Creative destruction, once a hallmark of progressive capitalism, is no longer working. Powerful companies that control software and silo valuable data are impeding innovation and threatening society. That is the conclusion of a recently published book, The New Goliaths: How Corporations Use Software to Dominate Industries, Kill Innovation, and Undermine Regulation. The author, James Bessen, vilifies the impact of software ownership and the ability of patents and other rights to effectively promote innovation and encourage competition.
Last summer, I lamented how the Department of Justice – Antitrust Division (DOJ), without Senate confirmed leadership, was hastily pushing through policies that augmented the already-enormous power of Big Tech and benefitted China’s interests. Similarly, I uncovered how the App Association, a Big Tech-funded advocacy organization masquerading as a group of small app developers, was able to trick the Federal Trade Commission (FTC) into inviting it to speak at its July 2021 Commission meeting alongside legitimate small businesses. This is the same association that supported Apple in its litigation against (real) app developers, issued a June 2021 press release against the House bills aimed at regulating Big Tech, and misses no opportunity to support Big Tech interests.
Big Tech’s patent troll narrative is really just the great Big Tech smash and grab. Jean Ann Booth explains in the Waco Tribune what patent trolls are by taking Big Tech’s cartoonish characterization as her own: Patent trolls are rich investors who buy up patents from failed startups just so they can sue companies commercializing the invention in order to extort their money. Extortion – that’s what patent trolls do. And they are wrecking U.S. innovation to boot. They sure sound scary. Patent trolls are indeed frightening. Flush with big bucks, Big Tech lobbyists pushed the patent troll narrative on Congress, the administration, and the courts, demanding that we gut U.S. patent law (the same U.S. patent law that drove over 200 years of American innovation) if we are to save American innovation. Government bureaucrats and politicians complied by smashing the U.S patent system. Now Big Tech can grab whatever technology they want.
Over the past several years, Congress has raised a long overdue microscope to Big Tech and its worst practices and as a result, the relationship between Washington, DC and Silicon Valley has changed tremendously. Rather than being feted by policymakers, Big Tech is now being forced to answer tough questions. Elected officials are now more aware of Big Tech’s reach and impact on our elections, security, and data collection – and they are not liking what they see. These companies have intruded on nearly every aspect of American lives and have avoided any responsibility or accountability.
On September 27, the National Music Publishers’ Association (NMPA) and online game platform provider Roblox announced that the two parties had settled ongoing copyright litigation in the Central District of California over Roblox’s unauthorized use of copyrighted music on its online gaming platform. The settlement also creates an opt-in mechanism for eligible NMPA publishers and opens a negotiation period for individual publishers to engage Roblox in go-forward licensing deals.
The Senate Judiciary Committee’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights held a hearing yesterday titled “Big Data, Big Questions: Implications for Competition and Consumers,” in which both Republican and Democratic senators pushed representatives of Facebook and Google to answer difficult questions about their platforms’ impact on everything from competitive marketplaces to teenagers’ body image. The hearing is one in a series that aims to conduct a bipartisan review of America’s competition issues, according to Subcommittee Chair, Amy Klobuchar (D-MN).
On August 19, the Federal Trade Commission (FTC) filed a first amended complaint for injunctive and other equitable relief in the U.S. District Court for the District of Columbia seeking a judgment that would split Instagram and WhatsApp away from Facebook as punishment for the social media giant’s alleged violations of antitrust law. The complaint, which traces many of the same arguments raised in a previous FTC suit that was dismissed by the District of Columbia this June, is yet another reminder that the current wave of antitrust enforcement against Big Tech has been an inevitable result of abysmal reforms of the U.S. patent system that have taken place since the mid-2000s, especially those reforms creating the Patent Trial and Appeal Board (PTAB) and turning Section 101 subject matter eligibility analysis into “validity goulash.”
In late June, medical technology firm Masimo Corporation and its consumer device subsidiary Cercacor Laboratories filed a complaint with the U.S. International Trade Commission (ITC) asking the agency to institute a Section 337 investigation into several versions of the Apple Watch. Masimo’s allegations, which also include trade secret litigation ongoing in U.S. district court, follow an increasingly familiar narrative in which a Big Tech player, in this case Apple, engages in licensing negotiations with a small tech developer, only to poach employees and ideas from the smaller firm without paying the original developers.
Last week, the attorneys general of 36 U.S. states and the District of Columbia filed a lawsuit in the Northern District of California against internet services and mobile operating system (OS) provider Google. The complaint lists various causes of action under the Sherman Antitrust Act and a number of state antitrust laws that have allegedly been violated by Google’s practices in leveraging its monopoly power in the mobile OS sector to maximize its revenues on app purchases through the Google Play Store through suppression of competing app platforms and charging exorbitant fees from app developers.
Yesterday, Rep. Beth Van Duyne (R-TX-24) sent a letter to President Joe Biden explaining her concerns over recent reports that the leading candidate for the top antitrust post at the Department of Justice (DOJ) is likely to go to long time Democrat antitrust official Renata Hesse, who served in the DOJ Antitrust Division during the Obama Administration as a Deputy Assistant Attorney General and as Acting Assistant Attorney General. Hesse, who has gone in and out of government, has represented both Google and Amazon, companies that are facing antitrust scrutiny from the DOJ, European Union and dozens of state Attorneys General.
The United States is not even two weeks into the administration of President Joe Biden and it’s likely that the administration’s selection for Director of the U.S. Patent and Trademark Office (USPTO) will not become clear for a few months yet. Many members of the U.S. innovation community, however, are well aware of the high stakes in play with that selection. The tenure of outgoing Director Andrei Iancu was lauded across many sectors of the U.S. patent system, perhaps with the exception of the tech sector. As we consider candidates for the next USPTO head, perhaps we should look to the political moment in which we find ourselves to guide our search.
As we thankfully see 2020 fading into the rear-view mirror and all look forward to a hopefully much better 2021, we want to take a moment to reflect on what the past year brought us and how the stage is set for another very fluid and consequential year for intellectual property policy. In times like these, it is clear that leadership matters more than ever. During some of the most challenging times our country has faced, there were a number of places where we saw strong leadership result in tangible progress. This year has already shown us a dramatic first few days. Beyond the tragic events in the U.S. Capitol, we saw the somewhat unexpected shift of power in the Senate to Democratic control based on the election of both Rev. Raphael Warnock and John Ossoff in Georgia. It is clear that the new Congress and the new Biden Administration will face huge challenges before we approach anything close to “normal” in any sense. That said, when it comes to IP, what can we expect?
Historically, startups bring more new technologies to market and create more new jobs than any other entity type. Investment is critical to any startup, and patents are often the only asset a startup owns to attract that investment. Patents are thus incredibly important for American economic growth and national security. It is not surprising that most small entities believe that the institution rules are unfair and should be reined in because it denies due process and takes property; they allow unending serial attacks; they deny adjudication in an Article III court even when the case is pending; they prohibitively raise costs and years to patent litigation; the PTAB invalidates 84% of the patents it reviews; and in the end, the rules make it difficult, if not impossible, to fund a startup that challenges Big Tech. What is surprising is that not all small entities agree. Some small entities mirror Big Tech and foreign entities’ comments arguing that institution rules should not change at all. They want the mess to stay the same.
In August, Apple, Google, Cisco and Intel filed a lawsuit against the U.S. Patent and Trademark Office (USPTO) in the Northern District of California challenging the Patent Trial and Appeal Board’s (PTAB’s) adoption of the NHK-Fintiv discretionary denial framework as procedurally invalid under the Administrative Procedures Act (APA), and arguing that the PTAB’s application of them violates the America Invents Act (AIA). Shortly after, a number of “Small Business Inventors” (US Inventor; 360 Heros, Inc.; Larry Golden; World Source Enterprises, LLC; Dareltech LLC; Tinnus Enterprises, LLC; Clearplay, Inc.; and E-Watch, Inc.) filed a Notice of Motion and Motion to Intervene and related Complaint in the case. Now, US Inventor has filed its reply brief, in which it contends that “AIA trial reviews have stifled innovation, crushed inventor morale, and created a lopsided process whose use alone (irrespective of individual merits) can destroy innovative businesses”. The organization is asking the court to enter a temporary restraining order and preliminary injunction in order to preserve “the one lifeline giving any hope of escaping this ongoing catastrophe for American innovation and fair competition.”
Why are the tech companies so in love with China? Are they are begging for China to steal their intellectual property? Sometimes it feels that way. The Wall Street Journal is reporting that U.S. companies that see their fortunes tied to China are raising concerns with the White House over a Trump Administration Executive Order that would ban WeChat from the United States. U.S. companies, including Apple, Ford, Walmart, Walt Disney, Procter & Gamble and Intel “are concerned the administration’s action could effectively cut them off from access to the lucrative China market, for example by ending their ability to accept payments or advertise on WeChat.”