Will a Patent Question Come Up At The Presidential Debates?

By Peter Harter
January 14, 2016

podium-american-flag-335Are the people who are supporting the candidates really getting what they want from the candidate on the issue that matters most?

Recently, Gary Shapiro, the President and Chief Executive Officer of the Computer Technology Association, brought this up at the annual Consumer Electronics Show (CES) in Las Vegas. Shapiro openly questioned whether the tech industry has been effective in their lobbying efforts.

Shapiro explained [1] that the tech industry hosts politicians in Silicon Valley, meets politicians at shows like CES in Vegas, and goes to DC, all to work on serious business issues like immigration, surveillance, privacy and patents. Yet, the tech industry chooses politicians with their hearts and they tend to support politicians because of their views on social issues. But are these politicians that the tech industry supports necessarily voting their way or making the issues that are good for business a priority?

One high profile example is immigration reform. It has been a top priority for some within the tech community, including Facebook’s Mark Zuckerberg, because more highly educated engineers and computer scientists are needed, perhaps more so now with unemployment figures kissing 5%. Despite what matters for the great economic force that is Silicon Valley, increasing H-1B visas is held hostage to more politically volatile issues involving amnesty. In parallel one has to wonder how to really count unemployment in the context of the underemployed, those that have given up looking, those that can’t qualify for tech jobs, and more recently the growing dynamic of the “gig” worker – those that are push-button labor via an app. Also, there is the increasingly visible dynamic of diversity and a lack thereof in the tech sector. Of course necessity is the Mother of Invention so the tech industry is creating robots and software to do tasks better or more cheaply than even white collar, knowledge workers.

Perhaps the shortage of tech talent has more to do with the state of our nation’s education system and the culture of the tech industry. Perhaps sunken investment in lobbying on H-1B visas for 20+ years by the tech industry coupled with the heat of the immigration debate prevents policy makers and tech industry leaders to consider other reforms that may address much of the talent issue.

So holding an elected official accountable to one issue like immigration can be well complicated.

Many people don’t like to be single-issue voters. Many people are complicated themselves. Many issues like immigration can often bleed into other areas like employment equality, diversity, and education. Quickly one has moved from tech talent to states rights. Labels and “litmus tests” or “purity tests” become epithets, making objective, informed, inclusive, fair and democratic discourse difficult. But when you see the “outsider” phenomenon driving both Democrats (Sanders) and Republicans (Trump), one should wonder if it may be best to focus on an issue that matters to one’s business and is also part of the founding fabric of our country and economic way of life – our operating system, if you will. Why support a politician that makes your heart throb but depresses your sustenance?

Some politicians have views that may be devastating for the pharmaceutical and biotechnology industries. These industries employ both executive management and organized labor and include multi-national conglomerates, startups, research foundations, and universities.

At this point in the presidential cycle it is too early to expect a great deal of substance on issues like patents?

The point where patents may come up in the Presidential debates will be in these application layer issues of drug pricing, taxes or maybe trade. But even then the discussion will be delicate and nuanced, unless we have a February 2008 situation. More on that later.

For example, the TPP or Trans Pacific Partnership has been so controversial that the Obama Administration probably won’t spend too much time this year asking Congress to act upon the TPP until after the elections in November and, thus, not create an albatross for Hillary Clinton. Republicans will likely be fine with that because they probably don’t want to have to have a trade issue to divide their party ideologically. You’ve got the corporate Republicans who want free trade deals and then you’ve got the isolationist Republicans who don’t want it for fear of losing to offshore competitors. Every politician remembers how controversial NAFTA proved to be.

The real next step in the patent debate is probably going to be at this application layer of drugs, taxes and trade. Sure litigation gamesmanship (generally and not just patents) remains important and perhaps for reasons not widely appreciated given the recent Supreme Court decisions on class action lawsuits and arbitration issues that have changed the balance of the force. But just look at how drug prices have roiled much of the presidential campaign season so far. Inversions, repatriation, corporate tax reform, and special interest tax deals in the 2,000+ page plus omnibus budget enacted late in December 2015 make many voters and businesses upset with how our government operates.

Senator Ted Cruz, Carly Fiorina and Senator Rick Santorum have already publicly expressed specific views about the Constitution and the patent system. And certainly the Constitution gets referenced a lot at these Presidential debates. But are they going to use their finite time at a debate to discuss patents when there is broader interest in guns, terrorism, refugees, wars, and the powers of the president? The Constitution may not necessarily be an application layer for patents in the context of presidential debates. It is certainly very congruent, especially when you look at the impairment of private property rights, the expansion of government, and separation of powers issues core to the patent debate and our system of justice and culture of equality.

Go back to the debate in Cleveland in February 2008 during the primary between Obama and Clinton where Tim Russert of Meet the Press asked them about patents. People in Toledo, Ohio were upset about losing jobs because of offshore copyists in the solar panel technology industry. The Federal Reserve Bank in Cleveland had recently done a study about what is the biggest impact for economic growth and jobs and found that patents, not education, were the biggest indicator across all 50 states. Russert used this background to ask a patent question of candidates Obama and Clinton and both replied by going to the application layer of trade and economic development, jobs.

As we get through the Iowa caucus and some of these other states and maybe a narrowing of the field there will be more opportunities to drill down into these application layers of taxes, drug prices, and trade and perhaps reveal the views of the candidates on patents. At the moment there are too many people in the race to allow anyone to get enough time on the national stage, either during the debate or in press coverage, to get into much detail with respect to their positions.

In this election cycle you have Senator Chuck Grassley, the farmer and Republican of Iowa, up for reelection. He chairs the Judiciary Committee and is very active on patent litigation abuse reform. In fact, he is presently going county by county in Iowa, to talk to his constituents, as he does every year, telling them that one of his top three priorities this year is to get his patent bill to the Senate floor. While Grassley is popular he faces a Democratic state senator who is using Grassley’s work on patent reform as an issue. Hillary Clinton recently said at an Iowa campaign stop that tech companies should have their patent rights suspended until they pay US taxes on offshore profits. See the IPWatchdog article for more detail. In 2012 the Senate’s Permanent Subcommittee on Investigations held hearings involving HP, Microsoft, Apple and others on these issues. Grassley has been head of the Senate’s Finance Committee and as such very active on tax policy issues. Clinton’s former Senate colleague Senator Chuck Schumer more recently has been working across the aisle to use patents as a tool to repatriate offshore profits to fund US highway construction. More on that below. Could patents fuel debate on income inequality and large corporations paying their fair share? Would Grassley or Iowa voters engage on patents from this vector?

In New Hampshire, Senator Kelly Ayotte, Republican and former state Attorney General (a law enforcement community active against patent trolls) is up for re-election and is facing off against the Democratic governor. Senator Ayotte is often mentioned as a VP candidate.

Also, during this election cycle, the Senate has more Republicans up for reelection than Democrats. Senator Mitch McConnell, the Senate Majority Leader, and other Republicans deciding which races merit support to maintain their Senate majority, will look at how the primary states and the eventual presidential nominee may be able to help or harm Republicans running for office. In 2010, for example, when then Senate Majority Leader Harry Reid was facing a very tight re-election he kept patent reform off the Senate floor because inventors and others concerned with the pending legislation campaigned in Nevada and elsewhere to claim enough sway over Reid’s race.

In 2016 we do not yet see this razor’s edge dynamic tied to the patent issue.

But let’s not forget the bell weather state of Ohio, which also hosts the GOP convention in July 2016. Senator Bob Portman, a Republican, is up for re-election and is sometimes mentioned as a VP contender. Portman has been active with Senator Schumer, Democrat of New York. Schumer is poised to be the #1 Democrat in the Senate after Harry Reid of Nevada retires at the end of 2016. Portman, like Grassley, works with Schumer on patent related issues. Portman and Schumer recently tried to tackle the corporate tax issue of repatriation by engineering a version of the “patent box” (a lower tax rate on royalty income generated from patent licensing) tied to funding of the federal highway program. Also, Portman recently endorsed Ohio Governor John Kasich for President. Some twenty years ago, then U.S. Rep. Kasich worked with President Bill Clinton to balance the budget and did so by diverting user fees from the USPTO.

When Senate Majority Leader Reid won re-election in 2010, he let the patent bill move to the Senate floor in January 2011. The issue of fee diversion nearly blew up the entire bill. Representatives Paul Ryan (R) and Harold Rogers (R), then Chairs of the Budget and Appropriations Committees respectively, blocked the patent bill from moving until the language ending fee diversion was changed to maintain Congressional control. When the House version of the bill went back to the Senate for debate, amendment and a final vote, a bi-partisan team nearly succeeded in reinstating the original Senate language ending fee diversion, which would have forced the House to reconsider the contentious issue all over again. Then Senator Marco Rubio missed that vote but later wrote that he would have joined the team to vote for the amendment and against the House version of the patent bill. Ryan, now Speaker of the House of Representatives and the former VP candidate with Mitt Romney in 2012, will preside over the GOP convention in Ohio in July 2016 and have to deal with headaches such as a multi-ballot contest. Ryan also had to contend all this year with a GOP caucus in the House that remains divisive. These divisions are likely to maintain or expand during the stress of the presidential election year.

Now with that as kind of the rough context you can perhaps appreciate the patent issue anew.

Once we get through these primaries and we have a narrowing of the gaggle of candidates, maybe people can drill down to more specific issues, especially when it can create useful opportunities. Ted Cruz, for example, is currently ahead in the polls in Iowa, although he is probably not on the same page as Grassley on patent reform. In fact, he is on the record as not supporting Grassley’s patent bill, S.1137, The PATENT Act. Cruz has come out against “The Washington Cartel” of which one could argue Grassley is a part of as he has been in office for such a long time. Cruz has taken on Senate Majority Leader Mitch McConnell and other Republicans so Grassley could be Cruz’s next target perhaps. There are news stories out there talking about how Cruz and his bad boy, non-cooperative demeanor in Washington along with his Senate colleagues is an advantage for him. So for Iowa would Cruz take on an Iowa based Republican that is popular? And after the Iowa primary is there an opportunity to double-down on the outsider, corrupt DC message?

Cruz and Grassley probably agree on a lot, however, when it comes to holding government accountable and reigning in expansive government actions by agencies run by political appointees.

Maybe people will pull their punches and not say anything about Republicans in a particular state until they do the math or until they get to the convention in Cleveland. That’s the rub for any specific issue like patents which can be broadened by looking at the application layer of large issues which are being talked about – drug prices, taxes, trade. Patents are not likely to get the debate they deserve because the issue can cost people support and not provide an outcome determinative benefit. Does Cruz benefit or lose by taking on patents in Iowa, at least on the Constitutional basis, by confronting Grassley? Does he risk losing the Iowa delegates? Does he risk offending other supporters?

It seems that the formats of modern day cable TV (even with social media partnerships) and the legacy and perhaps now faulty prism of polling lock us into the funnel of the major issues and keep candidates from diving into details or debating the substance at length. Perhaps it would be more fruitful if we put all the candidates into Independence Hall, nailed the windows shut, and not let them come out until they hammered out their improvement of our nation’s operating system.

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Sources / References

[1] POLITICO Morning Tech January 4, 2016 — DRIVING THE WEEK: VEGAS, BABY — The annual tech trade show CES kicks off this week out in Las Vegas, and Tony will be amid the slots to bring you live tech policy coverage beginning on Tuesday. Ahead of the show he sat down with Gary Shapiro, the leader of the newly renamed Consumer Technology Association, on C-SPAN’s “The Communicators” this weekend. …

— BUT WHAT ABOUT 2016? The presidential election hangs over the show. Last month Shapiro heralded GOP contender Marco Rubio as the “Uber candidate.” Asked about his support for the Florida Senator, the CTA chief — who cautioned the stance is a personal one — said he’s “not seen any other candidate, on the Republican or Democratic stage, talking about [tech] in a forceful or visual way, or frankly, in any way at all. When it comes to innovation, Shapiro said, “[Rubio] is the candidate that I think the tech industry should be talking about.”

Many in the Valley are actually donating or talking about Democratic front-runner Hillary Clinton — a fact Shapiro attributed to the area’s questionable approach to politics. “The challenge that I think the tech industry faces is that they’re promiscuous in their campaign giving. They support candidates who they agree with on social issues, and that leaves candidates, both Democrats and Republicans, going to Silicon Valley, collecting donations basically, without regard to where they stand on technology and innovation.” He said tech donors in the region, backing Clinton or others, should apply a tech-policy yardstick before writing checks.

Read more: http://www.politico.com/tipsheets/morning-tech/2016/01/morning-tech-congresss-tech-to-do-list-in-2016-ces-kicks-off-this-week-in-vegas-diller-touts-internet-tv-despite-aereo-ruling-211973#ixzz3wlvUjyvl

The Author

Peter Harter

Peter Harter has over 20 years of experience bridging the ecosystems of technology, business, law, venture finance and politics by providing advice to management, boards and investors on legislation, regulation, court cases, media, standards, treaties, political campaigns, capital, property and labor. As the founder of The Farrington Group, Peter advises public and private companies, investors, startups and nonprofits on risks from legislation, regulation, court cases, standards, politics, and more. He also helps identify relationships for sales, finance and and executive recruitment. Peter’s career began in 1993 as an Internet lawyer. He broadened in Silicon Valley as head of global government affairs for Netscape and EMusic.com and in business development and sales for Securify. He deepened his experience in policy in Washington, DC, lobbying on patent reform for Intellectual Ventures. Peter has expertise in the areas of patents, copyrights, open source, cybersecurity, export controls, voting, antitrust, nuclear energy, big data, and medical research reform.

To contact Peter please connect with him via LinkedIn.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 4 Comments comments.

  1. EG January 14, 2016 3:09 pm

    Peter,

    Given the other domestic and foreign policy issues at stake in this election cycle, most likely about “a snowball’s chance in hell.”

  2. Edward Heller January 14, 2016 6:08 pm

    The only thing that might get peoples attention would be the likes of Kyle Bass using the new IPR procedure to drop stock process on targeted companies and make money off of shorts. They can do this because there is no requirement for standing to file an IPR and because of the very high chance that an IPR will kill the targeted patent.

    If the questions are previewed to the panelist, they might be aghast at what is actually happening in the PTO.

  3. Anon January 14, 2016 7:14 pm

    We have covered the topic previously (and I still remain uncertain on some of the “internally developed” IP valuations), but when shareholder suits start popping up and demanding write-downs in company valuations (let’s remember that for a GREAT many firms, there has been a large scale historical trend to support current values through the “goodwill” category in which patent value is stored.

    I find it VERY difficult to believe that if (let’s choose the number one patent obtainer over the last 23 years**) – IBM will not be greatly devalued if is must recognize the loss of value of the substantial portion of patents that it holds.

    Main Street meets Wall Street meets K Street – there will be blood.

    ** See http://www.ipwatchdog.com/2016/01/13/64902/

  4. Edward Heller January 15, 2016 5:06 am

    anon, that is why I hope IBM changes sides on the issue of IPRs.