On January 22, 2016, ALJ Dee Lord issued Order No. 44 in Certain Wireless Standard Compliant Electronic Devices, Including Communication Devices and Tablet Computers(Inv. No. 337-TA-953) ordering the parties to show cause why (1) the Administrative Law Judge should not issue an initial determination with a copy of the private parties’ settlement agreement in compliance with the Commission Rules, and (2) why the private parties and their counsel should not be sanctioned pursuant to Commission Rule 210.4(d).

By way of background, this investigation is based on a February 26, 2015 complaint filed by Ericsson Inc. and Telefonaktiebolaget LM Ericsson (collectively, “Ericsson”) alleging violation by Apple Inc. a/k/a Apple Computer Inc. (“Apple”) of Section 337 in the importation into the U.S. and sale of certain wireless standard compliant electronic devices, including communication devices and tablet computers that infringe one or more claims of U.S. Patent Nos. 8,717,996; 8,660,270; 6,058,359; 6,301,556; 8,102,805; 8,607,130; 8,837,381; and 8,331,476.  See our March 3, 2015 and April 3, 2015 posts for more details on the complaint and Notice of Investigation, respectively. 

According to the Order, on December 29, 2015, Ericsson and Apple filed a motion to terminate the Investigation (“the first motion”) based on a settlement agreement.  The first motion did not include a copy of the private parties’ settlement agreement but instead attached exhibits purporting to corroborate the existence of the agreement.  On January 8, 2016, Ericsson and Apple filed an amended joint motion to terminate the Investigation (“the amended motion”) but again failed to attach a copy of the settlement agreement and filed only a heavily redacted public version of the agreement.  On January 12, 2016, ALJ Lord denied the amended joint motion to terminate finding that:  (1) the motion should have been filed under Commission Rule 210.21(b); (2) the motion failed to comply with the requirement under Commission Rules 210.21(a) and 210.21(b) that a copy of the settlement agreement be filed with the motion; and (3) the redactions in the public version of the settlement agreement went beyond the definition of confidential business information set forth in Commission Rule 201.6(a)(1) and ordered Apple and Ericsson to re-file their motion to terminate by January 19, 2016 in compliance with the Order.

On January 19, 2016, Ericsson and Apple filed a second amended joint motion to terminate the Investigation but again failed to file a copy of their settlement agreement.  Instead, Ericsson and Apple identified the agreement as a “physical exhibit,” sent a paper copy to the Office of the Secretary, requested that ALJ Lord permit submission of the agreement as a physical exhibit, and requested that any initial determination issued by ALJ Lord attach the settlement agreement as a physical exhibit.

ALJ Lord found that the Investigation appeared to be ripe for termination, except for the private parties’ request that the initial determination terminating the Investigation be issued in contravention of the Commission Rules.  ALJ Lord found that the second amended joint motion identified no authority for an administrative law judge to ignore or set aside agency rules and stated that the initial determination terminating the Investigation would include a filed copy of a confidential version of the settlement agreement, in compliance with Commission Rule 210.21(b)(2), unless the parties showed cause why the settlement agreement should not be filed with the initial determination.  Specifically, ALJ Lord found that the Ericsson and Apple had failed to explain why their proposed ad hoc procedure for handling physical documents would be less likely to result in inadvertent disclosure of the settlement agreement than the rules and procedures implemented by the Commission.  Accordingly, the parties were ordered to show cause why ALJ Lord should not issue an initial determination with a copy of the settlement agreement in compliance with the Commission Rules.

Additionally, ALJ Lord stated that, to address the private parties’ failure to comply with Order No. 43, and in light of the misrepresentations in the second amended motion to terminate, sanctions would be issued against Ericsson’s and Apple’s counsel unless the parties showed cause why sanctions should not be issued.  ALJ Lord noted that Apple and Ericsson could have sought reconsideration of Order No. 43 if they believed it was erroneous, or could have contacted the Secretary to determine whether alternative methods for filing were available but that, instead, Apple and Ericsson proceeded as if the law was of no consequence to them.  ALJ Lord found that such conduct warranted the imposition of sanctions because, unless deterred, Commission investigations would be undermined.  Accordingly, ALJ Lord ordered the lawyers to submit a bill detailing all fees and costs associated with the preparation and filing of the first motion to terminate, the amended motion to terminate, the second amended motion to terminate, and the response to Order No. 44. ALJ Lord stated that the starting point for determining the amount of sanctions would be the total of those fees and costs.