Washington Fiddles While China Burns Our Innovators
By Frank Cullen
The Department of Justice recently charged a Chinese spy for attempted espionage.
But his target wasn't a military institution or government agency -- it was General Electric. The spy had hidden confidential files, involving technology worth millions of dollars, in the codes of digital photographs and sent them back to a co-conspirator in China.
This sort of thievery is distressingly common. In total, Beijing steals approximately $600 billion in American intellectual property every year. This staggering -- and ongoing -- theft has helped make China into the world's second-largest economy and America's greatest geopolitical rival.
A better defense against IP theft is desperately needed. But our leaders shouldn't delude themselves -- cracking down on corporate espionage won't be enough to check the rise of China. Policymakers also need to actively stimulate American innovation, by making it easier for companies to safeguard their best ideas and products. Only then can we out-compete China.
All three branches of government have a role to play in these reforms.
Congress can start by passing Senator Thom Tillis's (R-NC) Patent Eligibility Restoration Act once it's reintroduced, which would effectively overrule a series of disastrous court decisions that have made it nearly impossible for U.S. companies to patent breakthroughs in crucial sectors like biotechnology, artificial intelligence, and 5G networks. Restoring patent eligibility in these fields would stimulate more research here in America and help ensure that capital doesn't flow to other more permissive countries, including China.
The executive branch could impose restrictions on when companies can petition the Patent Trial and Appeal Board, an administrative law body that reviews the validity of patents. For over a decade, Big Tech companies, including major Chinese companies like Huawei, Lenovo and ZTE, have challenged smaller rivals' U.S. patents at the PTAB in addition to litigating related patent challenges and patent infringement cases in the courts -- creating double-jeopardy situations where inventors have to defend their intellectual property on two fronts at once.
That's not fair. Double jeopardy inherently makes intellectual property riskier, and thus less valuable, in the eyes of investors -- and thus depresses startup valuations and deters R&D spending. Companies have a right to challenge the validity of patents they have been accused of infringing -- but they should have to choose between PTAB or the courts, rather than trying their luck in both.
The Federal Trade Commission -- an independent agency, to be clear -- could drop its proposed ban on all non-compete agreements. Without non-compete agreements, employees of high-tech companies would be able to defect to competing firms and easily divulge valuable trade secrets -- thereby derailing their previous employer's breakthrough R&D projects.
The Office of the United States Trade Representative could more forcefully crack down on digital piracy. A recent USTR report noted that China is one of the main sources of illegal recordings of theater performances and films. Such theft devastates the U.S. entertainment industry -- and costs the economy up to $71 billion annually.
The courts could also strike a blow against IP theft by issuing injunctions that force infringers to stop using the patented designs and ideas they've stolen -- rather than merely ordering them to pay monetary damages to partially compensate patent owners for the theft.
Lawmakers are working to combat Chinese IP theft. But we shouldn't pretend it's the only threat to American innovation. We also need to modernize our own laws and regulations to help companies protect, and further develop, their most promising ideas.
Frank Cullen is executive director of the Council for Innovation Promotion.
