Dear Santa: Bring Us Sound IP, Trade, Tax and Competition Policy

Oh, no! Only a few shopping days remain before Christmas.

It’s vital that the United States outcompete China (and other adversaries and competitors) and reclaim the lead in global technological innovation. Our economic and national security rely on that outcome.

To achieve this, we must reverse the slide of weakening property rights in inventions. We need sound patent policies that restore quiet title to patents, retain the patent system’s democratized and merit-based nature, and ensure that U.S. patent rights are robust, reliable and enforceable.

Moreover, we also need smart trade, tax and antitrust policies that benefit America’s competitiveness. To ensure U.S. success in its mission to promote and protect American innovation, the private sector must be empowered to outrun Chinese, European and other competitors (and trade partners).

American businesses, not government, are the true champions of inventing and spreading American scientific and technological breakthroughs, and their global adoption.

So, here’s my Christmas list for Santa Claus:

• Codify the 2019 Joint Policy Statement on Remedies for Standards-Essential Patents. The Justice Department, PTO and NIST affirmed access to injunctions and all available remedies for SEPs. Leadership in standards development and SEP licensing is a competitive advantage that America must own.

• Protect the U.S. International Trade Commission from being defanged, as Big Tech and predatory infringers seek.

• Design carefully tailored export controls over U.S. innovative technologies that maximize American innovators’ ability to license IP to and collect revenue from foreign firms. We must avoid the extremes of decoupling from China and exporting highly security-sensitive technology. Getting it wrong may spark Chinese retaliation, as it did this year against the American memory chipmaker Micron.

• Restore the Hatch-Waxman and the Biologics Price Competition and Innovation Acts’ balance between innovation and return on investment on one hand and timely generic drug and biologics market entry on the other. That is, innovation and access.

• Return sensible merger and acquisition rules that incentivize startup activity, allow exit strategies for startups while derisking R&D for large acquirers that have the wherewithal to scale a startup’s innovations. Timely M&A is a critical element of commercializing innovations and sparking dynamic competition.

• Build upon the Trump tax cuts with investment tax incentives, such as R&D credits. Tax incentives that fuel investing in R&D will help recalibrate our policies to empower American businesses as key allies in achieving our economic and national security goals.

• Codify former PTO Director Andrei Iancu’s administrative reforms to PTAB proceedings and denials, and his 2019 Revised Patent Subject Matter Eligibility Guidance.

• Enact into law then-Assistant Attorney General Makan Delrahim’s New Madison Approach as doctrine for navigating the nexus of patent rights and exclusivity with antitrust.

Additional pro-patent, pro-innovation legislation to put into law:

• The RESTORE Patent Rights Act, which overrules the 2006 eBay v. MercExchange jurisprudence. eBay has fostered predatory patent infringement. The RESTORE Act would restore access to the customary equitable remedy of injunctive relief for proven infringed patents.

• The PREVAIL Act, which would codify beneficial PTAB administrative reforms that add greater fairness and due process for those whose patents are hauled before that body. These include standing, the same burden of proof courts and the ITC apply, and other standards and procedures federal courts and the ITC observe.

• The Patent Eligibility Restoration Act, which abrogates judicially created exceptions to patent eligibility. PERA restores patent eligibility for computer-enabled inventions and life sciences patents at the heart of medical diagnostics and gene therapy. Certain exclusions would clarify that naturally occurring matter and laws of nature aren’t patent-eligible.

• The Restoring America’s Leadership in Innovation Act, which is the most comprehensive bill, would reset the above three and more aspects of our patent system that have weakened U.S. patents, patent rights and our patent system itself—to America’s competitive and economic detriment.

Please, Santa, help the American innovators on your “nice” list.

PREVAIL Act Will Bolster Property Rights

Just before Congress recessed for Thanksgiving, the U.S. Senate Judiciary Committee moved the most proproperty-rights legislation in years.

The committee reported out, on a bipartisan 11-10 vote, the Promoting and Respecting Economically Vital American Innovation Leadership Act, or PREVAIL Act (S. 2220, H.R. 4370). Sens. Chris Coons and Thom Tillis, with cosponsors Dick Durbin and Mazie Hirono, lead this propatent rights bill.

PREVAIL codifies Trump-era Patent and Trademark Office administrative reforms. It makes other rule-of-law changes to a biased tribunal of the Administrative State whose job is to deprive inventors of private property rights that patents supposedly secure.

Gene Quinn, founder and chief editor and commentator on IPWatchdog.com, calls PREVAIL’s Senate committee passage “a long-awaited victory” for its lead sponsor.

The Patent Trial and Appeal Board has become a tool for predatory patent infringement. Rather than streamlining patent validity reviews, PTAB has been weaponized.

"Every day PTAB remains tilted against patents, PTAB kills not only patents, but associated startups and the jobs, wealth, consumer benefits, new knowledge, new products and technologies they would have created"

Mr. Quinn notes “a growing understand[ing] in the U.S. Senate that the PTAB is being abused by big-tech giants using various tactics.” An infographic compiled by the Innovation Alliance shows that more than half of the top 20 most frequent filers at PTAB are Big Tech behemoths that routinely practice predatory patent infringement. Other regular PTAB users include Chinese national champion firms.

The Alliance of U.S. Startups and Inventors for Jobs (USIJ), a strong supporter of the PREVAIL Act, says, “Rather than curbing unnecessary litigation, the PTAB has multiplied proceedings and costs for all involved.”

PTAB from its beginnings in the early 2010s has operated by rules and procedures that vary dramatically from those governing patent validity analysis in federal court and the U.S. International Trade Commission. PTAB invalidates contested patent claims three-quarters of the time. About seven of every 10 patents brought before PTAB are fully invalidated. And PTAB cancels at least one patent claim in 85 percent of the patents it reviews.

“The PTAB is harming innovation in America because it is making it untenable for individuals and small entities to even get started,” Mr. Quinn observes. Another way to put it is that every day PTAB remains tilted against patents, PTAB kills not only patents, but associated startups and the jobs, wealth, consumer benefits, new knowledge, new products and technologies they would have created.

This evidence is overwhelming. Anyone of open mind can’t fail to understand the urgency of reforming PTAB in the manner PREVAIL would do.

Which brings us to the committee vote. Most Democrats voted for PREVAIL, several of them expressing their remaining concerns. Almost half of Republicans voted for PREVAIL. Unrelated issues factored into several GOP votes against, while some voiced substantive concerns.

The most frequent concerns heard from senators on both sides of the aisle at the Judiciary Committee related to pharmaceutical patents, drug prices and PTAB. These concerns are unfounded. The special interests trafficking in such nonsense seek to mislead, confuse, spread false narratives and unjustifiably tie PTAB reform to the hyper issue of drug costs.

First, a USIJ white paper rebuts the false claim that PTAB denials of certain requested patent challenges often involve pharma patents. In fact, USIJ finds that PTAB declined to institute proceedings on four patents—less than half a percent of the 604 denials—on pharmaceuticals. Moreover, only 6 percent, or 73 petitions of the 1,288 fiscal year 2024 petitions for PTAB institution, pertained to pharmaceutical or biotech patents. Most filings challenged patents in other technological areas.

Second, research from George Mason University’s Center for Intellectual Property x Innovation Policy disproves the assertion that pharma patents delay generic competition’s entry into the marketplace. C-IP2’s analysis finds that a drug’s effective patent life averages 13.35 years. And regardless of any patents and exclusivities placed on the FDA’s Orange Book after a drug’s market entry, those additions don’t extend its effective patent life, C-IP2 reports. Thus, patents don’t cause drug prices to rise.

In other words, concerns over alleged abuse of the patent system through “evergreening” or “patent thickets” lack a factual basis. False claims and unwarranted worries should be dismissed, particularly in relation to the urgently needed PREVAIL Act.

Rather, lawmakers should remember that our Constitution dictates that patents secure private property rights in one’s inventions. The right to exclude others from using, making or selling one’s invention is balanced by publication of the patent so that other innovators may learn the teachings of the new invention. Those inventors may learn and invent around the state-of-the-art invention.

The PREVAIL Act will begin to restore weakened U.S. patent rights while fostering dynamic competition, technological progress and the incentive to take economic and entrepreneurial risks. Congress should make this legislation a top priority in the new year.

Regulation by Market or Government?

Postmodern “trust busters” resent that most people “Google it” when looking for something online. And that Google’s free search tools are supported by advertisers willing to pay for access to users.

Not to worry. The neo-Brandeisian savants, namely Liz Warren acolyte and Chairwoman Lina Khan of the Federal Trade Commission and Assistant Attorney General for Antitrust Jonathan Kanter at the Justice Department, know what’s best for those poor, exploited folks who keep selecting Google for their online searches.

Among many federal antitrust lawsuits, DOJ sued Google, alleging monopolization. DOJ won in court. The judge said, “Google is a monopolist, and it has acted as one to maintain its monopoly.” The company has paid digital device makers and web browsers to make Google its featured search engine.

Meanwhile, in the free market, competitors in Internet search are gaining ground on Google in the search advertising market. Currently, Google holds 90 percent of global online search and 50.5 percent of the U.S. market. The firm’s lead has slid about 10 percentage points in U.S. market share since 2018. Amazon, Microsoft, Apple and Chinese spy tool TikTok count among the competition eating into Google’s erstwhile search-ad “monopoly.”

In other words, the government is expending massive amounts of taxpayer money on litigation (losing most of their cases because of outlandish legal theories that lack an empirical basis grounded in economics and consumers' welfare) — not to mention weaponizing antitrust laws, pursuing extreme remedies and erecting huge regulatory hurdles against even routine mergers and acquisitions — to force what the free market is accomplishing on its own in the search business.

To be clear, I’m no fan of Big Tech. But not because the firms are large corporations. And I do admire their technological innovation.

But I detest their left-wing, woke “values” they continually force-feed down America’s throat. I despise their heavy-handed viewpoint discrimination, acting like a journalistic enterprise in controlling content while hiding behind Section 230’s treating them as a disinterested, evenhanded marketplace of ideas (instead of the ideological censors they are).

And then there’s their antipatent behavior. Big Tech firms, including Google, are among the most frequent litigants at the Patent Trial and Appeal Board (AKA patent death panels) and some of the most devoted practitioners of predatory patent infringement.

There are several pro-IP bills that would counter the Infringers’ Lobby’s ability to game the patent system they have weakened over the past few decades. This legislation is the PREVAIL Act (S. 2220/H.R. 4370), the Patent Eligibility Restoration Act (S. 2140/H.R. 9474), the RESTORE Patent Rights Act (S. 4840/H.R. 9221) and the Restoring America’s Leadership in Innovation Act (H.R. 8134).

You’d expect Big Tech companies — at least those like Google, whose patented search algorithm secured the firm’s founders the patent exclusivity to commercialize a novel invention discovered at and the technology licensed out of Stanford — to respect patent rights and the integrity of intellectual property.

However, Big Tech companies and Chinese national tech champions exhibit disrespect for private property rights and short-circuit the exclusivity of reliable, enforceable patent terms that would enable innovators to emerge as competitors with a better mousetrap. Big Tech entities assault patents and IP in order to chop-block would-be small competitors and keep them from leapfrogging the existing competitive environment. Otherwise, the technological innovations of IP-centered startups — like Google once upon a time — could use patents to attract investors, create new products and markets, and spark dynamic competition.

University of Southern California law professor Jonathan Barnett explains how reliable IP benefits innovative entrants and poses a threat to incumbent large firms. “[W]eak-IP environments are hospitable for large, integrated firms that maintain internal markets for financing and conducting R&D and then embed the resulting intellectual output in goods and services for the end-user market. By contrast, strong-IP environments enable entry by smaller firms that specialize in R&D and monetize the resulting intellectual outputs through external relationships with third parties. This organizational distortion matters because larger firms tend to excel in incremental and process-related innovation that refines existing technologies while smaller firms tend to excel in product innovation that challenges existing technologies.”

This returns us to the detriments that government actions based on fringe antitrust theories (i.e., a heavy regulatory hand big on sticks and slim on carrots) cause. Strong, ill-founded antitrust policy serves to weaken intellectual property and reduce IP rights, whose natural outcomes in an unfettered marketplace would be dynamic competition, innovative advancement, and wealth and job creation.

On the antitrust side, an important part of the solution is the One Agency Act (H.R. 7737). This legislation would place all antitrust enforcement authority and resources in the Department of Justice. The FTC, the antitrust agency more biased against IP, would yield to DOJ in these matters and focus its attention on such things as consumer protection. These changes would bring greater efficiency, fairness and accountability to antitrust. As a cabinet department, DOJ is more accountable to Congress and speaks for the United States.

The U.S. House Judiciary Committee passed the One Agency Act last spring. Hopefully, the House will approve H.R. 7737 this year.

In short, we need a reset: Strengthen the patent system and private IP rights, curb antitrust’s excesses, and free up the free market by reducing the regulatory state that’s led to a strong-antitrust, weak-patents regime.

As it now stands, America's economic freedom is constrained, property rights are diminished and government systematically commits regulatory takings of private property as a matter of Biden-Harris policy. And Big Tech is both the U.S. government’s target and its pawn.