Princo Corp. v. International Trade Commission

During the 1980s and 1990s, Philips Corporation and Sony Corporation collaborated to develop technical standards to ensure that compact discs made by different manufacturers would be compatible and playable on machines designed to read earlier versions of the technology. The standards were compiled in a publication that was referred to as the Orange Book. Philips and Sony had each developed a different method for dealing with a particular encoding issue. After considering the competing solutions, engineers for the two companies decided to adopt Philips’s approach and began to offer licenses to the patents that were necessary to manufacture compact discs that complied with the Orange Book standards. The licenses included field-of-use restrictions that limited licensees to using the licensed patents to produce discs according to the Orange Book standards, which followed the Philips approach. The agreement between Philips and Sony compensated Sony with royalty payments for not using its patents. Princo Corporation and Princo America Corporation (collectively, Princo) (plaintiffs) entered into a license agreement with Philips but shortly thereafter stopped paying the licensing fees due under the agreement. Philips filed a complaint with the International Trade Commission (commission) (defendant), alleging that Princo was violating the Tariff Act of 1930 by importing compact discs that infringed Philips’s patents. The case was decided by an administrative-law judge and appealed to the commission and then to the appellate court, which remanded the case to the commission. On remand, Princo argued that Philips had committed patent misuse by colluding with Sony to fix the price of patent licenses in the market and inducing Sony not to license its competing patents. The commission rejected Princo’s patent-misuse argument, and Princo appealed.