By Eric Schweibenz
On August 3, 2013, U.S. Trade Representative, Ambassador Michael B.G. Froman, issued a letter to Chairman Williamson of the U.S. International Trade Commission (the “Commission”) announcing that President Barack Obama disapproves of the Commission’s determination to issue an exclusion order and a cease and desist order in Certain Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers (Inv. No. 337-TA-794).   

By way of background, the Complainants in this investigation are Samsung Electronics Co., Ltd. and Samsung Telecommunications America, LLC (collectively, “Samsung”).  On September 14, 2012, ALJ E. James Gildea issued an Initial Determination (“ID”) finding no violation of Section 337 with respect to U.S Patent Nos. 7,706,348 (the ‘348 patent); 7,486,644 (the ‘644 patent); 7,450,114 (the ‘114 patent); and 6,771,980 (the ‘980 patent) by Respondent Apple Inc. (“Apple”).  Specifically, ALJ Gildea found that the ‘348, ‘644, and ‘980 patents were valid but not infringed and that the ‘114 patent was both invalid and not infringed.   The ALJ also found that the economic prong of the domestic industry requirement was satisfied with respect to each of the patents, but that the technical prong was not satisfied for any of the patents.

On November 19, 2012, the Commission determined to review the ID in its entirety and issued a notice requesting written submissions from the parties and the public on certain issues, including the assertion of FRAND-related patents at the Commission, and on the issues of remedy, public interest and bond.  See our November 20, 2012 post for more details.  On March 13, 2013, the Commission issued another notice requesting written submissions from the parties and the public on various additional topics, including some FRAND-related topics.  See our March 21, 2013 post for more details. 

As set forth in its notice reporting the opinion, the Commission determined that Apple had violated Section 337 in connection with the importation and sale of wireless communication devices, portable music and data processing devices, and tablet computers that infringe certain claims of the ‘348 patent, but not with regard to the other patents.  The Commission issued a limited exclusion order and a cease and desist order directed at Apple, and terminated the investigation.  See our June 6, 2013 post for more details on the notice and submissions received and our July 17, 2013 post for more details on the Commission’s opinion in this investigation.

Ambassador Froman’s August 3, 2013 letter provides, in pertinent part:
The Administration is committed to promoting innovation and economic progress, including through providing adequate and effective protection and enforcement of intellectual property rights.  Relief available to the owners of intellectual property rights through section 337 is an important facet of achieving that objective.  At the same time, standards, and particularly voluntary consensus-based standards set by SDOs, have come to play an increasingly important role in the U.S. economy.  Important policy considerations arise in the enforcement of those patents incorporated into technical standards without which such standards cannot be implemented as designed, when the patent holder has made a voluntary commitment to offer to license these SEPs on FRAND terms.  Licensing SEPs on FRAND terms is an important element of the Administration’s policy of promoting innovation and economic progress and reflects the positive linkages between patent rights and standards setting.

I have reviewed the various policy considerations set out above based on the information provided in this case, including information developed in connection with the Commission’s determination.  Although the parties dispute the facts vigorously, it is beyond the scope of this policy review to revisit the Commission’s legal analysis or its findings based on its record.

After extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons, I have decided to disapprove the USITC’s determination to issue an exclusion order and cease and desist order in this investigation.  This decision is based on my review of the various policy considerations discussed above as they relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.

I would like to underscore that in any future cases involving SEPs that are subject to voluntary FRAND commitments, the Commission should be certain to (1) to examine thoroughly and carefully on its own initiative the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest and (2) seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards-essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up.  In addition, the Commission should make explicit findings on these issues to the maximum extent possible.  I will look for these elements in any future decisions involving FRAND-encumbered SEPs that are presented for policy review.  The Commission is well-positioned to consider these issues in its public interest determinations. 

This policy decision is not an endorsement or a criticism of the Commission’s decision or analysis.  My decision to disapprove this determination does not mean that the patent owner in this case is not entitled to a remedy.  On the contrary, the patent owner may continue to pursue its rights through the courts. 

For more information about the public interest factors and the history of Presidential disapproval of ITC remedies under Section 337, please see our June 17, 2009 post.