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Message: If anyone wants to read an interesting Duke Law Univ study analyzing the ITC
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and it's suspected bias towards domestic Complaintants, and comparing Injunction issuance success rates (and implications) between the ITC and District Courts, you might like this .
Lots of empirical data is compared .. (I've taken the liberty to copy and paste some discussion)
III.
THE ITC PROMOTES HOLD-UP BY PROVIDING INJUNCTIVE
R
ELIEF WHEN IT IS NOT THE PROPER REMEDY FOR THE
I
NFRINGEMENT
¶18
Unlike the allegations of bias in ITC proceedings, the third main
criticism deals with the nature of the laws governing ITC proceedings
themselves
, rather than the unfair or unequal application of those laws.
Several commentators have argued that the prevalence of injunctive relief as
the remedy in ITC proceedings leads to a scenario known as “patent holdup,”
resulting in inefficiency in the production of goods and in negotiations
between patent holders and producers.
46 The potential economic harm to
society from such forms of patent hold-up is two-fold. First, a permanent
injunction on the importation of an already designed and marketed good
may force domestic consumers to incur significant costs by shifting to an
inferior substitute.
47 Second, the producer itself will have to spend time and
money duplicating its original research and development processes for the
product in order to discover a non-infringing design, resulting in higher
prices to the final consumer.
48 The limitation on remedies available to the
42
S. REP. NO. 100-83, at 60–61 (1987).
43
Kinik, 362 F.3d at 1363.
44
19 U.S.C. § 1337(c) (2008).
45
See Hahn & Singer, supra note 11, at 461. See generally John Eden,
Unnecessary Indeterminacy: Process Patent Protection after
Kinik v. ITC, 2006
D
UKE L. & TECH. REV. 9 (2006).
46
See generally Mark Lemley & Carl Shapiro, Patent Hold-up and Royalty
Stacking
, 85 TEX. L. REV. 1991 (2007); Hahn & Singer, supra note 11.
47
Hahn & Singer, supra note 11, at 486.
48
Id.
2009
DUKE LAW & TECHNOLOGY REVIEW No. 11
ITC after finding patent infringement stems from the statutory authority
allowing it to hear Section 337 violations.
49
¶19
It is not surprising that the ITC has been found to grant injunctive
relief far more often than district courts, because the ITC lacks statutory
authority to award monetary damages and reasonable royalties. Chien
compared the success rate of claimants seeking injunctions in ITC
proceedings with that of successful plaintiffs in patent cases in district
courts who specifically requested injunctive relief.
50 She found that
injunctive relief was granted by the ITC in one hundred percent of cases,
while the district courts issued an injunction in seventy-nine percent of
cases.
51 Although the district courts were more likely than not to provide
injunctive relief for a successful plaintiff requesting it, injunctions were
guaranteed for successful complainants before the ITC. By using the
district court rate of issuing injunctive relief as a benchmark, this raw
empirical data would seem to suggest that there are at least several instances
where the ITC issues an exclusion order when another form of remedy
would have been more efficient or would have better served the parties
involved. Chien’s data is also limited to district court cases which reached a
final verdict and the plaintiff requested injunctive relief. By limiting the
number of district court cases to only those with the highest likelihood of
injunctive relief, the difference in rates between the ITC and district courts
is even more compelling.
¶20
Using a larger sample set, Hahn and Singer found that the ITC
issued injunctive relief in ninety-six percent of proceedings in which it
issued a remedy as opposed to twenty-nine percent of patent cases where
the district court found infringement.
52 This data includes all patent
infringement cases from a three-year period and is not limited to those
explicitly requesting injunctive relief. Hahn and Singer argue that although
the instance of injunctive relief in district court was relatively low, it can be
expected to decrease in the future after the holding in
eBay Inc. v.
Mercexchange
.53 In eBay, 54 the Supreme Court ruled that the traditional
four-part test which must be satisfied before a federal court can generally
issue an injunction applies to patent cases as well.
55 The purpose of this test
is to ensure that the district courts take full account of the public-interest
49
19 U.S.C. § 1337(d) (2008) (stating that the remedy upon finding of
infringement shall be an exclusion order subject to limited exceptions).
50
Chien, supra note 10, at 98–99.
51
Id.
52
Hahn & Singer, supra note 11, at 483–84.
53
Id. at 483.
54
eBay Inc. v. Mercexchange, 547 U.S. 388 (2006).
55
Id. at 390.
2009
DUKE LAW & TECHNOLOGY REVIEW No. 11
factors which would be harmed by a permanent injunction.
56 Although this
decision is designed to limit the availability of injunctive relief to plaintiffs
in district court, it will not have any direct effect on the remedies available
in ITC proceedings.
¶21
Hahn and Singer specifically describe two scenarios where the ITC
is likely (if not certain) to issue a permanent injunction in terms of an
exclusion order, which would likely to meet the
eBay test for federal patent
cases:
1. when the excluded product contains many complex
and patented components of which the allegedly
infringed patent only covers one small component, and
2. when the patent holder is a non-practicing entity
(NPE).
57
Both of these scenarios are likely to result in patent hold-up and arguably
higher-than-optimal royalty rates to patent holders.
¶22
The first scenario covers situations where industrial defendants
have invested significant amounts of time and money in the research and
development of a particular product which is threatened with the chance of
being excluded from importation into the United States due to the inclusion
of a small infringing component. An injunction, or even the threat of an
injunction, would likely cause the producer to incur immense further costs
in the redesign of the product to not include the infringing element. When
this is the case, the patent holder will be able to use this threat to extract a
higher royalty from the producer than the relative worth of the component
to the whole.
58 Through the use of an economic model, Lemley and
Shapiro argue that this higher royalty rate is above the optimally efficient
level.
59 Although other commentators have altered their model in order to
show that these negotiated royalties are not above optimal levels,
60 the main
proposition is strong: that patent holders will be more likely to negotiate a
higher royalty once the producer has incurred great design expense and is
facing a credible threat of an immediate, permanent injunction. Mitigating
this particular criticism, the ITC has its own balancing test, consisting of
nine independent factors (EPROMs factors) distinct from that set forth in
eBay
, to consider when determining the application and scope of an
exclusion order regarding products which incorporate a patented component
56
Id. at 391.
57
Hahn & Singer, supra note 11, at 484–85.
58
Lemley & Shapiro, supra note 47, at 2009–10.
59
Id. at 2008.
60
See, e.g., Einer Elhauge, Do Patent Holdup and Royalty Stacking Lead to
Systematically Excessive Royalties?
, 4 J. COMPETITION L. & ECON. 535 (2008).
2009
DUKE LAW & TECHNOLOGY REVIEW No. 11
(downstream products).
61 The definition of downstream products, however,
does not include all those products indicated by Hahn and Singer in this
scenario. A product incorporating many different patents would be, for
example, a microchip, while the downstream product would be any
computer, phone, or PDA including that particular chip. Thus, although the
EPROMs factors are designed to reduce the problem of patent hold-up, they
are not sufficient to eliminate the increased likelihood of an injunctive
remedy imposed by the ITC under this scenario.
¶23
The second scenario, a complaint brought by an NPE, is not
specifically addressed by the rules or procedures of the ITC. One possible
explanation for this is that, in their investigations, Hahn and Singer did not
find a single exclusion order issued by the ITC between 1990 and 2000 for
which the plaintiff satisfied this condition.
62 Although there were no
exclusion orders found meeting these criteria, there were four cases before
the ITC which resulted in settlements where the complainant was likely an
NPE.
63 That the proceeding resulted in a settlement is evidence that the
threat of an injunction from an ITC proceeding may be more effective than
in district court due to the inapplicability of the
eBay ruling. Although NPE
complainants have not been a significant contributor to ITC proceedings in
the past, there is no reason to believe that non-producing patent holders will
not threaten to bring a complaint before the ITC as a tactic in licensing
negotiations. Originally, the requirement of showing economic harm to a
developed domestic industry would have precluded NPE complainants from
requesting ITC investigations. However, the combination of stricter
requirements for injunctions in district courts after
eBay with lessened
restrictions of the domestic-industry requirement after the 1988 Omnibus
Act
64 could potentially lead to an increase in proceedings in the ITC
initiated by NPE
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