The United States International Trade Commission (“Commission”) has requested a public hearing in a pending Section 337 investigation, set for March 21, 2007, to address the issues of the public interest in remedies available at the Commission. The Commission has extended open invitations to the parties, interested governmental agencies, public interest groups and any other member of the interested public to make oral presentations at the hearing.
Broadcom Corporation, the complainant in the investigation, is seeking an exclusion order barring importation of “downstream products” made by third parties that include the infringing processor chip. Qualcomm Corporation, the respondent and the party that requested the oral hearing, argues that such a remedy would have a harmful, chilling effect on legitimate commerce and innovation.
This investigation arose from a complaint by Broadcom under Section 337 of the Tariff Act alleging that certain baseband processor chips and power control chips made by Qualcomm infringed Broadcom’s patents. In the Matter of Certain Baseband Processor Chips and Chipsets, Transmitter and Receiver (Radio) Chips, Power Control Chips, and Products Containing Same, Including Cellular Telephone Handsets. As part of its requested relief, Broadcom seeks an exclusion order from the Commission that bars the importation of downstream products, such as cellular telephone handsets, manufactured by third parties that incorporate the infringing chips. Id. at 15.
On October 10, 2006, the presiding administrative law judge (“ALJ”) issued an Initial Determination finding infringement and a violation of Section 337, and recommended a limited exclusion order directed to baseband processor chips imported by Qualcomm. The ALJ rejected arguments by Broadcom and the ITC’s Office of Unfair Import Investigations that the exclusion order should extend to downstream products made by third parties. The ALJ concluded that the potential harm that this exclusion order would have on legitimate commerce outweighed any benefit to Broadcom in excluding the downstream products.
Since that time, the Commission has scheduled a public hearing limited to the issues of remedy and the public interest. (See Certain Baseband Processor Chips, ITC Inv. No. 337-TA-543, Notice of Commission Decision to Hold a Public Hearing on the Issues of Remedy and the Public Interest, February 9, 2007.)
General Rule Permitting the Exclusion of Downstream Products
Under Section 337(d), 19 U.S.C. § 1337(d), the Commission may issue a limited exclusion order against a respondent that has been determined to be in violation of Section 337. Such an order directs the U.S. Customs Service to exclude from entry into the United States articles that are covered by, and thus infringe, the intellectual property rights at issue.
As a general rule, an exclusion order may cover downstream products if the Commission decides that exclusion of downstream products is necessary to give a complainant complete relief. However, because excluding downstream products can interfere with legitimate commerce, a balancing of interests must occur when considering the exclusion of such products.
The ITC’s Balancing Test Considers Multiple Factors
In Certain Erasable Programmable Read-Only Memories, Components Thereof, Products Containing Such Memories, and Processes for Making Such Memories (“EPROMs”), the Commission developed a multi-factor test to determine if it is appropriate to include downstream products in an exclusion order. See Inv. No. 337-TA-276, Comm. Op. at 125-26 (May 1989), aff’d sub. nom., Hyundai v. U.S. Int’l Trade Comm’n, 899 F.2d 1204 (Fed. Cir. 1990). The factors include:
- the value of the infringing articles compared to the value of the downstream products in which they are incorporated;
- the identity of the manufacturer of the downstream products, i.e., whether it can be determined that the downstream products are manufactured by a respondent or by a third party;
- the incremental value to a complainant of the exclusion of downstream products;
- the incremental detriment to a respondent from exclusion of such products;
- the burdens imposed on third parties resulting from exclusion of downstream products; the availability of alternative downstream products that do not contain the infringing articles;
- the likelihood that the downstream products actually contain the infringing articles and are thereby subject to exclusion;
- the opportunity for evasion of an exclusion order that does not include downstream products; and
- the enforceability of an order by Customs.
These factors are not meant to be exclusive of other considerations, because the Commission may take into account other factors which it believes bear on the question of whether to extend remedial exclusion to downstream products. See EPROMs at 125-26. The EPROMs test has been routinely applied by the ITC in assessing the potential impact of exclusion orders on downstream products.
Exclusion orders applying to downstream products are an important remedy at the Commission and have been necessary in the past to address infringement under particular circumstances. It is unlikely that the decision in this matter will eliminate or significantly affect the availability of this potential remedy, given the fact-specific nature of the inquiry used to determine whether such a remedy is appropriate. It will be interesting, however, to see how the Commission addresses the issue of a potential exclusion of cellular telephone handsets and other equipment containing the infringing chip but not manufactured or distributed by Qualcomm.