This matter has already been covered by Florian Mueller on FOSS Patents and by Britain Eakin on Law360, but I thought I would weigh in as well. Last week Federal Trade Commission Chair Lina Khan and Commissioner Rebecca Kelly Slaughter filed a public interest statement in Investigation No. 337-TA-1240 Certain UMTS and LE Cellular Modules and Products Containing the Same. According to the Law360 article, the case involves a complaint filed by Koninklijke Philips NV alleged that various companies including Thales Group are importing SEP-infringing products into the United States. Philips is asking the International Trade Commission to review ALJ David Shaw's ruling that the products do not infringe, and also is pursuing litigation against Thales in U.S. district court. With that backdrop, Chair Khan and Commissioner Slaughter have filed a statement focusing on the availability of exclusion orders for the importation of SEP-infringing products.
I'm not a big fan of the neo-Brandeisian school of antitrust, with which Chair Khan is often associated--but I'm also not a big fan of ITC exclusion orders, particularly in SEP cases, and in this case I'm in agreement with Chair Khan's analysis 100%. As I have noted previously (see, e.g., here), the ITC can be a popular venue for U.S. patent owners for a variety of reasons--among them that the Federal Circuit has held that the eBay factors do not apply in ITC proceedings. See Spansion, Inc. v. Int' Trade Comm'n, 629 F.3d 1331, 1357-60 (Fed. Cir. 2010). And while the U.S. Trade Representative in 2013 overturned an exclusion order the agency had entered in a dispute between Samsung and Apple involving SEPs, it's not clear that in other instances the ITC would necessarily deny an exclusion order just because a patent is standard-essential. As Chair Khan and Commissioner Slaugher note, this poses a risk of patent holdup, and their concluding statements are consistent with my views:
Particularly where the standard implementer is a willing licensee—including cases where the implementer commits to be bound by terms that either the parties themselves will determine are FRAND or that will be determined by a neutral adjudication/in a court proceeding—an exclusion order would be contrary to the public interest. At a minimum, the Commission should require a SEP holder to prove that the implementer is unwilling or unable to take a FRAND license as part of its public interest analysis before issuing an exclusion order. . . . Considering the willingness and ability of the potential licensee to take a license would support a balanced approach to ITC remedies by curbing opportunism by both SEP holders and potential licensees while recognizing that both the SEP holder and the standards implementer have a duty to negotiate in good faith towards a meaningful resolution of FRAND issues.
As a general matter, exclusionary relief is incongruent and against the public interest where a court has been asked to resolve FRAND terms and can make the SEP holder whole. We encourage the Commission to consider in its public interest assessment whether the facts at hand present a case where exclusionary relief would not be in the public interest, at least with respect to certain Respondents. . . .
In this case, the ALJ found that Philips has licensed its SEPs to numerous licensees and is willing to license Respondents, and that Respondents were engaged in licensing negotiations with Phillips. . . . There are several pending cases in the District of Delaware against various Respondents in which a party is seeking to have the court set FRAND terms for a license. When a District Court can make a complainant whole, both for past royalties with prejudgment interest and by establishing a future royalty rate, even a limited exclusion order is not in public interest.
I hope the ITC pays attention.