Government on its way to curbing abusive patent troll litigation

In April, for the third time in the past several years, a bipartisan bill was introduced in the House aimed at preventing non-practicing entities (NPEs) — also known as patent trolls — from bringing complaints under Section 337 of the Tariff Act at the U.S. International Trade Commission (ITC). The bill, called the Trade Protection Not Troll Protection Act, applies primarily to patent infringement complaints and would limit the ability of patent trolls to obtain relief from the ITC by amending the domestic industry requirements of Section 337. Petitioners bringing a complaint must show that they are engaged in a domestic industry in the United States.

Currently, NPEs can satisfy the requirement through their “licensing” activities, even if they conduct no manufacturing, or research and development, in the United States. The bill would amend Section 337 to require qualifying licensing activity include “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 would effectively preclude patent trolls from filing 337 complaints, as such entities typically buy patents with the purpose of asserting them against manufacturers of existing products.

{mosads}Many U.S. companies favor the bill because the ITC has become a frequent forum for NPEs bringing patent infringement cases. This is due, in part, to the extraordinarily strong remedy available to prevailing complainants in Section 337 cases — an exclusion order barring the entry of infringing articles into the United States, which is the functional equivalent of an injunction. In contrast, in a district court patent infringement case, an NPE is very unlikely to obtain an injunction because it does not manufacture or sell any competing products, and is therefore unable to satisfy the irreparable injury requirement for injunctive relief.

Because patent trolls do not promote domestic manufacturing, research and development, many see “troll” litigation at the ITC as an impediment to legitimate U.S. trade. Notably, the proposed legislation would not affect patent trolls’ ability to bring suit against alleged infringers in U.S. district courts — it would only limit their ability to bring duplicative proceedings at the ITC.

In addition to the proposed legislation, there are other potential developments at the ITC that could affect Section 337 investigations in the new administration. President Trump campaigned on a protectionist trade policy, and because the president nominates ITC commissioners, the ITC could be shaped to favor those policies.

Issues that are candidates for change include further refining the domestic industry standards through ITC decisions, expanding the ITC’s jurisdiction, and easing the standards for imposition of collateral remedial orders, such as cease and desist orders enjoining the sale of infringing articles already imported in the United States before the ITC’s exclusion order goes into effect.

An example of the potential expansion of ITC jurisdiction is highlighted by the ongoing U.S. Steel case regarding certain carbon and alloy steel products, in which U.S. Steel brought a price-fixing claim against virtually all Chinese steel manufacturers. This case could have a substantial impact by expanding the ITC’s jurisdiction to cases that do not satisfy standing requirements for such suits in U.S. courts.

In the U.S. Steel case, the ITC is confronted with the issue whether an ITC complainant has to meet the antitrust standing requirement of pleading and proving an “antitrust injury.” A ruling that there is no such requirement could open the ITC’s doors to a new genre of cases. The ITC held a hearing on this issue on April 20 and a decision is expected shortly.

These potential legislative and administrative developments have the potential to curtail what many see as abusive patent troll litigation, while at the same time expanding the ability of U.S. industries to bring Section 337 complaints against unfair acts by competitors.

David A. Hickerson is litigation partner in the Washington, DC office of Foley & Lardner LLP. He is a member of a member of the International Trade Commission Trial Lawyers Association, where he has represented numerous clients in Section 337 intellectual property-based investigations.

The views expressed by contributors are their own and are not the views of The Hill.