House Passes the America COMPETES Act as Response to Senate’s China Competition Bill

On February 4, the U.S. House of Representatives passed a major piece of legislation known as the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act of 2022, which is the House’s counterpart to the U.S. Senate’s United States Innovation and Competition Act of 2021. While both bills are designed to improve America’s competitiveness in several key technology areas over foreign economic rivals, especially China, some IP advocates are pointing out that the bill provides little more than lip service on protecting American IP rights against Chinese infringers.

House Passes Sprawling America COMPETES Act in Vote Along Party Lines

The America COMPETES Act passed the House along party lines in a 222-210 vote, and the nearly 3,000-page omnibus bill includes many similar provisions to the Senate’s version of the bill passed by that house of Congress last June. While the Senate bill passed with a relatively easy 68-32 vote, the bill got bogged down after both House Republicans and Democrats raised issues with the bill. Efforts to pass the legislation through the House were renewed this January in an attempt to address competition issues with China prior to the midterm election cycle. According to news reports, both bills include provisions earmarking more than $250 billion in federal funding to promote research and development in several key areas, including the semiconductor industry, although House and Senate leaders will have to negotiate specifics on how that money will be invested.

While both the Senate and House bills are sprawling pieces of legislation that branch into several policy areas including climate change and investments into foreign alliances, maintaining technological dominance over China throughout the 21st century is the driving force behind the legislation. Subsumed within both bills are several individual pieces of legislation directed at improving American R&D and technological supply chains in critical tech areas, including the Bioeconomy Research and Development Act, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, and the National Science Foundation for the Future Act.

Ever since the Endless Frontier Act was first introduced into both houses of Congress back in May 2020 to improve federal investment into research, development and commercialization of new technologies, that legislation has snowballed with the introduction of hundreds of amendments and attempts to shoehorn other proposed pieces of legislation into the bill. In May 2021, Senator Chuck Schumer (D-NY) introduced the Innovation and Competition Act as an omnibus version of the Endless Frontier Act including many innovation and IP-related sections, including the Inventor Diversity for Economic Advancement (IDEA) Act, that have not made it into the America COMPETES Act recently passed by the House. That same month, Senators Thom Tillis (R-NC) and Patrick Leahy (D-VT) introduced amendments that would require registration of foreign ownership of U.S. patents with the U.S. Patent and Trademark Office as well as expand the grounds for declaring U.S. patent claims to be unenforceable through ex parte reexamination. While the America COMPETES Act passed the House with more than 600 amendments submitted, it does not appear as though any language similar to the Leahy-Tillis amendments made it into the final version of the House bill.

Senate and House Bills Largely Ignore Pro-Competitive Aspects of Patent Rights

While there are differences between the Senate and House versions that will have to be bridged, both bills include several provisions for promoting American technological competitiveness over global rivals. News reports discussing the bills note that both would establish a technology directorate for the National Science Foundation (NSF) and improve funding for both the NSF and the U.S. Department of Energy’s Office of Science. Both bills also include provisions that specifically target China and would tighten federal oversight of publicly-funded research collaborations with Chinese entities as well as prohibiting federal grants for scientific research programs that participate in Chinese talent recruitment programs.

Other intellectual property issues that have been proposed as part of the America COMPETES Act have also raised a bit of controversy for their supposed impacts on e-commerce. An article by Protocol upon the America COMPETES Act’s introduction noted that the House version included the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce (SHOP SAFE) Act. Protocol noted that the SHOP SAFE Act creates new liabilities for large e-commerce platforms for sales of counterfeit products that could harm corporate profits in that sector.

On the other hand, inventor and IP advocates have opposed the America COMPETES Act because, in their view, the provisions on preventing counterfeits from e-commerce platforms are essentially toothless and will not achieve the bill’s ultimate goal of protecting American innovators from Chinese copyists. An e-mail distributed by inventor advocacy group US Inventor called the provisions on counterfeit liability against e-commerce giants like Amazon an “honor system” that can be easily side-stepped by companies who are willing to attest that they’ve taken reasonable steps to verify the authenticity of goods listed on their platform, whether or not they’re actually taking such steps, and agree not to use counterfeit marks. Despite counterfeit product listings being a huge issue with Amazon and other e-commerce platforms, Amazon barely acknowledges its liability for counterfeits in its corporate legal filings and the structure of many e-commerce platforms thrive on profits gained by the availability of cheap knockoffs that are sold without respect to the rights of IP owners in the U.S. and across the world.

Beyond these concerns, both the Innovation and Competition Act as well as the America COMPETES Act suffer from an ailment similar to that of proposed antitrust legislation that has been working its way through Congress in recent months. Though aimed at improving American competition, the America COMPETES Act mentions the word “patent” a total of 14 times over the course of 2,912 pages. Patent rights are pro-competitive because they give small innovators the ability to protect their business interests in developing and commercializing new technologies against much larger firms that can implement those technologies and efficiently infringe. Without any stronger protections for patent owners, including more certain patent eligibility standards under Section 101 and the abrogation of eBay v. MercExchange to restore proper injunctive relief for patent owners proving infringement, both the Senate and House bills could ultimately waste more than $250 billion of public funds invested in technological development that is eventually squandered by efficient infringers, many of whom live in the United States, and not just China.

Image Source: Deposit Photos
Author: Konstantinp
Image ID: 70846679