On June 7, 2013, the Federal Circuit issued its opinion in InterDigital Communications, LLC v. ITC (2012-1628).  This was an appeal by InterDigital Communications, Inc., InterDigital Technology Corp., and IPR Licensing, Inc. (collectively, “InterDigital”) from an order of the International Trade Commission (“the Commission”) terminating Investigation No. 337-TA-800 with respect to LG Electronics, Inc., LG Electronics USA, Inc., and LG Electronics Mobilecomm USA, Inc. (collectively, “LG”).

As summarized in the opinion, InterDigital and LG had entered into a multi-patent license agreement for devices designed to operate in accordance with second-generation and third-generation wireless standards.  According to its terms, the agreement terminated on December 31, 2010, although there were some survival clauses extending beyond the agreement throughout the life of the second-generation products.  The agreement also specifies that disputes are to be resolved by arbitration.

On July 26, 2011, InterDigital filed a complaint with the Commission asserting that several companies (not including LG) were infringing its patents relating to third-generation wireless technology.  See our July 28, 2011 post for more details on InterDigital’s original complaint.  Three months later, InterDigital successfully moved to amend the complaint to add LG as a respondent.

On January 20, 2012, LG moved to terminate the investigation, arguing that the accused third-generation products were still covered by its license with InterDigital, and that any infringement claim was subject to arbitration because it arose under the license agreement between InterDigital and LG.  The Administrative Law Judge (“ALJ”) assigned to the investigation granted the motion to terminate, and the Commission declined to review the decision, making it the final determination of the Commission.  InterDigital appealed the order terminating the investigation.  

According to the opinion, the first issue considered by the Federal Circuit was whether or not the court had jurisdiction over InterDigital’s appeal.  LG and the Commission both argued that the Federal Circuit did not have jurisdiction because 18 U.S.C. § 1337(c) provides a right to appeal “a final determination of the Commission under subsection (d), (e), (f), or (g),” and the investigation was terminated under subsection (c), not listed in the statute.  The Federal Circuit explained that its predecessor court, the Court of Customs and Patent Appeals, emphasized that an order should be appealable if “its effect upon appellants is the equivalent of a final determination” and that “substance, not form, must control.”  As such, the Federal Circuit concluded that LG and the Commission’s position was too restrictive, and that since the Commission’s decision was the equivalent of a final determination, it had jurisdiction to hear the appeal.

Regarding the merits of the case, the Federal Circuit agreed with the ALJ that the proper analysis was whether or not LG’s motion to terminate based on the assertion of arbitrability was “wholly groundless.”  However, the Federal Circuit held that the ALJ erred by “failing to assess the text of the parties’ Agreement to determine whether LG’s assertion of arbitrability was ‘wholly groundless.’”  The Federal Circuit supported this holding with case law stating that the inquiry necessarily requires the courts to examine and construe the underlying agreement.  Dream Theater, Inc. v. Dream Theater, 21 Cal. Rptr. 3d 322, 326 (2004).  When the agreement was considered, the Federal Circuit held that LG’s license defense and subsequent assertion of arbitration is simply “not plausible.”  Specifically, a “cursory review of the relevant provisions” illustrates that the survival clause only related to second-generation products, and there is “no plausible argument that LG’s license for [third-generation] products survived the termination of the Agreement.”  As such, LG’s assertion of arbitrabilty was deemed “wholly groundless” and the Commission’s order terminating the investigation was reversed and remanded.

Although agreeing that there was no plausible argument that LG could prevail under its license agreement, Judge Lourie wrote a dissenting opinion based on his belief that the Federal Circuit did not have jurisdiction to hear the appeal.  Specifically, Judge Lourie supports a strict reading of the jurisdiction statute limiting appeals to those arising from “a final determination of the Commission under subsection (d), (e), (f), or (g).”  Since the investigation was terminated under subsection (c), Judge Lourie would dismiss the case.