Private innovation and IP key to stopping China’s authoritarianism
Guida, 8-23, 24, Michelle Giuda is the CEO of the Krach Institute for Tech Diplomacy at Purdue University. She previously served as U.S. Assistant Secretary of State for Global Public Affairs, 8-23-24, Winning the Tech Race: Why American CEOs Must Lead, Not Follow, Winning the Tech Race: Why American CEOs Must Lead, Not Follow, https://nationalinterest.org/blog/techland/winning-tech-race-why-american-ceos-must-lead-not-follow-212435
The summer of 2024 is making a run for one of the most tumultuous in American political and stock market history. One presidential candidate dramatically stepped down, another barely dodged an assassin’s bullet, and the most important election on the world stage was reshaped in a matter of weeks. Lagging economic indicators and the warning of an American slowdown triggered a global stock sell-off. As this season of volatility heats up, one thing remains constant: the imperative for American and allied CEOs to lead the world with trusted technology. The Chinese Communist Party (CCP), under the leadership of General Secretary Xi Jinping, has made leading the world in new technologies a core pillar of its strategy to remake this international system in its authoritarian image. China is a determined and capable adversary who is partnering with regimes in Russia, Iran, North Korea, and elsewhere to achieve its freedom-suppressing ambitions. This is our long-term reality, and we—the United States and our allies—have no choice but to win. U.S. and allied governments can offer blueprints, principles, processes, and regulations for leading in AI, semiconductors, and other critical technologies. Still, our victory in the technology race will not be won in Washington, Brussels, or the United Nations. The real strategic impetus will come from our enterprising business leaders from Silicon Valley to Indianapolis to New York to Austin, with help from allies in places like Tallinn, Montevideo, Tel Aviv, and Taipei. We won’t regulate our way to victory over autocracy; we will have to innovate our way there. However, in order for this to be true, it will require CEOs and business leaders around the free world to embrace new thinking for a new world. New thinking means shifting from a mindset of regulatory compliance to a mindset of leadership. We caught a first glimpse of this type of leadership in early 2022 upon Russia’s invasion of Ukraine when over 1,000 companies decided to curtail their operations in Russia beyond what was legally required. The consequences of a conflict between China and Taiwan would be even more catastrophic, considering Taiwan’s role in semiconductor manufacturing. For business leaders, this means the difference between asking, “How do we navigate updated export controls on advanced chips?” and “How do we help the United States lead and make sure our technology doesn’t end up in the hands of the People’s Liberation Army?” Compliance is a task for General Counsels. Leadership is a task for CEOs. New thinking means prioritizing long-term interests over short-term gain. China is undoubtedly playing the long game. The CCP’s “Delete A” policy—as in, “Delete America” from the Chinese supply chain—promises to oust U.S. tech companies from the Chinese market entirely. Huawei’s new Ascend 910C chip for artificial intelligence, which seeks to compete with and replace Nvidia’s H100 chip, made unavailable in China due to U.S. export controls, is just the latest example of China’s increasing self-sufficiency. All signs point to a short future for American businesses in China. The first CEOs to create a long-term business strategy to address this reality will both mitigate the real costs of doing business in China—human rights violations, cyberattacks, forced technology transfers, and employee intimidation—and also set their companies up for long-term success. Finally, new thinking means returning to some old-fashioned fundamentals, such as the fact that companies, countries, and customers ultimately do business with people they trust. Allies across NATO, Germany, Japan, and many more are increasingly making “trust” a central requirement for tech, economic, trade, and foreign policy. The Clean Network, which rallied sixty countries representing two-thirds of the global GDP to only use trusted 5G equipment, is a case in point. Bad actors from China, Russia, and Iran are increasingly left out of the equation. It’s hard, for instance, to trust a country or company whose telecommunications systems are hardwired by Huawei, a company that serves as the backbone of China’s surveillance state and is required by law to hand over any and all customer data to the Chinese government. The CEOs who innovate and deploy trusted technologies and who prioritize working with trusted partners with shared values like respect for human rights, intellectual property, the rule of law, transparency, and sovereignty will be the preferred partners in the new global economy. That’s good not only for business but also for the national interest. It’s time for CEOs to think anew and lead anew. By helping secure America’s position as the world’s leader in technology alongside our trusted allies, our business leaders will not only secure long-term success for their company, shareholders, and customers; they will answer a call to lead from the country—and for the country—whose future relies upon them.
China is a threat, seeks technological dominance over the US
Obrien, 6-18, 2024, ROBERT C. O’BRIEN served as U.S. National Security Adviser from 2019 to 2021, Foreign Affairs, The Return of Peace Through Strength Making the Case for Trump’s Foreign Policy, https://www.foreignaffairs.com/united-states/return-peace-strength-trump-obrien
China now has a committed and useful junior partner in Moscow, as well. In 2018, a year after leaving office as vice president, Joe Biden co-authored an article in these pages titled “How to Stand Up to the Kremlin.” But Russia’s full-scale invasion of Ukraine in 2022 demonstrated that Moscow was hardly deterred by his tough talk. The war has also exposed the shameful truth that NATO’s European members are unprepared for a new combat environment that combines innovative technologies such as artificial intelligence with low-tech but lethal drones and century-old artillery. Joining China and Russia in an emerging axis of anti-American autocracies is Iran. Like the regimes in Beijing and Moscow, the theocracy in Tehran has grown bolder. With seeming impunity, its leaders frequently threaten the United States and its allies. Iran has now amassed enough enriched uranium to build a basic nuclear weapon in less than two weeks, if it chose to do so, according to the most authoritative estimates. Iran’s proxies, including Hamas, kidnap and kill Americans. And in April, for the first time, Iran attacked Washington’s closest ally in the Middle East, Israel, directly from Iranian territory, firing hundreds of drones and missiles. The picture closer to home is hardly any better. In Mexico, drug cartels form a parallel government in some areas and traffic people and illegal drugs into the United States. Venezuela is a belligerent basket case. And the Biden administration’s inability to secure the southern U.S. border is perhaps its biggest and most embarrassing failure. CLARITY ON CHINA This morass of American weakness and failure cries out for a Trumpian restoration of peace through strength. Nowhere is that need more urgent than in the contest with China. From the beginning of his presidential term, Biden has sent mixed messages about the threat posed by Beijing. Although Biden has retained tariffs and export controls enacted by Trump, he has also sent cabinet-level officials on a series of visits to Beijing, where they have delivered firm warnings about trade and security but also extended an olive branch, promising to restore some forms of the cooperation with China that existed before the Trump administration. This is a policy of pageantry over substance. Meetings and summits are activities, not achievements. Meanwhile, Beijing pays close attention to what the president and his top advisers say in public. Biden has referred to China’s economy as a “ticking time bomb” but also stated plainly, “I don’t want to contain China” and “We’re not looking to hurt China—sincerely. We’re all better off if China does well.” To believe such pablum is to believe that China is not truly an adversary. The Chinese Communist Party seeks to expand its power and security by supplanting the United States as the global leader in technological development and innovation in critical areas such as electric vehicles, solar power, artificial intelligence, and quantum computing. To do so, Beijing relies on enormous subsidies, intellectual property theft, and unfair trade practices. In the automotive industry, for example, Beijing has backed national champions such as BYD, which it has showered with subsidies and encouraged to dump millions of cheap electric vehicles into markets in the United States and allied countries, with the goal of bankrupting automakers from Seoul to Tokyo to Detroit to Bavaria. To maintain its competitive edge in the face of this onslaught, the United States must remain the best place in the world to invest, innovate, and do business. But the increasing authority of the U.S. regulatory state, including overaggressive antitrust enforcement, threatens to destroy the American system of free enterprise. Even as Chinese companies receive unfair support from Beijing to put American companies out of business, the governments of the United States and its European allies are making it harder for those same American companies to compete. This is a recipe for national decline; Western governments should abandon these unnecessary regulations. As China seeks to undermine American economic and military strength, Washington should return the favor—just as it did during the Cold War, when it worked to weaken the Soviet economy. Treasury Secretary Janet Yellen has said that a “full economic separation [from China] is neither practical nor desirable” and that the United States “reject[s] the idea that we should decouple our economy from China.” But Washington should, in fact, seek to decouple its economy from China’s. Without describing it as such, Trump began a de facto policy of decoupling by enacting higher tariffs on about half of Chinese exports to America, leaving Beijing the option to resume normal trade if it changed its conduct—an opportunity it did not take. Now is the time to press even further, with a 60 percent tariff on Chinese goods, as Trump has advocated, and tougher export controls on any technology that might be of use to China. Of course, Washington should keep open lines of communication with Beijing, but the United States should focus its Pacific diplomacy on allies such as Australia, Japan, the Philippines, and South Korea, traditional partners such as Singapore, and emerging ones such as Indonesia and Vietnam. Critics suggest that Trump’s calls for U.S. allies in Asia to contribute more to their own defense might worry them. On the contrary: my discussions with officials in the region have revealed that they would welcome more of Trump’s plain talk about the need for alliances to be two-way relationships and that they believe his approach would enhance security.
Rampant copyright infringement on web 3
SASHA SHILINA, 6/1/23, How to protect intellectual property in Web3, https://cointelegraph.com/explained/how-to-protect-intellectual-property-in-web3
Despite various advantages, navigating the realm of Web3 IP rights presents a host of challenges. Foremost is the looming specter of legal frameworks for IP protection in Web3, as governments seek to oversee this burgeoning industry, potentially creating a complex regulatory landscape. Traditional laws struggle to adapt to Web3’s decentralized nature, particularly regarding anonymity and jurisdictional ambiguity. Transactions often occur under pseudonymous addresses rather than real-world identities, complicating efforts to identify and address IP infringements. To counter this, tailored tools for identity verification and dispute resolution are imperative, possibly involving reputation systems within DAOs or collaborations with legal experts versed in decentralized environments. Interoperability issues further complicate matters. As diverse, decentralized IP management systems emerge, ensuring their compatibility becomes paramount. Achieving this necessitates standardization and collaboration among developers — a feat made complex by the decentralized nature of the ecosystem. Conflicts in the realm of IP and Web3 manifest in various forms, including rampant copyright infringements facilitated by easy content sharing and the proliferation of plagiarized and counterfeit works. Additionally, challenges arise from cross-chain copycats, orphaned works and vulnerabilities in smart contracts that expose IP-protected assets to unauthorized access or manipulation.
Blockchain ensures data integrity and IP
SASHA SHILINA, 6/1/23, How to protect intellectual property in Web3, https://cointelegraph.com/explained/how-to-protect-intellectual-property-in-web3
Blockchain ensures the integrity of data by recording transactions in a tamper-proof manner across a decentralized network, making it an invaluable tool for protecting IPs. Central to Web3 is blockchain technology, a decentralized ledger system renowned for its immutability and transparency. A blockchain ledger not only deters plagiarism and unauthorized use but also simplifies the process of proving ownership in legal disputes. For example, through blockchain, creators can timestamp their work, creating an immutable proof of authorship and ownership. As for blockchain-based IP solutions, proof-of-existence projects timestamp documents on-chain, OriginStamp adds artificial intelligence (AI) analysis for authenticity, and IP strategy software (IPwe) offers a blockchain-based patent registry, revolutionizing patent management in the blockchain era. Leveraging blockchain capabilities, smart contracts enable automated enforcement of IP rights, revolutionizing the way creators manage their IPs. Complementing blockchain technology are smart contracts, self-executing contracts with predefined terms and conditions written in code. Through smart contracts, creators can specify how their work can be used, ensuring that royalties are automatically distributed whenever their content is accessed or shared. This automated IP enforcement not only streamlines licensing processes and eliminates the need for intermediaries but also reduces the risk of infringement, providing creators with greater peace of mind and control over their creations. Mainly, smart contract development for IP rights represents a significant advancement in how we manage, protect and monetize creative works and innovations. Tools like OpenLaw and InvArch simplify legal agreements by enabling users to compose them as smart contracts, streamlining the contract creation process.
Tokenization on web 3 protects IP
SASHA SHILINA, 6/1/23, How to protect intellectual property in Web3, https://cointelegraph.com/explained/how-to-protect-intellectual-property-in-web3
Tokenization, as an IP enforcement mechanism in Web3, allows for the representation of ownership of digital or physical assets on the blockchain through tokens. Revolutionizing the way creators monetize and protect their creations, IP tokenization provides a transparent and secure solution for creators to tokenize their assets, ensuring immutable proof of ownership and enabling seamless trading of digital rights. This crypto paradigm shift democratizes access to IP ownership and introduces new revenue streams through smart contracts that govern licensing and royalties in decentralized systems. With the rise of decentralized finance (DeFi) and nonfungible tokens (NFTs), the tokenization of IP is poised to redefine traditional notions of ownership and copyright.
NFTs protect IP
SASHA SHILINA, 6/1/23, How to protect intellectual property in Web3, https://cointelegraph.com/explained/how-to-protect-intellectual-property-in-web3
While NFTs offer creators an exciting new avenue for monetizing their works, questions surrounding copyright protection in Web3 loom large, creating legal gray areas and potential pitfalls for both parties involved. NFTs offer a novel way to tokenize digital assets, including artwork, music and even tweets, granting ownership through blockchain. They have stormed into the spotlight, reshaping the digital landscape and challenging traditional notions of ownership and value. At the heart of this phenomenon lies the intersection of NFTs and IP, where creators and buyers navigate a complex web of rights and responsibilities. Digital scarcity, inherent in the NFTs concept, can play an essential role in IP preservation. While purchasing an NFT doesn’t automatically confer IP rights, certain collections, such as Bored Ape Yacht Club, have departed from this norm by granting full IP rights to owners. This unique feature allows owners to monetize their NFTs through avenues like music videos and brand partnerships. NFT marketplaces like OpenSea, Rarible and SuperRare mint and trade IP-backed NFTs, while fractional ownership platforms enable shared ownership of digital assets, democratizing investment in the burgeoning NFT market.
DAOs protect IP
SASHA SHILINA, 6/1/23, How to protect intellectual property in Web3, https://cointelegraph.com/explained/how-to-protect-intellectual-property-in-web3
In the realm of IP, DAOs offer a novel approach to collaborative digital rights management and enforcement. Decentralized autonomous organizations (DAOs) represent a groundbreaking evolution in governance, empowering communities to collectively manage resources and make decisions autonomously. These self-governing entities can establish transparent protocols for IP tokenization, licensing, ownership of shared assets and revenue distribution, benefiting creators and stakeholders alike. Initiatives like Aragon provide infrastructure and tools for DAO governance, facilitating decision-making processes related to IP matters in the Web3 landscape.
AI makes IP conceptually impossible; we can already write like and be like each other
Steve Krakauer, 5-30, 24, a NewsNation contributor, is the author of “Uncovered: How the Media Got Cozy with Power, Abandoned Its Principles, and Lost the People” and editor and host of the Fourth Watch newsletter and podcast.https://thehill.com/opinion/technology/4693024-scarjo-vs-openai-and-the-end-of-intellectual-property/, ScarJo vs. OpenAI, and the end of intellectual property
One of the soothing voices in OpenAI’s latest ChatGPT model sounded a lot like Scarlett Johansson from the movie “Her” — and that was a problem. The actress went public last week with her complaint about the AI giant using a voice she and many others believed sounded like her, causing a public relations crisis for the company. Johansson said CEO Sam Altman had contacted her asking for her permission to use her voice, saying her “voice would be comforting to people.” She declined, and the company asked again just weeks ago. But then out came the new model. “I was shocked, angered, and in disbelief that Mr. Altman would pursue a voice that sounded so eerily similar to mine,” she wrote in an open letter. “In a time when we are all grappling with deepfakes and the protection of our own likeness, our own work, our own identities, I believe these are questions that deserve absolute clarity.” The Washington Post attempted some PR clean-up for OpenAI, reporting that another actress was the voice model, but not naming her and not citing its sources. Still, Altman apologized, the voice was removed and the AI industry suffered a black eye. At the end of her letter, Johansson urged “appropriate legislation to help ensure that individual rights are protected.” We’re in the infancy of this issue, and the landscape is wilder than the Wild West — a virtual minefield where rules are being broken before they can even be fully conceived and contemplated. And while you may not want to think about AI in your life today, you’re already living it. AI intrudes into your Google searches now. It has taken over your actions on most of social media. It’s slowly, and then suddenly, being integrated into all of our lives. This ScarJo vs. OpenAI kerfuffle is important, but it will quickly become quaint and archaic. AI is turning our own identity into an existential question. There are two big terms in our culture that relate to this topic — “intellectual property,” or IP, and “name, image and likeness,” or NIL. You likely have heard about these relating to the entertainment industry, or with college sports. But what the Johansson incident foreshadows is how owning your own IP and your own NIL will become more difficult — and eventually nearly impossible — thanks to the advances in AI, as the lines get more blurred between what is real and what’s “real.” ScarJo may win this PR battle, and maybe she’ll get a settlement. But such cases will become increasingly hard to litigate and fight against, simply because AI is learning to become us — and to let anyone become anyone else. Let’s survey where we are today. Using the free ChatGPT tool — which is already several generations behind the more advanced paid versions, and only text-based — I prompted it to write a short article in the style of star New York Times reporter Maggie Haberman. In less than a second, it whipped out a post headlined, “Inside the Political Chessboard: Unraveling the Dynamics of Power in Washington,” with the catchy first line “In the labyrinthine corridors of Washington D.C., where power brokers play a never-ending game of political chess, every move holds significance.” I prompted it to write a song in the style of Taylor Swift, and got lyrics like “when the darkness starts closing in, I’ll find the light, I’ll let it in. For every tear shed, there’s a new sunrise.” How about a script of the hit HBO show “Euphoria”? “What if I’m tired of playing? What if I just want to be me, without all the masks and the lies?” it spit out instantaneously. Again, this is just a single, free AI text tool. There are programs like Suno, which creates music to sound like an artist or genre, and AI that generates images and video. These systems are learning as they go, getting better with each and every prompt. IP isn’t just for the individual, though. We’ve seen over the past several decades how valuable IP is to the entertainment industry, where Marvel has become a gigantic revenue generator and rebooting existing material is the norm. But why will the rights to X-Men and Harry Potter be as valuable when compelling content can be generated through AI that blurs the line between what is and isn’t actual IP? Try fighting the surge of “Harry Potter”–like video content in the coming months and years if you’re a rights-holder — and then extrapolate that out for every piece of IP. The one frontier where AI will have a harder time intruding into might be live sports, thus making it a more valuable commodity compared to other industries like film, television, music and media or journalism. There’s currently a massive arms race for the NBA playing out between Turner, Disney, NBC and Amazon. AI can’t water down live sports through real-ish versions of actual life. What LeBron James does for a living can’t be coopted by the digital masses in the ways that what Scarlett Johansson does can. But when it comes to mimicry to the point of undetectability, it will quickly become nearly impossible to legislate, or litigate. We will be forced to rely on the guardrails of these shadowy companies, growing more powerful by the day. I prompted ChatGPT to write me an interview transcript where we see President Biden’s dementia slip out. “I’m sorry, I can’t fulfill that request,” it spit back. A rare moment of self-policing, perhaps. But it will be short-lived. AI is taking over. Sorry ScarJo — and everyone else. Your “name, image, and likeness,” it belongs to all of us now. It’s 2024, and it’s the end of IP.
IP critical to competition with China; status quo has weakened (three potential cases in here)
Chris Borges, Program Manager and Associate Fellow, Geoeconomics Center, May 16, 2024, Intellectual Property Rights in the U.S.-China Innovation Competition, https://www.csis.org/analysis/intellectual-property-rights-us-china-innovation-competition
The United States is engaged in a competition for technology and innovation leadership with China, with both nations making significant investments in their domestic innovation systems while seeking to undermine the other’s innovation system. The United States, for instance, has implemented export controls and investment restrictions to slow China’s rate of technological innovation, while launching innovation initiatives covering emerging energy technologies, quantum computing, and wireless communications, among other industries. As the competition intensifies, many policymakers and analysts are caught up in the blow-by-blow of this industrial policy race. However, by focusing on these high-profile policies, they risk overlooking a fundamental driver of innovation: a system of secure and market-based intellectual property (IP) rights. IP rights are foundational for a strong innovation system. By converting ideas into property, secure IP rights allow firms to safely license their innovations, fostering more collaboration across the economy. A secure IP system also gives market actors the confidence to share their expertise and information with others, expanding the knowledge base of the innovation system. Further, the temporary ownership of an innovation afforded by an effective patent system provides the rents and hence the incentive for entrepreneurs and investors to take on the risks of driving new ideas to the market. For these reasons, the community of inventors, entrepreneurs, and start-ups repeatedly emphasizes the importance of secure IP rights in providing a path to market entry, growth, and fair participation. This view is validated when taken in the aggregate: academic studies find that secure IP rights positively affect innovation and economic growth in developed economies. Given the benefits of a robust, market-based IP system, the United States would seem to have the long-term advantage in any innovation competition with China. Yet, a series of court decisions and pieces of legislation over the last two decades has weakened IP rights in the United States, potentially undermining the competitiveness of the U.S. innovation ecosystem. China, in contrast, has spent decades strengthening IP protections to encourage innovation and attract private investment. While the United States remains the gold standard for IP protections, this standing should not be taken for granted. To effectively compete with China, the United States should reprioritize the development and maintenance of a system of secure IP rights to promote the strength and competitiveness of its innovation system. China Takes IP Seriously When it comes to IP, China is typically associated with its theft, not its protection. Indeed, China did not have a single patent law in place until 1984. At that time, China was just beginning to liberalize its economy and was considerably underdeveloped. In 1984, 78 percent of China’s population lived in rural areas, and its GDP per capita was 70 times smaller than that of the United States. As China began its economic rise, it largely prioritized the acquisition of foreign IP—often by appropriation and theft—rather than produce it on its own. Academic studies largely conclude that secure IP rights have a weaker effect on innovation in those developing economies where it is simpler to imitate external innovations. In other words, it is in a country’s rational self-interest to devalue IP protections when it is lower in the technology value chain. Even the United States was not immune to these incentives: George Washington’s administration openly urged stealing trade secrets from the British. However, as countries advance technologically and begin generating world-leading IP, securing this IP becomes more of a concern. While Chinese IP theft remains an issue today, IP protection in China has come a long way since 1984. A major first step was taken in 2001 when, upon accession to the World Trade Organization, China implemented extensive revisions of its IP laws to meet international standards. This progress has continued over the last decade as China’s IP protections have developed alongside its technological prowess. In 2014, China opened its first court that specifically adjudicates IP cases, which has since grown into a network of IP courts. China has even begun developing niche areas of patent law to incorporate new technologies. Today, establishing a robust system of IP rights to promote innovation is a national priority. In 2021, China released its 14th Five-Year Plan, which includes a notice on IP with ambitious goals such as doubling the number of patents it awards to foreign firms by 2025. Critically, China’s IP laws appear to equitably protect foreign actors. Observers note that foreigners fare well in IP cases adjudicated in China, and this observation is supported by data: studies from 2018 and 2019 found that foreign plaintiffs fared better than their Chinese counterparts in patent litigation in Chinese courts. And foreign companies have taken notice. A 2022 survey from the American Chamber of Commerce in China found that 44 percent of its members believe IP enforcement in China is improving, while only 23 percent reported that China’s IP regime limits their investments in China. Patent filing data, while an imperfect indicator of innovation overall, can be indicative of the robustness of a country’s IP laws, as inventors prefer to file their patents in locations where the protection of their ideas is best safeguarded. Over 46 percent of all patents filed in 2022 were filed in China, the most in the world. China’s IP system still has considerable room for improvement. Foreign firms operating in China remain wary of IP theft, and analysis of IP litigation in China is restricted to data from government-curated databases. Still, while China’s IP system remains behind the United States’, China is undoubtedly taking steps to improve it, thereby strengthening the competitiveness of its innovation ecosystem in the process. The United States: IP Is in the Crosshairs at a Critical Time In contrast to China’s gradual strengthening of IP protections, the United States has seen the robustness of its IP system steadily erode. Much of this erosion comes from three changes to the U.S. patent system made over the last two decades. First, in the 2006 case eBay v. MercExchange, the Supreme Court weakened patent owners’ ability to receive legal injunctions blocking the sale of their patented technology by an infringer. While injunctions are still available, they are now sought and granted significantly less often. The decreased threat of an injunction may create perverse incentives that cash-rich firms can exploit, such as “efficient infringement,” where the benefits of patent infringement outweigh the costs of defending against and even losing a lawsuit. Second, in 2011 Congress passed the Leahy-Smith America Invents Act, which created the Patent Trial and Appeal Board (PTAB) as a faster and cheaper alternative to district courts for retrospectively adjudicating patent validity. However, according to bill co-sponsor Lamar Smith, lawmakers unintentionally included several design flaws that are exploited to harass start-ups, small businesses, and individual inventors. For instance, the PTAB has a lower standard of proof for invalidating patents than district courts, which contributes to the PTAB invalidating over 80 percent of patents it agrees to review. Indeed, former federal circuit chief judge Randall Rader referred to the PTAB as a “death squad” killing property rights. And third, a series of Supreme Court decisions between 2010 and 2014 greatly decreased the scope of patent-eligible subject matter. The decisions established a two-step test for determining patent-eligible inventions known as the Alice/Mayo test, which restricts patents related to laws of nature, natural phenomena, and abstract ideas. Under the restrictions of Alice/Mayo, many once-patentable inventions became patent ineligible, resulting in the nullification of hundreds of patents. Through 2020, 60 percent of patents challenged under the Alice/Mayo framework were invalidated. Ultimately, the key issue with these three changes is the increased uncertainty they inject into the U.S. patent system. The increased risk of a successful retrospective patent eligibility challenge at the PTAB, for instance, introduces significant uncertainty for start-ups and other small actors who rely on IP to attract financing. Moreover, critics of Alice/Mayo assert that the test is vague and unpredictable, which hampers start-ups, reduces investment, and ultimately undermines innovation. Kimberly A. Moore, chief judge of the U.S. Court of Appeals for the Federal Circuit, expressed that Federal Circuit judges were “at a loss” in how to apply the current patent eligibility provisions, while some IP legal professionals claim that they are unable to provide clear guidance to businesses due to Alice/Mayo. Uncertainty—situations where the range and probability of outcomes cannot be predicted—hampers economic activity, and uncertainty in patent eligibility may encourage investors to avoid companies in patent-intensive industries. For instance, a 2022 study estimated that disease diagnostic technologies, which are highly impacted by Alice/Mayo, lost out on $9 billion in investment in the four years following its implementation. Another 2020 study found that the share of venture capital investment in patent-intensive industries such as semiconductors, pharmaceuticals, and biotech decreased from 50 percent in 2004 to 28 percent in 2017 in the United States, a time period which coincides with these changes. While the American Chamber of Commerce ranked the United States number one in its 2023 International IP Index, it identified “continued uncertainty over patentability for high-tech sectors” as a key weakness in U.S. IP protections. This uncertainty is particularly troubling in the context of international technology competition, as some of the subject matter most affected by these changes is clearly patent-eligible in Europe, China, and other jurisdictions. A 2017 study identified 1,400 patents, including cancer and diabetes treatments, that were granted in China and the European Union but not in the United States due to Alice/Mayo. The uncertainty introduced by these changes may divert research and development investment away from the United States, thereby undermining the international competitiveness of U.S. businesses Conclusion When it comes to its innovation competition with China, the United States has an inherent advantage in its strong IP system. And yet, poor policies and legal decisions place this key asset at risk. Rather than devalue IP rights at home, the United States should clarify and strengthen its IP system. If the United States is to prevail in an innovation-based national competition with China, it should play the long game and preserve and invest in what has been to date a world-leading innovation system anchored on robust and secure IP rights.
IP undermines innovation
Michael Perelman, 2003, January 1, The Political Economy of Intellectual Property, Monthly Review, https://monthlyreview.org/2003/01/01/the-political-economy-of-intellectual-property/
Perhaps the famous trickle down effect could justify the obscene maldistribution of wealth if intellectual property rights actually improved productivity. In fact, intellectual property rights are terribly destructive of productivity on many counts. First of all, intellectual property rights undermine the very science and technology that they are supposed to promote. Intellectual property rights are to science what tollbooths are to highway traffic. Both create bottlenecks and impede forward progress, but in the case of intellectual property rights, innumerable disputes arise about who gets to collect the tolls and how much the tolls should be. To the extent that the present system of intellectual property rights constricts the flow of new technologies, it imposes another incalculable cost on society. For example, virtually no new technology is the product of a single person or even a single corporation. Ideas and discoveries, what Marx called “universal labor,” draw upon a multitude of sources. Sorting out who deserves legitimate credit for any technology is impossible. Just consider the complexity of a large software system with 100,000 components. It can use hundreds of previously patented techniques. Because each patent search costs about a thousand dollars, searching for all the possible patent potholes in the program could easily run well over $1 million, and that far exceeds the cost of writing the program.18 Intellectual property rights spawn a system of wasteful litigation. Already, by the early 1990s, Intel’s annual litigation budget alone was believed to be at least $100 million. No doubt it has grown significantly since then. Intellectual property rights also create an atmosphere of secrecy, which is inimical to scientific progress. Finally, the quest for intellectual property rights is speeding up the corporatization of the university. Universities now routinely sell to corporations the rights to the patents developed in university laboratories, often at public expense.
IP leads to wasteful litigation
Michael Perelman, 2003, January 1, The Political Economy of Intellectual Property, Monthly Review, https://monthlyreview.org/2003/01/01/the-political-economy-of-intellectual-property/
Intellectual property rights spawn a system of wasteful litigation. Already, by the early 1990s, Intel’s annual litigation budget alone was believed to be at least $100 million. No doubt it has grown significantly since then.