property” at issue is practiced by QuickSet and the related QuickSet technologies, a subset of the entire television.

The court noted that

Roku does not dispute that QuickSet embodies the teachings of the ’196 patent, nor does Roku explain why Universal’s domestic investments into QuickSet are not “substantial.”

On the third issue, the court found that Roku didn’t directly address or dispute any of the ITC’s findings on obviousness.

As Morningstar reported, Universal’s federal patent infringement cases against Roku and its TV partners were on hold until the ITC decision was finalized, but it can now return to court and seek monetary damages for infringement.