Cornell Law Review Volume 98 Issue 1

Patent Holdup, the ITC, and the Public Interest

Patent-assertion entities, or “patent trolls,” use the threat of injunction to hold up product-producing companies in patent suits.  The Supreme Court’s 2006 decision in eBay Inc. v. MercExchange, L.L.C. largely ended that practice, at least in federal courts.  But it has had the unintended consequence of driving patent assertion entities to a different forum, the International Trade Commission (ITC), in hopes of obtaining injunctive relief no longer available in district courts.  In this Article, we document that dramatic trend.

Because the ITC is an administrative agency, not a federal court, eBay’s discretionary test for injunctive relief doesn’t apply.  And because the ITC can’t award monetary damages, it has tended to grant injunctions as a matter of course.  But as we suggest in this Article, the Commission has more power to adjust the remedies it grants than previously recognized.  The ITC should use this flexibility to craft exclusion orders that limit the ability of a patentee to extract settlements that exceed the economic value of the patent, a practice called “holdup.”  For instance, delaying the implementation of exclusion orders and grandfathering in existing products could avoid holdup problems.  The Commission could also use bond and penalty provisions to ensure that patentees receive compensation for ongoing infringement during transition periods.  If it uses its discretion wisely, the ITC can ensure that patentees are adequately rewarded without falling victim to the patent holdup problem that has beset district courts.

 

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