House Subcommittee Holds Hearing on ITC Patent Litigation

The House of Representatives Judiciary Subcommittee on Courts, Intellectual Property and the Internet held a hearing on April 14, 2016 regarding International Trade Commission Patent Litigation. Representatives heard testimony from six witnesses including practicing ITC attorneys, a trade expert, and the ITC’s General Counsel, regarding issues raised by concurrent litigation in the ITC and federal district court.

A central concern raised by several Representatives in their opening remarks was that domestic companies and non-practicing entities (NPEs) are using ITC jurisdiction for purposes other than seeking relief from unfair trade practices as Congress intended – namely, they are seeking leverage in licensing disputes. Representative Darrell Issa (R-Ca) noted that the ITC is adjudicating patent disputes that may properly be resolved in an Article III court.

Witnesses testifying at the hearing included: Deanna Okun, Partner, Adduci, Mastriani, & Schaumberg, LLP and Former Chairman of the ITC; John Thorne, Partner, Kellogg Huber Hansen Todd Evans & Figel, PLLC; Mark Whitaker, Partner, Morrison & Foerster, LLP; Dr. Fiona Scott Morton, Theodore Nierenberg Professor of Economics, Yale School of Management; Thomas Stoll, Principal, Stoll IP Consulting, LLC; and Dominic Bianchi, General Counsel, ITC.

Representatives and witnesses acknowledged the importance of ITC jurisdiction over cases in which a domestic entity seeks relief from the importation of infringing goods by one or more foreign entities outside the jurisdiction of federal district court. Testimony, however, was divided with respect to the effect of the ITC’s jurisdiction over domestic respondents that import goods manufactured abroad.

On one hand, the Subcommittee heard statements that complaints are often filed at the ITC to generate leverage in ordinary licensing disputes, thereby expanding the ITC’s intended function. Dr. Morton, specifically, opined that the availability of exclusion orders at the ITC inflates royalty rates for licenses that may otherwise be fairly decided and imposed by an Article III court. Speakers also noted that the ITC is not bound by the Supreme Court’s decision in eBay Inc. v. MercExchange, LLC when issuing an exclusion order, which makes obtaining an exclusion order in the ITC comparatively more likely than obtaining a similar injunction in district court, thus making the ITC a more attractive forum to a license-seeking plaintiff.

On the other hand, certain witnesses emphasized a recent decline in complaints filed at the ITC and the sufficiency of tools presently at the ITC’s disposal. Ms. Okun testified that NPEs filing complaints are often unable satisfy Section 337’s “domestic industry” requirement, even when there is evidence that a NPE has licensed a patent to a manufacturer. Additionally, Representative Jerrold Nadler (D-NY) expressed optimism in a pilot program launched by the ITC through which an initial ruling on the domestic industry issue may be made within 100 days of institution of an investigation.

Potential solutions offered by the panelists and Representatives addressing perceived abuse of ITC jurisdiction included altering the current relationship between jurisdiction at the ITC and jurisdiction in federal district court. Currently, pursuant to 28 U.S.C. § 1659, district court litigation shall be stayed pending resolution of an ITC investigation where a patent owner files suit in both venues regarding the same issues and a respondent requests such a stay. Representatives proposed measures favoring district court adjudications including stays of ITC investigations pending resolution of district court cases and removal of ITC investigations to district courts in certain circumstances.