The ITC Adjudicates Another Licensing Dispute for Standard-Essential Patents
In a recently filed patent complaint at the ITC, Koninklijke Philips is seeking an exclusion order to prevent the importation of various cellular modules used by internet-of-things devices accused of infringing four patents. The case is a particularly obnoxious example of how Section 337 can be abused to bypass the regular rules of the U.S. patent system in favor of unmerited remedies from a trade agency.
This is clearly not a trade dispute. While Philips used to make a broad range of electronic equipment, today the company’s business is mostly limited to medical devices and patent licensing. It does not compete with the respondents at all. Its domestic industry argument relies on the fact that one of the Dutch company’s numerous, imported sleep apnea machines is capable of connecting to a mobile network.
This is instead purely a licensing dispute. All four of the asserted patents have been declared standard-essential for 4G connectivity, meaning Philips is required to offer licenses to all implementers on fair, reasonable, and non-discriminatory (FRAND) terms. As such, Philips is not entitled to injunctive relief, nor does it directly benefit from blocking imports. The sole purpose of this ITC complaint is to use the cost of litigation and threat of an exclusion order to pressure respondents to settle.
But Philips is also suing the respondents in federal district court, where it is specifically asking the judge to determine a global FRAND rate. This means that the only contribution the ITC can make to this dispute is to help Philips secure a licensing rate through settlement that is higher than what—at the patent owner’s request—an Article III federal judge will determine Philips is entitled to under the law.
The litigation serves no recognizable policy goals. It is nevertheless made possible by the ITC’s lax application of Section 337’s domestic industry requirement, permissive approach to issuing exclusion orders based on FRAND-encumbered patents, and general antipathy toward its statutory mandate to consider the public interest.
