NIES, Circuit Judge.
Corning Glass Works appeals from the International Trade Commission's determination that the importation and sale of certain optical waveguide fibers manufactured in Japan by Sumitomo Electric Industries, Ltd. (SEI) and sold in the United States by Sumitomo Electric U.S.A., Inc. (SEUSA) (collectively Sumitomo) did not violate section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337 (1982).
The Commission instituted the investigation at issue on April 5, 1984, on the basis
The Commission referred the case to an administrative law judge for an evidentiary hearing and initial determination. On January 22, 1985, the ALJ issued his initial determination. He found that both patents were not proved to be invalid, or unenforceable, and were infringed by Sumitomo. The parties stipulated that the domestic industries operating under each patent were efficiently and economically operated. However, the ALJ found no effect or tendency to destroy or substantially injure the relevant industries. In this connection, he found that the optical waveguide fiber market in the United States had been expanding, and would continue to expand, faster than the capacity of the domestic industry to meet the demand. He also found that Sumitomo's imports had had no appreciable effect on the sales or prices of domestic producers and that such imports were likely to diminish in the years ahead.
Both Corning and Sumitomo petitioned the Commission for review of various portions of the initial determination. On March 8, 1985, the Commission ordered review of the initial determination, but only with respect to the issue of whether Sumitomo's importation or sales had the tendency to substantially injure an industry in the United States.
On April 18, 1985, the Commission completed its review, determined that there was no violation of section 337, and terminated the investigation. 50 Fed.Reg. 16,171 (1985). The Commission subsequently issued a written opinion. In re Certain Optical Waveguide Fibers, No. 337-TA-189 (May 20, 1985). In that opinion, the Commission affirmed the portion of the initial determination finding no tendency to substantially injure the relevant industries. The effect of the Commission's March, 1985 order and May, 1985 opinion was specifically declared to affirm the ALJ's initial determination in its entirety. 19 C.F.R. § 210.53(h).
The Commission Decision
The Commission's decision holds that there are two domestic industries, corresponding to the subject matter of each of Corning's patents. The industry under the '915 patent, that is, the patent claiming optical waveguide fibers, was found to consist of Corning and its licensees, AT & T, ITT and SpecTran; the industry under the '454 patent for a process for making the fibers solely of Corning. Although licensed under the '454 process, AT & T, ITT and SpecTran do not produce their fiber by the patented process. With respect to members of either domestic industry, the Commission refused to include Northern Telecom, Inc. (NTI), which sells fiber in the United States imported from its parent Northern Telecom, Ltd. (NTL) which manufactures the fiber in Canada under a license from Corning. The Commission also excluded American Fiberoptics and Lightwave Technologies Co., alleged by Corning to be infringers of its patents, and Valtec Corporation, an alleged infringer which has become a licensee.
Optical waveguide fiber is sold in both cabled and uncabled form. Uncabled fiber is sold to firms which cable the fiber for use in telecommunications and other applications. Corning makes and sells uncabled
In 1980, Sumitomo began importing and selling optical waveguide fiber in the United States. The U.S. market for optical waveguide fiber has grown with increasing rapidity since 1982 and is expected to double in size from 1985 to 1988. Detailed findings were made concerning the domestic producers' failed attempts to expand their production capacity to supply the burgeoning market. Corning itself has had to import fiber from overseas to meet its needs, as have other domestic manufacturers. Demand has outstripped supply across the industry. Corning's licensees and some of the cablers who sell Corning fiber testified that they are unaware of any business lost to Sumitomo. Sumitomo's sales efforts have been hampered by a lack of adequate product support service and marketing, and by an inability to offer quick delivery. The record indicates that its market share from imports has remained well under 1%.
Sumitomo's inability to gain a significant share of the United States market was a principal reason behind Sumitomo's decision to build a facility in this country for research, development and production of optical waveguide fiber and cable. Sumitomo began construction of its United States facility, Sumitomo Electric Research Triangle (SERT), in October, 1983, with production projected to begin in late 1985. It was found that SERT is intended to serve as Sumitomo's principal source of fiber and cable for the United States market. In conjunction with the start-up of SERT, Sumitomo intends to develop a sales, marketing and field engineering staff.
The Commission determined that the record does not establish that Sumitomo's importation and sale of the accused optical waveguide fibers have "the effect or tendency to destroy or substantially injure" the domestic industries, as required for exclusion under section 337. It rejected Corning's argument that sales activities related to Sumitomo's manufacture of fibers in the United States are relevant in determining injury. Rather, the Commission limited the injury inquiry to Sumitomo's sales of imported fibers. Finally, the Commission concluded that it would be speculative to find both that Sumitomo intended to substantially increase sales of imported fiber and that the domestic industry would be able to meet the rapidly expanding market on the evidence of record. While a lower quantum of proof of injury or tendency to injure is permitted in a patent-based section 337 case, per the Commission, mere speculation is not permitted.
The Standard of Appellate Review
Corning states the issues in this appeal in the following terms:
These statements of the issues misdirect the focus of the appeal. Like numerous other appellants, Corning essentially argues its case to this court as it did to the tribunal from which the appeal was taken. We are asked to decide the original issues
The appellate function is not to determine whether the findings and conclusions of the Commission were right or wrong, in the sense that the judges of this court would or would not reach the same result if they were to decide the matter in the first instance. Issues should be framed and addressed by parties to the appeal in the terms mandated by the standard of review. In this case, the standard of review is statutory. 19 U.S.C. § 1337(c) provides: "Any person adversely affected by a final determination of the Commission under subsection (d), (e), or (f) may appeal such determination to the United States Court of Appeals for the Federal Circuit for review in accordance with chapter 7 of title 5, United States Code ..."
Under the above standard of review, a reviewing court "shall decide all relevant questions of law." 5 U.S.C. § 706; see SSIH Equipment S.A. v. United States, 718 F.2d 365, 371-72, 218 USPQ 678, 684 (Fed.Cir.1983). Thus, this court is not bound by the Commission's interpretation of statutory provisions. However, even though an issue may be denominated one of law, the court is not free simply to substitute its view for that of the Commission. Deference must be given to an interpretation of a statute by the agency charged with its administration. United States v. Riverside Bayview Homes, Inc., 474 U.S. ___, 106 S.Ct. 455, 461, 88 L.Ed.2d 419 (1985). With respect to the meaning of the statutory requirements that an unfair method of competition must have "the effect or tendency ... to destroy or substantially injure a domestic industry ... in the United States," it is particularly within the province and expertise of the Commission to define those phrases.
In contrast, with respect to issues of fact, our scope of review is narrowly limited. We may overturn a factual finding only if it is unsupported by substantial evidence. 5 U.S.C. § 706(2)(E); American Hospital Supply Corp. v. Travenol Laboratories, Inc., 745 F.2d 1, 9, 223 USPQ 577, 583 (Fed.Cir.1984); General Motors Corp. v. U.S. International Trade Commission, 687 F.2d 476, 479-80, 215 USPQ 484, 487-88 (CCPA 1982), cert. denied, 459 U.S. 1105,
383 U.S. at 620, 86 S.Ct. at 1026; see also Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed.Cir.1984); SSIH, 718 F.2d at 381, 218 USPQ at 691 (additional views of Judge Nies); Bally/Midway, 714 F.2d at 1125, 219 USPQ at 103 (uncontradicted evidence established injury).
With these considerations in mind, we turn to Corning's arguments which, it asserts, warrant overturning the ITC's determination that Sumitomo's imports have no effect or tendency to substantially injure the domestic industries operating under Corning's patents.
Section 337 Standard of Injury
Corning argues that the Commission erred, as a matter of law, in interpreting the statutory injury requirement. The test for determining injury in a patent-based section 337 action, per Corning, is whether the acts of the infringer have resulted or will result in "conceivable losses of sales." The argument made by Corning here is a familiar refrain. A similar argument was made, for example, in Textron, Inc. v. U.S. International Trade Commission, 753 F.2d 1019, 224 USPQ 625 (Fed.Cir.1985), where, despite a finding of infringement of a registered trademark in the importation and sale of certain goods, no exclusion order was issued because of a negative injury determination. In essence, owners of rights in patents, trademarks and copyrights have argued, as Corning does, that infringement of such rights inevitably has the effect or tendency to substantially injure its business by reason of loss of sales or lower profits since its rights are exclusive, and that no further inquiry into the statutory requirement for injury is necessary or appropriate.
In affirming the Commission's interpretation that satisfaction of the statutory injury requirement did not automatically follow from proof of infringement of rights in intellectual property, this court held in Textron:
753 F.2d at 1028-29, 224 USPQ at 631-32; accord Warner Brothers, Inc. v. U.S. International Trade Commission, 787 F.2d 562, 564, 229 USPQ 126, 127 (Fed.Cir.1986) (no injury found notwithstanding copyright infringement).
Because section 337 does not function merely as an international extension of private rights under the patent statute, the statements of this court on the showing of injury required for the grant of an injunction in a patent infringement suit cannot be taken out of context and applied to the issuance of an exclusion order in a section 337 proceeding. Upon a patentee's proof of continuing infringement of a valid enforceable patent, "immediate irreparable harm is presumed" in connection with a request to a district court for injunctive relief. Smith International, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581, 219 USPQ 686, 692-93 (Fed.Cir.), cert. denied, 464 U.S. 996, 104 S.Ct. 493, 78 L.Ed.2d 687 (1983). Congress has, however, required more for an exclusion order against imports, as recognized by this court unequivocally in Textron. The Commission is, thus, correct in its statement, "[S]ection 337 has elements in addition to the establishment of the existence of unfair practices such as patent infringement which must be satisfied before relief [i.e., an exclusion order] can be granted." In re Certain Optical Waveguide Fibers, slip op. at 21.
Corning cannot be faulted in its analysis that a patentee is entitled to benefit from all sales in the United States of products covered by its patent and that diversion of any sales by an infringer without payment of royalties is legally and in fact an economic loss to the patentee. However, a section 337 proceeding is not designed simply to protect a patent owner from loss. That truism is readily apparent from the statutory scheme which provides no protection for a patent owner in the absence of a domestic industry. The patentee in that situation suffers a real loss from infringing imports, at least to the extent of the loss of possible royalties, but is relegated to private remedies.
There is no question here that there is a domestic industry. However, to accept proof of a conceivable or actual loss of sales or profits of any amount by the patentee as sufficient proof of an effect or tendency to substantially injure the domestic industry would eliminate the "independent proof" of the "distinct injury requirement" held to be necessary in Textron. Even if one equates the patent owner with the domestic industry, the statutory injury provision speaks not of any injury but of an effect or tendency "to destroy or substantially injure." Clearly, Corning's argument that, as a matter of law, proof of even a single lost sale of a patented item establishes a sufficient level of injury must be rejected. Congress has directed that the remedy of section 337, involving as it does the act of the sovereign in closing our borders to certain imports, be exercised only in those instances where at least there is proof of a tendency to substantially injure the subject industry.
In In re Von Clemm, 229 F.2d 441, 444-45, 108 USPQ 371, 373-74 (CCPA 1955), the Court of Customs and Patent Appeals, a predecessor of this court,
The argument is made here that in Bally/Midway, this court adopted the standard that unfair methods or acts that result in even "conceivable losses of sales" establish injury to the domestic industry.
While Corning's proposed "test" for injury may be easily rejected as statutorily impermissible, it would be difficult to articulate positively what quantum of injury is legally required. Indeed, the question of quantum of injury is not one on which it would be appropriate for this court to put forth a legal standard. The statement in Textron that "the infringer holds, or threatens to hold, a significant share of the domestic market in the covered articles or has made a significant amount of sales of the articles" gives guidance, but it is not definitive of the considerations relevant to the injury inquiry.
In any event, determination of injury is precisely the type of question for which the Commission has the expertise and has been given the responsibility to answer. Moreover, the determination of injury necessarily must be based upon the particular facts of each case.
Turning to Corning's arguments that past injury was proved,
Corning asserts that a more lenient standard of injury or a lesser quantum of proof should be required for "newly emerging, high technology industries" than for stable, mature industries. In such new industries, "excess demand over supply" and "declining prices" are normal growth patterns, per Corning, and should not give Sumitomo "a right to take advantage of rising demand to make inroads into the U.S. markets and to establish customer/supplier relationships which ultimately enable Sumitomo to seize a bigger share of the market as that market matures." Also, Corning argues, lost sales retard the patentee's growth, the patentee's recoupment of research and development costs and its achievement of full efficient operation. These are, of course, valid propositions, but they do not answer the question whether the sales by Sumitomo were so significant that they have had any of those effects. In this connection, the ALJ found not only that the domestic industry did not decline but also that Corning and its licensees could not satisfy demand for the product, despite increasing their capacities; that they had put customers on allocation; and, indeed, that they were themselves importing fiber in order to fill orders. Thus, the ALJ could not say that a sale by Sumitomo represented a lost sale to the domestic industry. In addition, the presence of non-licensed United States producers of fiber and of a licensed foreign producer (NTL) whose products were permitted by Corning to be sold in the United States by its subsidiary (NTI), also tended to negate Corning's position that Sumitomo's sales and market share were gained at the expense of the domestic industry. Thus, the evidence, per the ALJ, did not establish a nexus between Sumitomo's sales and any past injury to the domestic industry.
Corning argues that NTI/NTL were placed on the wrong side of the injury equation — that their licensed sales are part of the domestic industry even though the product is manufactured abroad. The Commission's interpretation that only operations within the United States constitute the domestic industry is reasonable and is supported by the precedent of this court.
Corning argues that competitors who allegedly infringe its patents also constitute part of the domestic industry operating under its patents, and, thus, their loss of sales should have been taken into account in determining past injury. However, the Commission is not in a position to try a multiplicity of infringement actions against domestic producers as part of an investigation into unfair trade practices in the importation of goods. On the record here, its decision to exclude the alleged domestic infringers from the domestic industry operating under the patent is not arbitrary or capricious. Nor has this factor, which "complicated" the evaluation of injury, been shown to be decisive in any way.
Similarly, other factors specifically mentioned by the ALJ, e.g., the aggressive pricing policy of other, much larger, licensed competitors, were seen as the cause of the reduction of domestic prices of optical fiber. While noting three isolated instances in which Sumitomo had underbid a cable competitor on a particular contract, (Sumitomo was not uniformly the low bidder), the ALJ found that such isolated instances would not have caused the massive nationwide, across-the-board price reductions in the domestic industry. That finding is supported by substantial evidence.
Corning also claims injury by loss of royalties from Sumitomo. This is rather a transparent attempt to clothe in different garb the argument that patent infringement per se constitutes injury. Also, we must note that the damage here, assuming infringement, is not a total loss of royalties but deferment of payment. The record indicates that Corning is pursuing an infringement action against Sumitomo. Civil Action No. 84 Civ. 9155 (S.D.N.Y.).
With respect to Sumitomo's sales having a tendency to substantially injure the domestic industry in the future, the only projected major change in circumstances foreseen by the Commission was Sumitomo's expected production of optical fiber in the United States at its SERT facility in North Carolina beginning in mid-to-late
The Commission considered the first argument unsupported by evidence and Corning merely urges us to adopt its view, which we decline to do. The Commission refused to consider the evidence of prospective sales by SERT, holding that "only sales of imports ... can be taken into account in finding a tendency to substantially injure." We find this interpretation of the statutory injury requirement reasonable. Further, no error is shown in the findings that any increase in Sumitomo's market share would be largely attributable to Sumitomo's SERT facility.
Numerous additional disagreements with the Commission's factual findings appear in appellant's brief with citations to evidence to the contrary in the record. No attempt is made, however, by Corning's counsel, to meet its burden on appeal of showing that a particular finding is unsupported by substantial evidence, that is, that no reasonable person could make the particular finding considering the evidence offered by both sides.
In any event, the factual challenges of Corning not specifically addressed herein have been considered. All findings are affirmed, appellant not having carried its burden on appeal of persuading this court that any findings are unsupported by substantial evidence.
Finally, Corning's assertion of procedural error in that the Commission refused to consider post-hearing evidence is meritless.
The factors considered by the Commission in its determination of no injury in this investigation are relevant. Its findings are supported by substantial evidence. None of the usual indices of injury, e.g., declines in sales, production, investment, profits, or employment, are present. Similarly, its evaluation of the future levels of imports and their likely effect is amply supported by the record.
As the Commission stated, its decision here does not sanction the infringement of
The determination of the International Trade Commission that no violation of section 337 resulted from the importation from Japan and sale in this country of certain optical waveguide fibers by Sumitomo is affirmed. The patent issues being mooted by affirmance on the grounds of no injury, we vacate the portion of the Commission's decision dealing with those issues.
AFFIRMED IN PART; VACATED IN PART.
S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (1974), U.S.Code Cong. & Admin.News 1974, 7186, 7329.