A Federal Circuit decision in a fight between Comcast Corp. and Rovi Corp. could drive more patent owners to turn to a federal trade agency when enforcing their patents against U.S. companies.
The U.S. International Trade Commission didn’t overstep its authority when it banned the importation of certain Comcast television set-top boxes in a patent infringement dispute with Rovi, the U.S. Court of Appeals for the Federal Circuit found last week.
The ruling validates the ITC’s interpretation of its own regulations, confirming the agency can stop imports of products that are brought by suppliers and that don’t infringe until combined with other parts inside the U.S. It could strengthen the hands of patents owners who want to enforce patents at the ITC.
“It demonstrates the reach of exclusion orders into areas that people maybe hadn’t fully appreciated,” Sheila Swaroop, partner at Knobbe Martens Olson & Bear LLP, said.
ITC investigations can be attractive to patent owners, in part because they typically move faster than district court cases and offer the potential for powerful exclusion orders. And unlike many courts, the ITC has been reluctant to pause investigations when the validity of the patent is challenged at the U.S. Patent and Trademark Office.
Owners of patents on network or computer systems could be emboldened to “to go after domestic companies on the theory that they have to import some parts,” said Charles Duan, a patent attorney and director of technology and innovation for the R Street think tank in Washington.
More broadly, U.S. service providers and manufacturing companies that use imported parts may find themselves before the ITC, even if they don’t import anything themselves, Duan said. The same could be true for cloud service providers that buy equipment from outside the U.S.
“That’s basically every internet startup that’s out there these days,” Duan said.
As of Thursday, there were 69 active exclusion orders related to patents, according to the ITC.
Starts With Suprema
Comcast’s set-top boxes by themselves don’t infringe Rovi’s patents, which cover a system for remote access to TV programs. The ITC found the Philadelphia pay-tv giant induced customers to infringe by telling them how to use a smartphone app to schedule recordings.
Attorneys say the decision builds on the Federal Circuit’s 2015 ruling in Suprema Inc. v. ITC, where the court found the ITC could exclude products that induce patent infringement.
The products in Suprema—fingerprint scanners—came to the U.S. with all the materials needed to induce infringement, attorneys say. Comcast’s set-top boxes were combined with Comcast servers and the smartphone app for the allegedly infringing system.
“What this opinion does is it confirms that inducement-oriented infringement theories at the ITC can lead to exclusion,” Rob Courtney, a principle at Fish & Richardson PC, said.
Comcast was also found to be an “importer” under the law, despite the set-top boxes being physically brought to the U.S. by the manufacturers, Arris Group Inc. and Technicolor SA. The Federal Circuit said there was “extensive evidence” of Comcast’s control over the importation of the boxes.
“The level of involvement in overseas activities is one thing that companies should be looking at” in the wake of the ruling, Swaroop said.
Expansion of Power
Comcast, in court filings, called the ITC’s decision an “extraordinary expansion” of the agency’s powers. It argued the dispute with Rovi belonged in district court, not the ITC, saying all of the alleged infringing activities occurred in the U.S., after the set-top boxes were imported.
Duan and R Street colleague Bill Watson argued a similar point in a June 2018 policy study, and wrote that expanding the ITC’s jurisdiction to cover “domestic patent disputes” will “needlessly expose American businesses to more litigation.”
Verizon Services Corp. said in an amicus brief supporting Comcast “the ITC’s already swollen docket will continue to grow and to displace the district court proceedings that Congress intended to serve as the venue for domestic patent litigation.”
The International Trade Commission in court filings has disputed that the case represented an expansion of Suprema. It suggested Comcast had taken a novel interpretation of the ruling and wanted to “rewrite Suprema in the fashion in which Comcast wishes it had been written.”
Rovi also criticized Comcast’s “crabbed interpretation” of the ITC’s authority.
But Comcast could be digging in, ready to extend the legal fight. The cable provider has hired Donald Verrilli, a former U.S. Solicitor General, to lead its appeal. Some expect the Suprema framework might be in its crosshairs.
“I think this was intended to be treated as a big case,” Duan said.
The case is Comcast Corp. v. ITC, Fed. Cir., No. 18-1450.