Navigating SEP Disputes Before the ITC: Strategy, Standards, and the Reach of Anti-Suit Injunctions

The U.S. International Trade Commission is a unique forum in the realm of intellectual property litigation. Originally established as a trade body to assess tariffs and the economic implications of global trade, the ITC now operates under the Administrative Procedure Act to handle a broad range of IP disputes. Cases before the ITC proceed at a lightning-fast pace before an Administrative Law Judge. Standard Essential Patents are a key subset of patents that are integral to some of the most significant achievements in cooperation among global companies. These patents cover essential technologies like cellular communication, video compression and decompression, and Wi-Fi. The structure, rules, and history of the ITC create a distinctive, often complex, forum for enforcing the crucial intellectual property rights in Standard Essential Patents.

I. Background of the International Trade Commission and Standard Essential Patents
The United States International Trade Commission (“ITC”) began as the United States Tariff Commission in 1916.[1] President Woodrow Wilson, who would sign the legislation creating the body, said, “[t]he tariff question is at the heart of every other economic question we have to deal with, and until we have dealt with that properly we can deal with nothing in a way that will be satisfactory and lasting.”[2] Major legislation in 1930 and 1988 transformed the body into the modern ITC that exists today.[3]

The ITC is headed by a panel of Principal Officers of the United States known as Commissioners (“Commission”).[4] The Commission chooses to institute investigations overseen by an Administrative Law Judge (“ALJ”) who is experienced in technology and patent law.[5] Complainants before the ITC are offered relief in the form of general or limited exclusion orders and cease & desist orders, but only if they meet the technical and economic prong of the domestic industry requirement.[6] The ITC’s ‘"statutory authority" under Article II is different from jurisdictional requirements of an Article III Court. The ITC, and the cases it oversees, is important in shaping the global aspect of supply chains and cross-border disputes.[7] One effect is that a company may choose to move low-margin manufacturing into the United States, but the creation of the intellectual property and the related high-margin businesses can be located anywhere in the world. The fast pace, sweeping and powerful remedy, and expert ALJs provide an appealing forum for the intellectual property rights holders who qualify.

A different pillar of intellectual property is developing, licensing, and litigating the rights protecting essential aspects of technology standards.[8] The quintessential example is the wireless communication standards that comprise 2G/3G/4G/5G/6G.[9] These standards, created by stakeholders in every level of the supply chain, allow cellular phones and other devices to seamlessly connect. Innovators and implementers, the terms that represent the rights holders and the rights users, work collaboratively to create a public protocol.[10] Any patent that is required to practice the agreed-on protocol then becomes a Standard Essential Patent (“SEP”).[11] The catch is how can a company fairly and reasonably provide equal access to its intellectual property without selective or discriminatory treatment when it knows that future companies will be locked in? Simple—promise to the relevant Standard Development Organization (“SDO”)[12] to be prepared to offer a license with Fair Reasonable And Non-Discriminatory (“(F)RAND”)[13] terms. However, this phrase is highly contested among parties in licensing SEPs and in the litigation that follows.[14]

II. How to Litigate SEPs (F)RAND Disputes at the ITC
SEP disputes can sprawl beyond the basic patent infringement dispute. Indeed, infringement is often conceded when an SEP is involved, and SEP disputes may instead focus on non-patent issues such as breach of contract, anti-trust or competition law principles, and remedy.

The implementer—the entity selling the consumer product which uses the standard—generally is a third-party beneficiary of the “promise” the innovator—the IP rights holder—made to the SDO. The ITC as a forum offers different paths for a respondent to escape an exclusion order, defenses such as noninfringement or breach of contract or, under the statutory public interest factors, a respondent may convince the ITC to set aside a remedial order. At the ITC, the basic components of both hinge on the relevant SDO’s intellectual rights policy and whether either or both parties negotiated in good faith to create a license. If either party fails to negotiate in good faith, then the reciprocal duty is suspended.[15] How such a defense is raised procedurally is more complicated.

The public interest at the ITC balances the needs of strong intellectual property enforcement without depriving domestic consumers of necessary or essential technology.[16] The Commission has set aside remedial orders when medical technology, such as beds for burn victims, is at issue.[17] The United States Trade Representative (“USTR”) requires the Commission make certain findings in SEP cases:

“[I]n any future cases involving SEPs that are subject to voluntary FRAND commitments, the Commission should be certain to . . . seek proactively to have the parties develop a comprehensive factual record related to these issues . . . including information on . . . the presence or absence of patent hold-up or reverse hold-up.”[18]

While the USTR has required the USITC to develop the public interest factual record, the ITC itself has never set aside a remedial order for an SEP purely on public interest grounds.[19]

Contract law principles dictate that the parties must work in good faith to reach a licensing deal, but there is no requirement a (F)RAND deal is completed. When no good faith efforts have been made a respondent can argue a compliant has waive the right to seek injunctive or exclusionary relief or that an exclusionary remedy is otherwise unenforceable due to the breach of contract.[20] Under either option the ALJ’s decision on any (F)RAND defense is based on whether the parties negotiated in good faith during any licensing negotiations.[21] It is imperative to properly develop the record with evidence of the actions of all parties during licensing negotiations.

III. Anti-Suit Injunctions and the ITC
SEP disputes often morph into global intellectual property wars because the parties are multinational behemoths that have sales across the globe.[22] In response a rising trend is for courts to set global (F)RAND rates.[23] Courts that have set global (F)RAND rates enforce the decisions by issuing Anti-Suit Injunctions (“ASI”) and some courts have even entered Anti-Anti-Suit Injunctions (“AASI”).[24] ASI’s are orders by a court enjoining a party from participating in or enforcing any order from a parallel proceeding in a foreign jurisdiction.[25] And an AASI is an order, from a foreign court enjoining one or more parties, either before or after an ASI is issued, from applying for or enforcing an ASI.[26] These disputes which started among companies have caused nations to litigate who will decide the value of intellectual property.[27] Parties before the ITC are even subject to injunctions. In Realtek Semiconductor Corporation v. LSI Corporation, Realtek moved for summary judgement of breach of contract and to enjoin LSI from enforcing any exclusion order by ITC.[28] The court in the North District of California agreed on both counts.[29] In the parallel ITC case, the ALJ found the ITC was not bound by collateral estoppel and that the developed factual record supported enforceability.[30] Although in general, the ITC only has an indirect role in global royalty rate disputes. The ITC can decide if a rate is (F)RAND, but parties often negotiate among themselves to overcome any issued exclusion orders. The ITC, as an Article I court, lacks the statutory authority to enter ASIs or dictate global (F)RAND rates.

Despite the ITC being a premier forum for intellectual property disputes and the important conversations around the value of intellectual property its entirely cut out of the conversation. Ironically, the ITC, which requires substantial analysis of economic impact to determine if an exclusion order can even issue is prohibited from performing the economic analysis of deciding (F)RAND rates for parties. The ITC’s lack of an effective tool to respond to ASI’s or set global (F)RAND rates, may cause the forum set up by the United States at the turn of the 18^th century to address effects of increasingly global trade to now not have a similar role in 21^st century conversations on the value of intellectual property and global technological advances.[31]