United States: The ITC Does Not Have Statutory Authority To Issue A Limited Exclusion Order Against Downstream Products Of Nonrespondents

Judges: Rader (author), Bryson, Linn

[Appealed from ITC]

In Kyocera Wireless Corp. v. International Trade Commission, Nos. 07-1493 et al. (Fed. Cir. Oct. 14, 2008), the Federal Circuit affirmed the ITC's claim construction, its determination of validity as to anticipation and obviousness, and its finding of no direct infringement. The Court, however, vacated and remanded the ITC's finding of induced infringement. It also vacated and remanded the limited exclusion order ("LEO") issued by the ITC, finding that the ITC lacked authority to issue an LEO against downstream products of nonrespondents.

Broadcom Corporation ("Broadcom") owns U.S. Patent No. 6,714,983 ("the '983 patent") directed to a mobile computing device that can communicate with wireless networks and operate in a reduced power mode to extend battery life. Broadcom filed a complaint in the ITC naming Qualcomm Incorporated ("Qualcomm") as the sole respondent, alleging that certain Qualcomm chips and chipsets infringed the '983 patent. The parties disagreed with the construction of the term "different" in the claim phrase "communication circuitry . . . being adapted to use a first wireless communication and a second wireless communication different from the first wireless communication." Qualcomm argued for a broad construction, but the ITC rejected that construction and construed "a first wireless communication and a second wireless communication different from the first wireless communication" as "refer[ring] to two different methods of communication." Slip op. at 5 (alteration in original). The ITC also rejected Qualcomm's anticipation and obviousness arguments. In addition, although the ITC found no direct infringement by Qualcomm, it found that Qualcomm was liable for induced infringement.

The ITC issued an LEO excluding handheld wireless devices that include certain Qualcomm chips and chipsets that are programmed to enable certain power-saving features covered by the '983 patent. Qualcomm appealed. Qualcomm's customers and wireless network operators, who were not named in Broadcom's complaint, also appealed. The customers included wireless device manufacturers whose products were subject to the LEO and the wireless network operators included those parties whose networks depended on products subject to the LEO. The Federal Circuit consolidated the appeals.

On appeal, the Federal Circuit started with claim construction. It affirmed the ITC's construction that "different" first and second wireless communications referred to two different communication methods, relying on the context of the claim as a whole and the specification. It rejected Qualcomm's contention that the construction of the same claim term in Sorensen v. ITC, 427 F.3d 1375 (Fed. Cir. 2005), required a broad construction of the term "different." The Court explained that its broad interpretation of the term "different" in Sorensen was based on its analysis of the context of the different claims and the intrinsic record in that case, and therefore, Sorensen did not create a categorical rule that the term "different" without further qualification must mean "any difference."

The Federal Circuit next addressed Qualcomm's anticipation arguments. Qualcomm first argued that three prior art patents anticipated the claims of the '983 patent. The Federal Circuit noted that Qualcomm's arguments with respect to these references turned on Qualcomm's construction of the term "different." Because the Court had already rejected that construction, it affirmed the ITC's finding that the three patent references did not anticipate the '983 patent claims. Second, Qualcomm argued that the Global System for Mobile Communications ("GSM") standard anticipated the '983 patent claims. The ITC found that Qualcomm had not shown that the GSM standard was a "printed publication" under 35 U.S.C. § 102 and that because the standard included separate GSM specifications, the specifications did not together constitute a single reference for § 102 purposes. The Federal Circuit rejected the ITC's finding that the GSM standard was not publicly available, explaining that GSM specifications were widely distributed without any restriction. However, the Court agreed with the ITC that the GSM standard was not a single reference as required for anticipation because it comprised different specifications authored by different authors at different times.

Qualcomm also challenged the ITC's determination with respect to obviousness. The ITC had rejected Qualcomm's obviousness arguments, finding that Qualcomm waived this defense by failing to raise it in a timely manner. Qualcomm argued that it never had the opportunity to present evidence under the proper legal standard because the Supreme Court's decision in KSR International Co. v. Telefl ex, Inc., 127 S. Ct. 1727 (2007), was decided after the ITC's determination of liability. The Federal Circuit rejected this argument, affirming the ITC's determination that Qualcomm waived this defense by failing to set forth an obviousness analysis until after an initial determination by the ALJ.

The Federal Circuit turned next to the ITC's infringement rulings. The ITC found that Qualcomm did not directly infringe the '983 patent, but found that it had induced infringement. Specifically, it found that Qualcomm induced infringement by its customers by, inter alia, providing them with software, training them, and recommending that they implement battery-saving features. The Federal Circuit affirmed the ITC's finding of no direct infringement, noting that there was substantial evidence for the ITC to conclude that Broadcom failed to establish direct infringement by Qualcomm. The Court, however, vacated and remanded the ITC's determination of induced infringement. It noted that the ITC's initial determination was issued prior to its decision in DSU Medical Corp. v. JMS Co., which clarified that the specific intent necessary for a finding of induced infringement "requires more than just intent to cause the acts that produce direct infringement" and that "the inducer must have an affirmative intent to cause direct infringement." 471 F.3d 1293, 1306 (Fed. Cir. 2006). The Court noted that the current record fell short of the necessary intent showing for inducement—that Qualcomm possessed a specific intent to cause infringement of Broadcom's '983 patent.

Finally, with respect to the LEO, Qualcomm and the third-party manufacturers and carriers argued that the ITC exceeded its statutory authority by issuing an LEO that excluded imports of downstream manufacturers that were not named in Broadcom's complaint. Specifically, they argued that the LEOs issued by the ITC may only exclude products of named parties. On the other hand, Broadcom and the ITC contended that the ITC has authority to issue an LEO that excludes all articles that are determined to violate 35 U.S.C. § 1337, regardless of the identity of the importer. The Federal Circuit agreed with Qualcomm and the other appellants, and vacated the LEO.

The Court explained that because the ITC is a creature of statute, its authority must be found in the enabling statute. The Court found that § 1337 provides for two types of exclusion orders that the ITC may issue: (1) general exclusion orders ("GEOs") and (2) LEOs. It noted that § 1337(d)(2) provides that the default exclusion remedy is an LEO and that a GEO is only appropriate under two exceptional circumstances. Specifically, the ITC may issue a GEO under either subsection d(2)(A) if it is "necessary to prevent circumvention of an exclusion order limited to products of named persons" or under subsection d(2)(b) if "there is a pattern of violation of this section and it is difficult to identify the source of infringing products." Slip op. at 25. By implication, reasoned the Court, an LEO is both "an exclusion order limited to products of named persons," and one where the complainant has not demonstrated "a pattern of violation of this section and [difficulty in identifying] the source of infringing products." Id. Thus, the Court concluded that "on its face, the statutory context limit[ed] LEOs to named respondents that the Commission finds in violation of Section 337," and that in order to obtain an exclusion order against nonrespondents, a complainant must seek a GEO and satisfy the heightened burdens imposed by § 1337. Id. at 25-26.

Further, the Federal Circuit found that Broadcom knew the identity of third-party handset manufacturers whose products contained Qualcomm's chips or chipsets, and that Broadcom appeared to have made a strategic decision in not naming the third-party handset manufacturers in its complaint. Therefore, the Federal Circuit reasoned that Broadcom opted to forgo the full advantage of obtaining an LEO that would exclude the known third-party handset manufacturers.

Finally, citing to its decision in Fuji Photo Film Co. v. ITC, 474 F.3d 1281, 1286 (Fed. Cir. 2007), the Federal Circuit reiterated its holding that LEOs "only apply to the specific parties before the Commission in the investigation." Slip op. at 29. Accordingly, the Federal Circuit vacated the LEO and remanded, noting that the ITC could reconsider its enforcement options on remand.

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