Increase in ITC complaints hits firms from Asia, but there does not seem to be a 'Trump factor' at play 08 Jan 18
As service providers prepare their annual deep-dives into US patent litigation statistics, it looks like the overall number of new district court cases filed will have fallen by about 10% between 2016 and 2017. But over at the International Trade Commission, the number of new investigations increased by around 13% last year, according to figures from Lex Machina. For major Asian tech companies, the ITC is a continuing concern; but it’s not the number of cases, but rather some recent legal developments that are garnering the most attention.
Governments in South Korea, Taiwan and mainland China have all warned about the effect of ITC probes on domestic industry in recent times. This level of attention speaks to how large tech companies in those jurisdictions gauge business threats from patent enforcement in the United States. Because it sits at the intersection of IP and trade law, an increase in ITC complaints against Asian firms was one of the most common predictions I heard last year when I asked experts around the world what impact the Trump administration might have on the patent world.
The numbers do indeed show that 2017 was a relatively busy year for Section 337 investigations. The 61 complaints filed was the highest since 2011. A read-through of defendant names indicates that about 60% of the complaints name at least one East Asian respondent, while almost one in three targets a mainland Chinese firm. But a comparison with 2016 shows that there is probably no Trump effect happening here. China has borne the brunt of Trump’s trade fulminations, but Chinese companies faced fewer complaints last year than they did in 2016. The share of investigations looking into Asian companies went up, but all of the increase was accounted for by Japanese, Korean and Taiwanese defendants.
In Korea, for one, this hasn’t gone unnoticed. Samsung and SK Hynix have faced numerous challenges over memory patents from asserters including BiTMICRO, Tessera and Netlist. Media accounts portray this as chip industry “trade pressure” rather than straightforward patent dispute, drawing comparisons to scrutiny of the sector by China’s National Development and Reform Commission (NDRC). But generally speaking, it is not protectionism behind the new enthusiasm for patent trials before the ITC’s administrative law judges. After all, a decent proportion of complainants themselves come from this part of the world.
One common attraction to ITC proceedings is that they will generally not be stayed pending IPR petitions. This helps to neutralise what has become the dominant defensive strategy in patent cases. An even bigger factor is the prospect of an injunction. The ITC can issue exclusion orders, and as this blog detailed in November, a recent ruling has even opened the door to the possibility of, effectively, SEP injunction. That decision recommended a limited exclusion order in a case between Sony and Fujifilm, the last two active manufacturers of “Linear Tape-Open” technology. Since our last update, the ITC announced it would indeed review-in-part its initial finding and asked for public comment as to the public interest aspects of the case. This week, Hewlett Packard Enterprise and IBM both weighed in, telling the commission that an injunction would potentially have harmful effects on the market for the technology, leaving only one US supplier.
The eventual outcome of the Fujifilm-Sony case may have a significant impact on whether ITC activity rises again next year. Another trend that could bear on ITC activity – and again, probably owing more to legal developments than to the Trump factor – has been the higher level of attention to trade secrets theft. As we recently pointed out, this has put Chinese firms in particular in the spotlight. One of the more interesting IP cases of 2017 was the Supreme Court’s denial of cert in a case called Sino Legend. The result, effectively, is that it continues to be possible to file ITC cases based on trade secret misappropriation that takes place entirely in China. If plaintiffs wake up to this possibility, look out.
This post was edited to correct the name of the petition denied cert by the Supreme Court last year.
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