Time To Close The ITC Patent Injunction Loophole
from the two-hacks-at-the-same-ball dept
For quite some time, we’ve been pointing out how patent holders have been using a bit of a loophole to get two separate shots at getting an injunction against other companies in patent disputes. This became even more popular after the Supreme Court ruled in the MercExchange case that injunctions banning the sale of goods often did not make sense. The loophole is that, rather than go through the court system, patent holders would go to the US International Trade Commission, claim that the goods they believed were infringing were an “unfair trade practice” and demand an injunction against importing them into the US — effectively the same thing as a court injunction against sale (assuming the good was manufactured outside the US).
Since then, we see it’s happening all the time that companies sue in the courts and use the ITC loophole as well. The ITC doesn’t need to abide by the court’s rules either, making it even easier to get an injunction this way. We found it quite problematic that patent holders were getting two hacks at the same ball — especially when one of those hacks doesn’t need to follow the Supreme Court’s rules on when an injunction is and is not appropriate. Others disagreed with our assessment, claiming that it’s not a loophole, but an important way to stop foreign companies from unfairly entering US markets.
Luckily, there’s now some actual research looking into the details of how the ITC is used for these sorts of things. Eric Goldman points our attention to a law review article looking at data on how the ITC patent injunction process has been used over the past twelve years, and the results aren’t pretty. It found that the ITC is used just as often between two American companies as it is used by an American company against a foreign company. Why the International Trade Commission gets involved in disputes between two domestic companies is not clear at all. It also found that many companies use both processes simultaneously, allowing them two separate attempts at getting the same injunction. Finally, the report finds that while there’s only a slight increase in the likelihood of the ITC finding in favor of the patent holder, it’s much more likely to grant an injunction barring the sale of a product.
As the report notes: “In the absence of coordination between the venues and with the high rate of parallel litigation, this two-track system may invite judicial waste and expose parties to the risk of duplicative litigation and potentially conflicting outcomes.” Hopefully this will help Congress realize that the ITC loophole on patents needs to be closed.