In the ITC: The public interest factors – newest patent troll countermeasure?

Intellectual Property and Technology News

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The International Trade Commission opened its doors to non-practicing entities (NPEs) with its decision in Certain Coaxial Cable Connectors and Components Thereof, Inv. No. 337-TA-650 (reported in IPT News, Q3 2010), holding that the domestic industry requirement can be satisfied by licensing activities. Previously, this requirement had been a barrier to entry deterring NPEs from filing patent infringement suits in the ITC. Before Coaxial Cable, ITC cases typically were company versus company disputes.

Since Coaxial Cable, NPEs have regularly filed patent infringement suits in the ITC, often naming all major industry players as respondents in the same complaint. That tactic benefits the NPE and, notably, has become a rarity in federal district courts (but not the ITC) in light of the joinder rules of the America Invents Act.

These developments have caused an uproar among companies that NPEs frequently target. To them, it seems antithetical to the ITC’s very purpose that an entity that makes no products can obtain an order excluding billions of dollars’ worth of popular products such as smartphones and flat-panel TVs from entering the US.

So-called public interest factors have come to assume an increasingly prominent role in ITC investigations. By statute, whenever a violation is found, the Commission must issue an exclusion order unless “after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry.” 19 U.S.C. § 337(d).

The Commission previously would consider public interest factors only after an Administrative Law Judge recommended that an exclusion order be issued (i.e., months after the hearing is held). However, in November 2011, the Commission enacted a new rule whereby the proposed respondents and members of the public can submit a five-page brief on public interest factors after the complaint is filed and before the investigation is instituted. See 19 C.F.R. § 210.8(c).

Following enactment of that rule, and in a sharp departure from previous practice, the Commission has instructed ALJs in certain investigations to make findings on public interest factors as part of the Initial Determination.

The shifting of the public interest inquiry from the post-hearing stage to the pre-institution and hearing stages will allow respondents, and industry players in general, to force NPEs to clear the public interest hurdle at an earlier stage, and the public interest issue will now be carefully weighed by the ALJs.

Will NPEs be able to convince ALJs, and eventually the Commission, that excluding popular consumer products from entering the US does not run afoul of public interest factors? Can they show that such exclusion would not negatively impact the US economy and consumers?

We expect to see a number of ALJ findings on public interest issues in NPE cases in 2013. Those findings may determine whether NPEs will become  permanent fixtures at the ITC or will be treated as guests who have overstayed their welcome.

For more information about public interest issues in the ITC, please contact Brent Yamashita.

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