“Frankly, we assumed too much…. We assumed that when a country begins to own IP it would protect IP for everybody. We applied general perceptions of the rest of world to China and found it did not quite work the way we anticipated.” – Mark Cohen at Senate IP Subcommittee Hearing
The Senate Judiciary Committee’s Subcommittee on Intellectual Property held a hearing today featuring a panel of patent-savvy witnesses to underscore the crucial role intellectual property plays in the U.S. economy and to define the biggest threats to IP rights, both foreign and domestic. The conclusion of most panelists as to what one step is most important in reestablishing the United States as an IP powerhouse was that we need to clean up our own IP system at home in order to even begin addressing threats from foreign competitors like China.
Much of the hearing, which was titled “Foreign Competitive Threats to American Innovation and Economic Leadership,” focused on the threat from China, particularly in the realm of trade secret theft and counterfeits. IP Subcommittee Chair, Senator Chris Coons (D-DE), noted in his opening statement that four-fifths of all counterfeits originated in China in 2021. China has also used legal means to gain an advantage, such as manipulating standard-setting bodies and flooding the U.S. Patent and Trademark Office (USPTO) with IP applications. While other countries, such as India, were mentioned, it was clear that the Subcommittee’s focus was on the potential exploitation of what Coons dubbed the “slipping” U.S. patent system by the Chinese government.
The Call is Coming from Inside the House
Both Coons and Senator Thom Tillis (R-NC), Ranking Member of the Subcommittee, also stressed that the lack of predictability in the U.S. system—especially in areas such as patent eligibility law, the Federal Trade Commission’s (FTC’s) recent proposal to eliminate noncompete agreements, and the administration’s support for a TRIPS IP waiver—is a big part of the problem.
Mark Cohen, the Asia IP Project Director at the Berkeley Center for Law & Technology, told the Subcommittee that “China’s rise did not occur overnight. Rather, we have made profound mistakes in not identifying China’s increasing innovative capacity and we need to proceed now without the bureaucratic myopia, antique organizational structures and indifference to data that have haunted prior administrations.”
Cohen identified three immediate steps the government should take: 1) fill the still-vacant position of Intellectual Property Enforcement Coordinator (IPEC), establish a Deputy USPTO Director for International Affairs, and define the role of the Solicitor General and/or the USPTO in educating the courts when they come into conflict with actions from Chinese courts; 2) strengthen the U.S. IP system by fixing eligibility issues, fixing low-quality trademark filings from China, have China disclose government subsidies for USPTO filings, and reconsider the TRIPS waiver; and 3) take a whole of government approach to the problem by creating a task force of leading tech executives, academics and officials to address the multidisciplinary challenges.
Tillis floated such an approach last year when he asked first the Administrative Conference of the United States (ACUS) and then the National Academy of Public Administration (NAPA) to conduct a study that will gather data on considerations for bringing together the U.S. Patent and Trademark Office (USPTO), U.S. Copyright Office (USCO), the Office of the Intellectual Property Enforcement Coordinator (IPEC) and other IP-relevant posts across agencies under one Senate-appointed and presidentially-appointed Director, with separate commissioners for each area. Tillis asked that the study be completed by March 31, 2023.
Cohen also brought up the subject of the FTC’s proposal on banning noncompete agreements, which Cohen said “will make trade secrets much harder to enforce in local markets.” Cohen also noted that, based on publicly available data from China, there is a 30% chance of winning a trade secret case in China overall, however, the odds jump to 66% if a noncompete agreement is involved. Cohen asked: “Why would we deprive our companies of a better and fairer chance to win a trade secret case?”
Patrick Kilbride, Senior Vice President of the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC), also focused on the domestic threat of IP policies that weaken rights, such as support for the TRIPS waiver, abusive practices in third-party litigation financing and the FTC’s proposal on noncompetes. Kilbride further noted that the threat of streaming piracy cost the United States 290,000 creative professional jobs in 2020, and $30 billion in revenue for those affected, while economy-wide it cost up to 500,000 jobs and $115 billion in GDP. “The U.S. government does not currently provide the tools to shut down foreign based infringing websites,” Kilbride said.
A New Narrative
Suzanne Harrison, Chair of the Patent Public Advisory Committee, offered three actions the Subcommittee can take: 1) create and disseminate a new IP narrative, 2) shore up our own IP ecosystem and 3) clearly define the leadership role of the USPTO.
Harrison said that the IP narrative over the last 17 years has focused on optimizing the system for one set of industries over others and that this led to the formation of the Patent Trial and Appeal Board (PTAB), which led to a lack of public confidence in the system. “This set up a false and damaging narrative that either the USPTO examiners were granting patents that should not have been granted or that PTAB judges were invalidating patents that were rightfully granted,” Harrison said. Redirecting that narrative is necessary to strengthen the perception of IP.
Matthew Turpin, Visiting Fellow at the Hoover Institution and Senior Advisor, Palantir Technologies, also focused on the red flags missed along the way with respect to China’s strategy to overtake the United States in key tech areas via IP. Referencing the Commission on the Theft of American Intellectual Property that was formed a decade ago, as well as the Office of the U.S. Trade Representative’s 2017 investigation under Section 301 of the Trade Act to examine unfair trade practices by China, Turpin said:
“The IP Commission, the Section 301 Investigation, and dozens of criminal prosecutions by the U.S. Justice Department over multiple Administrations, expose a truth that many have been reluctant to acknowledge: the United States is the victim of a comprehensive and intentional campaign by the People’s Republic of China involving criminal acts, espionage, market manipulation, and government policies which result in grave economic and national security harms.”
In response to a later question from Chair of the Judiciary Committee Dick Durbin (D-IL) about how China’s progress on IP even happened in the context of an authoritarian country that no one imagined would one day become so competitive, Turpin said that, in order to appear as though they are playing by U.S. democratic rules, which would undermine their system, they’ve chosen to “compete in a very different way.” He added: “We’re on a pathway to a much more turbulent relationship with [China] than even what we see now.”
Cohen also responded to Durbin’s question, explaining that the United States “relied a lot on platitudes” when it came to China. “Frankly, we assumed too much. We assumed the internet would create open and democratic societies – that is not true, it can equally be used as a tool of oppression. We assumed that when a country begins to own IP it would protect IP for everybody. We applied general perceptions of the rest of world to China and found it did not quite work the way we anticipated.”
Harris further stressed the importance of relying on data going forward, rather than history, when predicting the battles ahead. “We cannot use history to predict the future and that’s what we did with the Chinese IP system, because every other country followed the same predictable steps and we expected China to do that and they did not.”
Transparency, Consistency, Standing
Other issues addressed by both the senators and the witnesses included ensuring more transparency from China by utilizing existing tools under the World Trade Organization’s (WTO) TRIPS Agreement, which says that final judicial decisions should be published; coordinating consistent views on IP across government agencies; creating a higher-level IP position in the U.S. government to help with that coordination; and adding a standing requirement for cases before the PTAB.
“I’d encourage a standing requirement,” Harrison said. “Why is fair to allow people with no standing to bring suits against patent owners? That just is an equitable problem; that’s the kind of thing that’s having inventors lose faith with our system, and that’s not what we want.”
All of the witnesses’ full testimonies are available to download here.
Join the Discussion
7 comments so far. Add my comment.
Model 101April 20, 2023 01:40 pm
More lip service.
Kill 101 and make the reform retroactive.
Give the inventors due process.
Stop the political donations from big tech.
Do something productive instead of all the bull stuff.
You know what you need to do but you’re not doing it.
Do your jobs!!!
Bukin NagendraApril 19, 2023 11:19 am
Dear IPW. Thanks for your super Services to our Nation! US may charge 9% or so to China for A toZ patents stolen or regular. & pay half of it 2 the Inventors as they have no control over such thefts. To. Bukin Nagendra.
AnonApril 19, 2023 11:19 am
Once again, I ask that you please share your profession.
Note that I am not asking for particulars, so no need to “out” yourself, but your assertions have no merit and instead take the form of repeated propaganda against a strong US patent system.
Pro SayApril 19, 2023 11:08 am
Oh, what to do . . . what to do . . .
1. Eliminate 101. Unnecessary and innovation toxic. 102, 103, and 112 do the job.
2. Eliminate the PTAB. It, too, is innovation toxic.
3. Fire Vidal. Because she’s showing herself to be more Dudas and Lee than Inancu and Kappos, she, too, is innovation toxic.
4. Fire those judges on the CAFC who refuse to correctly cabin eligibility limits as SCOTUS directed. They, too, are innovation toxic.
5. Fire those judges on the SCOTUS for usurping the eligibility authority our Constitution grants only to Congress.
Viola! America is once again the World’s innovation leader.
AddyApril 19, 2023 11:00 am
American Axle was decided as it should be, similarly to how claiming functional outcomes in software claims absent a technology that begets those outcomes won’t (and shouldn’t) fly.
BApril 19, 2023 10:23 am
Respectfully, I would contend that the relevant “laws of nature” are already handled under 102 and 112. This is why the American Axle decision is a bad joke, a tale told by an idiot, full of sound and fury, signifying nothing.
What is a new metal alloy other than an expression of a law of nature?
Contrast gravity, which has been used by others / been made available to the public for quite a while
Bob Weber – Patent Kinetics, LLCApril 19, 2023 07:32 am
Fix the US patent system by:
1. Align the criteria for PTAB decisions (preponderance of evidence, i.e., more likely than not) with US District Court cases (clear and convincing evidence):
2. except for laws of nature, eliminate 101 challenges and rely on 102, 103, and 112.