ITC Monthly Wrap-Up: October 2023

Authored by: Rosalynd Upton, Ph.D.

October saw seven new Section 337 complaints filed with the Commission:

1. Certain Video Capable Electronic Devices, Including Computers, Streaming Devices, Televisions, and Components and Modules Thereof, Dkt. No. 3706
2. Video Capable Electronic Devices, Including Computers, Streaming Devices, Televisions, Cameras, and Components and Modules Thereof, Dkt. No. 3705
3. Certain Organic Light-Emitting Diode Display Modules and Components Thereof; Dkt. No. 3704
4. Products Containing Tirzepatide and Products Purporting to Contain Tirzepatide, Dkt. No. 3702
5. Disposable Vaporizer Devices and Components and Packaging Thereof, Dkt. No. 3700
6. Electronic Devices, Including Mobile Phones, Tablets, Laptops, Components Thereof, and Products Containing the Same; Dkt. No. 3699
7. Mobile Phones, Components Thereof, and Products Containing Same, Dkt. No. 3698

The Commission also instituted one new investigation in October:

1. Certain Chocolate Milk Powder and Packaging Thereof, Inv. No. 337-TA-1232

This month’s ITC Wrap-Up discusses the Commission’s recent decision in Certain LIDAR (Light Detection and Ranging) Systems and Components Thereof, Inv. No. 337-TA-1363, to affirm the administrative law judge’s decision to terminate the investigation under 19 U.S.C. § 1337(c) due to an arbitration agreement. In May, Ouster, Inc. (“Ouster”), filed a complaint asserting Section 337 violations concerning five patents against Hesai Group of Shanghai, China; Hesai Technology Co., Ltd., of Shanghai, China; and Hesai, Inc., of Palo Alto, California (collectively, “Hesai”). Hesai filed a motion to terminate or alternatively stay the investigation based upon an arbitration provision in a 2020 Litigation Settlement and Patent Cross-License Agreement (“Settlement Agreement”) between Hesai Photonics Technology Co., Ltd. (“Hesai Photonics,” a subsidiary of respondent Hesai Group) and Velodyne Lidar, Inc. (“Velodyne,” now merged with Ouster). The ALJ granted Hesai’s motion, finding that: (1) “a valid arbitration agreement at ¶ 9.5 exists as part of the Settlement Agreement that binds Ouster and Hesai”; (2) “the arbitrability of the dispute between Ouster and Hesai…rests with [Judicial Arbitration and Mediation Services, Inc.], London”; and (3) “Hesai did not waive its right to arbitrate as Ouster argues.” See Initial Determination at 4. Ouster filed a petition for review of the ID with the Commission.

The Commission affirmed the ALJ’s ruling, with modification. As part of its inquiry into whether to terminate the investigation under Section 337(c) of the Tariff Act, the ALJ weighed whether Hesai’s assertion of arbitrability was “wholly groundless.” Id. at 11-12, 16. The Commission reasoned that the Supreme Court had previously overruled the “wholly groundless” exception in Henry Schein, so the Commission struck the ALJ’s application of this legal standard in various portions of the ALJ’s decision. Comm’n Determination at 2 (citing Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529–31 (2019)). In particular, the Court in Henry Schein held that “[w]hen the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract…even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless…” Henry Schein, 139 S. Ct. at 529–31. The Commission thus terminated the investigation, with modification, in view of the parties’ arbitration agreement.

The Commission’s affirmance of the ALJ’s decision should remind complainants to take into consideration whether any arbitration agreements exist before filing their complaint. The Commission’s decision also makes clear that the “wholly groundless” standard is no longer a viable option to survive a motion to terminate under Section 337(c) due to an arbitration agreement.