Originally designed to help protect American businesses against unfair trade practices, the International Trade Commission instead is being used to target U.S. manufacturers, witnesses from Ford, Cisco, and other firms testified at a House Judiciary subcommittee hearing on Wednesday.
At issue are patent assertion entities, also known as “patent trolls,” which are companies that hold patents in order to earn royalties rather than use them to manufacture something. Patents are the lifeblood of many firms in today’s high-tech world, so companies are becoming increasingly bare-knuckled in their approach to developing, using, and protecting intellectual property.
Patent trolls are going after American manufacturers by accusing them of infringing on patents, David Kelley, general counsel for Ford Global Technologies, told the House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet.
“PAEs don’t produce goods—they don’t actually use technology to create products or jobs in the United States,” he said. “Their goal is to threaten other businesses with patent litigation in the hope that those other businesses will agree to pay royalties rather than face continuing legal claims.”
And those patent trolls are finding an easy venue at the ITC, which has different rules and practices than U.S. courts, such as issuing more injunctions, said Cisco’s vice president of litigation, Neal Rubin.
“Patent assertion entities who do not develop, do not make, do not sell and import products are now routinely using the ITC to assert their patents against U.S. operating companies, imposing great expense and burden on them and on U.S. consumers,” he said. “These assertions in the ITC are injuring rather than protecting our domestic economy.”
Rubin joined other witnesses in urging Congress to clarify what kind of company can bring a dispute before the ITC, and what kind of disputes the commission can consider.
But Colleen Chien, a professor at Santa Clara University, pointed out that it’s not just patent trolls that may be taking advantage of the system.
Rather than investing in new ideas, some big tech companies are spending billions of dollars hoarding existing patents to use as legal weapons against competitors and to protect themselves against patent trolls, she told the panel.
According to Chien, Google spent $12.5 billion to buy Motorola Mobility and its patents but spent less than half of that, $5.2 billion, on research and development in 2011. In 2011, Apple spent $2.4 billion on R&D but contributed more, approximately $2.6 billion, to a single transaction to buy patents from Nortel.
“It’s time for the patent wars to find patent peace,” subcommittee ranking member Melvin Watt, D-N.C., said. “It’s a drain on the economy.”