Hatch-Waxman Integrity Act is Introduced in U.S. House of Representatives

U.S. Representative Tom Flores has introduced the Hatch Waxman Integrity Act in the House of Representatives.  The Act has also been introduced in the Senate.  The Act is designed to curb the use of some methods to challenge patents at the United States Patent and Trademark Office.  A Press Release from Representative Flores’ Office states:

The Hatch-Waxman Integrity Act of 2018 would require a generic manufacturer wishing to challenge a brand-name drug patent to choose between the Hatch-Waxman framework, which affords certain advantages such as being able to rely on the drug innovator’s safety and efficacy studies for FDA approval, and inter partes review, or IPR, which is cheaper and faster than Hatch-Waxman litigation but does not provide the advantages of a streamlined generic approval process. The bill would apply similarly to patents on biologics.

The bill would preserve Hatch-Waxman as the standard path for generic manufacturers to challenge brand patents, while keeping IPR as an option where other interests come into play. It would not have any impact on the use of IPR by the tech community.

Senators Thom Tillis and Orin Hatch have released statements concerning the bills along with Representative Flores:

The Hatch-Waxman Integrity Act ensures that America remains a leader in developing life-saving and accessible therapies, cures and treatments for patients," said Flores. "It restores an effective balance between the interests of brand-name and generic drug manufacturers so that innovation and competition will continue to flourish.  It is fulfilling to work with Senator Hatch to modernize the Hatch-Waxman Act so that hardworking American families continue to benefit from health care innovation."

"As the coauthor and namesake of Hatch-Waxman, I have a keen interest in ensuring we have a well-functioning generic drug industry," said Hatch. "This means making sure that generic companies are able to develop drugs while also ensuring that brand companies have sufficient protections in place to recoup their investments. Hatch-Waxman struck a careful balance that achieved these goals and in doing so helped to create the modern generic drug industry. The Hatch-Waxman Integrity Act, which I’m pleased to be introducing today with Senator Tillis and Representative Flores, will help preserve that careful balance going by ensuring that newer, alternative procedures for challenging drug patents do not give one side an unintended advantage."

"The biotechnology and life sciences industry undertakes tremendous risk and costs to develop new, life-saving drugs, with the vast majority of products never making it to the market at great expense to the manufacturer. These drugs save millions of lives every year and are a critical component of our nation’s healthcare system. While it is important to call out bad actors who price gouge, we must allow sufficient time and balance so companies can continue to develop life-saving drugs and help people with the countless illnesses and diseases that affect millions of Americans," said Tillis. "The Hatch-Waxman Integrity Act of 2018 will restore a proper balance in the market so that companies will continue to spend billions of dollars to develop life-saving and life-altering treatments. I want to thank Senator Hatch for his leadership on this issue and I look forward to building support for this bill within the Senate."

A copy of the bill is here, and a summary analysis of the bill is here. 

WIPO Intellectual Property Indicators Released

The World Intellectual Property Organization (WIPO) recently released its World Intellectual Property Indicators information for 2017.  Global intellectual property filings are at an all-time high with patent filings up 5.8% from the prior year.  Notably, patent filings in China have increased substantially both by Chinese citizens and foreign residents.  U.S. patent filers continue to lead globally.  Concerning patents, WIPO notes:

China’s IP office received the highest number of patent applications in 2017, a record total of 1.38 million. China in 2017 refined its method for compiling statistics for patents and industrial designs applications, counting only those for which application fees have been paid. China’s IP office was followed by the offices of the United States of America (U.S.; 606,956), Japan (318,479), the Republic of Korea (204,775) and the European Patent Office (EPO; 166,585).

The top five offices accounted for 84.5% of the world total. Among these offices, China (+14.2%) and the EPO (+4.5%) saw strong growth in filings, while Japan (+0.03%) and the U.S. (+0.2%) saw negligible growth. The Republic of Korea (-1.9%) received fewer applications in 2017 than in 2016.

Germany (67,712), India (46,582), the Russian Federation (36,883), Canada (35,022) and Australia (28,906) also featured among the top 10 offices. Australia (+1.8%), Canada (+0.8%) and India (+3.4%) saw growth in filings, while Germany (-0.3%) and the Russian Federation (-11.3%) experienced a decline in filings.

. . .

Asia going strong

Asia has strengthened its position as the region with the greatest activity in patent filings. Offices located in Asia received 65.1% of all applications filed worldwide in 2017 – a considerable increase from 49.7% in 2007 - primarily driven by growth in China.

Offices located in North America accounted for 20.3% of the 2017 world total – six percentage points below its 2007 share. Europe’s share declined from 18.1% in 2007 to 11.2% in 2017. The combined share of Africa, Latin America and the Caribbean, and Oceania was 3.4% in 2017.

Patenting activity beyond borders

In filing abroad, which is an indication of a desire to expand in new markets, U.S. residents continue to lead with 230,931 equivalent patent applications filed abroad in 2017. The U.S. was followed by Japan (200,370), Germany (102,890), the Republic of Korea (67,484) and China (60,310).

Among these five origins, China reported a 15% growth in filings abroad, which is far above that of Japan (+2.1%) and the U.S. (+2%). Both Germany (-0.6%) and the Republic of Korea (-4.1%) had fewer filings abroad in 2017 than in 2016.

Patents in force worldwide grew by 5.7% to reach 13.7 million in 2017. Around 2.98 million patents were in force in the U.S., while China (2.09 million) and Japan (2.01 million) each had around 2 million.

WIPO has also released data concerning trademarks, plant variety applications, industrial design and geographical indications, available here.  For the first time, WIPO has collected and released data on the creative economy:

Revenue generated by the three sectors (trade, educational and scientific, technical and medical) of the publishing industry of 11 countries amounted to USD 248 billion. China reported the largest net revenue (USD 202.4 billion), followed by the U.S. (USD 25.9 billion), Germany (USD 5.8 billion) and the U.K. (USD 4.7 billion)[3].

Digital editions generated 28.3% of the total trade sector revenue in China, 23.5% in Japan, 18.4% in Sweden, 13.2% in Finland and 12.9% in the U.S.

The U.S. sold 2,693 million copies of published titles in 2017, followed by the U.K. (647 million), Brazil (617 million) and France (430 million).

US Antitrust Chief Delrahim Announces Withdrawal from DOJ/USPTO Policy Statement on Remedies for SEPs subject to FRAND

On December 7, the chief of the Antitrust Division at the U.S. Department of Justice (DOJ), Makan Delrahim, announced that the DOJ will be withdrawing from the 2013 USPTO and DOJ joint statement, “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”  The announcement was part of his speech, titled “Telegraph Road: Incentivizing Innovation at the Intersection of Antitrust and Patent law.”  His speech provides, in part:

. . . In the more recent past, we have seen somewhat of a shift toward the view that patents might confer too much power, particularly if those patents are essential to a technical interoperability standard.  The fundamental right of the patent holder to exclude competitors has been questioned in this context.

In particular, I have criticized the argument that it ought to be a violation of antitrust law for a holder of a standard-essential patent, or SEP, to exclude competitors from using the technology, including by seeking an injunction against the sale of infringing goods—I think that argument is wrong as a matter of antitrust law and bad as a matter of innovation policy. 

. . . When it comes to the test for obtaining injunctive relief against infringement, patent law already strikes a careful balance that optimizes the incentive to innovate, for the benefit of the public.  The test was articulated by the Supreme Court in eBay v. MercExchange.  

. . . A court applying the eBay test is thus allowed to consider effects in the market, including (as Justice Kennedy noted in concurrence) how significant the patented invention is to the use of the product, and whether the patent holder can be properly rewarded for that contribution without the ability to exclude competitors. 

When this test is used to maintain appropriate incentives to innovate, it thus facilitates the goals of antitrust law and patent law alike. 

I fear that we at the Antitrust Division gave some observers the opposite impression, however, with the confusion created by the joint statement issued by the Department of Justice and the U.S. Patent & Trademark Office in early 2013, entitled “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.” 

That Policy Statement purported to offer the agencies’ perspectives on the propriety of a federal court issuing an injunction, or the International Trade Commission’s issuing an exclusion order, “when a patent holder seeking such a remedy asserts standards-essential patents that are encumbered by a RAND or FRAND licensing commitment.”  In particular, the statement discusses what is in the “public interest” because the eBay test and the Tariff Act governing the ITC name the public interest as a relevant factor.

As I have said before, this joint statement should not be read as a limitation on the careful balance that patent law strikes to optimize the incentive to innovate.  There is no special set of rules for exclusion when patents are part of standards.  A FRAND commitment does not and should not create a compulsory licensing scheme.  

In those cases, as in all cases, the question is what result will optimize the incentives to innovate for the benefit of the public.  Since injunctions against infringement frequently do serve the public interest in maintaining a patent system that incentivizes and rewards successful inventors through the process of dynamic competition, enforcement agencies without clear direction otherwise from Congress should not place a thumb on the scale against an injunction in the case of FRAND-encumbered patents. 

Despite my clarification of the Antitrust Division’s position on the propriety of these types of injunctions, the potential for confusion remains high because the joint statement from 2013 indicates that an injunction or exclusion order “may harm competition and consumers,” seeming somehow to suggest an antitrust inquiry that is distinct from the goal of optimizing the incentives for innovation—namely, dynamic competition.  

This potential for confusion has lead me to a conclusion that I would like to announce here today, in the interest of clarity and predictability of the laws, and among the patent law community with whom we share the goal of incentivizing innovation: The Antitrust Division is hereby withdrawing its assent to the 2013 joint “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments.”

The 2013 statement has not accurately conveyed our position about when and how patent holders should be able to exclude competitors from practicing their technologies.  We will be engaging with the U.S.P.T.O. to draft a new joint statement that better provides clarity and predictability with respect to the balance of interests at stake when an SEP-holder seeks an injunctive order.

Any discussion regarding injunctive relief should include the recognition that in addition to patent holders being able to engage in patent “hold up,” patent implementers are also able to engage in “hold out” once the innovators have already sunk their investment into developing a valuable technology.  Additionally, a balanced discussion should recognize that some standard-setting organizations may make it too easy for patent implementers to bargain collectively and achieve sub-optimal concessions from patent holders that undermine the incentive to innovate.  That is the topic I want to turn to next.

Although standard-setting organizations can undoubtedly offer enormous benefits to consumers, there are antitrust risks associated with any activity that involves competitors making joint decisions.  When there is evidence that participants in a standard-setting organization have engaged in collusion, which is the “supreme evil” of antitrust law, according to the Supreme Court in Trinko, the Division will be inclined to investigate. 

For instance, there is a potential antitrust problem where a group of product manufacturers within a standard-setting organization come together to dictate licensing terms to a patent holder as a condition for inclusion in a standard because it may be a collective exertion of monopsony power over the patent holder.  . . . 

The Antitrust Division will therefore investigate and bring enforcement actions to end practices that eliminate the independent centers of decision-making and thereby harm competitive processes, including price competition and innovation competition.  Often a single maverick firm may be willing to take a chance on a new and innovative technology or business model that the rest of its competitors would rather see killed off in its incipiency.  Antitrust law recognizes the consumer benefit of those entrepreneurial and innovative tendencies and their vulnerability to collusion.

Although there are certain best practices for guarding the process of standard setting against such abuses, we are concerned that some standard-setting organizations may not even attempt to adopt these safeguards.  

. . . Calling your meetings a standard-setting organization, or even in fact publishing some standards necessary for interoperability, is not a free pass for coordination designed to reduce common competitive threats or forestalling innovative developments in the industry that put a legacy business model at risk.

… Patent policies affect the incentives for innovation.  If an SSO’s policy is too restrictive for one side or the other, it also risks deterring participation in procompetitive standard setting. 

Just as competition in the marketplace results in better outcomes for the consumers of goods and services, competition among standard-setting organizations to adopt better patent policies can result in better outcomes for the consumers of standard-setting activities (that is, for the participants themselves). 

It is for this reason that we will take a dim view of any coordinated effort by competitors to stifle competition among standard-setting organizations, including competition to offer the patent policy that brings the most participants to the table.  For instance, competitors would come under scrutiny if they orchestrated a group boycott of an SSO with a patent policy that is unfavorable to their commercial interests. 

The U.S. Industrial (Technology) Military Complex is Alive and Well: Microsoft and the Defense Innovation Unit

The LA Times recently published an article titled, “Microsoft will Give the U.S. Military Access to ‘All the Technology We Create'.”  The article discusses Microsoft’s recent announcement as well as the tension in some U.S. technology companies concerning working with the U.S. military.  For example, some Google employees have expressed displeasure with Google’s decision to work with the U.S. military.  The article notes that:

The Defense Department has established the Defense Innovation Unit, which is intended to provide capital — without taking an ownership stake — to companies that want to work on prototype projects that help address problems faced by the U.S. military.

The Defense Innovation Unit’s website is here.  The Defense Innovation Unit focuses on five areas: artificial intelligence, autonomous systems, human systems, information technology and space.  Their team includes: “about 75 military and civilian personnel. Prior to joining DIU, we’ve launched and sold companies backed by tier-1 VCs; led teams at the Joint Staff, the Office of the Secretary of Defense, and the White House; served with our military around the world; and helped build some of Silicon Valley's most iconic companies.”  Notably, the program is built around speed—a contractor will know if they have a “pilot” agreement within 30 days with a quick follow-through for a more involved contract.  The 2017 Annual Report states the mission of the Defense Innovation Unit:

The U.S. Department of Defense (DoD) established Defense Innovation Unit Experimental (DIUx) to accelerate commercial innovation to the warfighter in order to meet the changing demands of today’s strategic and technological environments. The Department’s 2018 National Defense Strategy (NDS) boldly acknowledges that our nation’s military-technical advantage is eroding as our competitors and adversaries have the same access to the global technology marketplace driving innovation. Without significant changes to DoD’s acquisition culture and processes, the U.S. military will continue to lose its long-held technological superiority.

Military-technical competition is dramatically different from past decades when key technologies were developed in government labs, often exclusively for military use. A technology first-mover up until the end of the Cold War, DoD must now adopt a fast follower posture to keep pace with commercial refresh cycles. The commercial sector leads the way in many cutting-edge areas from artificial intelligence to autonomous systems to space, the convergence of which generates the prospect of dramatic changes to the character of warfare. The implications of global access to advanced commercial technology are visible in today’s conflicts and the loss of exclusivity means the likelihood of technological surprise is far higher.

It is DIUx’s mission to lead DoD’s break with past paradigms of military-technical advantage to become fast adapters -- as opposed to sole developers -- of technology, integrating the advanced commercial capabilities necessary for strategic advantage. In this hyper-competitive environment, DoD needs to prioritize speed of delivery, rapid and modular upgrades, and quick operational adaptation on the battlefield. Success in this new era of military-technical competition no longer goes to those who seek the most exquisite systems, but rather to those who move fast and think creatively.

Headquartered in Mountain View, CA, with offices in Central Texas (Austin); Boston, MA; and in the Pentagon. . . . 

On intellectual property, the Frequently Asked Questions page states:

How is intellectual property treated and protected?

Prior to the start of a project, it is important that a company identify rights in pre-existing data. In general, companies retain ownership of IP assets created during the effort. DoD is usually licensed certain rights to use these assets in accordance with the agreed OT (i.e., pilot contract) terms and conditions. These rights control, inter alia, how DoD can use, disclose, or reproduce company-owned proprietary information.

What are the different ways IP is licensed under an OT agreement (i.e., pilot contract)?

Unlimited Rights. These give DoD the ability to use, disclose, reproduce, prepare derivative works, distribute copies, and perform publicly, in any manner and for any purpose, and to have or permit others to do so (absent any separate security classification or export control restriction). We usually don't need this and do not anticipate awarding any OT agreements (i.e., pilot contracts) with unlimited rights.

Government Purpose Rights. These give DoD the ability to use, modify, reproduce, release, perform, display, or disclose data only within the Government (including competitive re-procurement). However, DoD cannot release the data for any commercial purpose.

Limited Rights. DoD may use the company’s data, other than computer software, within DoD but not release the data outside of DoD except in limited circumstances. DoD may not use the data for manufacturing additional quantities of the item. Data may not be released without company permission/associated nondisclosure agreement.

Restricted Rights. These apply to noncommercial computer software only. DoD may only run the software on one computer at a time, and may make only the minimum copies needed for backup. The software may not be released outside of DoD except with company permission/associated nondisclosure agreement.

Northwestern Releases Technology Standards and Standard Setting Organizations Databases and Congratulations to Dr. Roya Ghafele!

Northwestern University, Pritzker Law School, has released three databases on technology standards and standard setting organizations.  The announcement states:

The Searle Center on Law, Regulation, and Economic Growth is pleased to announce the release of three important databases on Technology Standards and Standard Setting Organizations (SSOs). The databases are available free of charge for all academic researchers.

The first database, known as the Searle Center Database on Technology Standards and Standard Setting Organizations, created by Justus Baron and Daniel F. Spulber, contains original data on the rules and membership of SSOs, and bibliographic information on published technology standards (including an original database of normative and informative references between standard documents).

The second database, created by Justus Baron and Tim Pohlmann (IPlyitics), contains the currently most comprehensive database of declared standard-essential patents (SEP) and the first detailed mapping of declared SEPs to a systematic dataset of standard documents.

The third database, created by Justus Baron and Kirti Gupta (Qualcomm), includes detailed procedural data on standard development at an important SSO, the 3rd Generation Partnership Project 3GPP.

The three databases are inter-related, and share a common system of identifiers for standards and firms to facilitate research applications combining the various databases.

Under the direction of Daniel F. Spulber, (Kellogg School of Management, Northwestern University, and Research Director of the Searle Center), the Searle Center's Research Project on Innovation Economics addresses a broad range of important issues involving intellectual property (IP), research and development (R&D), the market for inventions, innovation, and technology standards.

For details on the databases and the Searle Center's ongoing Research Project on Innovation Economics Project please visit: http://www.law.northwestern.edu/searlecenter/innovationeconomics
Papers describing the databases can be found at the following links:

- Justus Baron and Daniel Spulber: Technology Standards and Standard Setting Organizations: Introduction to the Searle Center Database, Northwestern Law & Econ Research Paper No. 17-16. Available at SSRN: https://ssrn.com/abstract=3073165 or http://dx.doi.org/10.2139/ssrn.3073165, forthcoming Journal of Economics and Management Strategy, 2018.

- Justus Baron and Kirti Gupta: Unpacking 3GPP Standards. forthcoming Journal of Economics and Management Strategy, 2018.

- Justus Baron and Tim Pohlmann: Mapping Standards to Patents Using Declarations of Standard-Essential Patents, forthcoming Journal of Economics and Management Strategy, 2018.

Please see the following instructions to receive access to the database:

- The three Searle Center databases are intended only for academic research. Commercial and or for-profit research is strictly prohibited.

- Prior to being granted access to the databases, all academic researchers must first compete a Data License Agreement (DUA).

- The DUA is available for download here: http://bit.ly/searlessodua
- Once requestor has filled out the required fields and signed the DUA, email a scan of the DUA to searlecenter@law.northwestern.edu

- Please note that a PDF electronic signature on the DUA is acceptable.

- All research assistants or research personnel that will have access to the data must also complete DUA's.

- Once we receive your signed DUA, we will verify that your application fits the criteria listed above. If we conclude that it does, we will then send you a link to a Box Folder where all of the files and supporting documents will be permanently hosted. You may have to create a Box account in order to access the databases.
. . .

The databases release is apparently for academics.  My guess is that others can access the databases for a fee. 

Congratulations to Oxfirst’s Dr. Roya Ghafele on joining the EU Commissions’ Group of Experts on Licensing and Valuation of Standard Essential Patents!  According to the press release:

The purpose of the expert group is to ‘deepen the expertise on evolving industry practices related to the licensing of standard essential patents in the context of the digitalisation of the economy, the sound valuation of intellectual property and the determination of fair, reasonable and non-discriminatory ("FRAND") licensing terms.’ The Expert Group’s importance to European and international governance formulation on FRAND is widely recognized. The Expert Group will address a host of complex issues pertaining to patents that read on standards, as already set out in 2017 in the E.C.’s ‘Communication from the Commission to the Institutions on Setting out the EU approach to Standard Essential Patents.’

USPTO Director Iancu Calls for Change of Focus in so-called "Patent Troll" Debate

USPTO Director Iancu recently gave a speech in Texas concerning the debate involving innovation and patent enforcement by so-called "patent trolls" in the United States.  Notably, he lauds risk takers and innovators, and states that the patent troll narrative is designed to stifle innovation by essentially creating fear about participating in innovation.  He wants to focus on the positive stories of innovation.  He doesn’t appear to take the position that patent trolls (or patent assertion entities) do not abuse the patent system; just that we should focus on the positive by keeping in mind how far we’ve come from an innovation perspective.  He gets pretty close though.  Here’s a relevant portion of his speech:

Anyone could invent in America and everyone was incentivized by our constitutional patent system to do so. And incentivized they were. And invent they did. And the results have been remarkable.

Our constitutional patent system has given rise to a spark of ingenuity and development the magnitude of which humanity has never before known. Electricity and the telephone; the automobile and the airplane; recombinant DNA and DNA synthesis; the microprocessor, genetics and cancer treatments. And so much more. And all of it done with American patents.

Edison, Bell, and the Wright Brothers; Boyer and Cohen and Caruthers; Ted Hoff and Frances Arnold. These are inventors whose work we should celebrate. And theirs are the stories we should tell. Not scary monster stories.

Repeatedly telling “patent troll” stories is indeed odd, especially when they’re being told to the people who have been responsible for the greatest advances in human history.

The narrative must change. And, at least as far as the USPTO is concerned, it has now changed.

We are now focusing on the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to all Americans and to the world.

Take, for example, Bob Metcalfe, currently a professor of innovation and Murchison Fellow of Free Enterprise at the University of Texas in Austin.

By the age of 10, Bob knew he wanted to become an electrical engineer and attend MIT. He did. And followed that up with a master’s and Ph.D. from Harvard. In 1972, Bob began working at Xerox’s Palo Alto Research Center, where he met electrical and radio engineer D.R. Boggs.

With Boggs, Bob invented what came to be known as the Ethernet, the local area networking (LAN) technology that turns PCs into communication tools by linking them together. Today, more than a billion Ethernet-based devices are shipped every year. And then, in 1979, at the height of his career, Bob took a huge risk and left the comfort of Xerox and founded 3Com Corporation.

An inventor on many U.S. patents, Bob was awarded the National Medal of Technology by President George W. Bush in 2003 for his leadership in the invention, standardization, and commercialization of Ethernet. And in 2007, he was inducted into the National Inventors Hall of Fame.

Bob told us recently: “Rapid execution and patents are probably the two major defense mechanisms against the vicious status quo, which is out to crush you.”

Innovation and IP protection have indeed always been America’s mechanisms for progress in the face of the “vicious status quo.”

Take as another example Susann Keohane, IBM Global Research Leader for the Aging Initiative, another Texas-based inventor. Her inventions combine cognitive technology, the Internet of Things, and other emerging technologies to improve quality of life for people with disabilities and the aging population.

Susann is an IBM Master Inventor who holds 114 U.S. patents. And, importantly, she told me she is working on more!

This is the American patent system. These are the heroes who have taken risks to make something new and to change the world. Theirs are the stories that must drive our patent policies.

Because in this country, we want people to take risks. Like Susann and Bob, we want folks to leave their comfort zones and step into the forests of discovery and innovation. We want folks to step out of their lanes and try big, bold, new things. And scaring them with ugly monster stories does precisely the opposite; it drives towards policies that inhibit innovation.

Remarkably, in what I believe amounts to Orwellian “doublespeak," those who’ve been advancing the patent troll narrative argue that they do so because they are actually pro-innovation. That by their highlighting, relentlessly, the dangers in the patent system, they actually encourage innovation. Right!

After hearing about the Big Bad Wolf eating Little Red Riding Hood and her Grandma, would kids be more eager to go into the woods and more eager to take risks? Come on! What encourages more innovation? Susann Keohane, Bob Metcalfe, Thomas Edison, the Wright Brothers, Frances Arnold—or scary monster stories?

What encourages more folks to take risks and become entrepreneurs and inventors? Is it stories highlighting the success of risk-taking and the personal and public gratification of invention, or is it stories highlighting green monsters under bridges and the faults in the patent system?

Look, people are free to express any point of view, and they can certainly advocate for weakening our patent system. But they should be up front about it. Those who spend their time and money relentlessly preaching the dangers of monsters lurking under the innovation ecosystem, and who work exclusively to identify only faults in the system, are unconvincing when they argue that they are doing so for purposes of increasing innovation.

Certainly, innovation and entrepreneurship are risky. And certainly every system has faults, and we must be vigilant about identifying and eliminating abuses when they arise. I am personally committed to doing so. But for any system to be successful, it cannot focus exclusively on its faults. Successful systems must focus on their goals, successes, and aspirations.

Focusing exclusively on selected, known problems has damaging consequences.

The Issue with China and the United States: What to do about the theft of industrial trade secrets?

The Washington Post Editorial Board recently published an opinion piece, titled “The U.S. must take action to stop Chinese industrial espionage,” which strongly condemns China’s alleged theft of trade secrets.  The Editorial Board pointed to the recent indictment concerning DRAM trade secrets allegedly stolen from Micron, a U.S. based company.  The piece notes that a worker from Micron joined a state-supported Chinese company along with other employees--carrying with them trade secrets.  The editorial ends with the statement that, “In the end, China will only respond to compulsion.”  This is a powerful indictment of China from one of the leading newspapers in the United States.  The editorial can be found, here.  

The question is what are the next steps to exercise “compulsion."  This situation is somewhat different than the Chinese government requiring the disclosure of trade secrets for essentially market access to China. Indeed, even for non-state owned Chinese companies, my understanding is that the Chinese government is involved in technology development even in early stages and exercises a veto power over the direction of technology development. Recently, the Chinese government announced a ban on all new computer games in China.  As I've mentioned in a prior post, this could be a case of rogue Chinese employees attempting to become wealthy who may not be acting with express approval of the Chinese government; although perhaps with tacit approval of the government or willful blindness of the government.  Of course, this ultimately is to the great benefit of China.  However, what is our response?  That is the very difficult question the editorial does not address.  We all know there is an issue.  

Moreover, the problem with trade secrets is that once they are disclosed it is very hard if not impossible to put them back in the box.  Once we've lost it; it's likely lost irrevocably.  And, I don't think putting a few people in prison is going to provide much general deterrence to similar behavior.  Will we start seizing assets--does it matter from whom?  That seems unlikely to be smart--our interests are so intertwined now.  As I've mentioned before, will we attempt to ban all Chinese citizens from working or studying in the United States?  Is that in the best interest of our country?  That may not stop the bleeding of information through cybertheft.  More tariffs?  Does that work?

USPTO Discards Broadest Reasonable Interpretation Standard

The USPTO has discarded the broadest reasonable interpretation standard.  This may lead to fewer patents held to be invalid during IPR, PGR, and CBM proceedings.  The announcement states: 

The United States Patent and Trademark Office (USPTO) has published a final rule changing the claim construction standard applied during inter partes review (IPR), post-grant review (PGR), and the transitional program for covered business method patents (CBM) proceedings before the Patent Trial and Appeal Board (PTAB). 

The final rule replaces the “broadest reasonable interpretation” standard with the federal court claim construction standard that is used to construe a claim in a civil action under 35 U.S.C. § 282(b). This is the same claim construction standard articulated in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc), and its progeny. Additionally, under the final rule, when construing a claim term in an IPR, PGR, or CBM, the PTAB will take into consideration any prior claim construction determination that has been made in a civil action, or a proceeding before the International Trade Commission (ITC), if that prior claim construction is timely made of record in that IPR, PGR, or CBM.

. . . As noted in the rule package, the change will lead, among other things, to greater consistency and harmonization with the federal courts and the ITC and lead to greater certainty and predictability in the patent system. . . .  Several comments questioned the proposed “retroactive” application of the rule. In response to these comments, the final rule will not be retroactively applied and instead will apply only to IPR, PGR, and CBM petitions filed on or after the effective date of the final rule, which is November 13, 2018.

University of California Office of Innovation and Entrepreneurship Opens Liaison Office in Beijing

The University of California [UC] has opened a “liaison office” in Beijing to provide opportunities for UC startups to access China’s large market for products and services as well as its venture capital market.  The press release states, in part:

Office Opening

In June, 2018, UC’s Office of Innovation and Entrepreneurship (I&E) established a liaison office in Beijing at TusStar, a leading tech incubator and early-stage investment fund. The key objective of this liaison office is to provide business development and business-matching services as well as overall administrative support to UC startups looking to expand their business in China.

TusStar operates over 160 incubators globally; it has deployed over $2 billion in investment capital since 2001.  It is owned by Tus Holdings, a large integrated enterprise with 500+ subsidiaries and $15+ billion in investment capital.  

The new UC office will be located inside TusPark, the largest science park in Zhongguancun, the “Silicon Valley hub” of Beijing where multinational tech companies, such as Google, are based. 

Key Objective

The creation of this new office and relationship with TusStar will help UC startups connect with resources to market their products to Chinese customers, find additional sources of investor funding, connect with strategic manufacturing and distribution partners, and network with other UC alumni and UC entrepreneurs in China.

The Beijing office will also provide UC’s Office of Innovation and Entrepreneurship with the necessary business network and program support to coordinate alumni events and other programs connecting with Chinese investors and industry partners, i.e., cross-border tours, pitch competitions, conferences, forums and symposiums.

IP, Digital Trade and the New "NAFTA"

The United States Trade Representative has released a summary of some of the highlights concerning IP and the new “NAFTA” between the United States, Canada and Mexico.  The USMC agreement (United States Marine Corps or What We Say -- I'm making a joke.) summary states, in part:

UNITED STATES–MEXICO–CANADA TRADE FACT SHEET Modernizing NAFTA into a 21st Century Trade Agreement

The United States, Mexico, and Canada have reached an agreement to modernize the 24-year-old NAFTA into a 21st century, high-standard agreement. The new United States-Mexico-Canada Agreement (USMCA) will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.

INTELLECTUAL PROPERTY

The United States, Mexico, and Canada have reached an agreement on a modernized, high-standard Intellectual Property (IP) chapter that provides strong and effective protection and enforcement of IP rights critical to driving innovation, creating economic growth, and supporting American jobs.

Key Highlights: Protections for United States Innovators and Creators

The new IP Chapter will:

• Include 10 years of data protection for biologic drugs and a robust scope of products eligible for protection.
• Require full national treatment for copyright and related rights so United States creators are not deprived of the same protections that domestic creators receive in a foreign market.
• Continue to provide strong patent protection for innovators by enshrining patentability standards and patent office best practices to ensure that United States innovators, including small- and medium-sized businesses, are able to protect their inventions with patents.
• Include strong protection for pharmaceutical and agricultural innovators.
• Require a minimum copyright term of life of the author plus 70 years, and for those works with a copyright term that is not based on the life of a person, a minimum of 75 years after first authorized publication.
• Require strong standards against the circumvention of technological protection measures that often protect works such as digital music, movies, and books.
• Establish appropriate copyright safe harbors to provide protection for IP and predictability for legitimate enterprises that do not directly benefit from the infringement, consistent with United States law.
• Provide important procedural safeguards for recognition of new geographical indications (GIs), including strong standards for protection against issuances of GIs that would prevent United States producers from using common names, as well as establish a mechanism for consultation between the Parties on future GIs pursuant to international agreements.
• Enhance provisions for protecting trademarks, including well-known marks, to help companies that have invested effort and resources into establishing goodwill for their brands.

Key Achievement: Most Comprehensive Enforcement Provisions of Any Trade Agreement

For the first time, a trade agreement will require all of the following:

• Ex officio authority for law enforcement officials to stop suspected counterfeit or pirated goods at every phase of entering, exiting, and transiting through the territory of any Party.
• Express recognition that IP enforcement procedures must be available for the digital environment for trademark and copyright or related rights infringement.
• Meaningful criminal procedures and penalties for unauthorized camcording of movies, which is a significant source of pirated movies online.
• Civil and criminal penalties for satellite and cable signal theft.
• Broad protection against trade secret theft, including against state-owned enterprises.

Key Achievement: Strongest Standards of Protection for Trade Secrets of Any Prior FTA

In particular, the Chapter has the most robust protection for trade secrets of any prior United States trade agreement.  It includes all of the following protections against misappropriation of trade secrets, including by state-owned enterprises: civil procedures and remedies, criminal procedures and penalties, prohibitions against impeding licensing of trade secrets, judicial procedures to prevent disclosure of trade secrets during the litigation process, and penalties for government officials for the unauthorized disclosure of trade secrets. 

DIGITAL TRADE

The new Digital Trade chapter contains the strongest disciplines on digital trade of any international agreement, providing a firm foundation for the expansion of trade and investment in the innovative products and services where the United States has a competitive advantage. 

Key Highlights of the Digital Trade Chapter

The new Digital Trade chapter will:

• Prohibit customs duties and other discriminatory measures from being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.).
• Ensure that data can be transferred cross-border, and that limits on where data can be stored and processed are minimized, thereby enhancing and protecting the global digital ecosystem.
• Ensure that suppliers are not restricted in their use of electronic authentication or electronic signatures, thereby facilitating digital transactions.
• Guarantee that enforceable consumer protections, including for privacy and unsolicited communications, apply to the digital marketplace.
• Limit governments’ ability to require disclosure of proprietary computer source code and algorithms, to better protect the competitiveness of digital suppliers.
• Promote collaboration in tackling cybersecurity challenges while seeking to promote industry best practices to keep networks and services secure.
• Promote open access to government-generated public data, to enhance innovative use in commercial applications and services.
• Limit the civil liability of Internet platforms for third-party content that such platforms host or process, outside of the realm of intellectual property enforcement, thereby enhancing the economic viability of these engines of growth that depend on user interaction and user content.

New Collaboration Between University of California, Irvine and Beckman Coulter Diagnostics

Beckman Coulter Diagnostics and the University of California, Irvine have issued a press release announcing their new collaboration.  The press release states, in part:

"We are honored that Beckman Coulter Diagnostics has selected UCI as a strategic innovation partner," said Richard Sudek, Ph.D., chief innovation officer and executive director at UCI Applied Innovation. "This is a new type of industry collaboration which aims to significantly change how industry and universities partner together. We look forward to teaming up with Beckman Coulter to increase the speed and quality of how UCI discoveries make it to market."

"We are excited to tap into the broad expertise of UCI researchers as we focus on identifying innovative solutions to clinical unmet needs," said Fiona Adair, Ph.D., vice president of strategy and innovation at Beckman Coulter Diagnostics. "We believe this type of academic-industry partnership can lead to development of innovative diagnostic technologies to improve healthcare. UCI Applied Innovation is a place where valuable new ideas are incubated. In turn, we can provide promising students, researchers, and entrepreneurs industry-specific feedback and mentorship opportunities. We will have a Beckman Coulter office at the Cove @ UCI Applied Innovation for seamless collaboration with academic units as well as to integrate into the innovation ecosystem."

This level of collaboration is an industry model of synthesizing research, commercial expertise and clinical needs to produce beneficial results. As a first step, Beckman Coulter will fund Proof of Product grants to help UCI innovations bridge the gap between the lab and early commercialization. Through these grants, Beckman Coulter will determine a specific focus area for university entrepreneurial teams. 

Additionally, Beckman Coulter will also seek eligible UCI graduate students to enter its competitive talent onboarding program, in which they'll get the opportunity to work across multiple divisions of the company. 

"The partnership with UCI represents a landmark in Beckman Coulter's strategic initiative to drive translational innovation and extend the company's leadership in clinical diagnostics." said John Blackwood, senior vice president and general manager of products and services at Beckman Coulter. "Beckman Coulter is engaging with academic partners that excel in applying the latest technology to develop superior solutions for better patient outcomes. UCI maintains an ecosystem of innovation that facilitates academic-industry partnerships and we are excited about the opportunity to leverage UCI's research expertise for the benefit of patients around the world."

Hat tip to Technology Transfer Central. 

The Tide Turns: Rising Legal Services Employment in the United States

The legal services market in the United States contracted since the Great Recession.  However, there have been reports of a rebound.  CBRE, a commercial real estate firm, has released a report concerning legal services and real estate in the United States.  Part of the report concerns rethinking how square footage in law firms can be used more efficiently, including increasing collaboration space.  Another part of the report examines legal services employment—attorney employment--across the United States. 

The top five major legal services employment markets are 1) New York City; 2) Los Angeles; 3) Miami; 4) Chicago; and 5) Washington DC.  San Francisco is ninth.  The report states that there has not been much growth in most of the top ten major legal services employment markets except for Los Angeles (experiencing low double digit growth between 2015 and 2017) and San Francisco.  The report states that this is likely due to the growth in the media and tech industries.  In the highest growth markets category, Austin and Atlanta were the leaders in attorney growth.  Austin added more than 10%.  Austin is well-known for its tech industry.  According to the report, the cities of Austin, Atlanta and Kansas City added 10% or more growth in attorney positions since 2015.  The report also discusses the cities with largest decline in law degrees awarded. 

Morse on Using Tax Transfer Prices to Inform Patent Damages

In a recent essay titled, "Seeking Comparable Transactions in Patent and Tax," in the University of Texas Law School Review of Litigation, Professor Susan C. Morse discusses the merits of whether tax transfer prices can help inform patent damages.  The introduction of her article states:

Most business firms do not go around licensing their crown jewel intellectual property to unrelated third parties.  This presents a problem for both patent law and tax law.  In patent litigation, setting damages for a reasonable royalty under Georgia Pacific[1] invites the use of a benchmark royalty rate that would have been agreed to had the litigating parties negotiated a market rate in advance.  This counterfactual analysis repeats in tax law when firms allocate taxable income among affiliates located in different tax jurisdictions.  Transfer pricing rules similarly seek a price, such as a royalty, that would have been agreed to had the related affiliates negotiated a market rate as adverse, or “arm’s length,” parties.[2]

In their article, Tax Solutions to Patent Damages, Jennifer Blouin and Melissa Wasserman argue that tax transfer prices can provide some of the data needed to set patent litigation damages.[3]  One could also ask the converse, which is whether patent litigation outcomes can provide some data that tax transfer pricing needs. If patent law looks to tax transfer prices, it sees the advantage that the tax transfer prices are set ex ante when IP developed by one affiliate was first used by another affiliate.  This roughly aligns with patent law’s touchstone of a “hypothetical negotiation” that produces an “ex ante” license.[4]   If tax law looks to patent law, it sees the advantage that patent damages emerge from an adversarial process.  Patent damages may be set ex post, but their validity is bolstered by the fact that they are contested.

Blouin and Wasserman argue that parties and courts should make use of the large body of tax transfer price information to help support reasonable royalty calculations in patent damages cases.  Perhaps so.  But transfer pricing data is messy.  Using tax transfer prices sets for parties and courts the challenging task of understanding the prices in context.[5]  The risk exists that the analysis will fail because of the weight of its own complexity.

She concludes:

Tax transfer prices are imperfect. They are motivated by the incentive to reduce tax, not by the incentive to get the prices right.  Theory, doctrine, and constrained administrative resources limit the quality or truth of transfer prices.  But this does not mean that tax transfer prices are irrelevant to the problem of patent damages.  It means that the prices are contextual.  If they are used, they should be used with attention to comparability of terms, taxpayer incentives, and government enforcement. Patent litigants may have ample incentive to engage with questions of comparability, but understanding the interaction between the complex tax system and the complex patent system as applied to transfer pricing data would not be easy.  It could be so hard that the transaction costs would exceed the benefit of any increase in the quality of patent damages awards.

The essay can be found, here. A draft of the Professor Blouin and Professor Wasserman paper, titled, "Tax Solutions to Patent Damages," is available, here.  

Trump Requests Comments for Joint Strategic Plan on IP Enforcement

The President Trump's U.S. Office of Management and Budget has released a Federal Register request for comments from the public to help develop the U.S. 3-year Joint Strategic Plan on Intellectual Property Enforcement.  A summary of the request states:

The Federal Government is starting the process to develop a new 3-year Joint Strategic Plan on Intellectual Property Enforcement. By committing to common goals, the U.S. Government will more effectively and efficiently promote and protect our intellectual property. In this request for comments, the Executive Office of the President (``EOP''), Office of the U.S. Intellectual Property Enforcement Coordinator invites public input and participation in shaping the Administration's intellectual property enforcement strategy. The Office of the U.S. Intellectual Property Enforcement Coordinator (``IPEC'') is charged with developing, with certain Federal departments and agencies, the Administration's Joint Strategic Plan on Intellectual Property Enforcement for submission to Congress every three years. The previous 3-year Joint Strategic Plans were issued in 2010, 2013, and 2016. To assist IPEC and Federal agencies in our preparation of the fourth 3-year plan, IPEC requests input and recommendations from the public for improving the U.S. Government's intellectual property enforcement efforts, along the lines of this Administration's four-part strategic approach, described in greater detail below.

The prior 3-year joint strategic plan can be found, here.  We previously discussed the 2013 plan, here.  The complete Federal Register request can be found, here. 

MBA Apps Drop in United States: Could More of an IP Law Focus Help Some Schools?

In an article titled, “MBA Apps Take a Shocking Plunge” published at Poets & Quants,  John A. Byrne discusses how the number of MBA applications in the United States has dropped substantially.  The amount of the drop depends on the particular school; however, even top schools are experiencing a substantial decrease.  The article states:

At Rice University’s Jones Graduate School, for example, candidates to the school’s full-time programs plummeted by 27.7% to just 587 applications from 813 a year earlier.  At the McCombs School of Business at the University of Texas-Austin, applications fell 19.6%. At the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill, applicants declined by 18.3%. Applications dipped 16.2% at Georgetown University McDonough School of Business, while they fell 13.2% at Indiana University’s Kelley School of Business. 

The article provides several reasons for the decline in applications: difficulty for international students to obtain visas; some international students choosing MBA schools outside the U.S., such as in Canada; a booming economy; and high cost.  While I do not think it is a cause of the decline in applications, I do wonder if the business schools who have suffered a decline have adapted their curriculum to include intellectual property law related subjects.  I have not reviewed their course offerings, but I wonder if a school that did emphasize intellectual property would have a competitive edge.  Others have made this point, but I am not sure if there has been much change.  This may be a good time for innovation for some schools.  

A Presumption of Irreparable Harm for Injunctions for Trademark Matters?

The American Intellectual Property Law Association, Intellectual Property Owners Association, and the International Trademark Association have sent a letter to the Chairman and Ranking Member of the U.S. House of Representatives Judiciary Committee concerning the availability of a presumption of irreparable harm related to injunctions in trademark infringement and dilution.  The letter points to the erosion of the presumption by some courts following the U.S. Supreme Court eBay case concerning patent injunctions.  The letter states:

Injury in most Lanham Act violations is typically not readily or immediately quantifiable. Injunctive relief (which requires the claimant to meet a four-part test, including a showing of irreparable harm) most often is the only effective remedy to prevent harm to consumers and protect the trademark owner's reputation. For this reason, historically, U.S. federal courts, when considering a claim under the Lanham Act, almost uniformly applied a rebuttable presumption of irreparable harm upon a finding of liability or, in the context of a preliminary injunction, when liability was found to be probable. A rebuttable presumption of irreparable harm is an important avenue to adequate relief, given the difficulty of quantifying this type of injury.  . . .

Legislation reestablishing a presumption of irreparable harm under the Lanham Act would provide clarity for the courts and litigants alike. It would provide injunctive relief to trademark owners who prevail on the merits of their claim or who, in preliminary injunction proceedings, demonstrate that they are likely to prevail on the merits, and allow them to appropriately protect their brands and reputations. This will also protect consumers from harm arising from confusion about the source of products or services.

Hat tip to Professor Dennis Crouch of the Patently Obvious Blog. 

Reducing Regulation at the United States Patent and Trademark Office

The United States Patent and Trademark Office [USPTO] has formed a “Working Group on Regulatory Reform.” [Working Group].  The Working Group is responsible for following President Trump’s Executive Orders concerning reducing regulations: “federal agencies [must repeal] two regulations for every new significant regulation, and in such a way that the total cost of regulations does not increase.”  Notably, the USPTO website has a somewhat broader charge than that: “consider, review, and recommend ways that USPTO regulations can be improved, revised, and streamlined.”  The USPTO website further states:  

This Working Group consists of subject matter experts who are familiar with all of the agency’s regulations and will meet on a weekly basis. Members of this Working Group will also represent the USPTO on the Department of Commerce’s Regulatory Reform Task Force. Throughout this process, the USPTO Working Group will be seeking public input for any rulemaking that would revise or eliminate regulations.

Nicolas Oettinger, Senior Counsel for Regulatory and Legislative Affairs in the USPTO’s Office of General Counsel, will be leading this effort.

Additionally, members of the public may submit their ideas to improve, revise, and streamline USPTO regulations to: RegulatoryReformGroup@uspto.gov (link sends e-mail).

The Working Group’s recommendations will be interesting to follow.  Notably, the public can submit comments. 

Professor Nguyen on Sovereign Patent Funds

Professor Xuan-Thao Nguyen explores government created and funded patent funds in Sovereign Patent Funds recently published in the UC Davis Law Review.  In part, Professor Nguyen reviews and analyzes the sovereign patent funds of numerous countries and investigates their role in patent enforcement.  The following is a part of her introduction of her article:

What are SPFs? How are they created and structured? What purposes do SPFs serve? Are SPFs effective initiatives for foreign governments to encourage innovation and foster competition or are they merely state-sponsored patent trolls? Are they violating international trade law, specifically the World Trade Organization (“WTO”) Agreement on Subsidies and Countervailing Measures?

This Article is the first to address the above questions. The Article proceeds as follows. Part I traces the creation of SPFs in Japan, South Korea, Taiwan, China, and France. Part I also explains when, why, and how each country provides public funding to SPFs. There are many different types of SPFs in different technology and life sciences areas, and with specific goals and mandates, although several share the same goal of aggregating patents. Open innovation and patent licensing are two common themes among the different goals and approaches employed by SPFs. Part II investigates whether SPFs have engaged in patent assertions — attempts to use acquired patents “to generate revenue by asserting them against alleged infringers.” Part II focuses on the simultaneous litigations filed by the French SPF against LG Electronics Corporation and HTC Germany GmbH in Germany and the United States. Likewise, the Asian SPFs have filed lawsuits against multinational companies. The investigation reveals surprises, including that litigation is typically an SPF’s last resort. SPFs are reluctant to embrace litigation. Part II also examines SPFs’ licensing strategies. French and Korean SPFs seem to have success in licensing out. They direct more efforts to selecting quality patents for licensing. In addition, Korean and Japanese SPFs are engaging in licensing for open innovation.

SPFs have been condemned as global patent trolls and state sponsored patent trolls. Part III addresses whether the pejorative label is warranted. Exploring the popular narrative of patent trolls and the evolving landscape of the patent market where former manufacturing companies and research institutions, along with other non-practicing enterprises (“NPEs”), are participants, Part III reveals that the SPF label does not fit SPFs’ characteristics. SPFs are both diverse and complex. Some have collaborated with universities to engage in specific research and development projects. Some share their profits with original inventors. Some facilitate open innovation. Some are doing all of the above. Condemning SPFs as patent trolls amounts to dismissing the true innovations, research, and development that have been the hallmarks of many industries and sectors in Japan, South Korea, China, and France.

SPFs have also been condemned as a trade protectionist measure in violation of international trade law. Part IV examines the heavy charges that SPFs discourage international technology transfers, depress innovation, force foreign companies to accept unfavorable license terms akin to discriminatory tax, support domestic industries at the expense of foreign firms, resurrect ailing national companies, and cause a race to the bottom. Part IV found no evidence to support these condemnations. On the contrary, what SPFs have done since their existence refutes these charges.

If SPFs are illegal subsidies in violation of international trade law, there is an appropriate mechanism to remedy the harm. Part V turns to the WTO solution, analyzing relevant provisions of the WTO Agreement on Subsidies and Countervailing Measures. Part V discusses WTO Tribunal decisions, as they illuminate and interpret legal requirements in subsidy cases. Part V further suggests that the international framework is suited to eliminate SPFs if evidence exists that a particular subsidy is causing injury to a domestic industry. Certainly, using the appropriate channel to address SPFs is preferable to dismissive and pejorative labeling.

Part VI, however, posits that an international trade solution might be unnecessary because SPFs may soon be relics of the past. SPFs can easily alter their structure to remove the government-sponsored characteristic to quiet critics and restless nation litigants in the WTO Tribunal. Moreover, the global innovation and patent market is dynamic and complex; SPFs will not be able to survive and flourish if they are under governmental control. Part VI observes that, in fact, some prominent SPFs are planning to privatize in order to compete and adapt.

Overall, by creating and infusing SPFs with public funding to aggregate patents, a government can seem to have ownership and control of the patents while simultaneously wielding authority in dispute proceedings relating to those very same patents. The government can block or rule against others from challenging the validity of patents. The same government may coerce others into accepting unfavorable patent license terms. The same government also may protect domestic firms at the expense of foreign firms. Such an arrangement seems to create many conflicts. Additionally, SPFs may be illegal subsidies under international trade law. Also, the creation of SPFs suggests a new global chaos in patents. The new chaos raises fear that SPFs would cause a race to the bottom. SPFs become sovereign patent trolls with levers more potent than private patent trolls, depressing innovation for short-term gains. The fear about SPFs, however, is exaggerated. These concerns perhaps emanate from the tendency to group all SPFs from different countries into one and characterize them within the convenient patent troll narrative. Fear not, the present and future development of different SPFs should instead prompt us to rethink patents and the very laws creating them.

The article is available, here.