This decision by the United States International Trade Commission (ITC) involves a dispute over the proper remedy for the importation of various infringing chips made by Qualcom that are used in cell phones. The Qualcom chips infringe on patents held by Broadcom.
The ITC decided to ban the importation of the chips by themselves, but to allow the infringing chips to be imported in cell phones models that were being used up until June 7, 2007. The WSJ has called for the ITC partial ban to be overturned, by USTR head Susan Schwab, in order to protect innovation.
The ITC press release mentions the situations where infringing chips may be imported:
“The exclusion order does not apply to handheld wireless communications devices that are of the same models as handheld wireless communications devices that were being imported for sale to the general public on or before the date of the order, June 7, 2007.”
The WSJ doesn’t think the ITC goes far enough in allowing infringing chips (see full editorial), and includes this observation:
By a 4-2 vote on Thursday, the ITC decided to ban the import of any new cell phone model produced with certain microchips made by Qualcomm. ITC Chairman David Pearson dissented on grounds that the ban was antithetical to the public good, which is certainly true. But the import ban is effective immediately, and this means that President Bush, through Ms. Schwab, has just 60 days to set the ruling aside before it becomes permanent. There’s an overwhelming case for doing so. . .
The ITC ban is in effect a bar to innovation by these U.S. companies — a fact recognized both by Chairman Pearson in his dissent, and by the administrative law judge who originally heard the case and refused to issue a broad ban in October 2006. Moreover, Broadcom is already suing Qualcomm in federal court over these very same patents. There is thus no need for the ITC to muscle in, except to expand its own bureaucratic turf in the patent field. The ITC’s separate process was created only as a way to deal with patent infringers who were beyond the reach of U.S. courts.
See also my earlier blog entry: When customs authorities may allow infringing goods to be imported into the United States.
Here is the full ITC press release:
http://www.usitc.gov/ext_relations/news_release/2007/er0607ee1.htm
June 7, 2007
News Release 07-062
Inv. No. 337-TA-543
Contact: Peg O’Laughlin, 202-205-1819ITC ANNOUNCES REMEDY IN BROADCOM/QUALCOMM INVESTIGATION
The U.S. International Trade Commission (”ITC” or “Commission”) today announced the remedial orders it will issue in connection with its section 337 investigation concerning Baseband Processor Chips and Chipsets, Transmitter and Receiver (Radio) Chips, Power Control Chips, and Products Containing Same, Including Cellular Telephone Handsets (337-TA-543).
The chips and chipsets at issue are used in handheld wireless communications devices, including cellular telephone handsets, that are capable of operating on so-called third-generation (”3G”) cellular telephone networks, i.e., EV-DO (”Evolution-Data Optimized”) and WCDMA (”Wideband Code Division Multiple Access”) networks such as those operated by Verizon, Sprint, and AT&T.
The Commission previously determined that certain Qualcomm chips and chipsets were imported in violation of U.S. law because they infringe a U.S. patent held by Broadcom; the patent relates to mobile device capabilities and power management. Under section 337, which is designed to protect and enforce U.S. intellectual property rights, the Commission must determine the appropriate remedy to address this violation.
Vice Chairman Shara L. Aranoff, Commissioner Deanna Tanner Okun, Commissioner Charlotte R. Lane, and Commissioner Irving A. Williamson voted in favor of the remedial orders. They provide their supporting analysis in two separate opinions. Chairman Daniel R. Pearson and Commissioner Dean A. Pinkert voted for a more limited form of relief. The Commission’s written opinions will be made public after consultation with the parties to ensure the removal of confidential business information.
The Commission is issuing a limited exclusion order that bars the importation of Qualcomm’s infringing chips and chipsets and circuit board modules or carriers containing them. In addition, the exclusion order bars the importation of certain handheld wireless communications devices, such as cellular telephone handsets and personal digital assistants (”PDAs”), that contain Qualcomm’s infringing chips and chipsets. The exclusion order does not apply to handheld wireless communications devices that are of the same models as handheld wireless communications devices that were being imported for sale to the general public on or before the date of the order, June 7, 2007. However, the order does bar the importation of new models of handheld wireless communications devices that contain Qualcomm’s infringing chips and chipsets. Thus, the order “grandfathers” models of handheld wireless communications devices being imported into the United States for sale to the general public on or before June 7, 2007.
The Commission is also issuing a cease and desist order that prevents Qualcomm from engaging in certain activities within the United States related to the infringing chips.
The Commission reached its decision after careful consideration of the appropriateness of an order excluding from importation the “downstream products” that is, handheld wireless communications devices incorporating the infringing chips. The Commission found that an order excluding all downstream products would impose great burdens on third parties, given the limited availability of alternative downstream products not containing the infringing chips. However, as the infringing chips are not imported in significant quantities outside of downstream products, the Commission also found that an exclusion order covering only the chips and chipsets, and not downstream products, would afford little or no relief to the patent holder, Broadcom. The Commission determined that barring importation of downstream products, with an exemption for certain previously imported models, will substantially reduce the burdens imposed on third parties while affording meaningful relief to the patent holder.
The Commission found that, while exclusion of all downstream products could adversely affect the public interest, particularly the public health and welfare, competitive conditions in the U.S. economy, and U.S. consumers, the exemption for previously imported models sufficiently ameliorates this impact such that the orders should be issued.
The dissenting commissioners, Chairman Pearson and Commissioner Pinkert, determined that the appropriate remedy in this investigation is an exclusion order that would bar the importation of the infringing chips, and a cease and desist order that would bar the testing of the infringing chips, including chips that are incorporated into cellular telephone handsets. Chairman Pearson and Commissioner Pinkert determined that exclusion of all downstream products containing the infringing chips would adversely affect the public interest. Further, they declined to endorse the majority’s order that “grandfathers” currently imported models of handheld wireless communications devices.
Chairman Pearson determined that an order exempting previously imported handheld wireless communications devices from exclusion would still adversely affect the public interest. Commissioner Pinkert determined, with regard to such an approach, that the Commission’s record was insufficient to permit him to determine whether it was appropriate. Chairman Pearson and Commissioner Pinkert believe that their recommended order would provide appropriate and effective relief because it would place the direct burden of compliance on the infringing party rather than on third parties. It also would be easier to administer.
ITC remedial orders in section 337 investigations are effective when issued and become final 60 days after issuance unless disapproved for policy reasons by the U.S. Trade Representative.
Section 337 of the Tariff Act of 1930, as amended, authorizes the Commission to investigate alleged infringement of U.S. patents and trademarks by imported articles. If the Commission finds infringement, then it must order that the infringing articles be excluded from importation, unless, after considering the effect of the exclusion order on statutory public interest factors, it finds that the articles should not be excluded.
Background on this investigation:
On June 21, 2005, the Commission instituted an investigation under section 337 of the Tariff Act of 1930, 19 U.S.C. 1337, based on a complaint filed by Broadcom Corporation of Irvine, California (”Broadcom”), alleging a violation of section 337 in the importation, sale for importation, and sale within the United States after importation of certain baseband processor chips and chipsets, transmitter and receiver (radio) chips, power control chips, and products containing same, including cellular telephone handsets, by reason of infringement of certain claims of five U.S. patents (70 Fed. Reg. 35707 (June 21, 2005)). The complainant named Qualcomm Incorporated of San Diego, California (”Qualcomm”) as the only respondent.
On October 19, 2006, the presiding administrative law judge (”ALJ”), Judge Charles E. Bullock, issued an Initial Determination (”ID”) finding a violation of section 337 with respect to U.S. Patent No. 6,714,983. The ALJ also issued a Recommended Determination (”RD”) on Remedy and Bond, in which he recommended a limited exclusion order barring import of Qualcomm’s baseband processor chips. On December 8, 2006, the Commission issued a notice of its decision to review and upon review to modify in part the ALJ’s final ID. The modification made by the Commission did not change the finding of violation. The Commission also requested the parties to the investigation, interested government agencies, and any other interested persons to file written submissions on the issues of remedy, the public interest, and bonding.
On January 25, 2007, respondent Qualcomm moved, inter alia, for oral argument and a hearing on the issues of remedy and the public interest. In view of the impact that an exclusion order covering downstream products might have on the public interest, the Commission held a public hearing on the issues of remedy and the public interest on March 21-22, 2007.
The Commission announced its remedial orders on June 7, 2007. For further information, see the Commission’s Federal Register notice dated June 7, 2007, which is available on the ITC web site.
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