Former Government Officials Argue Against Section 337 Investigation Changes at Hearing
Government officials and industry representatives cautioned against changes to International Trade Commission Section 337 investigations -- warning of negative consequences that could lead to expensive, lengthy cases -- at a House Judiciary Subcommittee hearing April 16. The hearing focused on proposed efforts to suppress Non-Practicing Entities and Patent Assertions Entities from getting Exclusion Orders under Section 337, including calls from industry to amend the criteria for qualifying as a U.S. industry that can cause a Section 337 investigation. The Subcommittee on Courts, Intellectual Property and the Internet held a similar hearing last year (see 12071901).
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“Congress should amend Section 337 to change the domestic industry requirements by limiting qualification to those who engaged in production-based licensing, and not allow complainants to rely on revenue based licensing to satisfy domestic industry,” said Russell Binns, Jr., associate general counsel at communications system company Avaya, in his written testimony.
Others argue that NPEs can also use the threat of an Exclusion Order to “hold up” respondents accused of infringement for excessive payments, because the accused cannot afford the risk of being excluded from the U.S. market, said F. David Foster, chairman of the ITC Trial Lawyers Association Trade Committee, in written testimony. But Foster and others argued against changing the statute, citing progress ITC has made on its own to better apply the law. Recent Commission decisions, such as the HTC Android Smartphone case (see 11122104) show increased attention to the public interest, he said.
Proponents of editing the law, including Binns, have also argued for the ITC to include the eBay standard, referring to the recent Supreme Court case eBay v. MercExchange, which affirmed the traditional four-factor test for deciding when injunctive relief is appropriate for patent cases. Implementing eBay’s test would “engender confusion and uncertainty,” Foster said, plus increase the cost and length of investigations, since parties would need to undergo “additional steps to prove their cases,” he said. eBay also reintroduces an injury test in the ITC, “despite proof of injury specifically being eliminated in the 1988 legislation as necessary to establish a patent-based violation,” Foster said.
Others at the hearing discounted arguments about the recent Section 337-fueled rise in ITC cases. Former ITC Chairman Deanna Tanner Okun cited an ITC fact sheet which said that from May 2006 to June 2012, Non Practicing Entities accounted for just 10 percent of Section 337 investigations. Patent Assertions Entities accounted for 8 percent of investigations in the same period. The ITC is “tailoring its remedial orders to reflect economic and practical realities, and public interest concerns are being carefully addressed,” Okun said in testimony.” The ITC's recent decisions and administrative actions have sent a clear message that this is not the forum for patent holders who do not make the investments in the U.S. economy mandated by Congress.”