The Made in China Act

What is the “conservative” position on patents and other intellectual property?

There are plenty of lobbyists and advocacy groups in Washington these days who will tell you — and they are leading congressional Republicans in some strange directions.   

The top legislative priority among the groups that purport to speak for conservatives on patent policy is the Restoring America’s Leadership in Innovation Act (RALIA).

The main group behind this bill, U.S. Inventor, promotes it as the America-first response to Big Tech and China. So far, they have persuaded 25 House Republicans to cosponsor RALIA, including many of the body’s more conservative members

The American Conservative Union, Americans for Limited Government, Conservatives for Property Rights, and Eagle Forum also back the bill. 

What does the bill do? First and foremost, it would abolish the system of patent validity review at the U.S. Patent and Trademark Office. 

Current law authorizes such reviews at the USPTO’s Patent Trial and Appeal Board. The Board consists of administrative judges who all have at least an undergraduate degree in science or engineering and are trained in patent law. This system allows a patent to be evaluated by a USPTO employee who has a background in the relevant technology and who understands the invention. 

If RALIA were enacted, such USPTO review would be eliminated — the only way to contest the validity of a patent would be in a jury trial in civil court. 

U.S. Inventor’s “case studies”

What is U.S. Inventor’s argument for abolishing patent review at the USPTO?

The group mainly cites a series of case studies that it claims show that PTAB review is improperly cancelling patents. Let’s take a look at some of these examples.

One patent owner whom U.S. Inventor has brought to Capitol Hill several times is Leak Surveys, Inc. This company’s patent claims a system for detecting gas leaks from pipelines — it describes using infrared technology on a drone to identify hydrocarbon leaks. 

Sounds great, right? So how do you build this infrared detection system? 

It turns out that you can buy it off the shelf from another company. The patent itself states that you should use the “Merlin mid-wavelength infrared high-performance camera available from Indigo Systems, Inc. in California.” To detect gas leaks, you simply use this camera with commercially available cold filters that were known to detect hydrocarbon leaks. 

The validity challenge to the patent was ultimately brought by the same company that makes the camera — at some point, it decided that it shouldn’t have to pay licensing fees to someone else for the privilege of selling its own product.

The USPTO agreed that the patent’s claims were obvious — it concluded that using the filters with the camera was “use of a known element for its known use to achieve an expected result.” On appeal, the U.S. Court of Appeals found the case sufficiently straightforward that it summarily affirmed the USPTO.    

Another U.S. Inventor example involves jump ropes. This patent claims a jump rope that spins faster and better because the rope is attached to a shaft that rotates inside the handle. In addition, the claimed invention uses a swivel joint that lets the rope pivot relative to the handle.  

The patent owner in this case was a sympathetic party — a small, woman-owned business that was up against the equivalent of Big Jump Rope. But the ideas claimed in the patent were old. 

In the late 1970s, others had already tried to patent jump ropes that used rotating shafts and swivel joints. The USPTO found that these prior-art patents and applications rendered the invention obvious, and the Court of Appeals unanimously affirmed

The patents that U.S. Inventor cites are textbook examples of patents that are obvious. They claim things that were already known in the industry — they simply use pre-existing technology for its known functions. There is no reasonable dispute that these patents are invalid, as all the judges who reviewed the cases agreed.    

And mind you, these are the examples that U.S. Inventor itself chose for making its case that USPTO validity reviews are improperly cancelling patents. 

We can’t allow invalid patents to be enforced

Indeed, U.S. Inventor makes no effort to argue that the USPTO got it wrong in any of these examples. It simply takes it as self-evident that a patent owner should be allowed to enforce whatever patent it has obtained, regardless of its validity. 

But as much as one would like to side with the little guy in these cases, the United States cannot allow the patenting of ideas that were already patented by others or that were known in the industry. 

For one thing, the U.S. already issues on average over 1,000 patents a day. Allowing patents on obvious ideas would greatly increase this number, diverting royalties from true innovators and placing a substantial burden on the rest of the economy. 

Allowing the enforcement of invalid patents also would be a disaster for the U.S. economy, particularly the manufacturing sector. 

Since the 1970s, patent litigation has largely shifted from judge trials to jury trials and has become concentrated in a few plaintiff-friendly jurisdictions. 

Juries are good at many things, but they do not accurately or reliably assess patent validity. Few jurors have technical backgrounds. They tend to simply defer to the initial examination of the patent and allow invalid patents to be enforced. 

And unfortunately, as even U.S. Inventor’s examples demonstrate, many patents turn out to be improperly granted: About 45% of those challenged in court in the 90s and aughts were ultimately determined to be invalid. The examination conducted prior to the grant of a patent is limited in its reach — examiners have on average only about 20 hours to review an application. The system will always need a technically proficient means for the review of the validity of asserted patents.   

What happens when there is no validity review?

The last few years have served as a test of what would happen if validity review at the USPTO were abolished. During 2019-21, the agency adopted several controversial policies that cut off PTAB review of patents that were being asserted in court. 

In 2021, Intel, the nation’s biggest chipmaker, was sued on patents that were immunized from review by these policies. The case resulted in a $2.2 billion damages award, based on patents that claimed the basic idea of giving each component of a computer chip only as much power as it needs. 

In 2022, another set of patents that evaded review received a $218 million award. These patents claimed the idea of depositing a check by taking a digital photograph of it. In one claimed version, the patent specifies that the camera’s view finder includes lines that help you align the check

The USPTO has since backed off on its no-review policies and has instituted proceedings for many of these patents, finding that they are reasonably likely to be invalid. We may yet avoid the miscarriage of justice of making someone pay $200 million because they took a picture of a check. 

But the fact remains that absent the USPTO’s recent change in direction, these patents would have remained in effect and these verdicts were on track to be enforced. 

A strategy for destroying American manufacturing

And keep in mind that U.S. Inventor’s legislative project, RALIA, would abolish all patent validity trials at the USPTO. 

It is hard to imagine the economic devastation that would result from such a policy. It costs tens of billions of dollars to build a chip fabrication plant. Who would invest in making microprocessors in America if you could be hit with billions of dollars in damages based on demonstrably flimsy patents? 

There could be no reliable return on capital investment if there were no effective defense against assertions of invalid patents. And remember, the U.S. now issues almost 400,000 patents a year.

If RALIA were enacted, U.S manufacturing, particularly for advanced technologies, would be driven overseas by the resulting litigation. The bill should more appropriately be titled the Made in China Act.

It is also hard to fathom how such a policy can be characterized as conservative. A key insight of the Trump Administration — one that is now broadly accepted — is that we need to protect our manufacturing base, both for economic and national security reasons. 

We need to be able to manufacture microchips, telecommunications equipment, aircraft, and automobiles in the United States. It is essential that we maintain the skill and expertise that goes into making such things, much of which is not captured in patents and cannot easily be replicated.   

This is not a question of whether research and innovation are more or less important than industrial capacity. Both are critical to the United States’ long-term security and prosperity. 

And striking the right balance between the two requires an accurate and reliable system for assessing a patent’s validity. We need vigorous enforcement of strong patents to reward research and development while weeding out invalid patents to protect investments in plants and equipment.

Don’t let anyone tell you what you’re supposed to think

So, what are conservatives supposed to think about patent policy? The only answer is that you need to think for yourself. 

You should be skeptical of anyone telling you that ideological principles require you to align yourself with one side or another in an economic dispute. Each side to such disputes is simply pursuing its own interests. 

Congress should concern itself only with America’s interests. It needs to set policies that maximize technological innovation and manufacturing growth.

And when it comes to IP, you should be wary of anyone who tells you that their patent is groundbreaking and innovative and incredibly valuable — but that they don’t want it reviewed by anyone who understands the technology.  

Joseph Matal served as Acting Director of the U.S. Patent and Trademark Office (USPTO) from 2017 to 2018 and served as Acting Solicitor from 2018 to 2019. Prior to the USPTO, he served in senior legal roles for more than a decade for the U.S. Senate Judiciary Committee.