US ITC Not Keeping Pace With Digital Revolution, New Report Argues

The rapid rise of digital technology in the twenty-first century places new demands on intellectual property protections, while presenting new challenges. A new report suggests that a leading US agency that investigates patent infringement may need to be updated to keep up.

The Center for Strategic and International Studies (CSIS) released a report [pdf] on 22 June finding that the US International Trade Commission must modernize in order to adapt to the increase in high-technology production dependent on IP, and the related increase in IP infringement claims.

The Commission is responsible for investigating claims of US patent infringement and enforcing IP rights by issuing exclusions on imports that infringe on US patents. The report explains that the Commission continues to be based on nearly century-old legislation, Section 337 of the Tariff Act of 1930. Despite various reforms to Section 337 over the years (see background below), the current legislation is insufficient to meet the needs and address the challenges of the digital age, according to a CSIS press release summarising the report.

“Using the same laws and procedures written during the height of the Great Depression and last updated during the Reagan administration may be akin to forcing a square peg in a round hole,” the authors of the report state. The authors are William Reinsch, senior adviser and Scholl Chair in International Business at CSIS, Jonathan Robison, program coordinator and research assistant, Scholl Chair in International Business, and Andrew Lepczyk, a research intern in the Scholl Chair.

The main conclusion of the report is that the laws and procedures of the Commission must be updated to keep pace with the IP requirements of the digital revolution.

Detailed in the report recommendations below, these updates revolve around the need for greater efficiency of the Commission in processing cases, and the challenge of dealing with the digital, rather than material, nature of many new articles of trade.

Summary of Report Recommendations

1. “Tighten the nexus between patents and domestic industry requirements.”

Some claims are made by nonpracticing entities (NPEs) that build business models around the purchase and assertion of patents. “Tightening the nexus” involves raising standards on IP infringement claims to filter out NPE cases without sufficient merit.

2. “Reassess how the Sunshine Act is interpreted or implemented.”

The efficiency of the Commission is constrained by the Sunshine Act of 1976 that requires all communication between Commissioners to be open to the public and announced one week in advance. More informal communication would enable the Commission to share information on cases more quickly to reduce processing time.

3. “Congress should comprehensively clarify the current definition of ‘article of trade.’”

The authors of the report challenge US Congress to redefine the meaning of an “article of trade” to include some forms of digital data. However, they recognise that this is a complicated issue, as it could place a significant burden on digital service providers to enforce Commission orders.

4. “Maintain the current definition of ‘public interest.’”

“The current definition of public interest is broad enough to protect the U.S. economy and consumers, but not so precise as to interfere with the property rights of patent holders,” the report states. This definition offers the Commission sufficient flexibility and discretion to ensure efficiency without encouraging politicization over the interpretation of public interest.

Background on Section 337

Section 337 of the Tariff Act of 1930 was adopted as a mechanism to enforce the US patent system by recommending the exclusion of any imports that infringe on US patents and that threaten to damage US industry.

Section 337 was updated in the 1988 Omnibus Act to cover any IP infringement regardless of its impact on US industry. According to the report, while this reform aimed to increase protection, it in fact paved the way for some NPEs to take advantage of the IP system.

The final reforms to Section 337 occurred after the 1994 Uruguay Round Agreement of the WTO, which aimed to reduce discrimination of foreign companies by expanding their ability to raise counterclaims.

 

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