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Canadian Troll Patent Suits Could Upend U.S. Connectivity

Real Clear Policy

Air pollution from Canadian wildfires is just one of the problems we face from our neighbor to the north. A Canadian company weaponizing intellectual property rights could do major damage to the U.S. tech sector.

Bell Northern Research has been around since the 1970s, formed when Bell Canada and Northern Electric combined some of their operations. The name is now a complete misnomer – the current company called Bell Northern Research has nothing to do with either Bell Labs, research or innovation.

Rather, deploying an increasingly popular litigation strategy built on dicey claims to extract profits, it merely sues other companies for patent infringement. In recent years, the company filed more than two dozen complaints against numerous companies, claiming those firms have improperly incorporated Bell Northern intellectual property in their devices. Litigation attacks are just the beginning; it is also filing complaints before the US International Trade Commission (ITC).

The ITC has become a favored venue for extortionate patent trolls. The trade agency has just one penalty to hand out – a heavy-handed product import ban known as an exclusion order. And although Congress set up guardrails in the ITC statute to try to be sure this ban was not abused, recent ITC policies have broken down those guardrails.

This makes the ITC an ideal venue for patent trolls like Bell Northern to extort big settlements from companies who, ironically, are actually contributing to the US innovation economy by hiring US workers and investing in facilities and other equipment in the US. These companies often are forced to pay up on bad claims to avoid the risk of being blocked from the entire US market.

In the most recent example, Bell Northern is targeting nearly every product that relates to home internet connectivity, including, as the ITC investigation notice states, “semiconductor devices, and specifically undiced wafers, diced wafers, packaged chips and chipsets both attached and unattached to printed circuit boards and modules; personal and tablet computers; and routers, gateways, and networking devices having wireless communication capabilities, and components thereof.”

An ITC ruling in Bell Northern’s favor would wreak havoc with consumers and the companies that supply them with tech devices. The firms Bell Northern names in their latest ITC filing include US companies and productive multinationals like ASUS Computer International, Laird Connectivity, Qualcomm Technologies, MediaTek, and NXP USA, among  other tech businesses.

Unfortunately, this type of behavior is hardly unique to Bell Northern. Lawsuits like Bell Northern’s are a symptom of a much larger ITC problem.  Companies that don’t make anything, classified as patent assertion entities (PAEs), have been alerted to the opportunities at the ITC and are increasingly running this same play.  Since 2018, there has been a five-fold increase in these types of cases.  As with Bell Northern, the business model consists solely of acquiring often old intellectual property rights of questionable validity and then weaponizing them to demand undeserved payoffs from legitimate companies that actually serve consumers, create jobs and support economic growth.

As Bell Northern’s latest suit highlights, tech companies are often targeted by patent trolls, because tech-intensive devices may potentially implicate thousands of individual patents and patented components.  Even the most trivial or dubious patent allows a troll to threaten a total US market ban against any product that might involve that patent. 

The threat of an exclusion order against a laptop or phone can be so disruptive to supply chains and product manufacturing cycles that accused companies have little choice but to accede to the shakedown. The choice is simply between the lesser of two evils. But America suffers.

The harm caused by patent trolls is significant. One study found companies that settle with trolls end up reducing investments in research and development by an average of more than $160 million over the following two years. That means less innovation and fewer new products for consumers.

The direct economic costs are substantial too. Estimates show annual patent trolls annually cost over $29 billion for the companies they attack, decreasing productivity and driving up the retail prices of the products they sell.

While the ITC is supposed to protect American industries from unfair competition by imported products, the trolls have found a way to leverage the ITC to extract their pay while also hurting productive companies who are contributing to the US economy.  Fortunately, there is a solution to the ITC’s troll problem that is easier than controlling those Canadian wildfires – a common sense proposal, the Advancing America’s Interests Act (AAIA).

This bill would protect the rights of all inventors, large and small, who are actually working to turn their patents into real products, whether alone or through partnerships or licenses.  At the same time, it would prevent trolls from misusing the ITC to line their own pockets. The AAIA would reform and modernize the ITC, and better enable it to protect U.S. industries, workers and consumers from frivolous but costly patent infringement claims.

The ITC has an important job to do – protecting American companies from unfair foreign trade practices, but trolls are abusing this important agency. The AAIA will allow it to return to that mission and keep patent trolls out of the ITC.