Policy Analysis No. 708

Still a Protectionist Trade Remedy: The Case for Repealing Section 337

Section 337 of the Tariff Act of 1930 gives the United States International Trade Commission (ITC) the power to exclude products from the United States that are imported pursuant to “unfair methods of competition.” The range of potential activities covered by the law is broad, but the most common claim brought before the ITC is patent infringement. In addition to filing a lawsuit in federal district court, U.S. patent holders can often use Section 337 to bring a second case over the same subject matter as long as the defendant imports the impugned product from abroad. This tactic has become increasingly popular because the ITC renders its decisions relatively quickly and has the authority to order a very powerful remedy—total exclusion of the product from the U.S. market.

The availability of a second venue to pursue patent lawsuits poses serious systemic problems. Section 337 contravenes a foundational element of free trade known as national treatment and violates the commitments of the United States as a member of the World Trade Organization. The law negatively impacts the integrity and functionality of U.S. patent law by establishing a dual-track system for patent enforcement and retains its ability to serve as a purely protectionist trade remedy mechanism.

Proposals for modest reform offer an incomplete solution, and attempts to coordinate litigation at the ITC and district court proceedings will not end the discrimination, because the mere existence of a separate law and agency to handle patent cases against importers violates trade obligations. Repealing Section 337 is the only way to ensure the integrity of the U.S. patent system, to bring the United States into compliance with trade obligations, and to prevent future abuse of this protectionist trade law.

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Bill Watson is a trade policy analyst at the Cato Institute’s Herbert A Stiefel Center for Trade Policy Studies.