Property Rights Key for COVID Cures

It should be hard to miss, but America’s biomedical innovators and industry — that is, private companies putting their own or investors’ or both’s private resources at risk — are running in overdrive working on solutions to every type of need associated with COVID-19. Industry response to this pandemic has been broad and deep and sustained. For instance:

• Abbott Laboratories has just launched a new diagnostic test for use in convenient settings like doctors’ offices instead of sending samples to clinical labs. Abbott’s new test yields coronavirus results in 5 to 13 minutes. More than 200 diagnostic tests are in development.

• Johnson & Johnson is fast-tracking a COVID-19 vaccine that’s now expected to be widely available early in 2021. Sanofi and Moderna are each developing vaccines involving the virus’s genetic matter.

• Ford Motor and GE are retooling factories to mass-produce medical ventilators, as are GM and Ventec at idled auto plant facilities.

• Gilead has human trials underway, testing its antiviral drug remdesivir on COVID-19 patients while ramping up manufacture based on promising early results in animals.

• Medical device firm Medtronic is making widely available the design specifications and software code for a ventilator model.

These pharmaceutical, biotech, medical device and other companies are able to respond so quickly and fully for several reasons, each related to property rights. One, they function on a research-and-development business model. Two, their high-risk, high-reward R&D business rests on the foundation of secure, exclusive, enforceable private property rights. Three, they depend on financial returns on their investments to replenish R&D budgets, repay investors, ensure manufacturing facilities remain up to snuff and pay their top-notch scientists, researchers and engineers. Four, they rely on free enterprise for competitive success.

Now is the absolute wrong time to threaten the private property rights of COVID-19 fighters. There’s no good time to assault private property rights. In the midst of a worldwide public health crisis is as bad a time as is conceivable. Bayh-Dole 40 Executive Director Joe Allen warns, “there are those who want to use this crisis to return to the failed policies of the past.”

But that isn’t stopping those who loathe the private property rights and free market that make all-innovator-hands-on-deck rapid response possible. Doctors Without Borders is pressing for socialistic government policies, such as price controls and compulsory licensing, and demanding that innovators foreswear patents on coronavirus-related discoveries. A group from the Ivory Tower is hawking a corporate pledge not to seek or exert intellectual property protection on any COVID-19 solutions.

Such misguided efforts are very foolish. As ITIF’s Stephen Ezell notes, “In particular, [intentional U.S. incentives for funding R&D, enabling] commercialization of university research, and a drug pricing system that allows companies to earn profits they can reinvest to finance future generations of biomedical innovation [matter] given that the risky, expensive and uncertain process of developing a drug results in only one in several thousand molecular compounds ever making it from the research phase to market, while the cost for those drugs that do become commercialized approaches $2.9 billion.”

Property rights conservatives strongly reiterate that patents and IP are vital to discovery and development, especially in high-risk sectors such as medicine. Government price controls, compulsory licensing and other forms of expropriation of private property destroy prospects for innovation and for achieving future breakthroughs.

Modernizing Copyright in Trade Deals

Creators and copyright owners have strong advocates as the United States approaches future trade agreements. Senate Judiciary Subcommittee on Intellectual Property Chairman Thom Tillis, R-N.C., and ranking member Chris Coons, D-Del., have weighed in on the need to take a modernized approach to an outdated Digital Millennium Copyright Act provision.

Sens. Tillis and Coons asked the U.S. Trade Representative that provisions reflecting 17 U.S. Code Section 512 not be included in future trade agreements, as they were in the U.S.-Mexico-Canada Agreement. The Senate IP Subcommittee is working on updating the DMCA. Section 512 sits near the center of the target for DMCA modernization. Conservatives for Property Rights said, when the USMCA was struck: “We hope future trade deals will go further to advance accountability for online copyright infringement.”

Section 512 protects Internet platforms from liability if they remove copyright-infringing content, even if the same or similar infringing content reappears. That seemed fine in 1998, when the DMCA was enacted. But today, piracy is more sophisticated and creators routinely find their works repeatedly available through infringing means, after they had notified and the platform had taken it down.

The DMCA notice-and-takedown provision, circa 1998, isn’t suited for meaningfully defeating copyright infringement in 2020. The law no longer strikes an appropriate balance. Internet platforms have too little incentive to be vigilant against the all-too-common repeat appearance of infringing content on their platforms. And copyright owners can’t police the entire Internet themselves and continually do notice-and-takedown.

CPR shares Sens. Tillis’s and Coons’ desire for better terms. CPR has called for changes aligned with those the senators seek. In our report on industrial competitiveness, we recommended modernization:

“Strengthen and update the ‘notice and takedown’ process of the Digital Millennium Copyright Act to better protect creative works online. Require Internet platforms to keep infringing content from reappearing on their services once notified of its existence and encourage them to work more collaboratively with creative rights holders to reduce massive online IP infringement.”

CPR’s comments to the Federal Trade Commission focused on problems arising from DMCA Section 512:

“Persistent and growing Internet theft can in part be attributed to a lack of accountability by dominant online platforms. Section 512 of the Digital Millennium Copyright Act of 1998 (DMCA) granted these companies immunity from liability for infringing content carried on their services if they comply with limited obligations to remove the infringing content once notified by rights owners. But the Internet of today looks little like the Internet of 1998, which was dominated by companies like AOL, Prodigy, and GeoCities. Today, creators must play an endless game of “whack-a-mole” by sending millions of notices to online service providers only to see their works reappear virtually immediately. The scale of the problem is staggering. Google alone processed close to 900 million notices from copyright owners in 2017.

“This state of affairs chills creativity and innovation. For example, some platforms pay inordinately low royalty rates for music available on their streaming services — in large part because songwriters are competing with illegal free copies of their work. And innovators suffer, too. In a 2015 letter to shareholders, Netflix CEO Reed Hastings said '[p]iracy continues to be one of our biggest competitors. [Its growth] ... is sobering.'

“What’s more, piracy puts consumers at risk. Online safety groups such as the Digital Citizens Alliance have found that nearly 1/3 of piracy sites infect their users with malware, thereby putting consumers at risk for identity theft, fraud, ransomware, and more.”

Trade deals shouldn’t lock into place obsolete copyright policy that the Senate is looking to improve domestically.

OMB's Due Process Reform

March 16 marks the close of a public comment period for the latest commendable initiative by Russ Vought’s Office of Management and Budget.

The relentless expansion of the administrative state over the past century has spawned countless horror stories about government bureaucracies, administrative tribunals and others running roughshod over that category of sacred property rights related to fairness and due process. The problem is far worse than rogue bureaucrats. The administrative code and practices embody antirepublican, undemocratic policies and procedures. For example:

• The Patent Trial & Appeal Board, of questionable constitutionality, employs blatantly unfair procedures and rules wielded by unconstitutionally appointed administrative judges whose suspect rulings invalidate issued patents and who even overrule the decisions of constitutionally appointed judges and juries in Article III courts.

• The Federal Motor Carrier Safety Administration's unfair procedures put motor carriers in presumption-of-guilt, reverse-burden-of-proof, denial-of-due-process positions. FMCSA relies on flawed data and methodologies, ignores Administrative Procedure Act due process and mistreats objectively safe carriers.

This abuse of government power and encroachment on our inherent and constitutional rights rob American citizens of the blessings of liberty, limited government, and fairness and due process. The regulatory state ends up being ruled by thousands of tyrants.

The Trump administration has made deregulation a cornerstone of its tenure. This welcome effort has met with cries of thanks and relief from individuals and businesses subject to bureaucratic overreach, red tape and abuse. It’s also sparked institutionalized knuckle-dragging, “resistance” and utter disdain from the permanent bureaucrat cadre, along with its outside enablers in special interest groups and so-called “public interest” law.

With its “Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication,” OMB has sought public input “to identify additional reforms that will ensure adequate due process in regulatory enforcement and adjudication.” This request for information poses questions seeking specific examples of how various federal agencies unevenly enforce and unfairly adjudicate rules and regulations.

The RFI is premised on “[t]he presumption of innocence, adjudication by a neutral arbiter, fair and speedy proceedings, and the prohibition of double jeopardy, [being] some of the time-honored protections that constitute the rule of law in America.”

To the Trump OMB’s credit, reestablishing due process and fairness, especially with respect to regulatory enforcement and adjudication, is a high priority. And it aligns with the precepts of John Locke. “[W]hosoever in authority exceeds the power given him by the law, and makes use of the force he has under his command, to compass that upon the subject, which the law allows not, ceases in that to be a magistrate . . . .”

OMB undertakes to root out antidemocratic weeds and vines of the administrative state. Hopefully, it can rein in unelected government officials who take the excesses of regulation into their own hands, apply them capriciously or deny U.S. citizens core property rights.