Apple–Qualcomm Settlement Means ITC Can Go Back to Ignoring Section 337's Public Interest Factors

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On April 16, Qualcomm and Apple announced they had settled their long-running global patent dispute, with Apple agreeing to pay for a 6-year license under confidential terms.  The outcome is a win for Qualcomm, but the chipmaker still faces the possibility of sanctions by competition regulators for its licensing practices.  It also cuts short the unfolding saga at the International Trade Commission involving the potential application of Section 337's public interest factors.

As we chronicled in earlier blog posts, the ITC has been conducting two investigations based on two sets of patent complaints from Qualcomm seeking to block the same products: iPhones with Intel modems.  In both investigations, the administrative law judge found in Qualcomm's favor as to infringement of one of the asserted patents.  But in the first investigation, the ALJ recommended against an exclusion order on public interest grounds.  Specifically, the ALJ found that an import ban would reduce U.S. competitiveness in the development of 5G mobile technology, which in turn would harm consumers, innovation, and national security.   He also noted that Qualcomm was perfectly capable of obtaining relief for patent infringement in federal district court.

The recommendation sparked a heated debate that led a host of industry players, legislators, and academics to file comments with the ITC.  Much of that debate focused on technical questions about Qualcomm and Intel's relative contributions to 5G development and on the propriety of automatic injunctive relief as a remedy for patent infringement.

The public interest findings were only a recommendation to the Commission, which can refuse to issue an import ban "after considering 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."  The Commission's own determination was scheduled to be announced by late July.  

With the parties now having settled their patent dispute, the threat of an exclusion order is nullified. 

One unfortunate consequence of the settlement is that we won't get to see the ITC's analysis of the public interest factors.  Even if the Commission had decided to impose an exclusion order, we would at least have gotten some precedential guidance on how to apply the public interest factors in future cases.  Currently, there is almost no such guidance because the ITC has not denied an exclusion order on public interest grounds in over 30 years.

But Congress intended for the public interest to be an "overriding consideration" of "paramount" importance in Section 337 cases.  Unless and until the ITC begins to take that obligation seriously, Congress should consider mandating a more thorough analysis and adding greater specificity to the statutory public interest factors.

It's also worth noting that this particular dispute never really belonged at the ITC in the first place.  

Qualcomm and Apple were involved in a domestic licensing dispute that had nothing to do with "unfair practices in import trade."  They are both American companies that design products in the United States and manufacture them abroad.  Those products (microchips and cell phones, respectively) do not compete against each other.  And so an exclusion order would have benefited no one, because Qualcomm's goal was to get royalties from iPhone sales, not to prevent iPhone sales from unfairly competing with its own product.

The fact that the two companies were litigating in both district court and the ITC simultaneously highlights how the trade agency's overly broad jurisdiction leads to duplicative litigation without furthering any identifiable goals of trade policy or patent policy.