Will a little-known agency let patent trolls kill the Apple Watch?
WASHINGTON, D.C. – As many Americans were preparing for the holidays last month, California’s wealthiest tech company waited to hear if their popular Apple Watch would be banned from import into the United States.
That’s because the International Trade Commission (ITC)––a federal agency created to resolve trade disputes and protect American companies from unfair foreign competition––has been investigating whether or not the heart monitor technologies in the Apple Watch infringe upon patents held by another company, AliveCor.
In the end, the ITC did find that Apple infringed AliveCor’s patents and announced a ban on imports of the Apple Watch–although it won’t enforce it yet. But this isn’t where the mess ends. Earlier in December, the U.S. Patent and Trademark Office (USPTO) announced that the patents in question are actually invalid. This means that AliveCor’s entire case could be baseless.
While consumers wait to hear the fate of the Apple Watch, it is worth exploring why this happened in the first place. Simply put, patents have become weaponized by those rejecting innovation and seeking instead to extract maximum profits through the legal system.
Historically, the federal courts have been the battle ground for most patent disputes. But in recent years the ITC has become a popular alternative. This is due in large part to its popularity with patent trolls (more politely called patent assertion entities) who collect huge portfolios of patents to strategically assert against other companies in hopes of extracting royalties and licensing fees. Patent trolls do not innovate or produce anything; they make their money from lawsuits and legal threats.
What makes the ITC attractive to patent trolls is the fact that the commission can impose product bans that drive companies into settlements or licensing agreements in order to keep their products on the market.
While this benefits those who make money through litigation rather than innovation, it puts consumers in a bad spot. Banning the Apple Watch, for example, could even create public health risks by preventing consumers from using its heart-monitoring capabilities. While the ITC is supposed to consider impacts on the public interest, this is typically not a driving factor in its decisions.
Although the ITC was created to protect American companies from unfair foreign competition, ITC patent infringement investigations are increasingly used in disputes between domestic companies. An R Street Institute study found that since 2017, only 6.5 percent of ITC investigations involved domestic complaints and foreign respondents. At the same time, the data shows an increase in complaints brought by patent trolls, with the ITC reporting that roughly 20 percent of its investigations in 2021 were brought by them.
As the competing December decisions on the Apple Watch show, patent quality matters. The Patent Office found the patents in question to be “obvious” and therefore not patentable, while the ITC views the patent as valid and therefore found Apple guilty of infringement. These drastically different outcomes raise serious questions about the problems with multiple federal agencies policing patents.
The ITC made the right choice in delaying the Apple Watch import ban until the Patent Office finalizes its own decision. But what happens in the aftermath will be critical to the future of the ITC as a venue for patent fights. Both agencies would benefit from working together to take patent trolls seriously.
Ultimately, the ITC should not be an end-run around the American legal system. And there are ways to keep the ITC focused on legitimate cases. For example, the soon-to-be-sworn-in Congress should revisit the bipartisan Advancing America’s Interests Act, originally introduced by Reps. Suzan DelBene, D-Washington, and David Schweikert, R-Arizona. The bill would make it harder for patent trolls to abuse the ITC investigation process while also giving more weight to the public interest in decisions.
The potential ban of the Apple Watch is a surprising view into the messy world of patent litigation. Thankfully, the ITC decided to delay the import ban, but it should alert the public to the abusive tactics of patent trolls. Capricious lawsuits are a threat to all American companies; a fact policymakers must prioritize as patent abuse worsens, threatening innovation and consumers alike.
Image credit: Halfpoint