Preserving American industrial competitiveness It depends on strong and reliable patent rights
Innovation is the United States’ most valuable economic export and the cornerstone of our international competitive advantage. We are not the world’s largest manufacturing nation, but we are the world’s leading creator of technology and innovation, with innovative enterprises contributing to more than a third of our entire economy. The United States’ leadership in innovation can be seen in markets as diverse as wireless communications, autonomous vehicles, artificial intelligence, virtual and augmented reality, medical devices and pharmaceuticals. And that leadership produces myriad benefits, fostering economic growth, improving quality of life, and supporting jobs throughout the economy.
Strong intellectual property rights are the key to that success. The American patent system has been, and remains, a critical force for promoting continued innovation and fostering competition.
Over the past decade, however, our government institutions have shifted their support for innovation and, in some cases, have even attacked intellectual property rights. A decade of Supreme Court decisions have made it harder to obtain a patent, easier to invalidate a patent, and harder to defend a patent. Along with high invalidation rates in post-grant reviews at the U.S. Patent and Trademark Office, and repeated attempts in Congress to change the patent laws, strong patent rights are under assault.
The steady weakening of patent protections has encouraged widespread infringement of patents, as companies that use patented technology in their products (“implementers”) feel emboldened to take their chances infringing on a patent rather than negotiate a fair license (a phenomenon called “efficient infringement”) for the technology. Taken together, these developments have diminished the value of patents, and have contributed to the U.S. fall to twelfth place in the world for IP strength, down from tenth last year (and first every year before that) according to the U.S. Chamber of Commerce Global Intellectual Property Index.
In addition to Congress and the Patent Office, our antitrust regulators have also undermined patent rights. The Obama administration Antitrust Division of the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) threatened lawsuits against patent holders merely for exercising their Constitutional, statutory, and contractual rights to seek injunctive relief against patent infringers. The Obama administration spent years arguing that patent owners were routinely able to use the threat of an injunction to command unreasonable prices for their technology, despite robust empirical evidence refuting that theory. The Obama DOJ and FTC relied upon specter of so-called “patent holdup” to ignore their prior commitments to treat intellectual property like any other property right, and to create special antitrust rules hostile to intellectual property rights.
These efforts ignored the basic truth that patent licensing is a pro-competitive activity that encourages innovation and technological advancement. The hostility towards patent rights and presumption that a licensor is exercising monopoly power (despite clear caselaw and economic evidence that this is untrue) is the type of shortsightedness that replaces incentives to innovate with governmental protectionism.
Thankfully, the Trump administration has begun to reverse the previous, misguided approach to intellectual property and antitrust and pursued policies that again promote innovation, increase competition, and respect property rights. To start, U.S. Patent and Trademark Office Director Andrei Iancu has called for a new “pro-patent, pro-innovation dialogue,” and has taken steps to “increase the clarity and predictability” of patent rights.
He has called for a top-to-bottom review of the post-grant review procedures, and, despite his short tenure, has already initiated a USPTO rulemaking to harmonize some of the rules used in post-grant review proceedings with those used in federal courts. These measures will preserve the right of petitioners to challenge patents, while ensuring patent owners’ rights are presumed valid.
Likewise, Assistant Attorney General Makan Delrahim has called for an approach to antitrust that balances the interest of innovators and implementers “through the free market” and “in the form of freely negotiated licensing agreements.” Mr. Delrahim emphasized that the exercise of patent rights may not, by itself, constitute a violation of the antitrust laws.
Those wishing to use patented technology are free to negotiate a license from the owner of that technology, but the patent owner has no obligation under competition laws to grant that license, or to artificially decrease the price of that technology. Mr. Delrahim’s rationale is simple and correct: the best way to achieve the antitrust goal of protecting consumer welfare is to treat patent rights just like other property rights.
The steps taken by Mr. Iancu and Mr. Delrahim have begun the process of restoring the value of patents to both the economy and in country’s ability to compete internationally. We are leaving behind the days where merely exercising a patent right invited antitrust scrutiny. By recognizing the private ownership of innovative ideas and the ability to exchange those ideas on an open and free market, these positions have started to recalibrate U.S. antitrust and intellectual property policy toward a more balanced position that is pro-patent, pro-innovation, and pro-competition. This recalibration can only benefit American innovation, consumers, and the economy as a whole.
Rather than punish innovators for exercising their patent rights, the United States should continue to promote strong IP rights at home and abroad, protect the rights of inventors, and ensure that American innovation remains the cornerstone of American competitiveness.
Those wishing to use patented technology are free to negotiate a license from the owner of that technology, but the patent owner has no obligation under competition laws to grant that license, or to artificially decrease the price of that technology.
Jon Kyl, a former Republican U.S. senator from Arizona, is senior of counsel at Covington & Burling. Joshua D. Wright, a professor and executive director of the Global Antitrust Institute at Scalia Law School, is the former commissioner of the U.S. Federal Trade Commission.