“Allowing Chinese companies to continue to take American-patented wireless technology without paying the royalties is wrong. Worse, without holding China accountable for the theft, it risks the future of American technology companies.” – Senator Jim Inhofe
Senator Jim Inhofe (R-OK) yesterday introduced the “Protecting American Innovation and Development (PAID) Act of 2021,” a bill that would give the U.S. Department of Commerce authority to hold accountable bad-actor Chinese companies that refuse to pay licensing and royalty fees to free-market developers of wireless technologies covered by standard essential patents (SEPs).
According to Inhofe’s press release, Chinese companies often sell wireless products in the U.S. market that incorporate U.S. patented technology without paying licensing or royalty fees to the developers. The only recourse for this presently is to take these companies to court or file a complaint with the International Trade Commission (ITC), but that “can take decades—ultimately allowing bad actor companies to continue to steal the licensing / royalty fees rightfully owed,” said the release.
It added that allowing these bad practices to continue will cause free-market companies to fall behind China and ultimately will give China worldwide control of 5G technology and standards.
To more efficiently address these bad actors, the bill would direct the Department of Commerce to create a watch list of Chinese companies that are selling wireless products in the U.S. market without paying licensing / royalty fees. Once on the list, the companies would have 12 months to engage in negotiations or arbitration to agree on fees; if they refuse to comply, the companies would be banned from selling their products in the United States, while if they comply they would be taken off the list.
According to the bill’s language, a “covered person” would own at least one unexpired patent that is essential for the implementation of a wireless communications standard and a “person of concern” is someone who “has been, for a period of more than 180 days, selling wireless communications devices in or into the United States, directly or indirectly, that are claimed, labeled, marketed, or advertised as complying with that standard.”
To prove that a person of concern is subject to the penalties described in the bill, the covered person must have offered the foreign entity a license or the option to enter into arbitration to resolve the terms of such a license, and the foreign entity must not have executed such a license agreement or agreement to enter into arbitration “by the date that is 180 days after the covered person made such an offer.”
To demonstrate essentiality of the patent, the covered person must submit to the Commerce Department a court or arbitral decision asserting as much or a determination “by an independent patent evaluator not hired by the person that a patent owned by the person is essential for the implementation of that1standard.
The covered person could also submit evidence that a significant portion of wireless communications device manufacturers in the United States or world market have entered into agreements for licenses to its portfolio or a showing that the foreign entity or its affiliates had previously entered into licensing agreements for “a reasonably similar portfolio of the person’s patents that are essential for the implementation of that standard.”
In a statement, Inhofe said:
The Chinese Communist Party has a long history of challenging the United States in all areas – military, economy – but also in stealing what they cannot build themselves. Allowing Chinese companies to continue to take American-patented wireless technology without paying the royalties is wrong. Worse, without holding China accountable for the theft, it risks the future of American technology companies. No longer. This legislation will send a clear message to China: there will be consequences for theft of U.S. intellectual property.
Several other bills were proposed last year to protect American innovation against Chinese bad actors in other areas, including the “Safeguarding American Innovation Act” and the Defend COVID Research from Hackers Act.