This morning I read a highly informative report by Bloomberg's Susan Decker on the first day of the ITC's evidentiary hearing on HTC's second ITC complaint against Apple. After the dismissal of five Google loan patents and the pre-trial withdrawal of a homegrown HTC patent, that case, which was temporarily about eight patents, is down to two allegedly 4G/LTE-essential patents HTC acquired from a company named ADC Telecommunications.
Apple disputes that HTC has standing to sue it over those two patents, but according to the Bloomberg story, Administrative Law Judge Thomas B. Pender is not quite inclined to grant Apple's motion for termination. While Apple's motion hasn't been published (at least so far), this is not a huge surprise. Many patent purchase agreements have deficiencies that defendants can try to leverage against acquired patents, but the ADC-HTC deal took place under different circumstances than the Google-HTC deal. ADC was looking to cash in on a couple of patents, and if a patent holder primarily wants to do that, he's much more likely to assign all of the essential rights to the acquirer than a patent holder who only wants to rent those patents out to someone for a limited time and purpose.
According to the report, Apple also complained that HTC just bought these patents to sue Apple, but Judge Pender said that this doesn't matter since those patents "are a property right". I actually think it would make sense for the ITC to dismiss cases in which acquired patents get asserted, especially if such assertions occur after only a short period of time following the acquisition. The ITC's statutory purpose is to protect the "domestic industry" from unfair imports. It's really quite a stretch to let patent buyers and hoarders use the ITC as a forum (because it's fast and, especially, because it's easier than in federal court) to obtain, in the form of an import ban, injunctive relief). And I don't mean to hold this only against HTC: oddly, Apple itself uses, in its second ITC complaint against HTC, a patent acquired from British Telecom (BT).
Judge Pender appears to be at least fairly skeptical of the alleged invalidity of HTC's asserted patents, pointing to the "clear and convincing evidence" standard, which I believe is far too high but it is indeed the law of the land. Even if the judge pointed to this exacting standard, it's still not impossible that either he or the ultimate decision-maker at the ITC, the six-member Commission, will consider one or both patents invalid after looking at all of the evidence, including the one that will be presented at the ongoing hearing.
What's impossible to assess across the distance, without access to much more information, is whether HTC's infringement arguments are strong. But generally, infringement allegations over allegedly standard-essential patents succeed very often. If the specifications of a standard prescribe a particular functionality, and if a patent claim covers that functionality, it's easier to identify and prove infringement than in other cases.
So if HTC has standing, if the ITC wants to serve as many plaintiffs as the widest possible interpretation of its statute allows, if the patents aren't proven invalid by clear and convincing evidence, and if one or both patents are infringed, it will all come down to Apple's FRAND defense. Apple brought counterclaims against HTC relating to these two patents. For more details on Apple's allegations, please check out this post. A few weeks ago, HTC won a transfer to the District of Delaware of those counterclaims, which Apple had to remove immediately from the ITC investigation and opted to bring in the Eastern District of Virginia. If the Delaware-based court adjudicates Apple's counterclaims with as little enthusiasm as it showed for the handling of Apple's infringement claims, this may take very long. But even without its counterclaims succeeding in Delaware by the time the ITC investigation is concluded, Apple's FRAND defenses may still dissuade the ITC from ordering an import ban. I actually doubt very much that the ITC would ban Apple's 4G/LTE-capable gadgets, especially since the ITC recently received excellent advice from the FTC and faces mounting pressure from lawmakers on Capitol Hill (Senate and House of Representatives) when it comes to injunctions over standard-essential patents. After the election I wouldn't be surprised to see a legislative initiative to refocus the ITC on its real mandate, unless the ITC proves in the meantime that it's willing to do this by applying its rules wisely (and banning the iPhone 5 and the new iPad 4G over standard-essential patents would be a clear message to Congress that it has to make this a high-priority item of its new term).
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