Administrative Law Judg (ALJ) Lord at the U.S. International Trade Commission (ITC) recently issued an Order striking patent misuse claims against Philips Lighting (Philips) raised by WAC Lighting and other respondents that were premised on Philips filing its Complaint in the ITC without making a license available “on standard (reasonable) and non-discriminatory terms.”  This ruling provides incremental guidance on the specificity needed to plead a competition law claim based on standard essential patents (SEPs), including allegations of specific facts showing the anticompetitive effect of alleged improper SEP licensing activity. Continue Reading ALJ Lord dismisses SEP licensing-based patent misuse defenses (ITC Inv. No. 1081, Philips v. Feit Electric)

Today, the U.S. International Trade Commission (ITC) issued a Notice of Commission Final Determination  following its review of Administrative Law Judge (ALJ) Shaw’s September 2017 rulings concerning, among other things, three patents alleged to be essential to the Linear Tape Open (LTO) 7 standard (LTO-7). (see our Dec. 19, 2017 post summarizing ALJ Shaw’s decision).  Specifically, the ITC affirmed ALJ Shaw’s ruling that the ‘612, ‘106 and ‘805 patents are not essential to the LTO-7 Standard (with one caveat):

The Commission has determined to affirm with modification the Final ID’s finding that the asserted claims of the ‘612, 106, and ‘805 patents are not essential to the LTO-7 Standard.  In particular, with respect to the ‘106 patent, the Commission has determined not to reach the issue of whether the LTO-7 Standard requires a tape having a magnetic layer that contains an abrasive.  The Commission has determined to otherwise adopt the Final ID’s findings that the LTO-7 Standard does not require practice of the asserted claims of the ‘612, 106, and ‘805 Patents.  The Commission has determined not to reach any other issues concerning Sony’s essentiality defenses. [Notice at 5]

The last statement about not reaching any of Sony’s essentiality defenses presumably refers to Sony’s breach of contract, patent misuse, implied license, patent exhaustion, and waiver defenses, all of which were premised on the patent claims being essential to the LTO-7 standard.

The ITC further found that there was no violation of those patents, because they were not infringed or were invalid.  The ITC did decide there was a violation regarding another patent at issue in the investigation: the ‘891 Patent, which was not alleged to be essential to a standard.  The ITC issued a limited exclusion order and cease/desist order based on infringement of that ‘891 Patent.

The U.S. International Trade Commission (“ITC”) recently gave Notice that it will review some parts of the September 2017 Initial Determination and Recommended Determination on remedy by administrative law judge (“ALJ”) Shaw concerning patents alleged to be essential to the LTO Consortium’s  Linear Tape Open (“LTO”) standard for high-capacity, single-reel magnetic tape storage.

In September, ALJ Shaw found that the claims of one patent alleged to be essential to the LTO-7 Standard were valid and infringed, but that claims of two other alleged essential patents were not infringed.  He found that none of the asserted patent claims were essential to the LTO-7 Standard.  He also rejected Sony’s defenses that Fujifilm had breached an agreement with the LTO Consortium to license its essential patents to third-parties like Sony.  Based on those rulings, ALJ Shaw further recommended that a limited exclusion order should be entered and that Sony’s public interest arguments about the claims being essential to the LTO-7 standard did not require tailoring or curbing such an exclusion order.

The ITC full Commission has now decided to review part of ALJ Shaw’s liability determination, including issues about whether the alleged essential patents are infringed, valid or essential to the LTO-7 Standard.  Further, the Commission will consider the form of any exclusionary relief, including whether and to what extent public interests — such as Sony’s essentiality claim — counsel against or limit an exclusion order.  The parties and public may file initial written submissions on exclusionary relief and the public interest by December 27, 2017; reply written submissions must be filed by January 5, 2018.

We summarize  the decision below on the standard essential patent (“SEP”) issues.  We also discuss an Order Denying Preliminary Injunction entered a few weeks after ALJ Shaw’s decision here where Judge Gardephe in the Southern District of New York denied Sony’s motion to enjoin Fujifilm from continuing this ITC litigation.  Judge Gardephe’s decision provides more unredacted insight into the alleged LTO-7 licensing commitment at issue.  For example, Judge Gardephe’s decision indicates that the licensing commitment at issue was not a FRAND commitment, but apparently a commitment to enter nondiscriminatory licenses under Fujifilm’s standard licensing terms.  Further, the licensing commitment concerned essential patent claims, defined as claims “which must of necessity be practiced for compliance with the LTO7 Format.” Continue Reading ITC to consider ALJ’s decision and recommended exclusion order on alleged SEPs that ALJ found were not essential to the LTO-7 standard (337-TA-1012 Fujifilm v. Sony)

The U.S. International Trade Commission (“ITC”) recently denied a respondents request to use the Early Disposition Pilot Program to address “whether the asserted patents are standards-essential and are encumbered by mandatory licensing obligations giving rise to public interest concerns.”

Respondent 3S-Smart Software Solutions (“3S”) had submitted a first letter requesting use of the ITC’s Early Disposition Pilot Program because, among other things, the asserted patents may be essential to a standard set by the OPC Foundation (an automation industry standards setting organization) and subject to a royalty-free license.  On request, the OPC Foundation currently was determining whether the patents are essential to its standards.  3S asserts that, if the OPC Foundation finds that the patents are essential, OPC Foundation’s IPR Policy would require that the patents be licensed on a royalty-free basis.  3S argued that early determination of this defense would be an efficient way to proceed.

Complainant Rockwell Automation, Inc. (“Rockwell”) responded that it had not declared any patents to be essential, that the OPC Foundation’s review is not complete and that the outcome of such review will be subject to a challenge by Rockwell that could take months or years to resolve.  Further, Rockwell argues it could always withdraw from the OPC Foundation and assert its patents without being required to offer a royalty-free or FRAND license.  So early disposition would be inefficient and unduly delay resolution of the investigation.

3S replied that Rockwell could not cure its SEP issues by withdrawing from the OPC Foundation, because Rockwell was under an obligation to disclose its essential patents to the OPC Foundation and Rockwell’s withdrawal does not remove that promise.  Though not clear, 3S may be alluding to a potential defense that the patents may be unenforceable because Rockwell breached an obligation under the OPC Foundation’s IPR Policy to disclose its standard essential patents to the OPC Foundation.

The Commission rejected 3S’s request and gave the following short explanation for its decision:

The Commission assesses the effect of potential remedies on the statutory public interest factors following an affirmative determination on violation — once the actual scope of the Section 337 violation is determined, including the scope of valid and enforceable IP rights that are infringed (or other unfair acts) as well as the scope of imported infringing articles involved.  As such, this issue is outside the scope of the Early Disposition Pilot Program as the issue cannot be resolved at the beginning of an investigation.

Continue Reading ITC denies request for early, separate consideration of SEP issues (Rockwell v. 3S Inv. 337-TA-1020)

Today, a divided three-judge panel of the Federal Circuit (Prost, O’Malley concurring and Newman dissenting) ruled that the U.S. International Trade Commission’s (ITC) authority to provide remedies for unfair acts involving importation of “articles” does not extend to electronic transmission of digital data into the United States.  In addition to its impact on the ITC’s jurisdiction over certain patent infringement matters, this case provides insight into administrative law that may be worth reading for those interested in that issue.  We will not go into that lengthy analysis here, but do provide below a summary of the infringement at issue.  Given the division among the three-judge panel and impact of this decision on the scope of the ITC’s jurisdiction and emerging technologies (e.g., transmission of digital files used to print 3D models), this decision may be subject to requests for en banc review by the entire Federal Circuit or Supreme Court review.

The patents and infringement at issue concern using different stages of teeth aligners that are progressively swapped out over time to slowly transition a patient’s teeth from an initial (e.g., crooked) position into a final (e.g., straightened) position.  ClearCorrect US (located in the U.S.) would take measurements of the patient’s initial teeth positions and transmit that data to ClearCorrect Pakistan (located in Pakistan).  That Pakistani entity would generate digital models of intermediate positions of the teeth, each intermediate position corresponding to an aligner to be made in the progressive process of moving the teeth from an initial position to a final position.  The Pakistani entity electronically transmits those digital models back to the U.S. entity, which uses those digital models to 3D print each of the physical aligners to be used by the patient.

The patent owner argued that the Pakistani entity contributed to infringement of the patents by electronically transmitting the digital models of the different teeth aligners into the U.S.:

Here, the accused “articles” are the transmission of the “digital models, digital data and treatment plans, expressed as digital data sets, which are virtual three-dimensional models of the desired positions of the patients’ teeth at various stages of orthodontic treatment” (“digital models”) from Pakistan to the United States.

The full Commission reviewed the ALJ’s decision and held that (1) the U.S. entity’s direct infringement was solely in the United States and, thus, was not a 337 importation violation within the ITC’s jurisdiction, but (2) the Pakistani entity contributorily infringed the patents by transmitting the digital models into the United States and such infringement was a 337 violation within the ITC’s jurisdiction to grant exclsionary relief.

As discussed, on appeal, the panel majority held that the electronic transmission of digital data into the United States is not an “article” of importation into the United States within the remedial authority of the ITC.  The panel majority stated that Congress is in the best position to determine whether the term “article” should be extended to cover these circumstances.

On Friday, the U.S. International Trade Commission issued a Notice on its review of Judge Essex’s decision in the InterDigital v. Nokia investigation and found that Nokia did not infringe InterDigital’s 3GPP patents (see our May 12, 2015 post on Judge Essex’s decision).  Recall that, in granting partial review of Judge Essex’s decision, the Commission focused on receiving comments on both a claim construction estoppel issue and FRAND issues (see our June 26, 2015 post).  The Commission’s decision was based on the claim construction issue preclusion issue without commenting on the FRAND issues presented, stating:

[T]he Commission finds that issue preclusion applies with respect to the proper construction of the claim limitation “successively [transmits/transmitted] signals” based on the Commission’s determination in [the ] Inv. No. 337-TA-868, which relies substantively on the Commissions’ determination in [the] Inv. No. 337-TA-800, as affirmed by the United States Court of Appeals for the Federal Circuit (InterDigital Commc’ns, Inc. v. Int’l Trade Comm’n, 2015 WL 669305 (Fed. Cir. FEb. 18, 2015)).  The Commission further finds its prior constructions of the claim limitation “successively [transmits/transmitted] signals” in the 868 and 800 investigations are persuasive authority which the Commission should apply uniformly to the asserted patents.

The Commission also finds that issue preclusion requires a finding of non-infringement with respect to the asserted claims of the ‘966 and ‘847 patents, and that the evidence in the record independently supports a finding of non-infringement with respect to the claim limitation “successively [transmits/transmitted] signals as previously construed by the Commission in the 868 investigation.

So the investigation is now terminated.

The Commission noted that it had received public comments from several interested entities.  These comments are summarized below.

Chairwoman Edith Ramirez, U.S. Federal Trade Commission.  Chairwoman Edith Ramirez of the FTC, submitted Comments reflecting her view — i.e., not the official views of the FTC itself.  She took issue with Judge Essex’s allocating to the putative licensee (or “implementer”)  the burden of proving breach of a FRAND obligation, asserting that the patent holder should establish that the implementer was an unwilling licensee as part of the public interest analysis:

This investigation raises an important and unresolved question for the ITC: what standard should the ITC use to evaluate evidence concerning patent hold-up when a complainant seeks an exclusion order for alleged infringement of a FRAND-encumbered standard essential patent?  I recommend that, as part of its public interest analysis before issuing an exclusion order, the ITC require a SEP holder to prove that the implementer is unwilling or unable to take a FRAND license.  This standard would ensure that an exclusion order issues only when it would not facilitate patent hold-up and thus only when such an order would be consistent with the public interest.  It would also establish a balanced approach to ITC remedies by ensuring that a SEP holder follows through with its FRAND licensing commitment, while at the same time recognizing that both the SEP holder and the standards implementer have a duty to negotiate in good faith towards a meaningful resolution of FRAND issues.

Chairwoman Ramirez also disagreed with Judge Essex’s view that patent hold-up is not real, citing the Microsoft v. Motorola decision by Judge Robart and the Realtek v. LSI decision by Judge Whyte as examples that “the danger that bargaining conducted in the shadow of an exclusion order will lead to patent hold-up is real.”  (see our May 1, 2013 post and Feb. 27, 2014 post for summary of the FRAND determinations in the Microsoft and Realtek decisions, respectively).  Thus, she would require the patent holder to show that the implementer is an unwilling licensee, and she provided some examples of how the patent holder would show that:

A SEP holder may demonstrate an implementer’s unwillingness in a number of ways.  First, an implementer may be unwilling if it affirmatively demonstrates that it will not negotiate with the complainant.  An implementer may also be unwilling if it engages in a “constructive refusal to negotiate a FRAND license with the SEP owner or refusal to pay what has been determined to be a FRAND royalty.”  For example, this may occur when an implementer refused to license the patent holder’s FRAND-encumbered SEPs unless it also obtains a license to the patent holder’s differentiating patents, or insists on terms that are clearly outside a reasonable interpretation of FRAND.  When there is a dispute between the parties about what terms are FRAND terms, the meaning of FRAND must first be determined by a neutral adjudicator in order for the implementer’s offer to be evaluated in the context of a FRAND range.  An implementer may be unable to take a license if its is bankrupt, or otherwise financially unable to satisfy the terms of a FRAND license.  Finally, an exclusion order may be in the public interest when the respondent is outside the jurisdiction of the United States District Courts or is otherwise judgment-proof.

Chairwoman Ramirez also recommended that, if a FRAND rate is determined during an ITC investigation, “the ITC delay the effective date of Section 337 remedies and provide parties an opportunity to execute a FRAND license.”

She indicated that an implementer may be a willing licensee if it “commits to be bound by terms that either the parties themselves will determine to be FRAND, or that will be determined by neutral adjudication,” such as by the implementer “instituting a declaratory judgment action or other proceeding in which a court will set FRAND terms.”  She also indicated that a respondent should be able to “present[] affirmative defenses, including arguments about non-infringement, invalidity, or unenforceability” without “waiv[ing] the alternative position that … the patent is a SEP and hence the SEP holder’s FRAND commitment applies.”

Commissioner’s Ohlhausen and Wright, U.S. Federal Trade Commission.  Commissioners Ohlhausen and Wright of the FTC submitted Comments with a very different view from Chairwoman Ramirez.   They do not recommend “presum[ing] patent holdup is prevalent” and, instead, recommend following Judge Essex’s “evidence-based approach to the public interest inquiry.”  They approach the issue from an imperical, evidentiary economics point of view that patent hold-up is not a widespread probability in all instances, even if a theoretical possibility in some.  Their introduction, reproduced below, summarizes their key points:

The ITC should not begin its analysis by initially imposing upon the SEP holder the burden of proving that the accused infringer is unwilling or unable to take a license on FRANd terms.  This approach presumes patent holdup is frequent and results in significant negative consequences for competition and innovation.  Such a sharp departure from the current state of the law requires substantiation in the form of robust and reliable empirical evidence.  However, the data simply do not support such a presumption.  Beyond lack of empirical support, the proposed approach is contrary to sound economic analysis, would be contrary to the United States Trade Representative’s (USTR’s) directive in the Samsung matter, and would create a conflict between the standard imposed by the ITC and that required by federal courts.  It would also threaten to deter participation in standard setting by, among other things, encouraging reverse holdup and holdout, thereby depriving consumers of the substantial procompetitive benefits of standardized technology.

There is no empirical evidence to support the theory that patent holdup is a common problem in real world markets.  The theory that patent holdup is prevalent predicts that the threat of injunction leads to higher prices, reduced output, and lower rates of innovation.  These are all testable implications.  Contrary to these predictions, the empirical evidence is not consistent with the theory that patent holdup has resulted in a reduction of competition.  To the contrary, wireless prices have dropped relative to the overall consumer price index (CPI) since 2005, output has grown exponentially, features and innovation continue at a rapid pace, and competition between mobile device manufacturers has been highly robust with meaningful entry over time.

Recognizing the theoretical nature of holdup concerns, federal courts, including the United States Court of Appeals for the Federal Circuit, have held that concerns about holdup must be proven, and that accused infringers must bear the burden of demonstrating that the patent holder used injunctive relief to gain undue leverage and demand supra-competitive royalties.  Likewise, in an August 3, 2013 disapproval letter in the Samsung matter, the USTR instructed the ITC to “make explicit findings” to the extent possible on the presence or absence of patent holdup or reverse holdup in each particular case when conducting the public interest inquiry.  Any proposal to presume the existence of holdup contradicts the decisions of federal courts and the USTR’s directive.

(see our Aug. 3, 2013 post for a summary of the USTR’s directive in the Samsung v. Apple ITC investigation referenced above).

The Commissioners also provide some insight into the difference between “holdup”, “reverse holdup” and “hold out”, stating:

Holdup requires lock-in, and standard-implementing companies with asset-specific investments can be locked in to the technologies defining the standard.  On the other hand, innovators that are contributing to a standard-setting organization (SSO) can also be locked-in if their technologies have a market only within the standard.  Thus, incentives to engage in holdup run in both directions.  There is also the possibility of holdout.  While reverse holdup refers to the situation when licensees use their leverage to obtain rates and terms below FRAND, holdout refers to licensees either refusing to take a FRAND license or delaying doing so.

Ericsson.  Ericsson had submitted Comments that favored Judge Essex’s evidentiary-based approach and recognition that “FRAND licensing places obligations on both” innovators and implementers.  Thus, “threats posed by either hold-up or reverse hold-up, should be evaluated based on evidence; mere conjecture regarding FRAND issues should not preclude the entry of an otherwise appropriate exclusion order.”  Ericsson also asserts that “[s]peculation regarding the impact of an exclusion order on the parties’ future negotiations shoudl play no role in the public interest analysis,” agreeing with Judge Essex that a district court action for breach of contract would provide a remedy if the patent holder breaches its obligation to license on FRAND terms after an exclusion order is entered.

Ericsson asserts that the patent holder’s “willingness to accept an arbitral determination of FRAND terms reflects an absence of hold-up.”  In contrast, “delaying tactics in negotiating indicate the presence [of] reverse hold-up.”  Ericsson also asserts that whether a patent covers a significant or minor portion of an accused device should not impact the grant of an exclusion order, because the FRAND obligation applies even after an exclusion order is entered and, “to the extent that the portion of the device that is covered by the claims is standard-essential, the FRAND commitment ensures fair and reasonable licensing terms commensurate with the value of the covered portion.”

Intel, Dell and Hewlett-Packard.  A joint submission of Comments was made by Intel, Dell and Hewlett-Packard that take a more implementer-oriented approach with concerns that standardization may confer unearned market power to SEP holders and that the public interest requires limiting exclusionary relief absent “extraordinary circumstances.”  They summarized their view as follows:

[T]he public interest generally precludes an exclusion order on FRAND-encumbered SEPs, except in limited circumstances, including when: (1) the respondent refuses to accept (or unjustifiably delays in accepting) a license on terms that have been independently determined to be FRAND-compliant by a court or binding arbitrator in a final, non-appealable judgment; (ii) the respondent is unable due to financial distress to pay a FRAND royalty; or (iii) the patentee has no ability to assert an infringement claim against the importer or its customer, such that in rem jurisdiction over imported goods in an ITC action is the only practical option that the patentee has to prevent continued infringement.

J. Gregory Sidak of Criterion Economics.  J. Gregory Sidak, Chairman of Criterion Economics, submitted Comments in response to those submitted by Chairwoman Ramirez of the FTC.  He states that Chairwoman Ramirez’s “proposal that the ITC make the SEP holder bear the burden of proving an implementer’s unwillingness is problematic and misguided.”  His discussion uses a hypothetical licensing transaction where there is a reasonable range of FRAND royalty rates, where focusing on whether the SEP holder accepted the implementer’s offer (or counter-offer) “would grant the implementer the right to obtain a FRAND rate at the lower bound of the FRAND range” that results in “a massive wealth transfer from SEP holders to implementers.”

He further states that “the Chairwoman’s presumption that patent holdup routinely occurs in the real world has no support in economic theory or empirical fact.”  Further, “if one assumes that patent holdup might occur, one should consider that the symmetric risk of reverse holdup might also occur.”  Placing the burden on the patent holder to establish reverse holdup, as Chairwoman Ramirez suggests, is an “asymmetric treatment of the patent-holdup conjecture and the reverse-holdup conjecture [that] has no basis in economic theory.”  Further, presuming that patent holdup exists in every case is contrary to the Federal Circuit’s instructions in Ericsson v. D-Link that “a jury may be instructed that a theoretical conjecture of patent holdup can affect the computation of a FRAND royalty only when empirical evidence supports that conjecture.” (see our Dec. 5, 2014 post summarizing Ericsson v. D-Link)

Yesterday, the U.S. International Trade Commission (ITC) gave Notice that it has determined to review in part ALJ Essex’s decision concerning claim construction and standard essential patent (SEP) issues in the investigation whether Nokia infringes InterDigital 3GPP patents (see our May 12, 2015 post on ALJ Essex’s decision).  The ITC provided a list of questions to which the parties and interested persons should submit comment by July 10, 2015 (limited to 125 pages not counting attachments) and reply submissions by July 20, 2015 (limited to 75 pages not counting attachments).

Claim Construction Estoppel Issue.  Recall that this case has a rather lengthy history that includes a trip to the Federal Circuit and remand back for the instant remand proceedings.  ALJ Essex found that, for procedural reasons based on the authorized scope of the remand proceedings, the remand proceedings were bound by claim constructions entered earlier in the investigation as to claim limitations “successively [transmits/transmitted] signals” notwithstanding those terms being construed differently in other related litigation where non-infringement or no violation was found (see our Feb. 19, 2015 post on the 800 investigation and Sep. 2, 2014 post on the 868 investigation).  The ITC has decided to review this claim construction issue and posed three specific questions on it:

  1. Have Respondents waived any reliance on the application of the Commission’s construction in the 800 and 868 investigations of the limitation “successively [transmits/transmitted] signals?”
  2. Do the Commission’s determinations in the 800 and/or 868 investigation constitute an intervening change of controlling legal authority such that the Commission should apply the construction of “successively [transmits/transmitted] signals” as found in those investigations in determining infringement in this investigation?
  3. What evidence exists in the record of this investigation with respect to whether the accused products satisfy the “successively [transmits/transmitted] signals” limitation as construed by the Commission in the 800 and 868 investigations?

SSO-Obligation (FRAND) Issues.  Recall that ALJ Essex found that Respondents had not shown that the patent owner’s standard setting organization (SSO) obligation had been triggered by a showing that the patents actually were essential to the ETSI standard at issue.  Further, he found that ETSI had rejected limiting exclusionary relief and deferred to resolution in courts, so the patent owner seeking exclusionary relief in itself did not violate its SSO obligation.  He found the focus should be on the particular SSO obligation at issue, rather than undue reliance on vague public policy concerns about patent holdup and there was no evidence of actual patent holdup in this case.  ALJ Essex also found that the accused infringers had committed patent hold-out after they lost a non-infringement ruling on appeal in this case, at which time they should have negotiated a license and there was no showing that the patent owner’s offered license in negotiation was not fair, reasonable and non-discriminatory (FRAND) under the SSO obligation.

The ITC has posed nine questions on the SSO-obligation (or FRAND) issues:

4.  Please state and explain your position on whether, for purposes of the Commission’s consideration of of the statutory public interest factors, InterDigital has in effect asserted that the patents in question are FRAND-encumbered, standard-essential patents.

5.  Please state and explain your position on whether InterDigital has offered Respondents licensing terms that reflect the value of its own patents.

6.  What portion of the accused devices is allegedly covered by the asserted claims?  Do the patents in question relate to relatively minor features of the accused devices?

7.  Please state and explain your position on the legal significance of InterDigital’s alleged willingness to accept an arbitral determination of FRAND terms with respect to the patents in question.

8.  Please state and explain your position on the legal significance of InterDigital’s alleged unwillingness to obtain a judicial determination of FRAND terms with respect to the patents in question.

9.  Please state and explain your position on whether Respondents have shown themselves willing to take licenses to the patents in question on FRAND terms.

10.  Do Respondents’ alleged delaying tactics in negotiating with InterDigital provide sufficient evidence of reverse hold-up, regardless of Respondents’ offers to license only InterDigital’s U.S. patent portfolio?

11.  Do Respondents’ licensing counteroffers satisfy the requirements of the ETSI IPR Policy?

12.  Please state and explain your position on whether the RID [i.e., ALJ Essex’s final initial determination on remand] equates patent infringement and reverse hold-up.

These questions and the ITC’s ultimate resolution of the issues promises to result in one of the most important ITC decisions in litigating SEPs in the ITC, and perhaps elsewhere.

Yesterday, Administrative Law Judge Essex issued a one-page notice of initial determination holding that Nokia’s 3G mobile handsets infringe the asserted claims of InterDigital’s U.S. Patent Nos. 7,190,966 and 7,286,847 (“the ‘847 Patent”) in the International Trade Commission’s investigation styled In the Matter of Certain 3G Mobile Handsets and Components Thereof (ITC Inv. No. 337-TA-613).  In the one page notice, the Judge expressly relied upon a standard adopted by 3GPP in concluding that Nokia’s handsets meet the limitations of the one ‘847 Patent claim asserted by InterDigital:

It is held that the 3GPP standard supports a finding that the pilot signal (P-CPICH) satisfies the claim limitation ‘synchronize to the pilot signal’ as recited in the asserted claim of the ‘847 patent by synchronizing to either the P-SCH or S-SCH signals under the Commission’s construction of that claim limitation.

Judge Essex also held “that there is no evidence of patent hold-up, that there is evidence of reverse hold-up, and that public interest does not preclude issuance of an exclusion order.”

No written memorandum opinion has been made available. To the extent that a more detailed opinion on the issues exists in redacted form, the parties will have a certain period of time, as directed by the court, to propose redactions to protect any confidential business information from the version of the opinion that will be made available to the public.

Yesterday, the Federal Circuit affirmed the U.S. International Trade Commission’s (“ITC”) determination that certain Interdigital patents related to 3G CDMA technology were not infringed by Nokia and ZTE.  Recall that the ITC had reserved ruling on any RAND obligation defenses given its non-infringement finding (see our Feb. 24, 2014 post). ALJ Shaw’s Initial Determination had ruled on those defenses, finding that, among other things, InterDigital’s obligations arising from the ETSI IPR policy was to negotiate in good faith toward a license agreement and that InterDigital had negotiated in good faith notwithstanding Respondents arguments of bad faith based on InterDigital seeking an injunction, seeking to negotiate a worldwide license rather than a single country license and allegedly offering unfairly discriminatory rates given different effective royalties offered to ZTE and Nokia (see our July 30, 2013 post).

The International Trade Commission issued the public version of its opinion in Inv. No. 337-868, finding no violation by either Nokia or ZTE and terminating the investigation in its entirety. On review, the Commission neither affirmed nor rejected ALJ Essex’s FRAND analysis, which criticized respondents who had not actively sought a license from InterDigitial yet raised SSO-related affirmative defenses.

As you may recall from our July 2, 2014 post, ALJ Essex issued a Final Initial Determination following a February 2014 evidentiary hearing, finding the accused products did not infringe InterDigital’s asserted patents, the domestic industry requirement had not been met, only one claim (claim 16 of U.S. Patent No. 7,941,151) was invalid as indefinite, and that respondents did not demonstrate InterDigital had violated any FRAND obligation. The Final Initial Determination also included a lengthy FRAND analysis, which was highly critical of respondents that assert FRAND defenses without having first availed themselves of SSO procedures for resolving situations where licenses are not available.

Respondents petitioned the ITC to review, inter alia, ALJ Essex’s FRAND analysis. Respondents argued that under a proper FRAND analysis, the asserted patents should have been found unenforceable under the doctrines of equitable estoppel, unclean hands, and patent misuse. As previewed in the ITC’s August 14 notice, the Commission took no position on the FRAND issues raised by the respondents, finding it more efficient to decide those issues, if at all, following an appeal of a related decision:

Decision as to those issues would require further proceedings, and potentially additional factfinding. The Commission has decided that, on balance, the added delay, burdens, and expenses that would be incurred by the parties and the Commission in resolving these issues are unjustified here given their non-dispositive nature, especially in view of the existence of other pending proceedings regarding the asserted patents and patents closely related to them.  In addition, the Commission finds that it is in the interest of the efficient use of administrative, judicial, and private resources for the domestic industry and FRAND issues to be decided, if at  all, subsequent to final disposition of the pending appeal in InterDigital Communications LLC v. ITC, No. 2014-1176 (Fed. Cir.), which involves many of the same parties and issues with regard to related patents.