A License to Steal

Thomas Schatz
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Posted: Feb 05, 2015 3:16 PM
A License to Steal

Editor's note: Deborah Collier coauthored this piece. 

Life sometimes imitates fiction. James Bond had a “license to kill.” There are some individuals and nations that believe they have a “license to steal” intellectual property (IP), which can kill innovation.

While patent litigation reform and the June 19 Supreme Court decision regarding business methods and abstract ideas have dominated IP news in 2014, the most serious challenges to patents lie overseas. Several countries, particularly China, have been departing from international IP norms by undermining patents to the extent that they are essentially taking them from their owners in order to pursue domestic economic goals. Therefore, strong protection of patents both in the U.S. and globally is now more critical than ever. And in order to clearly convey this message, legislators must not move any bills during the 114th Congress that would undermine the nation’s robust patent system.

One of the reasons for the aggressive attacks on U.S. patents is that these countries know that IP is essential to economic success. According to the Global Intellectual Property Center, in 2012 IP was responsible for more than 55 million jobs in the U.S. A report released by Economists Incorporated on November 12, 2014 found that patents and other intellectual property constitute approximately 55 percent of U.S. GDP, and intangible assets including corporate IP and brand recognition account for 80 percent of the value of U.S. public companies. The report also cited innovative methods of patent licensing that could add up to $200 billion in new growth to the U.S. economy, since 95 percent of patents currently do not generate any licensing revenue.

On November 17, 2014, Citizens Against Government Waste released Intellectual Property: Making it Personal, which includes several examples of how IP theft adversely impacts innovators. Beyond the individual stories, the book also highlights how China is using its six year-old anti-monopoly law to curtail IP rights and promote industrial policy, which adversely impacts entire companies, not just individual innovators.

In particular, CAGW’s book noted two Federal Trade Commission (FTC) decisions cited by Commissioner Maureen Ohlhausen, who expressed her concern that they could convey to other nations that the U.S. does not highly value IP rights. The commissioner has heard Chinese officials citing the two FTC cases as settled U.S. law and, therefore, supportive of their nation’s restrictive policies. In fact, the cases are exceptions to U.S. IP rights protection.

FTC Commissioner Joshua Wright expressed similar concerns about the FTC as well as the Department of Justice (DOJ) in his remarks to the New York City Bar Association on March 11, 2014. He said that antitrust laws could be used to limit IP rights in developing antitrust systems, particularly China. In its September 2014 report on the implementation of China’s anti-monopoly law (AML), the U.S. Chamber of Commerce reiterated that the AML is being used to both support China’s industrial policy and systematically restrict IP rights.

Commissioner Wright also stated that the FTC and DOJ must enforce antitrust laws equally for both IP and real property. Otherwise, special rules for IP would degrade the value of such property rights and create an ad hoc approach to enforcement that would make it more difficult to protect IP rights both in the U.S and around the world.

George Mason University School of Law Professor Richard Epstein, in his December 1 preview of his policy brief on China’s AML, also noted that the FTC and DOJ actions encourage the Chinese to discriminate against foreign patents and allow them to be incorporated into state-run operations. He warned that these treacherous practices could be adopted by other countries.

The federal government generally does a good job promoting and protecting IP rights both in the U.S and around the world. The FTC and DOJ should therefore stop working at cross purposes with these objectives. Any deviation from such policies is an invitation to other countries to degrade and purloin IP from U.S. innovators for their own domestic purposes.

This license to steal must be revoked.