An Administrative Law Judge of the United States International Trade Commission (USITC, or just ITC) is scheduled to issue an initial determination (preliminary ruling) on Nokia's first complaint against HTC, filed in May 2012, on Monday (September 23, 2013). One of the patents still at issue in that ITC investigation relates to tethering.
Almost on the eve of the ruling, HTC has now launched a last-ditch initiative to stall the case. It has brought a "Motion to Stay the Investigation Pending the Sale of Nokia's Domestic Industry Business to Microsoft and to Preclude Nokia's Reliance on Activities Associated with Microsoft or Any Licensing Activities for Domestic Industry". It was filed yesterday, and for now it's sealed, but the headlines of the motion and the supporting memorandum showed up on the ITC's electronic document system today (click on the image to enlarge or read the text below the image):
"Memorandum in Support of Respondents' Motion to Stay the Investigation Pending the Sale of Nokia's Domestic Industry Business to Microsoft and to Preclude Nokia's Reliance on Activities Associated with Microsoft"
"Respondents' Motion to Stay the Investigation Pending the Sale of Nokia's Domestic Industry Business to Microsoft and to Preclude Nokia's Reliance on Activities Associated with Microsoft or Any Licensing Activities for Domestic Industry"
It's a known fact that Microsoft doesn't acquire Nokia's utility (technical) patents, but HTC's argument has nothing to do with patent ownership anyway. It's all about the ITC's domestic industry requirement, a unique concept. At the ITC it's not enough to prove infringement and to fend off a challenge to the validity of a patent (as well as any equitable defenses) but it's furthermore necessary to establish a domestic industry for a patent-in-suit. The traditional understanding of a domestic industry would be that a company, wherever headquartered, has some significant commercial activities in the United States relating to products that practice the patented invention. But that's not the only basis for satisfying the requirement. If a company proves an investment in licensing (such as spending money on litigation), it can also satisfy the domestic industry requirement with respect to patents it doesn't practice. Non-practicing entities file ITC complaints all the time.
HTC's argument is apparently that after the sale of Nokia's wireless devices business to Microsoft is consummated (which the parties believe to happen in early 2014), Nokia no longer satisfies the domestic industry requirement, at least not on the basis of products it markets in the U.S. that practice the claimed inventions. One problem with this argument is timing: HTC wants to stall the investigation now, at a point when the Administrative Law Judge is probably pretty much done with writing up the preliminary ruling, instead of raising the issue after the actual closing of the deal. As long as Nokia does satisfy the domestic industry requirement, it's entitled to an import ban -- enforcement might stop, however, if a deal closes that changes the situation.
I don't know to what extent Nokia based its domestic industry argument on licensing. If it has a strong domestic industry story even without the wireless devices business, then HTC can't get any mileage out of the Nokia-Microsoft deal. And that's what the following part of the headline of HTC's motion refers to: "to Preclude Nokia's Reliance on Activities Associated with Microsoft or Any Licensing Activities for Domestic Industry"
The term "reliance of activities associated with Microsoft" is broad and vague on its own. I guess this is a pre-emptive strike by HTC against any argument that even after the closing of the Microsoft deal there is still a domestic industry in place for those patents, which Microsoft has licensed. The final part, "any licensing activities for domestic industry" is even broader. HTC doesn't want the ITC to accept any Nokia argument based on licensing even if there are any other licensees than Microsoft (for example, Apple, though it appears that the Nokia-Apple deal is not a license per se but just a provisional standstill agreement for a rather short term). Again, I don't know what licensing-based domestic industry arguments Nokia has made so far, if any. Maybe it relied entirely on its product business, in which case HTC would not want Nokia to develop a whole new theory at this post-trial stage of the investigation.
Even if the motion was ultimately found to have no merit, it could benefit HTC if it causes delay. I'm not sure this will work. If the initial determination is now at a stage at which only some final editing is done, then it could come down on Monday anyway. Even after issuance of an initial determination, an investigation can be delayed, so that may be what HTC hopes to achieve at a minimum.
HTC has so far defended itself extremely well against Nokia's patent infringement claims, but it has repeatedly employed stalling tactics. I saw it in the U.S. based on the documents I read; I saw it happen in different German courtrooms. Of all the companies I watch, HTC is the most creative and effective one in this respect. For example, HTC persuaded the ITC to drop a Nokia patent from this investigation through a referral to arbitration, but arbitration never went anywhere and the ITC ultimately had enough of this and allowed Nokia to add the patent to the investigation of its second complaint. I haven't seen a motion to stay in that second investigation. Should I find it later, I'll add the information to this post. That one is at a different procedural stage, so HTC may have chosen a different course of action in that one.
Yesterday I attended a German Nokia v. HTC patent trial at which Nokia appeared to be on the winning track, with a ruling scheduled for November 8, 2013. But other German cases were stayed (over doubts concerning the validity of the asserted patents) and some were dismissed. The ITC investigation is, apart from the USB case I blogged about yesterday, Nokia's best near-term chance to gain decisive leverage over HTC with a view to a license deal.
HTC has a few countersuits going against Nokia, one of which is scheduled to be adjudicated tomorrow (in Mannheim). Since Microsoft and HTC have a patent license deal in place, HTC's enforcement of a rulings against Nokia (should it obtain any) might come to an end when the Microsoft-Nokia deal closes. This is a way in which Nokia's patent monetization would benefit from the sale of its wireless devices business, but in the domestic industry context HTC wants to capitalize on the Microsoft-Nokia deal for its defensive purposes and dilatory tactics.
If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.
Share with other professionals via LinkedIn: