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

Article excerpt

TABLE OF CONTENTS

I. INTRODUCTION
II. PRIOR EMPIRICAL RESEARCH ON SECTION 337
    INVESTIGATIONS
    A. The Value of ITC Litigated Patents
    B. Characteristics of Firms Utilizing the Section 337
       Process
III. APPROPRIATENESS OF INJUNCTIVE RELIEF IN PATENT
    CASES
IV. PURPORTED BENEFITS OF SECTION 337 INVESTIGATIONS
    A. Protectionism B. Speed in Resolving Patent Disputes
    C. Filling Gaps in District Court Jurisdiction
    V. EMPIRICAL RESULTS ON POSSIBLE BIASES IN SECTION 337
   INVESTIGATIONS
    A. Does the ITC Rule in Favor of Complainants Too
       Frequently?
       1. Percentage of Favorable Outcomes for Complainants
              in ITC Proceedings
       2. Frequency with Which the ITC is Overturned on
            Appeal
       3. Comparing Outcomes in Parallel District Court and
            ITC Proceedings
    B. Does the ITC Grant Injunctive Relief Too Often?

       1. Frequency of Injunctive Relief in the ITC and District
             Courts
       2. Does the ITC Issue Injunctive Relief in Cases That
             Likely Would Not Satisfy the eBay Test?
VI. POSSIBLE REFORMS OF THE ITC SECTION 337 PROCESS
    A. Minimizing the Social Costs of Errors Committed by the
       ITC and Administrative Costs Associated with
       Implementing Reforms
    B. Reform Proposals
       1. Restrict the ITC's Jurisdiction Over Patent Cases
       2. Require the ITC to Apply the eBay Test Before
             Granting Injunctive Relief
VII. CONCLUSION
APPENDIX 1: PARALLEL DISTRICT COURT/ITC PROCEEDINGS
APPENDIX 2: CANDIDATES FOR TYPE II ERRORS BY THE
  ITC--CASES THAT RESULTED IN AN EXCLUSION ORDER
  (WITHOUT SETTLEMENTS) BETWEEN 1990 AND 2000
APPENDIX 3: CANDIDATES FOR TYPE II ERRORS BY THE
  ITC--CASES THAT RESULTED IN A SETTLEMENT
  (WITHOUT EXCLUSION ORDER) BETWEEN 1990 AND 2000
APPENDIX 4: ITC CASES INVOLVING THE EPROM TEST

I. INTRODUCTION

The International Trade Commission ("ITC")--one of the two venues in which a firm can enforce its U.S. patent rights--awards patent holders nearly automatic injunctive relief if it finds infringement. (1) Yet an important new strand of academic literature demonstrates that awarding injunctive relief to patent holders, even when their patents are infringed, is often inconsistent with the socially optimal result. (2) In particular, when the patent covers a small component of an end product or when the patent holder is a non-practicing entity, the award of--or even the threat of--injunctive relief can lead to settlements at inflated royalty rates that are then passed on to end users in the form of higher prices. (3) In these cases, monetary fines or reasonable royalty rates will typically be better than injunctions at improving economic efficiency. (4)

A recent dispute in the ITC brought these issues sharply into focus. Broadcom, a U.S. company that makes communications-related technology, filed a complaint in the ITC against Qualcomm, another U.S. company that is a world leader in wireless communications technology. (5) In June 2007, the ITC imposed a limited exclusion order against Qualcomm chipsets, preventing the importation of many new, popular EV-DO handsets into the United States. (6) This action demonstrates the power of the ITC in influencing relations between domestic litigants. (7) The ITC's ruling has potentially far-reaching repercussions on the entire wireless industry, which may include increased costs, (8) the exclusion of more products, and the creation of precedent for future lawsuits. (9)

This Article presents the results of an empirical examination of ITC patent litigation. The ITC, which has jurisdiction to hear patent disputes under section 337 of the Smoot-Hawley Tariff Act of 1930 (10) ("section 337"), is likely to play an increasingly important role in the resolution of such disputes, not only because of the types of relief it can award, but because it has grown in popularity as a patent litigation venue. …