“In essence, Chinese, South Korean and FTC officials demand the benefits produced by free markets and property rights for free from American innovators in mobile technology, who took all the risk and made investments in research and development.”
When an agency of the U.S. government behaves — or, more accurately, misbehaves — just as a foreign government’s antipatent, antiproperty rights regime, you know the world has gotten far off track. But that’s what the Federal Trade Commission did in the final days of the Obama administration.
The misconduct of the FTC resembles the misconduct of China, South Korea and other competitor nations. They all share some common characteristics: turning antitrust laws into a weapon to appropriate inventive American companies’ intellectual property, predetermining the outcomes of official proceedings, denying private American companies of due process, hammering them through fines and legal jujitsu, and devaluing and imposing fire-sale prices for their patented inventions.
These government agencies target successful, inventive U.S. firms. They politicize their processes and disregard the exclusivity that rightfully belongs to patent owners. They take away private property from the creators and give it to favored domestic companies like Samsung and Huawei, which apparently lack the smarts to win fair and square in market-based competition or by ingenuity.
It’s time that America put an end to these threats, foreign and domestic. Either you believe in property rights and free enterprise or you don’t.
An egregious example of abuse of power is the FTC’s “midnight litigation.” One of a number of eleventh-hour actions this agency took against U.S. firms on flimsy “anticompetitive” grounds, the FTC filed suit against mobile technology leader Qualcomm three days before the presidential inauguration.
The undermanned commission ramrodded this through when two Obama commissioners outvoted the sole Republican commissioner. Given the timing of the partisan vote, this smells of politicization of an “independent” law enforcement agency.
The dissenting commissioner, Maureen Ohlhausen, called this an “extraordinary situation: an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide. These extreme circumstances compel me to voice my objections.”
About 20 conservative leaders wrote the new president urging that the administration drop the last-second lawsuit. They called the FTC action “midnight litigation at its worst — a misuse of antitrust litigation to promote a destructive policy agenda that aims to undercut patent property rights and conservative free market principles.”
It’s not every day that a Fortune 500 company is the little guy, but that’s exactly what Qualcomm is in the situations it faces today, both from the FTC’s and foreign governments’ machinations.
- China in 2013 abused antitrust law and denied due process to depress the price Qualcomm could get for its valuable, cutting-edge technologies still under exclusivity of the company’s patents, had China not undercut free market processes.
- The South Korean FTC-type agency has heavily fined this American company, having predetermined the antitrust outcome in favor of its home company and failing to live up to its trade agreement obligations of giving advance notice, sharing evidence, allowing cross-examination and affording other due process as legitimate, rules-based societies do.
- South Korea is rivaling China in its assault on American sovereignty. It’s imposing its anti-IP government price-setting around the world, not just in its national borders. This stomps on U.S. patents and U.S. national sovereignty!
- Taiwan is piling onto Qualcomm, ramping up its “investigation,” which mimics Chinese and Korean disrespect for the rule of law, property rights and American sovereignty.
Government bullying isn’t limited to Qualcomm. As the Heritage Foundation’s Alden Abbott notes, “In 2014 InterDigital agreed to change its patent licensing pricing structure and to limit its ability to seek injunctions against Chinese companies, in a settlement with the Chinese government.”
These agencies blur the lines of antitrust when intellectual property principles should apply. Patent rights aren’t monopolies. They rightly deed exclusivity to newly created property, including for licensing or sale of the patent.
Monopolies occur when a firm gains market power by driving out competitors, Black’s Law Dictionary explains. That’s impossible during IP exclusivity, as common sense instructs.
In essence, Chinese, South Korean and FTC officials demand the benefits produced by free markets and property rights for free from American innovators in mobile technology, who took all the risk and made investments in research and development.
It’s what South Korea, with its government price controls and woefully inadequate sales stay for resolving patent infringement cases, tilts the playing field to achieve — to deprive U.S. innovators of their property rights and enable IP thieves, inconsistent with South Korea’s international commitments.
All have in common the willingness to use the coercive power of government to appropriate, deprive and destroy private property rights and the ability of the private market to determine a fair price for a hard-earned product — especially those under the protection of a patent’s exclusivity.
Memo to the world: Government expropriation destroys incentives to invent and to create wealth.