Assessing Bias in Patent Infringement Cases: A Review of International Trade Commission Decisions

Abstract

The International Trade Commission (ITC) has gained importance in recent years because of its increasingly powerful role in adjudicating patent disputes. That little-known independent agency has the authority to bar importation of articles found to infringe a valid U.S. patent by issuing "exclusion orders." The Commission is now potentially the patent tribunal of first instance for electronic products and other products manufactured overseas. This paper examines possible biases in ITC decision making in favor of patent holders from both a positive and a normative perspective and offers suggestions for improving the efficiency of the ITC process for adjudicating complaints based on patent infringement. I provide the most comprehensive economic analysis to date of cases that arise under Section 337 of the Tariff Act of 1930.

This paper has three objectives. The first is to assess the purported benefits of the ITC's 337 process. I find that these benefits are small. The second is to assess the ITC's costs. In particular, I have sought to detect and measure any potential bias at the ITC in favor of complainants who seek to exclude allegedly infringing imported products. I find evidence of two types of bias. First, there is some evidence that the ITC is more likely to find infringement than are district courts - that is, the ITC appears to be more likely than are district courts to find an accused infringer to be liable. Second, a subtle yet important bias in favor of complainants relates to the ITC's practice of granting nearly automatic injunctive relief once it has found infringement. Yet as the Supreme Court has recently recognized, awarding nearly automatic injunctive relief in patent cases is not always in the public interest. Finally, I propose either removing jurisdiction from the ITC in most patent cases or imposing the same standard for issuing injunctions as applies in the district courts as two possible methods of reform that would reduce the social costs of ITC patent litigation.

Keywords: International Trade Commission, ITC, Section 337, patents, injunctive relief, patent litigation

JEL Classification: 034, K00, F10