ITC Policy Project: Little-to-Big Problem, Update
The International Trade Commission (ITC or Commission) has a little-to-big problem. The ITC cannot award patent damages; it can only exclude imports. When faced with a patent that covers only some feature or component of a greater whole, the ITC can’t parse its remedy; it can’t limit the patentee’s reward to its contribution to the component, no matter how minor.
Some owners of component patents take advantage of this and ask the ITC, for example, to exclude from import entire automobile lines on a patent that allegedly covers the processor within the cars’ infotainment system.
Here, we update Part II of our little-to-big problem series, where we featured Certain Wearable Electronic Devices with ECG Functionality and Components Thereof (Inv. No. Inv. No. 337-TA-1266). In this case, the patent holder asserts multiple patents on smartwatches that detect cardiac arrhythmia—an irregular heartbeat tied to the heart’s electrical activity.
In the agency’s initial determination, the administrative law judge (ALJ) found that certain Apple Watches infringed two of the asserted patents, and the relevant claims were not invalid. The ALJ recommended an exclusion order for the Apple Watches. Ironically, the ALJ set the bond rate—the amount Apple would have to pay, sufficient to protect the complainant from any injury, during the 60-day presidential review period—at $0.00.
The Commission then decided to review the initial determination. The review addressed various merits issues and considered whether an exclusion order would be in the public interest. We’ve discussed the ITC’s public interest factors here, here and here. In a little-to-big case, we’ve explained, the public interest should weigh more heavily against an exclusion order because the relative harm to competition and U.S. consumers is much greater than in cases where an excluded article or device embodies the innovation the patent holder achieved.
The Commission has now noticed its final decision. While the 89-page decision is not yet public, the notice confirms the ALJ’s findings on infringement and rejects the idea that the public interest weighs against an exclusion order. The Commission did not, however, accept the ALJ’s recommendation on bond.
The Commission set the bond rate at $2.00/watch. That rate alone should have suggested to the Commission that something was awry. The Apple Watches at issue retail for around $400 to $800. The bond rate is designed to protect the complainant from “any injury” caused by the continued sale of the item during the presidential review. Here, the bond rate is roughly 2/400 (½ percent) or 2/800 (¼ percent). Either way, it’s basically a “smidge” of the retail price. If this were a damages case, that smidge feels about right. The patents cover one function, while each watch performs hundreds, if not thousands, of operations, including dozens of health functions like workout tracking, sleep tracking, mindfulness and crash detection.
But where an injury is only a tiny portion of the value of the imported items, the Commission should reconsider whether it should issue an exclusion order. This conundrum is characteristic of the little-to-big problem. The ITC might have considered that if the “injury” is less than 1 percent and as little as 0.25 percent of the retail value (it was 0.00 percent in the ALJ’s view), the public’s access to the product takes precedence over a patentee’s ability to exclude imports.
In a final twist, just before the Commission noticed its final decision, the Patent & Trademark Office (PTO) jumped in. As often happens, the patents in suit were submitted to the PTO’s Patent Trial and Appeal Board (PTAB) for inter partes review. The PTAB found all relevant claims invalid in IPR2021-00971 and IPR2021-00972.
The ITC took the PTO’s decisions under consideration and, using its discretion, the Commission suspended the exclusion order pending appeal of the PTAB decisions. Precisely why, what that means, and when the ITC uses and withholds its discretion, we’ll cover in a future post on PTAB/ITC interactions.
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Image credit: Ashley Blackwell