Issues & Insights

5G: We’re Winning the Tech Race, But Losing the Legal Race

Economic numbers can be confusing — and scary. Tax reform charged the economy up. Trade wars have added uncertainty. Unemployment is at historic lows. Oil is possibly set for a price spike.

At times like this, when optimism, pessimism, and uncertainty all coexist, it would be beneficial if the government would speak with one voice. Unfortunately, it currently seems that one hand of our government doesn’t appear to be in sync with the other. And that is causing more — and more importantly unneeded — uncertainty.

An example of this unneeded uncertainty is the government’s role in the global battle for 5G dominance.

Many elements of the Trump administration have taken strong action to support U.S. 5G leadership and to stop Huawei — seen by most as an arm of the Chinese government — from gaining control of 5G. At the same time, part of the government continues a lawsuit begun by the Obama Federal Trade Commission to hobble the one company that can help us maintain that leadership — even turning to Huawei to help its case.

The leader in the U.S. in 5G technology is Qualcomm. Qualcomm developed the foundational technology that enables 5G and everyone else is building upon that. Huawei in China is still behind, but it is working hard to stay close. And this lead over the rest of the world gives both Qualcomm and the U.S. an economic advantage that other countries are understandably jealous about.

President Trump made sweeping policy decisions in an attempt to defend the U.S. leadership advantage in 5G, and also protect Qualcomm. He has further made the Chinese theft of U.S. intellectual property a primary talking point of his administration’s trade talks.

What’s more, Trump’s director of the U.S. Patent and Trademark office, Andre Iancu, has made some great strides in helping restore not only the strength of the U.S. innovation economy, but also the way in which we discuss innovators. He has been slowly rolling back the work of the last administration in harming the innovation system, and is also doing his best to promote the next generation of inventors. His presence at the USPTO has helped companies such as Qualcomm know that they have the support of the government when making investments into new technology like 5G and beyond.

The Trump administration should pat itself on the back for identifying a goal — a strong technology lead — and accomplishing that objective.

However, the story doesn’t end there. A flip side threatens to undo all of the good work with actions that are directly at odds with the positive things that have been achieved. The FTC just won a federal patent case against Qualcomm that has the potential to set back the company and make it almost impossible for it or any other U.S. innovators to win the next technology battle. The lawsuit was filed in the final days of the Obama administration by FTC officials and has unfortunately continued. 

In order to rule for the FTC, U.S. District Judge Lucy Koh had to throw out or “discount” all of the testimony from Qualcomm executives. In fact, the judge not only ignored the testimony of Qualcomm’s executives, but on the other side she accepted the testimony of Huawei — which the FTC called as its leadoff witness!

It is both perplexing and troubling how harmful the decision is. According to the Wall Street Journal: “The biggest threat to America’s 5G leadership isn’t China or Huawei, federal Judge Lucy Koh revealed in her sweeping 233-page ruling against Qualcomm Tuesday in a Federal Trade Commission lawsuit. It’s regulators and judges who try to control markets.”

I am a policy geek and an economist. I am not qualified to judge what the outcome of Qualcomm’s case should have been. However, I do know that a judge should at least listen to both sides. I also know that a lot of people smarter that I am regarding the law have opined on the travesty of the decision and have argued that it is a total misuse of antitrust law. 

And, it should also be clear that taking the testimony of an international competitor — that is really an extension of the Chinese government — over the testimony of a U.S. company is troubling, to say the least. Most importantly, it is easy to see that this ruling is a major blow to Trump’s goal of winning the worldwide technology race. 

In the hours after the decision, a number of industry and market analysts pointed out that the big winner from this decision is Huawei. So not only was the decision widely panned, not only was the handling of the case questionable, it sets back all of the hard work that the president has done to put America in the technological lead.

Given the direction of intellectual property policy and law over the past decade or two, away from research-and-development companies and more favorable toward infringers, Qualcomm (an R&D company) is doing an amazing job at fighting and staying in the international technology lead. This ruling, if left to stand, could be the straw that breaks the company’s back. Which is a travesty because it looked like Trump was attempting to take the innovation economy in a different direction.

Charles Sauer is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.

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