US Trade Commission Should Lose Patent Purview, Academic Says

Inspired by the pre-Christmas import ban on Apple Watches, a leading patent-law academic proposed eliminating the US International Trade Commission as a venue to litigate patent disputes.

The ITC already faces legal and lobbying challenges from Apple Inc., the largest US tech company, after banning imports of certain Apple Watches with blood-oxygen measuring tools in response to a patent-infringement action from Masimo Corp. Apple’s efforts aim to blunt the ITC’s ability to issue trade bans in response to legal actions brought by non-practicing entities, or NPEs, that own and assert patents but don’t make products based on the technology.

Reforms of the ITC’s patent jurisdiction shouldn’t be limited to NPEs, said Jorge Contreras, a law professor at the University of Utah’s S.J. Quinney College of Law, in both a June 20 phone interview with Bloomberg Law and a yet-to-be-published law review article he previewed earlier in the day on social media.

The ITC should leave the patent litigation game entirely, Contreras wrote. The former litigator called the tribunal’s work wasteful and duplicative of the work of federal courts, where patent-owning inventors have traditionally sued alleged infringers going back more than 200 years.

“At the end of the day,” he said, the agency “isn’t accomplishing anything that valuable, other than giving patent owners a second bite at the apple, which of course they love and of course they want to keep.”

Apple-Masimo Fight

That’s what happened with Masimo, Contreras said. The medical-sensor maker sued Apple in a federal court in California before launching its successful ITC action, which Apple is now appealing at the US Court of Appeals for the Federal Circuit.

Contreras said he’d been kicking around ideas about possible patent-related reforms to the ITC for more than a decade but decided to write the article following the heavily publicized smart watch import ban.

The ITC requires patent owners petitioning it to ban a competitor’s imports to demonstrate the existence of a domestic industry for products covered by the asserted patent or patents. Apple argued in its opening appellate brief that that domestic industry requirement should’ve doomed Masimo’s bid because the medical device company developed a competing smart watch only after filing its complaint.

But Contreras said he’s not sure a more stringent version of that requirement would necessarily be a bar to Masimo or other similarly situated patent owners.

“I have nothing against those other reforms, but they just don’t quite go far enough,” Contreras said. “Masimo’s not an NPE. Masimo’s a real company—a domestic company.”

Contreras’ article takes issue with how domestic companies are defined by the agency “as encompassing the patent enforcement and monetization business.”

He also critiqued other aspects of the ITC’s rulings. In the Apple-Masimo case, for example, Contreras said the agency instituted a ban on a product with a large number of features based on a single infringing feature. “While interesting, blood pressure monitoring is only one of hundreds of features embodied in an Apple Watch, many of which are arguably more central to its market appeal,” he wrote.

“I’m not representing Apple at all,” Contreras said, “but they’re an American company, and they and every other electronics firm has products manufactured overseas, which they do because it’s cheaper and saves American consumers money.”

“I don’t think there was ever a policy goal of penalizing American companies,” he said, referring to both the 1916 legislation creating the ITC and subsequent amendments to its enabling legislation in the 1970s and ‘80s that established the agency as an adjudicator of patent disputes.

Immediate Pushback

Contreras said the article is set to run in a Harvard academic journal. Within hours of previewing it on LinkedIn, the post had elicited responses from several patent-rights advocates and lawyers defending the trade agency.

The ITC “quickly stops copies of patented inventions at the border,” said Josh Malone, policy director at US Inventor in a comment on Contreras’ post. “To obtain an injunction in district court is nearly impossible,” he continued. As such, the ITC “protects and encourages investment in American industry.”

Contreras said he expects more criticism from patent owners and litigators who represent them, which he chalked up to the advantages he says they have at the ITC. The agency, he said, moves fast compared to most district courts and makes it easier for patent owners—particularly NPEs—to get injunctions blocking the sale of products than courts do.

Patent infringement-related injunctions became harder to obtain in district courts, particularly for NPEs, following the 2006 US Supreme Court decision in eBay v. MercExchange. That decision and the rise of the US Patent and Trademark Office’s Patent Trial and Appeal Board as a venue to challenge the validity of patents are among developments that inventors and their advocates say show the pendulum has swung too far in the direction of would-be patent infringement defendants.

“Certain corporate interests have been trying to weaken the patent system for years,” Alison Aubry Richards of Global IP Law Group in Chicago told Bloomberg Law in an email. “I’m not at all surprised that a logical next step is trying to weaken the ITC or do away with it.”

Richards called the agency “one of the few places where you might be actually get an order stopping someone from using your patented technology” and said it offered relatively fast relief to patent owners in the wake of eBay.

She said defense lawyers and big tech companies also overstate just how advantageous the tribunal is for patent holders and how easy it is to secure injunctions there—in part due to all the publicity surrounding the Apple-Masimo decision.

Harry Vartanian, an inventor and patent lawyer at Darrow Mustafa PC who responded to Contreras’ post, said if injunctive relief was more within reach for patent owners suing in district courts “less would opt for the ITC.”