Qualcomm v. Apple May Hinge on the ITC’s View of the Public Interest

When the International Trade Commission finds that imported products infringe a U.S. patent in violation of Section 337 of the Trade Act of 1930, it typically issues an exclusion order that bars those imports from entering the U.S. market.  But it doesn't have to.  

The ITC can refrain from issuing a remedy if it finds that excluding the accused imports would be contrary to the public interest.  Before making such a finding, the ITC must consider four factors laid out in the law.  These include “the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers.”

This “public interest test” has become a central part of two current ITC investigations—Mobile Electronic Devices (Invs. 1065 & 1093)—in which Qualcomm is seeking to block the importation of certain Apple iPhone models based on their infringement of various patents related to “power management and performance enhancements in mobile electronic devices” through the use of specially designed baseband processors.  

What makes these investigations unusual is that Qualcomm is explicitly seeking an exclusion order narrowly defined to include only iPhones “that do not incorporate a Qualcomm brand baseband processor modem.”  That is, Qualcomm wants the ITC to block iPhones that have Intel chips in them (Intel is the only other company that makes baseband processor modems used in Apple’s phones).  It’s worth mentioning that U.S. antitrust regulators are currently challenging Qualcomm’s licensing practices related to baseband technology—specifically for demanding that patent licensees abstain from doing business with competing chipmakers.

Apple is arguing that an ITC exclusion order would negatively affect competitive conditions in the United States.  Removing Qualcomm’s only competitor, Apple argues, would enable Qualcomm to monopolize the market, leading to higher prices and lower quality.  Moreover, Apple argues that preventing Intel from making modem processors will hinder 5G innovation—which is vital for America’s future economic competitiveness—while harming national security by leaving device-makers more dependent on Chinese suppliers.

Naturally, Qualcomm has contested all of these arguments. But the biggest obstacle for Apple is the fact that the ITC almost never withholds an exclusion order under the public interest test.  Indeed, in its entire history, the Commission has done so only three times—and the last one was over thirty years ago.    

Those three examples offer limited guidance on how public interest concerns might come into play in the future.  In 1979, the ITC opted not to issue an exclusion order in Automatic Crankpin Grinders (Inv. 60) because it would burden American automakers’ ability to provide fuel-efficient vehicles during an oil crisis.  A year later, the ITC declined to exclude imports in Inclined-Field Acceleration Tubes (Inv. 67) because universities used them to conduct research in nuclear physics and the domestic product was not an adequate substitute.  And finally in 1984, in Fluidized Supporting Apparatus (Invs. 182 & 188), the ITC decided to allow infringing hospital beds for treating burn victims where domestic producers would be unable to meet consumer demand.

The only time since 1984 that Section 337’s public interest factors have affected a remedy was in 2007, when the Commission conducted a highly publicized investigation that could have caused serious damage to the U.S. cell phone market.  In Baseband Processor Chips (Inv. 543), the ITC made a novel decision to narrow the scope of an exclusion order on public interest grounds by exempting phone models already being sold in the U.S. market from the exclusion order.  Ironically, Qualcomm was the respondent in that investigation, which targeted earlier versions of the same products at issue in Qualcomm’s case against Apple. 

The ITC’s public interest test also garnered attention after a Supreme Court decision in 2006 made it more difficult to secure injunctive relief in patent lawsuits in federal court.  In eBay v. MercExchange, the Court held that injunctions should not be awarded automatically as a remedy for patent infringement.  Among the factors that courts must now consider before issuing an injunction is whether money damages alone can provide a sufficient remedy. 

This created an incentive for licensing companies that don’t practice their patents to seek relief at the ITC instead.  The factors that the ITC considers in its public interest test are not the same as the eBay factors, but it has been suggested that the ITC could rely on that test to avoid issuing exclusion orders in cases where injunctive relief would be denied in a court.

If the Commission’s final decision in Mobile Electronic Devices is swayed in some way by public interest concerns, it may be due in part to political considerations.  All ITC exclusion orders are subject to presidential veto, and this administration harbors well-known concerns about Chinese chipmakers and the development of secure 5G networks.  

The Commission can prevent unwelcome political interference by taking those concerns into account now.