By Michael Rosen

Patent reform may be coming soon to a legislative chamber near you, as bipartisan legislation has been reintroduced to tighten restrictions on how the International Trade Commission (ITC) handles intellectual property cases.

The ITC is an independent, quasi-judicial federal agency
that seeks to stimulate and defend American innovation and manufacturing. Among
other things, the ITC is chartered to assess potential infringement of the intellectual
property (IP) of companies with a “domestic industry” related to their IP and
prohibit via an “exclusion order” the importation of infringing products.
This remedy can be very powerful, amounting to a de facto injunction that can
stop a foreign competitor in its tracks.

But defining what a domestic industry is has proved
challenging to litigants, legislators, and practitioners, as the term includes
licensing activity, such as when an inventor licenses their patent to a company
that then develops a product that practices it.

Yet, as explained in this space last year, the current understanding of what a domestic industry is can also include a “license” granted by a nonpracticing entity (sometimes called a “patent troll”) as a result of litigation. It can also include licenses held by third parties to an ITC investigation that manufacture components of allegedly infringing products. The latter practice has become known as creating a “domestic industry by subpoena” and has flummoxed respondents in ITC litigation who otherwise would be able to defeat the complainants’ claims of domestic industry.

In an effort to remedy this situation, earlier this month, Reps. Suzan DelBene (D-WA) and David Schweikert (R-AZ) reintroduced the Advancing America’s Interests Act (AAIA), which seeks to “make common sense reforms to modernize the ITC’s jurisdiction.”

The cosponsors assert that “patent licensing entities, which
produce no goods or services, have used the ITC as a forum to file expensive
patent cases against American companies,” thereby “abusing the ITC legal
process” in order “to shake down American companies in search of large
multi-million-dollar payouts.”

Like its previous version, the AIAA focuses on “tying
domestic industry to product development” by mandating that only “substantial
investment in licensing activities that leads to the adoption and development
of articles that incorporate” the IP in question qualifies as licensing for
domestic industry purposes. This language would likely mean the end of
patent-troll-generated licenses, although how the courts would define
“lead[ing] to the adoption and development” of relevant products remains an
open question.

The measure would also eliminate the possibility of a
domestic industry by subpoena by requiring the third party to “join . . . the
complaint under oath” to justify the finding of a domestic industry.

Moreover, the AIAA would require the full commission — not just the administrative law judge (ALJ) handling the investigation — to affirmatively declare that an exclusion order serves the public interest and would codify a pilot program that empowers the ALJ to render early decisions on key issues. The High Tech Inventors Alliance, a coalition of tech companies like Amazon, Cisco, Google, and Samsung, praised the bill’s reintroduction, proclaiming it will “modernize the International Trade Commission (ITC) and curb abusive patent litigation plaguing American businesses” and “protect legitimate trade concerns without allowing cases to be brought that hurt American businesses.” Last year’s version of the AIAA withered on the vine. Whether this year’s measure gains traction remains to be seen, although in a new Congress in an off year, its prospects are considerably stronger.

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