Bloomberg reports that the ITC staff believes Barnes & Noble should not be held to violate any of three Microsoft patents at issue in an investigation that could otherwise lead to an import ban against the Android-based Nook and Nook Color e-book readers.
Four weeks ago, Microsoft streamlined the case by dropping various patent claims, leaving claims from four different patents (out of the original five) on the agenda. Last week, Microsoft dropped the sole remaining claim of the '522 patent, thereby narrowing the case to three different patents. Such streamlining is common and expected during the course of ITC investigations.
An even more important kind of streamlining occurred last week when the Administrative Law Judge (ALJ) in charge of this investigation tossed out Barnes & Noble's "patent misuse" defense, which was for the most part based on antitrust allegations. B&N had claimed that Microsoft was exerting control over Android with its patents and presented conspiracy theories (involving Nokia and others) that the ALJ did not consider worthwhile exploring further.
As Microsoft pointed out in a statement quoted by ZDNet's Mary Jo Foley, the ITC staff may change its opinion after the evidentiary hearing that commenced today. After the trial, the parties as well as the Office of Unfair Import Investigations (OUII, commonly referred to as "the ITC staff") file their post-hearing briefs. Those are always sealed, so we won't be able to find out if the staff position changes. By the way, the OUII doesn't even participate in all ITC investigations these days due to resource constraints. For example, the ITC staff resigned from both investigations pitting Microsoft and Motorola against each other. It can also opt to follow an investigation only with respect to one or more patents at issue in a given investigation, instead of looking at all of them. That's what the OUII is doing in an investigation involving Apple and HTC.
Even after the OUII files its post-hearing brief, the ALJ forms his own opinion. The staff recommendation is not a preliminary ruling. The staff participates as a third party.
An initial determination by an ALJ isn't the final ruling either unless the Commission, the six-member decision-making body at the top of the ITC, adopts it in its entirety. Recently the Commission has modified a number of ALJ determinations. And even the Commission isn't the final judge: its decisions can still be appealed to the Federal Circuit.
The case history of Apple's first ITC complaint against HTC is a good example. In April 2011, the ITC staff advocated (also at the beginning of the trial) the dismissal of Apple's claims against HTC (and Nokia, but Apple and Nokia settled two months later anyway, before any further decision was made). But in mid-July, the ALJ found HTC in infringement of two Apple patents. The Commission agreed with the ALJ on one of those patents, ordering an import ban against infringing HTC Android devices. Meanwhile, Apple is appealing the Commission's negative findings with respect to one or more other patents to the Federal Circuit.
The ITC has generally proven to be tough terrain for patent assertions against smartphones and tablet computers, with a very high drop-out rate across the claims of all plaintiffs.
Microsoft holds far more Android-related patents than the ones it is presently asserting against Barnes & Noble. For example, it has more than two dozen patents in action against Motorola. Since B&N is unlikely to be able to revive its "patent misuse" defense, which it hoped might provide some leverage, I believe a settlement could happen anytime, but patent litigation in the United States is a slow process compared to how swiftly other jurisdictions adjudicate these cases. If B&N continues to refuse to take a license, there's always the possibility of Microsoft bringing additional ITC complaints and federal lawsuits. Absent a settlement, the ultimate outcome of this dispute certainly won't hinge on only three patents.
As the ITC trial unfolds, Microsoft also has a series of four trials in Mannheim coming up tomorrow. Motorola Mobility and its wholly-owned subsidiary General Instrument Corporation brought claims against Microsoft over four patents that will be discussed tomorrow afternoon.
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