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Innovation suffers when property rights are weak or difficult to enforce

Innovation suffers when property rights are weak or difficult to enforce
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U.S. policymakers apparently do not recognize the connection between imprudent court decisions and artificial intelligence (AI) and other emerging technologies that will determine our nation’s security and economic strength in the 21st century.  But their counterparts in China do.

While America’s leaders continue to weaken legal regimes that incentivize innovation, China’s leaders continue to upgrade their own legal and economic regimes. Their goal is to surpass the U.S. and all other nations in 10 advanced technologies, from AI to robotics to aerospace equipment. China’s “Made in China 2025” plan seeks to position China as the global industrial and technological superpower. And according to its very public “New Generation Artificial Intelligence Development” plan, China commits to become, by 2030, “the world’s premier artificial intelligence innovation center,” which in turn will “foster a new national leadership and establish the key fundamentals for an economic great power.”

A command economy, China compels its companies to do the government’s bidding. The Chinese government controls most of the country’s wealth, which it is massively investing in AI and the other nine technologies. In the United States, public investment as a percentage of GDP has steadily declined.

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In the U.S., private-sector companies are truly independent of the government. Investment decisions in our free-market economy are a function of whether legal protections adequately assure a return on investment. When those incentives fall, so do private investments, especially risky and expensive ones in advanced technologies.

We have traditionally incentivized research and development (R&D) investment by protecting resulting innovations with legal rights through intellectual property (IP) laws, including patents, trademarks and copyrights. Those incentives are fading, if not altogether gone. Almost 15 years of ultimately damaging, but well-intentioned, efforts by Congress and courts have radically transformed and drastically weakened our IP laws. When property rights are too weak or difficult to enforce, innovation and innovators suffer, especially small and medium enterprises. That is where we are today.

Our IP laws, dating to the country’s founding era, have not been sufficiently modernized to adapt to the realities of these revolutionary technologies. Artificial intelligence is a prime example, but so are robotics, autonomous vehicles, 5G telecommunications and quantum computing. We also have life-transforming medical advances in gene-editing, immunotherapies, antibodies and others that are not adequately addressed or accounted for by current IP doctrines. Under recent judge-made law, many of these technologies, including all diagnostic testing methods, even for COVID-19, are rendered ineligible for IP protection — regardless of being innovative. But in China, they are all eligible. The law needs to change, and only Congress can do it.

Moreover, the National Security Commission on Artificial Intelligence emphasized, in its April 2021 report, the urgent need to fix deficiencies in our protection systems if the U.S. is to continue to lead the world in advanced technologies and assure its national security. The commission concluded that the U.S. “lacks the comprehensive IP policies it needs for the AI era and is hindered by legal uncertainties in current U.S. patent eligibility and patentability doctrine.” We need, as the commission explained, “a plan to reform IP policies and regimes in ways that are designed to further national security priorities.”  

Both Congress and the Biden administration need to demonstrate bold leadership if we are to heed the commission’s advice. The U.S. “must elevate AI considerations from the technical to the strategic level,” the report explains. Part of the strategic elevation must be the modernization of existing IP laws, which are currently impeding progress. 

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We must also revitalize the United States Patent and Trademark Office (USPTO) and federal courts. For example, our courts are so short-staffed that protection cases routinely take half a decade or more to complete. In China, the times are much shorter. Enforcement of IP rights in China is far faster and cheaper, and injunctions, more common. China not only has invested hugely and modernized its laws, but also has greatly expanded support for agencies that promote innovation such as its patent office and courts. We have not. 

The USPTO gets no funding from Congress; it relies entirely on user fees. For routine operations, that system works. But major improvements such as AI-based searching of prior art require major infusions of federal funds. That, of course, requires congressional appropriations.

America simply cannot fail to react to challenges from China and other competitor nations. The commission has said it best: “This is not a time for incremental toggles to federal research budgets or adding a few new positions in the Pentagon for Silicon Valley technologists. This will be expensive and require a significant change in mindset.” Our collective government and innovation communities must act now to invest in AI innovation and improve IP protection in order to protect our national security and safeguard a democratic future.

The Hon. Paul R. Michel served on the U.S. Court of Appeals for the Federal Circuit for 22 years, the last six as chief judge, until retiring in 2010. He previously helped craft legislation as counsel to a U.S. senator, served in the Justice Department as associate deputy attorney general and was a Watergate special prosecutor.