University Games the Patent System with “Trade” Complaint Against Light Bulb Retailers
Section 337 of the Smoot–Hawley Tariff Act of 1930 gives the U.S. International Trade Commission the power to investigate and block imports accused of infringing U.S. intellectual property rights. This trade remedy can give patent owners a way to enforce their IP rights even when alleged infringers are operating beyond the reach of U.S. courts. But the ITC’s jurisdiction is currently so broad that most Section 337 investigations are merely redundant supplements to parallel lawsuits in federal district court. This overlapping jurisdiction makes the ITC a highly disruptive element in the U.S. patent system, enabling duplicative litigation, forum shopping, and excessive remedies.
A pair of recent Section 337 complaints filed by the University of California aptly demonstrate how the availability of ITC litigation gives some patent owners a way to game the system while serving no trade policy or patent policy rationale.
Due to the work of an academic research lab at UC–Santa Barbara, the University of California owns a series of patents related to “transparent LED structures and packaging that allow light to shine out of the front and back sides of the packaging.” The university is asserting those patents in federal court and at the ITC against manufacturers and distributors of “filament LED bulbs”—LED light bulbs marketed as “Vintage” or “Edison” bulbs because they look kind of like old-timey incandescent bulbs with bulky coil wire filaments.
The university’s first ITC complaint—Filament Light-Emitting Diodes and Products Containing Same (Inv. 1172)—included no manufacturers as respondents, naming instead five major retailers: Amazon, Bed Bath & Beyond, Ikea, Target, and Walmart. One of those respondents chose to settle and then the university withdrew its complaint halfway through the discovery process. The second complaint—Filament Light-Emitting Diodes and Products Containing Same (II) (Inv. 1220)—includes a mix of retailers (Ikea, again, and Home Depot) as well as three U.S.-based device makers (GE, Feit, and Satco).
The university has openly stated on its website that the goal of its litigation campaign is “to ensure UC Santa Barbara is rightfully compensated” by “seeking reasonable royalties from the defendants.” The campaign is being funded by Longford Capital, a “private investment company that invests in commercial litigation.” As a third-party litigation financer, Longford pays all of the university’s legal fees in exchange for a “portion of the proceeds generated from the monetization campaign.”
But the ITC cannot award money damages; it can only block future imports, something that doesn’t provide any direct benefit to either the patent owner or its financing partner. Considering that the university is perfectly capable of suing all of the alleged infringers in court, why would it bother with an ITC complaint?
The answer is that ITC litigation gives the university more leverage in settlement negotiations, because the agency’s quick procedures and powerful remedy make it a more favorable venue than federal district court.
Particularly relevant in this case is that the ITC will not delay its own proceedings (and may even issue a business crippling product ban) even while the Patent Trial and Appeal Board is actively reconsidering the validity of the asserted patents. This shields the university from the full effect of the America Invents Act and thwarts the will of Congress in establishing the inter partes review procedure.
Also, the university is almost certainly not entitled to a product ban under U.S. patent law, because—as a licensing entity—it does not suffer irreparable harm that cannot be remedied by an award of money damages and ongoing royalties.
In short, Section 337 arbitrarily enables them to bypass some parts of U.S. patent law—without serving any legitimate purpose.
A recently introduced reform bill (the Advancing America’s Interests Act) would eliminate cases like this from the ITC’s docket by narrowing the ways a licensing company can satisfy the law’s domestic industry requirement. These changes wouldn’t prevent the university enforcing its IP rights, but it would require them to do it in court where this dispute belongs.