On April 26, the ITC received another Section 337 complaint on behalf of Rovi against Comcast. This new complaint—Digital Video Receivers, Broadband Gateways, and Related Hardware and Software Components (DVR III)—is the third filed by the licensing company in the last three years seeking to block imports of cable boxes based on patents for operating a TV guide.
So far, Rovi's ITC campaign has been largely successful. The Commission completed the first investigation—DVR I (Inv. 1001)—in November 2017, ruling in Rovi's favor and issuing a limited exclusion order. Comcast has nevertheless been able to continue importing cable boxes (without modifying the accused product in any way) after discontinuing an online service that allowed customers to schedule a recording through an app on their phones. The Federal Circuit is currently reviewing the ITC's determination of violation in that case.
Rovi's second complaint—DVR II (Inv. 1103)—is still pending before an administrative law judge at the ITC. The hearing was held in October and a final initial determination is scheduled for release in early June.
With the filing of this third complaint, it's worth reiterating that, for so many reasons, this Rovi–Comcast dispute does not belong at the ITC. Like most Section 337 investigations, this dispute is also being tried in court. Moreover, the patent owner is not a competitor of the respondent, and so an exclusion order would not alleviate any harm suffered from unfair competition. And Rovi is a licensing company who can satisfy the law's domestic industry requirement only by relying on the investments of various licensees forced to provide evidence to the agency by subpoena.
Also, Rovi's patents don't even cover the accused imports; they relate to actions Comcast's customers perform like, for example, selecting a TV show to record from an interactive guide. Comcast is accused of inducing that infringing conduct, but all the infringing and inducing actions take place in the United States and are only tangentially related to the cable boxes.
Section 337 is supposed to be used by the ITC to “adjudicate trade disputes.” But this is a domestic licensing dispute between two American companies about conduct that occurred in the United States. Instead of being adjudicated by a trade agency arbitrarily wielding the power to exclude upstream imports, the dispute can and should be handled in the courts.
The agency, however, certainly doesn't see it that way. In DVR I (the case under appeal at the Federal Circuit), the Commission claimed in its final opinion that a domestic service provider accused of domestic inducement can be found in violation of Section 337 based solely on "importation of articles, proof of direct infringement, and proof of inducement." That is, it doesn't matter if the articles were capable of infringing at the time of importation, and it doesn't matter if the importation of articles contributed to the inducement.
We recently reported here on this blog about the ITC's position during oral arguments at the Federal Circuit in March. And wrote in detail about the potential consequences of this expansive interpretation of the agency's jurisdiction in a paper last year. We concluded the paper with this summation of what's at stake:
The ITC has asserted the power to block non-infringing imports based on the domestic activity of American companies. But this power was not what the drafters of Section 337 intended to authorize. The ITC is a trade agency whose powers and procedures are tailored toward protecting domestic industries from foreign competition and infringing imports. Excluding Comcast’s cable boxes because the company induced its customers to use a mobile app does nothing to prevent unfair trade.
Allowing the ITC to maintain this power turns the agency into an administrative patent court the import exclusion powers of which act as a ham-fisted remedy for domestic patent infringement. Expanding ITC jurisdiction significantly diminishes the role of courts in adjudicating patent disputes, undermines efforts to prevent abusive patent litigation and denies American companies their right to defend themselves in a court of law.
The ideal resolution of this issue would be for the Federal Circuit to reverse the ITC. The court could either overrule Suprema to hold that inducement not tied to the actual imported articles at the time of importation is outside the ITC’s jurisdiction or, less preferably, it could limit Suprema to cases where the inducer of infringement was also the importer.
Should the Federal Circuit fail to take these steps, lawmakers would need to begin looking at the ITC not merely as an administrator of foreign trade but as an executive agency that has seized the power to reach enormous swaths of domestic business – with potentially enormous ramifications beyond trade policy for the American economy at large.