With growing anxiety about trade, the International Trade Commission should be a force for stability and predictability in trade disputes, protecting American companies from unfair competition by foreign entities.
Unfortunately, the ITC is too often a place for American companies to harm fellow American competitors. Qualcomm’s patent dispute against Apple, and by extension, Intel, is an egregious example of this. Unfortunately, if the ITC sides with Qualcomm, the ruling would most severely affect American startups and consumers, proving again the proverb “when elephants fight, it is the grass that suffers most.”
The ITC was set up as a quasi-judicial federal commission to investigate unfair trade practices. Unlike federal District Courts, the ITC’s only available remedy to companies is a so-called exclusion order, which prevents the importation of goods that infringe valid U.S. patents. This is a mighty power, because no matter how trivial a patent might be to a product, the ITC can bar it from being sold in the United States.
The threat of an exclusion order is particularly concerning for startup component makers. If you run a small company that manufactures a unique type of glass used on iPhones, the dispute between Qualcomm and Apple has nothing to do with your product, but your business could be crippled if the ITC excludes some iPhones because of a separate patent issue. Since the typical smartphone uses technology based on more than 250,000 patents, there are a lot of potential small component makers that could be hurt by the exclusion of an iPhone.
Aside from the threat of an exclusion order, a decision in favor of Qualcomm could hurt startups and competition in the tech industry more generally. Apple and Qualcomm may be locked in heated legal battles in courtrooms worldwide, but the recent ITC case is particularly anticompetitive. Qualcomm isn’t looking for an exclusion order on all iPhones, only the iPhones that contain modems produced by Intel — its only competitor in the market. If Qualcomm is successful in blocking Intel modems, it will regain monopoly power in the modem market, driving up prices for consumers and creating increased barriers to entry that can stifle future innovation.
Startups affected by this decision will not just be those trying to make components for smartphones. These types of modems are used in a variety of devices that rely on cellular communications. As 5G is rolled out, Qualcomm modems will have a huge potential market in burgeoning industries like autonomous vehicles, smart cities and the Internet of Things. As startups innovate in these spaces, Qualcomm should not be allowed to use its market dominance to bully companies into unfair licensing agreements.
It is clear that if the ITC issues an exclusion order on iPhones containing Intel chips, it won’t be in the public interest. Stifling competition and disproportionately harming startups and consumers never is.
