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Royalties Doom Bid To Block Chimei Innolux Imports, ITC Says (Law360)

By Bill Donahue

A U.S. International Trade Commission judge ruled Monday that patent licensing company Mondis Technology Ltd. is barred from seeking an import ban on Chimei Innolux Corp.'s video displays because the company already pays court-imposed ongoing royalties to Mondis.

Administrative Law Judge Theodore R. Essex ruled that Chimei Innolux is an authorized licensee of Mondis' two patents for plug-and-play video display technology, meaning the company couldn't have infringed them or violated Section 337 of the Tariff Act of 1930. The judge terminated the investigation into Chimei Innolux, pending approval from the full commission

In October, a Texas federal judge ordered Chimei Innolux — a Hon Hai Precision Industry Co. Ltd. subsidiary — to pay ongoing royalties on sales of certain televisions and computer monitors after a federal jury found the products infringed Mondis' two patents.

Despite the royalty payments, Mondis filed a complaint with the ITC in January, claiming Chimei Innolux's imports still violated the two patents. The company argued that the royalties were a kind of damages, rather than rather than a court-negotiated licensing arrangement that granted Chimei Innolux the right to use the patents if it paid the fees.

But on Monday, Judge Essex flatly rejected Mondis's argument, ruling that the payment of mandatory ongoing royalties, as a matter of law, prevents infringement. Since Chimei Innolux couldn't have infringed the patents, Mondis's had no basis for its parallel suit seeking an exclusion order, the judge said.

"When one looks at the actual statutory basis for ongoing royalties and the theory under which courts have awarded them, it becomes apparent that Mondis's theory is incorrect and that it is improper to characterize the adjudged infringer's use under the ongoing royalty as an ongoing violation," Judge Essex said.

"Instead, an ongoing royalty should be viewed as license for the adjudged infringer to use the patented inventions such that there is no longer any violation of the patentee's patent rights," he added.

The court stressed that Mondis never sought an injunction against Chimei Innolux, but rather consented to the alternate remedy of ongoing royalties.

Mondis originally filed its district court suit in December 2007, claiming LG Electronics Inc., Hon Hai and Chimei Innolux infringed ten patents, including the two patents in the current case, U.S. Patent Numbers 6,247,090 and 7,089,342.

In August 2011, a Texas federal judge ruled that Chimei Innolux had infringed all computer monitor technology patent claims asserted by Mondis — even claims a jury had earlier found invalid.

Following the ruling, Chimei Innolux was ordered to pay Mondis $1.9 million for damages and an ongoing royalty rate of 0.75 percent for the allegedly infringed televisions and 1.5 percent for allegedly infringed computer monitors.

Mondis filed the current ITC suit in January, and the commission announced in February that it would launch a probe into the claims. But in May, ITC investigative staff recommended that Judge Essex toss the case for many of the reasons he eventually cited.

The patents-in-suit are U.S. Patent Numbers 6,247,090 and 7,089,342.

Mondis is represented by Foster Murphy Altman & Nickel PC and Dechert LLP.

Chimei Innolux is represented by Cooley LLP.

The case is In re: Certain Video Displays and Products Using and Containing Same, case number 337-TA-828, in the U.S. International Trade Commission.

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