In Qualcomm v. Apple, ITC Hears from Public about Competition, Innovation, Security . . . and Socialism

The Commission is currently reviewing the Final Initial Determination in Mobile Electronic Devices (Inv. 1065), in which Judge Pender found that Apple violated Section 337 by infringing one of Qualcomm's patents but recommended against issuing an exclusion under the statute’s public interest test. Specifically, he found that banning imports of iPhones with Intel chips would harm competitive conditions in the U.S. economy by enabling Qualcomm to monopolize the market for premium baseband modem processors. This would in turn harm U.S. competitiveness in 5G development to the detriment of consumers, innovation, and national security.

The case is very unusual, and the ALJ's recommendation is a big deal, so it's no surprise that the Commission has received over a dozen third-party submissions commenting on the public interest.

Six of these submissions urged the Commission not to issue an exclusion order.  Unsurprisingly, one of them was from Intel, reiterating testimony offered by Intel officers on Apple's behalf during the investigation into consequences of an exclusion order on Intel's future participation in 4G and 5G device markets.

Some of the submissions focused heavily on Qualcomm's troubles with antitrust law and its history of anti-competitive patent licensing practices.  Interestingly, Judge Pender did not consider Qualcomm's behavior to be a factor in his recommendation.  The Final ID makes one mention of the issue, saying that Qualcomm may be "hard to do business with," but "that is its choice."

However, that doesn't mean that the Commission will share Pender’s view of Qualcomm's anti-competitive intent when conducting its own public interest analysis.

The R Street Institute’s submission—co-signed by EFF, Engine Advocacy, and the Lincoln Network—makes the case that an exclusion order would: 1) "seriously undermine economic competition and innovation"; 2) "increase the national mobile communications infrastructure’s vulnerability to cyber-attacks"; 3) "frustrate the United States’ stated policy of promoting Internet access and broadband deployment"; and finally notes that 4) "Qualcomm’s purported desire to vindicate its patent rights is both questionable given Qualcomm’s other litigation positions, and inconsequential given Qualcomm’s easy access to a full remedy in district court."

On the other side, nine third-party comments were submitted in favor of an exclusion order.  While some of those directly contested the ALJ's findings that an exclusion order would lead to monopolization, reduce innovation, or harm national security, a number of pro-exclusion comments were submitted by conservative policy groups concerned more generally about the protection of property rights.  

Rather than address Section 337’s statutory public interest factors as they apply to this case, those comments boldly argued that an exclusion order should never be denied after a finding of infringement.  For example, Dan Schneider of the American Conservative Union asked, "How can a judge rule that a company has violated someone’s property right, but then refuse to grant relief to the aggrieved party? It makes no sense."  He went on to claim that Judge Pender's recommendation means "we are all socialists today."

hammer and sickle

Similar rhetoric was used in comments by Americans for Limited Government, Frontiers of Freedom and Conservatives for Property Rights.  

In their search for a simple narrative, these groups have glossed over some very important points. For one, their arguments completely ignore the existence of courts.  Qualcomm can sue (and has sued!) Apple in federal district court, where it is entitled to a remedy for infringement regardless of anything that happens at the ITC.

One reason why it is so important to reform the ITC's patent powers is that the agency continues to undermine the role of courts.  It’s frustrating that organizations dedicated to small government and the rule of law would take a position in favor of administrative adjudication over constitutionally appointed judges and juries.  Section 337 is almost never the only remedy available, and courts of law are the most appropriate venue in which to resolve private legal disputes.

The commenters also ignore that Section 337 is a trade remedy.  By attacking the very existence of the public interest test, these critics are (accidentally, I suspect) impugning numerous other trade-related limitations on the ITC's patent power.  

For example, if it is true that a remedy should never be denied after a finding of infringement, then Section 337's domestic industry test is also an affront to property rights. And what about the importation requirement?  Does the protection of property rights demand administrative adjudication of all domestic patent infringement claims as well?

As I commented in The Hill earlier this week, the fatal flaw in the argument that the ITC must always punish patent infringement is that it completely mischaracterizes the ITC's purpose, which is not to enforce all patent rights but to prevent “unfair acts in importation” from harming the U.S. economy.  Effective application of the public interest test is vital to achieving that mission.