Critics Warn Trade Agency ‘Patent Troll’ Bill Poses Risks for IP Owners

June 6, 2023

Some lawyers expressed concern that a bipartisan bill to prevent what its sponsors refer to as “abuse” of a US trade agency by patent-licensing entities has the potential to prevent other US entities from enforcing their intellectual property. This bill would limit patent-licensing operations’ access to the ITC. Critics claim that it is unnecessary and harmful to US inventors.

The “Advancing America’s Interests Act,” which Representatives. Arizona Republican David Schweikert also, Wear Beyer (D-Va.), would impose new restrictions on “non-practicing entities” that earn money by licensing patents and litigating patent cases. Their ability to use the International Trade Commission to stop imports that violate US patents would be restricted by the measure.

Initially, the purpose of the IP protection function of the commission was to provide a platform for US businesses to safeguard their goods and services from foreign infringement. Proponents of the bill contend that the statutory language currently in place permits NPEs—sometimes referred to as “patent trolls”—to abuse IP licensing in the United States.

The United States can be prevented from importing widely used goods like smartphones and tablets if infringement complaints at the trade agency are successful. Progressing exchange debates have brought about introductory ITC judgments inside the previous year that could prompt import limitations on specific Apple Inc. shrewd watches and Peloton Intelligent Inc. practice bicycles.

ITC objections recorded by NPEs are on the ascent, as per the latest commission information. However, attorneys who spoke with Bloomberg Law were unable to recall a single instance in which an NPE had obtained an exclusion order. The danger of that result can in any case act as an influence to get permitting arrangements to settle procedures, they said.

Neodrón, a non-profit organization based in Ireland, filed a complaint in 2020 to stop Inc., Apple, Microsoft Corp., Samsung Electronics Co., Sony Corp., and other technology giants from importing touch-controlled mobile devices. The case was resolved.

Generally speaking, even a rejection request itself is frequently “a necessary evil” for parties hoping to get settlements, as per Matthew Rizzolo, a lawyer at Ropes and Dim LLP who drives the company’s training before the ITC.

Before the ITC begins an investigation, patent-licensing businesses would be required to demonstrate that their patent has been used to adopt or develop a real product under the proposed legislation. The issue has been the subject of numerous attempts to address legislation in Congress.

According to American University assistant professor of IP law Charles Duan, “the way that the bill would have an effect is if somebody brings a case to ITC and they don’t use any products in the United States.” Because, in a sense, there is no substitute for American consumers if the ITC prevents a product from entering the country.

Duan said the bill would guarantee “that the ITC doesn’t go with the end result of impeding items, where there isn’t basically some other item that could fill that market that the patent holder is making.”

However, other lawyers contend that the bill is unnecessary and unfairly targets what is frequently a valid business model for investing in technology.

Nicholas Matich, an attorney at McKool Smith P.C., stated, “There are certainly abusive litigation tactics, and people can and should target those.” However, patent licensing is not a good business model.

Duan stated that the ITC “was basically meant as a remedy for US patent holders, who otherwise would be unable to reach foreign infringers because the US courts don’t have jurisdiction over foreign companies.” As a result of the trade agency’s actions, the ITC “was basically meant to take action.”

“The thought was, on the off chance that you’re not ready to carry it to court, then, at that point, you could involve the ITC as a method for preventing the organization from bringing items into the US,” he said.

The commission, be that as it may, isn’t restricted to requirement activities against unfamiliar organizations, and American organizations are currently consistently likely to patent-related grievances before it. Section 337 of the Tariff Act was amended in 1988 to allow companies licensing patents in the US to bring actions to block infringing imports, not just those selling domestically.

“The ITC is a basic gathering that was made to protect U.S. organizations from out-of-line unfamiliar contests,” Beyer said in a proclamation. ” Unfortunately, patent licensing companies have abused this powerful tool by targeting American businesses with unnecessary and unjustified litigation.

According to lawyers, this has resulted in a rise in new cases over the past few years.

“There’s been only an enormous convergence in ITC filings in all cases — and especially nonrehearsing elements enjoy began taking benefit of it,” said Kenneth Parker, an accomplice at Haynes and Boone LLP.

The commission declined to remark.

According to ITC data, businesses whose primary business is purchasing and monetizing patents filed 11 patent enforcement complaints at the ITC in 2022, up from seven the previous year.

In the same year, inventors, universities, and other organizations that license patents but do not primarily purchase and monetize them filed eight additional complaints, up from three in 2021. In at least 15 years of ITC data, both represent the greatest number of complaints.

Parker stated that changes to some federal district courts, such as the introduction of random judge assignments in the Western District of Texas, that has been favored by patent infringement plaintiffs have forced patent owners into previously regarded as more challenging enforcement channels, such as the ITC.

He stated, “It became clear over the last ten years that it’s a little more accessible, and perhaps not as difficult, despite being costly, as people thought.” As a result, a growing number of patent holders began submitting documents to the ITC.

Elizabeth Niemeyer, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP, stated that the data sample is relatively small, which makes it difficult to determine the precise extent of the increase or the prevalence of licensing entities.

She stated that even a small change of a few cases would be significant given the ITC’s low annual complaint volume.

She stated, “It’s kind of hard to tell, like, is it really just something that has become an NPE haven or if it’s just kind of a small blip over one year.” She was referring to the phenomenon.

According to George Summerfield, a partner at K&L Gates LLP and a former staff attorney with the ITC’s Office of Unfair Import Investigations, the “Fairy Tale” bill is unnecessary.

Summerfield asserted, “Nonpracticing entity is a misnomer, and the patent troll is like any other fairy tale; it doesn’t really exist.”

Using the analogy of “anyone who plays the stock market, buys stocks for companies they never worked for, or buys condominiums to flip them,” he rebutted the claim that patent licensing is less legitimate than other business models.

“It’s a speculation device actually, yet one that includes weighty portions of prosecution,” Summerfield said. ” But it is just like any other property right?

According to Matich of McKool Smith, the term “patent troll” should not “deprive them of patent remedies.”

Summerfield added that the ITC has a remarkable skill that helps them spot and shut down dishonesty objections.

“I don’t think specific legislation is needed to prevent a whole cast of complaints, some of which may be truly deserving of access to the commission,” the author states.

Nevertheless, the agency may be compelled to consider altering its own rules as a result of the bill’s introduction.

Duan stated, “Even if the bill itself does not become law, it has been the case in the past that the ITC pays attention whenever Congress shows interest in the ITC.” After the Senate Judiciary Committee held a hearing at which the Department of Justice and Federal Trade Commission expressed concerns regarding exclusion orders, he cited the commission and requested additional briefing in some cases involving standard essential patents.

He stated that the bill “signals to the agency that they need to start being more aware that they are being watched and that people care about these kinds of issues.” He referred to the agency as the agency.

Source – Bloomberglaw

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