Nintendo Co. (7974), maker of the Wii video-gaming system, won a U.S. appeals court ruling that makes it harder for patent-licensing companies to seek an import ban on products as a way to demand royalties.
Motiva LLC, which claimed Nintendo infringed its patents for a system to track a game user’s position, didn’t meet the requirements to file a trade complaint, the Court of Appeals for the Federal Circuit said yesterday in a decision posted on its website. The ruling backs the U.S. International Trade Commission’s decision against the Dublin, Ohio-based company.
The ITC’s goal is to protect U.S. markets from unfair trade practices, and it requires patent owners to prove they have something worth protecting. The agency said Motiva’s three-year-old lawsuit against Kyoto, Japan-based Nintendo in a district court didn’t pass that test, and the appeals court agreed.
“The evidence demonstrated that Motiva’s litigation was targeted at financial gains, not at encouraging adoption of Motiva’s patented technology,” Circuit Judge Sharon Prost wrote for the three-judge panel. “The inventors looked forward to financial gains through Motiva’s litigation, not hopes of stimulating investment or partnerships with manufacturers.”
The ITC had found Nintendo didn’t infringe the patents. The Federal Circuit, rather than ruling on that issue, made its decision on the question of whether a case should have been allowed at the commission.
“The court made a reasonable judgment,” Nintendo said in an e-mailed statement today.
The ITC has the power to block products that infringe U.S. patents. Companies such as Google Inc. (GOOG:US) and Apple Inc. have said that potential threat is being used too often by patent-licensing firms to force legal settlements. Such cases properly belong in district court, a group representing the technology companies said in testimony to Congress.
The ITC has only issued four import bans to companies that don’t make products, and in each of the cases, the patent owner developed the technology, according to an April report from the commission.
A trade judge, in a first this week, will hold a hearing to determine if a patent owner for laminated packaging meets the requirement that a domestic industry exists before it can bring infringement claims against liquor companies and toymakers.
“The ITC is not shutting the door, but it’s like one of those spy movies where you have to get through all these little lasers to get in,” said Smith Brittingham, a patent lawyer with Finnegan in Washington, who specializes in ITC cases. “They’re saying, ‘We recognize a poor domestic industry when we see one. Congress, you do not need to change our way of doing business to save the world from really tenuous claims.’”
Motiva was founded in 2003 by two men who sought to integrate fitness and video games through motion detection, according to the complaint. They were unsuccessful in commercializing any product.
In November 2006, Nintendo began selling the Wii, which features a motion-sensor controller that allows users to replicate movements like swinging a tennis racquet on screen.
“The release of the Wii crushed a startup in America,” said Motiva’s lawyer Christopher Banys in Palo Alto, California. “The ITC ought to be available to companies that are inventive institutions. Where does a nascent business go when it feels it’s been crushed?”
Motiva sued Nintendo in 2008 in federal court in Tyler, Texas, a district with a history of decisions favoring patent owners. Nintendo succeeded in having the case transferred to a federal court in Seattle, and then having it put on hold while the U.S. Patent and Trademark Office reviews the validity of the patents.
The ITC complaint was filed in September 2010, which both the agency and the Federal Circuit said was too late if Motiva wanted to show it was interested in preserving its ability to commercialize the inventions.
“Unless your licensing industry is truly robust, long-standing and from a company that has some kind of cache, I don’t think the ITC is the place to be,” said Rodney Sweetland, a patent lawyer with Duane Morris, who specializes in ITC cases.
The case is Motiva LLC v. ITC, 12-1252, U.S. Court of Appeals for the Federal Circuit (Washington). The lower case is In the Matter of Video Game Systems and Controllers, 337-743, U.S. International Trade Commission (Washington).
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