Proposed U.S. Inflation Reduction Act Takes on (some) Drug Pricing Issues in United States

U.S. Senator Joe Manchin released a press release concerning the U.S. Senate’s passage of the Inflation Reduction Act of 2022.  Importantly, the Act addresses rising health care costs.  The high cost of healthcare in the United States has been attributed to mostly two factors: 1) high wages for healthcare workers; and 2) the high cost of pharmaceuticals/biologics.  The first factor is unlikely to be addressed by the government.  The Inflation Reduction Act of 2022 takes on the pricing of pharmaceuticals/biologics.  Hopefully, the drug pricing changes will help reduce healthcare costs, but those changes may be offset by rising wages for healthcare workers.  Senator Manchin’s office has released a document outlining the Act’s provisions on drug costs, in part:

The IRA lowers healthcare costs for millions of Americans through policies that protect consumers and hold drug companies accountable. Specifically, the IRA will: • Empower Medicare to negotiate prescription drug prices, beginning with ten of the highest-costing drugs in 2023 and expanding to 20 each year by 2029, saving $100 billion. • Cap Medicare beneficiaries’ out-of-pocket costs at $2,000 per year, with the ability to spread the cost over monthly payments, saving more than a million seniors $1,200 per year.• Extend for three years provisions from the American Rescue Plan (ARP) that improved health care affordability for people who buy insurance on the individual marketplaces. • Penalize drug companies for outrageous price hikes. Drug companies – not consumers – will now be on the hook for drug prices that exceed inflation. Drug companies will lose current incentives to keep costs high by secretly negotiating with insurers and pharmacy benefit managers to ramp up profits at the expense of patients. This prohibition will save Medicare $71 billion. • Provide free vaccines for seniors under Medicare, including COVID vaccines, the shingles vaccine, and other necessary vaccines. • Increase help for low-income seniors, giving all qualifying Medicare beneficiaries the full low-income subsidy under Medicare Part D. The average value of this assistance is around $5,000 per person. • Stabilize Part D premiums in Medicare, ensuring seniors and people with disabilities will never see their premiums increase more than 6% from year to year through 2029. (emphasis added).

Likely Extension of Film and Television Tax Credits in California

California Governor Newsom is backing extending tax credits for films and television shows in California.  Governor Newsom is touting California’s commitment to reproductive rights as the attraction (in addition to the credits) for businesses to operate in California.  The press release states, in part:

SACRAMENTO – Together with Senator Anthony Portantino (D-La Cañada Flintridge) and the California Film Commission, Governor Gavin Newsom today announced his support for SB 485, which would invest $1.65 billion in the state’s Film & Television Tax Credit Program to extend it for an additional five years, through 2030. This program allocates $330 million per year in tax credits for the industry.
 
This announcement comes as hundreds of showrunners demand that production companies implement protocols to protect pregnant employees in states where abortion is outlawed.
 
“As other states roll back people’s rights, California will continue to protect fundamental freedoms for all and welcome businesses that stand up for their employees,” said Governor Newsom. “Extending this program will help ensure California’s world-renowned entertainment industry continues to drive economic growth with good jobs and a diverse, inclusive workforce.”
 
The state’s Film & Television Tax Credit Program has been shown to generate $24 in economic activity for every $1 invested – spurring tens of billions of dollars in economic output, helping create over 110,000 jobs, and bringing shows and films to California. Extending the Film & Television Tax Credit Program will help the state’s ongoing efforts to retain its status as the world’s film and TV production capital, a status long earned due to its superior crews, talent, infrastructure, weather, locations, and a host of other attributes that lead to business and creative success.
 
In response to today’s announcement by Governor Newsom, California Film Commission Executive Director Colleen Bell stated that the Commission stands ready to help all projects – including those that reject states where fundamental rights are under assault – make the most of all that California has to offer.  
 
“The Governor’s actions today speak to the values held by so many people across the film and TV production industry,” she said. “More than ever, California offers the best value and the best values.” 
 
Bell also noted that the creative community has unique influence and therefore, unique responsibility. “Working in and supporting a state that violates basic freedoms is antithetical to the industry’s core values,” she added. “It’s also bad business.” 
 
“California is the entertainment capital of the world and it is exciting and appropriate for the state to invest in keeping and expanding its impact. The economic benefit from extending the Film and Television Tax Credit Program creates thousands of jobs for talented crafts people and generates significant revenue for our budget. I am grateful to Governor Newsom for his unwavering support and leadership for enhancing this historic industry – which is unique to California. Talent and industry need certainty to compete with other states and the tax credit program extension does just that,” said Senator Anthony Portantino, author of SB 485.
 

Revenue boost for automotive industry from cellular connectivity outweighs SEP licensing costs

The automotive industry is being revolutionized by continuous cloud connectivity, autonomous driving technologies, drive train electrification and shared mobility. These transformations are being facilitated in part by the standardized cellular technologies now commonly implemented in “connected vehicles” or “CVs”. The proportion of vehicles shipped worldwide with cellular connectivity embedded is forecast to rise from 46% in 2020 to 76% in 2026.1

The commercial ecosystem for CVs has significantly matured since I last wrote about it here nearly two years ago. The benefits, incremental revenues and costs now associated with the adoption of cellular technologies in vehicles are being reflected in major commercial actions by industry players and in financial markets. Incremental product revenues at a vehicle’s point of sale together with ongoing monetization opportunities in value-added services and cost savings will parallel what has been achieved in smartphones, where substantial profits are reaped beyond initial product sales and recurring network operator service fees in the app ecosystem. The value of automotive connectivity is created through improved safety features, enhanced navigation, driver assistance and automation, vehicle and driver monitoring (e.g., to adjust insurance premiums), reduced maintenance costs, in-vehicle entertainment services and over-the-air software updates for various systems.

Although the portion of new car selling prices and aftermarket service fees attributable to cellular connectivity was estimated to be $54 billion in 2020, total patent royalties paid by automotive OEMs to license the cellular standard-essential patents (SEPs) upon which those capabilities depend was and remains considerably less than 1% of that figure. And that low percentage royalty yield will reduce—despite increasing total royalties as more OEMs are licensed—because that CV market value is expected to grow faster to $166 billion or more by 2025.2

SEP licensing fees are modest in comparison to product costs and with thousands of dollars in revenues and cost savings anticipated from connectivity services over a car’s typical lifespan of 14 years.3 Indeed, SEP licensing fees are a small proportion of an estimated average cost of $700 per vehicle for OEMs on telematics and infotainment systems, which are marked-up significantly when sold to consumers as bundled features or optional extras in finished goods car prices.4 Examples of additional ongoing revenues to OEMs include £141 ($176) per year after an initial free period, excluding mobile operator service charges, to subscribe to the Audi Connect Infotainment package in the UK. “Remote Services” cost an additional £37. In the Eurozone, Volkswagen charges €75 ($80) per year to extend its We Connect basic subscription and €145 for its “Plus” service. OEMs can receive $30 or more per year from insurance companies for policy holders that opt-in to provide their driving behavior data.

The value that SEPs confer on a CV has been a topic of much discussion, but consensus on how much the automotive industry should pay to license the 4G, 3G and 2G SEPs that underpin connectivity-based solutions has recently emerged. A substantial majority of these SEPs are licensed by the Avanci patent platform for a one-time payment of $15 per 4G CV (or, from 1 September 2022, $20 per 4G CV). With more than 40 automotive brands under license including BMW, Ford, General Motors, Mercedes-Benz and Volkswagen, Avanci licenses around 45% of CV shipments. This is unsurprising given that the platform is providing the “one-stop shop” with transparent and predictable pricing that many implementers and government authorities have demanded.

Automotive is now the most significant segment in IoT SEP licensing, with licensing revenues in the low hundreds of millions of dollars—paid to SEP owners mostly multilaterally through Avanci, but also bilaterally to companies including Nokia and Qualcomm. 

Cellular technology development is a huge, risky and costly endeavor including large numbers of R&D staff and many companies. For example, Ericsson, Nokia and Qualcomm each invest around $5bn apiece annually on R&D which is mostly in cellular. Other companies collectively invest billions more. Smartphones generate virtually all of the return on this R&D investment, which totals around $15 billion in SEP licensing revenues annually. 

While CVs valuably exploit various cellular technologies, including prime 4G LTE capabilities such as eMBB for streaming video, cellular technologies developed specifically for vehicles are also a major focus for standards setting organization 3GPP and the many companies that contribute patented technologies to its standards. Cellular Vehicle-to-Everything (C-V2X) technologies include many features that can improve safety on the road and help enable or enhance Advanced Driver-Assistance Systems (ADAS) and Automated Driving Systems (ADS). WiseHarbor analysis of 3GPP Radio Access Network Working Group contributions reveals that a significant 5% of these are for C-V2X among many innovations.

Consumers often pay more than $1,000 for a new smartphone, plus more per month in network operator service fees, because of the value they obtain from the many free and other services these devices also enable them to obtain including search, navigation, and social media. CV pricing likewise reflects value downstream—regardless of whether all that value is captured by the OEM itself. Yet CVs generate less than one fiftieth of the cellular SEP licensing fees from mobile phones. This is despite OEMs already collecting substantially more than half of their total annual revenues of $2.7 trillion in 2021 from CV sales. In comparison, total mobile phone sales revenues are around $500 million annually. Even if every CV produced over the next five years is licensed—including those expected to include 5G— the proportion of licensing revenues from cars is still unlikely to exceed one tenth that from smartphones.  

With increasing adoption and value of connectivity in vehicles, there is consensus with acceptance now that the modest SEP royalty charges being widely paid are fair and reasonable. Manufacturers and users of CVs are deriving enormous value from cellular technologies including those developed specifically for automotive use.

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1 WiseHarbor estimates based on various industry sources.

2 Markets and Markets estimated the global connected car services market to be worth $54 billion in 2020 with growth to reach $166 billion by 2025. Other industry analyst firms forecast a larger market (e.g. see endnote 3). “Less than 1%” is based on WiseHarbor’s estimate for cellular SEP licensing revenues on CV sales. Total annual car sales revenues were forecast by Statista to be in the range of $2.7-3.0 trillion.

3 Other CV market value estimates also include ongoing services revenues and operational cost savings. Allied Market Research valued the global connected car market —”offering comfort, convenience, performance, safety, and security along with powerful network technology”—at $63.03 billion in 2019, and projected it to grow at a CAGR of 17.1% to reach $225.16 billion by 2027.  McKinsey & Company estimates connectivity could deliver up to $310 in revenue and $180 in cost savings per car per year, on average, in 2030. There are around 1.4 billion cars on the road worldwide.

4 WiseHarbor estimates this figure using various sources focusing on component and manufacturing costs with car sales volumes rising from 73 million in 2020 to 95 million in 2026 and with the proportion of vehicles connected expected to rise from 46% to 76% in that period.

Senator Tillis' New Proposed Patent Eligible Subject Matter Legislation

Senator Thom Tillis has been busy.  He has proposed a new act to clarify patent eligibility doctrine in the United States.  This is definitely a relatively broad vision of patent eligibility.  Some work on the pricing side of pharmaceuticals/biologics would be helpful if this gets passed.  I am wondering if this may get tacked on to another piece of legislation—the timing is interesting.  The Press Release states:

U.S. Senator Thom Tillis (R-NC) introduced the Patent Eligibility Restoration Act of 2022, legislation that will restore patent eligibility to important inventions across many fields, while also resolving legitimate concerns over the patenting of mere ideas, the mere discovery of what already exists in nature, and social and cultural content that everyone agrees is beyond the scope of the patent system. This bill affirms the basic principle that the patent system is central to promoting technology-based innovation. 

“I have long said that clear, strong, and predictable patent rights are imperative to enable investments in the broad array of innovative technologies that are critical to the economic and global competitiveness of the United States, and to its national security,” said Senator Tillis. “Unfortunately, our current Supreme Court’s patent eligibility jurisprudence is undermining American innovation and allowing foreign adversaries like China to overtake us in key technology innovations. This legislation, which is the product of almost four years of consensus driven stakeholder conversations from all interested parties, maintains the existing statutory categories of eligible subject matter, which have worked well for over two centuries, and addresses concerns regarding inappropriate eligibility constraints by enumerating a specific but extensive list of excluded subject matter. I look forward to continuing to work with all interested stakeholders on this important matter. Passing patent eligibility reform remains one of my top legislative priorities during my second term.”

Background:

Unfortunately, due to a series of Supreme Court decisions, patent eligibility law in the United States has become confused, constricted, and unclear in recent years. This has led to inconsistent case decisions, uncertainty in innovation and investment communities, and unpredictable business outcomes. This has resulted in a wide range of well-documented negative impacts.

As of 2021, all 12 judges of the United States Court of Appeals for the Federal Circuit have lamented the state of the law. Witnesses and stakeholders from a wide array of industries, fields, interest groups, and academia have testified and submitted comments confirming the uncertainty and detailing the detrimental effects of patent eligibility confusion in the United States. And there is now widespread bipartisan agreement in Congress and across all recent Administrations that reforms are necessary to restore the United States to a position of global strength and leadership in key areas of technology and innovation, such as medical diagnostics, biotechnology, personalized medicine, artificial intelligence, 5G, and blockchain.

The proposed legislation states, in part:

SEC. 2. PATENT ELIGIBILITY. (a) IN GENERAL.—Chapter 10 of title 35, United 8 States Code, is amended— (1) in section 100— (A) in subsection (b), by striking ‘‘includes a new use of a known process’’ and inserting ‘‘includes a use, application, or method of manufacture of a known or naturally-occurring process’’; and (B) by adding at the end the following: ‘‘(k) The term ‘useful’ means, with respect to an invention or discovery, that the invention or discovery has a specific and practical utility from the perspective of a person of ordinary skill in the art to which the invention or discovery pertains.’’;

and (2) by amending section 101 to read as follows: ‘‘§ 101. Patent eligibility ‘‘(a) IN GENERAL.—Whoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may obtain a patent therefor, subject only to the exclusions in sub section (b) and to the further conditions and requirements of this title.

‘‘(b) ELIGIBILITY EXCLUSIONS.— ‘‘(1) IN GENERAL.—Subject to paragraph (2), a person may not obtain a patent for any of the following, if claimed as such: ‘‘(A) A mathematical formula, apart from a useful invention or discovery. ‘‘(B) A process that— ‘‘(i) is a non-technological economic, financial, business, social, cultural, or artistic process; ‘‘(ii) is a mental process performed solely in the human mind; or ‘‘(iii) occurs in nature wholly independent of, and prior to, any human activity. ‘‘(C) An unmodified human gene, as that gene exists in the human body. ‘‘(D) An unmodified natural material, as that material exists in nature.  ‘‘(2) CONDITIONS.— ‘‘(A) CERTAIN PROCESSES.—Notwithstanding paragraph (1)(B)(i), a person may obtain a patent for a claimed invention that is a process described in such provision if that process is embodied in a machine or manufacture, unless that machine or manufacture is recited in a patent claim without integrating, beyond merely storing and executing, the steps of the process that the machine or manufacture perform. ‘‘(B) HUMAN GENES AND NATURAL MATERIALS.—For the purposes of subparagraphs (C) and (D) of paragraph (1), a human gene or natural material that is isolated, purified, enriched, or otherwise altered by human activity, or that is otherwise employed in a useful invention or discovery, shall not be considered to be unmodified.  

‘‘(c) ELIGIBILITY.—  ‘‘(1) IN GENERAL.—In determining whether, under this section, a claimed invention is eligible for a patent, eligibility shall be determined—  ‘‘(A) by considering the claimed invention as a whole and without discounting or disregarding any claim element; and ‘‘(B) without regard to— ‘‘(i) the manner in which the claimed invention was made; ‘‘(ii) whether a claim element is known, conventional, routine, or naturally occurring;  ‘‘(iii) the state of the applicable art, as of the date on which the claimed invention is invented; or ‘‘(iv) any other consideration in section 102, 103, or 112.  

‘‘(2) INFRINGEMENT ACTION.— ‘‘(A) IN GENERAL.—In an action brought for infringement under this title, the court, at any time, may determine whether an invention or discovery that is a subject of the action is eligible for a patent under this section, including on motion of a party when there are no genuine issues of material fact. ‘‘(B) LIMITED DISCOVERY.—With respect to a determination described in subparagraph (A), the court may consider limited discovery relevant only to the eligibility described in that subparagraph before ruling on a motion described in that subparagraph.’’.

Senators Tillis and Leahy Propose to Improve U.S. Patent Quality

Senators Tillis, a Republican, and Leahy, a Democrat, have introduced legislation in Congress designed to improve patent quality at the USPTO.  The bipartisan nature of the legislation, hopefully, means it will be quickly adopted. [I am an optimist.] Senator Tillis’ press release states:

This legislation would evaluate prior and current initiatives and pilot programs relating to the quality of patents. It would evaluate the need for greater clarity in terms of what constitutes patent quality, the setting of patent quality metrics, and how the quality of work product performed by patent examiners is measured within the office. The bill would evaluate the need for recording examiner interviews via audio files or automated transcriptions, how the assignment of patent applications to examiners is undertaken, and the creation of a group that looks at real-world circumstances and uses that information to perform targeted review of certain patent applications. Furthermore, the bill would also study any evidence of fraud in the patent application process and suggest avenues to address such fraud.  

“If the United States is going to continue to be the world’s leading innovation economy, then we have to first make sure our patent system is strong and instills confidence,” said Senator Tillis. “We only have strong patents when those patents are of the highest quality and meet all the requirements of patentability. I’m proud to introduce this measure with my good friend Senator Leahy to improve the quality of patent examinations and ensure that the USPTO issues strong patents. This legislation is a step further in continuing our work to strengthen our intellectual property rights.” 

“I am proud to cosponsor this commonsense legislation with Ranking Member Tillis,” said Senator Leahy. “This bill follows up on our hearing last year on patent quality, which put a spotlight on the fact that many U.S. patents represent brilliant inventions and drive our economy.  Unfortunately though, some are issued by mistake and can cause great expense for unsuspecting Americans and small businesses.  I look forward to advancing legislative solutions that will help make sure that the patents that are issued are valid and to continuing my work supporting American creators and innovators.” 

Background:

For decades there has not been a major change to the time afforded to patent examiners for the examination of patent application, yet the nature of the technology from which these patent applications are derived and the complexity of this technology have only increased. In addition, the proliferation of prior art, which patent examiners must search for and review in order to make patentability determinations, has only increased and it has done so at a rapid pace. This complexity can and does lead to the necessity for patent examiners to raise more complex prior art rejections. And because of this patent examiners must be afforded the necessary amount of time so as to generate quality work products. 

This bill would require that not later than 1 year after the date of enactment of this Act the Comptroller General of the U.S. submit to the Senate Committee on the Judiciary and House the Committee on the Judiciary a report detailing this evaluation on patent examination improvement. Not later than 1 year after the date on which the Comptroller General of the U.S. submits their report the USPTO Director shall develop guidance for patent examiners focused on patent examination improvement. Finally, not later than 2 years after the date of enactment of this Act the USPTO Director, after soliciting public comment, shall submit to Congress a report that includes how the Office will improve the technical training of patent examiners with respect to emerging areas of technology, the status of office IT systems, a 5-year IT modernization plan, an accounting of the use by the office of advanced data science analytics and a 5-year modernization plan regarding advanced data science analytics, and finally how the result of the application of advanced data science analytics can be regularly shared with the public.

Japan's METI Releases Guidelines on Negotiating SEP Licenses

On March 31, 2022, the Japanese Ministry of Economy, Trade and Industry (METI) released guidelines concerning the negotiation of SEP licenses.  The METI description states:

In recent years, disputes have arisen worldwide on licensing Standard Essential Patents (SEPs) due to the widespread use of standards and the complication of technologies required for such standards. In particular, as the Fourth Industrial Revolution progresses in which many products will be computerized and processing data will create new added-value, SEP licensing among different industries, especially those in which Japan has strengths (e.g., automobiles, construction machinery and factories), is expected to expand in the future. Therefore, it is crucial for Japan to consider measures to resolve such disputes efficiently.

In light of this situation, the Competition Enhancement Office and the Intellectual Property Policy Office of Ministry of Economy, Trade and Industry (METI) held the “Study Group on Licensing Environment of Standard Essential Patents” (hereinafter referred to as “the Study Group”). The Study Group, comprised of representatives from industry and experts on intellectual property and competition law, has discussed the measures preferable for Japan. Considering problems faced by SEP holders and implementers caused by low predictability and transparency due to the absence of clear rules on the SEP licensing negotiations as well as international trends, METI indicated that “the Japanese government will promptly consider and externally disseminate the rules on good faith negotiations that should be complied with by both SEP holders and implementers” in the interim report of the Study Group published in July 2021, so that good faith negotiations between the parties may encourage early settlements and avoidance of unnecessary disputes, leading to the development of Japanese industries.

Following this policy, METI asked domestic and foreign companies, etc., about their opinions on actions at each of the main steps of SEP licensing negotiations, and METI also asked opinions on the same contents on the website. The Study Group discussed good faith negotiations with reference to these opinions. METI then established the “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” (hereinafter referred to as “the Guidelines”), considering the results of the discussions. METI also published a report that indicates the process of discussions to establish the Guidelines in the Study Group. 

The Guidelines are the norms of good faith negotiations provided by the Japanese government to be followed by SEP holders and implementers involved in SEP licensing negotiations, including Japanese patents, to realize an appropriate licensing environment through improvement of transparency and predictability of the negotiations. The Guidelines are not legally binding and do not guarantee that, even if followed, negotiations can be judged to be in good faith in each individual case as there are no clear global rules for SEP licensing negotiations. However, METI expects that various parties related to SEP licensing negotiations, such as those in the negotiations and the judiciary, utilize the Guidelines, because METI established the Guidelines considering opinions of domestic and foreign companies, etc., industries and experts on intellectual property and competition law in Japan. METI will also utilize the Guidelines to realize an appropriate licensing environment of SEPs.

The Guidelines are available, here.  The Report is available, here (in Japanese).  A document summarizing the differences between the Guidelines and the JPO document on negotiating concerning SEPs is available, here. 

Chips Act heading for President Biden's Signature

The U.S. Congress has passed the CHIPS Act.  Senator Schumer’s office released the following press release:

After years of relentless advocacy, U.S. Senate Majority Leader Charles E. Schumer today announced the Senate has passed his historic federal semiconductor incentive, scientific research, and technological competitiveness bill to bring manufacturing back from overseas to places like Upstate New York. The senator explained this will help build more resilient domestic supply chains to help lower costs for families, address inflation, and strengthen national security by manufacturing more microchips in America. Schumer said that the historic federal semiconductor manufacturing incentivizes will be the lightning rod for existing chip and tech companies to grow in New York, helping attract new major employers, creating thousands of new good paying jobs, and ensuring the foundation for the future is built in Upstate New York.

“This bill means lowering costs for families, strengthening our national security, and bringing manufacturing back to Upstate New York. With its rare combination of a world-class workforce, advanced manufacturers, and renowned higher education institutions, I wrote and championed this legislation with Upstate New York always at the forefront of my mind and now it is primed to reap the rewards. I want to see the future made in Upstate New York,” said Senator Schumer. “When you combine the chip manufacturing potential at sites like White Pine Commerce Park in Central New York, Marcy Nanocenter in the Mohawk Valley, and STAMP in Genesee County, with Globalfoundries and Wolfspeed’s existing plants and onsemi soon acquiring a facility in East Fishkill, NY, all coupled with world-renowned research capabilities at the Albany Nanocenter and across the SUNY system and the state’s universities and labs, Upstate New York could be the nation’s leader in microchips and other tech industries that will dominate this century. Simply put – this is the 21^st Century’s Erie Canal”

Currently, only 12% of chips are manufactured domestically, compared to 37% in the 1990s, and many foreign competitors, including China, are investing heavily to dominate the industry. Nearly 75% of global semiconductor production is now occurring in East Asia and foreign government subsidies drive the majority of the cost difference for producing semiconductors overseas. Schumer said that his legislation would help turn the tide on this trend by bringing manufacturing back to America, along with investing in other key technology and R&D so New York and the country can lead the world in innovation.

Specifically, Schumer highlighted that the bill includes:

• $39 billion for the CHIPS for America Fund to provide federal incentives to build, expand, or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging, or research and development.
• $11 billion for Department of Commerce research and development including creating a National Semiconductor Technology Center (NSTC) a public-private partnership to conduct advanced semiconductor manufacturing, with Albany Nanotech primed to be a top contender to serve as a major hub for the NSTC, and other specialized R&D programs that universities across the state are in a strong position to compete for.
• $2 billion for the DoD CHIPS for America Defense Fund.
• $200 million for the CHIPS for America Workforce and Education Fund to kick start development of the domestic semiconductor workforce, which faces near-term labor shortages, by leveraging activities of the National Science Foundation.
• A new Investment Tax Credit for semiconductor manufacturing facilities and equipment.
• $10 billion Regional Technology Hubs to support regional economic development efforts around the country to not only research and innovate technologies, but also manufacture them here in America.
• $1.5 billion for the Public Wireless Supply Chain Innovation Fund to spur the race to 5G, software-based wireless technologies, and innovative ‘leap-ahead’ technologies in the U.S. mobile broadband market. Schumer said that New York companies like JMA Wireless would be first in line for the $1.5 billion in federal incentives for next generation telecommunications tech included in his bill. This investments builds on the $65 billion to expand high-speed internet across the country passed in the Bipartisan Infrastructure & Jobs Law in which Schumer made sure to include Build America, Buy America provisions to ensure companies like JMA Wireless would build the technology used in the high-speed internet expansion.
• Increased investment for National Science Foundation (NSF) Research and Development Programs, including through a new technology directorate as proposed in Schumer’s original bipartisan Endless Frontier Act, and STEM education and training programs. Schumer said the region’s top research schools connected throughout the SUNY system, and others would be able to tap the increased investment for the NSF. Community colleges would also be able to utilize new investment for workforce training, including for the semiconductor industry.
• $13 billion to build the STEM workforce. Authorizes funding for STEM education, including scholarships, fellowships, and traineeships to create workers in critical fields, including to establishing an artificial intelligence scholarship-for-service program, a national network for microelectronics education, and cybersecurity workforce development programs. 
• $2 billion to strengthen small manufacturers. Triples funding for Manufacturing Extension Partnership, to support small- and medium-sized manufacturers with cybersecurity, workforce training, and supply chain resiliency.
• New investment to combat Supply Chain Disruption. Leverages the Manufacturing Extension Partnership to creates a National Supply Chain Database, to assist the businesses with supplier scouting and minimizing supply chain disruptions.
• Over $800 million to grow Manufacturing USA. Supports the creation of new competitively-awarded manufacturing research institutes with expanded capacity for education and workforce development.
• Infusion of new funds for the Department of Energy National Labs like Brookhaven National Lab. Funds will advance research and development, including in key technology areas like quantum computing, artificial intelligence (AI), and more.

Schumer explained that New York is uniquely suited to take advantage of these federal investments to reassert America’s global technological leadership. New York is currently home to over 80 semiconductor companies that employ over 34,000 NY workers, including global industry leaders like GlobalFoundries, Wolfspeed, onsemi, IBM, and other major microchip and innovation companies that support them like Corning Inc. In addition, Schumer said that New York offers dozens of shovel-ready sites primed for new investment from the semiconductor industry other companies in the innovation economy. 

Schumer has a long history of fighting to advance semiconductor manufacturing and R&D and the broader tech economy at the federal level. In May 2020, Schumer introduced his bipartisan Endless Frontier Act to make a surge new resources into federal R&D through the creation of a National Science Foundation technology directorate focused on key technology areas like quantum computing, advanced energy, AI, high performance computing, and more. Schumer’s Endless Frontier Act also proposed a new $10 billion regional technology hub program to invest in regions around the country with great potential to lead the nation in technology research, development, and manufacturing. In June 2020, Schumer introduced his bipartisan American Foundries Act to authorize new federal incentives for expanding domestic semiconductor manufacturing and R&D. Schumer successfully added this bill as an amendment to the Fiscal Year 2021 National Defense Authorization Act (NDAA). In June 2021, Schumer then successfully passed through the Senate his U.S. Innovation and Competition Act (USICA), legislation he introduced that combined his Endless Frontier Act to make a significant investment in research, development, manufacturing and innovation with other competitiveness legislation. As part of this package, Schumer also included $52 billion in emergency supplemental appropriations to implement the semiconductor-related manufacturing and R&D programs that he had successfully pushed to authorize in the Fiscal Year 2021 National Defense Authorization Act and that are at the heart of the bill which passed today. The House passed its companion legislation to USICA, the America COMPETES Act, this past January and negotiations continue to reconcile the differences between the two bills.  The bill that has passed this week combines the federal semiconductor incentives Schumer has been pushing with the investment in R&D, tech hubs, manufacturing, and other innovation programs from his Endless Frontier Act.

Schumer said that this major federal investment would touch every corner of New York:

Capital Region

Schumer’s legislation will help speed up and expand further opportunities to build on the Capital Region’s GlobalFoundries’ announcement last year of building a second chip fab in Malta, focused primarily on auto and military chip production, creating thousands of jobs on top of the 3,000 employees that GlobalFoundries already employs in the area.

The Capital Region is also poised to benefit with the Albany Nanotech complex potentially becoming the major hub of the nation’s first National Semiconductor Technology Center (NSTC), which is created by Schumer’s bill. Schumer has worked non-stop to uplift Albany Nanotech and the Capital Region as the best candidate to lead the nation in semiconductor research. In March 2021, following a call with the CEOs of IBM and Intel, Schumer announced a new partnership that will bring hundreds of jobs to the Albany region to conduct new semiconductor research, boosting the region’s already robust local chip research presence. Then, after bringing the Commerce Secretary to Malta to announce GlobalFoundries second chip fab last year, Schumer had Secretary Raimondo meet with Albany Nanotech leaders to discuss the facility’s cutting-edge capabilities. The senator continued this momentum earlier this year by bringing the Commerce Deputy Secretary Don Graves to tour the facility as well and meet with Governor Hochul and industry leaders to reiterate how the Capital Region and Albany Nanotech are uniquely suited to quickly stand up the NSTC. 

Central New York & The Mohawk Valley

Major sites like the Marcy Nanocenter and White Pine Commerce Park are already attracting interest from large semiconductor-related companies due to their shovel-ready infrastructure, and Schumer said his legislation would be the lightning rod for luring more jobs to Central NY and the Mohawk Valley. The industry has already taken notice, as highlighted by Cree-Wolfspeed’s $1.2 billion investment to build the world’s largest 200mm Silicon Carbide semiconductor facilities at Marcy, which will create over 600 jobs.

Schumer also said Syracuse tech companies like JMA Wireless would be able to take advantage of other historic incentives like the $1.5B in 5G and telecomm tech development that could accelerate their expansion locally, and the R&D investments included in the bill will support the region’s efforts in UAVs, quantum computing, and other technologies at Syracuse University, Rome Lab, and other area research institutions.

Finger Lakes

Schumer said the federal investment in his bill will further build on the recent $139M, 270 job expansion in Monroe County by Corning Inc. to support optic technology for the growing chip industry, with further expansion of the domestic semiconductor industry helping bolster this plant as more companies would rely on the components made at the new Fairport facility. Other companies that can benefit and grow are Akoustis Inc that employ about 100 in Canandaigua making semiconductor “RF Filter” chips used in mobile phones and Wi-Fi routers.

In addition, the Finger Lakes’ high concentration of research institutions from the University of Rochester to RIT make the region uniquely suited to benefit from the historic increases in the bill for to the National Science Foundation, which the Director of the NSF got to see firsthand when Schumer personally brought him to see their research facilities earlier this year. Schumer also cited a recent study authored MIT economists that analyzed over 100 regions to determine which are best poised to become new Tech-Economy hubs if provided federal scientific research and development investment and determined that Rochester, NY ranked No. 1 as the nation's top region ripe for technological and economic growth.

 

Western New York

In addition to shovel-ready sites like STAMP that could benefit from the chip incentive legislation, Schumer said that Western New York’s spot as a current finalist in the EDA Regional Challenge for its manufacturing cluster proposal make it a top candidate to compete for funding through the new regional technology hub program in his bill.

Schumer also said that research institutions like the University at Buffalo and technical training schools like Erie Community College are in a strong position to compete for manufacturing training and new NSF funds set to be boosted as well by his bill.

Southern Tier

The greater Binghamton area has already emerged as a growing hub for battery manufacturing and with Binghamton University (BU) as a finalist in the EDA Regional Challenge for its battery R&D proposal, Schumer said his bill could strengthen this plan even further by helping grow this critical supply chain in the Southern Tier.  In addition, top research schools like BU and Cornell University would be able to enhance their efforts through more federal research dollars and bolstering their workforce training initiatives. 

Hudson Valley

Schumer said the Hudson Valley is home to many chip and tech companies looking to grow like IBM in Westchester and Dutchess Counties, SeeQc in Elmsford, and onsemi, which will soon be fully taking over the GlobalFoundries facility at iPark in East Fishkill that will be able to utilize these historic incentives to bolster their operations. Plus, the close proximity to NYC and available sites like the former TechCity Campus in Ulster County, which Schumer recently pitched to a major battery company for a potential 500 job expansion, making the region a prime area for growth from his tech investment. Schumer said that the Hudson Valley’s colleges and universities can also benefit from this investment. For example, SUNY New Paltz is home to the Hudson Valley Additive Manufacturing Center and the Hudson Valley Venture Hub which are both are longstanding technology and entrepreneurial hubs that can grow with this new kind of investment, providing additional guidance and support beyond the hundreds of Hudson Valley and state businesses and entrepreneurs they have served to date.

USPTO and WIPO on ADR for SEP Disputes

The USPTO has announced a partnership with WIPO concerning utilizing alternative dispute resolution for SEP disputes.  The Press Release states:

The United States Patent and Trademark Office (USPTO) and the World Intellectual Property Organization (WIPO) today agreed to undertake joint efforts to facilitate the resolution of disputes related to standard essential patents.

Standard essential patents, or SEPs, are patents that have been declared essential to a given technical standard. As part of the standards-setting process, patent owners may agree to license SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms. Standards touch all aspects of modern life and include video compression, wireless communication technologies, computer connection standards, automotive technology, and more.

“International standards, and the role of patents that are essential to them, play an important role in promoting a strong national and global economy,” said Under Secretary of Commerce for Intellectual Property and USPTO Director Kathi Vidal. “The USPTO is grateful that Director General Tang recognized the USPTO’s leadership role in advancing discussions on standard essential patent policies. Our work with WIPO underscores the USPTO’s view that SEP policy is an international issue of international importance. This agreement will leverage existing resources at both the USPTO and WIPO, supporting options to enhance the efficiency of licensing of standard essential patents, and promote resolution of disputes related to those standards.”

The signing of the memorandum of understanding occurred during a meeting this week between Director Vidal and WIPO Director General Daren Tang on the sidelines of WIPO’s General Assembly in Geneva, Switzerland.

Under the terms of the agreement, the USPTO and WIPO will:

• Cooperate on activities that will lend efficiency and effectiveness to the resolution of disputed standard essential patent matters by leveraging existing WIPO Arbitration and Mediation Center and USPTO resources, and
• Engage in stakeholder outreach to raise awareness of the services provided by the WIPO Arbitration and Mediation Center through joint USPTO-WIPO programs.

The agreement will continue in operation for five years from the date of signing.

“We appreciate all the work Director General Tang and WIPO have done in this critical area. We look forward to a successful collaboration and engaging stakeholders to ensure we shape dispute resolution that will facilitate participation and implementation of standards by all innovators including small to medium-sized enterprises,” remarked Director Vidal.

“Alternative Dispute Resolution (ADR) has time and again demonstrated its value in the efficient and timely resolution of commercial disputes. In the last few years, the WIPO Arbitration and Mediation Center has been facilitating the resolution of SEP-related disputes and the new collaboration with the USPTO is an exciting development which will contribute to improving the efficiency of standard implementation,” noted Director General Tang.     

Senator Leahy Statement on proposed PTAB Reform Act of 2022

Senator Patrick Leahy, who is chair of the Senate IP Subcommittee, has released a statement concerning the bipartisan proposed PTAB Reform Act of 2022.  The statement provides:

Patents drive our economy, allowing innovators to do what they do best while knowing they can reap the benefits of their hard work.  Good quality patents thus give small businesses and inventors certainty that they can defend their inventions from others who didn’t put in the work. Without the rights guaranteed by patents, the engine of our economy, American innovation, simply would not be as strong.  

Given the power that a patent conveys, though, a patent issued by the U.S. Patent and Trademark Office needs to actually represent innovation.  There are serious consequences for our entire economy when the system permits enforcement of a patent that never should have issued.  Vermonters and small businesses all across the country have suffered these consequences.  Several years ago, an out-of-state company asserted poor-quality patents against dozens of Vermont small businesses and non-profits, demanding payments for each and every time a business scanned a document and then emailed it. It was a scam. And it was an egregious abuse of our patent system.    

That is why I am proud of the work we did in 2011to pass the Leahy-Smith America Invents Act, which allowed the public to take their concerns about a questionable patent back to the Patent Office for a more in-depth review.  Through proceedings created by the Leahy-Smith Act, the scan-to-email patents were brought back to the Patent Office and invalidated, allowing Vermont companies and non-profits to continue their important work.  The Patent Trial and Appeal Board, or PTAB, created under the Act, resolved those disputes in a way that was faster, less expensive, and more accurate than a district court because the disputes were overseen by technically trained patent judges under a strict deadline.  In the past decade of the PTAB’s existence, the public has brought thousands of patents to the Patent Office’s attention, and the Patent Office has expertly addressed validity, reinforcing the strength of high-quality patents and cancelling ones that never should have issued. 

As with any big new undertaking, that success has also brought new questions. And all enacted laws—particularly those dealing with ever-evolving technologies and science—need to be revisited and updated from time to time. That is why I am thrilled that Ranking Member Tillis, Senator Cornyn, and I just last week introduced the PTAB Reform Act of 2022.  We gathered feedback from participants in the patent system, including the public broadly and businesses across the country covering a vast array sectors and technologies.  We looked at concerns from all corners and presented a series of different options for addressing them.  This bill, the product of months of hard work and compromise, addresses the biggest concerns of stakeholders from across the spectrum.  This bill will update the PTAB so it can continue its important work into the next decade and beyond.

This is important legislation for a number of reasons.  One big question it addresses:  If a petition to the Patent Office to review a patent is meritorious on its face, should the Patent Office decline review anyway?  Many believe that all meritorious petitions should result in a review.  Many others believe that it is harassing to patent owners to have the same members of the public able to request review of the same patent repeatedly over time, when the patent owner has already defended the patent.  We addressed these issues—as we often do in the Senate—through compromise.  While meritorious petitions to review a patent should generally be granted, serial petitions over time from the same or related parties will not be allowed.

Another big question:  Who has the authority to make a final validity decision, civil-servant PTAB judges or the politically appointed Director of the Patent Office?  While the Supreme Court last year resolved that the Director is the final decision-maker, it left open questions about how the Director may make decisions.  This bill ensures that the decision-making process must be open to the public.  The public has a right to know when independent PTAB judges are making a decision, and when a politically-appointed Director is making a decision. We should not have a patent system where any given PTO Director can influence and decree decisions non-transparently and behind the scenes.

Our bill also addresses a concern raised by small business patent owners:  They had to pay to apply for a patent and then may have to pay again to defend it at the PTAB.  This is expensive, and we want to help small businesses shoulder the expense.  Thus, if a small entity has not already decided to undertake the expense of litigation, the Patent Office will cover the expense of a PTAB proceeding for that small business under our bill. 

. . . 

I know that Ranking Member Tillis and Senator Cornyn share my belief that the patent system should work well for all Americans and all sectors of our economy.  I look forward to continuing the bipartisan work of our IP Subcommittee to help deliver real improvements to our patent system. I want to leave behind an even stronger patent system that further empowers America’s greatest natural resource: our ingenuity and innovation.