ITC Receives Two New Section 337 Complaints Seeking Excessive Remedy in Patent Licensing Disputes
One of the ways that Section 337 disrupts the U.S. patent system is by offering excessive remedies to some patent owners in arbitrary situations. The fact that ITC litigation almost always occurs between parties that are simultaneously suing each other in federal district court means that the agency’s exclusion order remedy is also usually completely unnecessary to ensure the enforcement of patent rights. In those situations, the availability of a trade remedy merely provides additional leverage to secure higher royalty payments through settlement.
Two new Section 337 complaints recently filed at the ITC aptly demonstrate how this works.
In Fitness Devices, Streaming Components Thereof, and Systems Containing Same, satellite TV company Dish Network is asserting patents related to adaptive bit-rate streaming, which involves automatically altering video resolution while streaming. The accused products however are stationary bikes, rowing machines, and treadmills. Those machines (which are sold by the three respondent companies under various brands including ProForm, NordicTrack, and Peloton) come with video screens that run third-party software that allegedly infringes the patents.
Dish Network does not compete in any way with the respondents and does not operate a domestic industry that is harmed by sales of the accused products. As such, Dish cannot benefit directly from an import ban. The purpose of Dish’s complaint is not to prevent “unfair competition” but to secure licensing revenue from a new batch of companies potentially using its technology.
The parties disagree over the extent of Dish’s patent rights and their dispute can easily be adjudicated by a court of law. Allowing Dish to litigate this dispute also at the ITC merely enables them to threaten respondents with a disproportionately harmful remedy in hopes of securing a higher royalty rate in an eventual settlement.
Wearable ECG Devices
The complainant in Wearable Electronics Devices with ECG Capability and Components Thereof is AliveCor, a company that makes pocket-sized EKG sensors that work with a smartphone to detect arrhythmias. AliveCor used to make an app for the Apple Watch, but accuses Apple of stealing its ideas and blocking the company’s app in favor of Apple’s own arrhythmia detection software.
In a request for early disposition, Apple points out that since AliveCor no longer makes a smartwatch app, it cannot satisfy the domestic industry requirement. Apple’s request notes that AliveCor is trying to “assert domestic industry investments on a product it claims Apple drove to obsolescence three years ago.” And because the asserted patents explicitly require the use of a smartwatch, Apple argues that its own “comparative investments in the Apple Watch are relevant in determining whether AliveCor’s investments are adequate to warrant protection” and that “Apple’s investments dwarf any spend AliveCor contends is significant with respect to the articles protected by the patents, rendering AliveCor’s investments insignificant.”
Indeed, most of the technology at issue is really just functionality of the watch’s sensors mixed with some basic software data gathering. AliveCor’s patent literally describes a “smart watch to detect the presence of arrhythmia” by receiving data from the sensors and “detecting the presence of an arrhythmia.”
Even if AliveCor had a rock-solid domestic industry argument, this case still doesn’t belong in front of a trade agency. As with many other ITC patent cases, the respondent here is not a foreign competitor operating outside U.S. law to import products that infringe the patents of a U.S. industry. Instead, Apple is a potential customer or licensee of a patent owner seeking to gain extra leverage under the threat of a product ban. That ban would be entirely punitive because it would not directly benefit AliveCor whose own ability to practice the patents depends on imports of the accused product.
And AliveCor’s ability to enforce its patents rights does not depend at all on its access to an exclusion order from the ITC or on agency adjudication of its legal claims. A parallel infringement lawsuit asserting the same patents against Apple was filed by AliveCor in December in the Western District of Texas.