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Abstract

Understanding the rivalry in infringement-litigation dynamics is critical for firms in the telecommunication industry. While the number of cross-border patent disputes in these years has surged owing to the globalized economy, the existing literature primarily focuses on patent disputes among telecommunication companies in the national jurisdiction. Hence, to capture the rivalry in the telecommunication industry more comprehensively, we utilize the evolutionary social network to explore the patent dispute data in the International Trade Commission (ITC), which is a crucial legal battleground for enterprises with international business. Through developing a dynamic litigation network and discussing the possible role of the positions in compliance with their interacting relationship, we illustrated that companies involved in ITC investigations can be segmented into key players, frequent respondents, strategic applicants, as well as peripheral enterprises, and the litigation strategies implicated behind four groups of firms stress the strategic nature of ITC investigations. According to the findings, this study contributes to the literature on patent litigation in the telecommunication field and social network relationships. In addition, this paper suggests that telecommunication companies should develop litigation strategies based on their positions and roles in the competition network, and policymakers need to have a deeper understanding of the competition practices in the global legal context.

Keywords

International Trade Commission investigation patent disputes telecommunication industry social network analysis patent rivalry

Introduction

Increasingly aggressive competition accentuates the strategy function of patents (Juranek et al., 2020; Somaya, 2003) and more patentees tend to create a strategic value from tacit assets, resulting in numerous patent lawsuits these years (Kim & Song, 2013; H. N. Su et al., 2012). For defendant firms, being involved in patent litigation will exert huge financial pressure and business disruption, and vulnerability to legal action can damage the firm’s reputation significantly (Bessen & Meurer, 2008; C. Y. Su & Lin, 2021). Since the technology-driven and fast-paced industry will make firms engage in patent litigations more frequently (Choi et al., 2022), some scholars highlight that those effects will be more pronounced in the telecommunication industry and patent disputes in this industry are more crucial (Bessen & Meurer, 2008; Graham & Vishnubhakat, 2013; Rossi, 2022). Therefore, in such a highly competitive environment, understanding the rivalry in infringement-litigation dynamics is important for firms (Diestre et al., 2023). Based on the social network theory, data-driven network visualization is a critical way to assess the dynamic industrial competition landscape (Sarica et al., 2020), and it is vital for the management to understand the positions and roles of their companies and rivals in the industry competition networks (Chang et al., 2017; Zhang & Guan, 2019). Hence, it is timely and important to investigate the patent lawsuit network in the telecommunication industry.

Moreover, international competition was introduced in the globalized economy, and the market became more internationally orientated (van de Kaa & Greeven, 2017). Meanwhile, globalization makes patent infringement less controllable (David & Halbert, 2017), leading to a surge in the number of international patent disputes in these years (Chien, 2008; P. C. Lee & Su, 2014). To capture infringement-litigation dynamics in the telecommunication industry more comprehensively, including the competition in worldwide disputes is necessary. Nonetheless, the existing literature primarily focuses on the patent disputes among telecommunication companies in the national jurisdiction, while pay less attention to cross-border patent infringement. Despite a lack of studies, foreign patent litigation has attracted wide media and practice attention (Yang, 2019). For instance, ZTE Corporation has been sued by Maxell Ltd. in the U.S. district court and was ordered to pay significant damages up to $43 million. This lawsuit aroused widespread attention and sent ZTE’s stock prices plummeting. In addition, in a report released by Patexia Inc., ZTE, and Huawei, as foreign litigants in the U.S., are listed among the top 10 defendant firms most frequently sued in U.S. patent lawsuits (Patexia, 2022). Corporations that have an international business will suffer much more, as cross-country litigation causes more institutional pressure and higher trial costs (Norris, 2013; Powell & Lim, 2022; Turrini & Ypersele, 2010). Thus, Yang (2019) calls for more research on patent litigation under international jurisdiction. This study echoes the call by researching the industrial rivalry formed by the International Trade Commission (ITC) investigations, a special type of global patent dispute which has broader power in international trading.

In light of the abovementioned, the research questions that we endeavor to answer are as follows: (1) From the perspective of cross-border patent infringement, how does the rivalry evolve among telecommunication companies? (2) In the relational network formed by ITC investigations, what are the positions of actors and roles of the position? (3) For each role of the ITC network, which litigation strategy does the enterprise pursue? Our study contributes to the literature in three ways. First, previous studies put more emphasis on patent lawsuits in a domestic jurisdiction, while ignore cross-border patent disputes. Since patent infringement has become a common event in international business, this study echoes the call for research on international patent disputes by exploring the ITC investigation, a critical legal battle in global trade. Second, some scholars highlight that for the fast-moving telecommunication market, the legal battlefield has become globalized, and assessing the dynamic industrial competition is necessary (Sarica et al., 2020). Therefore, this paper enriches the literature in the telecommunication field by constructing an evolutionary rivalry network and drawing a more comprehensive picture of competition based on cross-border patent lawsuits data. Finally, the existing literature primarily focuses on the network in collaborative relationships while pay less attention to the competition network (Choi et al., 2022). This study applies the concept of the network to patent litigation which is embedded a fierce competition. In addition, given that a major shortcoming of the network research is lacking appreciation of network dynamics (Bensaou et al., 2014), we adopt evolutionary SNA and obtain a dynamic ITC network. Hence, this paper complements the social network research.

The remainder of this study is organized as follows. The second section provides a literature review. The third section describes the methodology and dataset. The fourth section presents the structural characteristics of the dynamic ITC network, which can illustrate the position of companies and make role analyses. After that, the fifth section discusses the strategic issues following all types of roles. Ultimately, the last section provides a short conclusion and derives implications for theory and practice.

Literature Review

Patent Disputes in Telecommunication Industry

Numerous patent litigations stemming from increasingly fierce competition affect the performance and competence of corporates significantly (J. S. Lee et al., 2019; Rudy & Black, 2018; H. N. Su et al., 2012). For claimants, suing competitors for patent infringement can benefit their market value (Czarnitzki et al., 2020; Raghu et al., 2008; Shih et al., 2020) while injuring the brand image (Nam et al., 2015) and R&D investment of the rivals (Cohen et al., 2018; Heinecke, 2015; Smeets, 2014). Given that rapid technological evolution has deepened the competition among telecommunication companies (Delp & Mayo, 2017) and rapid technological change can affect the market structure significantly, some studies propose that these effects are more noticeable in this industry and consider that patent disputes in this fast-changing field are more crucial (Bessen & Meurer, 2008; Graham & Vishnubhakat, 2013; Rossi, 2022). In such turbulent environments, it is crucial for firms to identify their major competitors before articulating a competitive strategy (Peteraf & Bergen, 2003). As patent lawsuits can reflect a rival’s strategic intention, this market signal can enable enterprises to collect information about competitors and the competitive environment (Wright et al., 2009). Especially in an industry characterized by patent thickets, patent litigations highly correlate with the rivalry among relevant enterprises (Armstrong et al., 2014). Thus, to win the initiative in the competition, companies need to explore the rivalry in the legal battleground, thereby gaining their competitive situation in the relevant market.

While a plethora of publications have discussed the explosion of patent disputes among the mobile telecommunication industry in the national jurisdiction, international patent infringement has garnered little attention. Since there is a surge in the number of international patent disputes in these years (Chien, 2008; P. C. Lee & Su, 2014), scholars call for more research on patent litigation under international jurisdiction (Yang, 2019). Furthermore, in view of the fact that the United States is the most competitive telecommunications market in the world, firms competing in this market are inclined to seek US patent protection (He et al., 2006). According to the Global Intellectual Property Center, the United States ranked 1st of the 50 economy entities in the IP index (GIPC, 2019), suggesting that the US patent system provides strong protection to patentees. Paik and Zhu (2016) report that strong IP countries like the United States paradoxically become a riskier place for firms that have international business. Particularly for companies with a weak patent system, they are more vulnerable to patent litigation owing to less litigation experience. Hence, there will be an increased litigation risk in the US market owing to the strain of identifying the effective boundaries of relevant patents. In the United States, besides the district court dealing with domestic patent infringement, the International Trade Commission (ITC) dealing with cross-border patent disputes (Brander & Spencer, 2023; Kim & Song, 2013). To capture the competition situation of the telecommunication industry more comprehensively, revealing the rivalry in the ITC jurisdiction is a pressing issue.

International Trade Commission Investigations

ITC is an independent government agency in the United States that deals with patent infringement across borders (Thomas, 1989). Under the dual-track patent litigation system in the United States, ITC investigation was developed for targeting foreign goods, while the litigation in federal district courts verdict domestic issues (Chien, 2008). Recently, to leverage patent rights to expel competitors, high-tech companies have turned to ITC with increased frequency to resolve patent disputes with global corporations (Norris, 2013). Indeed, for patentees in high-tech areas, ITC is a promising alternative to federal district court owing to its statutory provisions and procedures. For instance, the investigations by ITC lead to quick decisions, which is particularly crucial for companies in the short product lifecycles industry. Unlike litigations in district courts that might last for 2 to 6 years, ITC investigations could be concluded in 12 to 16 months. Since the injunction is not enforced until the case is closed, patentees might suffer from the sales of competitors during the waiting period. Moreover, administrative law judges (ALJ) in ITC cases are selected through strict examination and have extensive experience in patent cases (Duvall, 1980). For the investigations involved in complex technologies, ALJ with specialized technological knowledge can ensure the impartiality and efficiency of the trial. In addition, the America Invents Act issued in 2011 made significant changes to the process of patent enforcement in U.S. court, that is, the patentee cannot list several respondents who are unrelated in one lawsuit. Hence, some patentees who want to target more potential infringers in one lawsuit may choose ITC instead. Finally, the most appealing aspect of ITC could be the power to issue a general exclusion order, which can forbid all relevant competitor imports to the United States. Especially after the eBay versus MercExchange case which limited the availability of injunctive relief in U.S. courts, the role of ITC exclusion orders has been strengthened, thus making the ITC investigation more attractive to the patentee who wants to block the importation of all infringing articles regardless of the source (Chien, 2008). As different remedies affect the patentee’s strategic choice (Gugliuzza, 2019), patentees forgo damage rewards in exchange for an exclusion order, suggesting the critical significance of this relief (Co, 2004). In practice, the injunction is especially valuable in the high-tech industry to deter infringement and can bring a huge detrimental effect on the global sale of the infringers (Aydin Ozden & Khashabi, 2023).

Hence, the ITC forum has become more attractive to high-tech companies such as telecommunication manufacturers, giving rise to the number of relevant companies involved in ITC investigations. Indeed, the statistics of USITC illustrate that the number of ITC investigations filed in the telecommunication field maintains the highest number from 2009 to 2019. Meanwhile, Luo and Van Assche (2023) highlight that the US has adopted techno-nationalism recently and enforced its advantage in IP globally. As a government agency, ITC plays a much more important role in international trading than the district court dealing with domestic patent lawsuits (Kim and Song, 2013). Therefore, studying the rivalry among relevant companies in the ITC jurisdiction is vital for capturing the international competition situation of the industry.

Social Network Relationships

Previous studies highlight that a network perspective is critical to illustrate the structures and relationships (Zhang & Guan, 2019). Nonetheless, these researches mainly focus on the concept of network in collaborative relationships, while pay less attention to its application to competitive relationships (Choi et al., 2022). Since some scholars emphasize the importance of competition networks in obtaining a deeper understanding of the industry’s dynamics (Malerba, 2007), it is timely and important to investigate the competition network in the telecommunication industry. Drawing on the social network theory, Choi et al. (2022) suggest that competition networks could be built on the events of patent litigation. Meanwhile, Cantonnet et al. (2015) contend that patent dispute information is a crucial source of competitive intelligence which can strengthen companies’ competence. Correspondingly, we propose that the patent dispute in the ITC venue among those firms can create a competition network (hereinafter “ITC network”), and such a network is vital to elucidate the position of major players in the industry as well as the role of positions in management.

Social network analysis (SNA) denotes a method to capture the structures and relationships within a network (Hoppe & Reinelt, 2010), which has been used in analyzing patent infringement lawsuits lately. For instance, Kim and Song (2013) construct a lawsuit graph to measure the topological importance of 16 mobile phone manufacturers in the network. Following the wisdom of the litigation interrelationship, Chang et al. (2017) establish a structural model including network analysis, cluster analysis, and role analysis. These studies contributed to revealing the rivalry in the smartphone industry through SNA. However, in such a fast-moving market, the strategy of enterprises is constantly evolving (H. T. Wang, 2020). Hence, a static network cannot reflect the dynamic process of competition among companies. Essentially, besides denoting the static network structure, social network also indicates the changing process of network and the social phenomenon behind the change (Kwok et al., 2018). Since evolutionary SNA facilitates determining the influential nodes and also examining network dynamics (Ko et al., 2014), using it to explain a competitive pattern in the fast-changed area is still required.

Research Design and Methodology

Dataset

To construct the ITC network, first, we established a dataset via the official website of USITC. Through the selection of cases in “computer and telecommunications” category during 2009 to 2019, we obtained 142 ITC investigations in total. After that, we collected detailed information of investigations such as plaintiffs, respondents and institutional date, and finally included 258 enterprises in our litigation dataset. Interestingly, as the telecommunication industry involves several subindustries (Galetovic et al., 2018), companies involved in the abovementioned ITC investigations were operating in various markets. Precisely, disputants in the upstream of the industrial chain included chipmakers like Meditek and TSMC, router producers like Cisco and Arris, and WLAN providers like Aruba and Ruckus. Likewise, downstream litigants are not limited to smartphone manufacturers (although those enterprises account for a large proportion) but are open to laptop companies, motor corporations, and mobile operators. For instance, companies like ASUS and Acer that focus on computers, Audi and Toyota that produce automobile, and America Movil that provide Web service, are all involved in ITC cases. Alternatively, ITC investigations affected the entire industrial chain of the telecommunication industry; this finding reconfirmed that despite direct competition from rivals, firms might encounter vertical competition from suppliers or customers in the globalized economy (Peng & Liang, 2016). Hence, it is of utmost significance to draw the overall snapshot of the cross-border patent rivalry among companies within the industry.

Methodology

As mentioned above, in an industry with short innovation cycles, there is a frequent change in the competitive situation. Therefore, it could be more suitable to adopt evolutionary SNA for examining the dynamic process of competition. As the “dynamic” of a network refers to the life stage of a particular time or structure (Bensaou et al., 2014), we made a phase division to better capture the changes at different stages. Considering that the number of litigants involved in the ITC forum is a straightforward measure of the competition intensity, we count the number of disputants in each year and yield Figure 1 (the sum of the number of applicants and respondents, and the company will only be counted once if it appears in more than one case).

Figure 1.

The number of disputants involved in ITC investigations.

According to the trend shown in Figure 1, we divide the evolutionary network into three stages. The first stage was from 2009 to 2012 as the line appears in an upward trend. Besides the effect of eBay versus MercExchange case and the entry into force of the America Invents Act, the patent war among smartphone manufacturers can also contribute to the sharp rise in this stage. From 2011 to 2012, there was a white-hot competition between Apple and Android, making the ITC forum an attractive place to resolve standard-essential patent disputes (Norris, 2013), thereby resulting in a rise in the number of investigations during that period. The second stage was from 2012 to 2015 owing to the continuous decline in these years, settlement agreements were reached among manufacturers during this period. For instance, Nokia and Samsung reached a binding arbitration agreement in 2013, while HTC and Apple settled a 10-year patent license in 2014. Hence, the patent conflict in the mobile communication field has decreased slightly. Furthermore, although the number of litigants reached a high level in 2016, extending the analysis from 2015 to 2019 may provide a more accurate representation of fluctuations during this period. Hence, the last phase was from 2015 to 2019. With the outbreak of large-scale patent litigation between Qualcomm and Apple as well as a series of patent infringement dispute cases between Samsung and Huawei since 2016, patent competition among smartphone manufacturers has entered a new peak. As a form of patent dispute resolution, the trend in the number of ITC investigations is in line with the change in the intensity of patent competition in the telecommunication industry.

Subsequently, we construct the adjacency matrix of each stage respectively, to elucidate the interaction within ITC networks. These are asymmetric matrixes that include plaintiffs as the column and defendants as the row, as well as the number of investigations initiated by a plaintiff against a defendant. After the matrix development, we utilize the UCINET software to visualize the ITC network.

An Evolutionary Process of the Network

Figure 2 shows the three-stage evolutionary ITC network. As illustrated in Figure 2, the ITC network is a directed social network based on the patent litigation relationship between enterprises, in which each node denotes a disputant and the arrow points from the plaintiff to the respondent. To clarify the position of each node, we centralize the network so that the size of the node can indicate its relative importance in the network. For example, if a firm is frequently involved in ITC cases as a plaintiff or a respondent, it will have a larger node in the ITC network.

Figure 2.

Three-stage evolutionary ITC network: (a) Phase I (2009–2012), (b) Phase II (2013–2015), and (c) Phase III (2016–2019).

Table 1 presents the growth of the ITC network by way of the number of nodes, incumbents, newcomers, dropouts, links, and average links per node. The number of nodes in phase 1 is 93, and it increased to 173 in phase 3, nearly double-fold increase. Among the nodes, the number of incumbents is almost equal in the phase 2 and phase 3, while numerous newcomers involved in ITC investigation over period, with the number increasing to 135 in phase 3, accounting for 73% of the total numbers of nodes. Thus, the ratio of newcomers was much higher than the share of incumbents in each period, suggesting a significant amount of mobility as the network evolved.

Table 1.

Nodes Frequency Over Period.

	Phase 1 (2009–2012)	Phase 2 (2012–2015)	Phase 3 (2015–2019)
# of nodes (a)	93	134	185
# of incumbents	/	61	50
# (%) of newcomers	93 (100)	73 (54.5)	135 (73.0)
# of links (b)	167	201	241
Average link/node (b/a)	1.8	1.5	1.3
# of plaintiffs	37	44	56
# of defendants	63	96	142
Average defendant/plaintiff	1.7	2.18	2.54

Note. Since some firms act as both plaintiff and defendant, the sum of plaintiffs and defendants will exceed the number of nodes.

Furthermore, the link between nodes grew from 167 in phase 1 to 201 in phase 2 and finally to 241 in phase 3. The average number of links per node in phase 1 was 1.8, which is higher than the number in phase 2 (1.5) and phase 3 (1.3), indicating that the enterprises constructed a relatively closer connection at the beginning. More specifically, the number of plaintiffs rose steadily in three stages, suggesting that more patentees have paid attention to ITC forums in recent years. In addition, the number of defendants increased from 63 in phase 1 to 96 in phase 2 and finally reached 142 in phase 3. Such a sharp increase suggests that more enterprises are under the pressure of ITC investigations in these years. Moreover, the average number of defendants per plaintiff has been trending up over three periods, which implies that plaintiffs tend to sue more competitors in each ITC case.

Table 2 illustrates the characteristic indexes of the network, including density, network centralization, clustering coefficient, and average distance. Density denotes the ratio of the number of actual relationships in the network to the total number of theoretical relationships (Wasserman & Faust, 1994). In the ITC network, the density in three periods was low and showed a downward trend, with the number decreasing from 0.0195 in phase 1 to 0.0115 in phase 2 and 0.0074 in the last phase. A plausible explanation is that while there is a constant expansion in the network’s size, no close link is seen between incumbents and newcomers, and hence the resulting growth rate of the number of total theoretical relationships in the network is much faster than the growth rate of the actual relationships, thereby decreasing the network density. At the same time, the network centralization in each period was low and decreased to 0.06% in phase 3. Such a small value suggests that each small group in the network is relatively independent and the network is decentralized. Although some groups have core nodes, the connectivity between these small groups is inadequate, resulting in low network centralization.

Table 2.

The Characteristic Indexes of the ITC Network Over Period.

	Phase 1 (2009–2012)	Phase 2 (2012–2015)	Phase 3 (2015–2019)
Density	0.0195	0.0115	0.0074
Network centralization (%)	1.34	0.91	0.06
Clustering coefficient	0.051	0.016	0.008
Average distance	1.640	1.529	1.276
C-random	0.018	0.005	0.005
L-random	6.291	7.272	8.682

Owing to the low density and low network centralization, the ITC network in each stage tends to be a small-world network. As the clustering coefficient and the characteristic path length are the main indicators to measure the small-world network, we compute two indicators; Table 2 shows the results. Following the criteria put forward by Watts & Strogatz (1998), this study generates three random networks, which have the same size and same density with networks in three stages, respectively, and measures clustering coefficient (C-random) and average shortest path length (L-random) of random networks. As seen in Table 2, C >> C_random and L << L_random, suggesting that the ITC network fulfills the characteristics of the small-world network in the process of evolution. Thus, the ITC network depicts the characteristics of a group, which has close connections among the nodes within the small group while lacking the intergroup connections in the overall network. Alternatively, some hubs in the ITC network play a role in bridging several corporations.

Role Analysis and Strategic Issues of ITC Investigations

In the network analysis, it is common to use centrality measures as indicative of the importance of nodes (Borgatti, 2005). Accordingly, we calculate the centralities of enterprises, including in-degree centrality, out-degree centrality, and betweenness centrality in each stage. In particular, in the litigation-related network, the more direct the relationship of an enterprise is with others, the higher centrality it will have. As the ITC network is a directed multi-value graph, we regard the in-degree centrality as the sued counts while considering the out-degree centrality as the suing counts. In addition, as the betweenness centrality measures the paths that pass through a node, companies that are on the shortest paths between others can be deemed as key intermediaries (Freeman, 1979). Hence, we also include this indicator to measure the intermediary importance of nodes in the patent-infringement lawsuits relationship (Sternitzke et al., 2008). Table 3 shows the top 10 firms in three stages based on the centrality involved in ITC investigation. Finally, according to the clustering variables, we perform hierarchical clustering via SPSS and obtain four clusters.

Table 3.

The Top 10 Firms—Based on the Centrality Involved in ITC Cases.

The rank	Phase 1		Phase 2		Phase 3
The rank	Company	Value	Company	Value	Company	Value
In-degree centrality
1	Apple	11.413	Samsung	4.851	Apple	2.355
2	HTC	7.065	HTC	4.478	Samsung	1.449
3	LG	4.891	LG	3.731	LG	1.087
4	Nokia	4.348	ZTE	2.985	Comcast	1.087
5	Samsung	4.348	Apple	2.612	Lenovo	1.087
6	Research In Motion	4.348	Garmin	2.612	Sony	0.906
7	Huawei	3.261	Huawei	2.239	Arris	0.906
8	ZTE	3.261	Nokia	1.866	ASUS	0.906
9	Motorola	2.174	Acer	1.866	MediaTek	0.906
10	Acer	2.174	Pantech	1.866	Pace	0.906
Out-degree centrality
1	Technology Properties	18.478	Technology Properties	12.687	WebXchange	3.442
2	Phoenix	7.065	Samsung	4.851	Broadcom	2.899
3	PTSC	7.065	PTSC	4.851	ZiiLabs	2.717
4	Digitude Innovations	4.891	Phoenix	4.851	Globalfoundries	2.355
5	FlashPoint	4.348	Pragmatus	4.478	IFT	1.993
6	Apple	3.261	Digitude Innovations	3.358	Tessera	1.993
7	Pragmatus	3.261	Optical Devices	2.612	Avago	1.63
8	Saxon	3.261	Straight Path	2.612	Advanced Silicon	1.63
9	SPH	3.261	Andrea	2.239	BiTMICRO	1.63
10	Kodak	2.717	Tela	2.239	Creative Technology	1.63
Betweenness centrality
1	Apple	1.35	Samsung	0.909	Qualcomm	0.056
2	Motorola	0.337	Ericsson	0.129	LG	0.042
3	Nokia	0.232	Nokia	0.067	Sony	0.042
4	HTC	0.19	Motorola	0.017	Broadcom	0.04
5	Samsung	0.124	Belkin	0.011	Arris	0.024
6			Navico	0.006	Avago	0.013
7					Motorola	0.012
8					Xtera	0.009
9					NEC	0.009
10					Nokia	0.009

Roles of Four Positions

Wasserman and Faust (1994) report that the position is embedded in the relational network between companies that have similar social action, while the role implies the interaction between the positions. Thus, based on the clustering result and the ITC network, we conduct a role analysis of four positions in each stage.

As shown in Table 4, we classify the companies in the network into four types. We term Type 1 as “Key player,” which implies that they have a high level of activeness and passiveness. While the patent rights are asserted by them to exclude rivals frequently, others often sue them. Typically, the industry giants fit into this category. Type 2 was labeled as “Frequent respondent,” suggesting that their potential for litigation susceptibility is high; they are frequently the targets of investigations from rival and non-practicing entities (NPE), and this category includes several large-scale companies. Type 3 was named “Strategic applicant”; the characteristic of this type is that they will list several respondents in one case, which is an exceptional strategic move in the ITC investigation. Type 4 was “Peripheral enterprise”; these often act as bystanders whose level of activeness and passiveness are low. As they are occasionally sued and rarely file ITC investigations, their positions in the network are periphery. To ensure the robustness of the result, we cluster the companies based on Euclidean distance instead of the Square Euclidean Distance. We find that the only difference between the original result and the new result is that the new result has more subclass in Type 3, that is, strategic applicants. In other words, the new result classified strategic applicants into companies who sued many more rivals and who sued even more rivals, but the strategic nature of these applicants has not changed. Hence, the result remains robust.

Table 4.

Roles of Companies in the ITC Investigation Network.

Classification	Sub-class	Phase 1	Phase 2	Phase 3
Key players (Type 1)	—	Apple	Samsung	Qualcomm
Frequent respondents (Type 2)	I	Huawei, ZTE, Samsung, Research In Motion, LG, Nokia, HTC	ZTE, Nokia, Apple, Garmin, Huawei, Acer, Pantech	MediaTek, Pace, Lenovo, ASUS, HTC, Arris, Motorola, Comcast, LG, Sony, Hewlett Packard, Dell
	II	—	LG, HTC	Samsung
	III	—	—	Apple
Strategic applicants (Type 3)	IV	—	Optical Devices, Straight Path, InterDigital, IPR Licensing, Black Hills, Pragmatus, Tela, Andrea	Neodron, Rovi, Immersion, Parker Vision, SIPCO, Tela, Honeywell, Kudelski, OpenTV, AMD, Xtera
	V	Phoenix, PTSC	Phoenix, PTSC, Pragmatus, Digitude Innovations	BiTMICRO, Creative Technology, Advanced Silicon, Avago, IFT, Globalfoundries, Tessera, Andrea
	VI	Technology Properties	Technology Properties	Broadcom, Ziilabs, WebXchange
Peripheral enterprises (Type 4)	—	A total of 81 enterprises, among which 52 are respondents.	A total of 112 enterprises, among which 79 are respondents.	A total of 147 enterprises, among which 122 are respondents.

Note. Subclass means in the types of victims and strategic applicants, there are three subtypes. Type I means these companies received many attacks; Type II means the company received many more attacks than Type I, while Type III received even more number of attacks compared with Type II; correspondingly, Type IV means these companies sued many rivals; Type V implies these companies sued many more rivals than Type IV while Type VI means these companies sued even more rivals than Type V.

Key Players (Type 1)

In the first stage, Apple was the only key player. In detail, Apple initiated four investigations against competitors, including Nokia, Samsung, and Motorola. In the meantime, it has been sued for over 10 times during these 4 years. As the incumbents with obsolete designs tried to deter the emerging design from rapid expansion, Apple became the target of Motorola and Nokia after it debuted with the heuristic touch screen (Peng & Liang, 2016). Besides being accused by these companies of infringing on their patent rights, Apple was also the target of non-practicing entities (NPE) who do not practice the claimed subject matter of patents but may enforce their patent rights for license fees. Different from Chang et al. (2017) who labeled Apple as the sole market pioneer during the observing period, we identify Samsung as the sole firm in Type 1 at the second stage. Since we adopted evolutionary social network analysis and divided observing period years into three stages, we can observe the change of companies’ positions and roles. In this stage, Samsung filed two cases toward 13 companies. However, similar to Apple, it has been attacked nine times by patent trolls. While in the third stage, the key player turned out to be Qualcomm, a company that has strong patent assets and is good at operating patents. Similar to the finding of Guo et al. (2017), Qualcomm used its portfolio property advantages to collect large royalty payments from other industry players. In the ITC venue, it sued Apple two times and other four companies one time; this change suggests that a leading company has unlocked another forum to practice its patents. For firms that have a strong knowledge position in the telecommunication field, enforcing patents contributes to bargaining power and license revenues (Trappey & Trappey, 2017). Hence, ITC investigation has gained more popularity for large corporations in the telecommunication field.

Frequent Respondents (Type 2)

During the first phase, firms classified into Type 2 are large-size companies who have a broad production scale, including the likes of Huawei, Samsung, and Nokia. Meanwhile, they are the main targets of NPEs. Except Nokia whose half of investigations come from Apple, other companies are targeted by NPEs. Remarkably, some of them have been sued in the same case, and most cases are concluded in settlement, demonstrating that the purpose of NPEs to file the ITC cases is to obtain settlement payment from large-scale firms. Similar to the result of Chang et al. (2017) that 80% of patent infringement lawsuits in 2014 involving large firms, we find that five large firms fall into category two in the second stage. Nokia once again became a frequent respondent, which corresponds to the conclusion of Guo et al. (2019) that Nokia has experienced a downward trend from 2011. Notably, NPEs initiate almost all investigations toward these companies. However, although these firms have enough capital and resources, they seldom enforce their IP rights in the ITC forum. In the third stage, the key players in the former two stages (Apple and Samsung) have become the most vulnerable respondents. To be specific, besides being attacked by Qualcomm, Apple received 11 complaints from others. With regard to Samsung, its investigations come from enterprises instead of NPEs, indicating that Samsung has been embroiled in a legal battle in the last 4 years.

Strategic Applicants (Type 3)

As expected, strategic applicants are all NPEs in the first stage. Among them, Technology Properties filed two ITC investigations, one listed 13 respondents while the other named 21 respondents. In light of the above finding, their listed respondents in ITC venues are almost large-scale companies. Similarly, 12 firms are characterized by a strategic player in the second period, and most of them are NPEs. On average, the strategic players listed 5.36 respondents in one case. Interestingly, in contrast to the former stages in which companies of the group did not manufacture products, the last stage included several entity enterprises as strategic players. This finding is different from Chang et al.’s (2017) finding that strategic players only include NPEs, a possible reason is that some companies want to exert pressure on their rivals via listing rivals’ customers as respondents in the same case. Thus, those enterprises started listing many rivals in one complaint, and the number of companies characterized by strategic players has surged to 22 at this stage.

Peripheral Enterprises (Type 4)

Companies in this group are usually not brand owners in the telecommunications industry. Instead, they might be suppliers of parts and computing-related products. For instance, as telecommunication technologies have merged with numerous technologies such as vehicles (Noh et al., 2016), some motor corporations are involved in ITC investigations. Specifically, in the first stage, there are 81 peripheral firms, which are involved in sporadic investigation. Among them, 52 firms are respondents. Corresponding with the overall trend, the second stage has more companies that belong to Type 4. In this stage, 112 companies are located at the edge position, of which 79 firms are respondents. Likewise, accompanied by an increase in the number of ITC investigations, the number of companies characterized in Type 4 has increased to 147 peripheral firms in the third stage. Among them, 122 firms are respondents. Thus, respondents have increased a lot in this stage, suggesting the wider application scope of ITC investigations. Different from Kim and Song (2013) who cluster only a few companies into this category, we find a large number of peripheral enterprises in the ITC network. A plausible explanation is that compared to litigation in district courts which require defendants to have enforceable assets in the U.S., ITC investigation only requires defendants to export infringing products to the U.S. Hence, many enterprises may encounter ITC investigations although they are not charged in an infringement lawsuit.

Strategic Analysis of Four Groups

In this section, we attempted to capture the strategy of four groups of companies through their related ITC investigation. The results are discussed in detail below.

Key Players

In general, filing ITC investigations for key players tends to be a strategic move instead of a legal move. L. Wang et al. (2023) highlight that offensive patent litigation can promote the achievement of business goals. We believe that through against rivals both at district courts and the ITC forum, firms can seize more US market share. For example, in the first stage, while Apple proactively filed patent lawsuits against Samsung and HTC in district courts, the company also aimed at them at ITC venue; this litigation strategy helped to stop the market penetration speed of Android manufacturers (Peng & Liang, 2016). Based on the statistics, Apple made significant profits in the third and fourth quarters of 2011. In addition, in the third stage, Qualcomm used the ITC investigation as a means to conclude the patent war between itself and Apple. As the possession of intellectual property assets plays a large role in the telecommunication industry (Bekkers et al., 2002), the great standard essential patent portfolio gives Qualcomm an incentive to exploit the expanded market power and increase royalty rates (Lerner & Tirole, 2015). Accordingly, Qualcomm and Apple started large-scale patent war in 2017. Besides suing each other in several countries; Qualcomm also filed ITC investigation toward Apple in 2019. The interesting point is that after Qualcomm was granted an injunction on import in the initial order on March 26, the two companies reached a settlement in a global-scale on April 16; this short time interval suggests the strategic function of ITC investigation in settling disputes.

Another strategic issue is that these kinds of players are highly related to NPEs’ ITC investigations and these cases usually finish in reconciliation. As mentioned above, NPEs contributed to almost all complaints of Samsung. Similarly, the NPEs attacked Apple several times. Nevertheless, the results of these cases are almost settlement, suggesting that the industry giants tend to settle with NPEs in order not to affect their development and reputation. For them, getting out of frivolous lawsuits can save more time to develop and maintain the customer.

Frequent Respondents

HTC, Nokia, and ZTE have been classified into the type “Frequent Respondents” two times. All three are large foreign enterprises with a relatively high market share in the United States. Nevertheless, as they lacked the resources to participate in standard setting at that time, they became the target in the ITC forum despite their strong production capacity. For instance, besides weak R&D capabilities, ZTE faced resistance from existing standard providers in the CDMA field (Tan et al., 2020). In addition, HTC had only around 200 patents before 2012, which hindered it from claiming standard essential patents. Such insufficient patent stocks prevent HTC from filing a counterclaim in the ITC, leading to more investigations toward it. Furthermore, Nokia had no enthusiasm in developing a smartphone product after it became the largest mobile phone manufacturer, resulting failure in competing with a new dominant design (Peng & Liang, 2016). Thus, companies with relatively large production scales but fewer capabilities to develop core technology are more likely to be frequent respondents.

We further unearth that ITC investigations initiated by NPEs account for a large proportion of the cases that involved frequent respondents. Like the normal litigation conducted in federal district court, NPEs are the most active complaints in the ITC because of their profit model. Thus, the way of making dealings with NPEs becomes a crucial aspect for companies. For instance, Huawei was attacked by NPEs five times in the first stage and two times in the second stage. Subsequently, Huawei made a comprehensive settlement with Interdigital in 2016, thereby decreasing the probability of an ITC investigation being initiated in phase 3; this fact reconfirms the proposition that legal conflict propels enterprises to cooperate with aggressors on account of private benefits (Jones et al., 2021). In such cases, Huawei can remove patent barriers in overseas markets while Interdigital can gain considerable license fees. The benefits of cooperation outweigh the benefits of competition; hence, leading to win-win situation. This provides another explanation for why defendants and plaintiffs of patent lawsuits will increase their cooperation after litigation filings (Jones et al., 2021). Therefore, cooperation can be the rational optimal selection for frequent respondents if the disputed technology holds strategic importance in the innovation ecosystem.

Moreover, an interesting change of the companies classified as a frequent respondent is that the first two stages are mainly focused on terminal equipment suppliers, while the last stage entails parts suppliers such as ASUS working on VGA card, Comcast working on WLAN, Mediatek working on chips, and Arris working on router; this change implies that the ITC investigation has penetrated several parts of the supply chain and more diverse products, which offers new evidence for the truth that enterprises compete in both geographic markets and different product markets in the context of globalization (Peng & Liang, 2016).

Strategic Applicants

We count the number of NPEs and entity enterprises belonging to strategic applicants at each stage. As depicted in Figure 3, NPEs were active in each stage, while the proportion decreased. In detail, in the former two stages, the number of NPEs is much higher than that of real enterprises. Considering the respondents listed of those NPEs, most of them are large firms, such as Samsung, HTC, ZTE, and Huawei, which is consistent with profit models of NPEs that sue cash-rich firms (Cohen et al., 2016). As large firms give more importance to their reputation and customer trust, they tend to conclude the investigation as soon as possible. Such a tactic of NPEs seems to be effective, as the results of these cases usually end with a settlement.

Figure 3.

Clustering coefficient and average shortest path length of ITC network and random networks.

Nevertheless, the proportion of NPEs has declined during the last stage. A plausible explanation is the order of case (case number: 337-TA-868) in 2013 that adopted a strict interpretation of “domestic industry elements” clause, a condition for filing an ITC investigation that requires investment to be closely related to the technology development of the patent involved (Meyer, 2013); this requirement is disadvantageous to NPEs, resulting in a decline in the number of their cases.

Another trend that is seen in Figure 4 is that more entity enterprises became strategic players, and their number exceeds that of NPEs in the last stage. The strategic issue behind this change is that when a firm hopes to target a certain rival, it might choose to use the rival’s customer to exert pressure at the same time. In other words, the claimant will list rival’s customer as respondents in the same case. For instance, in the investigation no. 337-TA-1176, global foundries intended to sue TSMC for patent infringement and named more than 10 of its partners, including Apple, Qualcomm, Google, and Lenovo. Consequently, this case involved not only chipmakers but also downstream firms who used TSMC’s chips. As ITC was unable to include downstream products of downstream manufacturers in a limited exclusion order, the applicant changed its litigation strategy to drive downstream products out of the US markets. At present, besides asking for a general exclusion order, companies are inclined to list more respondents, including manufacturers in the middle and lower industrial chain.

Figure 4.

The number of patent trolls and entity enterprises in three stages.

Peripheral Enterprises

With regard to the peripheral enterprises, we count the number of companies that had been sued in each country or region, and obtain Figure 5, which reflects the trend of ITC investigations in these 10 years.

Figure 5.

The number of companies that had been involved in ITC investigations in each country or region at three stages.

Notably, when industry leaders are suing each other, the patent war causes more enterprises to get involved, resulting in the broader scope of peripheral enterprises worldwide. Indeed, in view of the close tie between the ITC investigation and the industry, all companies are at risk whether it locates upstream or downstream of the industrial chain. To be specific, the risk of downstream manufacturers has increased, as they cannot be subject to exclusion orders if they are not on the respondent list. Hence, the plaintiffs begin to name the rival, as well as its downstream manufacturers in the same case. In terms of upstream manufacturers, the alleged infringement might lead to the distrust of their customers. Owing to the potential risk of patent disputes, customers tend to choose a competitor’s product to avoid litigation, thereby resulting in the business loss of upstream manufacturers. Thus, all companies in the telecommunication field should pay attention to the ITC investigation.

Another interesting finding is that the number of US companies being investigated was the highest among the three stages. Although the statutory intent of ITC investigation is the protection of the domestic industry in the United States, ITC cases often involve domestic defendants (Chien, 2008). Until now, many American companies in the telecommunication field have found themselves vulnerable to ITC investigations. Such indiscriminate treatment between the US and non-US companies again reflects the strategic nature of the ITC investigation.

Furthermore, we unearth that the number of enterprises being sued in Asia has always been relatively high. On the one hand, the wireless telecommunication industry had been dominated by American and European standards in the 3G period (Soh & Yu, 2010). Firms in a developing country might be restrained by the limited capacity, thereby being the target in the legal battleground. Especially for those latecomers in global competition, they are supposed to comply with international norms such as legal principles (P. Wang et al., 2014), thereby increasing the probability of being defendants. On the other hand, since technological progress can destroy revenues that the leading firms enjoy (Asimakopoulos & Whalley, 2017), the incumbents will initiate litigation attacks to defend their position (Peng & Liang, 2016). Hence, with the development of China in the field of mobile communication, together with the fact that the ITC investigation plays a representative part in the intellectual property trade barrier (Li & Chen, 2020), the number of Chinese enterprises being investigated has increased significantly in recent years. In addition, Li and Chen (2020) demonstrate that the ITC investigation plays a representative part in intellectual property trade barrier build by U.S.

Discussion and Conclusions

The idea of this study is to capture the rivalry in the telecommunication industry from the perspective of cross-border infringement. As the competitive situation in such a fast-updating industry changes frequently, we have adopted evolutionary SNA to examine the structural features and social relationships. Through the cross-analysis of the litigations, the litigants, and their positions and roles in the ITC network, we find that companies involved in ITC investigations can be segmented into four groups, including key players, frequent respondents, strategic applicants, and peripheral enterprises. We further demonstrate the changes in the position of enterprises and their role as well as their competitive strategy at different stages. To be specific, key players are inclined to use the ITC investigation as a business tool instead of a legal way merely. In addition, most of the frequent respondents have a large market share in the United States market, leading to receiving attacks from both rivals and NPEs. Meanwhile, besides mobile manufacturers, more component suppliers become frequent respondents in the third stage. Moreover, although almost all strategic players are NPEs at the former two stages, enterprises account for the majority in the last stage, suggesting the change in litigation strategy of entity enterprises. Finally, there are an increasingly number of peripheral enterprises that have been affected by ITC investigations in the global scope.

Theoretical Contributions

Our findings make several significant contributions to the existing literature. First, this study complements the literature on patent litigation by focusing on cross-border patent infringement instead of infringement cases in a specific domestic jurisdiction. Because of the increasingly intensified competition worldwide, the number of international patent litigation surged. Hence, scholars call for more research on international patent disputes (Yang, 2019). As an independent government agency dealing with cross-border patent disputes, the ITC are now more important in international trading and the global economy than the court dealing with domestic patent lawsuits (Brander & Spencer, 2023). Therefore, this study concentrates on the ITC investigation, thereby enriching the literature on patent disputes and responding to scholarly calls. In addition, we summarize the litigation strategy of each cluster of firms involved in the ITC investigation. We find that key players like Apple and Qualcomm tend to regard the ITC investigation as a business tool instead of a legal mean, and more entity enterprises tend to be strategic players who list rivals and rival’s customers as respondents in the same case to exert pressure, thus verifying the strategic nature of ITC investigations (Kim & Song, 2013).

Second, our study also broadens the literature on the telecommunications field. Previous studies have constructed a domestic patent lawsuit graph of major mobile phone manufacturers and categorized actors into several groups based on clustering variables to recognize their roles (Chang et al., 2017; Kim & Song, 2013). Nonetheless, owing to the openness of the global economy, there is worldwide competition in the telecommunication industry. Instead of focusing on patent infringement lawsuits in district court only, the cross-border patent disputes warrant to be investigated. As a special global patent dispute that has an essential role in international trade, the ITC investigation can better reflect the rivalry at the international level. In addition, we find that there are a large number of SMEs that do not have branches in the United States also encountered ITC investigations. Since there is no personal jurisdiction restriction in ITC investigations, those enterprises that will not be charged in an infringement lawsuit may encounter an ITC investigation initiated as long as they have products exported to the United States. Therefore, we construct the rivalry network of ITC investigations that can include more companies, and thereby complement the picture of competition in the telecommunication industry.

Third, this study enhances the literature concerning social networks. While sizable studies adopt a social network perspective to discuss collaborative relationships among companies, competition relational network has received scarce attention (Choi et al., 2022). Meanwhile, some scholars highlight that dynamic industrial competition is intangible and difficult to analyze, and data-driven network visualization to assess the competition position of firms based on patent data is important (Sarica et al., 2020). Choi et al. (2022) further point out that future research can discuss competition networks based on the events of patent litigation. Therefore, we place the spotlight on the competition network, in particular on the patent lawsuit network. Moreover, Bensaou et al. (2014) propose that there is sparse research on evolutionary network, which can reflect the dynamic change of rivalry. Especially in a fast-changing industry like the telecommunication market, incumbent firms might lose their dominant positions to entrants in a short time. Hence, it is essential to adopt evolutionary SNA to capture the competition in technology-intensive industries in each short cycle. We advance this call by dividing 10 years into three stages based on the intensity of competition, which can better reflect the change of the competitive situation within the industry.

Practical Implications

This study supports implications in practice. First, telecommunication enterprises should develop litigation strategies based on their positions and roles in the dynamic competition network. To be specific, industry giants need to be aware of the strategic nature of ITC investigations. They can use ITC investigation to attain settlement with old rivals more quickly and beat new entrants more effectively. Regarding large companies that are being sued frequently, they should strengthen the patent stock to increase the bargaining chip. Likewise, if they are often being targeted by NPEs, they can carry out strategic cooperation (such as the cooperation between Huawei and Interdigital) to get rid of constant patent litigations. Moreover, if companies want to put more pressure on their rivals, they can list rivals’ customers as respondents in the same case, that is, acting as strategic applicants. Such a strategy may make rivals’ customers turn to their products to be free from lawsuits. In terms of peripheral enterprises, the indirect link between firms engaged in disputes with the same patent owner also deliver competitive intelligence. Since they are accused of infringing the same patent right, these alleged firms may themselves be potential competitors. Hence, peripheral actors also need to pay attention to those defendant firms in the same investigation.

Furthermore, it is important for policymakers, especially in developing countries, to have a deeper understanding of the competition practices in the global legal context among telecommunication companies. Based on our findings, there is an upward trend of the enterprise quantity that being involved in the ITC forum as peripheral enterprises, many of whom are small- and medium-size enterprises located in developing countries. In addition, owing to the advent of 5G technology, the competition in the telecommunication industry would be fiercer (Forge & Vu, 2020), leading to more companies being involved in cross-border patent litigation. Therefore, policymakers should develop policies to help enterprises be more proactive in such competition. For instance, keep the enterprises updated on recent patent lawsuits and assist them in identifying their position in the competition network, encourage firms to strengthen patent portfolios when firms act as frequent respondents, and help to establish an alliance among firms who are being litigated by the same strategic applicant, and thereby enhance firm’s competitiveness in global competition.

Limitations and Future Research

Our study is subject to some limitations. First, although the legal battleground is crucial for telecommunication companies, the rivalry discussed in this study does not extend outside of the legal context. Given that the competition among these companies could be compounded by conflict in other economic and political domains (Jones et al., 2021), future studies can comprehend our study by considering the rivalry from other forms of information such as market reports and policy reports. Second, we investigate the direct relationships among involved litigants in patent disputes. Nonetheless, there are many indirect firms as market participants in the industry that may also be affected by the ITC investigation, especially when the ITC exclusion order is issued. Since indirect rivals can also affect how focal actor competes in the market (Prato & Stark, 2023), future studies can draw a more comprehensive picture of competition-involved indirect actors. Finally, this study focuses on participants in the telecommunication industry, while pay less attention to the technological competition. In other words, we explore the network relationship among litigants instead of litigated patents. Nevertheless, the technology in the telecommunication industry is fast-moving, hence constructing a technology competition network based on the International Patent Classification (IPC) of litigated patents may be used to forecast technology trends and identify key technologies, thereby obtaining a deeper understanding of the industry’s dynamics. Therefore, additional analytical data concerning the disputed patents can be considered in future studies.

Footnotes

Acknowledgements

We would like to thank the editors and three reviewers for their helpful comments and suggestions.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This study is supported by the Hunan Federation of Social Sciences (Grant Number XSP24YBZ177).

Ethical Approval

Not applicable.

ORCID iD

Chenqian Xu

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Understanding the Rivalry Among Telecommunication Companies in the Cross-Border Patent Infringement: An Evolutionary Social Network Analysis

Abstract

Keywords

Introduction

Literature Review

Patent Disputes in Telecommunication Industry

International Trade Commission Investigations

Social Network Relationships

Research Design and Methodology

Dataset

Methodology

An Evolutionary Process of the Network

Role Analysis and Strategic Issues of ITC Investigations

Roles of Four Positions

Key Players (Type 1)

Frequent Respondents (Type 2)

Strategic Applicants (Type 3)

Peripheral Enterprises (Type 4)

Strategic Analysis of Four Groups

Key Players

Frequent Respondents

Strategic Applicants

Peripheral Enterprises

Discussion and Conclusions

Theoretical Contributions

Practical Implications

Limitations and Future Research

Footnotes

Acknowledgements

Declaration of Conflicting Interests

Funding

Ethical Approval

ORCID iD

References