The U.S. Needs to Make IP Policy a Priority, Now

By Bruce Berman
January 3, 2018

American innovation leadership is slipping. The timing is right for integrated innovation/IP policy that businesses, government and consumers all can believe in.


Once regarded as a copycat, counterfeiter and patent infringer, China is now threatening U.S. IP superiority with a flood of inventions and a superior system for resolving disputes. Until now, the U.S. was the go-to nation for new ideas; the defacto innovation leader.

In the absence of a discernable IP policy, America achieved leadership through laws and courts that supported inventors, and commerce, and that encouraged risk-taking. But the world is now flatter than we could have imagined. If America hopes to remain at the innovation forefront, it needs to rely not only on the ingenuity of its inventors and creators, but on the leadership and vision of government and businesses.

Various regulatory agencies have contributed reports and ideas about IP enforcement that address foreign infringement, but there is no strategic U.S. policy that promotes more and better intellectual property, and seeks to maintain its competitive edge.

Aspects of IP policy can be found in activities conducted by the State Department, Department of Justice, United States Patent and Trademark Office, White House, Federal Trade Commission, and other agencies. This approach may have been acceptable in the past, with lawmakers and the courts providing sufficient direction, but global competition, especially from China, and reduced spending on R&D, have created new challenges. America’s history of invention, authorship, and growing start-ups into job creators, is less certain than at any time since the early 19th century.

Despite the incredible success of several Internet companies — and, some believe, because of it — U.S. IP dominance is in quantifiable decline. Compounding the problem is China, which is now able and willing to fill the void. It has been widely reported that China is a better place than the U.S. and most other nations to obtain patent injunctions and receive a fair hearing in court. Despite this, many U.S. businesses and consumers, impatient with IP rights and cavalier about the impact of IP theft, have come to act with much same attitude the Chinese did before they learned better.

Make no mistake. China’s about face on IP rights is not about ethics or fairness – it is about competing in business and timing.

Copycats No More

“Until only a few years ago, talk of China as an innovator would have elicited scorn from most Western business and government leaders,” reports Fortune magazine. “The country was widely derided as a haven for copycats and pirates, or grudgingly acknowledged as an efficient manufacturing platform whose factories depended on the uneasy union of cheap Chinese labor and foreign technology.”

“Business in China today, however, is being led by innovation-obsessed execs like Ren Zhengfei, founder of Huawei Technologies, which last year filed more patent applications than any other company in the world.”

“The number of patents in force in China has leapt from about 600,000 in 2010 to almost 1.5 million,” said James K. Glassman, undersecretary for public diplomacy and public affairs at the U.S. State Department under George W. Bush, in an article that appeared in the The Hill, the Washington political daily.

“Last year, China accounted for 38 percent of all patent applications in the world, while the United States accounted for 20 percent. When calculated by applications per billion dollars of gross domestic product, the United States drops below South Korea, Japan, China, Germany and Switzerland.”

Entrepreneurial innovation drives developed economies, but with U.S. start-up activity off by 50,000 to 150,00 per year from the 1970s, according to US Census data, the lack of new businesses is likely to continue. Jobs created by businesses less than one year old have dropped from 4.5 million annually at the turn of this century to just three million.

Glassman says what has disrupted our patent system is a series of overreactions, including the America Invents Act.

Mixed Messages

U.S. startups are near a 40-year low. The decrease in U.S. businesses that receive venture funding is not a blip on the innovation radar. It is more likely a harbinger of things to come. This is the new reality that the U.S., the perennial technology leader, must learn to live with unless weakness in the IP system can be reversed quickly. An innovation policy that provide appropriate respect for IP rights would help to provide much-needed direction.

Defining what is or should be a U.S. IP policy is not a simple matter. In December 2016, the Obama White House issued “Supporting Innovation, Creativity and Enterprise: Charting the Course Ahead,” a U.S. joint strategic plan on IP enforcement covering fiscal years 2017 and 2018. It raises many good points about global enforcement, but little about supporting innovation or defending the IP rights of small U.S. businesses, authors, creative artists, and others, which are significant idea and job creators.

While the 152-page White House IP plan is not intended to be political in nature, the fact is that everything an administration does is likely to be seen as political. The Plan’s preamble, “A Reflection on Creativity and the American Spirit,” by California poet laureate, Dana Gioia, which cites Walt Whitman, one of America’s greatest visionaries, is an impressive beginning. But the Plan itself is mostly about foreign threats to U.S. IP, which while real and in need of addressing do not constitute a modern IP policy.

The Plan’s chief architect was Obama appointee Daniel Marti, IP Enforcement Coordinator and Chair of the Interagency IP Planning Committee. He was tasked with coordinating the development and issuance of two major documents: (i) an Annual Report on the progress made towards the effective enforcement of IP rights; and (ii) a Joint Strategic Plan on IP Enforcement (hereafter the “Joint Strategic Plan,” “Strategic Plan,” or “Plan”), issued every three years.

The Strategic Plan, said Marti, “represents a ‘call for action’ for all nations—as well as international organizations, industry, educational institutions, and consumer protection and public interest groups—to provide forward-thinking leadership and a collaborative approach to combatting illicit IP-based activities. Together, we can enhance our enforcement programs and policies for the modern era, and ensure that collective efforts to curb illicit trade in counterfeit and pirated goods, online commercial piracy, trade secret theft, and other acts of IP infringement are maintained as a top priority.”

Vishal J. Amin, former senior counsel on the House Judiciary Committee, was appointed by President Trump in 2017 and is the new White House “IP Czar.” He will presumably oversee implementation of the 2017-2018 directives established by Marti and his team from the current White House perspective.

Another document that offers less IP policy and strategy than economic justification and enforcement advice is “Intellectual Property and the U.S. Economy.” Published in 2016 by the USPTO with the Economic and Standards Administration, the 54-page report offers a great deal of data in support of various industries’ reliance on IP, but few specific policy directives for maintaining U.S. IP/innovation leadership, for creating jobs or dealing with sometimes unfair competition, foreign and domestic.

Unicorn IP

A study by the Foresight Valuation Group covered in IPWatchdog in 2015, found that 30% of U.S. Unicorns have no U.S. patent assets. About 62% have only 10 or fewer (issued and pending) U.S. patents in their name; these companies account for more than $157 billion in collective valuation and $25 billion in combined funding. The number of Unicorns, more than two-thirds of which are US software companies, reached 150 two years ago.

Unicorns can well afford to file patents but are either now unable to because of the nature of their business (software), or choose not to because of patents’ increased uncertainty. Snap, Inc. is an example of a leading social media company that had its $31 billion valuation cut in half since March 2017, due in large part to Facebook’s pursuit of highly similar products.

“Facebook/Instagram… has been trying to copy Snapchat out of existence for years, and they might be succeeding,” reports The New York Times. “Instagram Stories, a near-clone of Snapchat’s most distinctive feature, has reached 300 million daily active users, nearly twice as many as Snapchat.”

If Snap with 150 million daily users cannot rely on IP rights fend off Facebook, who can? Falling behind in the amount and quality of IP protection to China, which 35 years ago had no patent system and today has among the best, should not be considered an option. In a recent Wall Street Journal op-ed, journalist David Kline said that it is not China that Americans should fear, but “the US’ own complacency about making the IP system work as it is intended.” He may be right.

Technology giants, especially the FAANGs (Facebook, Amazon, Apple, Netflix and Google) are seen by many as among the most ardent IP abusers. Some see them serial IP infringers. Their respective business models are less about paying for the rights they need than simply taking the IP they require and dealing with the financial consequences, if any.

The FAANGs, and others, who dominate the competition and monetize their customers’ information, often without permission, realize they are increasingly symbols of bad business behavior. The heat they feel from regulators in Europe and the U.S. will continue to rise. IP infringement will come to be seen as an increasingly important part of their bad behavior. The timing is perfect for them to step back and step up and show the leadership they heretofore have chosen to ignore regarding IP rights. Movement toward a responsible IP middle ground – a less entrenched position that recognizes others’ rights and actively conveys a greater willingness to share successes and not only defend them – will help to inform a meaningful IP policy.

A Threat from Within

Inability to predict or control the future is the greatest threat to many market leaders. Their DNA compels them to seek growth and generate shareholder value. But refusal to acknowledge the IP contributions of other businesses and individuals, as well as the rising capabilities of other nations, is a good way for an industry to fuel its own demise and many jobs with it. U.S. automobile-makers are still recovering from the siege mentality that decimated market share and resulted in two huge bankruptcies that to recover from required billions of dollars in government assistance.

Few would disagree that the IP pendulum has over-swung. Here are the facts:

  • China can and will become the go-to nation for IP, if permitted
  • Some leading tech companies put on a friendly face but believe they must succeed at any cost; they see IP as a threat, national priorities be damned
  • Audiences need to know how IP rights work, including the prosperity they generate

To strike a proper balance, various parties need to be responsible. IP policy and practice leadership will need to come from government agencies that can work together with each other, as well as inventors, authors, investors, universities and the public. It will also need to come from established businesses willing to think strategically about the future. Willingness to recognize the threat to U.S. IP leadership from within – and the dangers of not – will help to assure that innovation, authorship and know-how remain integral to the nation’s future, and that industry-creating, job-generating American businesses are here to stay. Now, is the time for a U.S. IP policy creators, businesses and government can believe in.

The Author

Bruce Berman

Bruce Berman is principal of Brody Berman Associates, a management consulting and strategic communications firm he founded in 1988. He has supported 200+ IP portfolios, executives and businesses, including law firms and their clients. Bruce is responsible for five books, including From Ideas to Assets and The Intangible Investor and The Intangible Investor. He also writes The Intangible Investor column, which appears in IAM magazine. His weekly posts about trends can be seen at IP CloseUp. In 2016, Bruce founded the the Center for Intellectual Property Understanding, an independent, non-profit that focuses on IP awareness and education.

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 12 Comments comments.

  1. angry dude January 3, 2018 11:01 am

    I can confirm that most groundbreaking innovations in Virtual Reality technology come from China nowadays
    …AND those companies don’t even bother to ship some of those new products to US consumers anymore – they are for China only

    Pretty bad and insulting for good old USA

  2. Steve Loeb January 3, 2018 5:43 pm

    No matter what international agreements we conclude with China – they will cheat. When they get caught they’ll double talk their way through it nevertheless they will skirt any agreement that hampers their moving forward

  3. Paul Morinville January 4, 2018 12:32 am

    Mr. Loeb, the trouble is not an agreement with China, it is a patent system capable of attracting investment, which we have destroyed in the US. If we rebuild it, it acts as a bulwark against their growth in technology. Their system of government will send it back. Every company in China is at least in partially state owned. Who wants to be in business with a communist oligarchy?

  4. Jeff Hill January 4, 2018 1:38 am

    @ Steve Loeb: Tell me Steve. When you enter into contracts with Chinese companies, do you rely on English language contracts, that many times do not comply with Chinese law? Maybe that is why they can “double talk their way through it” like you said.

    @ Paul: There are literally millions of companies in China that are completely privately owned. Only the very largest companies and those that are critical to the economy and society are State Owned Enterprises. They are a drop in the bucket. Your comments reflect a prejudice born out of a complete lack of knowlege.

    My advice:
    China applies a “first to file” policy, regardless of previous use of the logo or brand name, or patent being applied for. It is important to register IP in China at the same time as your domestic filing as prevention against theft by Chinese companies engaged in the manufacture or sale of counterfeit products, regardless of whether or not you are planning to enter the Chinese market or have product manufactured here.

  5. Benny January 4, 2018 5:44 am

    Even a nuclear powered patent system can’t stop Chinese engineers from inventing and patenting in China.
    Even the most innovative startup in the US understands that to obtain a significant market share, they need to move their manufacturing offshore to control costs.
    A strong Chinese patent system benefits US inventions protected in China, and a weak US system weakens Chinese inventions protected in the US.
    I don’t see how fiddling the patent system is going to make any difference to investment in innovation, manufacturing and marketing. It’s a global playing field. I might need a visa or ESTA to enter the USA or China, but I don’t need one to obtain a patent in either country.

  6. Art Nutter January 4, 2018 6:40 am

    Great article, Bruce. You did your homework, and are correct. The US, and any country for that matter, will only succeed when an individual citizen’s right to fair compensation for sharing their inventions with the world is recognized and enforced. FAANGs is a great acronym, too. Intimidating, yet conquerable.

    China stopped sending their latest LCD technology to the US years ago because of patent bullying by US companies and courts. LCD technology advanced to 8K and 12K in China 2-3 years ago, yet none of that technology is available in the US. You can just buy those technologies off the shelf from Shanghai stores.

    You describe a commercial problem, i.e. getting paid for the use of your IP. Commercial problems require commercial solutions, not government policy. PatentBooks is the commercial solution.

  7. Bemused January 4, 2018 7:50 am

    Benny@4 said: “Even the most innovative startup in the US understands that to obtain a significant market share, they need to move their manufacturing offshore to control costs.”

    Benny, a start-up never gets to “significant market share” if their intellectual property is stolen because innovative start-up’s patents provide zero protection as a result of the AIA, anti-patent SCOTUS rulings, etc, etc.

    With all due respect, your comment “I don’t see how fiddling the patent system is going to make any difference to investment in innovation, manufacturing and marketing” is naive.

    The basis for capital to invest, for inventors to innovate and for companies to build market share in order to produce (manufacture) their products is all premised on one simple concept: That the owner of intellectual property can defend their new (or disruptive) product or service from theft by larger, better-capitalized and more established competitors.

    And that is precisely why we need to “fiddle” (or more accurately, engage in a major overhaul/rollback) with the nearly dead US patent system to stimulate innovation and capital investment.

  8. angry dude January 4, 2018 11:52 am

    Benny@5

    BS, dude

    a rambling of a wealthy, spoiled and dishonest industrialist

    Put yourself in the shoes of a small American “garage-based” tech startup (believe it or not there are still some) without millions of funding to go to China or elsewhere and then stfu
    So you somehow made it in your robotic or whatever business and now you want to screw others who are in the very early stages ???
    screw china, screw stinking us patent system and screw you benny

  9. angry dude January 4, 2018 12:07 pm

    Art Nutter @6

    “PatentBooks” ???

    R U kidding us, dude ?

    Why would an infringer pay any money for licensing patent if he can download any patent or published patent application for free from uspto website and then just implement patented tech in products ?

  10. George Sachs January 6, 2018 11:03 pm

    We could have told you all this as soon as the AIA was even being proposed! So why didn’t more attorneys raise a stink about it and why did Congress ‘overwhelmingly’ support the AIA? It proves that Congress and most patent attorneys were pretty stupid, right? We need to entirely repeal the AIA and go back to something more akin to our original patent laws – but costing far less to grant and enforce!

    We need lightning-fast patent dispute resolution (costing less than $10K) and taking less than 6 months, and I believe we should also just eliminate ‘claims’ altogether, since they don’t help anyway (and usually lead to all of the BIG interpretation problems). Also, since the spec and drawings need to always be consulted in order to figure out what the ‘real invention’ is, anyway, the claims become pretty useless for describing what the invention consists of. Descriptions DON’T even have to be ‘perfect’ (like claims do) – just something people of ‘ordinary skill’, or a jury, could agree on (and actually understand)!

    Patent disputes are pretty rare anyway (maybe one in 200-300), so why obsess over complex claims language that takes months to draft, analyze and approve, and which most inventors can’t understand in the end, anyway? Even examiners mainly focus on prior specs and drawings when it comes to decisions about claims allowance. Examiners never directly compare claims to make a decision about that! In fact, since they aren’t attorneys, they’re not allowed to do legal claims analysis or render legal decisions!

    And, how about the government just paying for all allowed patents and their enforcement (or at least resolution)? How about that? How about no more maintenance fees? Then we would leapfrog everyone and make America ‘really great again’ and also make it THE place to be an inventor again (including an independent inventor)! Hasn’t been that way for at least 70 years!

    Note: Above ideas and opinions should be credited to us – since they do not appear to have been expressed by others, before us. These comments will be retained for our records.

  11. George Sachs January 6, 2018 11:24 pm

    @Bemused

    You are correct! Minor ‘tweaks’ won’t do anything! We need a complete repeal and total ‘reboot’ back to what the Constitution actually intended! They never intended that patents should cost 10’s of thousands of dollars to get, have NO automatic enforcement by government and cost millions to litigate in the courts! What OTHER constitutional ‘rights’ (even property rights) are like that?! NONE!

    The Founders just assumed that what constituted patent rights was a ‘no brainer’! That’s why Article 1, Section 8 was so brief and lacking in details. They knew what they meant. Attorneys and legislators (and lobbyists) now just ‘conveniently pretend’ we don’t understand what they meant anymore! It’s OBVIOUS! Even a homeless person is ‘entitled’ to get and protect a U.S. patent – if they deserve to get one (not if they can afford to get one)! Indeed, that’s how one goes from homeless to (perhaps) wealthy! That’s the very embodiment of the ‘American Dream’!

    Article 1, Section 8 . . . IS . . . the ‘American Dream’ – NOT winning the lottery! Not being born to Trump! We have all forgotten that (well, except maybe for us)!

  12. angry dude January 7, 2018 7:03 pm

    George Sachs @11

    Let’s be reasonable, dude

    We don’t have many homeless engineers in this country (unless they were involved in pro se patent litigation – then this is one of the possible eventual outcomes sadly).
    Patent examination takes time and costs money
    Attorney fees for patent preparation are over 10 grand.
    I am willing to pay USPTO at least this much (10K) to have my patent application properly examined and granted if it’s deserving.
    BUT, after it’s granted I do not want any IPRs or PTABs (unless they can find completely new previously undiscovered prior art directly reading on my claims)
    I am sure most independent inventors will be ok with this.
    There has to be some barrier so that PTO is not flooded with worthless junk, but right now its a bait and switch – a shameless and dishonest game by the government to lure independent inventors so that they can be ripped off later on
    They charge micro-entity less than a dinner cost for provisional, followed by 20K combined in government and attorney fees for regular app, followed by 300-500K for PTAB, followed by 2-3 million in districts court litigation costs, followed by ??? CAFC, SCOTUS, wtf knows what ?

    This is just nuts and has to be stopped right now
    The whole world is laughing

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