Federal Circuit Holds That ITC Termination Of Investigation For Arbitration = Appealable Final Determination

StraussDeborah-49402-6882-bwrGuest Commentary

by Deborah S. Strauss, Counsel, Adduci, Mastriani & Schaumberg LLP

On June 7, 2013, in InterDigital Communications, LLC v. Int’l Trade Comm’n, the U.S. Court of Appeals for the Federal Circuit reversed and remanded the International Trade Commission’s termination of Certain Wireless Devices with 3G Capabilities, Investigation No. 337-TA-800.  The decision sends the underlying patent dispute to arbitration based on a prior license agreement between patentee InterDigital and LG Electronics, Inc.  The divided panel held that the Federal Circuit had jurisdiction to hear the appeal, and that the ITC erred in concluding that under the Federal Arbitration Act, LG’s assertion that all matters in dispute should be determined by arbitration under the prior license was not “wholly groundless.”  In its decision, the Federal Circuit held that termination of an investigation in favor of arbitration was “the equivalent of a final determination” and was therefore an action that could be appealed.

Implications.  The InterDigital ruling affirms that a party may appeal any Commission determination terminating an investigation if the effect of such a determination is equivalent to a final determination and if the moving party suffered prejudice as a result of the Commission’s action.  The appealability of a Commission determination under Section 337 does not necessarily turn solely on whether it formally arises out of Section 337(d), (e), (f) or (g).

The Federal Circuit also indicated that while the Commission might have discretion on whether to apply the Federal Arbitration Act, once it chooses to do so, the statute must be applied properly.

As a practical matter, the lesson from InterDigital for parties seeking to invoke an arbitration clause in an existing agreement at the ITC is that the better course of action would be to request that the Commission stay its investigation pending an arbitrability determination by the arbitrator.  After that determination, the stay can be lifted and the Commission can reopen the investigation to either consider the matter in its entirety (if the arbitrator concludes that the issue is not encompassed by the arbitration clause in the existing agreement) or to rule on any remaining issues, such as domestic industry and remedy (if the arbitrator issues a ruling on the substance of the claim).  Following this approach, the Commission would not issue a final determination, or the equivalent thereof, until all matters are properly considered, which allows the complaining party to avoid a costly and time-consuming appeal. Continue reading “Federal Circuit Holds That ITC Termination Of Investigation For Arbitration = Appealable Final Determination”