Coda on a Guardian of U.S. Innovation

The Biden administration has declined to hand Apple a “get out of jail free” card. That’s good for U.S. innovation leadership.

Patent-infringing models of the Apple Watch remain subject to an import exclusion order accompanying the U.S. International Trade Commission’s October determination that these devices violate U.S. innovator Masimo’s pulse oximeter patents.

The U.S. Trade Representative had 60 days to review the USITC ruling and potentially could have reversed it. Thankfully for the rule of law, property rights and U.S. competitiveness, USTR didn’t pull the rug from under Masimo, which invented the blood-oxygen sensor technology copied in Apple Watch Series 9 and Apple Watch Ultra 2 devices.

The Christmas Day deadline for USTR’s review ended with a holiday blessing for Masimo and a deserved lump of coal for Apple.

Upholding this exclusion order wasn’t a certainty. The Obama-Biden administration intervened for Apple in its USITC loss to Samsung concerning iPad and iPhone models. And President Biden has weaponized antitrust and other regulatory takings to the extreme, including as a means of undermining exclusive intellectual property rights.

Apple now continues its predatory infringement strategy. Apple—hardly alone as a practitioner of predatory infringement—would rather deliver the “kiss of death” to innovative firms.

The company is appealing the USITC case to the Federal Circuit Court of Appeals—the next step in ongoing, multipronged patent litigation. Thus, an American innovator’s IP remains uncertain and of tenuous reliability.

And as Locke’s Notebook has explained, the USITC remains under assault by deep-pocketed implementers of others’ inventions. This anti-IP warfare diminishes American innovation leadership.

Of course, Apple could simply license Masimo’s patent-protected innovation and pay royalties for its authorized use. It could have legitimized its watches and realized more Christmas sales.

In light of its Apple Watch patent infringement loss, perhaps it’s time that Apple start behaving like a good corporate citizen. Instead of stealing innovators’ IP via predatory infringement—especially that of American innovators—it’s time for recidivist predatory infringers to begin respecting property rights and the institutions for defending those rights. The time has come to license first and use others’ IP only with authorization.

As it stands, these predatory patent infringers are little more than “commercial implementers who’d love to get . . . state-of-the-art, standard-setting patents [and other patented inventions] at bargain-basement rates.” Their misbehavior aids China and harms the United States. It’s past time to choose loyalties.  And there’s only one right answer.

Breaking the Law That Led to 7,739 Patents and 1,000 Startups in 2022

The Biden administration is out to break the law. “The Interagency Working Group for Bayh-Dole will develop a framework for implementation of the march-in provision that clearly articulates guiding criteria and processes for making determinations where different factors, including price, may be a consideration in agencies’ assessments.”

The wildly successful, innovation-fostering Bayh-Dole Act contains no reference to the price of eventual products in connection with the law’s march-in provision—or in reference to anything else, for that matter.

March-in focuses on ensuring an invention’s commercialization, adequate supply in public health crises and domestic manufacturing of these new products when possible. The law’s authors, Senators Birch Bayh (D-Ind.) and Bob Dole (R-Kan.), chose to omit eventual products’ price from this very narrow set of extraordinary circumstances for which march-in is lawfully permissible.

But the Biden Departments of Commerce and of Health and Human Services are colluding. They’re intent upon shoehorning eventual product price as rationalization for the government to “march in” on patents that underlie certain products. That will violate this statute’s plain language.

This isn’t the Biden administration’s first attempt to violate the Bayh-Dole law by injecting product price into march-in. Political appointees in this administration’s National Institute of Standards and Technology pursued the same thing when they twisted the previous administration’s Return on Investment initiative into an excuse for government to march in on patents on the grounds of product price.

American voters disagree—strongly—with politicians messing up the landmark Bayh-Dole Act. A survey by Morning Consult found:

• 77% of voters fear the use of the Bayh-Dole Act as a price control could lower their access to innovative treatments for diseases like cancer, Alzheimer’s and rare diseases;

• 85% view it as important that policymakers protect Bayh-Dole—54% considering it “very important;”

• 91% of Democrats say it’s important to protect this law;

• Voters are twice as likely to support a candidate who’ll protect Bayh-Dole, over a candidate who’d significantly change it;

• Voters widely agree that government-private sector collaboration in bringing cutting-edge medicines to market and when those inventions are protected from government theft foster American scientific leadership.

The Bayh-Dole Coalition, of which Conservatives for Property Rights is a member organization, tweeted (or, as Twitter is now named X, etched, maybe) some of the harmful consequences that misuse of march-in will cause: “If the @CommerceGov @HHSGov Bayh-Dole working group suggests that price can be a factor in march-in decisions, investments in next-gen R&D across all economic industries will plummet and we'll see fewer treatments/cures. Get the facts on march-in here: https://buff.ly/3XbUQBv.“

Bayh-Dole has yielded four decades of practical benefit from otherwise wasted government grants. As the B-D Coalition tweeted, “Since 1980, #BayhDole has created...

$1,300,000,000+ in economic growth

4,200,000+ jobs

11,000+ startup companies.”

Before 1980, the zillions of taxpayer dollars poured into research grants merely advanced theoretical knowledge. Less than 5% of the inventions that came out of that spending was commercialized.

If HHS and Commerce violate Bayh-Dole, turning it into a government price control, they will return America to wasting taxpayer money on new knowledge that nobody gets anything useful out of. Expropriation of patents is the key to failure and loss of our innovative edge.

Bless his heart, President Biden needs to get himself and his people on the right side of the Bayh-Dole Act and innovation-fostering patent rights and patent policy.

Safeguarding Cutting-Edge U.S. Innovation

To hear U.S. importers of patent-infringing components and products tell it, the U.S. International Trade Commission serves the ulterior interests of “patent trolls.” Nothing could be further from the truth.

Predatory patent infringers such as Apple and the domestic auto industry rage against the USITC because of the effectiveness of its remedy—exclusion orders under Section 337 of the trade law. These effectively prevent them from bringing in imports with patent-infringing parts that infringers would use to collect ill-gotten gains that deprive American innovators of the just fruits of their innovative labor.

This trade remedy is one of the remaining strengths of the U.S. intellectual property system. Big Tech firms, foreign interests and implementers of cutting-edge American innovators’ IP have weakened the U.S. patent system over the past few decades.

They’ve thrown patent eligibility law into chaos, created an Administrative State tool at the Patent Office with which they easily wipe out issued patents, and made it very hard to obtain a judicial injunction against infringers (a remedy still readily available for copyright and trademark), even after defending a patent’s validity and proving infringement in court.

Now these anti-IP special interests have redoubled their efforts to defang the USITC and tilt the patent, including the standard-essential patent, royalty regime in their favor. Such self-interested mischief threatens U.S. competitiveness and global technological leadership, especially in critical and emerging technologies vital the America’s national interests. As Locke’s Notebook has previously explained:

Foundational technology involves discovering and developing scientific and mathematical solutions to fundamental, complex problems related to [critical technologies such as] wireless Internet and telecom connectivity. This type of R&D is arduous, riskier, expensive and longer-term.

Research and development apply those solutions to form the system on which end-user devices operate. These key inventions lay the foundation of a new technological ecosystem, such as 5G itself in wireless connectivity.

These innovators pour a large part of their royalty earnings into R&D and pioneer invention to state-of-the-art levels. Like iconic inventors such as Edison, they focus on invention rather than manufacturing. Whom the infringers’ lobby disparages as “trolls” or nonpracticing entities are inventors who license their IP to get back to the lab.

In other words, technology implementers rely on foundational technology and standard-essential patents for their second-level, follow-on innovations to work and interoperate. The honest ones pay fair royalties for the privilege. The savvy ones pay royalties and respect the division of labor that brings forth ever-better innovation and enables products that run on others' inventions.

Thus, the USITC appropriately protects American innovators even from domestic implementers. For example, medical device innovator Masimo Corp. recently won USITC exclusion and cease-and-desist orders to halt importation of Apple Watches that infringe Masimo patents related to reading blood-oxygen levels.

Regrettably, denizens of the infringers’ lobby are behind property rights-undermining initiatives like the European Union’s Framework for Transparent Licensing of Standard Essential Patents proposal of a compulsory licensing scheme on SEPs.

Domestically, these interests propose destructive legislation such as H.R. 3535, the Advancing America’s Interests Act, which would weaken the USITC’s ability to issue exclusion orders that halt importation of U.S. patent-infringing goods; the Standard Essential Royalty Act, a compulsory licensing regime; and the Defending American Patents Act, which would deny U.S. innovators access to foreign courts to enforce their patents.

U.S. auto makers are innovative in their lane, but must rely on American innovators in other technological spheres if their vehicles are to have features that attract buyers.

Computer and wireless device firms are innovative in their lanes, but must rely on American innovators who engineer the technologies that make voice communications, GPS, apps and other product features operable and interoperable.

Instead of trafficking in dangerous, destructive nonsense, such as lumping U.S. foundational innovators into fictitious mischaracterizations and pushing anti-IP policies, Big Tech firms, the auto industry and other technology implementers should pony up and pay fair royalties for the patent-protected inventions they desperately need in their consumer products.