Friday, October 18, 2013

ITC starts first FRAND-related public interest consultation since Presidential veto of iPhone ban

In early August, the Obama Administration vetoed an ITC exclusion order relating to older iPhones and iPads on public interest grounds and indicated that it expects the U.S. trade agency to carefully consider the public interest before ordering import bans over FRAND-pledged standard-essential patents (SEPs). But there are still various SEP cases pending before the ITC, and patent holders have already made different suggestions as to how the U.S. trade agency could justify SEP-based exclusion orders in a post-veto world.

Two SEP investigations have reached the stage of a Commission review (the Commission being the six-member decision-making body at the top of the ITC) since the Presidential veto. On September 4, the Commission decided to conduct a full review of a preliminary ruling clearing Nokia, Huawei and ZTE of violation of various InterDigital patents. But in its review notice it stated that it "is not interested in receiving written submissions that address the form of remedy and bonding, if any, or the public interest at this time". This means that if InterDigital obtains a reversal of any non-liability finding, a second round of submissions will have to be requested to address FRAND-related public interest issues.

The fact that the ITC does not request FRAND-related submissions right away on a "just in case" basis could mean that the probability of a liability finding in InterDigital's favor is not too high. But it could also be due to the fact that there are so many liability-related questions to be analyzed in that investigation that the trade agency would need more time anyway if any FRAND questions later became outcome-determinative.

With a view to ITC complaints by the likes of InterDigital I'd like to highlight an opinion piece recently published by the Wall Street Journal, authored by a former ITC commissioner who says the agency "has drifted from its original mission" and has become the "International Trolling Commission". The debate over the ITC's role is part of a wider patent reform discussion in the U.S., and the ITC's jurisdiction over complaints by patent troll as well as its jurisdiction over SEP cases will remain controversial until abolished.

Yesterday the ITC decided to conduct another full review of an investigation involving FRAND issues. That investigation of an LSI/Agere complaint against Funai and Realtek was of interest to a very few people in the world until a federal judge in the Northern District of California ordered a preliminary injunction barring complainants from enforcing an exclusion over over a SEP should they win one against Realtek.

In the LSI/Agere case, the Administrative Law Judge did not find (in a preliminary ruling) Realtek to infringe a SEP, but the ITC's review notice does raise FRAND-relate public interest questions right away. All of the Commission's public interest questions are about FRAND, with a particular focus on negotiations between the parties:

  1. Please discuss and cite any record evidence of the allegedly [F]RAND-encumbered nature of the declared standard essential '663, '958, and '867 patents. With regard to the '958 patent and the '867 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the Institute of Electrical and Electronic Engineers, Inc. (IEEE)? With regard to the '663 patent, what specific contract rights and/or obligations exist between the patentee and the applicable standard-setting organization, i.e., the International Telecommunication Union (ITU)?

  2. Please summarize the history to date of negotiations between LSI and Funai and between LSI and Realtek concerning any potential license to the '663, the '958, and the '867 patents, either alone, in conjunction with each other and/or the '087 patent, and/or in conjunction with non-asserted patents. Please provide copies of, or cite to their location in the record evidence, all offers and communications related to the negotiations including any offer or counteroffer made by Funai and Realtek.

  3. Please summarize all licenses to the '663, the '958, and the '867 patents granted by LSI to any entity including evidence of the value of each patent if such patent was licensed as part of a patent portfolio. Please provide copies of, or cite to their location in the record evidence, all agreements wherein LSI grants any entity a license to these patents. Please also provide a comparison of the offers made to Funai and/or Realtek with offers made to these other entities.

  4. If applicable, please discuss the industry practice for licensing patents involving technologies similar to the technologies in the '663, the '958, and the '867 patents individually or as part of a patent portfolio.

  5. Please identify the forums in which you have sought and/or obtained a determination of a [F]RAND rate for the '663, the '958, and the '867 patents. LSI, Funai and Realtek are each requested to submit specific licensing terms for the '663, the '958, and the '867 patents that each believes are reasoanble and non-discriminatory.

  6. Please discuss and cite any record evidence of any party attempting to gain undue leverage, or constructively refusing to negotiate a license, with respect to the '663, the '958, and the '867 patents. Please specify how that evidence is relevant to whether section 337 remedies with respec to such patents would be detrimental to competitive conditions in the U.S. economy and other statutory public interest factor.

The fifth question is the most interesting one in this particular case because it relates to the proceedings in Judge Whyte's court in Northern California.

The ITC's questions are broad and general. All that can be said at this stage is that the ITC wants to look at these questions in detail, including reasonable royalty rates, an area in which it doesn't have much expertise (if any). I interpret this FRAND questionnaire as an attempt by the ITC to encourage SEP holders to pursue import bans despite the recent veto. Even though it's now going to be harder than before to win a SEP-based exclusion order from the ITC and to actually enforce it, the ITC portrays these FRAND issues as highly case-specific, which is a way of creating legal uncertainty that could result in settlements. And such uncertainty is, in and of itself, not in the public interest.

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: