Friday, February 1, 2013

ITC now investigating InterDigital's SEP complaint against Samsung, Nokia, Huawei and ZTE

The United States International Trade Commission (USITC, or just ITC) has a rule according to which it decides within one month on whether or not to investigate a new complaint. Most of the time, an investigation is instituted. This also happened yesterday with respect to InterDigital's complaint, filed in early January, against Samsung, Nokia, Huawei and ZTE. But there would have been valid reasons for the ITC to delay institution of the investigation:

InterDigital responded to these letters, urging the ITC to go ahead and investigate anyway, arguing that all these arguments could still -- and actually should -- be raised post-institution. With respect to Samsung, IDCC noted that Samsung claimed to have had a license to only six of the seven patents-in-suit, but not the seventh one, which should give rise to an investigation at any rate.

While a postponement of the investigation would have been a significant tactical setback for IDCC, the underlying issues highlighted by Samsung and Huawei have not gone away. Samsung is still going to argue that IDCC needs to provide evidence of unlawful imports, though it's possible that the ITC is now going to allow InterDigital to conduct discovery of Samsung in order to identify such imports without having to go to a shop and buy samples of Samsung products undoubtedly imported into the U.S. after expiration of the license agreement. Huawei is still going to insist that this matter be resolved through a FRAND determination action in federal court, and if Huawei succeeds (as it clearly should in my view), it may very well be dismissed from this investigation.

I believe the fact that InterDigital is an American patent licensing firm while Samsung and Huawei are Asian electronics giants did not play a role in the ITC's decision to investigate. The ITC is increasingly positioning itself as the forum of choice for patent trolls regardless of where the defendants are based. The results achieved by leading U.S. (and foreign) technology companies at the ITC in recent years are rather negative, which is why major players, with a few exceptions, now tend to avoid the ITC when they bring new claims. German courts -- especially, but not only, the highly competent rocket docket in Mannheim -- have effectively displaced the ITC as a fast-track avenue to injunctive relief in global disputes between large operating companies. The ITC is, however, increasingly popular among patent trolls, especially if those rely exclusively or primarily on U.S. patents and lack strong German patents. I don't mean to refer to IDCC as a patent troll in the most pejorative sense of the world, given that it does its own research, but a non-producing, non-practicing entity it certainly is and that's why I believe it should seek compensation in federal court rather than ITC exclusion orders.

With respect to the access patent trolls have to ITC exclusion orders and a recent Federal Circuit ruling reinforcing this trend, I strongly recommend this (non-judgmental) Patently-O blog post, "NPEs Solidify Enforcement Jurisdiction at USITC". And I'm not sure U.S. Congress is going to sit by idly and let this happen forever. This trend is not in the interests of innovation, U.S. consumers, and legitimate U.S. (or foreign) innovators. The mere fact that the ITC decided not to delay institution of an investigation of InterDigital's complaint shouldn't be overrated, but policy makers should watch very closely what is going to happen in the further process. If the ITC did not dismiss Huawei from the investigation within a very few months based on the Chinese company having declared itself bound to the outcome of a FRAND determination action in federal court, I would be profoundly concerned about the anticompetitive effects of the mere threat of an exclusion order on negotiations between InterDigital and Huawei (and on similar situations involving other companies as well). I also think that the Federal Trade Commission (FTC) and Department of Justice (DoJ) should consider supporting Huawei's proposed solution -- FRAND determination in federal court -- through letters to the ITC, preferably at the early stages of the investigation and not only at the stage of a Commission review.

I'd finally like to mention that Huawei is also enforcing its own standard-essential patents against Chinese rival ZTE in various jurisdictions including, particularly, Germany. Yesterday I attended a seven-hour trial at the Dusseldorf Regional Court over two FRAND-pledged SEPs, and will blog about it within a few days (too much going on to do it sooner). I previously attended and blogged about another Huawei v. ZTE FRAND SEP trial, held in Mannheim in December 2012. As far as I can see at this stage, there's no inconsistency in the positions Huawei takes in these disputes: it advocates FRAND rate-setting by judges as a preferred solution either way. I would prefer Huawei to generally oppose SEP-based injunctive relief and sue ZTE only for monetary compensation, but again, its positions in the different lawsuits appear consistent to me so far.

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