Sunday, November 4, 2018

How and when the ITC analyzes its statutory public interest factors: three-page diagram

The roughly 100 pages on which meanwhile-retired Administrative Law Judge (ALJ) Thomas B. Pender discussed the statutory public interest factors in the investigation of Qualcomm's first ITC complaint against Apple warrant further commentary. There are antitrust cases pending against Qualcomm around the globe, and Apple raised an affirmative antitrust defense against Qualcomm's German patent assertions, but ALJ Pender's public-interest analysis is the first detailed judicial holding--based on extensive briefing and a multi-day hearing.

That's why I will soon dedicate a blog post to the subject of inhowfar ALJ Pender's public-interest analysis overlaps with key antitrust questions at issue in various other proceedings. But before we get there, I wanted to provide some procedural background.

It's important to understand that the United States International Trade Commission, a trade agency with quasi-judicial powers, clearly delineates the question of a "violation" (typically, the infringement of a patent not shown to be invalid; I sometimes refer to this as the "merits" part) from "remedies and bonding" (which I'll briefly refer to as "remedies"). This is one major difference from the public interest eBay factor, which is considered together with the other three factors.

The ALJ in charge of an investigation finishes his job by issuing an Initial Determination (ID) on the alleged violation and a Recommended Determination (RD) on the remedy sought. The Commission (the six-member decision-making body at the top of the organization) makes the final (apart from appeals or a Presidential veto) decision on both, but there is a technical difference: the ID becomes the final decision if the Commission declines to review it (which parteis can request); the RD is just a recommendation, and the Commission makes the first actual decision on remedies, which is why parties cannot seek a review of the RD (though they can, of course, voice any disagreement).

And then there's also the ITC staff (formerly called Office of Unfair Import Investigations, abbreviated as OUII). The staff participates in many investigations as a third party (though it sometimes elects not to do so, or limits its participation to specific issues). The staff's involvement is also meant to protect the public interest, but not in the sense of playing a "devil's advocate" and arguing against an import ban. In connection with the staff, "public interest" basically means to file third-party pleadings in order to increase the likelihood of a correct decision (ALJs adopt many, but by far not all, staff recommendations). As far as the statutory public interest factors that may counsel against an import ban are concerned, the ITC staff is normally (with the investigation of Qualcomm's second ITC complaint against Apple representing a remarkable exception) rather patentee-friendly. For the purposes of this post and the diagram contained in it, "public interest" refers to the statutory public interest factors, not the public interest in correct decisions.

The statutory public interest factors ("the effect of [a hypothetical import ban] upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers") have gained importance over the years. It's an irony of fate that a case where Qualcomm was the respondent (and Broadcom the complainant) played a key role in the evolution of the public interest debate at the ITC. The purpose of those public interest factors is not to condone patent infringement: patentees can always (and do most of the time) file a companion lawsuit in district court and seek an injunction as well as monetary damages there (though it will take longer, and injunctive relief will be far harder to obtain).

When the public interest is at issue, government agencies and the private stakeholders must also be able to chime in--and the parties are obviously listened to as part of this. Before an ITC exclusion order (= U.S. import ban) comes down and actually takes effect, there are various junctures at which the statutory public interest factors may be considered based on input from the parties as well as, potentially, government agencies and the general public. There's an explanation on the ITC website, but I wanted to add the Presidential review period to it and created a diagram (three-page PDF; this post continues below the document):

18-11-04 ITC Public Interes... by on Scribd

Now let's go through the steps shown in the diagram and look at them in the specific context of the ITC investigations of Qualcomm's two complaints against Apple (and, by extension, Intel, as Qualcomm decided to target only Intel-powered iPhones, even though one of the patents is about graphics and, therefore, technically not related to Intel's baseband chips by any stretch of the imagination).

Complainants are nowadays required to file a public interest statement along with each complaint. When a complaint is received, the ITC always solicits public interest statements from the general public. Responds can and often do file their statement at this stage, where it's still voluntary.

What's relatively new is that the Commission decides on whether to delegate fact-finding related to the statutory public interest factors to the ALJ in charge of the investigation. The ALJ will hold an evidentiary hearing either way, but only if the Commission directs him to gather evidence relating to the public interest will he also hear testimony related to those factors (and unrelated to the merits part). And if the ALJ is tasked with this, then the respondent (the company against which someone is seeking an import ban) is required (not merely invited) to file a public interest statement before the investigation is in full swing.

In the bottom third of page 1 of the PDF you find the rectangular box labeled "Public interest briefing, discovery, evidentiary hearing (before ALJ)" and, to the right of it, a reference to the ITC staff presenting its public-interest findings. That is exactly where the investigation of Qualcomm's second complaint against Apple stood when I reported in mid-September that the ITC staff, in the public part of the evidentiary hearing, recommended that no import ban be ordered should a violation (contrary to the staff's analysis, according to which there is none) be identified. However, in the investigation of Qualcomm's first ITC complaint against Apple, the ITC staff sided with Qualcomm. For lack of access to all the relevant documents I don't know why, but the record may differ, just like Presiding Judge Dr. Holger Kircher of the Mannheim Regional Court acknowledged substantial progress with Apple's antitrust defense at an early-October trial over what Apple had presented in a case involving another patent that was tried two weeks earlier.

The investigation of Qualcomm's first ITC complaint against Apple started several months earlier than the second one, and the RD (which will probably take until January inthe other investigation) already came down in late September. That procedural milestone is visualized by the rhombus at the bottom of page 1. And the ALJ, despite the staff's negative recommendation in that case, held that no import ban should be ordered owing to the anticompetitive effects of Qualcomm's anti-Intel efforts.

The issuance of the RD in late September triggered further public-interest briefing in accordance with 19 C.F.R. § 210.50(a)(4), as shown in the upper part of page 2 of the PDF.

The statute refers to government agencies, the general public, and the parties, but those submissions are on different schedules: the parties are obviously served the RD, and then have 30 days to comment on the public interest, while the clock technically begins to tick for the general public only after an official Commission notice appears in the Federal Register. In the first Qualcomm v. Apple case, the parties had their deadline on Halloween (see Friday's post for the filings and my related commentary), while government agencies and the general public have until Thursday (November 8). The deadline for government agencies and other stakeholders is another reason for which I wanted to explain the procedures here.

The parties are challenging the parts of the ALJ's ID (on the alleged violation) that are unfavorable to their respective interests, with Qualcomm requesting a review only in the event that Apple's petition succeeds (otherwise Qualcomm would rather prevail on one patent now than, hypothetically, over up to three patents later). The Commission now has to determine whether to review the ID. In cases where, unlike here, the ALJ found no violation, a decision not to review means that the ALJ's finding of no violation is affirmed, and then there's no public interest discussion anymore unless the complainant successfully appeals.

If the Commission decides to review, there's another chance for everyone to comment on the public interest (though it obviously wouldn't make sense for those who commented before to write something again unless there's something new to take into consideration).. As the ITC says on its website, "the rules continue the Commission’s past practice inviting the parties, government agencies, and members of the public to submit comments on the public interest after the Commission decides whether to review the ALJ’s decision on violation (unless the Commission affirms an ALJ's decision that there is no violation)."

Page 2 of the diagram ends with the final Commission determination, but if that one involves a finding of a violation and an exclusion order (import ban), it still isn't over. Not only can there be an appeal, but more immediately, the Commission will write a letter to the United States Trade Representative (USTR), to whom U.S. presidents typically delegate the review of ITC import bans. The Presidential review period takes 60 days, and no import ban takes effect before the President's office (in practical terms, the USTR) has had the chance to veto it. As page 3 shows, the USTR also receives briefing from the parties--and third parties will usually try to lobby the federal government as well.

In closing I'd just like to explain the colors in the diagram:

  • white background = ITC and USTR

  • red = complainant

  • green = respondent

  • yellow = complainant and respondent (as yellow results from mixing red with green)

  • blue = government agencies and general public

I hope that diagram, as well as my new smartphone patents battlemap, will prove useful to many of you as these processes unfold!

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