ITC Must Change Policies to Curb Rise in Patent Disputes, Lawmakers Say
Members of the House IP Subcommittee offered suggestions Wednesday during a hearing to curb the rising number of patent disputes at the U.S. International Trade Commission. The ITC is an independent, quasi-judicial government agency tasked with assessing the impact of imports on U.S. industries and overseeing actions against unfair trade practices. Subcommittee Chairman Bob Goodlatte, R-Va., said the average number of ITC complaints filed annually during the past decade is nearly triple the average for the previous decade, and “bogus lawsuits” continue to proliferate despite the passage of patent reform via the America Invents Act. Rep. Zoe Lofgren, D-Calif., described the increasing number of patent disputes at the ITC as a “shakedown situation."
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Goodlatte questioned whether the Supreme Court decision in eBay v. MercExchange was a driver for the increase in ITC cases in recent years. The case affirmed the traditional four-factor test for deciding when injunctive relief is appropriate for patent cases and subsequently increased the hurdles for so-called “patent trolls” to seek remedy in district courts, he said. Goodlatte posited that ITC may have become a new forum for patent trolls to seek money from U.S. innovators and questioned whether the commission is too “cavalierly” granting exclusion orders. Though Goodlatte did not recommend any specific legislative solutions he said committee members are interested in communicating ideas to reform how the commission approaches patent disputes.
Ranking Member Mel Watt, D-N.C., said consumers are the losers in the escalating “patent arms race” and urged members to restore order. Entities are using “patent holdups” as an unfair negotiating tool to undermine their rivals, he said. “The ability to leverage standards essential patents to obtain an exclusion order may result either in these products being excluded from the market altogether or the companies paying unreasonable royalty rates to prevent an exclusion. Either way the consumer loses,” said Watt. “It is time for the patent wars to find patent peace. They are a drain on the economy … and ultimately not good for the consumer or the company."
Watt suggested giving the ITC the authority to punish litigants who bring frivolous cases to the agency. Witnesses said they were generally receptive to shifting legal fees to entities who are acting in bad faith. But Tessera Technologies General Counsel Bernard Cassidy, whose company has large IP holdings in wireless, consumer and computing technologies, objected. “It is a part of our legal system to allow people into the court and into the system at a very low threshold,” Cassidy said. “Every judge knows that there will be nuisance cases brought before them."
Judiciary Committee Ranking Member John Conyers, D-Mich., is concerned about large companies using patents to advance their competitive position, he said. “The large corporations have taken to collecting patents as a legitimate competitive tool to concentrate market power,” he said. “I don’t think it is the little companies that are keeping us unorganized. I gave up that naivete years ago.” But witnesses disagreed that the issue is about large companies or institutions using their resources to subjugate smaller organizations.
Congress should act if the ITC doesn’t move to curb “anti-capitalistic behavior,” said Colleen Chien, a Santa Clara University law professor. She said it’s easier for patent trolls to acquire an injunction at the ITC than it is in district court. The ITC is not being used for its intended purpose, as U.S. companies are more likely to find themselves in ITC patent disputes than foreign companies, she said. Ford Motor Co. IP Counsel David Kelley said the increased patent litigation at the ITC is a “problem that is hurting American manufacturers.”
Cassidy said it would be “premature” for lawmakers to broadly legislate on the issue, and they instead should seek targeted remedies in cases where the ITC has failed. Congressional action should be reserved for a time when there is “strongest disagreement with the ITC’s interpretation of when relief is appropriate for patent holders,” he said. Congress shouldn’t extend the principles of the eBay decision to the ITC, as it would “substantially impede the ability of the commission,” he said.
Rep. Darrell Issa, R-Calif., salted wounds left by January’s House Judiciary markup of the Stop Online Piracy Act (SOPA). He asked witnesses whether the ITC’s “rocket docket” format permits entities to litigate cases faster and cheaper than in other courts. Chien said yes, the ITC is generally “better at keeping a deadline” and cases can be litigated on a faster basis. Issa then promoted his Online Protection and Enforcement of Digital Trade Act (HR-3782), a SOPA alternative, which would authorize the ITC to open investigations into foreign infringing websites.