Patent Holdup, the ITC, and the Public Interest
Colleen V. Chien
Santa Clara University - School of Law
Mark A. Lemley
Stanford Law School
July 2, 2012
Cornell Law Review, 2012
Stanford Public Law Working Paper No. 2022168
The Supreme Court's eBay decision requires district courts to weigh the equities before permanently enjoining a defendant. This is a good thing. Since eBay, the tactic of threatening injunctions to, in the Court’s words, “extract exorbitant fees” has declined. It's now harder for a patent assertion entity (PAE), or patent “troll," and in certain cases, operating companies, to win an injunction. But eBay’s discretionary test doesn’t apply at the ITC. This has had the unintended consequence of driving those who seek to circumvent eBay's ruling to the ITC, where the odds of getting an injunctions are better. In this paper, we document that trend, which is dramatic. Increasingly, cases filed at the ITC are filed by PAEs against an entire industry, often information technology. Practicing entities too have turned to the ITC to seek injunctions district courts won't give them, for example on patents covering industry standards.
Because the ITC can’t award damages, it has granted injunctions as a matter of course. But as we suggest in this paper, the Commission has more power to adjust the remedy it grants than previously recognized. We think it should use that flexibility to limit exclusion orders when competitive conditions demand it. A PAE may not be any more justified to receive an exclusion order from the ITC under its public interest analysis than to receive an injunction from a district court applying eBay. Even practicing entities should be denied the power to exclude in some circumstances, for example when the patents are standards-essential and/or encumbered by a RAND license, there is no evidence of bad faith, and the patentee can seek damages in the district court. When exclusion orders are issued, delays in their implementation and grandfathering in existing products can reduce holdup. Bond and penalty provisions could be used to ensure that patentees are compensated for ongoing infringement during these transition periods. Using its discretion wisely, the ITC can administer the statute to fairly and efficiently give patentees their due while minimizing harm to the public interest.
Number of Pages in PDF File: 44
Date posted: March 15, 2012 ; Last revised: May 25, 2014