ITC Administrative Law Judge Rules That Ongoing Royalty Precludes Exclusion Order

In a recent decision that continues the U.S. International Trade Commission's (ITC) evolving jurisprudence on licensing, Administrative Law Judge (ALJ) Theodore R. Essex held that a running royalty awarded in a prior district court case foreclosed relief at the ITC.1

The complainant at the ITC was Mondis Technology, Ltd., a U.K. non-practicing entity (NPE). Prior to bringing the case in the ITC, Mondis successfully sued the respondent in the U.S. District Court for the Eastern District of Texas.2 It did not seek injunctive relief based on the verdict, but rather, a running royalty. That request was granted by the district court.

Arguing that the ongoing royalty constituted a license, the defendant in the district court/ITC respondent moved for summary determination in the ITC. Mondis made three principal arguments in opposition:

that an ongoing royalty is not a license as a matter of law, that an ALJ previously held that an ongoing royalty was not necessarily a license precluding relief at the ITC and that there were public-policy reasons why NPEs should be able to obtain exclusion orders at the ITC since they could not obtain injunctions in district courts under eBay.3 The ALJ flatly rejected all three points in opposition, characterizing the latter two as "meritless."4 In finding that an award of an ongoing royalty is a license, the ALJ held:

"[O]ngoing royalties are not continuous damages payments for continuing damages, but instead they are compensation for giving up the right to exclude. Giving up the right to exclude is the essence of a license. . . . The court fashions a license between the two parties under its equitable power that prevents the violation of the rights under the patent by compensating the patentee for giving up the right to exclude."5

The ALJ distinguished the earlier decision relied upon by Mondis.6 In that case, complainant Paice previously sued Toyota in a district court. The jury found infringement and Paice moved for a permanent injunction. The district court denied injunctive relief, instead awarding an ongoing royalty. In the subsequent ITC case, Paice sought an exclusion order only for accused products not covered by the district court's ongoing royalty order. There, the ALJ found that the payment of ongoing royalties on the products covered by the district court action was not an authorization for importation by Toyota for the products on which it was not paying a running royalty.

In response to Mondis'...