Saturday, September 29, 2018

ITC judge finds Qualcomm's anti-Intel patent assertion campaign against the public interest: Intel-powered iPhones shouldn't be banned

In what appears to have been the last Final Initial Determination of his career, Administrative Law Judge Thomas B. Pender of the United States International Trade Commission (USITC, or just ITC) has found that Intel-powered iPhones infringe one Qualcomm patent that wasn't proved to be invalid, but also held that Qualcomm should be denied the exclusion order it's seeking from the U.S. trade agency because such a U.S. import ban would be against the public interest (this post continues below the document):

18-09-28 ITC 337-TA-1065 Qu... by on Scribd

A Final Initial Determination is, as the self-contradictory name indicates, not truly final. It's a single judge's position, and subject to review by the Commission, the six-member decision-making body at the top of the trade agency. The truly final decision--which may also be a remand, and which could otherwise be appealed to the Federal Circuit--is presently due January 28, 2019 (PDF).

The above document is not the actual ruling, but a notice of its key results. It will take some time before a public redacted version of the determination itself becomes available and sheds light on the underlying rationale. It's unclear to me why Qualcomm failed to satisfy the technical prong of the ITC's domestic industry requirement. What's no secret is the nature of the public interest concerns in this case:

When the complaint was filed in July 2017, I already expressed skepticism regarding Qualcomm's strategy of targeting only Intel-powered--not Qualcomm-powered--iPhones. While a potential shortage of supply is a major factor in the ITC's analysis, Qualcomm basically traded one issue in for another. By targeting its only major baseband chipset competitor, Qualcomm exposed itself to allegations of anticompetitive behavior, especially since antitrust regulators around the globe had at the time of the complaint already held Qualcomm in violation of competition law because of, among other things, its refusal to grant standard-essential patent (SEP) licenses to Intel.

This issue was raised shortly after the complaint in public-interest statements by Apple, Intel, and two industry bodies (CCIA and ACT).

In the ongoing FTC v. Qualcomm (and, by way of consolidation of a class action into the FTC case, "Quarter-Billion U.S. Smartphone Purchasers v. Qualcomm") litigation, Qualcomm's exclusionary practices regarding Intel and other chipset makers (Samsung is also known to have requested--and to have been denied--a license for its Exynos chipset division) are front and center:

  • Qualcomm is fighting tooth and nail against an FTC motion for partial summary judgment that merely seeks to remind Qualcomm of self-imposed licensing obligations.

  • After an evidentiary hearing (the ITC equivalent of a trial) was held in this ITC investigation, the aforementioned consumer class plaintiffs asked Judge Lucy Koh for an antisuit (anti-enforcement in this case) injunction so Qualcomm wouldn't get to enforce a hypothetical U.S. import ban against Intel-powered iPhones. Judge Koh denied the motion without prejudice. She appeared sympathetic to the concerns raised, but unconvinced of timing, so she basically suggested that the consumers should try again if Qualcomm actually prevailed on the merits (on a preliminary basis, that has now happened with respect to one of the original six patents), was granted an exclusion order (in order to do so, Qualcomm now has to overcome the ALJ's recommended decision by persuading the Commission to review and modify the determination, which will in any event be appealable to the Federal Circuit), and President Trump didn't veto it. Judge Koh's wait-and-see approach has once again been validated. Anyway, the consumer's antisuit motion also focused on Qualcomm's anti-Intel tactics.

Apple, which based on filings in proceedings before the European Patent Office and the Federal Patent Court of Germany is working closely with Intel to fend off Qualcomm's German patent infringement lawsuits, has also made German courts aware of the fact that all of the devices targeted by Qualcomm's German complaints come with Intel--not Qualcomm-chips in the German market. Whether that antitrust defense will get traction in Germany, where the law of the land is basically that patents entitle their owners to injunctions as a matter of law with exceptions being very few and far between, remains to be seen. But there are parallels between Qualcomm's two ITC complaints explicitly saying that injunctive relief is sought against only Intel-powered iPhones and the German cases that don't say so but practically have the same objective. At this month's Munich trial, counsel for Qualcomm noted that there are some Chinese patent infringement cases that purportedly also target Qualcomm-powered iPhones, and maybe we'll learn more about that at a later procedural stage.

Earlier this month it became known that the Office of Unfair Import Investigations (OUII, often referred to as "the ITC staff"), which participates in many ITC investigations as a neutral party and whose recommendations aren't binding on judges but often adopted by them and, especially, the Commission later on, raised public-interest concerns in the investigation of Qualcomm's second ITC complaint against Apple. Same issue there: targeting only Intel-powered iPhones. Formally those are two separate investigations, and in the first investigation no such recommendation was given, but it may very well have had an impact on ALJ Pender's recommendation regarding remedies, and it will without a doubt bear considerable weight with the Commission in the months ahead.

The ITC rarely finds that the public interest weighs against an import ban, which is the agency's only patent infringement remedy. Normally the institutional interest appears to outweigh the public interest in this regard, but to be fair, public-interest concerns are often also raised without having even remotely as strong a case as Qualcomm's targeting of its only major wireless chipset competitor represents. This blog has often voiced skepticism of public-interest arguments in cases such as Apple v. HTC (where only a dissenting commissioner sided with the Taiwanese Android device maker). Samsung's aggressive SEP assertions against Apple did raise a serious issue, but it took a presidential veto for the public interest to prevail.

I actually think it is in the ITC's institutional interest not to allow abse of its Section 337 proceedings for anticompetitive purposes. Lawmakers on Capitol Hill have repeatedly (here's an example) expressed concern over the way the agency basically offers complainants an end-run around the eBay v. MercExchange injunction standard. If the ITC doesn't proceed with some degree of caution, legislative intervention may occur--and in that case it's not unlikely that the ITC would have to respect the eBay standard in the future...

Finally, I hope none of my readers are disappointed that it took me until the next day to comment on this Final Initial Determination, though I usually try to report sooner on major decisions, especially scheduled ones. Reuters and Bloomberg reported on the ITC ruling at about the time I commented on the certification of that huge class of plaintiffs. However, the relevant notice had not appeared yet on the docket of investigation 337-TA-1065. It did so only hours later, at a time (7:49 PM Eastern) when I had already given up on it for the day:

I don't know whether the ITC itself gives major news agency reporters a heads-up or whether Apple (which already provided a quote to the agencies) received it beforehand. I do understand that Bloomberg and Reuters receive preferential treatment, and this blog hasn't always been nice to Apple to be honest (I just agree with them on select issues such as standard-essential patents, minus their lawyers' occasional hyperbole), but I believe the ITC should ensure that all of us have the same access to such a notice that contains no confidential information whatsoever...

[Update] It could be that a time zone issue (1:49 PM Eastern being 7:49 PM Central European Time) prevented me from accessing the notice earlier. I just had a Twittersation with the CCIA's Josh Landau about it and will contact the ITC's technical support. [/Update]

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