InterDigital vs. Nokia, Huawei and ZTE at ITC in Patent Dispute

U.S. International Trade Commission

InterDigital, Inc. (NASDAQ:IDCC) yesterday announced that its wholly-owned subsidiaries InterDigital Communications, LLC, InterDigital Technology Corporation and IPR Licensing, Inc. filed a complaint with the U.S. International Trade Commission (“ITC”) against Nokia Corporation, Nokia Inc., Huawei Technologies Co., Ltd., FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA), ZTE Corporation and ZTE (USA) Inc. The complaint alleges that the defendants have engaged in unfair trade practices by making and importing certain 3G wireless devices into the United States.

This InterDigital complaint arises under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337). Pursuant to Section 337, the ITC conducts investigations into allegations of unfair practices relating to importation and trade. Section 337 declares the infringement of certain statutory intellectual property rights and other forms of unfair competition to be unlawful practices. Section 337 investigations conducted by the U.S. International Trade Commission most often involve claims regarding intellectual property rights, including allegations of patent infringement and trademark infringement by imported goods. In this case, the InterDigital complaint asserts the defendants are infringing U.S. Patent Nos. 7,349,540, 7,502,406, 7,536,013, 7,616,970, 7,706,332, 7,706,830 and 7,970,127.

Pursuant to Section 337, the Commission is authorized to issue two types of remedy orders: (1) exclusion orders; and (2) cease and desist orders. An award of money damages is not available as a remedy for violation of Section 337, which is why ITC filings are typically associated with district court patent infringement litigation. A United States Federal District Court may issue both injunctive relief and money damages. Because the ITC offers a much faster proceeding it is becoming quite popular for patent owners to see exclusion orders for alleged patent infringement, thereby stopping the alleged ongoing infringement, and simultaneously filing a patent infringement action seeking monetary damages. This gives the plaintiff two bites at the apple, so to speak, and can create leverage for the patent owner if successful at the ITC.

An exclusion order directs the U.S. Customs and Border Protection to exclude articles from entry into the United States. A cease and desist order directs the defendant in the Commission investigation to cease its unfair acts, including selling infringing imported articles out of U.S. inventory. Unlike exclusion orders, cease and desist orders are enforced by the Commission, not by U.S. Customs. In this case, InterDigital is seeking both an exclusion order and a cease and desist order, which they have the right to do. InterDigital’s complaint with the ITC specifically seeks an exclusion order that would bar from entry into the U.S. any infringing 3G wireless devices (and components) that are imported by or on behalf of Respondents, including wireless mobile phones, USB sticks, mobile hotspots, and tablets capable of operating with a 3G WCDMA or 3G cdma2000® system. InterDigital’s complaint also seeks a cease and desist order to bar further sales of infringing products that have already been imported into the United States.

“Over the past thirty years, InterDigital has invested nearly one billion dollars in the development of advanced digital cellular technologies, creating important innovations, and helping to drive an industry creating billions of wireless connections,” said Lawrence Shay, President of InterDigital’s patent holding subsidiaries. “During that period, we have signed dozens of license agreements with manufacturers, giving them access to a patent portfolio of approximately 19,000 issued patents and patent applications – among the largest wireless portfolios in the world,” continued Shay. “The vast majority of our agreements have been reached without the need for litigation. However, despite having engaged in good faith efforts to license our patents to Nokia, Huawei and ZTE, we have not been able to reach an acceptable resolution. As a result, to protect our intellectual property and the interests of our licensees, we made the decision to bring legal action against these parties.”

From a procedural standpoint the ITC first needs to determine whether to investigate. After a complaint is filed with the ITC the Office of Unfair Import Investigations (OUII) examines the complaint for sufficiency and compliance with the applicable rules, and makes a recommendation to the Commission regarding institution of the requested investigation. The Commission will normally determine whether to institute a Section 337 investigation within 30 calendar days after the filing of a complaint. In the event that the Commission determines to institute a Section 337 investigation, a notice of investigation defining the scope of the investigation is published in the Federal Register. These notices typically appear in the Federal Register the week following the last day of the 30 or 35 day period for determining whether to institute an investigation. If the Commission determines not to institute an investigation based upon a complaint, the complainant and all the entities named as proposed defendants receive notice of the Commission’s action, but decisions not to institute an investigation are rare.

As of June 30, 2011, the company’s patent portfolio consisted of approximately 1,400 U.S. patents and approximately 8,000 non-U.S. patents. In addition, as of June 30, 2011, the company had approximately 1,250 pending applications in the U.S. and approximately 8,250 pending non-U.S. patent applications. The patents and applications comprising the company’s portfolio relate predominantly to digital wireless radiotelephony technology.

Stay tuned!