In a recent decision, the Federal Circuit clarified the ITC's authority to issue Limited and General Exclusion Orders prohibiting the importation of accused products. See Kyocera Wireless Corp. v. Qualcomm Inc., Case No. 07-1493 (Fed. Cir. Oct. 14, 2008) (available at http://www.cafc.uscourts.gov/opinions/07- 1493.pdf). In the decision, the Federal Circuit reversed and vacated an ITC Limited Exclusion Order (LEO) that purported to apply to companies that were not named respondents in the ITC investigation. The court found that the ITC's statutory authority only allowed LEO's against products imported by named respondents. The court explained that the ITC may issue a General Exclusion Order (GEO) to exclude products imported by persons not named in the investigation, but only when limited statutory exceptions -- not at issue in Qualcomm -- apply.
The decision involved an ITC investigation of Qualcomm microchips used in wireless devices, such as cell phones and PDAs. Broadcom petitioned the ITC to examine whether Qualcomm's chips, when programmed to enable certain battery-saving features, infringed a Broadcom patent. Qualcomm manufactured its chips abroad and sold them to device manufacturers, all of whom manufactured their products abroad and imported them into the United States. Qualcomm did not program the chips with the battery-saving features claimed in the patent, but provided the necessary software and training to the manufacturers to program the chips. Broadcom did not name the manufacturers as respondents in the investigation, but argued that Qualcomm should be held liable for inducing the manufacturers to infringe the patent by programming the chips.
The ITC found Broadcom's patent to be valid, but not directly infringed by Qualcomm, because Qualcomm did not itself program the chips with the battery saving features. However, the Commission found that Qualcomm contributorily infringed the patent by inducing the manufacturers to infringe the patent. The Commission issued an LEO "against the importation of all downstream products containing the accused technology." The LEO was not limited to importation by Qualcomm, but applied to all products containing the technology, regardless of importer.
Qualcomm appealed the decision to the Federal Circuit. Others subject to the LEO joined in the appeal, including manufacturers of mobile devices containing Qualcomm chips and network operators whose networks depend on such products. The Federal Circuit affirmed the ITC's findings of validity and no direct infringement, but it reversed and remanded the contributory infringement finding, and reversed and vacated the LEO.
On contributory infringement, the court noted that it had issued a new standard of intent following the ITC's decision, but before deciding the appeal. The intervening decision held that specific intent to induce infringement, not just general intent to induce the infringing acts, was necessary. In this case, it was not enough that Qualcomm provided the software and instruction on how to program the chips. Rather, it was necessary for the ITC to find that Qualcomm had knowledge of the patent and specifically intended to induce infringement of it. The court remanded the issue to the ITC for further review under the new standard.
The court then reversed the LEO, finding that the ITC has no statutory authority to issue an LEO against companies that were not respondents in the action. According to the ITC's enabling statute, "The authority of the Commission to order an exclusion from entry of articles shall be limited to persons determined by the Commission to be violating [19 U.S.C. 1337(d)]...." The Federal Circuit held that such authority does not permit the ITC to issue an LEO that would apply to non-respondents that were not "persons determined by the Commission to have violated" the statute.
The court further explained that the statute does allow the ITC to enter a GEO prohibiting importation of products by non-respondents, but only in two circumstances: (1) when a general exclusion from entry of articles is necessary to prevent circumvention of an exclusion order limited to products of named persons; or (2) there is a pattern of violation of this section and it is difficult to identify the source of infringing products. The ITC did not make findings on either exception to support a GEO, yet issued an LEO applying to nonrespondents. Hence, the Federal Circuit vacated the LEO as going beyond the ITC's statutory authority.
The decision is important for all involved in ITC proceedings, as it affects the scope of the ITC authority to enter the primary relief sought in Section 337 investigations. It may play a role in distribution practices as well as litigation strategy. Indeed, the court faulted Broadcom for the "strategic decision" not to name downstream manufacturers as respondents, despite knowing their identities and knowing that virtually all infringing devices were not imported by Qualcomm.