Later this month, Adminstrative Law Judge David P. Shaw is expected to issue an Initial Determination in In the Matter of Certain Wireless Devices with 3G Capabilities and Components Thereof (Inv. No. 337-TA-800), which is the ITC’s Section 337 investigation into InterDigital’s allegations of 3G-essential patent infringement by Huawei, LG Electronics, Nokia, and ZTE. The upcoming ID, though, will only relate to infringement accusations against Huawei, Nokia, and ZTE — as LG had previously been terminated from the case in July 2012. LG had been dismissed from the ITC case because LG claimed that InterDigital’s infringement allegations were an “arbitrable dispute” covered by a license agreement between the parties, and that an arbitrator — not the ITC — should decide the infringement issues. Once the ITC terminated LG from the case, InterDigital appealed this ruling to the Federal Circuit.
Today, in a 2-1 opinion [LINK] written by Judge Sharon Prost (joined by Judge William Bryson, with Judge Alan Lourie dissenting), the Federal Circuit reversed the ITC’s decision and remanded the case to the ITC for further proceedings. The court held that the ITC erred in terminating LG from the investigation, because the ITC failed to analyze the text of the license agreement to determine whether LG’s arguments regarding the arbitrability of the infringement dispute were “wholly groundless.” Furthermore, the court found that when the text of the agreement was actually considered, LG’s assertions were indeed “wholly groundless,” and the infringement claims were not subject to arbitration.
The court’s opinion includes a helpful recital of the facts regarding the prior license agreement between the parties, which was signed in January 2006 and covered both LG’s 2G-essential (GSM, GPRS, EDGE) and 3G-essential (WCDMA, CDMA2000) wireless products. That license expired on Dec. 31, 2010, seven months before InterDigital filed its ITC complaint. LG had argued that it had a continuing (paid-up) license under the products, as the agreement contained a survival clause that extended the license grant beyond the license’s expiration date. As such, the infringement dispute “arose under” the agreement and was arbitrable (because the agreement also contained an arbitration clause).
While the ITC accepted LG’s arguments at face value and declined to analyze the text of the agreement itself, the Federal Circuit did not — finding that such an analysis was necessary to determine whether LG’s claim was “wholly groundless” (the standard under relevant precedent). The court explained that the survival clause only applied to the paid-up grant relating to 2G-essential patents, and InterDigital’s allegations concerned 3G-essential patents. LG did not have an ongoing license for 3G-essential patents — “there simply is no plausible argument that LG’s license for 3G products survived the termination of the Agreement.” As such, the court held that LG’s assertion of arbitrability was “wholly groundless,” reversing and remanding the case back to the ITC.
Note — Before getting to the merits, the court spent several pages addressing the threshold issue of whether it had appellate jurisdiction over the appeal. Under 28 U.S.C. § 1295(a), the Federal Circuit has exclusive jurisdiction to review “final determinations” made by ITC in Section 337 proceedings. Both LG and the ITC argued that the order terminating the investigation with respect to LG was not a “final determination,” as it did not decide the case on the merits. The Federal Circuit rejected this “overly restrictive” view of its appellate jurisdiction in Section 337 cases, and found that the ITC’s order was an appealable final determination.
In dissent, Judge Lourie noted that while he agrees that LG’s claim of arbitrability was in fact “wholly groundless,” he disputes that the Federal Circuit had jurisdiction to entertain the appeal. He disagreed with the majority’s conclusion that the ITC’s decision was an appealable final determination, and stated that he would instead dismiss the appeal altogether (letting stand the ITC decision to terminate LG from the case).
So barring settlement, it looks like there could be more action in Inv. No. 337-TA-800 beyond the upcoming Initial Determination and the subsequent petitions to the Commission that will likely follow. The case between InterDigital and LG will likely now proceed forward in the ITC (although LG and/or the ITC could ask the panel or an en banc Fed Circuit to rehear the case), with ALJ Shaw likely setting forth a revised procedural schedule once the case returns within his purview.