The ITC Needs Bipartisan Reform to Deter Patent Speculators

Americans benefit from innovation and the policies and protections that promote it. However, the very system intended to protect US trade interests and innovators from foreign counterfeiters and infringers, notably the International Trade Commission, is being abused by non-practicing entities that specialize in acquiring patents for extortion—not for development or commercialization into products.

Also known as patent trolls, more and more NPEs are filing lawsuits at the ITC where they hope they can win powerful exclusion orders under a law called Section 337. Exclusion orders block allegedly infringing imports from the US, and NPEs use the threat of such an order to shake down legitimate companies and extract a large financial settlement.

Over time, this problem has grown worse. An ITC exclusion order can be based on infringement of a single patent. But today, modern products are increasingly complex and may potentially touch on thousands of individual patents—making it easier and easier for patent trolls to find a single patent hook that justifies their bringing an exploitative infringement claim.

These abusive practices at the ITC have increasingly real consequences given the IP-intensive nature of the modern economy. IP-intensive industries are some of the largest pistons of America’s economic engine—in 2019, they accounted for 41% of output ($7.8 trillion) and 44% of jobs (63 million).

Yet these same IP-intensive industries are frequently in the crosshairs of NPEs. And it’s not just the large firms that suffer from the ITC’s tolerance of patent trolls. Small business owners and entrepreneurs are often the victims of bad actors as well.

Congress must act to modernize the ITC and make it less hospitable to patent trolls. Fortunately, the re-introduced bipartisan Advancing America’s Interest Act would restore the ITC to its intended purpose: promoting legitimate US entrepreneurs, not patent speculators.

The ITC is an increasingly popular forum for patent cases because its investigations finish quickly relative to courts and because ITC exclusion orders are such a sweeping, powerful remedy, easily obtained compared to court injunctions. Bad actors know and exploit this. Patent trolls don’t innovate or make anything—they acquire portfolios of patents that are often old, weak, or of minor technical importance just to file lawsuits.

The threat of ITC exclusion orders empowers patent trolls with tremendous leverage to threaten and extract huge financial settlements. Trolls can easily threaten a total ban for an entire product line, whether that be a car, a computer, or a smartphone, with a simple claim on one minor patent out of tens of thousands that are potentially relevant to any one product.

Respondents, which are often highly productive and innovative companies supporting thousands of US jobs, will usually simply pay the patent troll a settlement rather than litigate the issue at the cost of many months and millions of dollars.

The ITC needs commonsense reforms so it can support the modern digital economy and protect US consumers and job creators. It’s time to rein in patent trolls and end their abuse. Passing the Advancing America’s Interests Act will meet this challenge.

By modernizing and reforming Section 337, the AAIA would allow the ITC’s exclusion order process to operate as Congress intended: by helping productive, innovative domestic companies that want action against unfair imports, and ensuring all ITC actions further the broader public interest.

The AAIA would also require entities that bring Section 337 cases to show that the patent at issue led to the development of an actual product that incorporates the patent. If the patent isn’t being used to develop an actual product, there’s no reason that the agency should be using taxpayer resources to hear these cases.

The re-introduction of the AAIA could not have come at a better time. The ITC has boasted that its Section 337 docket is growing every year, and that it involves a significant portion of America’s IP-intensive sector. Unfortunately, IP-intensive companies, with real jobs in America, are too often on the receiving end of threats of an ITC exclusion order—with non-practicing trolls bringing more and more complaints against these innovative companies.

Passing the AAIA would modernize the ITC and send a clear message to patent trolls. The public interest benefits of protecting US businesses and consumers far outweigh helping a patent troll make a quick buck. Congress must act. The cost of delay is too real.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Roslyn Layton is an international tech policy expert.

Write for Us: Author Guidelines