WASHINGTON (Legal Newsline) - Comcast customers won’t be able to use their cell phones to schedule recordings because of a decision reached Tuesday by the International Trade Commission.
The ITC decided Tuesday to side with Rovi, a company some have dubbed a “patent troll” that has also sued Comcast in federal court over the technology used in its X1 system. Rovi argued to the ITC that Comcast shouldn’t be able to import the cable boxes used with the X1 system.
The patents at issue expire in September. The ITC has a reputation of favoring patent holders and settling disputes quicker than federal judges.
“We respectfully disagree with the ITC’s decision in this matter,” Comcast said in a statement.
“In fact, Rovi has never disputed that Comcast or its predecessors independently developed our X1 platform and our cloud- and app-based technology.
“While we believe the ITC reached the wrong decision, we will remove this feature from those offered to our subscribers while we pursue an appeal.”
It is unclear where Comcast will file its appeal, as the company is waiting on the ITC’s full opinion. Thursday’s five-page decision adopted the findings of an ITC administrative law judge. It issued cease and desist orders against Comcast and a limited exclusion order that prohibits the importation of the cable boxes.
The ITC ruled that there are no public interest factors that would have prevented its actions.
Members of Congress from Pennsylvania, where Comcast is headquartered, have worried that a ruling for Rovi could negatively impact the 91,000 employees of Comcast and raise prices for cable subscribers everwhere.
“Limiting Comcast’s ability to provide cable service will harm a major competitor in the cable market and hinder competition,” Sen. Pat Toomey told the ITC.
“The (ITC judge’s) ordered remedy will likely result in harm to consumers. Comcast’s 22.5 million cable subscribers may be harmed by losing their choice of cable providers.
“Also, many more consumers may suffer due to a less competitive market, where remaining companies can limit choice and raise prices.”
A fellow lawmaker, the chair of the House Judiciary Committee, says the ITC is a forum used by patent-holders to assert weak claims.
“In recent years, however, patent assertion entities have used the Commission as a forum to assert weak or poorly issued patents against American businesses,” Virginia’s Bob Goodlatte said at a 2016 House subcommittee hearing on patent litigation at the ITC.
“It is evident that there are cases that have come before the ITC that probably should have been litigated exclusively in our U.S. district courts.”
Rovi has used a “patent troll” strategy to get this far, according to a Tech Crunch article following the company’s $1.1 billion acquisition of TiVo last year.
The company now holds more than 6,000 patents and pending applications, allowing it to generate billions of dollars from licensing and patent lawsuits, the New York Times reported.
The company has said it is using the ITC process because it moves quicker than federal courts and could precipitate a settlement.
“I think, what we've said really for both the ITC in the District Court cases is that generally speaking, a ITC case is 15 months to 18 months from the time it starts so we're three months into it at this point, so that gives you a some indication of where you think you can get a decision,” Carson said in July 2016.
"District Court cases, as you know, take longer, we've said, generally it's a three-year process in terms of trying to get to a final outcome there, and obviously that's a little bit based on what court dockets look like.”
“Clearly, the benefit of the ITC case is that it moves much more quickly, so we would hope that that prompts the other side to potentially want to come back to the table," CEO Thomas Carson said in said in July 2016.
“I think, what we've said really for both the ITC in the District Court cases is that generally speaking, a ITC case is 15 months to 18 months from the time it starts so we're three months into it at this point, so that gives you a some indication of where you think you can get a decision.
"District Court cases, as you know, take longer, we've said, generally it's a three-year process in terms of trying to get to a final outcome there, and obviously that's a little bit based on what court dockets look like.”
Rovi originally sued Comcast -- along with set-top box suppliers Arris, Pace, Technicolor and Humax -- in the U.S. District Court for the Eastern District of Texas, Marshall Division, on April 1, 2016. The court is the most popular in the country for patent claims, though Rovi has used Delaware, California, Virginia and New York courts when suing in the past.
In the complaint, Rovi accused Comcast of refusing to renew its licensing fee to continue to use Rovi’s Interactive Program Guide, or IPG, technology. The company needs a license for its X1 IPG product, Rovi says.
“After numerous attempts at negotiations, Rovi was left with no choice but to defend its intellectual property from unlicensed use,” Rovi President and CEO Tom Carson said.
“Rovi has taken this action to protect not only its patent portfolio, but also its stakeholders and licensees."
The case was transferred to a New York federal court in October 2016 after the Texas judge ruled the agreement between Rovi and Comcast required the case to be litigated there.
Meanwhile, Rovi sought to prosecute Comcast before the ITC.
On April 6, 2016, Rovi filed a complaint with the ITC. Section 337 of the Tariff Act prohibits imports of infringing goods.
Comcast filed its own lawsuit in the U.S. District Court for the Southern District of New York.
In that suit, filed May 23, 2016, Comcast alleged breach of contract and sought a declaratory judgment of patent noninfringement from Rovi’s filings in the Eastern District of Texas and the ITC.
Comcast argued both actions breach two different forum selection clauses in licensing agreements between the parties, both of which mandate Rovi’s actions be litigated in New York.
The company also argued that Rovi’s actions all assert patents that it has not infringed.
The New York federal court denied Comcast’s attempt to stay proceedings while waiting for a ruling from the ITC.
Judge J. Paul Oetken, in an opinion issued in May, said Comcast’s claims fell outside of the timeframe of a forum-selection clause in an expired patent agreement.
In the weeks following that decision, an administrative law judge with the ITC, David P. Shaw ruled that a Section 337 violation occurred with respect to two of Rovi’s six asserted patents.
However, in August, the ITC issued a notice agreeing to review Shaw’s final initial determination, or final ID.
Comcast, in a response, argued that government officials, industry leaders and labor representatives have voiced concerns over the public interest in providing uninterrupted cable services and avoiding unnecessary disruption of employment.
“The Accused Products in this Investigation are of great importance to American consumers. Comcast has more than 22 million subscribers in the United States. On average, Americans spend more than 5 hours a day watching television,” Comcast wrote.
“The STBs at issue are critical infrastructure for the viewing, recording, and enjoyment of television program, including critical public health and safety information as discussed above. Consumers demonstrate the value they associate with these devices and television viewing activities by the expenditures they make on television equipment and related services, approximately $162 billion in 2016.
“Consumers value these products for the wide variety of programming -- news, sports, entertainment, and health and safety information -- they are able to access through the functionality provided by STBs.”
Under Section 337, the ITC also must consider public health and welfare, and the impact of an exclusion order on competition in the marketplace before issuing an exclusion order.
But Goodlatte contends the commission “rarely” exercises its responsibility to apply that public-interest test.
“This failure to follow the law has particularly damaging results in today’s technology markets in which products are often reliant on hundreds or thousands of patents,” Goodlatte said during the hearing.
Goodlatte even argues the ITC is being used by some patent assertion entities as a “forum to assert weak or poorly-issued patents against American businesses.”
Standard-essential patent holders win half the time they file with the ITC, as opposed to a 28% win rate in federal court, according to testimony provided during the 2016 House subcommittee hearing.
From Legal Newsline: Reach editor John O’Brien at john.obrien@therecordinc.com.