From Silicon Valley to Shenzhen, China, the large tech companies that implement many key wireless standards in 5G have an interest in weakening intellectual-property protections so that, ultimately, they pay less. So why is the Biden administration playing right into their hands?
Earlier this year the deadline passed for public comments on a new draft policy statement from the Department of Justice related to what sort of remedies should be available to innovators when companies infringe on their standard essential patents, or SEPs.
As written, it would be harmful to American innovation.
The proposed policy has attracted fierce bipartisan opposition from former government officials, national security experts and some of America’s more important innovation companies. And concerns are still being shared with Justice. As recently as April 19, senators Marco Rubio, Thom Tillis and Tom Cotton, all Republicans, wrote to Attorney General Merrick Garland to express their deep misgivings with the draft policy.
This opposition, combined with the support the policy has attracted from Silicon Valley and Chinese trade associations, should be setting alarm bells off in Washington.
SEPs help protect the innovation that create the foundation for so much of the world’s economy, including how billions connect on a daily basis through their smartphones, tablets and other devices. The manner in which the White House has engaged on this subject recognizes the importance of standards-based technologies. But, unfortunately, the DOJ’s policy proposal allows companies to dodge or delay paying royalties on the intellectual property that they use — a common tactic used by manufacturers of devices such as smartphones called “hold out.”
As currently drafted, the policy proposal would seriously limit the ability of an SEP owner to get an injunction in the United States if a company infringed their intellectual property. Without the threat of a sales ban, those companies can continue to use an innovator’s SEPs, all the while knowing that they can drag out negotiations and pull companies into long and costly litigation.
This policy proposal also sends the wrong message to regulators and courts around the world regarding the administration’s views toward intellectual-property rights at a time when our closest rival, China, is doing all it can to strengthen its patent system in the interests of the country’s domestic tech champions. As a bipartisan group of former officials warned, the unintended effect would be to “support Chinese efforts to dominate critical technology standards and other advanced technologies, such as 5G. Put simply, devaluing U.S. patents is akin to a subsidized tech transfer to China.”
China has clearly identified standards as a key part of its arsenal in its global arms race with the United States. According to a January 2021 paper from the Center for a New American Security: “China is pursuing a comprehensive strategy to have Chinese-origin technologies be the foundation for global technology platforms and reduce its dependence on foreign intellectual property and standards.”
SEPs are a crucial if little understood part of standardized technologies, helping to protect the billions of dollars that are invested every year in research and development. And that R&D is only becoming more valuable. According to Accenture, 5G mobile wireless will add $1.5 trillion to U.S. gross domestic product and has the potential to create or transform 16 million American jobs.
The administration must strike a balance between supporting small- and medium- size businesses — the Apples and Googles of the future — while ensuring that large multi-billion-dollar companies cannot serially infringe on standard-essential technologies and drive down the returns for innovators.
Standards are of huge benefit to consumers everywhere, helping to ensure that you can access, say, a hotel’s Wi-Fi system whether you’re in New York, London or Beijing. That kind of inter-operability has become crucial to consumers and businesses worldwide and must be preserved by government policy that provides SEP owners with robust intellectual property protections and recognizes the delicate balance that exists between these innovators and the implementer community.
As a recent paper from the Carnegie Endowment for International Peace explained: “Standards act as the grease in the wheels of the global economy, reducing friction, facilitating trade and laying the groundwork for globalized technology networks like the World Wide Web.”
At the dawn of a new industrial age, one that will include a new era in connectivity, the administration cannot now add grit to this crucial economic engine.