The White House on ITC Section 337

On June 4, 2013, the International Trade Commission (ITC) issued its Notice of Final Determination in the ’794 Investigation finding that Apple had violated Section 337 with respect to one of Samsung’s patents. Based on this determination, the Commission issued both a limited exclusion order and cease and desist order barring Apple from importing its iPhone 4, iPhone 3GS, iPad 3G, iPad 3 and iPad 2 models for sale in the U.S. before June 3, 2015. The Commission postponed its ruling in March and again in May so that it could consider comments from the companies and the public on the potential public interest harm of a ban arising from standard essential patents (SEP) subject to fair, reasonable, and non-discriminatory (FRAND) terms.

A FRAND commitment may be viewed as a commitment by a patent holder to a standard setting organization (SSO) to license its standard essential patents on such “fair, reasonable, and nondiscriminatory terms” in exchange for the SSO’s agreement to adopt the patented technology into its standard. Here, the Commission determined that the public interest factor under Section 337 did not preclude issuance of the cease and desist order and that “Samsung’s FRAND declarations do not preclude that remedy.”

However, by Letter of August 3, 2013, U.S. Trade Representative Michael Froman notified the ITC of the President’s decision to disapprove the Commission’s determination to issue exclusion and cease and desist orders on the FRAND patent in the above ‘794 investigation. This is the first time since 1987 that the President has disapproved a Commission exclusionary remedy. Under 19 U.S.C. §1337(j), the President is required to engage in a policy evaluation of the Commission’s determinations to issue exclusion and cease and desist orders within a 60-day review period. If the President disapproves the determination then such determination will have no force or effect, effective on the date of the notice. The President’s decision cites to the January 8, 2013 Policy Statement issued by the Department of Justice and the U.S. Patent and Trademark Office explaining that exclusionary relief based on FRAND-encumbered SEPs should be available based only on the relevant factors described in the Policy Statement, in order to mitigate patent hold-up. For example, according to the Policy Statement, an exclusion order is appropriate upon a putative licensee’s refusal to pay a FRAND royalty or to engage in a negotiation to determine F/RAND terms. An exclusion order can also be appropriate if a putative licensee is not subject to the jurisdiction of a court that could award damages. The Policy Statement further advises that the list of relevant factors described is not an exhaustive one.

The President’s decision appears to harmonize the exclusionary relief available to the Commission with respect to FRAND-encumbered SEPs with the decision reached by the FTC in In re Motorola Mobility LLC and Google, Inc., Docket No. C-4410. However, the language in the FTC’s Decision and Order in Google/Motorola may be more restrictive. For example, the FTC’s Decision and Order requires that the potential licensee’s refusal be “in writing or in sworn testimony” and that “challenging the validity, value, Infringement or Essentiality of an alleged infringing FRAND Patent does not constitute a statement that a Potential Licensee will not license such FRAND Patent.”