Hyosung Tns Inc. v. Itc , 926 F.3d 1353 ( 2019 )

United States Court of Appeals
for the Federal Circuit
______________________
HYOSUNG TNS INC., NAUTILUS HYOSUNG
AMERICA INC., HS GLOBAL, INC.,
Appellants
v.
INTERNATIONAL TRADE COMMISSION,
Appellee
DIEBOLD NIXDORF, INC., DIEBOLD SELF-
SERVICE SYSTEMS,
Intervenors
______________________
2017-2563
______________________
Appeal from the United States International Trade
Commission in Investigation No. 337-TA-972.
______________________
Decided: June 17, 2019
______________________
GREGORY G. GARRE, Latham & Watkins LLP, Washing-
ton, DC, argued for appellants. Also represented by
GABRIEL BELL, ELANA NIGHTINGALE DAWSON, KEVIN
WHEELER.
SIDNEY A. ROSENZWEIG, Office of General Counsel,
United States International Trade Commission, Washing-
ton, DC, argued for appellee. Also represented by DOMINIC
2 HYOSUNG TNS INC. v. ITC
L. BIANCHI, WAYNE W. HERRINGTON.
PATRICK FLINN, Alston & Bird LLP, Atlanta, GA, ar-
gued for intervenors. Also represented by KEITH E.
BROYLES, PAMELA COUNCILL, DAVID FRIST, JOSHUA MARK
WEEKS; ADAM SWAIN, Washington, DC.
______________________
Before DYK, CLEVENGER, and O’MALLEY, Circuit Judges.
DYK, Circuit Judge.
Hyosung TNS Inc., Nautilus Hyosung America Inc.,
and HS Global, Inc., (collectively “Hyosung”) appeal from a
decision by the International Trade Commission (“ITC”).
The ITC concluded that various automatic teller machine
(“ATM”) models imported by Hyosung infringed claims of
two patents owned by Diebold Nixdorf, Inc., and Diebold
Self-Service Systems (collectively “Diebold”), U.S. Patent
Nos. 6,082,616 (’616 patent) and 7,832,631 (’631 patent). 1
The ITC issued a limited exclusion order as well as cease
and desist orders.
Because the appeal has become moot as to the ’616 pa-
tent, we dismiss the appeal as to the ’616 patent, vacate the
ITC’s decision as to that patent, and remand with instruc-
tions to revise the applicable orders. We affirm the ITC’s
decision and orders as to the ’631 patent.
BACKGROUND
Hyosung and Diebold are both in the market of manu-
facturing and selling ATMs. Diebold owns the ’616 and ’631
patents directed to ATMs. Diebold filed a complaint with
the ITC claiming that Hyosung’s imported ATMs infringe
1 Other patents were also at issue earlier in the ITC’s
investigation, but the only ones at issue on appeal are the
’616 and ’631 patents.
HYOSUNG TNS INC. v. ITC 3
claims in the ’616 and ’631 patents and their importation
violates 19 U.S.C. § 1337(a)(1)(B). The ITC initiated an in-
vestigation. The patented technology generally relates to
the structure and function of ATMs. The ’616 patent claims
an ATM rollout tray that allows for easier servicing of in-
ternal components of the ATM. The ’631 patent relates to
a particular method for reading magnetic ink character
recognition (“MICR”) data on checks (e.g., ink used for the
account and routing numbers) that are inserted into an
ATM regardless of their width or orientation.
The ITC concluded that Hyosung’s accused products in-
fringed both the ’616 and ’631 patents; that the asserted
claims were not shown to be invalid; and that the domestic
industry requirement was met for both patents. The ITC
entered a limited exclusion order and cease and desist or-
ders against Hyosung.
Thereafter, Hyosung redesigned its products in an ef-
fort to avoid infringing the ’616 patent. On May 26, 2017,
it sought an administrative ruling by U.S. Customs and
Border Protection (“Customs”) that the redesigned prod-
ucts did not infringe the ’616 patent, which would allow
Hyosung’s importation of the redesigned ATM products.
See 19 C.F.R. § 177. Both Hyosung and Diebold partici-
pated in the proceeding. Customs concluded that the newly
redesigned products did not infringe the ’616 patent and
were therefore not covered by the ITC’s limited exclusion
order as to the ’616 patent. Ruling Letter re Certain Auto-
mated Teller Machs., ATM Modules, Components Thereof,
& Prods. Containing Same, HQ H286719 (Customs), 2017
WL 3371581, at *17 (July 24, 2017).
Hyosung appeals the ITC’s decision. We have jurisdic-
tion under 28 U.S.C. § 1295(a)(6).
DISCUSSION
We review the ITC’s factual findings for substantial ev-
idence and legal conclusions de novo. Honeywell Int’l, Inc.
4 HYOSUNG TNS INC. v. ITC
v. Int’l Trade Comm’n, 341 F.3d 1332, 1338 (Fed. Cir.
2003).
I. ’616 Patent
Claims 1, 6, 10, 16, 26, and 27 of the ’616 patent are at
issue on appeal. Representative claim 1 of the ’616 patent
recites:
An automated banking machine apparatus com-
prising:
a housing bounding an interior area, the housing
having a first opening to the interior area;
a rollout tray movably supported on the housing,
the rollout tray including a wall portion, a service
opening extending through the wall portion,
wherein the rollout tray is movable between a first
position wherein the tray extends outward from
the first opening and the service opening is acces-
sible from outside the housing, and a second posi-
tion wherein the tray is within the interior area
and the service opening is not accessible from out-
side the housing;
a first serviceable component mounted in support-
ing connection with the tray and overlying the ser-
vice opening, the serviceable component having a
service point, and wherein the service point is ac-
cessible from outside the housing by extending a
tool upwardly through the service opening when
the tray is in the first position.
’616 patent, col. 8, ll. 8–25 (emphases added).
Hyosung makes two arguments as to why the ITC
erred when it found infringement of the ’616 patent. First,
Hyosung argues that the ITC improperly construed the
claim term “service opening.” Based on the intrinsic record,
the ITC construed the term to mean “an opening through
which a component may be serviced.” J.A. 94 (emphasis
HYOSUNG TNS INC. v. ITC 5
added). Hyosung argues this is an erroneous construction
because the claim term, in the context of the specification
and prosecution history, requires an opening that is de-
signed to enable servicing of a component. Hyosung con-
tends that the alleged service openings were not so
designed, and the administrative law judge found that
most of the imported ATMs had other ways to access com-
ponents for servicing other than by using the alleged “ser-
vice opening extending through the wall portion” of the
rollout tray.
Second, Hyosung argues that the ITC improperly found
that its products met the claim limitation “a second posi-
tion wherein the tray is within the interior area and the
service opening is not accessible from outside the housing.”
The parties agreed that the term “housing bounding an in-
terior area” refers to the “structure bounding an interior
area from which the rollout tray extends and into which
the rollout tray is retracted.” J.A. 336. An example of such
a “housing” (12) is shown in Figure 1 of the ’616 patent.
The patent distinguishes between the top portion of the en-
closure (housing 12) and the bottom portion (chest 24). The
ITC found that the second position limitation was satisfied
6 HYOSUNG TNS INC. v. ITC
because in normal operation the alleged service openings
in the imported ATMs are not accessible from outside the
housing when the rollout tray is retracted within the inte-
rior area. Hyosung argues that even if its products have
service openings, they do not meet the second position lim-
itation because the alleged service openings are always ac-
cessible from outside the housing, albeit not from outside
the entire ATM enclosure, when the rollout tray is re-
tracted within the interior area.
The ITC argues that we should not reach these issues
because the appeal has become moot as to the ’616 patent.
This is so, the ITC contends, because the patent expired on
June 2, 2018, and there is no evidence that the ITC orders
were violated during the time they were in effect. The ITC
argues that the court should “vacate the Commission’s
finding of violation of section 337 as to the ’616 patent, and
remand to the Commission with a direction to dismiss as
moot.” ITC Response Br. 28. Hyosung agrees, 2 but Diebold
argues that the appeal is not moot.
The party arguing that a case has become moot “bears
the burden of coming forward with the subsequent events
that have produced that alleged result.” Cardinal Chem.
Co. v. Morton Int’l, Inc., 508 U.S. 83, 98 (1993). We agree
with the ITC and Hyosung that this case has become moot.
Because the ’616 patent has expired, the ITC’s limited
exclusionary order and cease and desist orders as to that
patent have no further prospective effect. Tessera, Inc. v.
Int’l Trade Comm’n, 646 F.3d 1357, 1371 (Fed. Cir. 2011)
(citing Tex. Instruments Inc. v. U.S. Int’l Trade Comm’n,
851 F.2d 342, 344 (Fed. Cir. 1988)). Diebold does not disa-
gree. However, Diebold argues the appeal is not moot
2 However, Hyosung argues that the appeal as to the
’616 patent only becomes moot if the ITC decision is va-
cated.
HYOSUNG TNS INC. v. ITC 7
because there is a genuine possibility of future enforcement
proceedings based on Hyosung’s importation of its rede-
signed products during the time that the ITC’s orders were
in effect.
There is no assertion that Hyosung imported the origi-
nal allegedly infringing ATMs during the duration of the
ITC orders. Diebold also does not argue on appeal that Hy-
osung’s imported redesigned products, which have a plastic
cover over the alleged service openings, infringe the ’616
patent. Instead, Diebold argues that Hyosung may have vi-
olated the ITC’s orders if Hyosung removed the plastic
cover after importation of the redesigned products but be-
fore it sold them or if Hyosung instructed customers to re-
move the covers. Diebold has admitted that there is no
evidence that this has occurred, and it has failed to identify
a plausible reason why the plastic cover would be removed
for most of the imported products where the covered com-
ponents can still be accessed for service in another way.
Diebold has had nearly two years since Customs’ ruling
that Hyosung’s redesigned products do not infringe to in-
vestigate whether Hyosung violated the ITC orders and to
bring an enforcement proceeding at the ITC, which it has
failed to do. However, Diebold argues that it has brought
an infringement action in district court and might discover
additional information in that action that could show Hy-
osung violated the ITC orders, which could then lead the
ITC to institute an enforcement proceeding. Such “specula-
tion” based on a “highly attenuated chain of possibilities”
is insufficient to constitute a continuing controversy. Clap-
per v. Amnesty Int’l USA, 568 U.S. 398, 410 (2013); see
United Transp. Union v. ICC, 891 F.2d 908, 912 (D.C. Cir.
1989) (“[W]e may reject as overly speculative those links
which are predictions of future events (especially future ac-
tions to be taken by third parties) . . . .”); see also Friends
of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528
U.S. 167, 189 (2000) (quoting Arizonans for Official Eng-
lish v. Arizona, 520 U.S. 43, 68 n.22 (1997)).
8 HYOSUNG TNS INC. v. ITC
Diebold argues finally that possible collateral conse-
quences of a decision on the merits prevent the case from
becoming moot. The argument is that our affirmance or re-
versal of the ITC decision would have collateral conse-
quences in the pending district court infringement action.
To be sure, a case may remain alive based on “[c]ollateral
consequences[, which] may be found in the prospect that a
judgment will affect future litigation or administrative ac-
tion.” 13C Charles Alan Wright, Arthur R. Miller & Ed-
ward H. Cooper, Federal Practice and Procedure § 3533.3.1
(3d ed. 2008). But we have held that the ITC’s determina-
tion of patent infringement and validity do not have claim
or issue preclusive effect even if affirmed by our court. Bio-
Tech. Gen. Corp. v. Genentech, Inc., 80 F.3d 1553, 1563–64
(Fed. Cir. 1996); Tex. Instruments Inc. v. Cypress Semicon-
ductor Corp., 90 F.3d 1558, 1568–69 (Fed. Cir. 1996); Tan-
don Corp. v. U.S. Int’l Trade Comm’n, 831 F.2d 1017, 1019
(Fed. Cir. 1987).
In cases where the patent at issue has expired before
appellate review, we have dismissed the appeal from the
ITC decision as moot despite the fact that there was co-
pending civil litigation that could have been impacted by a
decision on appeal. See Tex. Instruments Inc. v. U.S. Int’l
Trade Comm’n, 851 F.2d 342, 344 (Fed. Cir. 1988) (reject-
ing party’s argument that the appeal was not moot based
on the potential impact on district court litigation); see also
e.g., Tessera, Inc. v. Int’l Trade Comm’n, 646 F.3d 1357,
1361 (Fed. Cir. 2011); Tessera, Inc. v. A-DATA Tech. Co.,
No. 2:07-CV-534 (E.D. Tex.) (case moot when there was
pending district court litigation). We conclude that in the
circumstances of this case, the potential for collateral con-
sequences resulting from the possible stare decisis effect of
HYOSUNG TNS INC. v. ITC 9
our decision, if precedential, does not prevent the appeal
from becoming moot. 3
Under similar circumstances, where an appeal from
the ITC has become moot based on expiration of a patent
during pendency of appeal, such “happenstance” has been
recognized as supporting vacatur of the underlying deci-
sion. Tessera, 646 F.3d at 1371; see Arizonans for Official
English, 520 U.S. at 71 (“Vacatur is in order when moot-
ness occurs through happenstance . . . .”); A.L. Mechling
Barge Lines, Inc. v. United States, 368 U.S. 324, 329–30
(1961); United States v. Munsingwear, Inc., 340 U.S. 36,
39–40 (1950) (noting it is the “duty of the appellate court”
to vacate a decision that has become moot during pendency
of appeal as the result of events outside the parties’ con-
trol). We accordingly vacate the ITC’s decision as to the
’616 patent, and we remand with instructions to amend the
cease and desist orders as they relate to the ’616 patent and
to amend the limited exclusion order so that the orders are
inapplicable to importation of products alleged to infringe
the ’616 patent.
II. ’631 Patent 4
A. Invalidity
Claims 1–7 and 18–20 of the ’631 patent are at issue on
appeal. Claim 1 recites:
3 This case is unlike Microsoft Corp. v. International
Trade Commission, No. 12-1445, 2014 WL 10209132 (Fed.
Cir. 2014), a non-precedential decision, where patent expi-
ration and alleged mootness occurred after our court
reached its decision on the merits and had already denied
the petition for rehearing en banc and no party had raised
the issue of the patent’s imminent expiration.
4 The ITC declined to institute review of most of the
administrative law judge’s determinations relating to the
10 HYOSUNG TNS INC. v. ITC
A method of sensing magnetic indicia on at least
one financial check, comprising:
(a) receiving at least one check in an automated
banking machine, wherein the at least one check
includes a check comprising magnetic indicia en-
coded in a micr line thereon;
(b) sensing through operation of at least one sensor
in the machine, a width associated with the check,
wherein the at least one sensor is in operative con-
nection with at least one processor in the machine;
(c) moving responsive at least in part to the width
sensed in (b), at least one of two magnetic read
heads in the machine, wherein the at least one
magnetic read head is moved responsive at least in
part to operation of the at least one processor,
wherein the at least one magnetic read head is
moved such that the micr line on the check is
aligned with one of the magnetic read heads re-
gardless of a facing position of the check;
(d) moving the check past the two magnetic read
heads in the machine responsive at least in part to
operation of the at least one processor;
(e) sensing micr line data on the check with one of
the two magnetic read heads.
’631 patent, col. 41, ll. 24–46 (emphasis added).
Hyosung makes two arguments for why the ITC erred
when it concluded that Hyosung had failed to show the as-
serted claims of the ’631 patent were invalid as obvious by
clear and convincing evidence. First, Hyosung argues that
the ITC applied an erroneous legal analysis for motivation
’631 patent, which thereafter became the decision of the
agency.
HYOSUNG TNS INC. v. ITC 11
to combine. Second, Hyosung argues that the ITC erred by
failing to find that the two prior art references, Yasuhiko
(Japanese patent application JP2004–110612A) and Kim
(Korean patent KR0613889), in light of knowledge of a per-
son of ordinary skill in the art, as evidenced by a third ref-
erence, Volpa (U.S. Patent No. 7,474,780), rendered the
asserted claims obvious.
Although we are skeptical that the ITC applied the cor-
rect motivation to combine analysis, 5 we do not reach this
issue as Hyosung has failed to show that the prior art com-
bination rendered the asserted claims obvious. In particu-
lar, Hyosung has failed to show that the alleged prior art
combination satisfied the limitation of reading a check’s
MICR line information “regardless of the facing position of
the check.” ’631 patent, col. 41, ll. 38–41 (claim 1), col. 44,
ll. 10–12 (claim 18). The parties agreed that the claim term
“facing position[s]” meant “any of the up, down, forward,
and backward positions.” J.A. 336 (alteration in original).
Hyosung relied on the combination of two prior art ref-
erences, Yasuhiko and Kim, as rendering the asserted
claims of the ’631 patent obvious. Yasuhiko and Kim are
not alleged to have explicitly taught the ability to read
checks inserted upside-down. 6 Instead, Hyosung contends
that a person of ordinary skill in the art would understand
that the MICR reader in Kim could read through the paper
5 See Allied Erecting & Dismantling Co. v. Genesis
Attachments, LLC, 825 F.3d 1373, 1381 (Fed. Cir. 2016)
(citing In re Keller, 642 F.2d 413, 425 (CCPA 1981)).
6 Hyosung also does not argue that a person of skill
in the art would have been motivated to modify the combi-
nation of Yasuhiko and Kim to add a MICR reader that
could read a check that was inserted upside down to arrive
at the claimed invention. Below, Hyosung discarded its ob-
viousness argument based on a three-piece prior art com-
bination of Yasuhiko, Kim, and Volpa.
12 HYOSUNG TNS INC. v. ITC
of a check, such that the combination satisfies the claim
limitation of being capable of reading a check inserted up-
side down into the ATM. Hyosung relied on Volpa, not as a
separate piece of prior art to be combined with Yasuhiko
and Kim, but rather as evidence of the knowledge of a per-
son of ordinary skill in the art that Kim’s MICR reader
would have such capability. See Ariosa Diagnostics v. Ver-
inata Health, Inc., 805 F.3d 1359, 1365 (Fed. Cir. 2015)
(“Art can legitimately serve to document the knowledge
that skilled artisans would bring to bear in reading the
prior art identified as producing obviousness.”). The ITC
rejected Hyosung’s argument based on the express teach-
ing in Kim that “all the checks may be recognized [by Kim’s
invention] unless the user inserts the checks upside down.”
J.A. 40349.
Hyosung’s response is that Kim misunderstood the ex-
tent of the capabilities of its MICR reader, but that does
not show that the ITC’s contrary conclusion was not sup-
ported by substantial evidence. We therefore affirm the
conclusion that Hyosung failed to show the asserted claims
of the ’631 patent were obvious.
B. Domestic Industry Requirement
As an independent basis for reversal of the ITC’s con-
clusion that there was a violation under 19 U.S.C.
§ 1337(a)(1)(B) based on the ’631 patent, Hyosung argues
that the ITC erred by relying on Diebold’s multi-million-
dollar investment in research and development from 2005
to 2010 to satisfy the economic prong of the domestic indus-
try requirement.
For there to be a violation under § 1337(a)(1)(B) based
on a claim of patent infringement, a domestic industry
must exist or be in the process of being established. 19
U.S.C. § 1337(a)(2) (“Subparagraph[] (B) . . . of paragraph
(1) appl[ies] only if an industry in the United States, relat-
ing to the articles protected by the patent . . . exists or is in
the process of being established.”). The ITC generally
HYOSUNG TNS INC. v. ITC 13
determines whether a domestic industry exists as of the
date the complaint is filed. See Motiva, LLC v. Int’l Trade
Comm’n, 716 F.3d 596, 601 n.6 (Fed. Cir. 2013). The do-
mestic industry requirement has two prongs: “the ‘eco-
nomic prong,’ which requires that there be an industry in
the United States, and the ‘technical prong,’ which requires
that the industry relate to articles protected by the patent.”
InterDigitial Comm’cns, LLC v. Int’l Trade Comm’n, 707
F.3d 1295, 1298 (Fed. Cir. 2013). There is no argument on
appeal that the technical prong is not satisfied by Diebold’s
products, which are within the scope of the claims.
For the economic prong, the statute provides that an
industry:
shall be considered to exist if there is in the United
States, with respect to the articles protected by the
patent . . . concerned—
(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, in-
cluding engineering, research and development, or
licensing.
19 U.S.C. § 1337(a)(3). The above activities “must pertain
to products covered by the [asserted] patent.” InterDigital,
707 F.3d at 1297–98. Additionally, the statute “requires a
quantitative analysis in determining whether a petitioner
has demonstrated a ‘significant investment in plant and
equipment’ or ‘significant employment of labor or capital.’”
Lelo Inc. v. Int’l Trade Comm’n, 786 F.3d 879, 883 (Fed.
Cir. 2015).
The ITC has previously held that “[p]ast expenditures
may be considered to support a domestic industry claim so
long as those investments pertain to the complainant’s in-
dustry with respect to the articles protected by the asserted
[intellectual property] rights and the complainant is
14 HYOSUNG TNS INC. v. ITC
continuing to make qualifying investments at the time the
complaint is filed.” Certain Television Sets, Television Re-
ceivers, Television Tuners, & Components Thereof, Inv. No.
337-TA-910, 2015 WL 6755093, at *36 (Oct. 30, 2015).
As of the date Diebold filed its complaint in 2015, the
ITC found that the economic prong of the domestic industry
requirement was satisfied for the ’631 patent. The ITC pri-
marily relied on Diebold’s multi-million-dollar investments
between 2005 and 2010 for the research and development
of its IDMbd module, which included the claimed feature of
a movable magnetic read head recited in the asserted ’631
patent claims. The ITC found this to be a substantial in-
vestment with a nexus to ongoing expenses in field service
and assembly for the ATMs containing the IDMbd module,
and reflected in an increasing number of ATMs that were
being fitted with the IDMbd modules.
On appeal, Hyosung argues that the ITC erred by find-
ing that a domestic industry “exists” “irrespective of when
[Diebold’s research and development] investments oc-
curred or how connected they are to the present.” Hyosung
Open. Br. 55. Hyosung contends that “where investments
occur five years or more before a complaint is filed and are
not connected to any meaningful ongoing investments, they
do not count.” Hyosung Reply Br. 26. We disagree with Hy-
osung’s characterization of the ITC’s decision and conclude
that Hyosung has failed to demonstrate error with the
ITC’s determination.
There is nothing in the statutory language that sup-
ports Hyosung’s bright line rule for rejecting research ex-
penditures that are made more than five years earlier. To
be sure, a past investment may have such an attenuated
connection to the continued existence of a domestic indus-
try as to be irrelevant, see, e.g., Motiva, 716 F.3d at 600–
01, but that has not been shown to be the case here. We see
no legal error in the ITC’s conclusion that a past invest-
ment may, by virtue of its connection to ongoing field
HYOSUNG TNS INC. v. ITC 15
service and assembly expenses, support a finding that the
economic prong of the domestic industry requirement is
met. Here, there is substantial evidence supporting the
ITC’s finding that Diebold’s earlier substantial investment
in research and development relating to the ’631 patent
was relevant based on the ongoing qualifying and mean-
ingful expenditures exploiting that technology, and that
there was a sufficient nexus between the earlier invest-
ment in research and the continuing expenditures. We af-
firm the ITC’s determination that a domestic industry
exists for the ’631 patent.
CONCLUSION
As to the ’616 patent, we dismiss the appeal as moot,
vacate the ITC’s decision, and remand with instructions to
amend the relevant ITC orders. For the ’631 patent, we af-
firm the ITC’s conclusions that Hyosung failed to show that
the asserted claims were invalid as obvious and that the
economic prong of the domestic industry requirement un-
der 19 U.S.C. § 1337(a)(3) was satisfied.
AFFIRMED-IN-PART, VACATED-IN-PART,
DISMISSED-IN-PART, AND REMANDED
COSTS
No costs.