Friday, July 20, 2012

ITC on 337 Cases – No NPE Problem Here?

In the wake of substantial lobbying by many companies in the tech sector to limit ITC jurisdiction to prevent non-practicing entities (NPEs) from initiating 337 actions, the ITC published a press release, Facts and Trends Regarding USITC 337 Investigations.  This "fact sheet" presents some interesting data on recent trends in ITC 337 investigations and spins it in a way that suggests that there is no NPE problem at the ITC (and implying that no remedial action by Congress is required.)   

The data illustrates a clear uptick in the ITC’s case load, including NPE activity, since the Supreme Court’s 2006 EBay decision.  It also shows that, while perhaps not dominating the docket, NPE activity represents a significant portion of the ITC’s docket.  In fact, since 2006, 18% of ITC investigations were brought by NPEs, with what the ITC refers to as “category 1” NPEs (such as universities) accounting for 10% and “category 2” NPEs (patent investors/enforcers, sometimes called the not-so-nice term “trolls”) accounting for 8% of the ITC's 337 case load.  This doesn’t seem too imbalanced at first blush.  But, when one considers all of the enforceable IP rights in the U.S. that could form the basis of an ITC complaint, Category 2 NPEs must own or control some minuscule percentage of those rights.  As a percentage of IP ownership, it can certainly be argued that Category 2 NPEs do in fact represent a disproportionate share of the ITC docket.

With respect to settlements, the ITC data illustrates that on average, about 50% of all 337 investigations are terminated by settlement or consent order prior to completion of the investigation.  Category 2 NPEs show a somewhat higher settlement percentage, at 61 %.  This should not be too surprising, though, since the Category 2 NPE business model is one that ultimately seeks monetary compensation from patent enforcement efforts.  Injunctive relief, such as an exclusion order, only has value to a Category 2 NPE as a source of leverage in maximizing a financial return, not as the ultimate relief obtained.  

The ITC data is nicely presented in a short (four page) fact sheet and is worth a look, even if you don’t agree with the ITC’s spin on the data.  The data is certainly not so compelling as to prove that there is no NPE problem at the ITC or otherwise end the debate as to whether the ITC's domestic industry requirement should be limited in such a way as to foreclose NPE access to the ITC.