O N THE H AHN 2007 R ESEARCH

In early 2007, one brief but harsh working paper³⁷ authored by Robert W. Hahn of the AEI-Brookings Joint Center for Regulatory Studies of Washington, D.C. proposed that:

A. The district courts should obtain jurisdiction of the Section 337 proceedings.

B. Otherwise, the USITC shall adopt the Supreme Court’s eBay decision³⁸ and issue injunctive relief orders according to the traditional four-factor tests for any kind of injunctive relief.

36 467 U.S. at 840.

37 Robert W. Hahn, Assessing Bias in Patent Infringement Cases: A Review of International Trade Commission Decisions (AEI-Brookings Joint Center Working Paper No. RP07-03, February 2007), available at http://papers.

ssrn.com/sol3/papers.cfm?abstract_id=950583 .

38 eBay Inc. v. MercExchange, L.L.C., 547 U.S. ___, 126 S.Ct. 1837 (2006). (“(1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that

considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” The last factor is considered by the President)

The Hahn paper’s analysis is mainly based on a USITC decisional database (January 1972 to July 2006) built by him that is unrelated to this research. Except for the results disclosed in the working paper, I have not seen Hahn’s actual database.

Hahn’s Point A is revolutionary. However, he surely is not the first person to make such a grand proposal. For example, Section 1.4 shows that the Tariff Commission had proposed to relinquish its Section 337 proceedings as early as in the 1930s claiming itself lack of patent law expertise. Patent litigation has always been a specialized branch of the law. As long as an agency is in power, people definitively would want to make recommendations.

In contrast, this thesis assumes that the USITC’s Section 337 subject matter jurisdiction is not fundamentally flawed and has been gradually perfected throughout its eighty-some years of history. This thesis may be more useful to its readers if it insightfully reviews the USITC’s evolution in detail rather than to make just another recommendation that may not be accepted by the powers that be. Being a passive observer and faithful describer, this thesis tells a historical and legal story qualitatively and quantitatively and leaves final value judgments to the readers.

1.2.1 Hahn’s Major Findings

The Hahn paper empirically reviewed the USITC’s Section 337 decisions and found:

1. The USITC has assumed an increasingly prominent role in adjudicating patent disputes in recent years.³⁹

2. However, that the Section 337 proceedings provide not much benefit to the public because they are seriously biased in two ways:

a. The USITC is more likely to find patent infringement (23%)⁴⁰ than are district courts (6%).⁴¹ About 35% of the USITC’s patent-related determinations are reversed by the Federal Circuit (in favor of complainant 48%; in favor of respondents 26%).⁴² In contrast, the district courts’ reversal rates between

39 Hahn at 3.

40 Hahn at 4, 14-15.

41 Hahn cited Jay P. Kesan, Gwendolyn G. Ball, How Are Patent Cases Resolved? An Empirical Examination of the Adjudication and Settlement of Patent Disputes, (Univ. of Ill. Coll. of Law, Law & Econ. Working Paper No.

52, 2006), 84 WASH.U.L.REV. 237 (2006). (Hahn’s pinpoint citation may be erroneous.)

42 Hahn also cited Greene (2000, 2001) who estimated the USITC’s reversal rates between 1986 and 1999 were about 34%. It seems like Hahn has forgotten to provide a full citation to the Greene paper.

1995 and 2000 are about 18%.⁴³ Hahn used this finding to question the USITC’s decision-making quality.⁴⁴

b. The USITC usually issues an injunctive relief order automatically once it has found patent infringement.⁴⁵ Of the 109 patent-infringed cases, the USITC issued injunctive relief orders to 103 of them.⁴⁶ On the contrary, according to Kesan and Ball (2006),⁴⁷ the district courts grant injunctive relief only to about 20% of the cases once patent infringement has been found.⁴⁸

Based on the above findings, Hahn proposed, “either removing jurisdiction from the ITC in most patent cases or imposing the same standard for issuing injunctions as applies in the district courts as two possible methods of reform that would reduce the social costs of ITC patent litigation.”⁴⁹ Among all, the Hahn paper alleged that the USITC is “biased” to the patentees on three major statutory grounds:

I. The USITC’s subject matter jurisdiction “eliminates wrangling over complex jurisdiction and venue issues that are common in district court proceedings.”

43 Hahn cited mainly Kimberly A. Moore, Are District Court Judges Equipped to Resolve Patent Cases?, 15 HARV.J.L.&TECH. 1, 15 tbl.1 (2001). (“A study by Federal Circuit Judge Kimberly Moore finds an average overall reversal rate for federal district court patent cases before the Federal Circuit between 1995 and 2000 of around 18 percent.”)

44 Hahn at 16-18.

45 Hahn at 4.

46 Hahn at 21.

47 84 W^ASH.U.L.R^EV. 279-280. (“Permanent injunctions are more common, though they seem to play a different role in the process. As shown in Table 10, injunctions are most commonly found in consent judgments and even formal settlements, most likely as a mechanism for formalizing the agreement. They are also

sometimes employed in default judgments as a way of controlling an infringing party who has not presented himself in court. However, they are rare in adjudicated cases: only 19% of cases ending in trials and only 4% of those terminating in summary judgments included an injunction. Note that these numbers correspond only to those cases involving grants of permanent injunction and not to any grants of preliminary injunctions in patent cases. ”)

48 Hahn at 5, 20-21. (“To determine whether the ITC is more inclined to offer injunctive relief because of its limited arsenal of remedies, I compare the incidence of injunctive relief at the ITC after a finding of

infringement — which is extremely high — with the imposition of injunctive relief in a particular group of district court cases. Prior to eBay, many district courts failed to take sufficient account of public interest considerations militating against injunctive relief, but despite this practice, I find that district courts that find infringement impose injunctive relief in only 20 percent of cases. In the future, however, one should expect that district courts will impose injunctive relief as a remedy for infringement less frequently because of the four-part test in eBay. This will make the ITC an even more attractive forum for patent disputes, leading to more

inappropriate injunctions that result in a net harm to social welfare.”)

49 Hahn at 1.

II. The USITC’s procedures are on a tight schedule, which may compromise respondents’ right to due process.

III. Some patent litigation defenses are not available to USITC’s respondents.⁵⁰

Based on the empirical finding that the USITC’s Section 337 proceedings have been problematic, the Hahn paper then questions the necessity and public interest value of injunctive exclusionary relief.⁵¹

1.2.2 The Differences between This Thesis and Hahn’s Paper

Even though this thesis’s database and Hahn’s database cover almost the same time period of the Section 337 proceeding’s history, differences in data management rules between the two independently developed proprietary databases may result in certain critical incompatible results. These rules are generally created to handle irregular entries and exceptional cases, such as multiple determinations to an investigation or cases reversed by the Federal Circuit. For descriptions of this thesis’ rules, please refer to Section 6.1. This thesis’s final data set was created for the analysis of the USITC’s injunctive order issuance behavior.

The data analysis of this thesis follows certain self-created rules that may not be observed by Hahn’s research:

• All available information is collected. However, the final analysis only applies to a relevant subset.

• Only utility patent cases are included. Cases without a utility patent are excluded. Design patent-only cases are excluded.

• Only exclusion orders issued after the creation of the Limited Exclusion Order are analyzed.

1.2.3 The Hahn Paper’s Problems

The Hahn paper may still be in development. Some errors or possible errors may be corrected.

50 Hahn at 3-4.

51 Hahn at 22. (The Hahn paper used a Type I and II Error model to estimate the costs of the USITC’s errors.).

The Point 1’s finding is generally undisputed and welcomed by patent litigators.

Since the scope of this research does not include Federal Circuit reversal rates, this research does not comment on the Point 2.a.

As to the Point 2.b, the USITC’s nearly automatic issuance of injunctive relief orders is a legal fact required by the statute. The USITC’s nearly automatic issuance of remedial orders is a fact. However, the 20% district court injunction issuance rate may be suspiciously too low. Prior to the Supreme Court’s 2006 eBay decision (see Section 5.3), the Federal Circuit had an actively enforced policy that demanded district courts to grant permanent injunctive relief automatically once patent infringement has been found.⁵² This issue is not within the scope of this thesis.

Some of the problems in Hahn 2007 are discussed in this thesis whether in detail or just briefly covered as a less important side issue. Two out of the three biases named by Hahn paper may be weak or groundless.

The Point I shall be viewed as a non-issue. After all, there must be a court willing to hear a dispute and make the decision if a patentee wants to sue an alleged infringer. The named defendant may persuade a court to transfer the pending legal action to another fairer or friendlier court; it may not request the court to dismiss the case if the court finds the complaint justiciable. Therefore, forum shopping and the jurisdictional disputes between the adversaries may only be seen as a procedural artifact rather than a valuable part of the defendant’s due process.

The Points II has been debated at the GATT in the late 1980s.⁵³ The U.S. then amended the laws despite that the amended laws may still be unfair to academic researchers.

Section 337 investigations’ deadlines are now flexible.⁵⁴ (See also Section 1.7.2).

52 MercExchange, Inc. v. eBay, Inc., 401 F.3d 1323, 1339 (Fed. Cir. 2005). (“general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances.”).

53 1988 GATT Panel Report. (“3.36 The Community argued that … Because USITC Commissioners were not as well qualified to deal with the legal aspects of patent issues, they might be reluctant to enter into detailed consideration of difficult patent law problems that arose in testing the validity of patents. They were thus more likely to be decisively influenced by the presumption of validity of the patent in the knowledge that rulings on this matter had no res judicata effect and that the respondent could initiate federal district court proceedings to challenge the validity of the patent.”). (“5.19 … The Panel found that the relatively short and fixed time-limits for the completion of proceedings under Section 337 could put the respondent in a significantly less favourable position than it would have been in before a federal district court where no fixed time-limits apply, both because the complainant has a greater opportunity than the respondent to prepare his case before bringing the complaint and because defence in general benefits from delay.”).

54 19 U.S.C. § 1337(b)(1). (“The Commission shall conclude any such investigation and make its determination under this section at the earliest practicable time after the date of publication of notice of such investigation.”).

The Point III touches a hotly debated area of patent law procedures. For example, the so-called “Kinik doctrine” bars a defendant from raising a 35 U.S.C. § 271 (g)(i) “material change” defense in a Section 337 investigation.⁵⁵ Since a defendant who has infringed a process patent may use this affirmative defense in a district court but not in the USITC, it may be unfair to the defendant. This controversial doctrine is supported by the AIPLA but disagreed by some legal scholars.⁵⁶ However, this research does not investigate this issue.