ITC Exclusion Order Request Threatens U.S. Trade Interests

REUTERS/Dado Ruvic

Peter Roff Contributor
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Over the last decade changes in technology have brought about momentous changes in the commercial space. The Internet and the many devices that link to it have created a world in which the business of buying and selling goods is not only international but instantaneous.

All this has been good for the global market and for the people who participate in it. The challenge moving forward is to write rules for the system that keeps goods and services flowing and not get bogged down in a morass of protectionism. Hopefully that’s what the 12-nation Trans Pacific Partnership talks that entered a crucial stage this week accomplish.

Getting to this point has been difficult. It was not easy to get Congress to agree to give President Barack Obama the trade promotion authority he needed. Now that he has it the U.S. participants in the TPP talks in Maui can deal from a position of strength rather than from a point of ambiguity. America has nothing to fear from free trade between nations; being freed from having to pander to protectionists on the left and the right allows the U.S. to stand on the principle that free trade is fair trade and that all nations should open their borders to imports without restrictions.

It won’t be easy but the week set aside for formal discussions – given the tremendous amount of prep work that has gone into the talks – should be enough time to produce a deal that Congress can approve by year’s end. And it must be a deal that takes into account future growth and innovation in the technology sector – which is where most of the growth in the global economy may come from for some time. And this may mean changing things at home as well.

A case currently before the U.S. International Trade Commission, depending on how it turns out, could prohibit the sale of Samsung phones in the United States. It may also set a bad precedent that could undermine the chance for a successful conclusion to the TPP.

The ITC is currently considering a complaint lodged by NVidia Corporation that Samsung Electronics Co., and Qualcomm, Inc., infringed on its patents in the popular Galaxy line of smart phones and some tablets. However, NVidia is simultaneously seeking to renegotiate the agreements under which it licenses the processor. It wants the companies which use its technology to pay more money for the privilege. What they may see as a clever carrot-and-stick approach to getting what they want is actually an abuse of the system and could potentially have far reaching impact on U.S. trade interests.

The virtue of this forum, for the complainant at least, is that among the limited remedies the commission can order is a ban on the sale in the United States of chips manufactured by Qualcomm and included in Samsung smartphones that include the processor in question.

There is something not quite right when companies attempt to use a federal agency (albeit, an independent one) to gain competitive advantage or to strengthen a negotiating position. We all depend on the idea of equality under the law to keep the commercial sector free of unnecessary confusion, coercion, and conflict. The lines are supposed to be clear but, and with increasing frequency federal courts and commissions and administrative law judges are asked to render decisions on this that may have an extraordinary impact on American commerce.

If NVidia prevails, for example, it would set off a shortage of mobile phones that other providers could not quickly or easily fill. Consumers would be harmed on the front by having their choices in the marketplace curtailed severely as well as on the back as the decision would undoubtedly slow the pace of innovation in what is one of the few remaining industrial bright lights. The ITC should not be left with the task of adjudicating cases in order to tip the scales during licensing disputes and negotiations. If two parties cannot come to an agreement in the boardroom, then they should fight it out in federal court and seek financial damages. Exclusion orders can cause damage that extends far beyond the entities cataloged on the court dockets.

From the global trade perspective the wrong decision could be disastrous. Patent protections can and should be a major consideration within trade agreements like TPP. Licensing complaints can be resolved as a civil matter between private parties, but exclusion orders should not be considered and certainly not imposed without the utmost caution. A careless decision would not only disrupt commerce in the American technology sector is would set a bad precedent for global commercial agreements like TPP that are next on the list of things to get done.

Peter Roff is a former political analyst for United Press International who now provides commentary on public policy issues for One America News.