IP Law Daily, PATENT NEWS: Lawmakers probe use of ITC by patent holders to exclude tech imports, (Apr 15, 2016)

By Lynn Stanton, TR Daily

Members of the House Judiciary courts, intellectual property, and the Internet subcommittee probed witnesses on whether patent-assertion entities are venue shopping, and inappropriately seeking importation exclusion orders from the International Trade Commission when viable relief is available from the federal courts, at an April 14 hearing.

Subcommittee Chairman Darrell Issa (R-Calif) cited a dispute between Eastman Kodak Co. and Apple, Inc., that Kodak pursued through the ITC. “Apple had enough money in the bank to buy Kodak,” and hence could have been compelled to pay any court-ordered damages, yet Kodak went to the ITC as though it could not get relief from the courts, Chairman Issa said.

Similarly, a dispute between Broadcom Corp. and Qualcomm, Inc., ended up at the ITC, although the companies are located an hour apart on the West Coast and there was no reason to think Qualcomm could not pay damages, he added.

In his opening statement, subcommittee ranking minority member Jerrold Nadler (D-NY) noted that “the ITC has begun a pilot project, which it proposes to codify and expand, allowing the Commission to identify potentially case-dispositive issues when an investigation begins, and direct the presiding judge to issue an Initial Determination of those issues within 100 days. If used to its full extent and made permanent, this may help weed out weak claims at an early stage and discourage many others from even being filed. Indeed, recent statistics indicate that filings by NPEs has dropped from its peak between 2008 and 2011.

“I hope our witnesses will help us to understand whether this reduction in filings is just temporary, or whether the ITC has adequately addressed the concern over abusive litigation through these and other measures,” he continued. “And if further action is necessary, does the ITC have sufficient tools at its disposal, or is congressional action required?”

“I also look forward to a discussion of whether patent litigation at the ITC serves as a complement to district court litigation or whether they conflict with each other. As an independent, quasi-judicial federal agency focused solely on trade, the ITC operates under a different set of rules with a different mandate than Article III courts,” Rep. Nadler said.

Full Judiciary Committee Chairman Bob Goodlatte (R-Va) said, “It is evident that there are cases that have come before the ITC that probably should have been litigated exclusively in our U.S. District Courts. Nowhere is the disharmony between patent law and Article III court precedent more on display than the application of exclusion orders in technology cases at the ITC.”

Chairman Goodlatte continued, “The following are some steps stakeholders have recommended the ITC take to address this problem. First, a return to a pre-2010 domestic-industry standard that does not allow legal expenses, airplane flights, and the like to satisfy the domestic-industry requirement.

“Second, application of the public-interest test and economic-interest test at the beginning of a Section 337 review for purposes of determining claims consideration as well as the issuance of exclusion orders.

“And third, based on the public-interest and economic-interest test analysis, articulation of standards that clarify which patent disputes should be adjudicated by the ITC and those which are more properly addressed by U.S. district courts.

“I look forward to hearing from all of our witnesses on patent litigation issues at the ITC, to learn more about the progress that has been made and the work that still remains, in order to ensure that we continue to promote American ingenuity, innovation and jobs.”

Rep. John Conyers (D-Mich), ranking minority member for the full Judiciary Committee, said, “Any legislative changes to section 337 [which controls ITC authority] should avoid unintended consequences, particularly with respect to any adverse impact they may have on American innovators.” He also said that lawmakers should consider the ramifications of the Supreme Court’s 2006 eBay v. MercExchange decision, which said that patent holders seeking an injunction in federal courts must satisfy the same four-prong test applied to other requests for injunctions.

Witness Deanna Okun, former ITC chairman and currently a partner in the law firm of Adduci, Mastriani & Schaumberg LLP, said, “We want our most innovative companies to have more, not fewer, opportunities to address infringement.”

John Thorne, partner in the law firm of Kellogg Huber Hansen Todd Evans & Figel PLLC, said, “We did a quick count of cases at the ITC to see how many were companies with American assets, and the answer was almost all of them,” and most disputes before the ITC cases involved parallel court cases, he said.

Mr. Thorne said that he represented a plaintiff who chose to pursue its set-top box patent dispute with a cable TV company before the ITC because of “the unique leverage” available from the import exclusion injunction. Under the eBay ruling, he said that he believe a district court would have denied an injunction, while allowing monetary damages.

News: Patent