Trade Policy Is About Much More Than Tariffs

Authored by Gordon Gray via RealClearMarkets,

Since the early days of his campaign, President Donald Trump has pledged to impose wide-ranging tariffs on many imported goods, including a 10 percent or higher tax on imports from other countries. This decision has made waves, drawn criticism, and largely dominated the trade policy debate in recent months – understandable, given the far-reaching implications of such a drastic change in policy. Nevertheless, President Trump’s tariffs are far from the only trade policy issue deserving of attention by the new administration. As we look ahead to January, any trade reform effort considered by President Trump and his advisors should also include overdue changes to a little-known agency responsible for implementing our country’s trade agenda: the International Trade Commission (ITC).

Congress has given the executive branch wide authority to set trade policy. The ITC’s role is less widely understood. Due to Section 337 of the Tariff Act of 1930, the ITC maintains the ability to institute “unfair import investigations,” a tool ostensibly designed to protect American companies from intellectual property infringement violations stemming from foreign competitors.

If an infringed product is imported into the United States, the ITC has one remedy – an Exclusion Order – that completely ban the product in question from the U.S. market.

Unfortunately, in recent years, the ITC has become the forum of choice for opportunistic patent assertion entities (PAEs). Also known as patent trolls, PAEs are companies that purchase portfolios of patents with the sole purpose of using them as the basis for infringement litigation. While the threshold for injunctions in federal courts are much higher, patent trolls flock to the ITC thanks to its unique ability to issue relief via ITC Exclusion Orders.

When an Exclusion Order is issued, the ITC is supposed to investigate and determine whether banning the imported product in question will negatively affect the public. In the past, a wide range of stakeholders, from Hispanic interest groups to rural community advocates, have called on the ITC to issue public interest exemptions and ensure consumers’ access to critical products is not impeded. Unfortunately, the ITC rarely conducts a thorough public interest review before taking action. In fact, it’s been nearly forty years since it last used a public interest exemption to decline issuing an Exclusion Order.

Fortunately, there are bipartisan efforts in Congress to address these deficiencies in how the ITC considers such cases. Last year, Representatives David Schweikert (AZ-01) and Don Beyer (VA-08) introduced the Advancing America’s Interests Act (AAIA) to stop patent abuse at the ITC and reaffirm its public interest standard.

The AAIA would also strengthen an important feature of the the Tariff Act – the “domestic industry” standard – that would prohibit a U.S. company from being used as a plaintiff unless they voluntarily join a complaint requesting the ITC’s relief. As part of the Tariff Act of 1930, a complainant at the ITC needs to demonstrate that it contributes to the industry in the U.S. related to whatever patent rights it is alleging have been infringed. Yet in an oft-used loophole, the patent holder can satisfy this requirement by stating it licenses its patents to other companies even if those companies did not join the complaint.

This creates a “domestic industry by subpoena” problem where a patent troll claims it has met the domestic industry requirement by involving an otherwise unwilling and uninterested licensee in the investigation. The AAIA would prohibit this practice unless the licensed entity in question ‘joins’ the complaint.

Tariffs policy and protectionism figured prominently in the presidential campaign, and there is no doubt these issues will remain salient during the second Trump administration. But trade policy is more than simply a function of tariffs. Congress should act and pass legislation to return the ITC to its original mission. The constant threat of patent troll litigation is a drag on many U.S. companies and pulls resources away from developing the new technologies necessary to grow our economy and out-innovate the world.

As policymakers look forward to what should be included in a new administration’s trade agenda, fixing the ITC should be at the top of the list.