International Patent Decision Not Good for InterDigital Inc.


Last week, the U.S. International Trade Commission (ITC) upheld, with modifications, its Administrative Law Judge’s (ALJ) June findings that neither ZTE Corp.’s devices nor Nokia’s phones (now made by Microsoft Corp.) violated InterDigital Inc.’s international patent rights. The ITC stated that it would release the reasoning in more detail in an upcoming opinion.

The International Trade Commission’s Powerful Role

The ITC is an independent, quasi-judicial federal agency that lends its trade expertise to both the legislative and executive branches. It has become the focus of this international patent dispute (and others like it) because it has the authority to block imports made overseas that violate U.S. intellectual property rights. Thus, it holds special power over large multi-national companies involved in patent disputes because it can ultimately block the U.S. as a revenue source.

InterDigital’s Ongoing Legal Struggles

Last year, InterDigital received nearly all of its $325 million in sales from patent licenses with mobile phone companies. The case referenced above is part of a multi-year struggle by InterDigital to obtain royalties on sales of the newest generations of mobile phones and the company’s third ITC mobile phone case.  InterDigital lost both of the prior cases at the ITC.  It then won a small victory on appeal in the first case and a rehearing has been scheduled for January.  The second case is currently on appeal.

The Current Case

InterDigital brought the case against Nokia, ZTE, and Samsung, alleging infringements of mobile-phone related international patents, including one that improves transmissions.  Samsung settled in early June.  Nokia and ZTE, in contrast, have stood strong and continue to deny that they owe InterDigital any royalties from their sales.

U.S. Senators Robert Casey (D – PA) and Pat Toomey (R – PA) both wrote to the ITC on InterDigital’s behalf last month. InterDigital was formerly based in King of Prussia, Pennsylvania and many of its 300 employees still reside in the state.  However, Judge Theodore Essex was unpersuaded by their pleas or InterDIgital’s arguments.  In his June decision, he found no patent infringement by Nokia or ZTE.

Under ITC precedent, the international patent holder must demonstrate that it has a domestic industry that it can defend; absent that, the ITC will not inhibit trade. Here, the Judge found that InterDigital had not created a “market” in the U.S. for the patents; it could not find a sufficient link between InterDigital’s three patents and any product.

Responses to ITC Decision and InterDigital’s Future

InterDigital called the decision “unfortunate” and pledged to challenge Judge Essex’s findings. InterDigital’s CEO, William Merritt, stated the decision “does not align with the validation of our portfolio and licensing practices that is reflected in our numerous agreements with major wireless companies worldwide.” In contrast and unsurprisingly, David Cuddy, a Microsoft spokesman, was more upbeat, stating, “We’re grateful the commission has now confirmed that we don’t even use these patents in our products.”

InterDigital’s last hopes now rest upon its federal appeal. Since almost all of InterDigital’s sales last year, which totaled $325 million, were with mobile phone companies, a loss on appeal could deal a serious blow to its future revenue streams.

International Business Attorneys

ITC disputes are complex, difficult to manage, and can have serious implications for both international and domestic companies.  If your business is involved in disputes before the ITC or impacted by its decisions, let the experienced attorneys at Whitcomb Selinsky, PC advise and guide you. Please call (303) 534-1958 or complete a contact form on our website.

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