PublishedAugust 18, 2020

Reps. DelBene and Schweikert Introduce Important Bipartisan ITC Reform Bill

Last week, Representative Suzan DelBene (D-WA) and Representative David Schweikert (R-AZ) introduced a bipartisan bill that would return the International Trade Commission (ITC) to a focus on its mission of protecting American industry from unfair foreign competition.  H.R. 8037, the “Advancing America’s Interests Act” (AAIA), would reform both the domestic industry and public interest inquiries in ITC litigation, helping to keep the ITC focused on protecting U.S. companies and consumers.  

As Rep. DelBene said in her introduction of the bill, “in recent years, patent licensing entities have abused the ITC process for financial gain.”  If this bill had been law, some of the most abusive recent ITC litigation would have been eliminated or significantly scaled back.  And that, in turn, will make sure that Rep. Schweikert’s statement that “America has always been a shining light for innovation” continues to be true.

Making Domestic Industry About The Industry

In order to bring an ITC complaint, the complainant has to be able to show that they have a U.S. domestic industry related to their patent.  For a company that actually manufactures a product, that’s not a problem.  But right now, sufficient activity and industry in licensing a patent can qualify as domestic industry.

That’s not all bad.  It ensures that universities and smaller inventors who partner with larger manufacturing entities can rely on their licensing efforts to bring their case.  But right now, the requirement is just that the patent be licensed and that a product exist that can be pigeonholed into the patent.  That means that if someone licenses the patent under threat of suit, the patent licensing activity qualifies as domestic industry—even when the licensee invented the idea without any help from the patent owner.  Effectively, the patent holder gets to rely on other people’s domestic industry as their own, then reap the profit from someone else’s investment. 

The AAIA would significantly narrow that problem, without eliminating the ability for universities and technology developers who partner with manufacturers to bring ITC cases.  The AAIA requires that the license “lead[] to the adoption and development of articles that incorporate the patent.”  In other words, if you license your patent to someone and they develop a product based on it, that’s domestic industry.  If someone is already making a product and you force them to take a license under the threat of suit, that isn’t.  By tying domestic industry to product development like this, the AAIA makes sure that what the ITC protects is the use of patents to develop new innovations, not the use of patents as weapons against people who independently invented something.

Eliminating Domestic Industry By Subpoena

There’s another aspect of the domestic industry problem.  Instead of showing licensing activities, you can rely on investments in manufacturing equipment or in manufacturing employees who make a product incorporating the patent.  For a company that actually manufactures a product, that’s not a problem.  And for inventors who partner with companies who do the manufacturing, that isn’t much of a problem either.

But the ITC also allows a complainant to prove domestic industry by forcing another company—an unwilling licensee—to be their domestic industry.  This isn’t a rare circumstance.  In fact, this practice is so common that it has its own nickname—“domestic industry by subpoena.”

That unwilling licensee might not want to be involved at all—perhaps it has a good business relationship with the target of the ITC case.  The unwilling licensee might even be financially harmed if the complaint is successful—maybe it supplies components to the target and would lose significant sales if the product is taken off market.  

And even if the licensee wouldn’t be harmed by the ITC’s remedy, it’s still forced to turn over documents describing its valuable technology and then to spend its own time and money testifying as to how its products work.  ITC cases are incredibly expensive—according to AIPLA, typically 2x to 3x as expensive as normal patent litigation, which is already expensive.  Unwilling licensees are forced to bear a significant portion of that cost, with no benefit in sight.

The AAIA would eliminate the ability for a complainant to drag an unwilling company in front of the ITC as its domestic industry.  Only if the company joins the complaint, under oath, can they qualify as domestic industry.

Between the two domestic industry reforms, the vast majority of NPE litigation at the ITC—cases like the SIPCO or Neodron investigations—would be headed off at the pass, ensuring that American innovators can spend their money on innovation, not litigation.

But there’s more to this bill, and this last part might be the most significant one.

Putting Public Interest Back Into The ITC

Right now, the ITC is statutorily required to consider the public interest when determining whether to issue an exclusion order that bans products from the United States.  But it gives that requirement short shrift.  

The ITC has conducted more than 750 investigations under § 1337 over the past 15 years. In those 15 years, they have never refused to issue an exclusion order because of the public interest.  In fact, the last time the ITC refused to issue an exclusion order on public interest grounds was more than 30 years ago, in 1984.  In its entire modern history, the ITC has refused a total of 3 exclusion orders based on the public interest.  In those 750 cases, the ITC never found that the public would be harmed more than aided by blocking products from the U.S.—products including radios used by first responders, tools for gene sequencing, and diagnostic products that can help fight COVID.  Not once.

The Commission often justifies its failure to seriously consider the public interest based on a “strong public interest in enforcing intellectual property.”  But that justification makes a mockery of the statutory requirement to respect the public interest.  By allowing enforcement to outweigh any other aspect of harm to the public, the Commission has effectively ignored the statute.

The AAIA helps remedy that.  Right now, the Commission is required to issue an exclusion order unless it specifically finds that the public interest outweighs exclusion.  The AAIA would require the Commission to specifically find that the public interest is in favor of exclusion.  Instead of paying lip service to the public interest by stating that enforcement of IP is in the public interest and outweighs other aspects of the public interest, the Commission would be required to establish why the public interest favors exclusion.

The AAIA also permits the Commission to reach a public interest determination during the case, instead of only looking at the public interest at the end of the case.  This will help ensure that companies aren’t forced to waste money litigating a case where the public interest clearly weighs against exclusion.

By revitalizing the public interest component in ITC cases, Reps. DelBene and Schweikert will be returning the ITC to what it was always meant to be—an agency where “the public interest must be paramount in the administration of [its] statute.”

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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