ROBERT WORK AND RAMA ELLURU
In the second Republican presidential debate, candidates spoke forcefully about China, alternately calling for outright decoupling, claiming we are already in a new cold war, and pledging to “declare independence from China.”
Their rhetoric reflects a broader concern across government about strategic dependence and maintaining America’s technological edge, which the U.S. House Select Committee on the Chinese Communist Party addressed specifically in a hearing over the summer. What went unmentioned was the recent revelation that China’s Huawei’s release of its newest smartphone, which contains a domestically produced chip that is prompting questions about the effectiveness of U.S. export controls, demonstrates that a strategy of technology denial alone will not be sufficient to maintain U.S. leadership.
The passage of the CHIPS and Science Act was a significant initial step, providing more than $50 billion to expand U.S. semiconductor manufacturing capacity and promote scientific research. While we cheer this vital infusion of funding, federal investment on its own will never be enough for us to compete.
When China’s leaders want to dominate an emerging technology like 5G, artificial intelligence, or quantum computing, they direct their centrally planned economy to steer billions of yuan into those areas. Coupled with that are the inherent advantages of Beijing’s military-civil fusion strategy, which, unlike Western systems, seeks to break down firewalls and “create stronger linkages between its civilian economy and defense industrial base,” to share information, collaborate and synchronize efforts. The objective is to advance technological and military dominance hand in hand.
In the United States, there are some historical examples of government-funded research projects leading to commercial technology breakthroughs. However, we increasingly rely on having the right policies to incentivize the private sector to innovate. And for more than 200 years, a strong, reliable and predictable patent system has been a key tool in the U.S. policy arsenal.
By giving inventors a time-limited, exclusive right to use, sell or license their invention, patents have encouraged and rewarded risk-taking and promoted technological breakthroughs. They have provided small inventors, universities, start-ups and entrepreneurs a path to market entry, where they’ve been rewarded by commercial success rather than government assistance. By allowing one inventor to build on the ideas of another, patents have been a driving force in accelerating American innovation.
Given the resounding success of our patent system and its importance to our economic strength and national security, it is distressing that we have seen a continuing assault on that system over the last several decades. A combination of legislative action and judicial decisions have resulted in a weakening of patent rights. This inability to enforce patents and receive a fair return on investment disincentivizes innovation and its private sector funding.
The signs of this happening are clear. In recent years, venture capital funding has increasingly flowed toward investment opportunities outside of the United States, with our share of global venture capital funding falling from 82 percent in 2004 to 49 percent in 2021. And the United States has fallen in key rankings of global innovation.
Meanwhile, China has moved in the opposite direction, strengthening its patent system to complement government-funded efforts and incentivizing its own innovators in its quest to overtake the United States. To demonstrate its commitment, China elevated its new patent office to a Cabinet-level equivalent and has enforced its new patent protections firmly. At the same time, it has challenged foreign patent claims in fora like the World Trade Organization and our own Patent Trial and Appeal Board (PTAB).
As the National Security Commission on Artificial Intelligence (for which we served as vice chair and staff) wrote in its final report, “China is both leveraging and exploiting intellectual property (IP) policies as a critical tool within its national strategies for emerging technologies.” Unfortunately, “the United States has failed to similarly recognize the importance of IP in securing its own national security, economic interests, and technology competitiveness.” Left unaddressed, America is in danger of losing its “comparative advantage in securing stable and effective property rights in new technological innovation.”
Despite the commission’s clear call for a course correction on U.S. IP policy, some government leaders have recommended policy changes that would further weaken patent rights, including proposing legislation that would make it harder for the U.S. International Trade Commission to block infringing imports from China. Fortunately, other approaches to providing clarity and certainty in patent rights that underpin investments in innovation are available, including addressing repetitive and duplicative patent challenges at the PTAB, harmonizing evidentiary standards used there with those used in district courts, and undoing a long series of judicial decisions that have created immense inconsistency and uncertainty regarding the subject matter that is eligible for patent protection.
In the 21st century, supporting our military is necessary, but not sufficient to ensure our national security. Our national security today is tied just as much to the productivity and dynamism of our private sector economy and its ability to incentivize private investment into new, cutting-edge technologies. And strong patent rights have historically driven that private-sector investment. We should take every step possible to preserve and strengthen them.
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