On April 14, 2016, the House Judiciary Committee held a hearing to examine patent litigation at the International Trade Commission ("ITC"). What was anticipated to be an inquiry into the proposed Trade Protection Not Troll Protection Act, H.R. 4829, quickly developed into the Committee's questioning whether the ITC has too-broad authority that is duplicative of Article III federal courts. If the Committee's apparent inclination to limit ITC jurisdiction is codified into law, it could lead to a limited ability to protect U.S. industry.
Subcommittee Chairman Rep. Darrell Issa (R-Calif.) opened the hearing by noting the duplicative authority of the ITC and federal courts and asserting that the ITC should not have jurisdiction over patent infringement cases against U.S. entities that can be brought in federal court. Rep. Issa cited to ITC Inv. Nos. 337-TA-703 (Kodak v. Apple, et al.) and 337-TA-543 (Broadcom v. Qualcomm) as examples of cases over which he believes the ITC should not have had jurisdiction. He further suggested that federal courts be provided the authority to stay ITC proceedings. However, the different evidentiary and procedural burdens in administrative actions targeted at U.S. trade remedies as opposed to federal court actions targeting individual damage theories were not addressed during the hearing.
Rep. Jerrold Nadler (D-N.Y.) took issue with the Commission's decision to impose exclusion orders without considering the equitable factors for patent injunctive relief provided by the U.S. Supreme Court in eBay v. MercExchange. Rep. Nadler, however, did not address the statutory nature of ITC remedial orders contrasted with the equitable powers of federal courts.
Chairman Rep. Bob Goodlatte (R-Va.) steered the hearing back to the issue of nonpracticing entities when he lamented that statistics indicate that patent assertion entities, commonly referred to as patent trolls, are using the ITC to exploit U.S. patent laws.
The Committee took testimony from several witnesses who disagreed that the ITC is a favorable venue for patent assertion entities. Former ITC Commissioner Deanna Tanner Okun said that the Commission's domestic industry requirement is a significant barrier to nonpracticing entities filing in the ITC and noted that only four nonpracticing entities have successfully obtained exclusion orders over the past decade. Thomas L. Stoll, principal of Stoll IP Consulting, cited to the Commission's tightening of the domestic industry requirement and institution of the 100-day pilot program as examples of successful efforts to curb nonpracticing entities from filing suit in the ITC.
Other witnesses testified that the current efforts on the part of the Commission are not enough. For example, Dr. Fiona M. Scott Morton, professor of economics at the Yale School of Management, testified that the Commission's ability to issue an exclusion order for a device covered by thousands of patents as a remedy for the infringement of a single patent leads to unfair royalties in settlements. She suggested that legislation that goes beyond changes in procedure is necessary. However, Dr. Scott Morton did not identify substantive changes and how they would address her expressed concerns over unfair settlements.
The ITC is currently one of the most important venues for the protection of U.S. innovation and research and development. To the extent that Congress feels it necessary to address nonpracticing entities by limiting the scope of the ITC's authority, it should be cognizant that doing so can diminish important trade protections for U.S. industry. Jones Day will continue to monitor Congress's actions with respect to the ITC and will provide updates as they develop.