E.O.: Assaulting Property Rights Is a Strange Way to Promote Competition

President Biden’s July 9 executive order, “Promoting Competition in the American Economy,” purports to promote competition. Let’s just say the order presumes a whole lot. Its false presumptions lead to policies that weaponize a blunt instrument: antitrust.

The White House claims that the E.O. addresses anticompetitive problems arising from consolidation in industrial sectors such as banking, hospitals, agriculture, technology and biopharmaceuticals. Unfortunately, the “trust busting” order is long on concentrating Big Government’s power and short on fostering competition.

Two fundamental flaws underlie the E.O.: One, the order assumes a static, zero-sum economy. It may reslice the pie, but won’t grow the pie.

Two, it presumes intellectual property exclusivity to be anticompetitive. However, patents and IP are vital for sparking new competition, creating new markets and displacing monopolists.

The order supplants decisions in the market made by hundreds of thousands of businesses and investors with skin in the game and by millions of consumers. The E.O. empowers bureaucrats with nothing at risk if they choose wrongly or regulate unwisely to make decisions in Uncle Sam’s ivory tower. And the order hands bureaucrats an A-bomb with orders to seek and destroy.

This makes the E.O. a recipe for concentrated power and market lethargy. It locks in incumbent firms, protecting consolidation! It will kill dynamic competition and the kind of innovation that solves big problems and gives the United States an edge against China.

This order badly hurts inventors' private property rights. For example, the E.O. turns back the clock on the New Madison Approach that has restored balance between antitrust and IP.

For small and large inventors, whose innovation stands to spark dynamic competition, the companies that could implement their inventions hold asymmetric advantage. Implementers have no risk in the invention, while inventors have incurred substantial sunk costs.

Many implementers stoop to predatory IP infringement. Inventors need the exclusive period of the patent term in order to fend off those thieves and to go from 0 to 60 commercializing their inventions.

So, patent exclusivity enables innovators to shake up static markets and compete with established corporations. But throughout, the E.O. presumes that IP harms competition.

Other examples of the E.O.’s misguided directives include:

• Undoing Standard-Essential Patents’ Access to IP Remedies: The order threatens to reverse the 2019 Joint Policy Statement on Remedies for Standards-Essential Patents. The Justice-USPTO-NIST statement affirmed access to injunctions and other available remedies for SEPs subject to fair, reasonable and nondiscriminatory, or FRAND, licensing commitments. Returning to the 2013 approach turns FRAND into a compulsory licensing clause and weakens IP rights, harming both competition and innovation.

• “Unjustifiably” Delayed Generic Drug and Biosimilar Market Entry: The E.O. disrupts the balance the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act strike between biopharma innovation and faster market entry by generic drugs and biologics. Twisting the patent system to diminish innovators’ market exclusivity rights leads to fewer new medicines as well as fewer generics.

• Industry-Specific M&A Rules: The order calls for industry-specific merger and acquisition rules for banks, health care, and other sectors. This is an unsound regulatory move. It introduces adverse unintended consequences by undermining the rule of law.

• Reversals of Approved Deals: Putting reversal of previously approved mergers, including vertical mergers, on the table injects costly uncertainty for investors and businesses across the board. It reduces competition by inducing extreme caution. Such roadblocks to M&A disincentivize startup activity by foreclosing exit strategies while abetting monopoly.

• Bayh-Dole Product Price or March-In: It discourages NIST from including in its Bayh-Dole final rule anything that relates to the law’s march-in rights or price of a product from federally funded inventions. This directive leaves unaddressed the most remarked-on part of the proposed rule. It leaves unsettled — and open to deliberate misreading — the statute’s narrow grounds for marching in on a patent. Nothing in the law itself justifies basing march-in on the price of a product.

But wait, there's much more! So, suffice it to say that this E.O. disrespects private property rights. It will make America poorer.

U.S. Voters to Pols: Drop the Radicalism

It turns out the American people aren’t as generous with other people’s property or with their hard-earned tax dollars as some politicians would have us think.

New polling data show the majority of our fellow Americans are more sagacious than are too many officials in Washington. The recent survey of voters, conducted by the Center for Individual Freedom, a coalition member of Conservatives for Property Rights, reveals respect for property rights, prudence in priorities and carrots instead of sticks. And they long for those they sent to Washington to work across the aisle like grownups.

Rather than the radical socialism, environmental extremism and identity politics Washington is pushing, the CFIF poll shows that voters want common-sense protections for American innovation. Take the World Trade Organization proposal to waive treaty protections for intellectual property. Some 83 percent of voters think foreign countries should protect U.S. intellectual property as they promised in trade agreements.

Two-thirds favor licensing U.S. IP for COVID-19 vaccine instead of waiving drug companies’ IP rights — Republicans, 77 percent; Independents, 69 percent; Democrats, 55 percent. And 63 percent of voters (including 61 percent of Democrats) consider IP licensing the better way to boost COVID vaccine supplies.

Voters have empathy for others around the world. Some 62 percent agree that it’s very important for the United States to help make COVID vaccines available in other countries. Only, they insist on doing it the right way that respects the property rights of innovators.

Notably, nearly 9 out of 10 (87 percent) value America’s pharmaceutical industry for its producing COVID vaccines, and 82 percent consider the sector important for safeguarding us from future pandemics.

More than 8 out of 10 (82 percent) worry that a COVID vaccine IP waiver like that proposed at the WTO might lead to vaccine development and safety problems. Some 81 percent are concerned about an IP waiver raising risks from counterfeit vaccines.

Nor do voters support government price controls and confiscatory taxes as government hammers to drive down prescription drug costs. Heck, only 5 percent consider drug costs a burning issue. Most American voters consider jobs and the economy (37 percent) or the COVID-19 pandemic (32 percent) the top issue. And the most important health policy issue is the cost of health insurance (53 percent), not prescriptions.

Almost three-fourths of voters, including majorities in each party, say no thanks to government price controls and yes to providing medical providers, insurers, and pharma companies incentives and transparency. About 2-1 favor the approach in Republicans’ H.R. 19 to the punitive, heavily regulatory H.R. 3 of Speaker Nancy Pelosi. This includes majorities in each party, Respondents frown upon H.R. 3’s likely results, such as slowing access to new medicines, crimping seniors’ access to cancer drugs, killing biopharma industry jobs and reducing drug innovation.

For bipartisan cooperation, 62 percent of voters want to see President Biden compromise and build Republican support for any new federal spending. And at least three-fourths oppose using Medicare cuts to drug spending or a 95 percent tax on prescription medicine (in H.R. 3) for funding government spending.

It’s reassuring that the American electorate retains common sense and fundamental American principles. Maybe the radical pols driving us down the road to radical ruin will pay attention to the good instruction from the voters in CFIF’s survey.

5G: Made Possible by Property Rights

With ads for 5G services and new 5G-enabled smartphones and other devices on the rise, it’s worth considering the role property rights play in this newest stage in wireless technology.

Let’s start with a recent report by Accenture, which examines the economic benefits 5G connectivity should bring the United States over the next few years. Cutting to the chase, “The Impact of 5G on the United States Economy” estimates that the fifth generation of wireless technology will yield as many as 16 million American jobs and contribute up to $1.5 trillion in GDP by 2025. Each of those jobs in 5G will spur another 1.8 U.S. jobs. And 5G will spark as much as $2.7 trillion in U.S. sales growth. All this in 5G’s early years, as it’s still maturing!

The foundational inventions that underlie 5G wireless build on, and vastly improve, mobile technology. Years and years of research and development in a very few innovators’ labs. Billions and billions of dollars in private R&D funding. Overcoming complicated scientific and technological challenges.

Qualcomm, for example, pours a fifth of its revenues into R&D. And the report notes “the semiconductor industry has invested more in R&D since the 1990s than all other major industrial segments individually, with major companies such as TSMC, Intel and Qualcomm leading the way for cutting edge, technological innovation.”

All this investment of tremendous levels of financial, industrial and human resources came with no guarantee of success at any level.

The Accenture report includes a policy framework for ensuring and protecting the innovation ecosystem for 5G. To ensure U.S. technological leadership in 5G (and other fields of critical technology), we must restore patent reliability, the ability to fully exercise one’s IP rights, and safeguard the integrity of standards development and access to remedies such as injunction — including for standard-essential patents.

The successful, foundational inventions get patented and enter the standards development phase. Innovators and implementers convene in standards-development organizations to determine, on a consensus basis, which specific technologies are the best and are to become the industry standard.

Standardization ensures interoperability of multiple implementers’ devices — so your iPhone on a T-Mobile plan seamlessly keeps you connected through your Ford SUV’s interface with GPS navigation, your mother’s voice on her Samsung phone with AT&T service and your Pandora-streamed music, all at the same time.

To ensure such sophisticated results and realize 5G’s promise, standards are essential. So is IP-respecting, good-faith, SDO and participant integrity. Accenture observes that “the establishment of standards should balance utilizing the full spectrum of international expertise with national security to ensure seamless connectivity globally.”

Keep in mind: Innovators’ R&D investment decisions occur many years before a cutting-edge invention has shown promise and while seemingly insurmountable technological and engineering challenges loomed. Intellectual property rights — namely exclusivity throughout the patent term and the means to enforce one’s rights against patent infringers and implementer holdouts — encourage such high-risk, high-reward discovery and invention.

Today, we’ve come a long way from 1G “brick” phones delivering analog voice calls in the 1980s. 2G digital voice in the 1990s gave way to the 2000s’ voice and data transmission. Next, the 2010s’ smartphone took us to voice, data and bandwidth broad enough that it’s enabled the mobile app economy and the Internet of Things.

With 5G, its level of data speed, low latency, ultrahigh broadband capacity, quality, security and reliability will support 1 million connected devices per one square kilometer (about 4/10s mile). That is, 5G is orders of magnitude superior technologically to 4G.

Hence, 5G promises a new Industrial Revolution. It has the potential to spur unimagined advances in and applications for manufacturing, utilities, artificial intelligence, telemedicine, robotics, transportation and much more. New economic sectors, like the app economy with 4G, will blossom.

But only because of private property rights as the foundation of 5G’s foundational innovation.