OPINION:
Congress has a chance to rein in one of the most abused parts of America’s patent system, and hardly anyone is talking about it.
The Advancing America’s Interests Act, introduced in the previous Congress, would close loopholes at the International Trade Commission that patent trolls have used for years to secure large paydays.
Patent trolls, also called nonpracticing entities, don’t build products, hire workers or bring new ideas to the market. Their business model is to buy patents, often sitting unused, and claim legitimate companies are infringing on them. Because modern products can involve hundreds of thousands of patents — such as a smartphone, which has more than 250,000 patents — it’s easy for trolls to allege a technical violation. The goal isn’t to protect innovation but rather to force a settlement big enough to make the lawsuit worth their while.
In the past, most of these cases were filed in federal courts, particularly in the Eastern District of Texas, which became notorious for its “rocket docket” and plaintiff-friendly procedures. However, recent court reforms have made it harder for trolls to get easy wins, prompting them to shift to the International Trade Commission. Unlike federal courts, the commission moves more quickly, often resolving cases in 15 months or less. It also imposes exclusion orders rather than monetary damages, a remedy far more disruptive to the accused company.
I raised these concerns on Capitol Hill last year, noting how patent trolls have shifted from federal courts to the International Trade Commission to take advantage of its broad exclusion powers. Created to shield U.S. industries from unfair foreign competition, the agency can issue “exclusion orders,” essentially complete bans on importing a product into the United States.
For trolls, the real value is not in enforcing such a ban but in using the threat of one to pressure companies into settling before the case concludes. Even the threat of a ban can be enough to bring a company to the negotiating table because losing access to the U.S. market, even temporarily, can be devastating. The costs of these settlements and legal battles are often passed along to consumers through higher prices.
The impact goes beyond the targeted companies. Inventories can be disrupted for smaller suppliers and retailers that depend on those products, and consumers may have fewer choices on store shelves.
The problem has worsened. A March decision in the U.S. Court of Appeals for the Federal Circuit in Lashify Inc. v. ITC expanded what counts as a “domestic industry,” opening the door for more patent trolls to bring a Section 337 case before the International Trade Commission. Commission data shows that patent troll cases more than doubled from 2020 to 2021, reaching 13% of all investigations that year. The figure is likely higher today.
Academic research from Harvard University estimated in 2014 that patent trolls drained $29 billion in out-of-pocket costs and destroyed more than $60 billion in firm value each year, equivalent to more than $38 billion and $78 billion in today’s dollars. These costs ripple through supply chains, slow down product development and push consumer prices higher.
That is why the Advancing America’s Interests Act matters. It would tighten the domestic industry requirement so only companies that actually make products could bring cases to the International Trade Commission, require the full commission to review exclusion orders, and ensure that public interest considerations, such as consumer prices and supply chain stability, carry real weight before imports are banned.
While the Advancing America’s Interests Act quietly awaits reintroduction, a flashier idea is grabbing headlines. The Wall Street Journal recently reported that the Trump administration is considering a patent tax of up to 5% of a patent’s value. That tax would hit every patent holder, including those from biotech startups and retail brands, without addressing the real problems in the patent system.
The decision before Congress is simple: Fix the International Trade Commission’s patent troll problem with the Advancing America’s Interests Act, or push a flashy but misguided patent tax that punishes every inventor. If lawmakers are serious about fostering American innovation and competitiveness, they must make it harder for bad litigation to thrive at the International Trade Commission before imposing a new 5% tax on patents.
The commission does not need a revenue overhaul; it needs a reality check.
Correction: A previous version of this article gave the wrong year of introduction for the Advancing America’s Interests Act.
• Danielle Zanzalari is an assistant professor of economics at Seton Hall University. Her research focuses on an array of economic issues, as well as bank regulation and pension reform.
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