China’s ambition to eclipse American technological and geopolitical leadership has been evident for decades. Beijing’s relentless industrial espionage, economic policies, subsidies, and $1.4 trillion infrastructure program pose critical challenges to U.S. interests. Domination of 5G technology is a priority for China because it is critical to the development of other advanced technologies crucial to Beijing’s quest for dominance and the immense economic opportunities involved.
In the midst of this struggle between global titans, a singular Irish patent troll has hijacked the U.S. International Trade Commission (ITC) dispute process, and in doing so has become — wittingly or unwittingly — a powerful ally for China in the fight for 5G supremacy. The ITC is an independent federal agency established to protect American industries from trade violations. It is empowered under Section 337 of American trade law to investigate complaints of imports alleged to violate U.S. patents and, where conditions are right, to ban any that infringe American intellectual property (IP) rights.
The ITC must weigh two considerations before it can issue exclusion orders banning imports that violate IP laws: (1) the domestic industry requirement, and (2) the public interest. Under the domestic industry requirement, the allegedly offending imports must include IP that an established or emerging U.S. industry is using or preparing to use. Under the public-interest consideration, an exclusion order may not be issued if public interest precludes it. Particularly given our battle for leadership in 5G, it is difficult to imagine interests weightier than protecting Americans’ access to connected devices.
The ITC has become a popular venue for patent trolls and their abusive tactics, which now threaten America’s ability to protect its 5G network from high-risk Chinese equipment vendors. Trolls use patents solely to accuse productive companies of infringement — in hopes of coercing outsized royalty payments through lawsuits and other aggressive tactics. The ITC process is a target for exploitation because it is faster than federal court litigation. ITC exclusion orders are easier to obtain than court injunctions and can provide extraordinary leverage in settlement negotiations.
However, patent trolls do not engage in productive activities like manufacturing, improving or selling the products containing the patents they obtain. Thus, they are often referred to as “non-practicing entities” (NPEs) and are widely reviled as predatory opportunists who do not make any constructive contributions to the economy. In short, they do not engage in productive economic activity in the U.S and their complaints should be dismissed as self-serving tactics that harm the public interest.
The activities of Neodron, a Dublin, Ireland-based patent troll, exemplify this toxic strategy. In February 2019, shortly after its incorporation, Neodron acquired several patents related to touch screen technology from U.S.-based Microchip Technologies. Neodron then immediately filed an ITC complaint and several related federal lawsuits alleging infringement of these patents by nine leading U.S. companies including Amazon, Dell and HP.
It subsequently filed a second similar ITC complaint in February 2020 that expanded the list of victims so Neodron now is threatening more than 90 percent of the smartphones, tablets, and laptops imported into the United States.
Neither Neodron nor Microchip produces or sells the devices Neodron is asking the ITC to ban. Moreover, Neodron’s reliance on its association with Microchip to satisfy the domestic industry requirement lacks credibility. Microchip simply doesn’t have meaningful U.S. business operations related to Neodron’s patents.
Neodron’s requested exclusion orders would have disastrous consequences for U.S. 5G infrastructure development. Such orders would lock the only non-Chinese suppliers of 5G smartphones out of the U.S. market and squelch investment incentives for all the other affected manufacturers. Simultaneously, of course, this would provide a wide-open U.S. market for Chinese manufacturers.
That Neodron is willing to forge ahead at the ITC despite these unfathomably dire results suggests that its true motive is not to actually obtain an exclusion order, but rather to pressure innovative companies that, unlike Neodron, produce real technology and real American jobs to fork over hefty financial settlements. Granting Neodron an exclusion order would endanger national security by restricting access to equipment necessary to develop a national 5G network uncompromised by hostile Chinese suppliers and interests. Minimizing the public interest here would signal clearly that extortion is an effective ploy at the ITC.
The ITC should prevent more mischief from other trolls by decisively rejecting Neodron’s requests for exclusion. The Commission should embrace a meaningful and appropriate reading of the domestic industry and public interest requirements to send a strong message that it will reject exclusion order requests that only benefit trolls at the expense of U.S. national security, domestic industries and American consumers.
• William J. Murphy is an associate professor of social science at the New England Institute of Technology in East Greenwich, R.I.