Speedy 5G, Emerging Tech to Spur More Patent Cases at ITC

Fast-changing technology is driving more companies to the U.S. International Trade Commission to block patent-infringing imports by foreign rivals.

The ITC has fielded nearly four dozen patent infringement complaints this year against companies such as China-based ZTE Corp., Japan-based Nikon Corp., and Japan-based Nintendo Co. Ltd., Bloomberg Law data show. The disputes cover a wide range of technology, from semiconductor parts to sleep apnea masks to unmanned aerial vehicles.

The infringement complaints show no signs of slowing down, as next-generation 5G wireless technology unfolds and companies race to offer the latest high-tech devices, intellectual property and tech attorneys told Bloomberg Law.

Bringing a case to the ITC instead of federal district court means a speedier resolution for tech and telecom companies, whose products can become obsolete fast. Most ITC cases wrap up in 16 months. Patent infringement cases in U.S. district courts can drag on for years, while accused infringers challenge the validity of a patent with the U.S. Patent and Trademark Office.

“Rapidly changing technologies only emphasize the need for speed,” Matthew L. Woods, an IP and technology attorney at Robins Kaplan LLP in Minneapolis, said. “A rocket docket like the ITC is well suited to deal with that.”

End Results

The number of patent disputes at the ITC has risen steadily over the past 15 years, the data show. The total dipped slightly in 2012, following a spike the previous year due to the smartphone wars, to settle in at 65 infringement complaints in 2017—more than three times the 2003 total.

ITC disputes have led tech companies to enter into licensing agreements with U.S. patent holders, redesign their products, or pull their goods from the market. Licensing or redesigning is better than having the ITC issue an exclusion order, which directs the U.S. Customs and Border Protection to block the product in question from entering the U.S. ITC rulings can be appealed to the U.S. Court of Appeals for the Federal Circuit.

“There’s a lot at stake when they get involved in an ITC investigation,” Sturgis M. Sobin, an intellectual property attorney at Covington & Burlington LLP, said. “There’s a lot of pressure for companies to avoid facing an exclusion order.”

Comcast Corp. had to remove a DVR recording feature from its streaming app following a November 2017 ITC order banning certain digital video receivers from the U.S., a company spokesperson said, requesting anonymity so they could comment on the matter. That order is on appeal at the Federal Circuit, the spokesperson said.

Arista Networks in August agreed to pay Cisco Systems Inc. $400 million and maintain product modifications to settle an ITC dispute over user interface patents, according to a joint company statement.

Sony Corp. and Fujifilm Holdings Corp. await an ITC final ruling in December on whether Fujifilm has infringed Sony’s magnetic tape cartridge patents. Both parties are seeking to block the others’ data storage products from the U.S. market.

And Apple Inc. and Qualcomm Inc. await a final ruling by January on whether to block the import of Apple’s iPhones. An ITC judge found in September that Apple infringed one of Qualcomm’s patents but declined to recommend a ban due to public interest factors.

Evolving Tech

Technology products were the single largest category of patent infringement disputes in 2017, the ITC said in an August report. About 38 percent of the proceedings involved computer and telecom equipment—an 8 percent increase over the previous year—while another 6 percent involved consumer electronics, it said.

The ITC recently opened an investigation into whether ZTE, Apple, and Taiwan-based consumer electronics company HTC Corp. are infringing patents essential to cellular communication standards. Another recently opened investigation will tackle claims that camera giant Nikon is infringing lithography-related patents.

Patent infringement complaints in the telecom sector are sure to increase once ultra-fast 5G wireless networks come on line, Tom Jarvis, a patent attorney who chairs Winston & Strawn’s ITC practice, told Bloomberg Law. The U.S. Federal Communications Commission has been easing barriers and opening airwaves for the rollout of 5G networks that will power the internet of things, autonomous vehicles, and other emerging technologies.

In a fast-paced industry with ever-evolving mobile technology, a forum for quickly and efficiently resolving patent disputes can be a real draw. “That has increased in importance as technology life cycles shorten,” Sobin said.

Already, the ITC saw a spike in patent cases in 2011 during the smartphone wars, when competition among Apple, Samsung, and other companies erupted over mobile devices’ operating systems and features. A similar upswing could happen again with 5G, Eric W. Schweibenz, chair of the ITC litigation practice at Oblon, McClelland Maier & Neustadt LLP, said.

The ITC may not always be the best place to resolve patent disputes, however. Owners of standard-essential patents may find it difficult to pursue an import ban because they are obligated by industry standard-setting organizations to license their patents under fair, reasonable, and nondiscriminatory terms, Jamie B. Beaber, a partner at Mayer Brown in Washington who leads the firm’s ITC litigation practice, said. Standard-essential patents underlie technology on standards set by those organizations.

“That obligation makes it extremely difficult for complainants to pursue injunctive relief in the form of an exclusion order before the ITC,” Beaber said.

Powerful Remedy

Companies pursuing claims can collect damages if a federal court rules an import infringes a patent. But only the ITC can order customs to stop the import at the border.

“This is a huge advantage for companies that win,” Suzanne Kane, a former customs attorney now with Akin Gump Strauss Hauer & Feld LLP, said. “The docket has exploded as companies realize that this is a really powerful form of relief.”

The ITC had 109 active exclusion orders at the end of 2017, according to the ITC website. The threat of being excluded can give companies a powerful incentive to settle.

Last December, Broadcom Ltd. entered into a multi-year patent licensing agreement with Tessera Technologies Inc. to settle an ITC dispute over Broadcom’s semiconductor chips—a conflict that might have stopped a slew of Broadcom telecom products from coming into the U.S.

Sometimes, exclusion orders aren’t as drastic as they sound.

Although some importers end up shut out of the U.S. market, supply chains can often adjust, offsetting an order by sourcing their products from other companies or countries, said Daniel Pearson, a former ITC commissioner who is principal of Pearson International Trade Services LLC, a trade policy consultancy in Oakton, Va.

The ITC is also obligated to consider the public interest in issuing orders, which helps minimize impact to the broader economy and consumers, he said.