Context: The United States International Trade Commission (USITC, or just ITC) is investigating a complaint by Nokia against Amazon. An Administrative Law Judge (ALJ) of the ITC found Amazon to infringe four of Nokia’s five asserted standard-essential patents (SEPs) and held it responsible for its failure to take a license on fair, reasonable and non-discriminatory (FRAND) terms (January 9, 2025 ip fray article). The ALJ’s ruling is a final initial determination (FID), which is not really final as it is subject to a potential Commission review (the Commission being, in this context, the political appointees at the top of the U.S. trade agency), a hypothetical Presidential veto, and there can furthermore be an appeal to the United States Court of Appeals for the Federal Circuit. Both parties filed petitions for review, with Amazon trying to come away unscathed and Nokia trying to prevail on the fifth patent, too. Additionally, Amazon was trying to delay or derail the proceedings based on the alleged lack of a sufficient number of commissioners (January 17, 2025 ip fray article; follow-up in section 5 of a February 11, 2025 ip fray article).
What’s new: Yesterday the Commission determined to review the FID in its entirety and asked the parties to answer various questions concerning the domestic industry requirement (which must be satisfied for the ITC to grant limited exclusion orders, i.e., U.S. import bans), FRAND (relating to the legal standard as well as the question of what bearing the UK FRAND determination requested by Amazon should have on the USITC decision) and certain public-interest considerations. It also extended the target date for the completion of the investigation by approximately a month to May 14, 2025.
Direct impact: No firm conclusions can be drawn from the fact that the questions were put on the table. The Commission knows that Amazon is a deep-pocketed, sophisticated and politically well-connected defendant. It is possible that the purpose of the questions is to strengthen the decision with a view to a Presidential review and Federal Circuit appeal. But it cannot be ruled out that the current ITC leadership intends to narrow the scope of its agency’s jurisdiction, which would be unprecedented in the context of Section 337 (Unfair Import) investigations that were originally meant to serve protectionist objectives but have moved closer and closer to a general patent dispute resolution vehicle.
Wider ramifications: The ITC is currently also conspicuously hesitant to conclude an investigation of an Ericsson complaint over Lenovo (February 21, 2025 ip fray article). We believe that parties contemplating ITC complaints over SEPs should keep an eye on those developments. For example, the European Court of Justice (ECJ) made a game-changer decision earlier this week that enables courts in the EU to order injunctions and other remedies even over non-EU patents (February 25, 2025 ip fray article). With what is called an anchor defendant, it may even work to draw U.S. legal entities into proceedings over U.S. patents in courts in EU member states.
The questions raised by the Commission can be grouped into four categories (you can click below to go directly to a particular section):
- Domestic industry requirement
- (F)RAND standard
- Foreign (F)RAND determinations
- Public interest: exemptions for service, repair, replacement
1. Domestic industry requirement
The ITC can order an import ban only if on top of all other requirements for the infringement of a valid patent, the domestic industry requirement (DIR) is satisfied. The DIR has a technical prong (which works like an “infringement” analysis except that it is about lawful use) as well as an economic prong.
The narrowest scope would be if a patentee complaining to the ITC had to have a U.S. manufacturing operation that practices the asserted patents. For example, if General Motors showed that it makes cars in Detroit that practice certain patents, it could use them against a European car maker that imports foreign-made vehicles into the U.S. market. But that narrowest of scenarios is not the reality of recent years. The ITC also accepts licensing businesses as complainants. Many patentees were deemed entitled to relief from the ITC just because of their investments in a U.S. licensing business (such as through litigation). That is not what’s at issue in the Nokia-Amazon and Ericsson-Lenovo SEP disputes that are pending at the moment. Nokia and Ericsson argue that they have U.S. licensees such as Apple (for cellular SEPs) and Microsoft (for multimedia SEPs because of its Xbox video game console).
Now, there are two types of issues that the ITC is looking into in that regard:
- To what extent do the asserted patents actually cover the domestic industry products?
- Is it enough for the licensees to be based in the U.S. and investing in R&D and marketing in the U.S., despite the fact that they actually import those products from elsewhere (typically China)?
These are the related questions (questions 3 and 4 raise very general questions beyond the case at hand):
- Citing the evidentiary record, please describe the extent to which the Microsoft Xbox chipsets are customized and the extent to which Microsoft is involved in such customization. Please explain how such customization impacts the analysis under the Magnetic Tapes factors—“whether the patented technology is sold as a separate entity or article of commerce; whether it is an essential component of the downstream product; and whether the domestic industry activities have a direct relationship to exploitation of the patented technology.” See Certain Magnetic Tape Cartridges, Inv. No. 337-TA-1058, Comm’n Op. at 48-50 (Apr. 9, 2019).
- What is the evidence that Nokia’s licensees’ R&D activities and investments in their downstream products “have a direct relationship to the exploitation of the patented technology” of each asserted patent? Please explain what that direct relationship is. Under the rationale of Magnetic Tapes, at what point would domestic industry activities no longer have a direct relationship to exploitation of the patented technology such that the activities should not be considered “with respect to the article protected by the patent”? How is the consideration of the relationship of domestic activities asserted under subsection (A) or (B) to exploitation of the patented technology under the rationale of Magnetic Tapes different than the consideration of the relationship of the asserted activities to exploitation of the patented technology under subsection (C)?
- In determining whether domestic research and development (R&D) investments are significant under subsection 337(a)(3)(A), should the Commission consider all worldwide plant and equipment investments related to the article protected by each patent or only worldwide R&D-related plant and equipment expenses? Likewise, in determining whether domestic R&D investments are significant under subsection 337(a)(3)(B), should the Commission consider all worldwide labor and capital investments related to the article protected by each patent or only worldwide R&D-related labor and capital expenses? Please discuss the evidence of record as to these contextual analyses.
- Please address whether the Commission should continue allowing investments related to engineering, research and development to qualify for a domestic industry under subsections 337(a)(3)(A) and (B). See Certain Solid State Storage Drives, Stacked Electronic Components, and Products Containing Same, Inv. No. 337-TA-1097, Comm’n Op. (June 29, 2018). If engineering, research and development investments can still be considered under subsections (A) and (B), should the Commission consider a different basis for determining significance of those investments under subsections (A) and (B) than what should be considered in determining whether those investments are substantial under subsection (C)?
2. (F)RAND standard
The “F” makes no difference; RAND used to be the more common term in the U.S., where FRAND is now also widely understood. For a long time, (F)RAND was considered part of the ITC’s public-interst analysis. But both Amazon and Lenovo want it to be considered as both a general defense and, as a fallback, as a public-interest issue.
Yesterday’s review notice raises rather general questions about how and in what context to adjudicate (F)RAND:
- When the complainant alleges that an asserted patent is a standard essential patent, subject to reasonable, and non-discriminatory (RAND) licensing terms, is the complainant precluded from seeking an exclusion order and/or cease and desist order based on infringement of that patent? Should the Commission consider RAND licensing obligations as a legal or equitable defense (i.e., as part of its violation determination) under section 337(c), 19 U.S.C. 1337(c)) or as part of its consideration of the public interest factors under section 337(d)(1) and (f)(1)? Please discuss theories in law, equity, and the public interest, and identify which (if any) of the public interest factors of 337(d)(1) and (f)(1) preclude issuance of such an order.
- In the event a violation is found, does the information regarding the parties’ RAND obligations and licensing attempts inform any particular public interest factor that the Commission should consider under section 337(d)(1) and (f)(1)? If so, please identify which factor it informs and explain why, including the relevant evidence of record. As part of its public interest analysis, should the Commission determine whether any prior license offer made by the patent holder covering the accused products is reasonable and non-discriminatory? If so, what evidence should the Commission consider in determining whether offers are reasonable and non-discriminatory based on the record of this investigation
- Should the Commission determine whether Amazon is a willing putative licensee? What is Amazon’s obligation to fairly compensate the patent holder? What is the evidence of record, which party has the burden of proof, and was that burden met?
- In this investigation, what evidence is there in the record regarding whether Nokia complied with its patent disclosure obligations regarding the setting of the H.264 and H.265 standards with respect to the patents asserted in this investigation? Please cite the relevant agreement and evidence of Nokia’s compliance or noncompliance with regard to any obligations concerning the disclosure of the asserted patents.
- What is the evidence of record of hold-up or hold-out by the parties, if any?
3. Foreign (F)RAND determinations
The England & Wales Court of Appeal (EWCA) is increasingly encroaching on foreign (including U.S.) jurisdiction (February 18, 2025 ip fray article). When this article was published, another decision on a request for (a declaration concerning) an interim license was only a few hours away (February 28, 2025 LinkedIn post by ip fray). A key difference between the Nokia-Amazon and Ericsson-Lenovo disputes is that Amazon is actually seeking a UK court order forcing Nokia to grant an interim license, while Lenovo is so far asking only for a declaration.
Amazon asked the ITC to await a UK decision on FRAND. The Commission is now asking the following question:
- To what extent would the resolution of the Amazon-Nokia dispute in the UK court resolve issues in this investigation, including without limitation the violation issues, the remedy issues, and the public interest issues? If the UK court determines that a license should be granted on RAND terms, would that license cover the accused products in this investigation? What is the expected timing of any such resolution in the UK proceedings? Should the Commission extend its target date pending resolution of this dispute by the UK court?
4. Public interest: exemptions for service, repair, replacement
The ITC finally also asks three non-FRAND public-interest questions, two of which relate to possible exemptions for service, repair and replacement purposes and the last one of which is a case-specific question about whether customers have viable alternatives to the accused Amazon products.
- Should the Commission provide an exemption to its remedial orders to allow for service, repair, and/or replacement of the accused products? Should such an exemption apply to only accused products under warranty? If an exemption should be granted to allow accused products to be used for service, repair, and/or replacement, please propose specific language that should be included in the Commission’s remedial orders for any such exemption.
- What are the warranty terms, if any, for the accused products? Is there any evidence of record showing that the warranty terms can be satisfied using non-infringing products?
- Please provide data and information in the record identifying all reasonable substitutes for the accused products and their availability to U.S. consumers.