“You can either have policy based on facts and evidence, or you can have policy based on political muscle and campaign contributions, and it’s obvious which is going to secure the future of the country.” – Judge Paul Michel at LeadershIP 2022
The LeadershIP 2022 Conference, for which IPWatchdog was a partner, took place earlier this week in Washington, DC, and featured leaders in U.S. government and intellectual property (IP) discussing the way that IP policies interact with and impact national security issues. The overarching sentiment from panelists was that all three branches of U.S. government are failing to prioritize a strong IP system, which could result in the United States falling behind as an innovation leader, to the benefit of potential bad-faith competitors like China and Russia.
During a panel on “Innovation, Standards and National Security,” retired Federal Circuit Chief Judge Paul Michel, joining remotely, said that “the linchpin of why the patent system works” is the promise and threat to competitors of exclusivity, or an injunction in the case of infringement. However, as evidenced by positions outlined in the Biden administration’s Draft Policy Statement on SEPs, for example, “the policy debate now about SEPs is to try to remove the availability of injunctions, the key part of the whole system,” which Michel added is “an absolutely horrible idea.” He continued: “You can either have policy based on facts and evidence, or you can have policy based on political muscle and campaign contributions, and it’s obvious which is going to secure the future of the country. The SEP/injunction debate is just one more instance of that dilemma and we need to get it right.”
Jonathan Barnett of the University of Southern California’s Gould School of Law, speaking on a panel titled “Competition and Intellectual Property: How to Create a Diverse Innovation Ecosystem?”, said that policy statements like the U.S. Draft Statement on SEPs and the European Union’s recent “call for evidence” on fair licensing of SEPs are distorting the property system toward IP users and away from creators/ owners. Barnett said the key to ensuring that the U.S. innovation economy remains strong is legislatively reversing the Supreme Court’s decision in eBay v. MercExchange. “Once you have injunctions in place you have a property system again and then the market can do everything else, Barnett said. “A robust innovation economy is business model agnostic.”
Retired Federal Circuit Judge Kathleen O’Malley described eBay as “the beginning of the end” for U.S. IP protection. “Friends from around the world have told me that was the beginning of the end for us being at the top of the food chain in terms of our IP system,” O’Malley said during a Fireside Chat discussion moderated by former USPTO Director David Kappos. “If at the end of the day the only threat that you have is that you’ll possibly have to pay the same royalty you should have been [paying] from the beginning, then what good is the IP protection?”
The Straight Line from IP Policy to National Security
Decisions and policies like these pose a very real threat to protecting emerging technologies in areas such as artificial intelligence, 5G, biotech and materials, said Kappos. “It feels like those very areas are the most challenged as to patent protection,” whether under eligibility laws, written description, or some other “unclear standard,” he added. “It seems like there’s something going on here when you have national security experts pointing to technologies being super critical to national security on the one hand, while the rest of the legislative and judiciary branches are saying ‘we’re going to put more pressure on these platform technologies and not permit them to be protected for various reasons.”
O’Malley said that this phenomenon is due to a very real misunderstanding by some “on the courts and in Congress and the administration who are less inclined to believe that IP does enhance innovation. There is a view that if you weaken IP for those very enabling innovations, that they will be more broadly available to everyone, and then everyone can innovate on top of that on an equal basis. Do I agree with that? No. But I think that’s the rationale.”
Kappos also emphasized the outsized role of small companies and entities in creating the breakthroughs that are part of the country’s national defense ecosystem and asked O’Malley how the IP system relates to the small entity as distinct from big companies. O’Malley said that once a company benefits from the use of IP and gets big enough, “they don’t then need IP as much to protect themselves because they can use trade secrets, they can use their economies of scale. What you need IP for is that next, bright, different idea. That’s why at some point, you need to make sure that you don’t throw the baby out with the bathwater and let big corporations who have already benefited hurt the rest of us by just destroying our IP system.”
Stephen Susalka of AUTM also took part in the Fireside Chat with Kappos and O’Malley and described how critical the Bayh-Dole Act has been to U.S. innovation. He provided examples like the popular allergy medicine, Allegra, which was developed by Georgetown University and only made widely available to the public via technology transfer and the incentivizes promised under Bayh-Dole, which Susalka said has been the most copied piece of legislation worldwide because of its dramatic positive effect on U.S. innovation. However, there is presently a campaign to invoke the march-in rights provision of the Bayh-Dole Act in an effort to lower drug prices, which Susalka said is misguided. The idea of marching in was meant to ensure that universities were properly licensing their inventions and companies properly commercializing them. “That has now been warped into using march in to take back IP,” Susalka said. “Tech transfer is all about [minimizing] unpredictability. You want to make it more attractive for a company to develop [the technology] further. March-in in does exactly the opposite. It makes it completely unpredictable. The first time march-in is used inappropriately, it will cause companies to think, ‘do I want to do this when the carpet could be yanked out from under me at any time?’”
The end result of such policies could very well be an end to innovation of the key technologies the United States needs to combat crises such as pandemics and war. O’Malley noted that the only way COVID-19 vaccine technology was ready so quickly was “serial IP protections” along the way over the course of about 16 years. “I don’t know why there’s such a move away from allowing exclusive rights to be exclusionary,” O’Malley said. “There are times, like if the [semiconductor] chips shortage was so dramatic, that the public interest outweighs the patent right. But you can’t just say because you want free medicine, you’re going to take away any ability to profit—because then you’re not going to have medicine.”
Susalka encouraged attendees to support the United States Innovation and Competition Act (USICA), which has a provision that would invest in tech transfer, while O’Malley said that what’s needed is 1) a more centralized, unified patent policy and 2) education about the importance of patents to the economy and to security. Other panelists throughout the day emphasized the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund, which would set aside more than $50 billion in federal funding to create a trio of funds meant to support semiconductor production by funding various research initiatives. “We are entirely reliant on foreign manufacturers and chip suppliers,” explained Jessica McBroom, Director of International Economics and Competitiveness at the U.S. National Security Council, on a panel titled “Semiconductor Supply Chain and Intellectual Property: What’s the Nexus?” McBroom said the United States only has 12% production capacity for chips right now, and the administration is trying to change that. “It’s jarring to know the U.S. is entirely reliant on foreign providers for this technology,” McBroom said.
But Susie Armstrong, SVP Engineering at Qualcomm, said that, while it’s important to have secondary sources of manufacturing capability, “if we lose the innovation position we have, we don’t have a manufacturing problem” to worry about. “The discussion has to be around IP, and that’s not getting the [attention] it deserves in Washington.”