Of the many breathtaking actions in President Joe Biden’s executive order on Promoting Competition in the American Economy, here’s one that undercuts stated Biden administration priorities.
Biden has expressed intention to counter China’s aggressive efforts to leapfrog America and the West in emerging technologies. The president has indicated support for promoting domestic research and development in areas such as 5G and artificial intelligence, and boost U.S. manufacturing in semiconductors and other strategic goods.
Clearly, China is playing to win. Its military-civil fusion strategy involves theft of American intellectual property, nefarious funding of propaganda centers at American institutions and investment bids in U.S. firms in emerging technologies. And now China is using a new gambit – “antisuit injunctions” – to set an artificially low price on the most cutting-edge U.S. technology, not just for Chinese companies, but for all companies everywhere.
Little could be of greater urgency. The tightening Chinese grip on its companies, oppressing segments of its population including in Hong Kong, threatening Japan with nuclear attack over Taiwan. China’s not kidding around.
Alongside China’s malign influence and aggression, a global semiconductor shortage hampers economic recovery. Many products now require microchips, from automobiles to 5G equipment to appliances.
The world’s biggest chipmaker, Taiwan Semiconductor Manufacturing Co., is located – you guessed it – in Taiwan, the disputed, autonomous area Communist China counts as its own. TSMC holds almost 60% of the chipmaking market.
The Biden administration is blocking a Dutch company that makes top-of-the-line equipment used to produce advanced microchips from selling it to China. Sales would jeopardize U.S. national security, as well as the security of other nations.
However, the July 9 executive order calls for “review” of the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments that the Department of Justice, the Patent and Trademark Office, and the National Institute of Standards and Technology issued in 2019.
“Review” may not sound too troubling, but there’s a history here. The executive order foreshadows a return to a disruptive Obama-era joint policy statement.
Technological standards development groups are voluntary and consensus-based. A technology adopted as an industry standard involves related patents and the patentee’s FRAND commitment, but core patent rights should remain undisturbed.
The 2013 statement tilted too far against standard-essential patent owners’ rights. Its expansive interpretation of “public interest” went too far where SEPs and injunctions against patent infringers are concerned. It effectively denied SEP owners injunctive relief.
Assistant Attorney General Makan Delrahim said, when withdrawing the 2013 document, the “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 [fair, reasonable and nondiscriminatory] commitment does not and should not create a compulsory licensing scheme.”
“The 2013 Joint Policy Statement was a prime example of a policy change that disadvantaged patent holders,” stakeholder correspondence noted. “While we believe the U.S. Patent and Trademark Office at the time tried hard with some success to make the statement as pro-innovation as possible, we agree with AAG Delrahim that the 2013 Joint Policy Statement was at best confused on how to maintain the incentive to innovate in a standard-development context.”
The 2019 statement takes a more evenly balanced approach. The stakeholders observed that “the policy of the U.S. government across all its agencies should be to encourage innovation. This is especially so as the United States increasingly competes against China and other countries in the race for dominance and influence in 5G, artificial intelligence, and other critical technologies that will dominate the future.”
Counterproductively for America’s prospects of keeping the technological lead over China, Biden’s executive order presumes SEPs accumulate inordinate market power. It mistakenly views SEP access to remedies like injunctions as leading to anticompetitive conditions and prone to abuse.
The July 9 executive order also threatens to cripple consequential mergers and acquisitions. Its 72 actions by the Federal Trade Commission and other agencies include empowering a rogue FTC and Justice Department to second-guess and unwind approved, even completed corporate mergers and acquisitions across industries. Talk about injecting uncertainty and freezing beneficial transactions.
Meanwhile, Intel is boosting its domestic microchip manufacturing capacity. It’s expanding its plants in Arizona and New Mexico.
The company plans to become a contract chipmaker like TSMC. American chipmakers could add capacity to meet the global shortage and bolster the goal of fostering U.S. domestic microchip production. That will involve some mergers and acquisitions, the types that run into the executive order buzzsaw.
China will be very pleased with the Biden encumbrances against U.S. innovators.
James Edwards, Ph.D., is executive director of Conservatives for Property Rights (@4PropertyRights) and patent policy adviser to Eagle Forum Education and Legal Defense Fund. The views expressed are his own.