The U.S. International Trade Commission (ITC) is an independent agency that serves several important trade-related functions for the federal government. Its activities include research, among them a pending report on the impact of the proposed U.S.-Mexico-Canada Agreement (USMCA) on the economy. The ITC also determines whether U.S. firms have been injured by “unfair” foreign competition, as NTU discussed in a 2018 Issue Brief.
Another function of the ITC is to evaluate allegations that imported goods have violated U.S. intellectual property (IP) laws. Under Section 337 of the Tariff Act of 1930, the ITC can restrict imports of goods that violate U.S. patents, copyrights, trademarks, etc.
The ITC is currently considering a complaint from Qualcomm alleging that certain Apple products infringe on Qualcomm patents. In Section 337 cases like this one, an Administrative Law Judge provides an initial determination on whether U.S. IP rights are being violated and suggests a remedy to ITC Commissioners, who determine what action to take. The President then has the authority to review proposed ITC actions.
The enforcement tools available to the ITC in Section 337 cases are cease and desist orders and/or exclusion orders, which restrict sales of the offending articles in the United States. The ITC does not have the authority to impose monetary penalties as a remedy. Currently, there are approximately 111 exclusion orders in effect.
In September 2018, an Administrative Law Judge ruled in his Initial Determination that Apple infringed on one Qualcomm patent, but further ruled that restricting Apple imports would not be in the public interest. He was able to do this because in cases where U.S. intellectual property has been infringed, the ITC has the discretion to allow imports to continue under certain circumstances. However, in practice the ITC has very rarely used this public interest exception to permit continued imports in cases where IP violations have been found. According to the relevant statute:
If the Commission determines, as a result of an investigation under this section, that there is a violation of this section, it shall direct that the articles concerned, imported by any person violating the provision of this section, be excluded from entry into the United States, unless, after considering the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers, it finds that such articles should not be excluded from entry.
This particular dispute has prompted cries of monopolization on one side and cries of theft on the other.
According to Apple, “Qualcomm has continued to unfairly demand royalties for technologies they have nothing to do with to protect their monopoly. We're glad the ITC stopped Qualcomm's attempt to damage competition and ultimately harm innovators and US consumers.” But as Qualcomm states, “...there are many ways Apple could stop infringing our technology without affecting the public interest.”
Fortunately, U.S. law gives provides a reasonable process to determine the proper course of action and proper remedies following the Judge's decision. The ITC has proven to be a reliable arbiter of disputes under the criteria provided by U.S. law. The inclusion of a “public interest” provision complicates their job in this particular case, but the process is much more likely to lead to a beneficial outcome than anti-dumping and countervailing duty cases, which do not allow the ITC to even consider the impact of potential trade remedies on the overall public welfare of the United States.
The ITC plans to complete its investigation by February 19, 2019, after which the Office of the U.S. Trade Representative, as delegated by the President, will have 60 days to approve or disapprove of the ITC’s action.
Institutions like the ITC have coherent, cohesive procedures in place to provide a fair forum for dispute resolution. They are particularly critical for IP cases, as are the checks and balances afforded to the USTR. Without them, there would be heavier reliance on much more blunt tools of trade and IP policy that risk greater disruption to the economy and consumers.