Patent Holdup, the ITC, and the Public Interest

Intellectual Property and Patents

Article Snapshot

Author(s)

Colleen Chien and Mark Lemley

Source

Cornell Law Review, Vol. 98, No. 1, 2012

Summary

The authors recount the impact of the ITC in providing an avenue around the eBay decision and propose possible remedies.

Policy Relevance

The Supreme Court’s eBay decision stopped patent holdup situations in the district courts; however, the ITC provides another forum for PAEs to create holdup situations. The ITC has the power to implement its exclusion orders with increased flexibility to prevent sidestepping eBay and it should do so.

Main Points

  • Patent holdup typically occurs when a patent assertion entity (PAE) uses the threat of an injunction to gain a favorable settlement.
     
  • The Supreme Court’s decision in eBay Inc. v. MercExchange, L.L.C. resulted in district courts rarely granting injunctions to PAEs in patent infringement cases, which largely solved holdup problems in federal courts.
     
  • Unfortunately, many PAEs now flock to the International Trade Commission (ITC), a federal administrative agency, to seek product exclusions and create holdup situations.
     
  • The ITC has the power to issue exclusion orders, which can require removal of an offending product from an entire market—a very harsh penalty. This creates the opportunity for PAEs to sidestep the eBay decision.
     
  • In making decisions the ITC has the authority to take into account the public interest, but extremely rarely finds that the public interest outweighs an exclusion order.
     
  • The public interest consideration is beginning to change. Administrative Law Judges at the ITC are now allowed to take evidence on public interest concerns at the outset of the case, which is a positive change.
     
  • The ITC has more discretion at its disposal than it has actually exercised in the past—its exclusion orders have traditionally been all or nothing affairs.
     
  • The ITC should adopt the following strategies to increase the flexibility of its remedies:
    • Use Grandfathering of certain products and tailor the scope of exclusions more narrowly.
       
    • Use delayed exclusion orders to give respondents time to design around infringing elements.
       
    • Use posted bonds so that respondents can continue to import their products during the review period. Also, use civil penalties so there is a monetary remedy even without monetary damages.
       
  • The ITC essentially has more power to adjust its remedies than commentators have recognized and it should use that power to prevent “end runs” by PAEs around the eBay decision.
     

 

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