International Trade Commission Facing Changes

By Kerrie Spencer, staff writer – August 1, 2012

The arbiter of the high money, high stakes battles between companies that make mobile devices, the International Trade Commission, is facing potential changes to its involvement in U.S. patent lawsuits. Unless they are intellectual property lawyers, few people really understand what the somewhat obscure ITC does, or how relevant it is. For instance, Google Inc’s Motorola Mobility unit and HTC Corp have sales bans slapped on their products by the ITC due to patent infringement lawsuits with Apple and Microsoft Corp. [2]

This agency was originally created to protect U.S. companies from unfair foreign competition. Over time, its role has evolved to become the “go-to” for patent infringement lawsuits relating to Blu-ray devices, chips and smartphones. It was and continues to be the court of last resort for companies that want to slap down their allegedly patent infringing competitors, because the ITC is able to easily ban imports that infringe on patents. This is a far more difficult task in district court. [1][2]

Recent headlines indicate the House of Representatives Judiciary Committee (HRJC) was uttering a litany of complaints about companies that file patent infringement lawsuit in district courts, particularly those that want financial damages (this relates to patent trolling.) [4] The HRJC went one step further and also condemned businesses that flocked to the ITC to file their cases, wielding the significant threat of a sales ban to give more strength to their case. While it may be viewed by the HRJC as a questionable practice, many companies are grateful for the legal leverage it provides them, knowing that settlements may come about faster under the threat of a sales ban. [1][5]

Additionally, the ITC does not have the same standards when it comes to banning a product on the wrong side of the patent infringement rules and regulations. District courts must meet a much higher standard before they consider banning a product. This is due to a Supreme Court ruling in 2006 – eBay, Inc. v. MercExchange. In this case, the court overruled an extensive legal precedent that virtually ensured a permanent injunction when valid, enforceable patents were infringed. [1][5]

However, this leaves the door wide open for the ITC to be abused by opportunistic companies wanting slightly faster results than those that could be obtained in district court. However, the interesting thing is that at least two-thirds of the cases being heard by the ITC also have a companion case in district court. [1] There is nothing like covering your bases.

None of the political pundits are quite sure where these hearings are going, nor what the outcome may be further down the line. Up for discussion recently was whether or not companies involved in a patent infringement lawsuit should even be asking for sales bans on patents they view as a critical part of a product in dispute. Patent trolling was again revisited, with still no resolution in sight. Trolls are infamous for suing for various licenses for their patents, but they do not even make the product at the center of the legal dispute. In other words, it’s a quick way to force a company to settle for mega bucks, rather than go to court and lose the case.

Based on the hearings to date, about the only thing the House seemed to agree on was that double lawsuits had to stop, as the majority of them are a waste of time and money and based on questionable ethics. This level of agreement is note-worthy given that it is an election year. The burning question is whether or not the legislation setting up the ITC was ever intended to have companies sue everyone twice. At the heart of this double dipping conundrum is a poorly cloaked intention to rip another company off for money they do not, in many instances, deserve.

It’s more than just getting money for a patent they do nothing with in the long run. It is how these double lawsuits end up escalating legal costs. It is not uncommon for a patent infringement lawsuit to cost a company millions to defend, which is why many of them will settle before going to court.

There are a variety of groups pushing to have this double jeopardy-like situation squashed by issuing standard essential patents, something that would make certain that all devices worked with one another. [1] While a novel thought, it needs industry cooperation to work. Would the industry cooperate? Based on the number of patent troll lawsuits, the it seems the underlying desire for some companies is not cooperation but cash.

Other industry discussions have centered around patent holders agreeing to take a pass on their right to chase after exclusion orders. Again, this is a profit driven area, and it might take a long time before everyone can get on the same page to reach consensus.

As with the majority of things involving politics and money, change can be slow to come. In the meantime, trolls will keep trolling, patents may or may not be infringed upon, sales may or may not be banned and double lawsuits will still be filed. At times, the human condition can be shockingly stagnant, in spite of clear evidence that things need to change.

Sources:

1. http://www.chicagotribune.com/news/sns-rt-us-congress-itcbre86h1ia-20120718,0,2630620.story
2. http://www.usitc.gov/
3. http://info.usitc.gov/ouii/public/337inv.nsf/Pending?OpenView
4. http://www.insurancejournal.com/news/national/2012/07/19/256268.htm
5. http://www.insidecounsel.com/2012/03/20/ip-determining-if-the-itc-is-right-for-your-patent