Patent assertion entities (PAEs), or patent “trolls,” use the threat of an injunction to hold up product producing companies in patent suits. The Supreme Court’s 2006 eBay decision largely ended that practice, at least in district court. But it has had the unintended consequence of driving PAEs to a different forum, the International Trade Commission (ITC), in hopes of obtaining an injunction no longer available in district court. In this paper, we document that trend, which is dramatic. Increasingly, cases filed at the ITC are filed by PAEs against an entire industry, often information technology.
eBay’s discretionary test for injunctive relief doesn’t apply at the ITC. And because the ITC can’t award damages, it has tended to grant injunctions as a matter of course. But as we suggest in this paper, the Commission has more power to adjust the remedy it grants than previously recognized. We think it should use that flexibility to limit exclusion orders in circumstances where the patentee can hold up defendants. Delays in implementing the exclusion order and grandfathering in existing products can avoid holdup problems. Bond and penalty provisions can ensure that patentees are compensated for ongoing infringement during these transition periods. If it uses its discretion wisely, the ITC can ensure that patentees are compensated without falling victim to the patent holdup problem that has beset district courts.
Colleen V. Chien & Mark A. Lemley, Patent Holdup, the ITC, and the Public Interest, Cornell Law Review, (2012)