Changing how ITC deals with patents in Section 337

In the latest twist on the Samsung/Apple patent wars, the Obama Administration — specifically US Trade Representative Michael Froman — vetoed an International Trade Commission (ITC) order banning the importation of some Apple products (see Froman’s letter). It remains to be seen whether this action is likely to have a major impact on future cases. This could be a one-off action or it could set a trend (for example, see various opinions from the WSJ to ComputerWorld). It does illustrate that the ITC has become a major venue for patent infringement litigation. And the heightened attention to the ITC’s role is a positive development in and of itself.
The ITC’s jurisdiction stems from its Section 337 authority to treat patent infringement as an unfair trade practice and bar importation of the of offending good (see ITC’s Summary of Statutory Provision Related to Import Relief). Since the remedy is exclusion of the product from the U.S Market, this power is parallel to the old practice of the courts to impose an immediate injunction on the sale of the product. The Supreme Court found this policy of mandatory injunction problematic in the E-Bay vs. MercExchange case (see earlier posting). A similar result is needed for Section 337.
In other words, the issue is not with the ITC or USTR and their decisions in this case. The issue should be the appropriateness of the underlying statute.
Suggestions have been made on changing the ITC role (see “The Topsy-Turvy ITC”), such as “(1) removing ITC jurisdiction over U.S.-based parties, even if they manufacture products overseas, (2) removing ITC jurisdiction over cases in which a remedy is otherwise reasonably available in the U.S. courts, and (3) limiting the availability of exclusion orders involving standards-essential patents along the lines recently proposed by the FTC and others.” Some have even called for repealing Section 337. I propose we look at a more radical and different approach. Let’s treat patent infringement similar to dumping or subsidies.
Trade law is well established to deal with dumping and subsidies. The remedy is monetary in the form of tariffs and countervailing duties (CVD). Why can’t a monetary remedy similar to a CVD be assessed in a patent infringement case? I realize that this would separate patent infringement cases from the rest of Section 337. There may be good reasons an unfair trade practice (“standard”) 337 case can only be enforced through exclusion. But in the case of patents, the point should be monetary compensation, not automatic injunction.
I also realize this would put a new burden on the ITC of determining the appropriate level of the CVD. A solution would be to break up the process as is now done in CVD cases between Commerce and ITC. Of course, it would be key to make sure that the funds go to the plaintiffs not the U.S. Treasury since the purpose is to recompense the plaintiff for the lost income from the infringement. I do understand this might have some WTO issues (as evidenced by the problems with the Continued Dumping and Subsidy Offset Act of 2000). But regardless of the technical difficulties, shifting from a death sentence approach to a graduated response might help ease the litigation problems – both at the ITC and in the patent wars in general.
By the way, if you think that the ITC patent battles only cover high-tech, think again. Here is a recent ITC notice on a case involving alleged patent infringement on “certain muzzle-loading firearms and components.


July employment data

As you have probably read in numerous places, the July employment data from BLS was lack luster. Employment rose by 162,000, which was less than expected. And unemployment rate dropped slightly to 7.4% but only because fewer people were looking for work.
One of my key trends to watch is that of the involuntary underemployed (part-time for economic reasons) — which represents a waste of human capital. The total number of involuntary underemployed declined very slightly in July – basically status quo. But the components shifted. Those who could only find part-time work increased while those on slack work declined. However, the number of involuntary underemployed spiked at the onset of the Great Recession and has stayed at a historically high rate with only a slight downward trend (as the chart below shows). If this is the “new normal” then we need to worry about whether we are permanently under-utilizing our human capital.

Involuntary underemployed July 2013.png