Yesterday, we covered some of the wide-ranging reaction to U.S. Trade Representative Michael Froman’s decision to veto the ITC’s exclusion order in Inv. No. 337-TA-794.  One recurring theme was the question of what this ruling might mean for other SEP-related Section 337 cases that are currently at the ITC (or may be brought in the future).  It’s a very good question — one without a clear answer.

Some of this lack of clarity appears to stem from Ambassador Froman’s letter announcing his decision.  The letter clearly states that exclusion orders may be available as a remedy for FRAND-encumbered SEPs in some circumstances, so this does not appear to represent a complete bar on SEP cases at the ITC.  The letter concludes with a statement that the decision is “not … a criticism of the Commission’s decision or analysis” (although there plainly seems to be something he disagrees with).  He also notes that while that while Apple and Samsung vigorously dispute the FRAND-related facts of this case, “it is beyond the scope of this policy review to revisit the Commission’s analysis or its findings based on its record.”  Nevertheless, Ambassador Froman states that he decided to disapprove of the remedy issued by the ITC based upon his review of the various FRAND-related policy considerations as they relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.  The question many are asking is, what could the ITC (and/or Samsung) have done differently to avoid this disapproval?

The penultimate paragraph appears to provide some guidance for the Commission in evaluating FRAND issues in current and future cases.  Here, the USTR calls for the ITC to:

  1. Examine thoroughly and on its own initiative (emphasis added) the public interest issues presented at the outset of its proceeding and when determining whether a particular remedy is in the public interest; and
  2. Seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the ALJ and during the formal remedy phase of the investigation, including information on the standards-essential nature of the patent at issue (if contested by the patent holder) and the presence or absence of patent hold-up or reverse hold-up (i.e., licensee “hold-out”).

The USTR notes that the Commission should endeavor to “make explicit findings on these issues to the maximum extent possible,” and that he will look for these elements in future policy reviews of decisions made in FRAND-encumbered SEP cases.  And it seems that the USTR is placing the burden squarely on the ITC itself to bring up these issues sua sponte, even if the parties haven’t fully addressed them for whatever reason.  In the future, we may see more public interest fact-finding in FRAND-related Section 337 proceedings delegated to the ALJs, so that a more robust record can be developed.  But for those investigations involving SEPs in which a Initial Determination has already been made, such as the pending cases involving InterDigital (337-TA-800) and LSI/Agere (337-TA-837), this may spur the Commission to solicit significant amounts of FRAND-related information in connection with its review of the ID.

Those of you who are familiar with the -794 case involving Samsung and Apple may be wondering, didn’t the Commission also ask for intense public interest briefing on FRAND issues there as well?  It certainly did — but apparently, its factual findings on these issues were not enough to satisfy the USTR.  As you may recall, the Commission found that Apple should be the party bearing the burden of proof with respect to the FRAND-related defenses, including showing that the patent was actually essential (and therefore subject to the FRAND obligation).  But the Commission found that even after all of the parties’ briefing, there were still disputed issues about whether the patent was actually essential to the standard.  This is one issue where the USTR now seems to be requiring a particular finding regarding essentiality or non-essentiality.

But note that the Commission (beginning at p. 52 of its opinion) also considered in the alternative the merits of Apple’s FRAND defense — assuming (1) that the patent at issue was essential to the standard, (2) the FRAND obligation applied, and (3) that the FRAND obligation was legally enforceable.  In doing this alternative analysis, the ITC analyzed the history of the Samsung-Apple negotiations, finding that Apple did not prove that Samsung failed to negotiate in good faith for a FRAND license.  As to the issues of patent hold-up and reverse hold-up, the Commission found (on pp. 62-63) that Apple may have been engaged in reverse hold-up, while it noted (on p. 66) that “Samsung can hardly be accused of patent hold-up when it has licensed its declared-essential patents…to more than 30 companies.”

It seems at least arguable that the Commission in the -794 case did address the issues cited by Ambassador Froman, at least to some extent.  But perhaps the ITC’s analysis was not thorough, comprehensive, and explicit enough, and its assignment of the burden of proof on FRAND issues to Apple seems to have not been well-received by the USTR (although assigning the FRAND burden to the accused infringer was long the practice of the ITC and continues to be the case in district courts).

This in and of itself raises an interesting question — could Samsung now ask the Commission to make further, more detailed findings of fact relating to the FRAND issues in the -794 case, in an attempt to satisfy the standards set forth in Ambassador Froman’s disapproval letter?  It may not be out of the question — the disapproval only relates to the exclusionary relief already issued by the ITC, and doesn’t categorically bar any future potential relief.  In prior cases involving Presidential disapproval of ITC exclusion orders, the ITC has in fact issued modified exclusion orders after the inital exclusionary relief was vetoed.

But regardless of what eventually happens with the -794 case, it will be interesting to see how these FRAND issues play out in pending and future cases, and whether some would-be litigants simply choose to litigate in district courts rather than meet the seemingly ever-increasing bar (and attendant expenses) for getting an ITC exclusion order on FRAND-encumbered patents.