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August 23, 2006
IPR and trade
I find myself in the strange situation of agreeing (somewhat) with the Editorial Board of the Wall Street Journal as they complain about companies now using the trade laws to bring patent infringement cases – see the poorly titled article Smoot-Hawley's Revenge:
The ITC was established in 1916 as the U.S. Tariff Commission. Smoot-Hawley gave it the authority to review claims of "unfair trade practices" based on patent infringement. If a company with U.S. operations believes a competitor is importing a product that infringes on its intellectual property, it can bring a Section 337 claim to the ITC. An administrative law judge then hears the case, and he can issue an exclusion order barring imports of the infringing product for the duration of the patent. The order is also subject to the review and approval by the six-member, bipartisan ITC board.
Incredibly, all of this takes place separately from normal judicial proceedings on patent infringement or validity. Most of the cell-phone cases mentioned above are also in court on patent-infringement grounds, but these cases can take years and are subject to lengthy appeals. The ITC tries to discharge Section 337 cases in about a year, and will not wait for the courts. Once the ITC votes on the judge's order, there is only one avenue of appeal: The President has 60 days to override the ITC's order. If he doesn't act, the import ban takes effect.
One would think that the Editorial Board would be all in favor of strong IPR and use of trade law to crack down on "the theft of intellectual property." In the past, they have complained about allowing developing countries to copy drugs under the guise of declaring a health emergency.
But on patents and copyright, the WSJ has been relatively consistent. In 2002, they urged the Supreme Court to overturn the 1998 Sonny Bono Copyright Term Extension Act which extended existing copyrights 70 years after the death of the creator. More recently, in their comment on the Blackberry case - "Patently Absurd", they stated,
Patents are supposed to protect intellectual property and spur innovation, and once upon a time in America they did. But like everything else the legal system touches nowadays, U.S. patent law has been hijacked so that it now operates nearly in reverse, deterring research and penalizing innovation.
My agreement with the Journal in this case is only partial, however. The Journal get the problem right -- concern over companies gaming the system -- but picks on the wrong target. The Journal apparently would like to throw out the Section 337 process -- thus depriving the US of its major tool to combat foreign counterfeiting. But the problem isn't the ITC and Section 337. As the Journal admits (but dismisses), there are three levels to the ITC process: an administrative law judge; the Commission; and Presidential review. Any one of these can throw out a bad decision.
And there is judicial review (see ITC FAQ's), even if it appears to be more circumspect than in patent law cases -- as the law firm of Jones Day notes:
District courts are reversed by the Federal Circuit with regard to the meaning of patent claims from 38 to 50% of the time, depending on the statistical data gathered. See, e.g., Andrew T. Zidel, Patent Claim Construction in the Trial Courts: A Study Showing the Need for Clear Guidance From the Federal Circuit, 33 Seton Hall L. Rev. 711 (2003) (citing numerous studies showing the Federal Circuit’s high reversal rate on claim construction issues); Kimberly A. Moore, Are District Court Judges Equipped to Resolve Patent Cases?, 15 Har. J. Law & Tec. 1 (2001) ("The high reversal rate on claim construction is problematic. It creates uncertainty in patent cases and in patent claim scope analysis until the Federal Circuit review is complete."). The ITC's claim interpretations are, however, rarely reversed by the Federal Circuit. Thus, the uncertainty that accompanies claim construction rulings by federal district courts is greatly minimized in a Section 337 proceeding before the ITC where experienced, specialized judges conduct the investigations.
The real problem is our patent system -- especially with the presumption of the validity of a patent even in the face of evidence of problems with patent quality. There are provisions in pending patent reform legislation that would deal with that problem. Specifically there are proposals for a pre-grant opposition process and a post-grant review procedure. These mechanisms would help determine the validity of a patent well before the litigation or Section 337 process began.
The Journal has highlighted a problem. I hope they will now start advocating for the correct solution.
Posted by Ken Jarboe at August 23, 2006 2:53 PM
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Comments
One may take issue with the processes inside the USPTO, but, but law, a Patent (Grant) is presumed valid on its face and thus enforceable against those who "make, use or sell" without License in the country in which the Patent is issued.
The argument about patent claim construction is very simplistic, and in fact, in the Federal courts, is an extremely complex matter.
Patents are a legal right granted to the inventor to practice his intellectual property or to license it to others over a relatively short time frame (20 years from the date of patent application, not from the date of grant).
Using whatever the law allows to protect that usually very expensive to acquire Patent should be something the WSJ wants to protect, much as the Journal would use any legal means to protect its own logo, trademarks, copyrights and patents, if any.
Since patents are on their face presumed valid, the ITC offers patent holders an extra, very legal and very legitimate opportunity to pursue proection against only foreign infringers trying to penetrate U.S. markets. The ITC is not an avenue to bypass the very central function of the federal courts in patent interpretation matters, since the ITC has no jurisdiction for that.
Indeed, one may argue that using the ITC somewhat relieves the burdens on the federal court system.
Our very small group of partnerships has spent hundreds of thousands of dollars to invent, patent and hopefully to produce and distribute in the U.S and in many foreign countries. Absent the protection of Patents, we never would have invested the first dollar.
Posted by: P Feldman at August 23, 2006 5:09 PM