The ITC’s flexible enforcement may protect consumers and markets
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In recent weeks, international trade has risen to the top among hot-button Beltway issues, with “trade wars” dominating headlines. Amid the barrage of reported sanctions, tariffs and tensions, and the winners and losers from each, one powerful quasi-judicial agency plays a pivotal role in nearly all matters of U.S. trade: the U.S. International Trade Commission (ITC).

The ITC – an independent federal agency tasked with examining disputes over products and components imported into the U.S. – plays an important role in ensuring American companies, or entire industries are not subject to predatory trade practices involving intellectual property. While these disputes often play out between companies, the individual American consumer is almost always impacted by the ITC’s final decision. Measures taken by the Commission can and should benefit American consumers by enforcing pro-competitive policies, which foster a level playing field that keeps prices fair and markets ripe with innovation.

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Unfortunately, in recent years an increasing number of cases have been brought before the ITC that may not warrant the agency’s remedy or even review. Increasingly, ITC complaints are leveraged as an end-run around the U.S. District Courts for plaintiffs seeking to enhance their negotiating position.

The solitary remedy available to the ITC is the exclusion order. This “all-or-nothing” enforcement structure, which bans the import of goods deemed to be infringing, supercharges the potential consumer and public welfare impact of the cases the Commission reviews. Because the exclusion order is the ITC’s only available remedy, agency actions can have resounding impacts on industries, markets, product choices and the prices paid by consumers.

However, the ITC’s discretion on flexibility when exclusion orders are imposed can result in significant risk mitigation that protects American consumers and the public welfare. The ITC has demonstrated – in certain instances – the ability to temper its enforcement. Such adaptability provides infringing companies adequate opportunity and time necessary to find a workable solution, whether it be through designing around the infringing patents or restructuring a supply chain and substituting in non-infringing parts or components.

Notably, in the 2012 ITC decision in the investigation, Certain Personal Data and Mobile Communication Devices and Related Software, the Commission delayed the implementation of an exclusion order by four months. That decision stated, “competitive conditions in the United States do not weigh against the issuance of an exclusion order, but favor providing a transition period.” That decision also stipulated that ordering such a delay was, “reasonable and within [its] authority to implement.”

Two years later, in the ITCs 2014 decision in the investigation, Certain Digital Models, Inv. No. 337-TA-833, the Commission issued a stay of the exclusion order pending appeal. In these cases, transition time prior to the enforcement of an issued exclusion order reduced unintended harms to consumers and the public interest. Further, this respite temporarily preserves consumers’ access to products, which otherwise face disruption by immediately removing products from the marketplace. 

Unfortunately, despite their clear benefits, the ITC has been limited in its implementation of tailored exclusion orders. The public interest is better served by commonsense, pragmatic enforcement solutions that protect consumer welfare and the viability of American companies while also ensuring fair trade enforcement. Even with the stark, “all-or-nothing” nature of the exclusion order, case law demonstrates that the ITC can, and has, provided workable resolutions – and should continue to do so.

The ITC’s more frequent consideration of delayed enforcement would be a welcome shift. In law review article “Patent Holdup, the ITC, and the Public Interest”, Professors Colleen Chien and Mark Lemley emphasize the beneficial effects of mitigating enforcement, stating that, “incorporating a delay allows the ITC to award exclusion orders where the public interest might dictate otherwise.”

Consumers should not be punished by strategic legal maneuvering at the ITC. The use of delayed enforcement would have the added benefit of combatting the wave of questionable claims at the ITC, when plaintiffs are seeking negotiating power aimed at recovering higher patent royalties or licensing fees. These complaints often feature dubious infringement claims asserting weak and sometimes outright invalid patents. Though many of these cases would more suitably accessed by a federal court, with available monetary awards, the plaintiffs seek the threat of the ITC hammer in an exclusion order and its crippling impacts. Ultimately, the consumer pays for this misuse when they are stuck with reduced choice, inflated prices, and hobbled innovation.

The American Consumer Institute encourages the Commission to exercise its discretion for each case while considering all enforcement options. Exclusion orders should not be granted as a matter of course. Consumers benefit from thoughtfully tailored remedies prescribed flexibly, based on the facts of each case and all those who may be impacted by their final decision.

Steve Pociask is President and CEO of the American Consumer institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org.