A month ago, we alerted you to ALJ David P. Shaw’s Initial Determination finding no violation of Section 337 in In the Matter of Certain Wireless Devices with 3G Capabilities and Components ThereofInv. No. 337-TA-800 — the ITC’s investigation into InterDigital’s accusations that Huawei, Nokia, and ZTE infringed several 3G-essential InterDigital patents.  Yesterday, the ITC finally released the public version of the ~450 page Initial Determination.

[337-TA-800 Initial Determination (PUBLIC)]

As we noted in our post on the parties’ respective petitions for review, while the ALJ found no infringement of any valid patent claims (and therefore no violation of Section 337), he did address the Respondents’ FRAND-related defenses — and made some interesting findings.  After the jump, we’ll take a quick look at these findings, which begin on page 417 of the Initial Determination.

ALJ Shaw notes that the Respondents’ FRAND-related affirmative defenses generally break down as follows:

  • The ITC should not allow exclusion orders to issue on SEPs against “willing licensees”;
  • InterDigital has failed to negotiate in good faith with the Respondents;
  • InterDigital’s license offers to the Respondents are discriminatory and do not comply with FRAND;
  • InterDigital is barred from enforcing its FRAND-encumbered patents under the doctrines of equitable estoppel, waiver, and patent misuse; and
  • InterDigital has granted an implied license to the Respondents.

Before delving into the analysis of the FRAND defenses in detail, ALJ Shaw notes that there are actually multiple SSO patent policies at issue — the policies of ETSI (for the WCDMA standard) and the TIA and ITU (for CDMA2000).  However, the difference between the two policies, to the extent any exist, do not appear to have factored much in his conclusions.  ALJ does note — as we were able to glean from the parties’ petitions for review — that at least with respect to the ETSI IPR policy (governed by French law), InterDigital’s FRAND obligation is simply an accord de principe — an obligation to negotiate in good faith toward reaching a license agreement.

And in fact, ALJ Shaw found that InterDigital did negotiate in good faith with each of the Respondents, complying with its FRAND obligations.  Much of this portion of the ID is (unfortunately) redacted, but it appears that the Respondents argued that InterDigital’s negotiations were conducted in bad faith due to its seeking of injunctions, its attempts to negotiate a worldwide license to its patent portfolio (as opposed to a US-only license), and opposing the Respondents’ efforts to seek an expedited FRAND determination in district court.  But ALJ Shaw rejected all of these arguments, finding that even in light of InterDigital’s FRAND commitments, none of this conducted evidenced bad faith.  For example, he notes that InterDigital’s practice of seeking worldwide license agreements instead of single-country licenses is contemplated by the SSO IPR policies.  ALJ Shaw also notes that InterDigital had been in licensing discussions with each of these parties for a period of several years before the ITC case was filed.  In viewing the (redacted) history of licensing negotiations as a whole, ALJ Shaw found no bad faith.

As to the allegations that InterDigital offered unfairly discriminatory rates to the parties, ALJ Shaw found the Respondents’ allegations wanting.  For instance, where the Respondents based their allegations on an “effective royalty rate” from alleged comparable licenses, ALJ Shaw notes that the nondiscrimination analysis required consideration of more than just the monetary terms.  He also distinguishes between the Respondents, noting that, for example, ZTE and Nokia are not necessarily “similar situated” and therefore need not be offered the same FRAND rates.

Addressing the Respondents’ equitable estoppel, waiver, and misuse defenses, ALJ Shaw found them all lacking in proof.  Equitable estoppel requires a showing of a misleading statement or conduct, reliance by the defendant, and material prejudice.  Here, ALJ Shaw found that the Respondents failed to show both that they actually relied on InterDigital’s FRAND commitments, and also that the FRAND commitments were actually misleading (because, as he already concluding, InterDigital did negotiate in good faith consistent with its FRAND obligations).  ALJ Shaw also found no evidence that InterDigital waived its right to seek an exclusion order by making a FRAND commitment, distinguishing an earlier case involving Broadcom and Qualcomm where Qualcomm was found to have waived due to a violation of an SSO duty of disclosure.  (Here, there was no alleged violation of a duty of disclosure.)  Lastly, the ALJ disposed of the Respondents’ misuse theory — that InterDigital improperly attempted to expand the scope of its US patents by seeking worldwide licenses — again noting that worldwide licensing is contemplated by SSO policies.

Additionally, ALJ Shaw found that there is no legal authority for the proposition that the ITC should not issue an exclusion order on a FRAND SEP, noting that the ITC is a “creature of statute” and that Section 337 does not distinguish between types of cases.

(The section relating to the Respondents’ license defense is almost fully redacted, so unfortunately we can’t shed any light here on that defense).

This case now proceeds to the full Commission for potential review.  But as we noted before, there’s also the potential for the remand of InterDigital’s accusations against LG to delay the ultimate resolution of the -800 investigation.