Apple and the ITC: A Good Lesson for Students of Patent Law

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Recently, HTC announced that some sales of the One X and EVO 4G LTE smartphones would be delayed while they are examined for compliance with an exclusion order obtained by Apple from the International Trade Commission (ITC, a U.S. agency that is responsible for policies governing imports and exports).  The exclusion order was based on a finding of patent infringement related to software patent, Pat. No. 5,946,647, that detects data such as telephone numbers in otherwise plain text.  Since eBay v. MercExchange, 547 U.S. 388 (2006) held that injunctions are not automatic following a finding of patent infringement, patent law students are taught that a suit at the ITC is becoming more popular as a tool for enforcing patents.  This popularity is because the only remedy available from the ITC is an order excluding infringing products from entering the U.S., which for electronics such as smartphones, is effectively an injunction.

However, two aspects of the exclusion order affecting the HTC phones demonstrate how an exclusion order is different from a injunction.  First, products already in the U.S. can be sold.  According the New York Times, AT&T has offered the One X for sale based on shipments prior to the exclusion order, but Sprint has delayed launch of the EVO 4G LTE.  If the patent owner, in this case Apple, later brings suit in Federal Court, they may recover damages for the infringement caused by selling the phones, but the costs of litigation for a small number of infringing devices may discourage such enforcement.  Second, because the ITC has a more active role in policing imports than a Federal Court in policing an injunction, delays just to examine whether imported products infringe is more likely to occur.  HTC claims that since the original finding of infringement, they have redesigned their software to work around the patent.  Although federal judges have the authority to tailor injunctions to the needs of the case, it is unlikely to examine new products without at least a request for a contempt proceeding from the patent owner.  Therefore, non-infringing products are more likely to suffer some delay that may impact sales if the finding of infringement comes from the ITC instead of a Federal Court.

Given the differences between exclusion orders and permanent injunctions, the value of one over the other will vary from case to case.  Whether this particular exclusion order proves to be major victory or a “narrow, unsatisfying win for Apple” remains to be seen.  However, for a case that began under the belief that it would be a grand battle between the iPhone and Android powered phones, this lone exclusion order is something of a letdown.

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May 30th, 2012 at 12:00 pm

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