The stalling artists at HTC have gone too far by asking the United States International Trade Commission (USITC, or just ITC) to stay its investigation of Nokia's first complaint against its Taiwanese rival pending consummation of the Microsoft-Nokia transaction. On Friday, Administrative Law Judge (ALJ) Thomas Pender denied HTC's motion before Nokia had even replied (or at least before any Nokia opposition showed up on the U.S. trade agency's electronic document system). This was the second blow to HTC in the dispute with Nokia on the same day. Earlier in the day, Judge Andreas Voss ("Voß" in German) of the Mannheim Regional Court had tossed a complaint by HTC subsidiary S3 Graphics against Nokia.
In the Friday order, Judge Pender confirms again that his initial determination (preliminary ruling, subject to Commission review) will issue on schedule, i.e., this Monday (September 23, 2013).
HTC's motion is still sealed, but Judge Pender's order is not, shedding some more light on the motion. HTC requested Judge Pender to stay "this Investigation until shortly after the sale of Nokia's D&S business is expected to be finalized, i.e., April 1, 2014, a limited reopening thereafter of the record on domestic industry, and a corresponding eight-month, one-week extension of the procedural schedule and the target date for this Investigation". Judge Pender's order sums up HTC's additional requests as motions to preclude Nokia from relying "(1) on activities associated with Microsoft to establish the existence of domestic industry for any purpose at any stage of this Investigation, or to support a domestic industry during the term of any exclusion order issued by the Commission in this Investigation; and (2) upon any licensing activities to support a domestic industry going forward". All of this information is consistent with what I inferred from the headline of the motion (the only part of the motion that was made public before the order).
Judge Pender found it "impossible to discern any reason to grant HTC's motion" when considering (the following bullet points are, besides the commentary in brackets, a verbatim quote from the order, but reformatted)
the speculative nature of the motion [elsewhere, the order says that generally "HTC basees its allegations on what might occur and then argues from that to what might occur"];
the timing of the motion [too early with respect to the closing of the Microsoft deal, which a footnote of the order mentions could still change between now and closing in order "to obviate HTC's arguments" if necessary at all, and almost on the eve of the initial determination];
the lack of relevancy of licensing to this investigation [elsewhere, the order notes that HTC "stipulated to facts sufficient to establish Domestic Industry", which facts contain no mention of licensing, nor did Nokia present any argument concerning licensing -- consequently, the initial determination on Monday won't address licensing either];
the extraordinary reach and scope [eight months of delay] of the relief requested (and thus its potential prejudice to Nokia); and
the lack of any regulatory or other relevant legal support for HTC's motion.
Judge Pender's reference to a stipulation to facts relevant to the domestic industry analysis will hopefully not discourage other parties from entering into such stipulations. And I don't think there will be fewer stipulations, but presumably all future parties to ITC investigations will, provided that their counsel is aware of what happened in this Nokia-HTC case, ensure that if they stipulate to facts warranting a finding of domestic industry they will not be limited in their ability to raise or re-raise any domestic industry arguments if any underlying facts change or are about to change. While I agree with Judge Pender's prompt denial of this motion, I think he could have been clearer as to the role HTC's stipulation to facts played in this. I understand the order as saying in this regard that neither Nokia nor HTC made licensing an issue in this investigation, so there's no reason he should grant a licensing-related motion. But what he wrote could also be understood as saying that HTC, through the stipulation, somehow waived arguments.
There's no indication that HTC suggested licensing was part of Nokia's argument at this stage, so I don't think it had to be reminded of a stipulation to different facts. This was a motion to preclude, not a motion to strike or exclude. The fact that a claim or argument hasn't been made yet is not, in and of itself, a sufficient reason to deny a motion to preclude, and that's not what Judge Pender meant if I understand him correctly. I believe he meant to say that HTC can't just shoot down pre-emptively all sorts of arguments Nokia might make one day in what could be a future scenario because otherwise there would be too many motions of this kind. And HTC's motion to preclude was exceedingly broad and vague (it was an "any", "any", "any" scope), which I believe would have been an even stronger reason to deny it than a stipulation to different facts.
The order does not state explicitly whether Nokia could, after the closing of the Microsoft deal, keep an import ban (assuming that it wins won in the meantime) in effect by arguing that there still is a domestic industry relating to the relevant patents, possibly also raising a licensing-based argument. I don't even know if there is any precedent at the ITC for an import ban that was granted because the domestic industry requirement was satisfied by one set of facts only to be lifted later because those facts changed after a transaction or upheld after such a change because a modified set of facts, following a transaction, still enabled the complainant to satisfy the requirement. The question may never have been addressed, and probably won't have to be addressed here.
It's unlikely that HTC wouldn't settle with Nokia if an import ban was ordered, only because it hopes that the import ban would go away shortly thereafter due to the closing of the Microsoft deal. The target date for the final ruling here is in four months; import bans take effect after the 60-day Presidential review period, which would be late March, and the Microsoft-Nokia deal is expected to close in early 2014, which could be during the Commission review of the initial determination, during the Presidential review, or shortly after the ban takes effect. Should HTC elect to engage in such a gamble, then we'll get some clarification. What I can't imagine is that a whole new ITC investigation or a lengthy, full-blown enforcement proceeding would have to be conducted to revisit the domestic industry question. But I wouldn't be surprised to see some limited reopening of the record on domestic industry at that stage. Also, considering how U.S. Customs & Border Protection apparently acted in its (non-)enforcement of Microsoft's import ban against Motorola, HTC might be able to persuade customs officers to withhold enforcement pending another clarification of the domestic industry question...
HTC's motion was the first but may not be the last attempt by someone to leverage the Microsoft deal, under which no utility (i.e., technical invention) patents are even transferred, to impair Nokia's IP monetization efforts. But if any other attempts are made, they will suffer a similar fate, and probably similarly quickly, as HTC's motion. In this regard it's important to bear in mind that Microsoft has nothing to do with Nokia's obligations vis-à-vis its shareholders. If a company owns intellectual property, it must put it to good use. It's always been like that, at Nokia and elsewhere, and always will be. HTC will need a license from Nokia covering some of its non-standard-essential patents (it already has a SEP license), and it would have needed one anyway, as do others in the industry. Nokia will always be able to satisfy the ITC's domestic industry requirement for at least as long as someone like InterDigital is able to. (By the way, unlike InterDigital, Nokia is still going to own some very significant operating businesses -- the Here maps and the NSN infrastructure business).
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