By Reynolds Holding
NEW YORK, Jan 17 (Reuters Breakingviews) - The U.S.
International Trade Commission is the wrong referee in the
high-tech patent wars. It is supposed to stop foreign
infringers. But speedy procedures and a fuzzy remit are turning
it into a hot spot for suing American firms. This benefits
patent trolls - firms that collect rights to inventions but
don't make them - and companies seeking to block rivals in a
hurry. The losers may be investors and innovation.
American courts have made progress in discouraging costly
patent actions of dubious merit. In 2006, the Supreme Court made
it tougher for patent holders to obtain orders stopping the sale
of rivals' products. And last year, federal judges in
California, Wisconsin and Illinois tossed out Apple and Motorola
Mobility claims that didn't clearly establish harm.
Lawyers have predictably turned to friendlier forums.
Mannheim and other German cities are now favorites for their
know-how and pro-patent approach. In the United States, the ITC
is suddenly popular, holding almost a fifth of the nation's
patent trials, according to a study by Colleen Chien, a Santa
Clara University law professor.
It's easy to see why. The agency decides cases in half the
time federal courts take and routinely issues orders blocking
alleged infringers. Jurisdiction is rarely an issue, because
most U.S. technology firms make their products abroad and import
them. And last week the U.S. Court of Appeals for the Federal
Circuit made filing ITC cases much easier, ruling that they no
longer need to involve patented products that actually exist.
A big downside is that patent trolls are piling in. From
January 2011 through June 2012, they accounted for more than a
quarter of ITC patent cases, according to Chien, and targeted
twice as many U.S. firms as foreign ones. Recent Boston
University research found that trolls cost public companies
nearly $100 billion in market value each year. Innovation also
suffers, because the risk of lawsuits discourages research and
Smartphone makers like Samsung, meanwhile, are flocking to
the ITC for orders quashing competitors' devices. As several
courts have noted, that can undermine competition. The Supreme
Court, a harsh critic recently of excessive patent litigation,
has never taken an ITC case. With last week's decision ripe for
review and another close behind, maybe that will change.
- The U.S. Court of Appeals for the Federal Circuit on Jan.
10 ruled that patent trolls and other companies holding rights
to products that aren't actually produced may still seek relief
from the U.S. International Trade Commission. The decision
significantly expands the ITC's jurisdiction, which covers cases
involving foreign imports that allegedly infringe patents of a
"domestic industry," typically a U.S. company that makes, or has
at least granted a license to a firm that makes, a U.S. product.
On Jan. 11, the court heard arguments in another case that could
expand the ITC's reach further.
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
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