Patent Reform 2014: Removing Non-Practicing Entities from the USITC’s Jurisdiction

This is a Guest Post from attorney Ben Snitkoff who originally posted it on the blog Technically Legal. Technically Legal is a blog and podcast run by three technology-focused lawyers and their technology expert: David O’Brien, Dominik Rabiej, Ben Snitkoff, and David Lu.

Two Representatives have introduced a bill in the House aimed at preventing non-practicing entities (NPEs) from using the International Trade Commission (ITC) as a venue for patent disputes.

First, some background. The ITC is an administrative body charged with holding hearings and making adjudications regarding imports into the United States. In addition to its other duties, it may prevent the importation of items that infringe US patents, trademarks, or copyrights. However, in order to prevent importation of infringing articles, a complainant (or plaintiff) in the ITC must prove that there is a domestic industry protected by that IP.

Before 2006, injunctions were regular in patent cases in Federal District Court. If an NPE won a case against an operating company, the NPE would almost certainly get an injunction, causing substantial damage to that company. The risk of facing an injunction was a powerful force in driving operating companies to settle cases. If the alternatives are pay money or shut down, many companies would opt to pay.

After the eBay v. MercExchange case, obtaining an injunction in District Court became more difficult, particularly in cases where the plaintiff was an NPE. However, the ITC is a creature of statute, and doesn’t play by the same injunction rules. If a complainant wins a case in the ITC, they automatically get an importation ban against at least the parties found to infringe. However, in order to win the case, you must prove that there is a domestic industry in products protected by the patents the other parties infringe. The most obvious case is that the complainant makes a product protected by a patent, and the respondents are importing devices that infringe that same patent.

After revisions to the statutes that govern the ITC in 1998, complainants could prove that there was a domestic industry by showing that they made substantial investments to license other parties to their patents, or that people who have licenses also have products that practice the asserted patents.

In recent years, investigations filed by NPEs have accounted for a growing percent of investigations before the ITC, and the call for reform has been growing.

The bill introduced in the House purports to be that reform. However, whether the bill would be effective is questionable, particularly because there is no word yet of a corresponding bill introduced in the Senate.

There are several immediate problems with the bill. First, the bill attempts to modify the ability to rely on licensing by replacing the word “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

This provision is, at best, inartfully drafted. “Articles that incorporate the patent” has no clear meaning in case law. Similarly, with “incorporate the . . . copyright.” This invites litigation over the meaning of the term when it could be more clearly stated as:

substantial investment in licensing activities that leads to the adoption and development of articles that practice the patent, embody the copyrighted work, or incorporate the trademark, mask work, or design

It is also not very clear what the drafters mean by “adoption and development” and why both actions are necessary, as long as there is “substantial investment” in those articles.

The bill proceeds to put in statute, with some modifications, some recent rule making changes in the ITC which allowed a preliminary investigation with respect to domestic industry. However, the short-description of the bill and the bill itself disagree on the timing. The 1-pager says that “once a preliminary investigation in initiated, requiring [sic] an early initial determination as to the DI standing of a complaint within 45 days.” However, the bill requires that “The Commission shall render its determination in the preliminary investigation under this paragraph not later than 45 days after the filing of the complaint.”

Typically, in ITC practice, an investigation is not initiated until thirty days after the complaint is filed. Additionally, forty-five days is less than half the time the Commission has previously allotted for these preliminary investigations. It seems virtually impossible to allow the parties to conduct discovery, submit briefing, hold a preliminary hearing, and issue a written opinion within either forty-five days of filing, or even forty-five days after a preliminary investigation was initiated.

Finally, even in cases where a complaint fully proves their case, the ITC may choose not to exclude certain articles for importation if it was not in the public interest. Those rare cases were traditionally limited to cases where public safety and welfare were endangered by an importation ban. This bill expands the public interest to include competitive conditions in the United States. This section appears to accomplish what it sets out to do, though the ITC’s Administrative Law Judges may be reluctant to hold that the importations of consumer luxury goods rise to a level of public interest so important as implicate these new guidelines.

42 thoughts on “Patent Reform 2014: Removing Non-Practicing Entities from the USITC’s Jurisdiction

  1. ‘Two Representatives have introduced a bill in the House aimed at preventing non-practicing entities (NPEs) from using the International Trade Commission (ITC) as a venue for patent disputes’

    Can you say dissemble? All these bills are ever designed to do is legalize theft, making it easier for large multinationals to rob and crush their would be small competitors.

    link to npr.org
    link to npr.org

    The patent system now teeters on the brink of lawlessness. Call it what you will…patent hoarder, patent troll, non-practicing entity, shell company, etc. It all means one thing: “we’re using your invention and we’re not going to stop or pay”. It’s a pure red herring by large invention thieves and their paid puppets to kill any inventor support system. Their goal is to legalize theft. The fact is, many of the large multinationals and their puppets who defame inventors in this way themselves make no products in the US or create any American jobs and it is their continued blatant theft which makes it impossible for the true creators to do so. To infringers the only patents that are legitimate are their own -if they have any. Meanwhile, the huge multinationals ship more and more US jobs overseas.

    It’s about property rights. They should not only be for the rich and powerful -campaign contributors. America’s founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity and the jobs the commercialization of those inventions bring. For 200 years the patent system has not only fueled the US economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius (anyone know how to make a Stradivarius violin?) and in turn weaken our economy and job creation. Worse yet, we destroy the American dream -the ability to prosper from our ingenuity for the benefit of our families and communities. To kill or weaken the patent system is to kill all our futures. Show me a country with weak or ineffective property rights and I’ll show you a weak economy with high unemployment. If we cannot own the product of our minds or labors, what can we be said to truly own. Life and liberty are fundamentally tied to and in fact based on property rights. Our very lives are inseparably tied to our property.

    Prior to the Supreme Court case eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the eBay decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back into the patent system with injunctions fully enforceable on all infringers by all patentees, large and small.

    Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    For the truth about trolls and so-called patent reform, please see link to truereform.piausa.org.
    link to piausa.wordpress.com
    link to kentucky.com
    link to hoover.org

    1. ll these bills are ever designed to do is legalize theft, making it easier for large multinationals to rob and crush their would be small competitors.

      Complete and total b.s.

    2. Prior to the Supreme Court case eBay v Mercexchange, small entities had a viable chance at commercializing their inventions.

      Small entities are commercializing their inventions every day.

      The really smart ones do it without wasting the money on jnky patents.

      Put a fork in it already. Learn to innovate like a grown-up instead of grifting off the work of others. Any twelve year old can sit around and read Big G.’s “innovators we watch” and come up with “improvements” to the computer-implement jnk that he spotlights there (at the same time regularly sponsoring “guest posters” who repeatedly claim that “big corporations don’t innovate” — go figure. It’s past time for the patent txxbxggers to get a life. But grifters only know how to grift so don’t hold your breath.

      1. like a grownup…

        grifting off the work of others…

        It’s opposite day in the land of Malcolm.

        (and again with the false characterization that large corporations don’t patent – that is not and has never been the position – just ask i4i) Just stick your head back into the sand and pretend that patents are only for “grifters.”

  2. Would a university or other R&D entity ever be able to use the ITC to protect is business model? If instead of licensing the patent, foreign entities simply chose to import infringing articles, is there no remedy — ever? Must one sue in court every end user?

    Such a bill seem like using sledge hammer to swat a fly. Trolls are properly defined as people who assert invalid patents or whose infringement claims are dubious at best. We should stop saying everyone with a valid patent and solid infringement claims is a troll.

    And we should stop the effort to undermine R&D in the United States.

    1. We should stop saying everyone with a valid patent and solid infringement claims is a troll.

      Nobody is saying that.

      1. Nobody is saying that.

        Translation: while that is plainly evident that such is what is meant, no one has the intellectual honesty to directly say that because facing the true meaning of what is going on would make the whole change a bit (like in a whole lot) harder to sell.

        1. that is plainly evident that such is what is meant

          If you honestly believe this, you truly do belong in a mental hospital.

          You’re really no different than the shrimpbrains elsewhere on the Internets who argue that people opposed to the death penalty “plainly want more people to be murdered.”

          Most people aren’t as st0 0pit as you. Really. You need to try harder.

          1. LOL – another great strawman built by Malcolm: “who argue that people opposed to the death penalty ‘plainly want more people to be murdered.’

            Where do you find all that straw?

            1. It’s called “an apt analogy”. It’s not a “strawman.” The people I refer to do actually exist and they actually do make those desperate and silly assertions about people with whom they disagree, just like you (presumably) believe the incredibly desperate and silly assertions that you make about well-intentioned people who want to address perceived problems with the patent systems.

              Another analogy for you: gun nxts who claim that advocates for stricter gun laws “want to take everybody’s guns away” so they can establish some kind of totalitarian state. That’s what you sound like when you respond to any criticism of the patent system with your inane b.s. and insults. Grow the eff up.

              And again: please ask a friend to help you understand the concept of a “strawman” argument. You seem to have incredibly difficulty with the concept and you often make a f 0 0 l of yourself as a result.

            2. no one here is making the argument that you set up only to knock down yourself.

              Good gob.

              The “strawman” being knocked down was made by Ned in the comment that started this thread. Are you really that dense? Here it is again: “We should stop saying everyone with a valid patent and solid infringement claims is a troll.”

              I pointed out nobody is saying that (and I’m right about that). Certainly nobody here is saying that. I’m not aware of anybody ever saying such a thing, ever.

              Then you chimed in stating, in your typically bizarre fashion, that “it’s plainly evident that such is what is meant”.

              No, it’s not “plainly evident” unless, as I already indicated, you’ve got a foot in the door of the asylum.

              We should also stop saying that everyone who owns a patent is a criminal who deserves jail time. Right? Even though nobody is saying that it’s important to stop saying it. Because “it’s plainly evident that such is what is meant.” Because you say so.

              This is how ridiculous you two sound.

    2. we should stop the effort to undermine R&D in the United States.

      Nobody is trying to “undermine R&D in the United States”.

        1. Attempts to equate “patent reform” with “wanting to burn the patent system down” or imaginary efforts to “undermine R&D in the US” are just rhetorical games played by pxtxnt txxbxggers who are concerned about their own wallets and nothing else.

          Everybody knows this. You’ve been doing it for years. Cripes, we used to have to listen to some snivelling m0 r0n tell us that “every patent creates a job.” And then some other txbxgger piped in with the ridiculous asssertion that patent reform is destroying the middle class.

          It’s just another form of the “give rich entitled people more money or they won’t create jobs for you” b.s. that billionaires like the Kochs pay to have disseminated to the paranoid “anti-government” ignorami who serve as their footsoldiers.

    3. Ned,

      Big Corp does not care about any individual country.

      The ability to purely and simply move to the lowest cost factor country in the world, while gaming the various individual sovereigns patent law systems (and hamper the ability of true innovation to obtain exclusive rights) is the aim of the game.

      Read carefully the new bill: it is chock full of exclusive-nature defeating language and heavily favors already established Big Corp who can compete on size and other established factors rather than true innovation.

      The cry of “product” is a cheap sheepskin.

    4. This is not a comment on the Bill itself, but it is NOT true the only ITC alternative is to “sue in court every end USER.” The direct infringement statute 35 USC 271(a) was amended 1/1/96 to add: “or imports into the United States.” Many if not most imported products of significant commercial volume will have a U.S. importer-distributor or, for imported parts, a large manufacturer importer, that can be sued for importation infringement.

  3. DC: This invites litigation over the meaning of the term when it could be more clearly stated as:

    substantial investment in licensing activities that leads to the adoption and development of articles that practice the patent, embody the copyrighted work, or incorporate the trademark, mask work, or design

    It is also not very clear what the drafters mean by “adoption and development” and why both actions are necessary, as long as there is “substantial investment” in those articles.

    Another alternative (brackets indicate deletions): “substantial investment in licensing activities that leads to the [adoption of] development of articles that [practice] would otherwise infringe the patent, [embody ]the copyright[ed work], or [incorporate the] trademark[, mask work, or design].

    1. What they mean is that everyone can infringe with impunity and there is no remedy in the ITC unless one develops and markets covered articles himself or licenses another to bring such articles to market.

      1. there is no remedy in the ITC unless one develops and markets covered articles himself or licenses another to bring such articles to market.

        That seems perfectly reasonable to me and a lot of other people, I’m sure.

        What’s your problem with this?

        1. As far as you and a lot of people, you might try the right path to change: call your congressman.

          You know, follow the law.

  4. Let’s not confuse cranking up the propaganda machine and “call for reform.”

    (that’s an awful like not paying attention to whom exactly coined the term “Troll” and exactly why they did so – hint: it was not for the protection of ‘Joe Consumer”)

    1. News flash: nobody cares who coined the term “patent troll” except for (wait for it) patent trolls and folks like you who love to defend them and their jnky patents.

      The ship has sailed. Screaming at the sky isn’t going to bring it back to harbor.

      1. LOL – more pay no attention to the man behind the curtain thinking.

        “that ship has sailed” – was that the same ship with the “Troll” bills that sailed that you were apparently clueless about?

        1. Again: if you think these bills aren’t coming back in some form or another (that you will find equally distasteful), then you need to lay off the happy sauce for a couple days.

  5. this appears to be nothing more than chum in an effort to reawaken bills that have lost their impetus.

    …talk about a lack of learning from history – the Quid Pro Quo just does not include actually having to make products.

    The effort here to remove licensing should be seen as the sham that it is.

      1. Pull your head out of the sand Malcolm – or are you unaware that Leahy has basically called the “Troll” bills dead?

        1. are you unaware that Leahy has basically called the “Troll” bills dead

          Bills get stalled momentarily for all kinds of reasons. These reforms aren’t going to go away just because Ex-Director Kueball’s clients want them to go away.

          And the Supreme Court cases are going to keep coming, too.

          Get used to being on defense. Scrawny little third-string cornerbacks like you are going to get lots of exercise in the coming years. And lots of sod kicked in your face. Enjoy.

  6. Just when it seemed that there was hope coming from the USSC, US 8676045 B1 is making the news rounds.

    You be the judge.

    1. zzzz – IBP, the parading of a bad patent is a rather silly gesture. Take note that it is one of Malcolm’s tired rhetorical tools and desist.

      1. the parading of a bad patent is a rather silly gesture

        LOL!!!!!

        Let’s watch the totally non-silly Anon Show instead.

        LOLOLOLOLOLOL!!!!!!!!

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