Ruling Request; U.S. International Trade Commission; Limited Exclusion Order; Investigation No. 337-TA-1012, Certain Magnetic Data Storage Tapes and Cartridges Containing the Same

HQ H297262 August 9, 2018 OT:RR:BSTC:IPR H297262 CBC/JW/CAB CATEGORY: 19 U.S.C. § 1337; Unfair Competition VIA EMAIL: Gregory Corbett Wolf Greenfield & Sacks, P.C. 600 Atlantic Avenue Boston, MA 02210  WGS-Sony-1012-CBP@wolfgreenfield.com RE: Ruling Request; U.S. International Trade Commission; Limited Exclusion Order; Investigation No. 337-TA-1012, Certain Magnetic Data Storage Tapes and Cartridges Containing the Same Dear Mr. Corbett, Pursuant to 19 C.F.R. part 177 the Intellectual Property Rights Branch (“IPR Branch”), Regulations and Rulings, U.S. Customs and Border Protection (“CBP”) issues this ruling letter. We find that the redesigned LTO-7 and LTO-8 magnetic data storage tapes at issue are subject to the limited exclusion order (“LEO”) issued by the U.S. International Trade Commission (“ITC” or “Commission”) in Investigation No. 337-TA-1012 pursuant to section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337. Sony has failed to meet its burden to demonstrate that certain redesigned LTO-7 and LTO-8 magnetic data storage tapes that have been prescreened by a verification plan developed by Sony (collectively, “products at issue”), will avoid infringement of the patent at issue in the LEO. Specifically, we find that: (i) the products at issue in this case are limited to articles that have passed through Sony’s verification plan, (ii) none of the evidence produced by Sony in this proceeding is the result of articles that were subjected to Sony’s verification plan, and (iii) Sony failed to provide the relevant evidence for us to determine whether its verification plan would have been effective had it been in place. Accordingly, Sony has failed to meet its burden to demonstrate that the products at issue are not subject to the LEO. This ruling letter is the result of an inter partes proceeding administered by CBP. The inter partes proceeding involved the two parties with a direct and demonstrable interest in the question presented by the ruling request: (1) your clients, Sony Corporation, Sony Corporation of America, Sony Electronics Inc., Sony Storage Media Solutions Corporation, Sony Storage Media Manufacturing Corporation, Sony DADC US Inc., and Sony Latin America Inc. (collectively, “Sony”); and (2) Fujifilm Corporation and Fujifilm Recording Media U.S.A., Inc. (collectively, “Fujifilm”). See, e.g., Ruling Request at 1, 3; Comm’n Op. at 1–2. The parties were asked to clearly identify confidential information [[with red brackets]] in all of their submissions to the IPR Branch. See CBP Email to the Parties Dated April 18, 2018. Upon review, CBP has determined that not all of the information identified by Sony should be granted confidential treatment, and only information bracketed in red [[ ]] will be redacted from the published public version ruling. See infra Section III.A. If there is information in this ruling letter not currently bracketed in red [[ ]] that either party believes constitutes confidential information, or is information subject to an administrative protective order in the underlying ITC investigation or other related proceding, and should be redacted from the published ruling, then the parties are asked to contact CBP within five (5) business days of the date of this ruling letter. Please note that any request for confidential treatment must provide a particularized showing of the specific harm that will result if certain information is disclosed. Broad, unsubstantiated allegations of harm without specific examples articulating reasons for the harm will not suffice. As discussed in greater detail in Section III.A, a request for confidential treatment of information submitted in connection with a ruling requested under 19 C.F.R. part 177 faces a strong presumption in favor of disclosure. The person seeking this treatment must overcome that presumption with a request that is narrowly tailored and supported by evidence establishing a likelihood of substantial harm to a competitive position that outweighs the general history and public policy—embedded in the Freedom of Information Act (“FOIA”) (5 U.S.C. § 552) (“FOIA”), the common law, and the relevant Customs regulations—favoring transparency and disclosure. BACKGROUND ITC Investigation No. 337-TA-1012 Procedural History at the ITC The Commission instituted Investigation No. 337-TA-1012 on June 27, 2016, based on a complaint filed by Fujifilm. 81 Fed. Reg. 43243 (July 1, 2017); Comm’n Op. at 1–2. The complaint alleged violations of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337), in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain magnetic data storage tapes and cartridges containing the same by reason of infringement of one or more of claims 1, 4–9, 11, and 14 of U.S. Patent No. 6,641,891 (“the ’891 patent”); claims 2, 5, and 6 of U.S. Patent No. 6,703,106 (“the ’106 patent”); claim 1 of U.S. Patent No. 6,703,101 (“the ’101 patent”); claims 1, 2, 4, 5, and 7-11 of U.S. Patent No. 6,767,612 (“the ’612 patent”); claim 1 of U.S. Patent No. 8,236,434 (“the ’434 patent”); and claims 3 and 10 of U.S. Patent No. 7,355,805 (“the ’805 patent”). Id. The notice of investigation named as respondents Sony Corporation of Tokyo, Japan; Sony Corporation of America of New York, New York; and Sony Electronics Inc. of San Diego, California. Id. The Office of Unfair Import Investigations participated as a party. Id. On February 15, 2017, the Commission determined not to review the Administrative Law Judge’s (“ALJ”) order (Order No. 24), granting a motion to terminate to terminate the investigation as to the ’101 patent. Comm’n Op. at 2–10; 83 Fed. Reg. 11245 (March 14, 2018). On September 1, 2017, the Administrative Law Judge (“ALJ”) issued his final Initial Determination (“ID”) finding a violation of section 337 with respect to asserted claims 1, 4–9, 11, and 14 of the ’891 patent. Id. The parties appealed to the Commission, which determined to review-in-part the ID’s findings with respect to the each of the five remaining patents in suit. Id. On March 8, 2018, the Commission affirmed the ID with modification. Id. The Commission found a violation of section 337 only with respect to the ’891 patent and affirmed its validity. Id. The Commission issued, inter alia, a limited exclusion order (“1012 LEO”) prohibiting the entry for consumption into the United States, entry for consumption from a foreign-trade zone, or withdrawal from a warehouse for consumption of magnetic data storage tapes and cartridges containing the same that infringe one or more of claims 1, 4–9, 11, and 14 of the ’891 patent that are manufactured abroad by, or on behalf of, or imported by or on behalf of respondents (i.e., Sony) or any of their affiliated companies, parents, subsidiaries, agents, or other related business entities, or their successors or assigns, for the remaining term of the ’891 patent except under license of the patent owner or as provided by law. See id.; 1012 LEO. Rule 177 Proceeding before the IPR Branch Procedural History On April 13, 2018, Sony submitted a letter requesting an administrative ruling pursuant to 19 C.F.R. part 177, which included exhibits A–S and appendices A and B (collectively, “Ruling Request”). On May 15, 2018, Fujifilm submitted a response to the Ruling Request, which included exhibits 1–12 and an appendix (collectively, “Fujifilm Response”). On May 23, Sony submitted a reply to the Fujifilm response, which included exhibits T–W (collectively, “Sony Reply”). On May 25, CBP conducted a teleconference with the parties, during which the Sony Reply was discussed. In an email to the parties that day, CBP revised the procedural schedule to provide additional time for Fujifilm’s sur-reply. See CBP Email to Parties dated May 25, 2018. On June 11, 2018, Fujifilm submitted a sur-reply to the Sony Reply, which included exhibits 13–20 (collectively, “Fujifilm Sur-Reply”). Both parties presented arguments to CBP during oral arguments held on June 15, 2018. Both parties subsequently submitted post-hearing briefs on June 22, 2018. Fujifilm’s post-hearing brief included exhibits 21–24 and Sony’s post-hearing brief included exhibits X–AA. The Products at Issue The present ruling is issued pursuant to 19 C.F.R. pt. 177, which requires that a ruling request be directed to a specifically described transaction. See 19 C.F.R. § 177.1(a)(1). Sony defines the particular transaction as the importation of certain newly-redesigned magnetic data storage tapes, including newly redesigned Linear Tape-Open (“LTO”) LTO-7 and LTO-8 generation magnetic data storage tapes, manufactured by or on behalf of, or imported by or on behalf of, Sony”that have been prescreened by a “verification plan” which Sony developed to “ensure that no infringing products are imported into the United States” (collectively, “products at issue”). Ruling Request at 1, 19 and 22; Exh. B of Ruling Request (Nakashio Decl.) at ¶ 47. Sony’s Redesigned LTO Tape Cartridges According to Sony, it “has developed redesigned LTO-7 and LTO-8 magnetic data storage tapes that have a lower ‘coercivity.’” Ruling Request at 2. Sony explains that “[e]ach manufacturing ‘production lot’ is comprised of magnetic (and other) material that is painted onto large rolls of supporting tape material.” Exh. B of Ruling Request (Nakashio Decl.) at ¶ 28. “The materials from each ‘production lot’ are used to make multiple ‘jumbo rolls’ of magnetic tape.” Id. A “jumbo roll” “consists of 14,000 meters of magnetic tape that is wound into a giant roll.” Id. “The tape manufactured on each ‘jumbo roll’ is used to produce 658 individual LTO cartridges.” Id. “Each jumbo roll is sliced along its length into 47 different ‘channels’ or ‘pancakes.’” Id. at ¶ 29. Each pancake comprises 14 positions. Id. at ¶¶ 29, 31. “[E]ach ‘position’ on each ‘pancake’ (or ‘channel’) corresponds to magnetic tape that will be used in a single LTO cartridge. Id. at ¶ 30.
Id. at ¶ 29. “The tape from each of the 47 ‘pancakes’ (or ‘channels’) is ultimately wound into LTO cartridges.” Id. at ¶ 31. Sony indicates that it modified its manufacturing process for its LTO 7 and LTO 8 tape to “ensure that the magnetic layers do not have a coercivity equal to or higher than 159 kA/m” by altering its process for [[ ]] and modifying its manufacturing processes for [[ ]] Nakashio Decl. at ¶ 25; see also Ruling Request at 19, 22. Sony’s “Verification Plan” In addition to the above-noted changes to its manufacturing process, Sony “developed a robust verification plan to implement [a] [[ ]] threshold and ensure that no infringing products are imported into the United States.” Nakashio Decl. at ¶ 47. Sony states that “Sony’s redesign and quality testing ensures that its Redesigned LTO-8 [and LTO-7] Data Tapes’ coercivity values all fall below a threshold of [[ ]], one that is a full [[ ]] lower than the claimed coercivity range.” Id. at 19 and 22 (citation omitted) (emphasis in the original); see also id. at 4 n.4 (“Sony’s manufacturing quality control process involves testing multiple portions of multiple magnetic tape ‘jumbo rolls’ in each production lot, and disqualifies cartridges measured with a coercivity above [[ ]] (i.e., [[ ]] less than the lower limit of the claims) from being imported into the United States.”); Nakashio Decl. at ¶ 47 (“Sony has developed a robust verification plan to implement this [[ ]] threshold and ensure that no infringing products are imported into the United States.”); Sony Reply at 10 (“Sony has designed a longitudinal magnetic tape with a coercivity value below 159 kA/m, and has created quality control procedures to disqualify any tape with a coercivity above [[ ]] thus avoiding infringement of the ‘891 patent.”); Sony Post-Hearing Brief at 19 (“The data shown below [referring to the coercivity test results of Sony’s redesigned tapes submitted throughout the course of this proceeding], combined with Sony’s rigorous and conservative quality control and voluntary disqualification procedure, ensures that the Redesigned LTO-7 and LTO-8 Data Tapes will not infringe the ‘891 patent.”). Sony indicates that its verification plan includes testing of the redesigned tape as it is made. Ruling Request at 19 and 22; Nakashio Decl. at ¶¶ 44-50. “For each production lot, Sony takes numerous coercivity measurements across multiple jumbo rolls.” Ruling Request at 19 and 22; Nakashio Decl. at ¶¶ 48. “And for each jumbo roll Sony takes at least [[ ]] different coercivity measurements, spread across the roll in different ‘channels’ and “‘positions.’” Id. During oral argument before the IPR Branch and in Sony’s post-hearing brief, Sony further specified that “Sony’s quality control and voluntary disqualification protocol requires at least [[ ]] coercivity measurements for each jumbo roll, taken at different positions from each of at least channels [[ ]].” Sony Post-Hearing Brief at 3-4; Oral Arg Tr. at 26:4-5. According to the Declaration of Dr. Ross submitted with the Ruling Request, “Sony’s policy regarding the redesigned tapes is to do three things upon measurement of a coercivity value greater than [[ ]]: ” Test the adjacent pancake(s) to ensure that the coercivity of that pancake is not within the claimed range; Segregates this pancake for further coercivity testing in each position (i.e., tape cartridge location) to determine if the individual cartridge has a measured coercivity value below [[ ]]; and Measure the coercivity of each position within the pancake (i.e., tape cartridge), and any position which results in a measured coercivity value greater than [[ ]] is not shipped for importation into the United States. See Exh. A (Ross Decl.) of Ruling Request at ¶ 85; Ruling Request at 22-23. Mr. Nakashio also states, “[i]n the event that a particular tested ‘position’ (destined to be a tape cartridge) is found to have a coercivity greater than [[ ]] . . . Sony will disqualify the entire ‘pancake’ and ensure that no tape drawn from the pancake (corresponding to 14 cartridges) is imported into the United States.” Nakashio Decl. at ¶ 50. In its post-hearing brief, Sony further stated that “[t]o the extent that any samples in those channels [referring to channels [[ ]]] test above [[ ]] (i.e., a full [[ ]] below the claim limit), those channels will be disqualified for import into the United States, and the next adjacent channel will be tested until two coercivity measurements at different positions within a channel yield coercivity values equal to or below [[ ]].” Sony Post-Hearing Brief at 3-4. Evidence of the Products at Issue Submitted by Sony The products at issue are certain newly-redesigned magnetic data storage tapes that have been prescreened by a “verification plan” which Sony developed to “ensure that no infringing products are imported into the United States.” Ruling Request at 1, 19 and 22; Exh. B of Ruling Request (Nakashio Decl.) at ¶ 47. Over the course of the inter partes proceeding, Sony submitted 240 coercivity measurements taken from seven jumbo rolls across two production lots of redesigned tape. Sony Post-Hearing Brief at 3. However, none of the evidence submitted by Sony as part of the inter partes proceeding comes from redesigned magnetic data storage tapes that were subjected to prescreening by Sony’s verification plan. See Oral Arg. Tr. at 24:8-20; Sony Post-Hearing Brief at 23 (“this quality control procedure was conceived after analyzing Sony’s first lot of Redesigned tapes, and its second lot was consumed for qualifications by the TPCs”). Sony’s Ruling Request Dated April 13, 2018 In Sony’s Ruling Request, Sony submitted the results of coercivity testing for the redesigned LTO-8 data tapes and the redesigned LTO-7 data tapes from both Dr. Ross’s testing and Sony’s internal testing. See Ruling Request at 16-21. Dr. Ross’s Testing Procedure Thirty sample cartridges of Redesigned LTO-7 and thirty sample cartridges of Redesigned LTO-8 were sent by Sony to the lab Dr. Ross used to perform coercivity measurements. Exh. A of Ruling Request (Ross Decl.) at ¶ 47. “[T]he thirty sample cartridges of Redesigned LTO-7 tape and the thirty sample cartridges of Redesigned LTO-8 tape were taken from various locations throughout the jumbo roll, including from across 9 different ‘channel/pancakes’ and from 3 different ‘positions’ on each ‘channel/pancake.’” Id. at ¶ 48. Dr. Ross tested three sample locations taken from each of the twenty-seven sample cartridges of the Redesigned LTO-7 and three sample locations from each of the twenty seven sample cartridges of the Redesigned LTO-8 each from the beginning, middle and end of each cartridge. Id. at ¶ 53; Ruling Request at 16-17;  Dr. Ross used a vibrating sample magnetometer (VSM) to measure the coercivity of the Redesigned Data Tapes and measured coercivity in the longitudinal direction. Id. at ¶¶ 63-64. For the LTO-8 data tapes Dr. Ross tested three sample locations on each of 27 different redesigned LTO-8 tapes. Ruling Request at 16-17. For the LTO-7 data tapes, “Dr. Ross requested and directed the testing of 27 Redesigned LTO-7 tapes.” Ruling Request at 20. Three different samples were taken from each tape. Id. Sony’s Internal Testing Procedure Sony’s internal testing procedure was slightly different than Dr. Ross’s testing procedure. Exh. A of Ruling Request (Ross Decl.) at ¶ 86. Sony’s internal testing incorporated the “stacking” method, while Dr. Ross’s did not. See Ruling Request at 19. “Sony stacks three layers of magnetic tape together, and then proceeds to punch out a sample for VSM measurement.” Exh. A of Ruling Request (Ross Decl.) at ¶ 86. Sony’s internal testing procedure, like Dr. Ross’s, measured coercivity in the longitudinal direction. See e.g., Exh. B (Nakashio Decl.) of Ruling Request at ¶¶ 21, 24. For the LTO-8 data tapes, Sony conducted internal testing involving 20 different redesigned LTO-8 tape samples. Ruling Request at 17. The coercivity values for the redesigned LTO-8 Data Tapes were measured in channels [[ ]]. Nakashio Decl. at ¶ 35. Notably, no coercivity measurements were taken from channel [[ ]], although such measurement is required by Sony’s verification plan set forth in Section I.B.2.b. Id. For the LTO-7 data tapes, Sony’s internal testing results were based on 18 different sample LTO-7 tapes. Ruling Request at 21. The coercivity values for the redesigned LTO-7 Data Tapes were measured in channels [[ ]]. Nakashio Decl. at ¶ 33. With respect to this testing for the Redesigned LTO-7 Data Tapes, Mr. Nakashio noted “[t]he [[ ]] channel rather than the [[ ]] channel was used for the Redesigned LTO-7 tape testing because of an error related to servo writing (i.e., one unrelated to any magnetic properties of the tapes).” Id. Again, no coercivity measurements were taken from [[ ]], although such measurement is required by Sony’s verification plan set forth in Section I.B.2.b. Id. Sony’s Reply Dated May 23, 2018 Since the submission of Sony’s Ruling Request, Sony manufactured additional production lots of its Redesigned LTO-7 and LTO-8 Tapes, including a production lot consisting of ten additional jumbo rolls of Redesigned LTO-7 and LTO-8 Tapes. Sony Reply at 12. “Five of the ten jumbo rolls were tested f