The ITC Policy Project’s main goal is to publish and analyze data about patent litigation at the ITC in order to make the case for why and how Section 337 should be reformed. To that end, we’re publishing a series of “Year in Review” posts focused on what happened (or didn’t happen) at the ITC in 2019.

Future installments in the series will address persistent myths about the ITC’s role in the patent system; application of Section 337’s public interest, domestic industry and importation requirements; and how the agency is dealing with prominent issues like standard-essential patents and non-practicing entities.

Administrative Patent Court

Section 337 of the Smoot–Hawley Tariff Act of 1930 prohibits “unfair methods of competition and unfair acts in the importation of articles,” and empowers the U.S. International Trade Commission to exclude offending products from the U.S. market. The law was enacted as part of a larger package of protectionist trade remedies (like the flexible tariff provision and antidumping law) creating bureaucratic mechanisms to protect domestic industries from foreign competition on a case-by-case basis.

In practice, Section 337 has enabled a federal trade agency to become one of the most prominent institutions in the U.S. patent system. Despite the law’s design as an all-purpose, protectionist trade remedy, the vast majority of Section 337 complaints are based on allegations of patent infringement, and the ITC operates primarily as an administrative patent court for imports.

And because almost all Section 337 investigations involve parties that are also suing each other over the same dispute in federal district court, the agency’s role in the patent system is almost entirely duplicative.

The ITC applies the same rules of patent law used in federal court. And like a lawsuit in federal court, ITC investigations begin with a complaint filed by a patent owner and conclude after a trial before an administrative law judge. Because Section 337 is a trade remedy, complainants must also prove the existence of a domestic industry, and the ITC is required to deny relief if an import ban would harm the public interest.

The ITC itself views Section 337 as a patent enforcement statute that creates “an attractive forum to resolve disputes” where patent owners can pursue “quick resolution of matters that would usually involve more drawn-out litigation in the U.S. district courts” and secure “unique relief in the form of exclusion of goods at the border.”

This vision has fueled a long-term trend in ITC jurisprudence downplaying the trade-related aspects of Section 337 litigation. The agency has broadly interpreted the domestic industry test, importation requirement and even the meaning of the word “articles” in an effort to expand its jurisdiction over an ever-larger share of patent disputes. Moreover, the law’s public interest test has been virtually ignored for over 30 years.

Having an administrative patent court for imports has not only enabled a lot of duplicative litigation, it has also caused a number of serious problems for the U.S. patent system. The United States currently has a dual-track patent litigation system in which the ITC and district courts exercise overlapping jurisdiction while applying different procedures and remedies. This predictably and consistently leads to forum shopping, patent hold-up, abusive litigation and conflicting judgments.

Growing Caseload

From 2010 to 2019, the agency instituted an average of 49 new investigations per year—by far its busiest decade ever. When compared to 27 per year in the 2000s and 12 per year in the 1990s, it’s clear that the ITC’s impact is growing.

There’s also no sign that the agency’s caseload will diminish any time soon. The ITC instituted 47 new investigations in 2018, 48 new investigations in 2019, and in its most recent Budget Justification report to Congress, the agency predicts it will receive 28 percent more new Section 337 complaints in 2020 than it did in 2019.

Major Player

Because the settlement rate for Section 337 investigations (~60 percent) is a whole lot lower than district court lawsuits (>95 percent), the ITC oversees a shockingly high share of all patent trials in the United States.

July 2018–June 2019. District Court percentages are for all patent cases terminated during the period. Sources: United Patents; U.S. Int’l Trade Comm.; Administrative Office of the U.S. Courts.

In 2019, the ITC’s administrative law judges conducted 21 full evidentiary hearings in Section 337 cases. This is roughly 15% of the average number of patent trials held nationwide each year for the last ten years.

Between July 2018 and June 2019 (the most recent 12-month period for which we have official district court trial data), the ITC was responsible for 21.6 percent of all patent trials, making the trade agency the second most active patent court in the United States.