The old Southern adage “if it ain’t broke, don‘t fix it” is frequently deployed as an argument against making incremental changes to systems that function as intended, even if it might be at a reduced rate of reliability and efficiency. As the people of Texas recently discovered in hindsight when the great arctic vortex storm of 2021 “broke” the system for delivery of electric power to consumers, the system had in fact needed important incremental changes to handle the severe stress it experienced.
Just like the Texas power grid, the U.S. system for protecting U.S. domestic industries and our economy from unfairly traded imports could use some attention. In particular, the International Trade Commission’s (ITC) adjudication of cases brought under Section 337 to block imports is functioning sub-optimally, inconsistently, and inefficiently.
It features an ever-increasing workload for the administrative law judges who handle Section 337 cases, as well as repeated misfires of the system by investigating complaints and issuing exclusions that harm U.S. interests. The system requires retuning in a number of areas if the ITC is to fulfill its mission.
Scope of Exclusion Orders, Section 337
Let’s take one area—the scope of exclusion orders. To maintain a well-tuned economy with strong competition and consumer choice, decisions in 337 cases must ensure that unfairly traded goods can be kept out of the U.S., while legitimate international trade involving non-infringing, new and redesigned products can continue to flow into the U.S. without any problem.
To achieve this goal, when the ITC unleashes its massive power to block imports from the U.S. market because of unfair competition, it must take every precaution not to impede fair trade and innovation or stifle healthy competition in the U.S. market. Under its current practice, the ITC unfortunately has not been attuned to the need to take all the precautions required to meet these key metrics.
Since Section 337’s enactment through its amendments in the late 1980s and early 1990s, this legal remedy has grown to become a very powerful weapon for IP holders to block the importation of goods—which historically were typically knock-offs of patented consumer goods or industrial equipment. Even in the 1990s, few cases involved complex products.
The system seemed to balance the need to protect U.S. industries reliant on intellectual property, importers’ rights to import fairly traded goods, and U.S. consumers’ need for choice and competition in the marketplace.
Digital Revolution Brings Complexity
Since the onset of the digital revolution, products and patents have become much more complex, making it more difficult, and yet more necessary, to determine what products should be excluded and what products should not.
Unfortunately, ITC exclusion orders have become broader and broader resulting in very few products in any category found conclusively to infringe by the ITC during its investigations. This has put a huge burden on importers to prove to a completely different agency, U.S. Customs, that their non-infringing products, including redesigned products, should not be stopped at the border after ITC’s investigations have ended.
The ITC set a supposed policy of assessing redesigns that were presented during the initial 337 investigation, and clearing them for import where they did not infringe, to keep fair trade and innovation moving forward. This is a win-win policy. The IP holder gets infringement to cease, importers know what products can continue to be imported, and U.S. consumers get prompt access to newly redesigned products to ensure a fair and competitive marketplace.
However, the ITC’s lack of a consistent approach to reviewing redesigned products may generate presumptive import bans on non-infringing products to the detriment of importers and U.S. consumers. It also creates business uncertainty.
Whenever the ITC fails to assess a redesign, this just adds to the prevailing uncertainty regarding whether the ITC will assess redesigns the next time. Further, if the respondent cannot count on avoiding the effects of an exclusion with a redesign, this tilts the balance of power dramatically, perversely increasing complainants’ leverage to achieve an extortionate settlement
In the end, such results impair the ITC’s credibility and its execution of its mandate to protect free and fair trade.
How does one remedy this situation? A modest tweak to ITC standards of practice would establish a system whereby the ITC adjudicates a redesign of the product or component accused of infringement, if the redesign is submitted for evaluation during the pendency of the investigation.
The other alternative, if the ITC cannot self-correct, would seem to be a wholesale review by Congress of the ITC’s function and passage of ITC reform legislation. That is much more time consuming, when it seems a timely incremental change will fix the problem.
Like the Texas power system, the ITC system was not broken until it was. Let’s get it fixed.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Charles B. “Chuck” Meyer, registered patent attorney, is a Texas-based tech lawyer with over 30 years’ experience in international and domestic intellectual property law.