|The AmeriKat keeping her ears peeled for|
the possibility of major reform for
patent disputes in the ITC
"Recent alarming statistics indicate that patent assertion entities, commonly referred to as patent trolls, have used the ITC to exploit our patent laws. These ITC cases can result in injunctions that can keep imported goods out of the U.S. market. There are certain steps that the ITC can take to correct these problems and the Committee looks forward to a thorough examination of these potential patent litigation reform solutions." (see full statement here)Subcommittee Chairman Darrell Issa (Republican - California) continued:
"In recent years, however, the International Trade Commission has been co-opted as a forum to assert weak or poorly-issued patents against American businesses. We look forward to hearing from the witnesses on how we can reform this process to avoid unnecessary and costly litigation."The hearing was directed to the proposed Trade Protection Not Troll Protection Act (H.R. 4829) which was introduced in the 114th Congress at the end of March (it had previously been introduced in 2014). The ITC has a "domestic industry" requirement. This means that the ITC only has jurisdiction over products protected by a patent where the complainant can show that, with respect to those products, there is a significant investment in plant or equipment, employment of labor or capital or substantial investment in exploitation, including engineering, R&D or licensing. Non-practicing entities (NPEs) make use of the licensing requirement. The bill would amend the provision by requiring a higher threshold for the licensing prong by demanding that complainants show that there is a "substantial investment" in licensing activities that lead to "the adoption and development of articles that incorporate the patent..." The bill would also require complainants who rely on the licensing prong to join one or more of its licensees in as a co-complaint to qualify under the domestic industry requirement.
|Chairman Issa starts questioning in the latest patent troll|
focused legislative effort
The Committee last considered the topic in 2013 in the context of abusive patent litigation. Testimony before the Committee was that patent trolls had started to flood the ITC following eBay as they were unable to obtain essentially automatic injunctions from the district courts (some estimates suggested that it reduced their chances of obtaining injunctive relief to one in three). The ITC does not apply the eBay analysis and an exclusion order is almost automatic in the case of an infringement finding. Trolls were therefore exploiting this "death-knell" to pressure defendants into settling frivolous cases. Since that hearing, the ITC has taken steps to address this issue. Congressman Nadler (Democrat - New York) explained these steps as follows:
"For example, as ITC case law continues to evolve, NPEs, whose entire business model depends on litigation, may find it more difficult to establish that there is a domestic industry that would be threatened by the importation of a particular product, as is required under Section 337 of the Tariff Act.In addition, the ITC has begun a pilot project, which it proposes to codify and expand, allowing the Commission to identify potentially case-dispositive issues when an investigation begins, and direct the presiding judge to issue an Initial Determination of those issues within 100 days. If used to its full extent and made permanent, this may help weed out weak claims at an early stage and discourage many others from even being filed. Indeed, recent statistics indicate that filings by NPEs has dropped from its peak between 2008 and 2011."
|John Thorne of Kellog Huber Hansen - injunctions may|
be the appropriate remedy, but not always. The ITC's remedy
is almost "always" an injunction (or exclusion order)
|Mark Whitaker of|
Morrison & Foerster says the stats
tell a different story...
|Fiona Scott Morton of Yale explains|
that the ITC's remedies are
|What will be the future of |
patent disputes at the US ITC?
Second, by instituting a 100-day pilot program to quickly dispense with unmeritorious cases, the ITC can resolve, by an investigation, a dispositive issue, such as the lack of domestic industry. If there is such a dispositive issue, then the assigned Administrative Judge can conduct an expedited fact-finding and abbreviated hearing and briefing schedule limited to that issue. The decision on that issue is given within 100 days from the institution of the investigation. These efforts have resulted in a reduction in the number of cases instituted - from 69 in 2011 to 39 in 2014. toll concluded: "Only 36 new investigations were instituted last year. According to the ITC’s own statistics, non-practicing entities were the complainants in only two of the 36 ITC investigations instituted last year." To read all of Stoll's written statement click here.
Dominic Bianchi (General Counsel or US ITC) comments were primarily set out in his statement (see here). In questioning, he admitted that although much had been said about the 100-day pilot number, so far only one case has been adjudicated under that program.
The hearing then opened up to a series of questions from the Committee members including whether, in the absence of eBay criteria in the ITC, the ITC considered the public interest. No explicit examples were given from current or former ITC witnesses, but it was noted that the ITC does take the public interest element into account including its effect on consumers and the US economy. To a question of whether it was right that the ITC did not have to perform a balance of equities, Okun stated that there were safeguards in the statute, including equitable defences and the provision which enables the President to disprove an order. Although there was much disagreement about what the statistics actually demonstrated (and whether they were counting NPEs v PAEs), the key question seemed to boil down to whether, as matter of policy, it was right that the US should have a separate remedial forum not subject to equitable balances when the district courts could and were addressing the same dispute? A solution proposed, following questions from Congresswoman Lofgren (Democrat- California), was to divide up disputes between domestic entities (to be dealt with by the district courts) and disputes involving a foreign entity (to be dealt with by the ITC, which was the original intent of the ITC).
Before Chairman Issa adjourned the session, Congressman Nadler concluded:
"It seems to be very questionable why we have a situation where one body can issue decrees that flaunt the normal equitable considerations that an Article III court would impose. Why would you have this dual jurisdiction where you cannot at least stay [the ITC case]. You should develop one body of case law and enable the normal equitable principles to apply."To the AmeriKat, the appetite of the Committee seemed overwhelmingly strong and went beyond the more restrained amendments proposed by H.R.489. For this reason, despite it being an election year which would otherwise have muted this debate, we may be hearing more on the future role of patent disputes at the ITC. In the meantime, what do readers think? Is the dual-jurisdiction functionality between the ITC and district courts a problem?
And, if you have are really interested, you can watch the entire two hour hearing during your Monday morning commute (click here).