Thursday, June 14, 2012

Apple benefits from lawmakers' concern about import bans based on standard-essential patents

On Tuesday I reported on various letters from Members of Congress to the ITC on public interest considerations relevant to the Xbox case. The issue of injunctive relief, including ITC import bans, based on standard-essential patents (SEPs) is key to the ITC's decision on both Google (Motorola) complaints: the one against Microsoft and the one against Apple. But it appears that no Congressional statements were filed specifically in the Apple case. Nevertheless Apple is going to benefit from the fact that the ITC sees widespread concern about SEP abuse not only in the tech industry but also among high-ranking politicians.

The investigations of Motorola's complaints against Apple and Microsoft are now on almost identical schedules as the initial determinations were made on two consecutive days. And other ITC investigations in which import bans are being sought over FRAND-pledged SEPs are underway: the investigations of Samsung's complaint against Apple and InterDigital's recent complaint against Huawei, Nokia and ZTE.

It would make sense for the ITC to clarify its position on SEPs now rather than later. There's a good chance that it will happen, but no guarantee. The ITC wouldn't have to reach the question of SEP abuse if it

  • modified the ALJ's initial determination against Apple (with only one patent being deemed violated and considering that it was made by the ITC ALJ with the least experience in patent law, a final ruling that there is no violation wouldn't be unusual in any way)


  • made any one of the following decisions on the Xbox case:

    • The ITC could overrule another ALJ's initial determination on this case. However, since three SEPs were deemed violated, a finding of no such violation is, just from a statistical point of view, considerably less probable in this case than in the Apple case.

    • The ITC could extend the target date for this investigation (currently in late August) by a few months to December or January, giving the United States District Court for the Western District of Washington enough time to set the terms of a license agreement between Microsoft and Motorola. That federal lawsuit will go to trial in November. Microsoft started that FRAND enforcement action before Motorola filed its ITC complaint. That sequence of events is unusual, if not unique in the history of the ITC. It would enable the ITC to leave the FRAND issues to a federal court without setting a precedent that would affect many other cases (if any at all). And even Motorola stated, shortly before the initial determination was made, that further developments in the Seattle action could affect the ITC decision.

    • The ITC could deny an import ban against the Xbox for public interest considerations specific to that case. As certain Representatives highlighted, a ban would adversely affect Microsoft and other American companies (such as Microsoft's supplier IBM and the games industry) and close the market to the only American videogame console, which competes with two Japanese platforms -- quite the opposite of what the ITC's mandate is about. The fact that Motorola doesn't compete with the Xbox in any way and only attacks that product because it wants leverage over Microsoft for unrelated purposes would also support such a decision. If all of these parameters didn't constitute sufficient public interest considerations to deny an import ban, it's hard to think of examples (short of import bans against technologies that are absolutely crucial to public health or safety) in which the ITC might indeed deny a ban for public interest reasons.

In light of the Samsung and InterDigital complaints and the fact that the ITC will get ever more complaints over SEPs unless it sends out a clear message to such patent holders that they should sue in federal court for monetary compensation, I would like the ITC to take a clear position on SEPs now. But at the analytical level I recognize that the ITC won't necessarily have to reach that issue, given that Motorola's two complaints may fail for other reasons.

The ITC's role in patent enforcement and, especially, the fact that injunctive relief is granted in almost 100% of the cases in which a violation is identified are increasingly the subject of political debate. After the 2006 eBay v. MercExchange Supreme Court decision it's become very difficult to obtain injunctive relief in district court, but at the ITC it's still the norm. In December 2010, the Court of Appeals Federal Circuit ruled in the Spansion case that the ITC "is not required to apply the traditional four-factor test for injunctive relief used by district courts when deciding whether to issue the equitable remedy of a permanent injunction".

Without mentioning Spansion, Congressman Issa wrote in his submission: "If the ITC were in a position to apply the eBay Inc. v. MercExchange, L.L.C. four-part test that is currently used in federal court, it is my belief that the Commission would be much less likely to award injunctive relief as a remedy in this matter [the Xbox case]."

Over the years, the ITC became more and more of a general patent litigation forum, expanding way beyond its original Section 337 mandate of preventing counterfeiters from importing illegal goods into the U.S. market. There are voices in the public debate that would like the ITC to go back to those roots. For example, Verizon generally opposes ITC import bans, whether over SEPs over non-standard-essential patents, and besides filing public interest statements in a couple of investigations also made a public call on President Obama to use his presidential veto right against any smartphone ban. Professor James Boyle from the Duke University School of Law authored a paper on behalf of the Open Invention Network, a patent aggregator backed by half a dozen companies with a strategic interest in Linux, in which he makes some "reform" proposals for the ITC, aiming to make import bans much less likely to be ordered. A more nuanced but somewhat similar proposal -- arguing that the ITC should be more reluctant to ban products -- was made by Stanford Professor Mark Lemley and Santa Clara Assistant Professor Colleen Chien. The two Californians authored a detailed paper as well as a New York Times op-ed.

In light of this political pressure that is mounting, the ITC can't just go on and grant import bans in almost every investigation in which a violation is identified. Import bans against key products based on SEPs could trigger a political process that might result in fundamental restrictions on the ITC's quasi-judicial mandate. Due to what's at stake, that could happen amazingly quickly. Denying import bans in connection with SEPs would go a long way to addressing legitimate concerns. The most pressing problem -- unlike other patents, SEPs can't be worked around -- would be solved, and as a result, there would be much less support (and much less of a sense of urgency) for further-reaching reform proposals.

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