The ITC rolls out the red carpet for patent trolls

Intellectual Property and Technology News

The brief respite provided by eBay is gone. Injunctions are now available to patent trolls, or non-practicing entities, through a patent infringement lawsuit in the ITC.

 

Since the eBay decision, corporations could treat cases filed by patent trolls differently because, post-eBay, district courts have been unlikely to award injunctive relief to non-practicing entities. In a recent decision, however, the ITC has provided a road map for patent trolls to obtain standing to sue in the ITC, thus providing access to injunctive relief in the form of an exclusion order. As a result, corporations importing products into the United States may be subject to a new one-two punch from patent trolls: a suit in federal district court for monetary damages; and a simultaneous suit in the ITC for a limited exclusion order.

 

The ITC’s decision in Coaxial Cable Connectors1 will have a significant impact on companies and individuals relying primarily on licensing activities to establish a domestic industry under 19 U.S.C. §1337(a)(3)(C), especially corporations having substantial licensing operations. The case clarifies that the ITC is a forum available to many more patent owners than once thought. Expenditures on litigation and other related activities may be considered as part of the domestic industry, but those expenditures must be truly licensing-related and tied to exploitation of the asserted patent(s). Notably, the issue was raised before the Commission because the Office of Unfair Import Investigations (OUII), not a respondent, petitioned for review of the economic prong of the domestic industry requirement.

 

The ITC held that “litigation activities (including patent infringement lawsuits) may satisfy [§337(a)(3)(C)] if a complainant can prove that the activities are related to licensing and pertain to the patent at issue, and can document the associated costs.”2

 

The ITC stressed that for litigation costs related to licensing to apply toward subsection (C) of the domestic industry requirement, a complainant must “prove that each asserted activity is related to licensing” and must show that the “licensing activities pertain to the particular patent(s) at issue.”3 The ITC also provided a roadmap in the form of concrete examples: “drafting and sending cease and desist letters, filing and conducting a patent infringement litigation, conducting settlement negotiations, and negotiating, drafting, and executing a license” – as long as the complainant can clearly link each activity to licensing the asserted patent(s).4 In practice, this means if a patent troll has secured several license agreements prior to filing in the ITC, it will almost certainly satisfy the domestic industry requirement through §337(a)(3)(C).

 

Another less heralded but nonetheless important consequence of this ruling is that the ITC has now further clarified that companies are clearly permitted to assert patents at the ITC that do not cover their own products, but are instead directed to competing products, as long as companies can satisfy §337(a)(3)(C).

 

After Coaxial Cable Connectors, patentees and their assignees will almost certainly be able to use their current litigation expenses to meet the economic prong of the domestic industry requirement if they can demonstrate those expenses are “clearly linked” to licensing activities relating to the patent asserted in the ITC. We can therefore expect the number of §337 cases to continue trending upward, with more patent trolls filing ITC complaints. 

 


1 Certain Coaxial Cable Connectors and Components Thereof

and Products Containing Same, Inv. No. 337-TA-650, Commission

Opinion issued on April 14, 2010.

2 Id. at 44.

3 Id. at 50.

4 Id. at 50-51.