US ITC Injunction Reform Efforts

In Ben Sitkoff’s guest post in the Patently-O blog titled “PatentReform 2014: Removing Non-Practicing Entities from the USITC’s Jurisdiction,” he discusses a recent bill introduced in the House of Representatives, which aims to prevent non-practicing entities (NPEs) from using the International Trade Commission as a venue for patent disputes.

As background, the ITC is responsible for rulings regarding the importation of goods into the United States, and may prevent the importation of items that infringe US patents, trademarks, or copyrights. In order to create an injunction through the ITC, a plaintiff in the ITC must prove that there is a domestic industry protected by that IP.

Before 2006, injunctions were a common damage awarded to NPEs in federal courts, causing substantial damage to the practicing entity, and incentivizing practicing entities to settle cases. However, after the eBay v. MercExchange case, obtaining injunctions in District Court became more difficult, especially for NPEs. The ITC, on the other hand, injunctions are still common, with winning complainants automatically receiving an importation ban against at least the parties found to infringe.

In order for an NPE to win an injunction through the ITC, however, it must, as previously stated, prove that there is a domestic industry in products protected by the patents the defending parties are infringing upon. While the most obvious case of this would be the complainant making a product protected by a patent and the respondents importing devices that infringe that patent, complainants could also prove that they had made substantial investments to license other parties to their patents, or that people who have licenses also have products that practice the asserted patents.

This House bill aims to reform NPE’s abuse of ITC injunctions by revising this proof requirement to be more stringent. However, it has several immediate problems regarding its language.

1.      It aims to modify the ability to rely on licensing by replacing “licensing” with “substantial investment in licensing activities that leads to the adoption and development of articles that incorporate the patent, copyright, trademark, mask work, or design.” The issue with this phrasing is that “articles that incorporate the patent” has no clear meaning in case law, while “incorporate the… copyright” leaves the meaning of “incorporate” ambiguous.

2.      The bill aims to target a recent rule making change in the ITC which allow a preliminary investigation with respect to the domestic industry. However, the short-description of the bill, and the bill itself, disagree on the timing. While the one-pager limits this preliminary investigation to 45 days after it has been started, the actual bill limits this investigation to no later than 45 days after the filing of the complaint. The ITC has historically only initiatied their investigations after the complaint has been filed for thirty days. Furthermore, 45 days is less than half the time the ITC had previously alloted for these investigations. Overall, this 45 day limit severly handicaps parties’ ability to conduct discovery, submit briefing, hold a preliminary hearing, and issue a written opinion within either 45 days of filing, or even 45 days after a prelimary investigation was initiated.

3.      Even in cases where a complainant fully proves their case, the ITC may choose not to implement an injunction in the interest of the public. This has occurred traditionally in cases wehre public safety and welfare would be endangered by importation bans; however, this bill expands the public interest to include competitive competitions in the US. The implication of this is that, while patent trolls may be hindered from preventing companies from importing, the ITC’s Administrative Law Judges may be reluctant to apply the traditional “public interest” guidelines to consumer luxury goods.

At a high level, this bill succeeds in being the first step in reforming the relationship between patent trolls, importation bans, and the ITC. However, Sitkoff pokes some very valid holes into the wording of the bill, citing some ambiguous language, overly zealous time restrictions, and ambitious definitions as reasons for its potential failure. I think that the bill, having not yet passed the Senate, has plenty of time for revision, and look forward to tracking the progress of the bill as it continues its development.

I further discuss my thoughts on this topic at the following link:
https://www.youtube.com/watch?v=fbTXHBVsuHY