The Value of Imports Subject to ITC Patent Investigations

One reason why an import ban by the International Trade Commission is often an inappropriate remedy for patent infringement is because the product under investigation can be vastly more valuable than the asserted patent.  Patent owners can maximize the benefit of an ITC complaint if they target the most valuable and widely sold product embodying the patented technology.  As a result, the ITC ends up determining the fate of billions of dollars’ worth of high-tech imports every year.

Consider the following examples of products that are routinely subject to patent investigations, often for patents related to a minor or peripheral function of the device.  I found the trade values through the ITC’s DataWeb tool by searching for total customs value of imports under relevant eight-digit tariff lines from all countries in 2017.  This number necessarily overstates the value of imports subject to an investigation against only a portion of importers and also understates the costs of an exclusion order to downstream businesses and consumers. Nevertheless, I think it provides a useful way to approximate the economic importance of ITC patent investigations.

Smartphones

Ten years ago, the ITC was virtually drowning in a flood of smartphone-related patent complaints.  The quantity of complaints dropped dramatically around 2011, but the ITC still regularly conducts investigations that could result in an exclusion order against a large portion of U.S. cell phone imports. 

Since the beginning of 2016, twenty complaints have been filed against every major smartphone brand operating in the United States, including Apple, Samsung, LG, Motorola, HTC, ZTE, Sony, Lenovo, Google, and Blackberry.  Right now, there are four active investigations at the ITC threatening Apple, Samsung, ZTE, and HTC. 

In 2017, Americans imported $55.7 billion worth of cell phones.  According to a Reuters report from March 2018, that number includes approximately $15.7 billion worth of iPhones, each of which includes 25–30% U.S content and provides an additional 164% value to U.S. companies in the form of profit and retail markup.  And that doesn’t include all the downstream benefits for app developers, e-businesses, and their consumers.

Laptops and Tablets

If smartphones are the most commonly targeted product at the ITC, portable computers come in at a close second.  The ITC has conducted over 60 investigations involving laptop or tablet computers since 2008, including five that are currently active.  In 2017, Americans imported $39.9 billion worth of laptops and tablets.

Semiconductor Chips

Considering the volume of cases involving computing devices, it should come as no surprise that ITC investigations also regularly target imports of integrated circuits.  Indeed, many of the mobile device investigations have involved patents related to technology embedded in the computer’s processor, which is often included as an upstream component subject to an exclusion order.  In 2017, Americans imported just over $20 billion worth of unincorporated integrated circuits.

Semiconductor Manufacturing Equipment

To take things even further upstream, the ITC is currently investigating imports of lithography machines used to manufacture integrated circuits in the United States.  According to the Semiconductor Industry Association, the United States leads the world in semiconductor manufacturing, with U.S. chipmakers’ exports totaling $44 billion in 2017.  Trade data reveals that domestic chipmakers also imported $3.6 billion worth of specialized manufacturing equipment.

Cable Boxes

The ITC has conducted roughly a dozen investigations into set-top boxes from a host of manufacturers in the last twenty years.  The agency had never issued an exclusion order in any of those cases until last year, when it found that Comcast induced infringement of a DVR-related patent by enabling its customers to schedule recordings from their phones.  That determination is on appeal at the Federal Circuit, where Comcast is arguing that the ITC should not be permitted to block non-infringing imports based on domestic inducing conduct unrelated to the imported article.  Comcast has been able to sidestep the exclusion order and continue importing cable boxes for its 22 million subscribers by simply turning off the offending feature in its mobile app.

Americans imported roughly $4 billion worth of set-top boxes in 2017.

Cars

Modern automobiles are not only technologically advanced themselves but also include state of-the-art computers for navigation or entertainment purposes.  They’re also the product of complex cross-border supply chains, with both foreign- and domestic-brand vehicles being assembled abroad.  As such, automakers routinely find themselves at the ITC defending their products from an import ban for allegedly infringing a patent.

With eleven investigations instituted in the last ten years, virtually every major foreign and domestic automaker has been a respondent in an ITC investigation targeting imported vehicles.  In that time, only one major automaker (Fiat Chrysler) has been a complainant at the ITC.  Most of the complaints against automobiles have been filed by patent assertion entities.

There are currently two active patent investigations—one brought by Intellectual Ventures against Honda and Toyota and one by Broadcom against Toyota—targeting imported cars as well as parts used for those companies’ U.S.-based manufacturing operations.

Even without including trucks or other specialized vehicles, the customs value of imported passenger cars in 2017 was $184 billion