ITC Section 337 Update—September 10, 2013

by King & Spalding

Jury Finds That Motorola Breached FRAND Obligations By Offering Microsoft A License At An Unreasonable Royalty Rate – On September 4, 2013, a Jury in the United States District Court for the Western District of Washington returned a unanimous Verdict finding that Motorola breached its FRAND commitments to the IEEE and International Telecommunications Union (“ITU”) by offering to license certain of its declared standard-essential patents to Microsoft at an unreasonable royalty rate.  Months earlier, the District Court in that case ruled that Motorola entered into binding contractual commitments to the IEEE and ITU and to Microsoft (as a third-party beneficiary to the contract) to license its declared essential patents on FRAND terms, but denied summary judgment on the issue of whether Motorola’s allegedly unreasonable offer letters were a per se breach of its FRAND obligations.  In addition to finding that the offer letters to Microsoft constituted a breach of Motorola’s FRAND commitments, the Jury determined that Motorola’s conduct in seeking injunctive relief from a German court violated Motorola’s duty of good faith and fair dealing with respect to the IEEE and ITU.  Microsoft was awarded $11.5 million in damages for costs incurred as a foreseeable result of Motorola’s breach of its contractual commitment to the ITU.  The Jury also awarded Microsoft over $3 million in attorney fees and litigation costs.  The case is Microsoft v. Motorola, No. 2:10-cv-1823 (W.D. Wash.).

Public Version Of Commission Opinion In First 100-Day ID Procedure Issues In 874 Investigation – On September 3, 2013, the Commission issued a public version of its Opinion in Certain Products Having Laminated Packaging, Laminated Packaging, And Components Thereof, Inv. No. 337-TA-874.  The Commission affirmed the ALJ’s implementation of the first 100-Day ID Procedure and ID finding that the economic prong of the domestic industry requirement was not satisfied, thereby terminating the investigation with a finding of no violation of Section 337.  The Commission also addressed the ID’s finding that the Commission lacked authority under the Constitution, the Administrative Procedure Act ("APA") and Commission Rules to direct issuance of an early ID.  The Commission stated that “the ID provides no authority to support its conclusion that a complainant in a Section 337 investigation has a constitutionally-protected interest in obtaining a hearing to address all the issues in an investigation instead of a proceeding that prioritizes one issue that portends to be dispositive, with the remaining issues deferred depending on the resolution of the potentially dispositive issue.”  The Commission further held that it was not required to “go through notice-and-comment rulemaking pursuant to section 4 of the APA” before it could implement the 100-Day Procedure, because procedural rules have always been exempt from the APA requirement of informal rulemaking.  Finally, the Commission held that conducting an expedited proceeding to resolve a dispositive issue, in the interest of orderly administration of an investigation, is not in conflict with preexisting Commission Rules and is “no different from each ALJ’s institution of ‘ground rules’ supplemental to Commission rules at the outset of each investigation.”       

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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