As we close in on the end of the year, it seems like a good time to look at who exactly has been bringing cases before the International Trade Commission (ITCInternational Trade Commission). The ITC’s mission includes investigating and making determinations related to unfair foreign trade practices, including patent infringement, that harm U.S. industry. And the ITC’s primary tool for this is 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., barring products from entering the United States.
Used properly, exclusion orders are a protection against unfair trade practices. But patent trolls have weaponized Section 337 investigations and the potential for exclusion orders to force American companies to pay them for weak patents of limited or no value. And even if 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. isn’t ultimately issued, the process of defending against patent trolls’ claims is extremely costly for the companies targeted—costs of defending an ITCInternational Trade Commission action were estimated at approximately $8 million per patent in suit. (And there’s almost never just one patent asserted.) And the impact of 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. is so huge—completely removing products from the U.S. market—that even if a company is confident that the patent infringement claim is bogus, they may decide to settle anyways. The possibility of 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., no matter how unlikely, is rarely worth the risk.
The ITCInternational Trade Commission plays a vital role in addressing unfair trade practices, but, as mandated by statute, its decisions need to serve the public interest. It is not in the public interest for the ITCInternational Trade Commission to serve as an alternate venue for meritless, abusive patent litigation.
According to the ITC’s own data, patent trolls are responsible for a massive share of ITCInternational Trade Commission Section 337 investigations — 21% in 2020 and 19% in 2021. So, who are these shell companies?
Here are some of our “favorite” trolls at the ITCInternational Trade Commission from recent years.
- DivX LLC: DivX is a subsidiary of Fortress Investment Group. Yes, that’s the same private equity company that tried to use Theranos patents to go after COVID-19 test technology early in the pandemic) petitioned for a Section 337 investigation against Amazon and Vizio, targeting television sticks and tablets among other electronic devices. This was just one of a long series of attempts by DivX to monetize weak patents against companies that actually make products. (This is particularly ironic given DivX’s origins as a company whose codecs were best known for their use in movie piracy.)
- Neodron: In 2021, the ITCInternational Trade Commission instituted a Section 337 investigation into Cypress – an American semiconductor manufacturer acquired by Infineon Technologies – among others because of a complaint by the Irish patent troll Neodrón. Neodrón is the same patent troll that has made exorbitant claims against companies like Amazon, HP, and Microsoft. One previous claim alleged infringement related to the importation and sale of “certain capacitive touch sensing systems, capacitive touch sensing controllers, microcontrollers with capacitive touch sensing functionality, and components thereof”. If Neodrón’s claim was found to be valid, nearly 88% of smartphones sold in the U.S. would be taken off the market. The 2021 case was another example of attempted extortion by Neodrón and it was terminated, but only after Neodrón reached a settlement with the targeted companies.
- Q3 Networking: In 2020, patent 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. Q3 Networking filed an ITC complaint over the “sale of certain routers, access points, controllers, network management devices, other networking products, and hardware and software components thereof.” A Section 337 investigation was subsequently instituted against companies including CommScope, Ruckus Wireless, Hewlett Packard, and Netgear. The ITCInternational Trade Commission found no violation after a costly multi-year legal battle. Q3 Networking is a subsidiary of the notorious patent 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. IP Edge. IP Edge, of course, is currently best known for trying to avoid having to admit that it’s behind a plethora of patent lawsuits in Delaware.
- Arigna Technology: General Motors was forced to participate in a Section 337 investigation due to a complaint made by patent 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. Arigna Technology in 2021, over alleged importation and sale of “certain power inverters and converters, vehicles containing the same, and components thereof” that are a component of U.S.-manufactured electric vehicles. The patents Arigna is asserting don’t describe an electric car part—they’re about small semiconductors. But suing the semiconductor maker on a $3 part won’t make you the kind of money going after a $50,000 car will. After an expensive legal battle, the ITCInternational Trade Commission determined that Arigna’s patents weren’t infringed and one of them wasn’t even valid. Arigna is associated with the Dublin-based patent monetization firm Atlantic IP—the same company that’s behind Neodron—and is funded by the hedge fund Magnetar Capital.
These examples are just a few of the many instances where patent trolls have weaponized an institution that is supposed to work for American businesses against the very businesses it was intended to protect. The ITCInternational Trade Commission was never supposed to replace U.S. district courts, but that’s how some complainants appear to be trying to use it. Unfortunately, another year has passed without the ITCInternational Trade Commission taking action to remedy this abuse.
Maybe next Christmas, the ITCInternational Trade Commission can give us a present—weeding out bad-faith, outrageous petitions before patent trolls can use the process as leverage against American companies.
And if they don’t? Well, that’s just one more reason that Congress needs to pass the Advancing America’s Interests Act.
