Fortune Magazine: Biden must decide whether patent-infringing Apple watches can be imported into the U.S. from China by Christmas–but Congress could neuter America’s ability to protect its IP altogether. By Andrei Iancu and David J. Kappos.
The U.S. International Trade Commission (ITC) recently issued an order that could prohibit imports of some Apple Watch products. The ruling is now subject to President Biden’s review, who must decide whether to allow or veto the ban by Dec. 25.
The quasi-judicial body, which adjudicates trade-related disputes, found that Apple infringes on blood-oxygen-monitoring technology invented by Masimo, a smaller California-based medical technology company. Meanwhile, Apple claimed that Masimo is trying to keep Apple Watches from U.S. consumers, “while making way for their own watch that copies Apple.”
Import bans are a potent remedy–but they’re necessary to keep infringing goods from entering the U.S. market and protect companies from intellectual property theft.
After all, if companies–whether foreign or domestic–can steal American firms’ technology, incorporate it into their products, manufacture those goods in China and other competitor nations, and then import them at will, it would undermine U.S. firms’ willingness to invest in new products. Innovation, job creation, and economic growth would all suffer.
Unfortunately, some in Congress are trying to neuter the ITC’s power to crack down on patent theft. While these lawmakers are trying to help giant corporations, they are also helping America’s rivals in the process. Our elected officials should do neither.
Lawmakers are considering the Advancing America’s Interests Act, which would weaken the ITC’s exclusion orders by first requiring the agency to “affirmatively determine that any exclusion serves the public interest.” In practice, the requirement would prevent the ITC from barring the importation of patent-infringing goods except in the rarest of cases.
Consider the Apple-Masimo example. Unlike U.S. courts, the ITC doesn’t award monetary damages. So if the law changes and the ITC can no longer stop Apple Watch imports, the judgment against Apple would be rendered meaningless–all bark and no bite. Apple will be free to steal Masimo’s technology, make infringing watches overseas, and then import them into the United States, depriving Masimo of the market it wants to develop for its inventions.
For small innovators, stopping the sale of patent-infringing products is what matters. The court system offers only partial justice. If a small firm sues over patent infringement in a U.S. court and wins, the court will generally only award some monetary damages–they generally don’t order large infringers to pull the offending product off the market.
As long as the infringing products remain on the market, the violator still profits. Very large companies sometimes deliberately infringe smaller rivals’ patents, figuring that court-ordered damages are a worthwhile price to pay for appropriating a promising product and undercutting a smaller competitor before it can grow into a true threat.
That’s why the ITC’s ability to bar patent-violating goods is critical: It provides a significant consequence that makes corporate behemoths think twice before opting for an “efficient infringement” strategy.
Absent such a penalty, large companies are encouraged to conduct more manufacturing abroad, knowing that they can play fast and loose with IP rules. And their Chinese partners and suppliers stand to benefit too, as they gain jobs and profits. Without robust exclusion orders, foreign patent infringement entering the U.S. market can be expected to increase, leaving U.S. firms with little to no recourse.
Ironically, the Advancing America’s Interests Act would sabotage the ongoing work of the “Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party,” a bipartisan House of Representatives effort to address, among other matters, Chinese theft of U.S. intellectual property. Chinese IP theft costs the U.S. hundreds of billions of dollars, harming IP-intensive industries that employ millions of Americans. This theft needs to be stopped, and legislators need to make it easier–not harder–to prevent such infringing products from entering the United States.
It’d be the height of hypocrisy for members of Congress to talk tough about Chinese IP theft in one committee room while making it easier for China to violate American firms’ intellectual property rights in another.
Put simply, the ITC stops patent infringement. That’s why the ITC’s ruling–and its authority–must remain intact.Andrei Iancu served as the undersecretary of Commerce for intellectual property and director of the U.S. Patent and Trademark Office from 2018 to 2021. David Kappos served as the undersecretary of Commerce for intellectual property and director of the United States Patent and Trademark Office from 2009 to 2013. Both serve as board co-chairs of the Council for Innovation Promotion.