Apple continues to lose patent cases. The solution: rewrite the rules.
Over the past decade, some of Apple’s biggest regulatory woes have come from a little-known federal agency, the US International Trade Commission. The office’s patent judges have found Apple guilty of appropriating innovations in smartphones, semiconductors and smartwatches. And recently they forced Apple to remove a health feature from Apple Watches.
Now the tech giant is pushing back. As it defends itself against patent complaints at the ITC, Apple has begun lobbying lawmakers to help rewrite the agency’s rules.
The company has campaigned across Washington for legislation that would make some patent owners ineligible to file complaints with the ITC. It has tried to influence the language of committee reports that could affect how the agency imposes penalties. And it has increased its lobbying power by hiring one of the agency’s former commissioners.
The lobbying effort comes as Apple is embroiled in a multi-year legal battle with two US medical device makers over technology in the Apple Watch. The companies, LevendCor And Masimofiled complaints with the ITC against Apple in 2021 for appropriating innovations they had developed to measure the electrical activity of the heart and oxygen levels in people’s blood.
After losing both cases, Apple this year removed the technology to measure blood oxygen in its watches, which infringed on Masimo’s patent. It is appealing the ITC’s decision. A similar sentence has been suspended as legal proceedings related to the case continue ITC finding that Apple has infringed on AliveCor innovations with the electrocardiogram function of the Apple Watch.
Apple is trying to dilute the agency’s signature power. Unlike traditional patent courts, where juries or judges typically hand out fines, the ITC’s judges can discipline a company that infringes a patent by banning the import of the infringing product.
Since Apple makes all its signature devices abroad, a block on the import of its devices would be dangerous for the company. To avoid that fine in the future, the company says, it wants the service to put the public interest of a product above a ban. The company is betting that the court would then give more credence to Apple’s argument that Americans would be harmed by an import ban because they would lose access to the communication and health functions of iPhones and Apple Watches.
An Apple spokeswoman said existing law requires the ITC to consider how the public interest might be harmed before ordering an import ban. But it said public data showed that the agency had conducted public interest evaluations in only a fifth of the cases it had heard since 2010. As a result the lobbyists have spoken with White House and Congressional leaders on the ITC, as well as other issues such as privacy and domestic manufacturing.
Adam Mossoff, a patent law expert and professor at George Mason University, said Apple misinterpreted the law, which requires the ITC to block a product if it finds it infringes a patent. An import ban should only be lifted if there is a proven threat to health or safety, he said. Blocking the sale of an Apple device would not be considered harmful.
“The problem with their lobbying is that they are trying to neutralize a well-functioning court by closing its doors to Americans whose rights have been violated,” he said.
When Congress created the ITC in 1916, it sought to protect American innovation by allowing the U.S. government to ban the importation of products containing stolen technology. But as production moved abroad, the federal agency’s legal system became a forum for disputes between U.S. companies.
The ITC judges, who are appointed by the committee, conduct hearings with different standards for patent litigation than those applied to district court cases. The cases are fast-paced and compressed and can culminate in the courts punishing a patent abuser by blocking his products.
Before a ban takes effect, a company found guilty can appeal to the White House for a reprieve. But it is rare for a government that oversees the agency to go against a judge’s recommendation.
Apple has become the prime example of how the ITC can be used. Because the company produces almost all of its products abroad, the judges who found it guilty of infringing patents on smartphones, semiconductors and smartwatches say it should be punished by blocking the import of iPhones, iPads and Apple Watches.
Apple has largely escaped the import bans. In 2013, the The Obama administration vetoed it the ITC’s plan to block imports of iPhones after the agency found that Apple had infringed on one of Samsung’s smartphone patents. In 2019, Apple agreed to pay Qualcomm a royalty on a number of wireless technology patents, a precursor to an ITC ruling that could have blocked iPhone sales. And after losing the Masimo case, Apple agreed to remove the violative health feature to avoid an Apple Watch ban.
For years, Apple avoided the kind of lobbying that was common for a major company. It had a small office in Washington with just a few people and employed only one lobbying firm, said two people familiar with the firm’s practices. But as the company’s regulatory challenges have increased, its policy team has expanded to include dozens of people and 11 lobbying firms.
Despite AliveCor and Masimo’s patent complaints, Apple’s Washington team prioritized lobbying to change the ITC. In 2022, it began working with the ITC Modernization Alliance, a loose coalition of companies that also includes Samsung, Intel, Dell, Google, Verizon and Comcast. The group worked with members of Congress to write the Advancing America’s Interest Act in 2019 supported its reintroduction in 2023.
The bill’s proponents — Reps. David Schweikert, a Republican from Arizona, and Donald S. Beyer Jr., a Democrat from Virginia — have promoted it as a way to curb abuse of the ITC by patent trolls. It would prohibit patent holders from suing unless they manufactured a product that used the patented technology or had already licensed the technology to someone else.
AliveCor and Masimo are medical companies that have focused more on selling products to healthcare providers and consumers than on licensing innovations to consumer technology companies like Apple.
Last year, Apple’s lobbyists filed three reports revealing that Apple had campaigned on behalf of the bill, according to Open Secrets, a nonprofit organization that researches campaign finance. It has also expanded its lobbying ranks by Hire Deanna Tanner Okuna former one ITC Chairman who works for the law firm Polsinelli. (The hiring was previously reported by Politics.)
The lobbying campaign coincided with an effort in Washington to argue that an ITC ban on Apple Watch imports would deprive people of a device crucial to their health, two people familiar with the lobbying said.
In addition to direct legislative lobbying, Apple also worked with a member of Congress to put language on page 97 of a committee report for the 2024 Appropriations Bill, said Rep. Ken Buck, a Colorado Republican. This language would require the ITC to assess how it determined a product’s value to the public before proposing a ban and to report to Congress on that process.
“To me, this circumvented the legitimate process,” said Mr. Buck, who is leaving Congress this month. He told Rep. Thomas Massie, a Kentucky Republican who sits on the Government Committee, that he had 10 votes and would block the bill unless the language was removed. Mr. Massie’s office confirmed that the language had been removed at Mr. Buck’s request, but declined to comment further.
An Apple spokeswoman disagreed with Mr. Buck’s claims that his lobbying work circumvented the legitimate legislative process. She said the public federal lobbying reports detail how the company worked on issues important to its products and customers.
The spokeswoman also pointed to the Senate’s approval of a committee report that included a sentence expressing support for the ITC conducting a thorough analysis of the public health impact of a product ban before issuing one, which Apple said in the future wants.