Background
The case arose from an ITC investigation involving Qualcomm chips — semiconductor processors incorporated into cellular telephones — that Broadcom alleged infringed its patents when programmed with specific power-saving software. The ITC found a Section 337 violation and issued a limited exclusion order (LEO) that, in addition to barring Qualcomm’s own infringing chip imports, also extended to cellular handsets containing those chips made and imported by third parties such as Nokia, Motorola, and other device manufacturers who were not named respondents in the investigation.
Kyocera and other handset makers challenged the LEO to the extent it covered their products, arguing that the ITC lacked statutory authority to issue an LEO covering the products of non-parties to the investigation. The ITC defended its long-standing practice of extending downstream relief to finished products incorporating infringing components, arguing it was necessary to make any exclusion order effective.
The Court’s Holding
The Federal Circuit vacated the downstream portion of the LEO. The court held that the plain text of Section 337 of the Tariff Act of 1930 authorizes a limited exclusion order only against “articles” imported by “persons determined to be violating” Section 337 — i.e., the named respondents in the investigation. Third-party companies who were not respondents and who were not determined to have violated Section 337 cannot have their products excluded under an LEO.
The court distinguished between two types of ITC exclusion orders: a limited exclusion order (LEO), which is directed to specific respondents and applies only to their imports; and a general exclusion order (GEO), which can bar importation of a class of products regardless of who makes them. If the ITC wants to block downstream products from non-respondent manufacturers, it must issue a GEO — which requires a higher statutory showing that the exclusion is necessary to prevent circumvention of an LEO or that there is a pattern of violation and identifying the violators is impracticable.
Key Takeaways
- A limited exclusion order under Section 337 can only apply to imports by the named respondents in the ITC investigation — not to third-party manufacturers’ downstream products containing infringing components.
- To obtain broad exclusion covering all sources of a product category (including non-party finished goods makers), complainants must seek a general exclusion order, which requires meeting a higher statutory threshold.
- The ruling significantly constrained the ITC’s ability to provide complete relief in component-level patent cases, since the ultimate infringing products are often made by non-party companies not named in the investigation.
- Patent holders must carefully consider whether to name downstream product manufacturers as respondents in ITC investigations or seek a GEO to achieve comprehensive market exclusion.
Why It Matters
Kyocera v. ITC significantly changed ITC practice in Section 337 investigations involving component patents. Before this decision, the ITC routinely issued limited exclusion orders that swept in downstream finished goods even when made by companies not named in the complaint. This provided patentees with broad market exclusion that disrupted entire product categories. After Kyocera, that downstream relief requires either naming all product makers as respondents (potentially burdensome and strategically complex) or meeting the GEO threshold.
For technology companies that make final consumer products using components from third-party chip and component suppliers, Kyocera provided important protection: a patent holder cannot obtain an ITC exclusion order blocking their products without naming them as respondents and proving they violated Section 337. For patent holders and ITC practitioners, the decision reshaped investigation strategy, investigation scope, and the choice between seeking LEOs or GEOs in cases involving multi-layered supply chains.