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President Reagan presciently noted that the “government does not solve problems. It subsidizes them.” The implicit subsidization of patent trolls by the International Trade Commission (ITC) exemplifies this tendency.

The ITC is an independent government agency, which describes itself as empowered to “investigate and make determinations in proceedings involving imports claimed to injure a domestic industry or violate U.S. intellectual property rights”. This description overstates the ITC’s actual mandate, and underscores how granting broad authority to a quasi-judicial agency is a recipe for government over-reach and, ultimately, economic harm.

<I>THIS POST HAS BEEN UPDATED. SEE THE NOTE BELOW FOR DETAILS.</I>

In a rare step, the White House on Saturday overturned a decision by the U.S. International Trade Commission that would have banned Apple from importing several of its older products.

The US International Trade Commission (USITC) is a respected independent, nonpartisan, quasi-judicial federal agency that analyzes trade issues for the president and the Congress. But in June 2021, the commission released a report of 386 pages, titled Economic Impact of Trade Agreements, which committed serious methodological blunders that mislead the public on the value of trade accords implemented since 1984.

The USITC delivered an overall estimate that trade agreements have added very little to trade growth and therefore to economic growth. This finding may cheer protectionists and those who want trade agreements to pay less attention to trade barriers and more attention to social issues. But the USITC made two major mistakes. First, in analyzing the North American Free Trade Agreement (NAFTA) enacted in 1993, which entered into effect in January 1994, the USITC failed to measure the growth in US-Mexico trade separately from growth in trade with Mexico and Canada together. Second, the commission omitted altogether China’s accession to the World Trade Organization (WTO) in 2001, by far the biggest trade agreement of the 21st century, on the ground that accession is not a free trade agreement (FTA). Without these mistakes, the USITC report would have shown much more dramatic growth in trade resulting from liberalizing trade in the last three decades.

On appeal, the Federal Circuit has affirming the claim construction and thus the resulting non-infringement and obviousness decisions.  In the process, the appellate panel reiterated the lower court’s statement that “ARM’s insistence on trying [the case] was largely a charade used for the purpose of extending the life of the earlier ITC . . . order.”

Normal preclusion rules do not apply to interactions between the ITC and District Court. See, Tandon Corp. v. U.S. Int’l Trade Comm’n, 831 F.2d 1017, 1018 (Fed. Cir. 1987) (even appellate treatment of an ITC decision “does not estop fresh consideration by other tribunals”); S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (“it seems clear that any disposition of a Commission action by a Federal Court should not have a res judicata or collateral estoppel effect in [infringement] cases before such [district] courts.”).

The U.S. International Trade Commission (USITC or Commission) pursues its mission in three areas of U.S. international trade:

adjudication,

The United States International Trade Commission is an independent agency created by the Revenue Act (39 Stat. 795) and originally named the United States Tariff Commission. The name was changed to the United States International Trade Commission by section 171 of the Trade Act of 1974 (19 U.S.C. 2231).

Six Commissioners are appointed by the President with the advice and consent of the Senate for 9-year terms, unless appointed to fill an unexpired term. The Chairman and Vice Chairman are designated by the President for 2-year terms, and succeeding Chairmen may not be of the same political party. The Chairman generally is responsible for the administration of the Commission. Not more than three Commissioners may be members of the same political party (19 U.S.C. 1330).

Regulatory failure caused by overlapping regulations is ubiquitous, with examples in all jurisdictions across a range of disciplines. Overlapping regulation can be problematic. It obscures policy objectives and hinders the development of effective and clear regulation. In addition, regulatory overlap can inflict real costs on businesses through repetitive inspections and data collection efforts. It is particularly burdensome when agencies issue conflicting rules with inconsistent standards. Recognizing that regulatory overlap exists and is a problem provides the context to this program of research. Our research project was an exploration using a systematic quantitative literature review (SQLR) method to better understand the way regulatory failure, caused by overlapping regulations, has featured in academic literature. The SQLR method was chosen as it employs a systematic process to consolidate a sample of literature, and quantitative measures to draw connections between different academic sources. Ultimately, our research concluded that the literature does not provide clear prescriptive principles for reducing unnecessary regulatory overlap. This begs a question as to whether more research is needed in this area, or alternatively whether the complexities raised by regulatory overlap are not reducible to general principles.

1 Introduction

Multilateral IP Rules. TRIPS established minimum standards of IP protection that most WTO members must provide, based on core WTO nondiscrimination principles. It set civil, administrative, and criminal enforcement procedures and remedies, and border measures. TRIPS obligations are subject to WTO enforcement.

TRIPS has certain exceptions and flexibilities. It allows compulsory licensing for patents in specific circumstances, and exempts least-developed countries from most obligations until July 1, 2034, and pharmaceutical-related obligations until January 1, 2033. In the 2001 WTO “Doha Declaration,” WTO members agreed to interpret TRIPS to support WTO members’ right to protect public health, particularly to promote access to medicines. TRIPS has elicited some stakeholder debate about how it seeks to balance innovation and other aims.

When clients find themselves in need of guidance involving challenges to patents, trademarks, copyrights, trade secrets or other types of unfair competition regarding imported goods, our team’s trial skills and case management tools can help resolve these matters efficiently. Our team works with respondents, complainants, and third parties – and has the knowledge to create effective strategies for each.

ITC investigations – cases heard by administrative law judges – are usually resolved in 18 months or less and are often the preferred type of proceeding. In addition, the ITC does not award monetary damages.

As for the infringement notion, it encompasses cases where a person who is not the owner or licensee and assignee of the owner of the IPR copies, reproduces, or exercises any of the exclusive rights granted in respect to the IPR in question without the license or consent of the IPR owner. Furthermore, infringement proceedings comprise both claims where the plaintiff brings an IPR infringement action or where the claimant starts a declaratory action to establish that the IPR is not infringed. The term pure infringement claims will be adopted to denote infringement disputes where the validity of the IPR involved is not raised. Additionally, the term transnational misappropriation of IPRs will be used synonymously with transnational infringement of IPRs. The term protection will be treated as synonymous to judicial enforcement.

That’s because of a ruling Thursday by the International Trade Commission that most Apple Watches contain parts that infringe on patents held by Masimo Corp., a producer of medical technology, and its sister company, Cercacor Laboratories Inc., both of Irvine, Calif. An import ban and a cease-and-desist order on sales both take effect on Dec. 26 — unless President Biden reverses the decision by Dec. 25, which appears unlikely. (Presidents rarely overrule the independent, nonpartisan agency, which was founded in 1916 as the U.S. Tariff Commission.)

Masimo argues that Apple’s reputation for innovation is undeserved and that the company has made a practice of “efficient infringement” — using other companies’ technologies without permission and dealing with the legal fallout as necessary. The company points to something that Steve Jobs, Apple’s co-founder, said in 1996: “Picasso had a saying. He said, ‘Good artists copy; great artists steal.’ And we have, you know, always been shameless about stealing great ideas.”

On March 28, the U.S. International Trade Commission, an independent, quasi-judicial federal agency with broad authority in the area of import trade, published in the Federal Register a notice of proposed rules and amendments to the rules of practice and procedure governing proceedings before the ITC. These rules and amendments, if ultimately adopted, would represent the first amendments to the ITC’s rules in several years. The proposed changes range from minor correction of typographical errors and implementation of gender-neutral language to the permanent adoption of electronic filing standards implemented during the pandemic, as well as changes that would more align various aspects of the ITC’s Section 337 investigations with federal district court litigation.

This alert highlights some of the more notable proposed amendments and rule changes as they pertain to Section 337 unfair import investigations before the Commission.

There are many advantages to pursuing relief for patent infringement in the International Trade Commission (ITC) compared to U.S. district court, but one that receives little attention is the success rate for complainants (plaintiffs). The rate has been climbing for years and reached nearly 90% for cases decided on the merits in 2017. With such a high rate of success and the many other advantages for complainants, the ITC should be on every patent owner’s radar.

The ITC has authority to hear patent infringement cases under Section 337 of the Tariff Act. Section 337 limits the ITC’s authority to patent cases in which a complainant alleges infringement by the importation, the sale for importation, or sale after importation in the United States of an accused product. The complainant also must allege that a domestic industry exists or is in the process of being established in the United States. The domestic industry must be the result of efforts by the complainant or its licensees to invest in or exploit the patented article or technology.

Several perceived advantages contribute to the increased use of the ITC as a patent enforcement forum. The first is jurisdiction. The ITC gains jurisdiction over importers via the "mere act of importation." 24 This makes jurisdiction over foreign companies much easier, and less complex, than in United States district court where venue and personal jurisdiction rules can deny jurisdictional coverage over such defendants.25 The second perceived advantage is the speed of ITC proceedings.26 Fast track 27 adjudication venues have historically attracted patentees. The ITC is required, by

19 U.S.C. § 1337(d) (setting forth exclusion standards); Kumar, supra note 3, at 537-38. 19 U.S.C. § 1337(b)(1); Kumar, supra note 3, at 536. 17 19 U.S.C. § 1337(a)(1); Kumar, supra note 3, at 536. 19 U.S.C. § 1337(b), (c); Kumar, supra note 3, at 536-37 (setting forth ITC procedures for patent actions). 19 Tex. Instruments, Inc. v. U.S. Int'l Trade Comm'n, 851 F.2d 342, 344 (Fed. Cir. 1988); Chien, supra note 2, at 74-75. 20 Hahn & Singer, supra note 7, at 460 (Figure 1). 21 Id. 22 See id. ("A review of the ITC Database of section 337 investigations ... suggests that other important industries are affected by the ITC's role in patent law, including computers, semiconductors, and communications systems."). 23 Id. at 461. 24 19 U.S.C. § 1337(a)(1); Hahn & Singer, supra note 7, at 461; Kumar, supra note 3, at 535. 25 Hahn & Singer, supra note 7, at 461; see also Kumar, supra note 3, at 535 ("The ITC also has nationwide jurisdiction to conduct investigations, including nationwide service of process for subpoena enforcement actions."). 26 Hahn & Singer, supra note 7, at 461. 5 TEXAS INTELLECTUAL PROPERTY LA WJOURNAL

Chinese companies who import products or own patents in the U.S. should understand intellectual property investigations at the International Trade Commission (“ITC”). The ITC presents both great danger and great opportunity. Here, we provide an overview of the ITC and highlight its key distinguishing features.

In the United States, federal district courts typically hear disputes over patents and other intellectual property rights. The ITC is an alternative forum. An ITC investigation begins when the patent owner (or “Complainant”) accuses another (the Respondent”) of importing into the United States a product that infringes a U.S. patent, copyright, or trademark.

These measures are buying time for a third aspect of U.S. strategy: the multilateral development of alternatives to Huawei. The International Development Finance Corporation is offering financing to countries that choose non-Chinese options for their 5G networks. If Huawei can be stymied, then firms in democratic countries will have a better shot at setting the technological standards that will shape the telecommunications industry in the future. The Biden administration is also betting on something called Open Radio Access Networks, or O-RAN, an effort to develop common standards that promote greater compatibility between different types of telecommunications equipment. In effect, O-RAN allows different companies to plug and play in a single network, making it harder for Huawei or any other firm to dominate global telecommunications infrastructure. O-RAN has yet to be deployed commercially at any scale. Feasibility and affordability remain significant concerns; it may work better for big countries than for small ones. Yet the pace of deployments is predicted to accelerate rapidly over the next three to five years, so Biden has put it high on the agenda for U.S. diplomacy with key countries (South Korea, Japan, India) as well as institutions such as the European Union and the Quadrilateral Security Dialogue. America’s strategy, then, is about running faster as well as slowing its rival. Washington aims to break Huawei’s momentum until the U.S. and its friends can develop alternatives that will limit the Chinese firm’s global appeal. The effects of U.S. policy are starting to accumulate. As of 2021, eight of the world’s 10 largest economies, countries representing over 60% of the world’s cellular equipment market, and nearly all members of the European Union, had either banned or restricted Huawei from their 5G networks. Many countries that have not imposed formal restrictions, such as Germany and Canada, have subtly made it very difficult for Huawei. The company’s sales of network gear fell 14.2% between mid-2020 and mid-2021. Its overall revenue fell roughly 29% and earnings have slumped in regions from the Middle East to the Americas. Huawei’s founder, Ren Zhengfei, has declared that there is “no chaos within the company,” but the numbers tell a different story. Huawei’s predicament could get much worse. Probably next year, the company will run out of the advanced semiconductors it stockpiled as U.S. hostility grew. That will force it to fulfill existing contracts with older, less efficient components — or not fulfill them at all. Huawei may be too important for the Communist Party to let it fail. But its global expansion will become increasingly problematic. Meanwhile, there has been less collateral damage from the anti-Huawei campaign than some observers initially feared. U.S. and foreign chipmakers worried that the sanctions would crush their sales, given that Huawei was the world’s third-largest chip purchaser.

Allied governments chafed at Washington’s push to make its sanctions extraterritorial. But the chipmakers have not been massacred, in part because Huawei’s now-thriving competitors are buying more, and in part because the U.S. has allowed Huawei to purchase older chips not suitable for its 5G business. And American policies have often benefited major foreign firms, such as Samsung Electronics Co., Ericsson AB and Nokia Oyj, by hobbling their principal rival.

Rethinking China’s “export strategy.” On the other hand, China’s export strategy is more complicated in practice. Surveillance technology is provided by liberal democracies and authoritarian regimes alike.36 Therefore, China is not simply propagating a digital authoritarian model to export an alternative form of governance. As its actions depend on political context, bilateral relations, and mutual economic interests, China appears more opportunistic than strategic with respect to exporting advanced surveillance technologies. Beijing may not be linking these technologies to a specific political use.

The adoption of Chinese surveillance technology in strong liberal democracies across Europe shows that regime type is not a good predictor of countries that will adopt artificial intelligence (AI) surveillance technology.37 The demands for these technologies (e.g., controlling migration, tracking terrorist activity) are diverse and often not clearly connected to China’s geopolitical goals—including the promotion of authoritarian practices. For example, in France, domestic terrorist threats appear to drive the need for these technologies.38 In Greece, however, the use of advanced surveillance technologies in automated border control (ABC) systems are a priority to process passengers more efficiently, as well as to screen the influx of migrants at Europe’s borders.39

The United States is unlikely to win the tech war. There are two reasons for this conclusion.

First, the empirical record consistently shows that rising powers don’t sit idly by when dominant states disrupt their access to critical resources. Typically, they respond by subsidizing industrial development, pushing their businesses to upgrade into high-value positions to become self-sufficient. Chinese President Xi Jinping has urged the country to prioritize “self-reliance in science and technology” and described innovation in core technologies as the key to surviving “intense international competition.” To that end, the Chinese government has supported the development of an indigenous chipmaking industry: Guangzhou City invested $30 billion in initial funding, and Beijing has readied an additional $143 billion in subsidies and tax credits.

For patent owners, the ability to obtain an injunction often provides a great deal of leverage in license negotiations. Historically, the grant of an injunction was seen as a foregone conclusion following a finding of infringement.  But the Supreme Court’s decision in eBay v. MercExchange altered that equation by making injunctions more difficult to obtain, particularly for non-practicing patent owners, who do not make and sell products covered by the patents. As a result, many patent owners have turned to the U.S. International Trade Commission (“ITC”) as an alternative to U.S. District Courts for prosecuting infringement suits.

The ITC permits a patent owner to enforce its rights against an entity that imports allegedly infringing products in the United States. And like a U.S. District Court, the ITC also has the power to issue injunctions, called “exclusion orders,” to stop infringing products from being imported into the U.S.

The Advantages of the ITC when Compared to U.S. District Courts

There are several advantages to bringing a Section 337 investigation over litigation in a U.S. district court — namely, the remedies available, expediency of the investigation, and jurisdictional benefits.