By Krisztina Pusok and Steve Pociask, American Consumer Institute
The U.S. International Trade Commission (ITC) has become an increasingly popular venue for patent complaints, allowing patent trolls to exploit the loopholes in ITC practice for financial gains. Unless the ITC’s statute or practice adjusts to better reflect the realities of modern products and innovation in a global economy, consumers could face drastically fewer choices and much higher prices for smart electronics, while the U.S. innovation future dims.
Lawsuits by patent trolls are up this year: 20% higher than last year and 30% above 2018, with 470 lawsuits filed during the first 4 months of 2020. This type of activity takes a major toll on the economy, innovation, and consumers.
Patent trolls do not make, sell, or invent anything; they simply exploit patents they have acquired to file as many legal complaints as they can, trying to squeeze money out of actual productive businesses.
These trolls are now abusing the ITC’s intellectual property procedures and are taking advantage of Section 337 of the Tariff Act of 1930, as an additional and preferred litigation avenue because the ITC renders decisions more quickly than federal district courts, and its exclusive remedy is a fearsome import ban.
Unfortunately, the ITC is not subject to a key Supreme Court precedent that ensures courts do not routinely issue heavy-handed remedies like injunctions, or exclusion orders in ITC cases. This opens the door for successful misuse of the ITC process to threaten these bans, despite the ITC’s core missions to protect U.S. industry and the public interest.
For example, Neodron, an Ireland-based company that was established in late 2018 with a straightforward business model: to acquire and monetize patents. Neodron specifically seeks out patents for technologies found in complex electronic products that often incorporate thousands of patents.
Based on a few touchscreen related patents Neodron has filed two Section 337 complaints requesting exclusion orders for a wide range of smartphones, tablets, and laptops American consumers rely on the most. If Neodron is successful, American consumers would face a ban on more than 90 percent of smartphones, tablets and laptops coming into the United States.
Consider the ripple effects of this potential ban on the U.S. economy and American consumers.
The ban would translate into fewer product choices and higher prices for millions of American consumers and businesses. Connectivity and smart devices are now essential to managing daily life and participating in today’s economy, whether that’s work obligations, food shopping, paying bills, completing homework assignments, seeking medical care, or checking up on loved ones. The new digital-everything reality that the COVID-19 pandemic has abruptly forced on us makes clear how dependent we are on these products and how severely their loss would hit us.
Given the severe damage that patent trolls could inflict on the U.S. economy and the American consumers, Congress should prioritize updating the ITC’s statute to prevent continued abuse by patent trolls. It is Congress’ core mission to protect the public interest, and it should do so now. Allowing a continuation of abusive litigation under the current system has high chances of damaging the U.S. economy and harm American consumers.
Krisztina Pusok is the Director of Policy and Research and Steve Pociask is president for the American Consumer Institute.