Patent Watch: InterDigital Commc'ns, Inc. v. Int'l Trade Comm'n

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"[A]n ITC order terminating an investigation on the basis of an arbitration agreement [is] an appealable final determination under 19 U.S.C. § 1337(c) [over which the Federal Circuit has] jurisdiction under 28 U.S.C. § 1295(a)(6)."

On June 7, 2013, in InterDigital Commc'ns, Inc. v. Int'l Trade Comm'n, the U.S. Court of Appeals for the Federal Circuit (Lourie, Bryson, Prost*) reversed and remanded the ITC order terminating the 19 U.S.C. § 1337 investigation in favor of arbitration because of a prior patent license agreement, which related to patents covering operations of 2G and 3G wireless communication devices, between InterDigital and LG that permitted the parties to submit to arbitration any disputes arising under the agreement. The Federal Circuit stated:

LG and the ITC argue that under the plain language of § 1337(c), there is no right to appeal an ITC order terminating an investigation on the basis of an arbitration agreement. They note that § 1337(c) provides a right to appeal "a final determination of the Commission under subsection (d), (e), (f), or (g)," and that the ITC terminated the investigation as to LG under the language added to subsection (c) [to] allow for termination "on the basis of an agreement between the private parties to the investigation, including an agreement to present the matter for arbitration." They view § 1337(c) as only permitting appeals of decisions made on the merits as to whether a violation of § 1337 has occurred. They conclude that the ITC's termination under subsection (c) is not a final determination under subsection (d), (e), (f), or (g) and thus is not appealable.

We find, however, that the reading of § 1337(c) urged by LG and the ITC, permitting appeals only of final decisions on the merits, is overly restrictive. . . . Their view of the statute also "disregards the general rule that judicial review will not be precluded on the sole ground that specific procedures for judicial review of a particular agency action are not spelled out in a statute." In addition, the language of § 1337(c) indicates that when Congress amended the statute to permit the ITC to terminate an investigation on the basis of "an agreement between the private parties to the investigation, including an agreement to present the matter for arbitration," it was envisioning a situation where the parties indisputably agreed to arbitrate -- not a situation like the present case, where there is a serious disagreement as to whether the dispute is subject to arbitration.

Because the ITC's order terminating the investigation in favor of arbitration was not a determination on the merits under § 1337(d), (e), (f), or (g), the pertinent question is whether the effect of the ITC's order is the equivalent of a final determination. . . . The ITC argues that . . . "the effect of the dismissal depends on the decision of the arbitrator." The ALJ terminated the investigation in favor of allowing an arbitrator to determine whether the dispute between InterDigital and LG is subject to arbitration. The ITC notes that "[i]f the arbitrator decides that the matter is not subject to the arbitration provision, InterDigital can reassert its complaint against LG before the Commission." In essence, the ITC's argument is that because InterDigital may be able to refile its complaint against LG at some point in the future, the order terminating the investigation is not "final."

We disagree. It is true that InterDigital may be able to bring its claims against LG in the ITC again in the future. On the other hand, it may not. Moreover, InterDigital contends (without contradiction from the other parties) that even if it ultimately succeeds in convincing the arbitrators that its claims against LG are not subject to arbitration, it will not be able to reopen the terminated investigation. Instead, it will have to file a new complaint. [And] InterDigital will have to await the outcome of the proceeding before the arbitrators to find out whether it can file a new complaint. Until the arbitrators determine whether InterDigital's claims are subject to arbitration, any new complaint InterDigital filed would also be terminated in favor of arbitration. In the meantime, LG may continue to import devices that allegedly infringe InterDigital's asserted patents. The order therefore has "the same operative effect, in terms of economic impact" as a final determination. . . . Accordingly, we hold that the order terminating the investigation as to LG was an appealable final determination under 19 U.S.C. § 1337(c) and that we therefore have jurisdiction under 28 U.S.C. § 1295(a)(6).

[T]he ALJ first determined "that the parties clearly and unmistakably intended to delegate the question of arbitrability to an arbitrator." The ALJ then turned to the question of whether LG's request for arbitration was "wholly groundless." The ALJ agreed with LG's position that the "wholly groundless" inquiry "does not extend to the merits of LG's license defense." The ALJ then found that LG's assertion of arbitrability was not wholly groundless . . . . As a result, the ALJ terminated the investigation as to LG. . . . In conducting the "wholly groundless" inquiry, the ALJ recited LG's arguments that (i) the Agreement expressly grants LG a license to the asserted patents, (ii) the license covers the products accused in this Investigation, and (iii) Section 2.1, the grant clause, survived the expiration of the Agreement. However, the ALJ failed to construe the provisions in the Agreement cited by LG to the limited extent necessary to assess whether its arguments were plausible. Instead, the ALJ simply concluded, "LG claims that it has a continuing license for the accused products under the terms of the Agreement, a dispute 'arising under' the Agreement." It was legal error for the ALJ to terminate the investigation without assessing whether LG's license defense was at least plausible.

If the ALJ had performed the proper analysis, he would have found that LG's license defense is not plausible. Rather, a cursory review of the relevant provisions in the Agreement confirms that LG no longer holds a license to InterDigital's patents for 3G products. [T]he result is unambiguous: the only surviving portion of the grant clause is that portion providing LG with a "fully paid-up" license for the life of InterDigital's patents for 2G products. There simply is no plausible argument that LG's license for 3G products survived the termination of the Agreement. Accordingly, LG's assertion of arbitrability was "wholly groundless." For the foregoing reasons, we reverse the ITC's order terminating the investigation as to LG and remand for further proceedings.

Topics:  Arbitration, Arbitration Agreements, Investigations, ITC, Patents

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Intellectual Property Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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