Source: https://www.gordonrees.com/publications/2013/the-unintended-consequences-of-35-u-s-c-299-and-the-itc
Timestamp: 2019-04-22 10:01:11+00:00

Document:
The ITC was founded in 1916 under the Revenue Act.4 It is a quasijudicial Federal Agency equipped with investigative powers relating to trade.5 The objective of the ITC is to protect US trade against improper foreign trade (i.e. unlawful importation of articles protected by U.S. patents).
Substantial economic activity in the U.S. can be shown through conventional use of patented products (i.e. make, use or selling) or solely by licensing.9 This is significant in the context of Non-Practicing Entities (“NPE” aka “Patent Trolls”) since an NPE typically engages in licensing. An NPE is commonly understood as an entity that obtains a patent but never actually makes, uses, or sells the protected technology.10 Rather, the NPE will “use” the patent to sue a party it believes to have infringed its patent and/or it licenses the technology for a reasonable profit.11 Accordingly, where an NPE simply licenses its patent, the patented products are imported and the patent is infringed, the ITC will have jurisdiction to begin an official investigation. Further, the ITC has in rem jurisdiction in its investigations arising out of the allegedly infringing articles. Meaning, unlike proceedings in district court where a plaintiff would have to show in personam jurisdiction in order to proceed, no such procedural hurdle would exist in the ITC.
Discovery in ITC investigations is aggressive and seemingly without bounds. Where Federal Rules in district court mandate that a respondent has 30 days to respond to discovery orders,18 discovery in the ITC’s “rocket-docket” begins only 10 days after investigations commence with little to no limits on what can be requested.19 Inevitably, this leads to a deluge of valuable information that must be supplied in a short-period of time.
Because evidentiary hearings typically begin six months from the commencement of the investigation and arrive at a final decision in less than a year, settlement negotiations in the interim tip noticeably in favor of the plaintiffs. Plaintiffs can methodically prepare their investigations before filing while defendants suffer from the element of surprise. While the ITC can be criticized as an improper venue because damages do not avail themselves, because the majority of patent suits terminate in settlement,20 the absence of legal remedies can perhaps be overlooked given the value of an exclusion order as leverage in settlement negotiations. This value increases exponentially when viewed in conjunction with the “rocket-docket” speed of ITC investigations.
Whereas before the AIA NPEs were able to join parties with rights arising out of the same transaction or occurrence in some districts based solely on infringement of the same patent,26 the AIA renders joinder arising solely from infringement of the patents in suit impossible absent waiver .27 Yet, because the AIA does not govern ITC investigations, instead of discouraging NPEs from permissively joining multiple defendants in one suit, §299 may have had the unintended consequence of providing an alternative channel to simply head to the joinder-friendly venue at the ITC for its desired relief.
The difficult standard as to injunctions under eBay or joinder under §299 may have the intended consequence of discouraging NPEs from joining multiple defendants and/or generally from pursuing equitable remedies. It may also have engendered unintended consequences. While too early to tell whether §299 is that watershed moment envisioned by Congress as to patent litigation and NPEs, it bears mentioning that only 20% of ITC investigations since eBay have been filed by NPEs.28 Moreover, of the 20%, only four NPEs prevailed and were granted exclusion orders.29 Low numbers notwithstanding, for plaintiffs-- including NPEs-- wishing to join multiple defendants who may struggle to satisfy §299 or who may seek injunctions but may not satisfy eBay, the reduced legal standards and increased efficiency of the ITC renders it an attractive alternative venue for patent litigation.
1 See eBay Inc. v. Mercexchange, 547 US 388, 391 (2006).
2 Pub. L. No. 112-29 (2011).
6 United States International Trade Commission, Filing Guidance for New Complaints, available at http://www.usitc.gov/docket_services/documents/Updated337ComplaintGuidance.pdf (last visited April 10, 2013).
9 Interdigital Communications v. ITC, 690 F. 3d 1318, 1330 (Fed. Cir. 2012) (“If there were any ambiguity as to whether the statute could be applied to a domestic industry consisting purely of licensing activities, the Commission’s consistent interpretation of the statute to reach such an industry would be entitled to deference under the principles of Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)”).
15 eBay, 547 US at 391 (“A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction”).
20 Jay Kesan and Gwendolyn Ball, How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement ofPatent Disputes, 84 Wash. L. Rev. 237, 254, 272 ( The settlement rate has been estimated as high as 95% and as low as 66% for patent infringement suits).
22 See “NPEs: Fact or Fiction?”(June 15, 2006, Serial No. 109–104).
26 See MyMail, Ltd. v. Am. Online, Inc., 223 F.R.D. 455, 457 (E.D. Tex. 2004), Sprint Commc’ns Co. v. Theglobe.com, Inc., 233 F.R.D. 615, 617-18 (D. Kans. 2006).
28 United States International Trade Commission, Facts and Trends Regarding USITC Section 1337 Investigations, available at http://www.usitc.gov/press_room/documents/featured_news/sec337factsupdate.pdf (last visited April 23, 2013).

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