In Comcast v. ITC, Federal Circuit Approves Agency’s Push into Purely Domestic Patent Disputes
Last week, the Federal Circuit upheld the ITC’s decision in Digital Video Receivers and Hardware and Software Components Thereof (Inv. 1001) (DVR I) to issue an exclusion order against non-infringing cable boxes based entirely on the domestic conduct of an American service provider that does not import the boxes. The ITC’s action was made possible by an incredibly broad interpretation of Section 337, which the Federal Circuit has now expressly endorsed in Comcast v. ITC.
The DVR I investigation is part of an ongoing dispute between Comcast and Rovi, a patent licensing company with a long history of acquiring and aggressively asserting questionably valid patents in the cable television industry. The patents Rovi asserted in this case (which were deemed invalid as obvious by PTAB in 2018) describe scheduling a DVR recording over the internet. The ITC found that Comcast indirectly infringed those patents by offering its customers a smartphone app they can use to control their cloud-based DVR service.
Section 337 prohibits “importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that—(i)infringe a valid and enforceable United States patent . . ..”
In Suprema v. ITC, the Federal Circuit affirmed an ITC exclusion order against non-infringing scanners because infringing software was added to them after importation. The court held that “the phrase ‘articles that infringe’ covers goods that were used by an importer to directly infringe post-importation as a result of the seller’s inducement.” The ITC pushed the boundaries of Suprema in DVR I by removing any link between importation and inducement. The Commission stated that a Section 337 violation occurs when there is “importation of articles, proof of direct infringement, and proof of inducement.” The Federal Circuit’s Comcast opinion accepts this position without any limitation.
The court also upheld the agency’s finding that Comcast “imported” the accused cable boxes even though the articles were literally imported by third party suppliers. According to the ITC, “Comcast is sufficiently involved with the design, manufacture, and importation of the accused products, such that it is an importer for purposes of Section 337.”
These two holdings combine to offer the ITC blanket permission to expand its jurisdiction over a huge swath of domestic patent disputes that have nothing to do with trade. American companies use imported parts to do all kinds of things and they should not be subject to trade sanctions in purely domestic patent disputes.
Charles Duan and I wrote a paper two years ago about the dangers of this outcome:
Expanding ITC jurisdiction significantly diminishes the role of courts in adjudicating patent disputes, undermines efforts to prevent abusive patent litigation and denies American companies their right to defend themselves in a court of law.
The ideal resolution of this issue would be for the Federal Circuit to reverse the ITC. The court could either overrule Suprema to hold that inducement not tied to the actual imported articles at the time of importation is outside the ITC’s jurisdiction or, less preferably, it could limit Suprema to cases where the inducer of infringement was also the importer.
Should the Federal Circuit fail to take these steps, lawmakers would need to begin looking at the ITC not merely as an administrator of foreign trade but as an executive agency that has seized the power to reach enormous swaths of domestic business – with potentially enormous ramifications beyond trade policy for the American economy at large.