Congress established the United States Tariff Commission, now the United States International Trade Commission (USITC), in 1916. In the Progressive Era philosophy of the time, “scientific management” was seen as the means to solve economic, social and political problems. With this in mind, Congress empowered the agency to apply scientific principles to the study and enforcement of tariffs, and the Commission’s first chairman was a Harvard economist. But progressives did not anticipate the problems that surfaced a century later: patent trolls play by the rules, using the labels “science” and “technology” to amass private financial fortunes by demanding big financial settlements – while undermining America’s innovation and security. .
Played by globalization
While the USITC has important statutory obligations, such as providing authoritative trade reports to Congress and the President to inform policy-making, “patent trolls” like to abuse the agency to get rich quick at the expense of innovative companies. Unlike inventors who create new things and seek patent protection for their creation, trolls engage in international arbitration of American international trade and patent law to earn income – not to create or produce anything. it would be. The revenue from these exploits can far exceed the value of the patent itself. While patent disputes are usually handled by bona fide courts, trolls love the USITC as a quasi-judicial body that can issue an all-powerful “exclusion order” to block imported products to United States, even if a minor patent is involved.
Electronics is a key area for trolls, as any smartphone can involve hundreds of thousands of individual patents. The mere allegation to the USITC that a single patent is infringed is the opening salvo to ban the entire device from importing into the United States. And this threat poses intolerable risks to industrialists, the trolls know it well.
Naturally, the trolls have focused on major smartphone vendors like Apple, Samsung, Motorola and Google, all of which have been sued multiple times for patent infringement and had to defend themselves in court and before the USITC. The latest set of ITC claims come from Daedalus Prime, a recently licensed patent troll from Bronxville, NY, with the sole purpose of shaking up Samsung, the leading Android smartphone vendor. Using old Intel patents, Daedalus is asking the USITC to ban Samsung smartphones based on alleged technology related to the application processor chip, a strategy that appears to target Qualcomm TSMC chips. If Daedalus were to succeed, the only Android phones entering the United States would be those that Chinese smartphone makers could supply.
USITC Abuses Undermine Broadband Security and Accessibility Policy
Ironically, the import bans that trolls are seeking against these international suppliers of high-end chips and devices could empower Chinese government actors that US policy tries to limit. While Chinese smartphone makers currently have little distribution in the United States, they desperately want more market share. Restricting non-Chinese phone makers in the US market would be a boon for Chinese Xiaomi, Honor, Oppo, OnePlus, Coolpad, Gionee, Hisense, LeEco and Tecno Mobile. This policy direction contradicts fundamental efforts by Congress and the administration (outside of the USITC) to limit US market opportunities for Chinese entities deemed to endanger US interests. Major agencies like the Bureau of Industry and Commerce Security and the Federal Communications Commission are developing a deliberate policy to restrain these Chinese entities, to protect US strategic advantage, and to deter intrusion into US devices. The USITC seems oblivious to the contrary path it is taking, with its toleration, if not empowerment, of abusive patent trolls. Its reckless granting of exclusion orders appears to ignore the compounded supply chain challenges still reverberating from Covid-19.
The Daedalus case presents a serious threat to America’s smartphone supply, which is driving America’s mobile economy and connectivity. Smartphones are essential to help bridge the digital divide in the United States, especially for low-income and minority households. For example, a quarter of American Hispanic adults are “smartphone-only” internet users.
Congress never intended to allow the USITC to be weaponized against trusted suppliers of key products, and Congress clearly would not want to pursue policies that allow US adversaries to benefit from arbitration. permitted by the USITC. It doesn’t take a scientist to figure out that the USITC experiment went wrong when trolls, not innovators, are the predictable winners.
Congress defeated powerful opponents of reform in other areas, but delayed USITC reform for some time. As the new Congress kicks off with its promise to restore America’s economy, it can begin by closing loopholes that aid and abet trolls to reap ill-gotten financial gains and undermine security. The USITC should work for American consumers and bona fide innovators, not for arbitrageurs who exploit the system for their financial advantage.