Wednesday, February 6, 2019

ITC must hold retrial in Qualcomm v. Apple, says constitutional law scholar: judge not properly reappointed?

The ITC investigation of Qualcomm's first complaint against Apple had already reached the stage of a Commission review of the initial determination (ID) on the merits. Contrary to what various inaccurate media reports and commentaries suggested, that decision to review the ID is entirely unrelated to the fact that the Commission must make a determination on whether or not to order an import ban (unless there is a final finding of no violation). While the Commission can simply make an Administrative Law Judge's (ALJ) ID the final decision on the merits of a case by not reviewing it, the ALJ's recommendation on remedy cannot be elevated to an actual order: regardless of whether the Commission tends to agree or disagree with the ALJ's recommendation, it has to request public-interest statements from stakeholders (as long as there is at least a procedural possibility of a finding of a violation) and then has to make its own determination (which may or may not be consistent with the recommendation, possibly up to the point where it's basically just a copy-and-paste job, but formally an active determination has to be made).

On the technical merits, the Commission granted Apple's petition (to review the finding of a violation with respect to one patent) and denied Qualcomm's petition (to review negative findings regarding two other patents). This, too, was missed by the other reports I saw.

With respect to the technical merits, the Commission raised nine questions. Any one of those nine questions could be answered in a way that would make Apple win the case (apart from the possibility of an appeal by Qualcomm to the Federal Circuit). Even if we assumed, for instance, that Qualcomm had a 90% chance of prevailing on any given question, the fact that it would have to overcome a 10% risk nine times would result in a bottom-line chance only slightly better than 1 in 3 that it can surmount all nine hurdles. And at least some of the questions suggest a far greater risk than 10% to Qualcomm.

Despite the temporary government shutdown, some public-interest statements were successfully submitted about a month ago. In a January 13 blog post I noted bipartisan support for the ALJ's view that Qualcomm should not obtain an import ban even if it prevailed on the technical merits.

After the shutdown, the Commission extended the target date for its final determination to March 26, and some additional Congressional submissions became discoverable. Four U.S. Representatives from California (all of them Democrats) and seven Republican Congressmen (from Texas, Florida, Colorado, and North Carolina) submitted statements.

Then there were some NGO submissions supporting Qualcomm, one submission by multiple NGOs supporting Apple and Intel, and a few letters from people who personally know J. Gregory Sidak, a Qualcomm economic expert on whose credibility ALJ Pender commented very negatively. Mr. Sidak's friends--most notably including Judge Posner--seek to defend his reputation.

One submission, however, stood out because it raised an issue I hadn't seen in any previous ITC investigation. Professor Steven G. Calabresi (Northwestern University Pritzker School of Law), a former Reagan and Bush 41 Administration official who used to clerk for the late Justice Antonin Scalia, believes it would be unconstitutional to proceed on the basis of ALJ Pender's ID. Instead, Professor Calabresi argues, the Commission must "remand [this] Investigation for a completely new evidentiary hearing [= trial] and a completely new initial determination and recommended determination before a different ALJ who has been constitutionally appointed." Alternatively, he goes on to explain, the Commissioners could also preside over such a retrial themselves and then draft a completely new and final determination. The latter, which his submission doesn't say, would however be very unusual since the Commission delegates evidentiary hearings (= trials) to ALJs.

Professor Calabresi, who is also the chairman of the Federalist Society (which supports Qualcomm against the FTC, for all the wrong reasons in my opinion--though I'm politically in the same camp on most other issues), describes himself as one of the leading experts on the Appointments Clause. What makes him doubt the constitutionality of the investigation of Qualcomm's first ITC complaint against Apple is that ALJ Pender retired sometime in or before early September, but shortly thereafter, Chief ALJ Charles E. Bullock, who had temporarily been assigned to this case, informed the parties that retired ALJ Pender had been reappointed for the purpose of completing this investigation.

In Professor Calabresi's opinion, that notice was "constitutionally suspect" because, in his reading of the Appointments Clause and the related case law, the Commission--not the Chief ALJ--would have had to reevaluate ALJ Pender's ability to serve in that capacity and would then have had to hold a vote. Professor Calabresi does not see any indication that such a vote was held, and he doubts that an immediate reappointment was possible, given that some evaluation would firstly have been required. Therefore, he suspects Chief ALJ Bullock--not the six Commissioners--reappointed ALJ Pender.

[Update] Last summer the ITC published a document concerning its process for hiring ALJs (PDF). I wanted to add that link so anyone interested in the subject can compare Professor Calabresi's theory with the ITC's practice. [/Update]

I don't have an opinion on this theory of unconstitutionality. But interesting it is. It could be that this is an indirect attempt by Qualcomm to get a second bite at the Apple, given that it's currently on the losing track with respect to the merits (only one out of six originally asserted patents was deemed valid and infringed, and the nine Commission questions make it more likely than not that even that single-patent win won't be affirmed). However, Qualcomm is generally also interested in getting potential leverage quickly, and a retrial before a new ALJ would delay the investigation substantially, with a high risk to Qualcomm that the new ALJ would be influenced strongly by ALJ Pender's conclusions.

As I wrote earlier today, Qualcomm's attempts to gain leverage over Apple (and Intel) from patent infringement lawsuits have failed miserably so far. Most of those patent assertions went nowhere, and to the extent any of them succeeded, Apple has apparently been able to work around them (through software updates in China, and--as my previous post discussed--a hardware modification for the German market, though the chipset to be replaced almost certainly doesn't infringe Qualcomm's envelope tracker patent anyway).

Maybe Qualcomm is so desperate at this stage that it even wants an ITC retrial, just because it hopes to get a better outcome than if the ITC decided the case next month. Maybe Qualcomm doesn't want to alienate the ITC directly (as there is also a second case pending), and therefore has asked its friends at the Federalist Society--which already support it against the FTC as I mentioned--for help by raising a constitutional issue with the ITC. It's interesting that the FedSoc's vice chairman, David McIntosh, also submitted a public-interest statement (one that effectively supports Qualcomm), though not in the FedSoc's name, but on behalf of a "Club for Growth." But whoever may or may not have pulled whatever strings in this regard, I do think Professor Calabresi's theory is interesting. Here's his submission to the ITC:

19-02-06 Steven G. Calabres... by on Scribd

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