Efficient infringers beware. Wilbur Ross, Trump’s nominee to run the Commerce Department, may not be well known to the intellectual property and innovation communities. Let’s look at the public record. A year ago in an interview in the Epoch Times Ross describes in detail why China is not yet as innovative as the US. This analysis by Ross explains much about his statements as a formal advisor for the Trump campaign this year and why his zero tolerance for IP theft indicates a possible change in direction for US patent policy.
While China beat the US in 2011 as the world’s top patent filer and this year as the top patent issuer, quality matters more than quantity when it comes to value. Even the patent skeptics at the Wall Street Journal have noted in their editorial pages the outsized influence of Google with the Obama administration on copyright and patent issues. This summer the Wall Street Journal highlighted how American companies are getting better patent justice in China thanks to Chinese courts and their enforcement of patent laws by the Chinese government than they may be able to obtain in America.
This week hundreds of America’s leading IP financiers and dealmakers are gathering in Shanghai for the IP Business Congress Asia produced by Intellectual Asset Management. Will the availability of the injunction and efficient court proceedings in China provide American businesses the certainty they’ve been denied in the US thanks to PTAB’s IPRs and wayward court decisions such as Alice?
Ten years or so ago China’s Premier Wen Jiabao said that the future of competition is competition in intellectual property. Ross gets this. In the Epoch Times interview Ross says that the biggest impediment for China is the fact that so much of their economy is state owned and thus the bureaucracy and culture do not encourage risk taking – patently obvious ingredient of creativity and invention. Thanks to his decades of experience in debt finance and bankruptcy transactions Ross can fully appreciate today’s trends in China and how they indicate China is investing to create market conditions to attract risk takers, innovators from around the globe. For example, researchers from MIT, Harvard, Florida State University, and Xiamen University recently concluded that IP protection in China enables firms there to innovate more and to obtain loans more easily for investment in R&D.
Ross and his Trump campaign advisor colleague Peter Navarro, a professor at UC Irvine, said many times the past year, before and after the GOP convention in Cleveland and before and after the general election, that trade disputes with other countries can be addressed by going after intellectual property theft. Just read their editorial in The Washington Post from September to learn about their intent on using IP as a tool against “mercantilist cheating” as Trump takes on trade deals. Don’t forget that the GOP platform in July in Cleveland said that patents are a private property right just like land and that IP theft is such a big problem that it needs to be escalated and is a national security threat.
Is the scourge of efficient infringement and political cronyism simply a cheap copy of mercantilist cheating that Ross has called out? Not very innovative or disruptive for Silicon Valley and other infringer lobby giants to blow shareholder money on expensive lawyers, lobbyists, academics, bloggers, politicians and spin doctors to delay and avoid paying patent owners. But to their credit it is according to some perhaps a new version of efficient breach doctrine, where according to Ashley Keller infringers are allowed to efficiently infringe because the rules are not properly calibrated to ensure those taking risks are compensated for their innovations.
Ross has a long view on the American economy and has had some exposure to patents. Many of the manufacturing, textile and telecommunications companies he has refinanced owned patents. Ross as the “bankruptcy king” or “vulture capitalist” dealt with patents as one of the many assets to use to help turn around a distressed company. Here even the Obama administration agrees with Ross in the example of GM and Delphi. Using patents as collateral for a loan should not be controversial or exotic. Today people are getting loans and credit ratings based on their social media status or gaming talents. The government auctions off intangible assets like spectrum to raise money to reduce the federal deficit.
And Ross is not alone on the Trump team. Financiers like Steve Mnuchin and Steve Bannon, Treasury Secretary nominee and White House Chief of Strategy respectively, worked on deals involving the value of copyrights from Hollywood. Todd Ricketts, nominee for Deputy Secretary of Commerce, knows about patent litigation from his time at TD Ameritrade and knows of the value of IP and enforceable licenses as co-owner of the World Champion Chicago Cubs. John Trump Jr. and national security advisor Lt. Gen. Michael Flynn have experience with enforcing the value of their patents at MacroSolve and the Drone Aviation Corporation.
The long view of Ross and the value of intellectual property may even go back to when he first met Trump. Ross was on the team from the Rothschild bank that refinanced Trump’s branded Atlantic City casinos. Trump as a real estate developer in Manhattan has benefited from the value of air rights and from eminent domain the value of economic development. As Trump works to separate himself from his business operations the value of his brand and licensing is of increasing focus. Here too there is agreement with Obama and the Clintons as they have made millions from copyright and other licensing, largely from their authored and spoken works. And Ross gets IP quality, value and enforcement personally given his reputation for collecting fine works of art from Belgium, Vietnam and China worth hundreds of millions.
When Secretary Penny Pritzker went through the Senate Commerce Committee for her confirmation hearing she was asked what she would do on patents. In response to a question from Senator Warner (D-VA) she said that job creation comes from patent protection. Senator Scott (R-SC) asked about making things again and talked up how insourcing of manufacturing jobs is on the rise in South Carolina. Pritzker’s reply: manufacturing firms create the most patents and you can’t innovate unless you are close to the factory floor and that the US is a great place to make things thanks to the rule of law and a strong patent system. Sen. Scott asked her about enforcement of trade laws to protect IP and she said that she felt that was very important and would focus on it as Commerce Secretary. And in response to a question from Sen. Klobuchar (D-MN) about improving competitiveness and job creation for small firms Pritzker said that improving the speed of patent issuance can help to quicken time to market for firms.
Many of these same questions remain relevant and can be asked of Ross during his confirmation proceedings. His answers may be similar, demonstrating that IP remains a nonpartisan area and really an unfortunate battle of business models and political influence. And his answers can make America’s patent system great again by increasing certainty for business and eliminating efficient infringement and other forms of unfair competition patent owners face today. Ross is on the record stating that intellectual property is an asset that merits capital investment and enforcement. In Scoring the Trump Economic Plan: Trade, Regulatory & Energy Policy Impacts published by Ross and Navarro in September 2016 Ross openly criticizes Secretary of State Hillary Clinton for not engaging in corrective diplomatic actions and for doing nothing to protect intellectual property.
Many have noted that the Trump administration will be taking an axe to bureaucracy and regulations. Ross as Commerce Secretary and the next Director of the Patent and Trademark Office enjoy substantial authority to make changes and without requiring new legislation. A good place to start is to stop the USPTO’s fee increase rulemaking, stop the USPTO’s unilateral diversion of fees collected from applicants and owners to fund the PTAB, and stop the refunding of fees to failed PTAB petitioners.
Ross, as Commerce Secretary, has other levers outside of the USPTO to use to shape the US patent system. The National Institute for Standards and Technology (NIST) can do a better job tracking and promoting how every government agency develops IP and generates a return for the public. Kellyanne Conway, Trump’s campaign manager, said at a recent Wall Street Journal CEO conference in DC that fairness is about equality of opportunity, not outcomes. To symbolize this commitment to fairness and equality of opportunity perhaps it is time the US Census, a part of the Commerce Department, restores the job title of inventor to the census survey?
If there is a mandate for Ross at Commerce it is enabling a patent system that opens up innovation to more Americans, especially not in the zip codes of Silicon Valley, so that they can put food on their tables for their families and earn a living based on their inventions. If fame and celebrity is a bankable industry that employs millions in America then, paraphrasing President Lincoln, it is time for inventors and ideas too to be an industry fueling the fire for economic growth and jobs. Mr. Ross on your first day on the job at Commerce please do stand on the 15th Street side of the building to read these words from President Lincoln.