Yesterday, the International Trade Commission (ITCInternational Trade Commission) instituted an investigation based on a complaint filed by an apparent non-practicing entity (NPENon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More), SIPCO. The ITCInternational Trade Commission, as Patent Progress has covered in the past [1][2], is intended to protect American manufacturers from unfair foreign competition.
So why did the ITCInternational Trade Commission institute an investigation of American companies filed by an NPENon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More?
NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More Fleeing From EDTX To The ITCInternational Trade Commission
After the Supreme Court’s TC Heartland decision made it harder to file suit in the notoriously NPE-friendly Eastern District of Texas, Patent Progress predicted that NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More might try to shift venues to the ITCInternational Trade Commission. This appears to be an example of exactly that. While SIPCO claims not to be an NPENon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More, their website focuses on their patent licensing business; the ‘products and consulting services’ they claim to offer are not described in detail (unlike their patent list and licensing structure.)
The ITCInternational Trade Commission is a desirable venue both because it can grant an exclusion orderAn order issued by the U.S. ITC as a result of a 337 action, excluding from entry into the United States goods found to infringe a U.S. patent. (effectively an injunction against any products manufactured outside of the U.S.) and because the ITCInternational Trade Commission has a highly compressed case schedule, making ITCInternational Trade Commission trials expensive for defendants. The combination of these two factors means that an ITCInternational Trade Commission case carries more expense and more risk for defendants—making them more likely to want to settle.
I Thought The ITCInternational Trade Commission Defended Against Unfair Foreign Competition
In theory, the ITCInternational Trade Commission is intended to protect American industry against unfair competition from foreign entities.
In practice, the ITCInternational Trade Commission frequently institutes investigations against American industries.
In this case, the ITCInternational Trade Commission is taking aim at two long-standing American innovators. If an industry manufactures a portion of its products overseas, then they can have their products excluded by the ITCInternational Trade Commission even if the company is American and the research and development and product design was done in the U.S. Here, important defendants include Emerson Electric (headquartered in St. Louis, MO, with a subsidiary in Bloomington, MN) and Analog Devices (headquartered in Norwood, MA, with subsidiary Linear Technologies headquartered in Milpitas, CA). Between the two, they employ over 100,000 people.[1. Emerson Electric is over a hundred years old and its history includes being a leading defense manufacturer during World War II; Analog Devices is a bit younger—only fifty—but has been a leading American innovator in semiconductors, including being a premiere manufacturer of the analog-digital converters that take signals out of our analog world and make them into digital data that computers and smartphones can manipulate.]
I Thought The ITCInternational Trade Commission Defended American Industries
In theory, the ITCInternational Trade Commission can only institute an investigation based on a complaint from a company that can show that they create economic value within the United States—the so-called “domestic industry” requirement.
In practice, the ITCInternational Trade Commission will accept just about anything as evidence of “domestic industry.” Most critically, they’ll accept licensing activity—even if the license was made under threat of litigation and didn’t actually lead to a manufactured product. This allows NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More that make nothing and don’t contribute to innovation (more on the linked paper in a future post) to bring ITCInternational Trade Commission cases.
SIPCO, unsurprisingly, relies on licensing activity. They’ve previously licensed their patents to Honeywell. Honeywell makes products. And that might just be enough for the ITCInternational Trade Commission.
So the ITCInternational Trade Commission, in theory a defender of American industry against unfair foreign competition, is actually allowing NPEsNon-Practicing Entity. A broad term associated with trolls but now disfavored because it includes universities and legitimate technology developers that seek to license technology in advance rather than after a producing company has independently developed it. More to target American manufacturers. How do we fix it?
Fixing The Problem
One option would be to pass the “Trade Protection, Not TrollAn entity in the business of being infringed — by analogy to the mythological troll that exacted payments from the unwary. Cf. NPE, PAE, PME. See Reitzig and Henkel, Patent Trolls, the Sustainability of ‘Locking-in-to-Extort’ Strategies, and Implications for Innovating Firms. Protection” Act (TPNTP) introduced by Rep. Cárdenas and co-sponsored by Rep. Issa. TPNTP would require that any licensing activity used to prove domestic industry must show how the licensing led to the product, rather than allowing a license taken after the product was released under threat of litigation to suffice. TPNTP would also require that the licensee join in the ITCInternational Trade Commission case. Given that SIPCO relies on an assertion that their licensees make products—an assertion that is questionable at best, and only weakly tied to the patents—they would be far less likely to be able to successfully bring an ITCInternational Trade Commission suit if TPNTP were law.
The second option is far simpler. Bar ITCInternational Trade Commission jurisdiction over patent cases where a defendant is subject to the jurisdiction of the U.S. district courts. Return the ITCInternational Trade Commission to its proper role—handling unfair competition from entities that aren’t subject to the U.S. district courts—and let the district courts handle infringement cases, the way that the courts have done since the first Patent Act in 1790.