[00:00:41] Speaker 04:
Okay, the next argued case is number 18-1450, Comcast Corporation against the International Trade Commission.

[00:00:54] Speaker 04:
Mr. Verrilli.

[00:00:56] Speaker 06:
Good morning and may it please the Court.

[00:00:57] Speaker 06:
I'm Don Verrilli for Appellants.

[00:01:00] Speaker 06:
The Commission's order against Comcast exceeded its jurisdiction for two reasons.

[00:01:04] Speaker 06:
First, importing set-top boxes cannot violate Section 337

[00:01:09] Speaker 06:
because they are not articles that infringe.

[00:01:12] Speaker 06:
Section 337 is an in rem statute, so the focus has to be on the status of the articles as they cross the border.

[00:01:20] Speaker 06:
These boxes do not satisfy all limitations of any Roe v. Claim, so they don't violate Section 271A.

[00:01:28] Speaker 06:
They're staple articles, so their importation cannot be contributory infringement.

[00:01:34] Speaker 06:
And Suprema does not.

[00:01:36] Speaker 06:
So really, how does your case differ from the facts in the law of Suprema?

[00:01:41] Speaker 06:
That's a key question, Your Honor.

[00:01:42] Speaker 06:
And I think it does differ factually and legally in a way both that suggests that Suprema doesn't control here and even that Suprema doesn't justify the exertion of jurisdiction.

[00:01:53] Speaker 06:
And if I might just walk through a little bit.

[00:01:56] Speaker 06:
And again, I don't mean to be presumptuous, especially with Your Honor in suggesting that I can tell you what Suprema means, but I can tell you how I read it.

[00:02:03] Speaker 06:
And I would start with the holding, the conclusion, where the court holds that the commission's interpretation of the phrase, articles that infringe, covers goods that were used by an importer to directly infringe post-importation as a result of the seller's inducement is reasonable.

[00:02:21] Speaker 06:
I think the differences are many here.

[00:02:25] Speaker 06:
First, the importer here, Comcast, did not directly infringe.

[00:02:32] Speaker 06:
Second, there was no inducement.

[00:02:34] Speaker 01:
Just to get this out of the way, so Comcast is the importer in this case?

[00:02:39] Speaker 06:
No, forgive me.

[00:02:40] Speaker 06:
That's our second argument that Comcast is not the importer.

[00:02:42] Speaker 06:
But even if you're going to grant it for the purposes of analyzing this here, that Comcast did not directly infringe.

[00:02:52] Speaker 06:
And the other key point, I think, is that in Suprema, Suprema, the foreign company, did the inducing pre-importation

[00:03:01] Speaker 06:
And so, and I do think that that's the key difference, and that, as I understand the Court's opinion, created the connection to the statutory language and its in rem focus, and that there was pre-importation inducement in that Suprema convinced mentalics to import these scanners.

[00:03:20] Speaker 06:
Is there not pre-importation inducement in this case?

[00:03:24] Speaker 06:
No, Your Honor, there is no pre-importation inducement in this case.

[00:03:27] Speaker 06:
And I think that's quite clear.

[00:03:30] Speaker 06:
All of the inducement occurs in the United States after importation.

[00:03:34] Speaker 06:
All of the inducement is Comcast convincing its customers to use the mobile app, which allegedly infringes the Roe v. Patent.

[00:03:42] Speaker 06:
So there is no inducement pre-importation.

[00:03:45] Speaker 06:
To keep it simple, I thought you weren't contesting inducement.

[00:03:50] Speaker 06:
We're not contesting inducement, Your Honor, but what we are contesting is that

[00:03:53] Speaker 06:
there was any pre-importation inducement, which I respectfully suggest is what you need to create the connection to the in rem focus of the statute, that the articles have to infringe when they cross the border.

[00:04:07] Speaker 06:
And as we read Suprema, what it says is that you could find that the articles infringed when they crossed the border because there was pre-importation inducement involving the articles.

[00:04:16] Speaker 06:
In fact, the Suprema convincing metallics to import the articles

[00:04:21] Speaker 06:
and to use them in the way that mentalics did in combination with the software that resulted in direct infringement was the inducement.

[00:04:28] Speaker 06:
It was the persuasion.

[00:04:29] Speaker 01:
Doesn't Comcast, in this case, send the programming specifications to Eris and Technicolor?

[00:04:39] Speaker 01:
I mean, they tell them how to produce the boxes and send them the specifications to do that.

[00:04:47] Speaker 06:
So yes, Your Honor, I'd like to make a specific point and then a broader point about that, if I could.

[00:04:52] Speaker 06:
With respect to the specific point, we do give them specifications so that the boxes that Arris and Technicolor manufacture will work in our system.

[00:05:00] Speaker 06:
And it is true, then, in footnote 13 of the Commission's decision, which is at page 85 of the appendix, in their alternative backup holding, they say that that amounts to inducement.

[00:05:11] Speaker 06:
But I think that there's a fatal legal flaw with that argument, because if one looks at the record pages that the footnote cites, what those record pages say are just what Your Honor said, that we provide

[00:05:22] Speaker 06:
the specs that Arison Technicolor then used to manufacture the devices.

[00:05:27] Speaker 06:
But that's not inducement.

[00:05:28] Speaker 06:
In fact, the ALJ found that it's not inducement.

[00:05:32] Speaker 06:
That's at page 373 of the appendix because Arison Technicolor engaged in no direct infringement.

[00:05:38] Speaker 06:
And so any directives that we made to Arison Technicolor can't be inducing infringement because, of course, under global tech, inducement of infringement has to be aimed at the direct infringer.

[00:05:48] Speaker 06:
So just as a matter of law, it's wrong to say that that was pre-importation inducement.

[00:05:52] Speaker 06:
And if one looks at the citations, that is the only pre-importation inducement that those citations could even arguably refer to.

[00:06:00] Speaker 06:
The other parts of the citations all refer to Comcast's domestic activity, trying to convince its subscribers to use the mobile app.

[00:06:07] Speaker 06:
So respectfully, there is zero evidence of pre-importation inducement here.

[00:06:12] Speaker 06:
And that's the critical distinction from Suprema.

[00:06:17] Speaker 06:
And I do think, but I do think if I could make a more general point here and just take a step back, it may help the court understand why this case really is the polar opposite of Suprema.

[00:06:26] Speaker 06:
These set-top boxes, as was found in this proceeding, are staple articles.

[00:06:31] Speaker 06:
They perform generic functions when they are combined with Comcast's system.

[00:06:36] Speaker 06:
Comcast's system

[00:06:38] Speaker 06:
is a cloud-based system.

[00:06:39] Speaker 06:
All the intelligence in the system resides on the servers, not on the box.

[00:06:43] Speaker 06:
And the botches only work with a Comcast system, correct?

[00:06:46] Speaker 01:
Yes, that's true, Your Honor, but that's sort of normal in this industry.

[00:06:49] Speaker 06:
And they have no other use, the botches have no other use other than with the Comcast system.

[00:06:54] Speaker 06:
That's true, but they are still staple articles of commerce, as the ALJ found, and the Commission did not disturb.

[00:07:01] Speaker 05:
And that's because the overwhelming majority of... That's the case, and why weren't the scanners in Suprema also staple articles of commerce?

[00:07:09] Speaker 06:
Well, I think the difference, Your Honor, is that the scanners, the difference is that Suprema persuaded mentalics to purchase these scanners and persuaded them to load those, to use the software development kit to create software that... That doesn't seem to be answering the same question.

[00:07:27] Speaker 05:
That's answering the question of inducement and the like.

[00:07:30] Speaker 05:
But you're arguing that even though these, these box, the Comcast boxes are specially, especially built for Comcast, are designed to work with Comcast system, they're still staple articles of commerce, but it seems to me that the very same thing could have been said of the scanners and Suprema.

[00:07:48] Speaker 06:
I understand that, but I think there's a vital difference, and it's this.

[00:07:51] Speaker 06:
Once the software was loaded on, which was what Suprema was trying to persuade mentalics to do,

[00:07:58] Speaker 06:
then those scanners at that point infringed 100% of the time.

[00:08:01] Speaker 06:
100% of the scanners infringed 100% of the time.

[00:08:04] Speaker 06:
Here, what you have is a situation in which when these boxes come in, and this was the finding by the ALJ, undisturbed, 99% of the boxes are never involved in any infringing activity.

[00:08:17] Speaker 06:
1% of the boxes are involved in the infringing activity alleged here, but even those 1%

[00:08:24] Speaker 06:
are predominantly used for non-infringing uses.

[00:08:28] Speaker 06:
And so you have a situation in which you've got an exclusion order that bans 100 percent of the importation of these boxes in a situation where 99 percent of the time there's nothing infringing going on.

[00:08:41] Speaker 01:
Wouldn't that situation be remedied by the exclusion order itself, by how it's drafted and its scope?

[00:08:47] Speaker 06:
Well, the problem here, Your Honor, is I think that the way the exclusion order was drafted was to

[00:08:53] Speaker 06:
was to exclude all of the boxes.

[00:08:55] Speaker 01:
Now, we were able to come up with a workaround, but I think the workaround... So at this point, are the boxes, they're not coming into the U.S.

[00:09:03] Speaker 01:
customs?

[00:09:03] Speaker 01:
No, they are.

[00:09:03] Speaker 06:
They are coming in, Your Honor, but if I could just explain why.

[00:09:06] Speaker 06:
Okay.

[00:09:07] Speaker 06:
They're coming in because we made a change, but we didn't make a change to the box.

[00:09:11] Speaker 06:
We made a change to the domestic software on the domestic servers so that the app

[00:09:16] Speaker 06:
function wouldn't work anymore.

[00:09:18] Speaker 06:
The boxes are, and now they are, the boxes are being allowed in, but the boxes are 100% identical to the way they were before the exclusion order, which I think tells you that they're, these are not... Except that you designed a round and you eliminated the feature that was deemed to be infringing, correct?

[00:09:34] Speaker 01:
But not in the box, Your Honor, because the, and remember... In the system.

[00:09:38] Speaker 06:
In the system, but not in the box.

[00:09:40] Speaker 01:
This is a system we're looking at.

[00:09:41] Speaker 06:
Well, respectfully, Your Honor, I think under the statute

[00:09:46] Speaker 06:
what the court needs to look at is whether these are articles that infringe.

[00:09:50] Speaker 05:
I think that's the problem is, and I hate to keep coming back to it, but it seems like you could have made the same argument could have been made in Suprema, that the users of the scanners could have decided to put on different software for those scanners, and then it would have been non-infringing.

[00:10:09] Speaker 05:
And so there was a design around there too.

[00:10:11] Speaker 06:
Yes, Your Honor, but the key difference, I think... I'm sorry, I didn't mean to... The key difference, I think, is that, and it was repeated, I respectfully, many times in the Suprema decision, is that there was pre-importation inducement by Suprema.

[00:10:26] Speaker 06:
Suprema persuaded Metallics to use the scanners in this way, and then took an affirmative act to promote the inducement by selling the scanners across the border, and that gave the

[00:10:41] Speaker 05:
I understand that position, but it seems to me even if it's slightly factually different, I mean that it's still fairly much the same.

[00:10:49] Speaker 05:
That Comcast is directing these manufacturers to make these certain specifications so that they'll be imported and that the customers can use the mobile apps in a way that will infringe.

[00:11:01] Speaker 05:
So it may not be the same exact chain of pre-importation inducement, but it seems like

[00:11:07] Speaker 05:
a possibly different chain that still suffices.

[00:11:11] Speaker 06:
If I could just make two points and then I'd like to make some points about the importer issue if I could.

[00:11:15] Speaker 06:
I think that the differences are vital given that the statute focuses on whether these are articles that infringe when they cross the border and so the pre-importation inducement is vital and although there was pre-importation communication with Arison Technicolor

[00:11:35] Speaker 06:
There was no pre-importation inducement.

[00:11:37] Speaker 06:
The ALJ specifically found that at page 363.

[00:11:41] Speaker 06:
So the fact that all the inducement occurs post-importation in the United States, I think, is a critical difference.

[00:11:48] Speaker 06:
And that's why you end up in this situation with the wildly disproportionate exclusion order, whereas in Suprema, the exclusion order was perfectly tailored, because every one of those scanners that went to Mentalex was going to be used for infringement.

[00:12:01] Speaker 06:
So if I could then now talk about the importer issue.

[00:12:05] Speaker 06:
We think it's quite clear that we are not the importer.

[00:12:10] Speaker 06:
Aris and Technicolor is the importer.

[00:12:12] Speaker 06:
Importer is not defined in the statute.

[00:12:15] Speaker 06:
Importation is not defined in the statute.

[00:12:17] Speaker 06:
So you can give it its ordinary meaning.

[00:12:19] Speaker 06:
And its ordinary meaning is bringing goods across the border under customs control.

[00:12:23] Speaker 06:
Comcast did not do that in this case.

[00:12:26] Speaker 06:
Aris and Technicolor did it.

[00:12:28] Speaker 06:
And Comcast just entered into a contract to take acquisition of the goods once they came across the border.

[00:12:36] Speaker 01:
Doesn't our customs law make way for there to be more than one importer?

[00:12:40] Speaker 01:
Given a single importation, you can have more than one importer.

[00:12:44] Speaker 01:
You can have different characters or actors that are all importers.

[00:12:48] Speaker 06:
Yes, that's certainly true, Your Honor.

[00:12:50] Speaker 06:
But I think that doesn't allow one to stretch

[00:12:53] Speaker 06:
meaning of importation and importer so far as to cover us in this case because what we have here and what the Commission said in this case is not... Why not?

[00:13:03] Speaker 01:
You're manufacturing the goods abroad according to particular specifications for use in your system.

[00:13:09] Speaker 01:
You're having them... You're requiring the quantity, how much production is to be had.

[00:13:16] Speaker 01:
You direct where the boxes are to be sent once they come into the U.S.

[00:13:21] Speaker 06:
So if I could make a factual point and a legal point, and then if I could, I'd like to reserve the balance of my time.

[00:13:27] Speaker 06:
Please proceed.

[00:13:28] Speaker 06:
As a factual matter, Your Honor, we provide them with specifications.

[00:13:32] Speaker 06:
The contract doesn't require that these articles be built abroad or domestically or anywhere else.

[00:13:39] Speaker 06:
The record shows that we're agnostic as to where they're built.

[00:13:43] Speaker 06:
And I think one way to understand why we're not an importer here is because if ours and Technicolor tomorrow decide to change their mind

[00:13:51] Speaker 06:
and manufacture these products in the United States.

[00:13:54] Speaker 06:
The contract would not change one iota.

[00:13:56] Speaker 06:
The relationship would not change one iota.

[00:13:58] Speaker 06:
The information we provide to them would not change one iota.

[00:14:01] Speaker 06:
So what we are sufficiently involved in, to use the commission's language, at most is the manufacture, not the importation.

[00:14:09] Speaker 01:
Now the legal point, if I could, that I think it's... You did pay the importer duties.

[00:14:15] Speaker 01:
Let's say you were not the term of our importer record.

[00:14:20] Speaker 01:
that still makes you the importer for other purposes of customs law?

[00:14:24] Speaker 06:
Well, the Commission didn't find us to be the importer on that basis, Your Honor.

[00:14:28] Speaker 06:
They found us to be the importer because we were sufficiently involved because we provided the specs.

[00:14:33] Speaker 06:
But as I said, that's just involvement in manufacture.

[00:14:36] Speaker 06:
And I think you can't stretch the statutory language as far as they want to.

[00:14:39] Speaker 06:
And there are strong textual indicators that you can't.

[00:14:42] Speaker 06:
One of them is section 1508,

[00:14:46] Speaker 06:
which is a record-keeping statute and specifically provides for record-keeping requirements for importers and for those who cause importation.

[00:14:54] Speaker 06:
So Congress thought of those as two different categories there.

[00:14:57] Speaker 06:
If you look at 1528, the same thing is true there.

[00:15:01] Speaker 06:
And if you look at 1595, the same thing is true there.

[00:15:03] Speaker 06:
And then respectively, I think 337 itself shows that Congress made a considerate judgment.

[00:15:08] Speaker 06:
It's an importation, sale for importation, sale after importation.

[00:15:11] Speaker 06:
And that's it.

[00:15:12] Speaker 06:
So I just think you can't stretch the language there.

[00:15:14] Speaker 06:
And if I could, there's already lots of time.

[00:15:17] Speaker 06:
That's fine.

[00:15:17] Speaker 06:
Thank you.

[00:15:18] Speaker 03:
Thank you, Mr. Rubin.

[00:15:19] Speaker 03:
We'll save you rebuttal time.

[00:15:20] Speaker 03:
Thank you.

[00:15:21] Speaker 03:
Mr. Rosenzweig.

[00:15:23] Speaker 00:
Good morning, and may it please the court.

[00:15:26] Speaker 00:
Rogan and its brief contended that the decision in this case on the Suprema issue follows A4CRI from Suprema.

[00:15:33] Speaker 00:
And that's definitely true.

[00:15:36] Speaker 00:
Council for the Appellants is relying on a theory that

[00:15:41] Speaker 00:
that Suprema was decided because Suprema persuaded Mentalix to import Suprema's boxes.

[00:15:50] Speaker 00:
That's not true on the public record.

[00:15:51] Speaker 00:
I have to be careful because I wouldn't want to impugn opposing counsel.

[00:15:55] Speaker 00:
I went back through the confidential record just to make sure that that's not true.

[00:15:59] Speaker 00:
You all were on Suprema.

[00:16:01] Speaker 00:
You have the briefs, your bench memos, and so forth.

[00:16:05] Speaker 05:
There is a factual difference here, though.

[00:16:06] Speaker 05:
I'm not sure it makes any legal difference.

[00:16:10] Speaker 05:
All of the box, all the scanners in Suprema were loaded with the infringing software and they operated in an infringing manner.

[00:16:18] Speaker 05:
Here, even though they're loaded with it, I think it's undisputed that a very small percentage of the boxes and the end users actually use the infringing functions.

[00:16:31] Speaker 00:
Well, I have two responses to that.

[00:16:33] Speaker 00:
The first is that one of the principle points of friction in Suprema between the majority

[00:16:38] Speaker 00:
and the members of the court who ultimately dissented, was the fact that the exclusion order did cover Suprema's boxes that were not being supplied to MentalX, that Suprema would have to demonstrate that those boxes didn't fall within the scope of the exclusion order and future proceedings.

[00:16:53] Speaker 00:
And that shaped some members of the court quite a lot.

[00:16:57] Speaker 00:
Second of all, this issue about 1% of boxes or not, that also came up.

[00:17:01] Speaker 05:
Sure, but that's an easier determination to make, because it's basically

[00:17:05] Speaker 05:
is this software gonna be loaded or is this being sold to a customer that's gonna be using a different software.

[00:17:11] Speaker 05:
These boxes are all sold to Comcast.

[00:17:14] Speaker 05:
They're all loaded with the software and whether they infringe or not depends on a very downstage use decision by the end user.

[00:17:24] Speaker 05:
I assume you agree that it would be impossible to fashion an exclusion order that only targeted the end users that use this device.

[00:17:35] Speaker 00:
I disagree with that.

[00:17:36] Speaker 00:
This is a situation in which the boxes not only worked on Comcast network, they're not allowed to be sold to people other than Comcast.

[00:17:44] Speaker 00:
Comcast controls the entire system end to end.

[00:17:47] Speaker 00:
The reason why we have this importation question in this case is because Comcast doesn't even sell its boxes to its users.

[00:17:53] Speaker 00:
If it did, this would be a simple sale for importation.

[00:17:55] Speaker 00:
But Comcast itself maintains control over the boxes, so we have that importation issue.

[00:18:00] Speaker 01:
Is Comcast viewed as a first purchaser after importation?

[00:18:06] Speaker 00:
You know, because in this case, Aris and Technicolor stipulated to importation, despite the fact... Are they the consignee?

[00:18:15] Speaker 00:
We don't have any of the actual customs paperwork.

[00:18:19] Speaker 00:
I mean, as a pragmatic matter, you would think that

[00:18:22] Speaker 00:
that Comcast would be the consignee insofar as these boxes aren't allowed to be sold to anybody else.

[00:18:27] Speaker 00:
You know, which of the various Comcast corporate entities that might be, I don't know, from the record here.

[00:18:35] Speaker 00:
In Suprema and in here, the direct infringement occurred before the investigation began.

[00:18:40] Speaker 00:
The direct infringement here began when Comcast's license with Roe v. expired, and Comcast chose not to change its system in any way.

[00:18:52] Speaker 00:
The boxes in Suprema, this court might remember, those were method claims for processing, data processing.

[00:18:58] Speaker 00:
And one of the arguments that counsel in Suprema made to your honors is that none of the steps of those patents were actually performed on the scanners.

[00:19:08] Speaker 00:
In this case, the ALJ here found that the X1 cable boxes at issue form a necessary part of the claimed local interactive program guide equipment at Joint Appendix page 305.

[00:19:20] Speaker 00:
Comcast expert at 1791 to 92 didn't disagree with that.

[00:19:24] Speaker 00:
And that's all waived on appeal.

[00:19:26] Speaker 00:
They don't dispute any of the patent findings.

[00:19:29] Speaker 00:
So this also makes Comcast more culpable than in Suprema.

[00:19:33] Speaker 00:
As I said before, Comcast controls the entire system end to end.

[00:19:38] Speaker 00:
Unlike Suprema, where Suprema's collaboration with MentalX occurred and then kind of stopped.

[00:19:45] Speaker 00:
in the sense that, you know, MentalX developed its Fed Submit software and worked with Suprema scanners.

[00:19:51] Speaker 00:
Here, Comcast's inducement just kept going.

[00:19:54] Speaker 00:
You know, Comcast was encouraging its users all along to engage in this remote recording functionality, and Comcast never stopped.

[00:20:03] Speaker 00:
Also, unlike Suprema, and your honors may remember also that members of this court had concerns about Suprema's willful blindness, how Suprema could possibly certify as to non-infringement,

[00:20:15] Speaker 00:
In this case, Comcast admits its own culpable intent to induce.

[00:20:20] Speaker 00:
So it admits its own culpable intent to induce.

[00:20:23] Speaker 00:
It does so in connection with its complete end-to-end system.

[00:20:28] Speaker 01:
And if that's true, it admits it only insofar as it induces within the United States only, not pre-importation.

[00:20:36] Speaker 00:
It admits the acts of direct infringement in the United States.

[00:20:40] Speaker 00:
And it admits that it actively encourages that.

[00:20:43] Speaker 00:
The first case that this court had after Grokster to decide what inducement was going to be in the wake of Grokster was DSU, where this case went in bank.

[00:20:52] Speaker 00:
I think Sue Esponte in this court said, if an entity offers a product with the object of promoting its use to infringe, as shown by clear expression or other affirmative steps taken to foster infringement, then it is liable for the resulting acts of infringement by third parties.

[00:21:06] Speaker 00:
I mean, that's exactly what happened here.

[00:21:07] Speaker 00:
And this, frankly, is a clearer case than Suprema.

[00:21:11] Speaker 00:
If I could spend just a couple of minutes on importation unless the panel has further questions about Suprema.

[00:21:17] Speaker 00:
Okay.

[00:21:18] Speaker 00:
Thank you.

[00:21:20] Speaker 00:
For decades, the Commission has interpreted its language pragmatically for purposes of importation.

[00:21:28] Speaker 00:
You know, the purpose of Commission proceedings is to stop unfair acts.

[00:21:33] Speaker 00:
And that's been the case for the better part of a century now.

[00:21:36] Speaker 00:
It's not to deal with customs duties.

[00:21:39] Speaker 00:
Opposing counsel repeatedly cites other statutes in a part of Title 19 called ascertainment collection and recovery of duties.

[00:21:51] Speaker 00:
That's not material here.

[00:21:52] Speaker 00:
The commission isn't concerned with collection of duties and the commission isn't concerned with malevolent acts by bad freight forwarders.

[00:21:58] Speaker 00:
The goal is to stop the unfair acts.

[00:22:01] Speaker 00:
Here Comcast control is not just providing the specs to ARIS and Technicolor.

[00:22:06] Speaker 00:
I mean, the commission has three pages of findings as to Comcast control on pages 135 to 137 of the appendix.

[00:22:14] Speaker 00:
And Comcast is not merely contracting for manufacturing and delivery of products.

[00:22:20] Speaker 00:
All the boxes are custom made for Comcast.

[00:22:22] Speaker 00:
They work only on Comcast network.

[00:22:24] Speaker 00:
They can't be sold to anybody else.

[00:22:26] Speaker 00:
Comcast requires the boxes to be preloaded with what amounts to Comcast operating system.

[00:22:32] Speaker 00:
And the argument that it's sitting there in the same way that I might order a box of cornflakes from someone is kind of fanciful.

[00:22:42] Speaker 00:
As we've pointed out in our brief, the commission's test for importation is consonant with case law demonstrating that a person like Comcast is a person who brings articles into the United States.

[00:22:56] Speaker 00:
In response to those cases, like this court's decision in Secretary Haggerty

[00:23:00] Speaker 00:
Comcast says, well, the purpose of those other cases was different.

[00:23:04] Speaker 00:
But then that proves the commission's point.

[00:23:06] Speaker 00:
If we're going to look at the purpose of those other cases, Terry Haggerty, Hoover, and Allison, then you look to the purpose of Section 337, which this court has discussed in Suprema and Tianri and Orion and Von Clem and Bakelite for the better part of the century.

[00:23:24] Speaker 00:
Comcast simply can't hide in a complicated global supply chain behind its suppliers.

[00:23:31] Speaker 00:
With respect to Aris and Technicolor's appeal, it kind of dovetails with this importation argument that Comcast makes.

[00:23:40] Speaker 00:
They say that a limited exclusion order extends only to named parties and not to anyone else acting on those parties' behalf.

[00:23:47] Speaker 00:
And that's simply inconsistent with global trade.

[00:23:51] Speaker 05:
It's inconsistent with... What makes the difference?

[00:23:55] Speaker 05:
I mean, they can only sell these to Comcast, so if Comcast,

[00:23:59] Speaker 05:
all the articles imported for Comcast.

[00:24:03] Speaker 05:
And if they are excluded, it's all the articles for them, too.

[00:24:07] Speaker 00:
Well, for present purposes, that's true.

[00:24:10] Speaker 00:
And I would agree with that.

[00:24:11] Speaker 00:
But there's some ambiguity in the record about whether certain software gets shared with other parties at other cable companies as part of some consortium at page 1736.

[00:24:23] Speaker 00:
I can't get into the details of that.

[00:24:26] Speaker 00:
Comcast could also license its boxes

[00:24:29] Speaker 00:
other cable operators.

[00:24:31] Speaker 00:
I don't know that it does so in the United States.

[00:24:34] Speaker 00:
So there's a possibility there.

[00:24:36] Speaker 00:
But you're right that in this case, these are Comcast boxes.

[00:24:40] Speaker 00:
They're coming through Harrison Technicolor as part of multiple steps, sometimes passing to Harrison Technicolor taking title in the United States, other times not in the United States with other actors manufacturing the boxes.

[00:24:54] Speaker 00:
As discussed,

[00:24:56] Speaker 00:
For example, on page 31638, which is Technicolor's, how Technicolor takes title.

[00:25:06] Speaker 00:
So the commission has always interpreted on behalf of language pragmatically.

[00:25:11] Speaker 00:
It's consistent with injunctive relief in the district courts under Rule 65D2C, which notes that injunctions always apply to other persons who are in active concert or participation with anyone

[00:25:23] Speaker 01:
Described many of our 337 cases involved the the issue as to the scope of the exclusion order Here because Comcast never does sell the boxes it remains the owner of the boxes I guess until So they're tossed into a landfill until they're thrown away or something that has an effect on on the feasibility on the practical ability of making an exclusion order doesn't

[00:25:49] Speaker 00:
I don't think it does.

[00:25:50] Speaker 00:
I mean, I've had discussions with customs about this.

[00:25:52] Speaker 00:
And, you know, if you ask customs, how often are you having to rely on, on behalf of language?

[00:25:58] Speaker 00:
What they'll tell you is almost every case, that the supply chains are so complicated, that things are moving around manufacturing, that a company's transactions are changing because of taxes and other business reasons.

[00:26:11] Speaker 00:
That they're always having to look at the articles.

[00:26:15] Speaker 00:
They're always having to look at the invoices.

[00:26:16] Speaker 00:
They're always having to figure out who the consignee is.

[00:26:19] Speaker 01:
In these cases, it's pretty easy because Comcast articles... They're the sole importer or they're the only entity that's bringing in the boxes.

[00:26:27] Speaker 01:
Wouldn't it be rather simple for them to certify that they're not going to use them in an infringing manner?

[00:26:32] Speaker 00:
Well, in this case, they went to customs.

[00:26:35] Speaker 00:
They went to customs for a Part 177 inter-party ruling.

[00:26:41] Speaker 00:
It wasn't part of the commission record, but it is

[00:26:43] Speaker 00:
included toward the end of the appendix.

[00:26:47] Speaker 00:
And they got relief, and their boxes were allowed back in.

[00:26:50] Speaker 00:
There's a 60-day period of presidential review here where the boxes were allowed in without bonding.

[00:26:56] Speaker 00:
And some two weeks after that, customs allowed them in.

[00:26:59] Speaker 00:
So they really haven't suffered here.

[00:27:01] Speaker 00:
One last thing I'll say, because I think it will benefit the court.

[00:27:04] Speaker 00:
Because Comcast didn't dispute the patents here, both of these patents expire in September.

[00:27:09] Speaker 00:
It's not clear from the face of the patents because one of them has a terminal disclaimer, but I just thought the court should know that.

[00:27:14] Speaker 00:
Thank you.

[00:27:15] Speaker 04:
Thank you.

[00:27:16] Speaker 04:
We'll hear from Mr. Lampkin.

[00:27:34] Speaker 02:
Good morning.

[00:27:35] Speaker 02:
Thank you and may it please the court.

[00:27:37] Speaker 02:
Comcast does not dispute infringement.

[00:27:39] Speaker 02:
And it doesn't dispute that it induced that infringement, that it brought its boxes of the country and intended its customers to complete and use an infringing system.

[00:27:48] Speaker 02:
The commission found that Comcast's inducing conduct began before importation, the importation itself was inducing conduct, and that it continued after importation.

[00:27:59] Speaker 02:
It occurred before importation when Comcast designed the X1 STBs to be used in an infringing manner, a sort of direct quote out of the commission's opinion.

[00:28:08] Speaker 02:
And it did that in two ways.

[00:28:10] Speaker 02:
First, the patents require there to be an internet communication path for the commands, and these boxes are designed to plug in the system and be able to receive that communication over the internet from the remote in order to do the recording function.

[00:28:25] Speaker 02:
And they are specifically designed to fit into the system and perform that function.

[00:28:28] Speaker 02:
And second, one of the limitations is to have a local interactive television program guide.

[00:28:34] Speaker 02:
And the specification explains that that guide can be consist of

[00:28:38] Speaker 02:
server and client setup, the set-top box and Comcast servers.

[00:28:43] Speaker 02:
And these set-top boxes perform critical functions in that local interactive program guide.

[00:28:49] Speaker 02:
They're designed specifically to function it.

[00:28:51] Speaker 02:
So the design itself of these boxes to infringe itself is an event that occurred before importation.

[00:28:58] Speaker 02:
Importation itself under Suprema can be inducement and part of the inducement.

[00:29:02] Speaker 02:
And the boxes were brought into the United States, each one of them as part of a scheme to induce infringement.

[00:29:07] Speaker 02:
Comcast, it's not disputed, controls how many come in, when they come in, what the boxes look like, and which of Comcast facilities they're delivered to.

[00:29:16] Speaker 02:
It exercises control of the fact that these are being brought over to the United States.

[00:29:20] Speaker 02:
And finally, throughout, Comcast has been inducing infringement.

[00:29:25] Speaker 02:
While the boxes are being made, it is promoting, telling, and describing to its users how to use the remote boarding functionality.

[00:29:33] Speaker 02:
It's promoting the use of the X1 system, including Xfinity apps and its online and promotional materials.

[00:29:38] Speaker 02:
That is all going on as boxes are being made, boxes are being brought across the border, and boxes are being distributed in the United States.

[00:29:46] Speaker 02:
Whatever temporal limitations Suprema might impose under the Commission's findings is met here.

[00:29:53] Speaker 02:
It really isn't a case that asks the court to test the outer limits of Suprema.

[00:29:57] Speaker 02:
In fact, this case is actually much more aggravating than Suprema.

[00:30:01] Speaker 02:
At least in Suprema, to practice that method claim, you needed Suprema scanners, you needed a separate computer, and you needed mental software.

[00:30:09] Speaker 02:
Here, Comcast pretty much provides everything.

[00:30:12] Speaker 02:
It provides the set-top boxes, it operates the cable system they plug into, it instructs its consumers how to use the infringing system, and it provides the apps and the software needed to complete the infringing system and use it.

[00:30:26] Speaker 02:
I wanted to turn briefly, however, to one question, Judge Hughes.

[00:30:29] Speaker 02:
And that was your question about 1%.

[00:30:31] Speaker 02:
Because I think that, in some sense, is a concern about Suprema, not a concern about its application.

[00:30:37] Speaker 02:
But I don't think it's one that should matter.

[00:30:39] Speaker 02:
Because under Suprema, the commission just doesn't have to wait until the inducement hits 30%, or 50%, or 70% of Comcast customers.

[00:30:49] Speaker 02:
It's allowed to intervene at the border in order to prevent that inducement from having greater effect.

[00:30:54] Speaker 02:
And it makes perfect sense in contacts like this, because every set-top box that comes across is part of Comcast's scheme of inducing infringement.

[00:31:04] Speaker 02:
Everyone is designed to be capable of infringing.

[00:31:07] Speaker 02:
For every one of them, Comcast is advertising, you may use these boxes, you may use our system, you may use your remote in order to do the functionalities that are covered by Roevey's claims.

[00:31:21] Speaker 02:
And remember that 1% judge use?

[00:31:24] Speaker 02:
That's millions and millions of infringing uses, because the Comcast system is so vast.

[00:31:30] Speaker 02:
200 to 300,000 per month is what the record says.

[00:31:34] Speaker 02:
And the second is that I think the Commission frankly can tailor remedies, and it does tailor remedies.

[00:31:39] Speaker 02:
And this decision shows exactly how it does that.

[00:31:42] Speaker 02:
So the Commission, for example, can limit it to goods that are imported with the intent to induce.

[00:31:47] Speaker 02:
The Commission can also delay its orders for exclusion to allow the design around.

[00:31:52] Speaker 02:
And in this case, what the commission did is it actually decided to not post a bond, or not require a bond.

[00:31:59] Speaker 02:
And so during the entire 60-day presidential review period, Comcast could bring in these infringing boxes.

[00:32:04] Speaker 02:
And then once that period ended, Comcast was promptly able to redesign things to avoid infringement, get a certification from Customs and Border Protection, and begin bringing in the boxes on the certification that these would not be used for the infringing purpose.

[00:32:21] Speaker 02:
opposing counsels pointed out that the change made here was to the system, not to the boxes themselves.

[00:32:28] Speaker 02:
I don't think that has any effect here.

[00:32:30] Speaker 02:
It's based on faulty reasoning.

[00:32:32] Speaker 02:
For example, if Apple were importing infringing iPhones, I see I'm out of time.

[00:32:38] Speaker 02:
Finish the thought.

[00:32:39] Speaker 02:
Finish the thought.

[00:32:40] Speaker 02:
If they were importing infringing iPhones, for example, that had a weather app that communicated with a server, and that was infringement, they could either change their iPhones to remove the app,

[00:32:49] Speaker 02:
Or they could cut the communication with the server so the weather app isn't working anymore.

[00:32:53] Speaker 02:
And what Comcast effectively did here was the latter.

[00:32:56] Speaker 02:
It effectively cut that communication with the remote rather than changing the box themselves.

[00:33:02] Speaker 02:
And that's because it's a system claim.

[00:33:04] Speaker 02:
And the system claim required that communication.

[00:33:07] Speaker 02:
And I'm not going to describe it in detail, but I think if the court were to look at page 5831, which describes the tracing of the data and the information that goes on, starting with the client apps on the left

[00:33:18] Speaker 02:
and it moves across to the right and up, and it has that dog leg eventually over to the DVR, you would see that that's the communication path that just got cut in order to avoid infringement.

[00:33:27] Speaker 02:
Thank you.

[00:33:27] Speaker 02:
If there's no question.

[00:33:31] Speaker 06:
Thank you.

[00:33:37] Speaker 06:
I'd like to make a couple specific points about importation and then go back to articles and infringement.

[00:33:41] Speaker 06:
With respect to importation, just to be clear in response to a question, you asked me, Your Honor,

[00:33:46] Speaker 06:
Comcast did not pay the importation duties right and that's that they did we did not and that's at page 3201 and we were not the consignee either so on that on that score now in terms of what my friend mr. Lampkin says about these boxes being designed to infringe now the other part it is a case that you maintain ownership of the boxes that's correct that's the standard industry practice for for all cable systems they do maintain the boxes don't enter

[00:34:16] Speaker 01:
freely the U.S.

[00:34:17] Speaker 01:
market, they remain in possession and control of Comcast.

[00:34:21] Speaker 06:
They do, but they are used, as the ALJ found and the Commission upheld, overwhelmingly in non-infringing ways.

[00:34:32] Speaker 06:
And my friend quoted some numbers, but the numbers on the other side of it.

[00:34:36] Speaker 06:
For 22 million people who have these boxes, the boxes are never used in an infringing way, and even for the other people that

[00:34:45] Speaker 06:
about my friends.

[00:34:46] Speaker 01:
But our pen law focuses on infringement, not the number or the frequency of the episode of infringement, correct?

[00:34:52] Speaker 06:
But I do think it gets to the point of why there is a problem severing the commission's exercise of jurisdiction from the question of whether the articles infringe when they cross the border, because it creates precisely the problem that you have here in this situation with the remedy, in that the remedy is widely disproportionate because the remedy

[00:35:15] Speaker 06:
requires exclusion of all the articles.

[00:35:17] Speaker 05:
Yeah, except that because there was enough time or whatever, you were able to make the fix so that even now those 1% can't infringe because that function is not there anymore and so nobody's infringing.

[00:35:31] Speaker 05:
And so nothing of yours is being excluded for non-infringing uses, which would be a problem if you couldn't adapt.

[00:35:39] Speaker 05:
If 100% of your boxes were excluded for only 1% usage, and you had no way to address that, I think there would be a significant problem.

[00:35:47] Speaker 05:
But you had a very quick and easy fix, which is get rid of the offending functionality.

[00:35:53] Speaker 05:
And you did that, and you got your boxes back in.

[00:35:55] Speaker 05:
I don't understand why that's not a reasonable exercise of the Commission's discretion.

[00:35:59] Speaker 06:
Because the Commission didn't exercise discretion in that way, Your Honor.

[00:36:04] Speaker 06:
The Commission banned them.

[00:36:05] Speaker 06:
we made the change.

[00:36:06] Speaker 06:
Now, it's true that the ransom payment was rather low in this case, but that doesn't make it not extortion.

[00:36:11] Speaker 05:
And there are going to be other... What other way would they have remedied the... I know you disagree that there's an imprint and an inducement and all that, but let's just start from the premise that you're liable for all of this.

[00:36:22] Speaker 05:
What other way would they have remedied this?

[00:36:24] Speaker 06:
Your Honor, I'm not going to duck your question, but I do think that that's our point.

[00:36:30] Speaker 06:
Our point is that the remedy, the fact that they have this

[00:36:33] Speaker 06:
problem with the remedy that they can't make it fit the violation shows you that it's not something that was within the contemplation of Congress in the first place.

[00:36:42] Speaker 05:
I get that, but I mean, to me, that sounds like you're arguing against Suprema, which we can't do anything about.

[00:36:47] Speaker 06:
Well, I've tried to explain why I don't think that's the case.

[00:36:50] Speaker 06:
But if I could just sum up briefly, if I might, that I do think it's important to remember that this is an in-rem statute that focuses on cross-border activity.

[00:37:02] Speaker 06:
And it's about unfair trade practices.

[00:37:04] Speaker 06:
And what we have in this case is a dispute between two domestic companies about conduct that's occurring in the United States.

[00:37:11] Speaker 06:
The inducing activities in the United States and the allegation that were directly infringing as a result in the United States really doesn't have anything to do with unfair trade practices.

[00:37:22] Speaker 06:
And that's why I think it's important that the respect for the statutory text and its interim focus

[00:37:30] Speaker 01:
be enforced because otherwise you're going to be in precisely this kind of a situation and you're going to be in a situation in which... The in-rep focus of a 337 case is to be able to define the parameters of an unfair trade practice.

[00:37:45] Speaker 01:
It seems to me that if your position was adopted then it would lead to widespread circumvention and it would actually make 337 superfluous.

[00:37:56] Speaker 01:
There would be no use for it.

[00:37:58] Speaker 01:
All you have to do is

[00:37:59] Speaker 01:
For example, this is infringing feature.

[00:38:02] Speaker 01:
This is not.

[00:38:04] Speaker 01:
Well, if it's sold in the United States, it's infringing.

[00:38:06] Speaker 01:
But hey, let's import them.

[00:38:08] Speaker 01:
And once they come into the US, then we just put them together and sell them.

[00:38:12] Speaker 01:
And we'll take our chances with the district court.

[00:38:15] Speaker 01:
But 337 is designed to prevent that from happening, to prevent this from coming in into the US customs territory.

[00:38:22] Speaker 01:
That's what 337 is designed to do.

[00:38:27] Speaker 01:
It seems to me, given my own trade experience, that this would lead to widespread circumvention of US customs laws.

[00:38:35] Speaker 06:
I appreciate that, Your Honor.

[00:38:36] Speaker 06:
And perhaps that would explain a situation like Suprema, where 100% of the articles were going to be used for infringing purposes.

[00:38:45] Speaker 06:
But the problem with allowing the complete, but there was a link to the statutory text, in Your Honor's opinion, in Suprema.

[00:38:52] Speaker 06:
When you sever the link to the statutory text, you're in a situation where

[00:38:56] Speaker 06:
respectfully, I think.

[00:38:57] Speaker 01:
But you do agree that 337 is a trade statute.

[00:39:02] Speaker 01:
Yes, Your Honor.

[00:39:03] Speaker 01:
Police's unfair trade practices.

[00:39:04] Speaker 06:
And it addresses unfair trade acts.

[00:39:07] Speaker 06:
Yes.

[00:39:08] Speaker 06:
And the provision here applies to the unfairness in the importation of articles that infringe.

[00:39:16] Speaker 06:
And I think that's the fundamental problem with the case my friends on the other side are advancing.

[00:39:21] Speaker 06:
There are no articles that infringe when they cross the border, so there is no unfair trade practice

[00:39:25] Speaker 06:
when these articles cross the border.

[00:39:27] Speaker 06:
And I do think that's the fundamental point here.

[00:39:33] Speaker 04:
Thank you.