The International Trade Commission Is Opening the Door to Abusive Patent Owners and Endangering U.S. Businesses

The International Trade Commission, or ITC, is a forum that’s meant to protect U.S. industries from unfair trade practices. But in recent years, the prime beneficiaries of the sprawling ITC haven’t been American manufacturers, but patent owners, patent lawyers, and—you guessed it—patent trolls. 

The ITC is a quasi-judicial agency, that has the power to act a lot like a court. An administrative judge decides disputed issues, including allegations of patent infringement. When patent owners show imported items infringe, the ITC can ban those products from coming into the U.S., with “exclusion orders” that stop further importation.  

The ITC has been steadily expanding its patent enforcement powers for some years now. Patent owners have been treating it as a kind of super-powered patent court, because the exclusion orders they can get are so valuable. That’s especially true now, since court injunctions that stop products from reaching consumer markets have become very hard to get in district courts.

Now, the ITC is expanding its powers again. That’s why we’ve joined with R Street to file an amicus brief [PDF] telling the Supreme Court to stop the ITC from getting involved in domestic patent disputes that have nothing to do with foreign trade. 

In a recent case between Rovi and Comcast, the Commission ruled that it can issue exclusion orders against companies that don’t import anything at all. The ITC has held that Comcast’s set-top boxes can infringe Rovi’s software patents, and be subject to an exclusion order—even though they’re imported by another company, and don’t infringe when they’re imported. What’s more, to infringe the patent, Comcast users would have to be using a (non-imported) mobile app.

This case never should have gone to the ITC. It’s a dispute between two U.S. companies about activities that occur in the U.S.—the installation and use of mobile apps on Comcast set-top boxes. It has nothing to do with unfair trade practices. Yet, the ITC could issue a sweeping exclusion order affecting millions of products.

If the Supreme Court doesn’t take up this case and reverse it, more patent owners—including patent trolls—will be able to drag U.S. companies into expensive ITC investigations for using basic computer and networking technology. Those companies could face exclusion orders forcing them to stop building and selling products and services that U.S. consumers want and need.

Increasingly, patent trolls are coming to the ITC, because they’re looking for the leverage they no longer can get from district court injunctions. In 2007, the Supreme Court decided eBay v. MercExchange [PDF]. That decision essentially stopped patent trolls that don’t make or sell anything from getting court injunctions that remove products from shelves. The business of patent trolling has continued since eBay, but because the high court put an end to automatic injunctions in patent cases (as EFF and others argued they should), trolls lost a huge amount of leverage.

Opening the ITC to patent trolls has been disastrous. It allows them to get extortionate leverage over U.S. consumers by getting within striking distance of powerful ITC exclusion orders, and thus allows them to get around limits that the Supreme Court imposed in eBay. Right now, the ITC is letting an Ireland-based patent troll move forward with a case that seeks to ban the importation of 80% of Android tablets, 86% of Windows tablets, more than 50% of Android smartphones, and 97% of premium Android smartphones

People who make, use, and sell basic computer equipment are already plagued by the threat of weak software patents. The last thing users and small businesses need is yet another venue where they can be subject to spurious, but expensive, patent claims. Patent owners shouldn’t be able to drag companies into an international trade court for purely domestic activities, like installing and using software. 

We hope the Supreme Court takes this case, and stops the ITC from wildly expanding its authority. After that, it’s high time for Congress to consider legislation that could actually fix this outdated, out-of-control trade court. Since 2010, ITC judges have held that patent trolls and their patent-licensing activity constitute a “domestic industry” eligible for protection and ITC action. That’s right—the U.S. “industry” they’re protecting is, in some cases, pure litigation.  That’s distorted markets while hurting productive businesses and their consumers. As we have said for years, Congress should reform the ITC to kick out patent trolls

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Author: Joe Mullin

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