Congress Looking to Rein In ‘Patent Trolls’

A relatively obscure government agency at the center of a high stakes battle between the companies that make smartphones – Apple, Samsung Electronics, HTC and others – could well be headed for big changes.

The International Trade Commission, which was created to protect U.S. companies from unfair foreign competition, has evolved into a top venue for the high-tech patent wars over smartphones, chips and Blu-Ray devices because the ITC can more easily ban imports that infringe patents than district courts.

The House of Representatives Judiciary Committee, in a hearing on Wednesday, aired complaints about companies that file patent infringement lawsuits in district courts to ask for financial damages, but who also file an ITC complaint because the mere threat of a sales ban is a potent argument to settle.

District courts, because of a 2006 Supreme Court case, have to meet a higher bar to ban infringing products.

“Sometimes the ITC is being used opportunistically,” Colleen Chien, who teaches at the Santa Clara University School of Law, told lawmakers. She estimated that two-thirds of ITC cases have a counterpart in district court.

The hearing is the second to discuss the relatively obscure ITC in a week. The first, at the Senate Judiciary Committee, was to discuss whether companies should ask for sales bans because they infringed patents seen as “essential” to a product.

Neither hearing had a ITC representative testifying.

This hearing focused more on patent trolls, considered a rude term that technology companies call firms that sue frequently to win licenses for their patents but do not make anything.

Unusually for Washington in an election year, there seemed to be agreement on both sides of the aisle that the days of the double lawsuits should end soon.

“Did we intend to have everybody sue everybody twice?” asked Representative Darrell Issa, a California Republican.

“We’ve got a shakedown situation that has migrated to the ITC,” agreed Representative Zoe Lofgren, a California Democrat.

Executives from Ford Global Technologies, LLC and Cisco Systems Inc. told lawmakers that an ITC case, and the related threat of an import ban, cost companies millions of dollars to fight off.

“It doubles or triples our costs” to fight in a district court and the ITC, said Neal Rubin, vice president of litigation for Cisco.

Bert Foer, president of the American Antitrust Institute, urged lawmakers to take up the issue of standard essential patents, which are set by a variety of standard setting organizations to ensure interoperability between devices.

The groups have varying rules governing the obligations of companies that hold patents essential to a standard. Most require broad licensing at reasonable rates and there has been talk of requiring holders to agree to give up the right to seek exclusion orders.

One major standards group, the International Telecommunication Union, announced this month that it would host a roundtable of standards organizations, industry players and governments in October to discuss the issue.

HTC Corp. and Google Inc .unit Motorola Mobility have recently had sales bans put on their products by the ITC because of patent infringement lawsuits with Apple Inc. and Microsoft Corp., respectively.

Respondents in ITC lawsuits are a virtual Who’s Who of the tech world, including Apple, Microsoft and Samsung Electronics Co. Ltd.