In addition to being entrepreneurs and innovators, many ACT | The App Association members are patent holders. Their valuable intellectual property (IP) is the lifeblood of their businesses, allowing them to compete in crowded markets. The United States has many venues in which to protect IP, including the International Trade Commission (ITC), which hears cases of patent misuse and abuse by foreign companies to help protect domestic manufacturing and other types of business. Although the ITC has important functions, it has been a common avenue for abuse by so-called “patent trolls” and needs to be reformed. Representatives David Schweikert (R-AZ-01) and Don Beyer (D-VA-08) introduced a bill to do just that.
One of the main ways foreign companies can harm U.S. industry is by purchasing patents that are often invalid or weak and using them to press spurious or unfair lawsuits at the ITC. While a patent holder has the right to use litigation to enforce their exclusive right to make, use, and sell their IP-protected invention, patent trolls are not innovators and operate solely to acquire and monetize patents, for example, on small parts of cars to attempt import bans on the entire vehicle. Since the ITC’s only recourse is to implement an import ban, the Agency can do little to stop these patent trolls from using the venue to exploit American businesses. Companies end up paying significant sums in settlement to avoid the ban, even when they have a high probability of winning their case.
H.R. 3535, the Advancing America’s Interests Act, would limit the ability of patent trolls to use unknowing companies as complainants in their suits, making it much harder to satisfy the ITC’s domestic industry requirement. As practiced now, the domestic industry requirement means a complainant must demonstrate that their patent is practiced in some way in the U.S. market, both through economic activity (investing in plants and equipment, employment of labor or capital, or investment in exploitation of the patent) and through technical use (practicing the patent by producing articles protected by the patent, through licensing of products, or other practice of the patent). However, the patent at issue need not be practiced by the complainant in the case. Improvements to this requirement would significantly reduce the spurious complaints lodged by patent trolls.
The bill would also require the ITC to consider “public interest” at the outset of the case rather than as a defense once infringement is determined. Under current law, the ITC goes through its process of determining whether the defendant infringed the patent and then implements an import ban on the infringing product—unless the defendant can argue successfully that the import ban is not in the public interest. Considering public interest at the outset would stop complaints like the automobile example above, which rely on bans of certain integral parts to de facto ban finished products and allow the complainant to extract heavy concessions from defendants.
The ITC serves as an important protection for U.S. companies that hold patents. However, patent trolls have found ways to weaponize the process against patent users and force them to settle for significant sums. We hope that the Advancing America’s Interests Act will help to modernize the ITC and alleviate patent trolling that is crippling U.S. innovation.