The U.S. Supreme Court let InterDigital Inc. pursue a bid to extract patent royalties from Nokia Oyj for the third generation of mobile-phone technology.
The nation’s highest court today rejected an appeal by Nokia, which contended that InterDigital couldn’t block imports of the disputed technology because it wasn’t making any products of its own. A federal appeals court had said InterDigital could press the case, one of several the company has filed at the U.S. International Trade Commission.
Companies including Amazon.com Inc. and Hewlett-Packard Co. joined Nokia in urging the Supreme Court to take up the appeal and limit the ITC’s jurisdiction. They argued that the commission has become a favorite forum for companies whose sole business is to obtain patents and seek royalties.
“Instead of protecting American jobs from unfair trade practices, the ITC is now imposing unfair litigation practices, to the detriment of the very domestic industries it is supposed to protect,” Amazon, Hewlett-Packard and Red Hat Inc. said in a court filing.
The ITC is a quasi-judicial agency whose job is to protect U.S. markets from unfair trade practices, such as infringement of intellectual property. It has the power to order products halted at the U.S. border.
InterDigital and the Obama administration both told the court it shouldn’t hear the case. InterDigital, based in Wilmington, Delaware, said in court papers that it “does not simply take advantage of others’ inventions” and “has been at the forefront of digital wireless telephony since its founding” in 1972.
InterDigital surged after the Supreme Court released its order, rising as much as $1.67, or 4.4 percent, to $39.87 before dropping back. The shares fell $1.00, or 2.6 percent, to $37.20 at 4:30 p.m. in Nasdaq Stock Market trading.
The company, which owns about 1,700 U.S. patents, receives almost all its revenue from royalties.
A federal statute gives the ITC power to stop imports only when infringement harms a domestic industry. The central question in the Nokia appeal was whether licensing alone -- without production -- is enough to meet the domestic-injury requirement.
The U.S. Court of Appeals for the Federal Circuit, which specializes in patent cases, said federal law “makes clear that the required United States industry can be based on patent licensing alone.”
Nokia, which is based in Espoo, Finland, said the lower court ruling “entrenches a significant expansion of the ITC’s authority beyond its traditional role as a specialized international trade forum.”
InterDigital says Nokia’s phones use patented technology that prevents mobile phone signals from interfering with one another. Nokia’s sales have declined amid smartphone competition from companies including Apple Inc.
In a second complaint at the trade commission over 3G wireless technology, InterDigital is targeting ZTE Corp. and Huawei Technologies Co. as well as Nokia. That case involves other InterDigital patents.
The Supreme Court is already planning to hear two appeals that would deter patent litigation by making it easier for targets of infringement suits to collect attorneys’ fees.
The Supreme Court appeal rejected today is Nokia v. ITC, 12-1352. The ITC case is In the Matter of Certain 3G Mobile Handsets and components thereof, 337-613, U.S. International Trade Commission (Washington).