Here’s One Way to Fix the High-Tech Patent Mess

It’s been over a month since the Obama Administration took the unusual step of intervening in a patent case at the International Trade Commission to prevent the agency from banning the importation of Apple iPhones and iPads.  Multiple commentators (including myself) have chimed in with a range of views.  Most, but not all, think that something is wrong with the U.S. patent system, though they don’t necessarily agree on what exactly.

Some have claimed that the President’s intervention will have negative consequences for U.S. foreign economic relations.  Showing favoritism to a U.S. company in a private dispute with its major rival (Korea-based Samsung) could lead to accusations of protectionism and cronyism.  Some commentators have worried that the veto will undermine the U.S. trade agenda of encouraging stronger intellectual property protection around the world. 

These criticisms reveal a shallow understanding of the patent policy debate that drove the president to intervene.  The ITC enforces patents by issuing an import ban for any product it finds to be infringing a U.S. patent.  It operates much like a court in this capacity, but with faster procedures and only one available remedy.  There are certain situations, however, where patent infringement simply does not necessitate taking the offending products off the shelf.  To be brief, the Apple case was one of those, and the president’s veto was good for patent policy.

Claude Barfield at the American Enterprise Institute has provided an excellent explanation of the issue in a recent essay, which I encourage you to read in its entirety.  Recognizing that the current system is undesirable, he poses a number of critical policy questions.  I’d like to take a shot at answering them.

While there is no likelihood that the Wall Street Journal’s call to abolish the ITC will happen (it is far too popular with protectionist elements in the U.S. business community), should consideration be given to curb its use of the import injunctive power? Would it be possible to remove the agency from the patent infringement process, as recommended by the Financial Times, or to allow it to issue injunctions only pursuant to a court decision?

Yes, any of those would be great.  I have explained at length before why the ITC should get out of the business of enforcing patents.  But how far away should it get?  Any distance we can add would be an improvement over the current situation. 

One modest possibility is to require that decisions as to whether infringement has occurred be made by a court, but then allow a victorious plaintiff to seek an import ban from the ITC.  This proposal (which was considered by the U.S. Trade Representative’s office decades ago but rejected by Congress) would solve the existing problem of different substantive law and procedural rules caused by the ITC’s current role.  But if federal courts are making infringement determinations, why not just give those courts the power to issue import bans?  The most common argument in favor of ITC patent litigation is that the agency is quick and effective at making infringement determinations.  Without that role, is there really anything left for the ITC? 

Given the Supreme Court’s clear warning regarding overuse of injunctions in patent infringement cases, should there be an attempt, either through regulation or statute, to follow up with more precise rules for determining the basis for import bans in patent infringement cases?

It is quite likely that either the ITC itself or Congress will do exactly that.  There have been multiple hearings in the House over the last two years on the problems posed by patent trolls and by standard-essential patents at the ITC.  The White House also has argued that the ITC should follow the same standard as federal courts before issuing an import ban—including a public interest analysis.

Aligning ITC and federal court practice would definitely alleviate much of the trouble caused by having duplicative patent litigation venues.  Again, however, what purpose does the ITC’s patent jurisdiction serve if its remedy is no more powerful than a standard court?  Well, if you’re a patent owner, you would point out that ITC litigation uses faster, more efficient procedures.  But it does so at the expense of due process protections for defendants—like a jury.  Tipping the scales toward patent owners just might be a bug rather than a feature.

Even if you think patent litigation should be more plaintiff-friendly, having a specialized enforcement venue for imports is not your best option.  Any deficiencies in the way federal courts handle patent cases ought to be addressed through reform of court procedures.  That way, patent owners would have the same rights regardless of where an alleged an infringer sources its products.   

Maybe the trouble caused by the ITC would be worthwhile if the agency also provided some legitimate benefit, but it doesn’t.  No other country on earth has a specialized patent court for imports, and if we didn’t have ITC patent litigation, no one would be pressing to create it today.  In fact, ITC import bans were condemned decades ago as inconsistent with international trade rules.

Patent policy is complicated enough without the ITC’s purely disruptive influence.  Whether it’s the appearance of favoritism, frustration of trade policy, or reducing flexibility in the patent system, none of these problems is a price worth paying for useless trade discrimination.