Dubious Patent Tactics at the International Trade Commission Threaten Innovation

By Bruce Gjovig
September 3, 2020

“The sweeping import ban Neodron wants would negatively affect the bottom line of innovators, and the resulting higher prices and supply shortages for mobile phones, tablets, and touchscreen laptops at various price points would hurt the millions of Americans and businesses that rely on these devices.”

International Trade Commission perspective - https://depositphotos.com/61369901/stock-photo-perspective-word-on-a-puzzle.htmlIt is easy to assume startups have little at stake in a simmering patent fight between a little-known overseas company and some of the world’s largest mobile device makers, such as Samsung, Motorola, Microsoft, Dell, and Amazon, and Apple, among others. But that assumption is wrong and overlooks a remarkably successful symbiosis.

It is no overstatement to say that mobile technology is at the heart of the most sweeping change in daily life since the Industrial Revolution. In the last ten years, companies large and small have invested trillions of dollars in everything from infrastructure to R&D, creating millions of jobs.

Tech startups are the lifeblood of the digital economy. In fact, startups often outpace established companies as employment engines. For example, in 2017 alone, 415,226 new U.S. startups were launched, fostering a gain of 1.7 million additional jobs.

Of course, new firms rarely pop up out of nowhere. They often thrive on platforms built over time by companies that can afford to risk multi-billion dollar investments. Start-up designers, vendors, and entrepreneurs of all kinds, in turn, enable big companies to stay agile, attentive to shifts in market dynamics, consumer demand, and innovation.

With industry giants racing to compete in the emerging 5G world, startup activity increasing by nearly 200% since 2012, and new tech hubs emerging beyond Silicon Valley. The U.S. can look forward to a few new segments and products as well as game-changing innovative improvements of existing technologies.

A Matter of Concern

Two complaints filed by an Ireland incorporated entity called Neodron are a matter of concern not only to the big companies in the cross hairs, but also the countless startups throughout the global supply chain. Likewise, Neodron’s petitions for the U.S. International Trade Commission (ITC) to ban the import of devices with the disputed technology—over 90% of smartphones and tablet in the U.S. market—could hit large companies’ sales and upend the environment where small and mid-sized companies have thrived.

Neodron and other dubious actors, sometimes termed Patent Assertion Entities (PAEs) and often referred to as “patent trolls,” do not invent or manufacture new products and technologies. They obtain patents and then file suits alleging intellectual property infringement. Often backed by hedge funds or other third party profiteers, they spend freely on legal wrangling on even flimsy assertions to bully and vanquish actual tech innovators – and then pocket millions of dollars.

To be sure, respect for patent rights is indispensable for innovation, whether a company is large or small. When IP disputes arise, the federal courts are best equipped to adjudicate claims and award damages. However, costly, drawn-out litigation by PAEs too often distracts large companies from coming up with new ideas in cooperation with the startups with which they interact as partners, customers, or competitors. Threatening lawsuits can also cripple the ability of emerging innovators to attract capital from investors, build a talent team, or to find new partners. In a recent survey of 200 venture capitalists, 100% indicated that the presence of a patent demand letter would be a major deterrent in their decision to invest.

Drastic Remedies Threaten SMEs

Enlisting the ITC to threaten exclusion from the U.S. market, meanwhile, creates a range of additional hazards for companies large and small. The sweeping import ban Neodron wants would negatively affect the bottom line of innovators, and the resulting higher prices and supply shortages for mobile phones, tablets, and touchscreen laptops at various price points would hurt the millions of Americans and businesses that rely on these devices. Small and medium-sized business that are fastest to adopt mobile services, for example, experience much faster revenue growth and create more jobs than their mobile-hesitant counterparts.

Startups play a key role in driving innovation and job creation in our economy and have an especially strong interest in preserving IP protections. They also have a lot to lose when fly-by-night operators use the drastic remedies of the ITC to force settlement of IP disputes against the industry leaders competing in a global arena. Entrepreneurs cannot thrive in a marketplace beset by continuous litigation, massive supply disruptions, and uncertainty.

 

Image Source: Deposit Photos
Copyright: iqoncept
Image ID:61369901 

The Author

Bruce Gjovig

Bruce Gjovig is CEO Emeritus of the UND Center for Innovation Foundation of Grand Forks, North Dakota, a nonprofit entrepreneur outreach center that received numerous national and international awards for excellence.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 9 Comments comments.

  1. TFCFM September 3, 2020 9:18 am

    On this point, legislation has been introduced (HR 8037) that seeks to limit use of ITC Section 337 investigations by patent assertion entitites.

    Bill can be found at this link:

    https://delbene.house.gov/uploadedfiles/delben_041_xml_-_for_introduction.pdf

  2. Pro Say September 3, 2020 11:46 am

    Ugh.

    “dubious patent tactics” “dubious actors”

    Oh, I see. So following U.S. law . . . is now “dubious.”

    “large companies from coming up with new ideas in cooperation with the startups”

    Oh, I see. You mean like Apple cooperating with the innovative VirnetX, right?

    “filed by an Ireland incorporated entity”

    Oh, I see. So the U.S. should discriminate against evil foreigners because . . . well, just because we should. (Trump squeals in delight.)

    “do not invent or manufacture new products and technologies.”

    Oh, I see. Inventors and those to whom they sell their patents to shouldn’t be paid for their hard work, risks, and innovations.

    “Often backed by hedge funds or other third party profiteers”

    Oh, I see. Because profit is . . . bad. Bad. Evil. Bad. Evil.

    Ring, ring. Communism calling.

    “respect for patent rights is indispensable for innovation”

    Oh, I see. So the government should have the right to pick and choose who’s patent rights should be respected . . . and who’s shouldn’t.

    Same old swill.

    Same. Old. Swill.

  3. Jonathan September 3, 2020 12:27 pm

    The narrative of the “patent troll” always seems to start halfway through the story: “They obtain patents”. The first half of the story is more interesting, but not so helpful for corporate activists. “Innovator trampled in marketplace and forced to sell assets”. The harder you make it to enforce IP rights the more NPEs there will be. Leave the ITC alone.

  4. Anon September 3, 2020 12:29 pm

    This article is nothing more than Efficient Infringer pablum and classic FUD.

    Absolutely shameful.

  5. Sarah September 3, 2020 12:36 pm

    HEY FB you were sup[posed to tell me my cases were sent to Memphis. but that would have put the ball in your clients court.

  6. Benny September 4, 2020 5:38 am

    Anon, it is more than you think it is.
    Innovating startups can be pushed out of the market and their tech lost when hit with a patent infringement lawsuit which is not directed at their core technology. If your sole concern is profit then you are correct in your view. If you also take an intterest in widespread innovation you need to take a different approach.

  7. Anon September 4, 2020 11:44 am

    Innovating startups can be pushed out of the market and their tech lost when hit with a patent infringement lawsuit which is not directed at their core technology.

    That is nothing more than a ‘patents are bad’ ploy – and very much an Efficient Infringers’ mantra.

    Just because you try to ‘dress it up’ that the Efficient Infringer might be some small tech STEALING another’s IP does not make it any less a ploy for Efficient Infringement.

    I suggest that you look up Sir Thomas More and the view that I would be ‘defending the devil’ in my statements here.

    This is NOT more than what I think it is – it is exactly what I think it is.

  8. David Lewis September 4, 2020 4:00 pm

    More fear mongering about “patent trolls” for the purpose of justifying patent infringement – a form of piracy. This sort of fear mongering has lead the unfortunate trashing of our patent system, thereby allowing infringers steal IP relatively easily.

    It should be noted that the startups (that are touted as fueling our economy) do not necessarily have the money to market their products and may be nonpracticing entities, as are often individual inventors working out of their garages.

    Note that part of the rise in value of Chinese patents (which now tend to sell for more than their US counter parts) and the fall of the value of US patents is the ease in which one can prevent imports of patent infringing (and therefore pirated) products – despite the higher degree of corruption in the Chinese system.

  9. Night Writer September 7, 2020 9:59 am

    The biggest thing that people just don’t get is money. That most of these anti-patent articles are paid for by non-profit organizations that are funded by a few huge international corporations.

    People act as if they are not paid advocacy but rather academic papers. They are not. They are being paid to write this nonsense.