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There is little doubt, and much evidence, that innovators respond to expected future profit. People are drawn to problems for which the rewards are great. We have seen this in our own work; one of us is a health care economist who studies innovation and the other a consultant who advises innovators in the health sector. There is little doubt, and much evidence, that innovators respond to expected future profit. People are drawn to problems for which the rewards are great. We have seen this in our own work; one of us is a health care economist who studies innovation and the other a consultant who advises innovators in the health sector. The current dispute over drug price negotiations is a good time to consider alternatives to the patent system that may better align the incentives for innovation with the needs of patients and society. One such alternative, patent buyouts, has been proposed by Michael Kremer, University of Chicago economist and Nobel laureate. Kremer’s — articulated more than two decades ago — was inspired by the example of the patent for daguerreotype photography, which the French government purchased in 1839 and placed without charge in the public domain. As a result, this early form of photography was rapidly adopted worldwide. Kremer’s plan envisions offering innovators the option of selling their patent rights to the U.S. government at prices equivalent to their estimated private value as determined at auction. The government would then make the innovations available to the public without requiring a licensing fee. Patent buyouts eliminate many of the distortions that arise from today’s pricing model because the value of the innovation would not need to be recouped through market sales at monopoly prices in a fixed time frame. Under the buyout system, almost all new drugs would be sold and priced like generics. The social gains would thus be greatest for new drugs that would otherwise win a high price in the current system — typically branded drugs with few competitors. Life-cycle management would be a thing of the past. Indeed, this system, as with daguerreotype photography, might accelerate innovation by stimulating follow-up applications of the original discovery. A patent buyout scheme is no panacea and presents many practical challenges. Auctions would have to be carefully structured to determine the correct price and, in some cases like antibiotics, additional subsidies might still be required to support adequate innovation. The government could misuse its purchasing power and force the sale of patents at confiscatory prices. Financing the purchase of patent rights will also require careful thought. These practical challenges, not to mention the political challenges of reforming the patent system through an act of Congress, are daunting. However, it took nearly 40 years to authorize Medicare coverage of outpatient prescription drugs and an additional 20 years before CMS began to negotiate drug prices. Great change is often impossible until, suddenly, it is not. With the advent of this new era of drug price negotiation, now is the time to think about the changes needed to keep the engines of innovation in health care running far into the future.

3. DISCUSSION The large increase in international travel over the last century might be assumed to have resulted in a high chance of a devastating global pandemic (see e.g. [32]). Here we have used a general epidemiological model to demonstrate that an important, yet often overlooked, factor in the dynamics of a newly introduced high-virulence (HV) pathogen strain is partial immunity driven by exposures to related pathogen strains. When a HV pathogen strain arrives in a population following an epidemic of a related but low virulence (LV) strain, the probability of a major epidemic of the HV strain is decreased. High rates of travel between spatially distinct subpopulations can drive larger outbreaks of low virulence pathogens, in turn providing higher levels of immunity if/when a HV strain, which has the potential to cause a devastating epidemic, appears in the population (Fig 4a-c). Not only did we find that the probability of a major epidemic of the HV strain decreases when travel between subpopulations increases, but the expected final size of the HV strain outbreak can also be reduced. This was particularly pronounced when the level of cross-immunity between strains was high (Fig 4i), since lower cross-immunity levels combined with high travel rates can lead to large epidemics due to increased mixing between subpopulations (Fig 4g). When between-subpopulation travel was increased, the reduction in the probability of a major epidemic of the HV strain, and the expected size, was largely due to cross-immunity reducing the proportion of outbreaks that proceeded to become major epidemics. If/when major epidemics occurred, we found that they were typically larger when there was more travel between regions (Fig 4d-e), although this was not always the case, particularly when the level of cross-immunity was very high (Fig 4f). Partial cross-immunity against a highly virulent strain from prior exposure to a less virulent strain is characteristic of influenza outbreaks in different seasons. For example, it has been suggested that individuals born before 1890 were protected against the 1918 H1N1 pandemic due to the outbreak in 1889-90 [33] and that individuals infected with multiple historical seasonal H1N1 influenza strains were protected against the 2009 H1N1 influenza pandemic strain [34]. Our results suggest that cross-immunity might be a potential explanatory factor as to why there has not been a pandemic as devastating as the 1918 influenza epidemic in the century since, despite the emergence of a strain antigenically similar to the 1918 pandemic strain in 2009. Travel rates increased substantially during the 20th century. As a theoretical exercise, we obtained crude estimates of the travel rates from Europe to the USA, comparing rates during the early 20th century with current travel rates. For the early 20th century rates, we used registry statistics from USA ports from 1914 to 1924 (see Supplementary Material Section 5). Oceanic travel should approximate overall trans-Atlantic travel in this time period, as other modes of long-distance travel were extremely rare. This yielded the approximation λ≈ 3.6· 10-6 per day. Conversely, when estimating current rates of travel from European countries to the USA, approximated using data on air travel, we obtain much higher values of λ≈ 3.7· 10-4 per day. It might be expected that such a significant rise in travel in this time period might have reduced the risk of a global pandemic of a pathogen with circulating strains that induce cross-immunity. Cross-immunity is known to affect the dynamics of outbreaks of various pathogens. Vibrio cholera, for example, exhibits almost complete cross-immunity between strains (a study by Koelle et al. [35] used a cross-immunity level of α= 0.955). On the other hand, human Respiratory Syncytial Virus (hRSV) has been shown to provide incomplete cross-immunity against infections from the same virus group (α ≈ 0.6, [36]). It also provides low levels of cross-immunity again hRSV infections

However, there are some reasons to think that naturally occurring pathogens are unlikely to cause human extinction. Firstly, Homo sapiens have been around for 200,000 years and the Homo genus for around six million years without being exterminated by an infectious disease, which is evidence that the base rate of extinction-risk natural pathogens is low.82 Indeed, past disease outbreaks have not come close to rendering humans extinct. Although bodies were piled high in the streets across Europe during the Black Death,83 human extinction was never a serious possibility, and some economists even argue that it was a boon for the European economy.84 Secondly, infectious disease has only contributed to the extinction of a small minority of animal species.85 The only confirmed case of a mammalian species extinction being caused by an infectious disease is a type of rat native only to Christmas Island. Having said that, the context may be importantly different for modern day humans, so it is unclear whether the risk is increasing or decreasing. On the one hand, due to globalisation, the world is more interconnected making it easier for pathogens to spread. On the other hand, interconnectedness could also increase immunity by increasing exposure to lower virulence strains between subpopulations.87 Moreover, advancements in medicine and sanitation limit the potential damage an outbreak might do.

China has a few hundred nuclear warheads. The United States and Russia each have several thousand. There are questionable reports China may double the size of its nuclear stockpile by the end of this decade. Even if that’s true, China’s arsenal would still be five to six times smaller than the current arsenals of the two nuclear giants.

China has had the fiscal and technical resources to match U.S. and Russian numbers for quite a while. So, why is China’s nuclear arsenal still so small? That’s a question worth asking before publishing alarming and misleading headlines about a Chinese nuclear buildup.

Even if China is willing to fulfill its mission by launching a war with the U.S., can China afford it? First, the top Chinese leader is not ready for war with U.S. China will not be able to take a risk without internal coordination and support. The voice of China’s foreign policy comes from different departments. They are not well coordinated and lack a strategy with a long-term vision. China does not have a system for making consistent and workable foreign policy, and the top leader has not gained sufficient power to manage foreign relations. China is facing a mountain of domestic problems, including corruption in the military. The Chinese government has learned the lesson that a combination of internal violence and external conflict can contribute to the collapse of the regime. Now Xi Jinping is more likely to focus on China’s domestic issues especially the pandemic and its consequences in economic and financial areas. Xi’s top priority before the 20th Congress of the CCP is to carefully manage the power balance among factions in the party, attempting to ensure his third term of presidency. After the 20th Congress, Xi will take some time to reorganize the system and put new policies in place. It is not wise for the CCP to take military risks in dealing with territorial disputes with various countries at the same time as it tries to maintain domestic social stability. China cannot afford to fight against multiple countries at the same time because the U.S. has military treaties with several allies in the region. Taking military actions could possibly destroy Xi’s China Dream, his lifelong presidency, his domestic agenda and China’s global ambitions eventually. Considering all these challenges, Chinese leaders may continue their efforts to rebalance the relationship between China and the U.S. while boosting the economic growth and preparing the unification with Taiwan after the 20th National Congress of the CCP in 2022.

Second, China has understood that any conflict between China and the U.S. would be a global disaster, especially between the two nuclear powers.78 A war between the two giants is unthinkable.79 It could be a Third World War if the U.S. had a war with China.80 China now has 260 nuclear weapons in its stockpile, while the U.S. has 4670 or more. China promised that it would implement a “No first use” nuclear policy, implying that the country possesses nuclear weapons only to deter other states from a nuclear attack and expresses the purely self-defensive nature of China’s nuclear strategy. More fundamentally, it has demonstrated a viable path toward international nuclear disarmament.81 Many China experts “appear not to be worried by China’s rapidly growing nuclear capabilities, because Beijing’s official policy promises that China will not be the first to employ nuclear weapons in a conflict. Beijing promises that its nuclear forces are for deterrence and retaliation only, not for aggression.”82 However, China continues to develop its nuclear weapons. China is likely to double the size of its nuclear stockpile in a few years.83 U.S. military leaders are not as naïve as academics about China’s “no first use” pledge. Charles Richard, chief of U.S. Strategic Command, testified to the Senate Armed Services Committee that he could “drive a truck through China’s ‘no first use’ policy, because China’s unprecedented rapid expansion of its nuclear and missile capabilities is not consistent with a belief in ‘minimum deterrence’ and ‘no first use.’”84 In January 2022, five global nuclear powers who are the permanent members of the U.N. Security Council, the U.S., the UK, Russia, China, and France, signed a joint statement and agreed to prevent nuclear weapons from spreading and to ensure a nuclear war would not happen. The agreement itself is a positive sign, indicating that nuclear deterrence is working and there will be no massive war between China and the U.S.85 Practically, it is hard to trust a dictator’s words. In March 2022, Putin already put nuclear deterrent forces on high alert and attacked Europe’s largest nuclear plant just a month after Russia signed the joint statement.

Is Xi’s dream of a world-class PLA realistic? His vision largely depends on PLA efforts to increase jointness and achieve intelligentization.

By all accounts, the Chinese military is on the march. The PLA’s annual budget grows at a rapid pace year after year. The PLA Navy is now larger than the U.S. Navy. “Carrier-killer” missiles attempt to threaten America’s ability to project power in the Indo-Pacific. The PLA’s increasingly sophisticated nuclear arsenal grows at an alarming pace. But these raw numbers alone do not capture some of the more subtle measures of warfighting capabilities, such as organization, training, education, and doctrinal concepts. These seldom noted yet critical measures of military power may tell a different story about the PLA’s pace of growth and ability to achieve its ambitions.

Much of the debate over military AI leadership and U.S. technological competition with China hinges on the assumption that there is a significant first-mover advantage when it comes to these technologies, meaning the first to develop them could reap substantial economic and military effects. However, fear of pronounced AI first-mover advantages instead reflects how AI is prone to “overhyping” where incredibly high expectations of capabilities surpass the reality of what is possible. Overhyping can obscure real progress and generate an inappropriate perception of an ​​​​​​AI arms race that “misrepresents the competition going on among countries.” Any possible first-mover advantage for AI would be unsustainable.

AI is a general-purpose, enabling technology not dissimilar to electricity. Moreover, the private sector drives its development, rather than the defense sector. While technologies that are singularly applicable to military contexts diffuse more slowly, those that are multi-use like AI have the added prodding of market incentives to speed up their spread.

If there’s one lesson we’ve learned from delving into Barron’s archives in our centennial year, it is this: Don’t underestimate the resilience of the U.S. economy and stock market. We saw that theme time and again as we published a series of retrospective pieces during 2021—and the resilience is strikingly evident still.

When the Covid-ravaged economy contracted in 2020, it was just the 19th time since 1920 in which real gross domestic product had declined, year over year. And nine of those years came between 1930 and 1949, a result of the Great Depression or post–World War II demobilization.

First, war can occur at any stage of expansion, crisis, recession, recovery, so it is unrealistic to assume that wars occur at any particular stage of the business cycle. On the one hand, although the domestic economic problems in the crisis/recession/depression period break out and become prominent in a short time, in fact, such challenge exists at all stages of the business cycle. When countries cannot manage to solve these problems through conventional approaches, including fiscal and monetary policies, they may resort to military expansion to achieve their goals, a theory known as Lateral Pressure. [13] Under such circumstances, even countries in the period of economic expansion are facing downward pressure on the economy and may try to solve the problem through expansion. On the other hand, although the resources required for foreign wars are huge for countries in economic depression, the decision to wage wars depends largely on the consideration of the gain and loss of wars. Even during depression, governments can raise funding for war by issuing bonds. Argentina, for example, was mired in economic stagflation before the war on the Malvinas islands (also known as the Falkland islands in the UK). In fact, many governments would dramatically increase their expenditure to stimulate the economy during the recession, and economically war is the same as these policies, so the claim that a depressed economy cannot support a war is unfounded. In addition, during the crisis period of the business cycle, which is the early stage of the economic downturn, despite the economic crisis and potential depression, the country still retains the ability to start wars based on its economic and military power. Based on the above understanding, war has the conditions and reasons for its outbreak in all stages of the business cycle.

Second, the economic origin for the outbreak of war is downward pressure on the economy rather than optimism or competition for monopoly capital, which may exist during economic recession or economic prosperity. This is due to a fact that during economic prosperity, people are also worried about a potential economic recession. Blainey pointed out that wars often occur in the economic upturn, which is caused by the optimism in people's mind [14], that is, the confidence to prevail. This interpretation linking optimism and war ignores the strength contrast between the warring parties. Not all wars are equally comprehensive, and there have always been wars of unequal strength. In such a war, one of the parties tends to have an absolute advantage, so the expectation of the outcome of the war is not directly related to the economic situation of the country. Optimism is not a major factor leading to war, but may somewhat serve as stimulation. In addition, Lenin attributed the war to competition between monopoly capital. This theory may seem plausible, but its scope of application is obviously too narrow. Lenin's theory of imperialism is only applicable to developed capitalist countries in the late stage of the development capitalism, but in reality, many wars take place among developing countries whose economies are still at their beginning stages. Therefore, the theory centered on competition among monopoly capital cannot explain most foreign wars. Moreover, even wars that occur during periods of economic expansion are likely to result from the potential expectation of economic recession, the "limits of growth" [15] faced during prosperity — a potential deficiency of market demand. So the downward pressure on the economy is the cause of war.

There is a large literature on diversionary conflict in international relations, but it focuses on material conflicts like militarized interstate disputes rather than foreign policy rhetoric. It is based in social identity theory, which suggests that leaders can increase ingroup affinity by making intergroup distinctions more salient (Coser 1956; Simmel 1955; Tajfel and Turner 1979). A recent review concludes that though the internal logic of diversionary conflict is “compelling and theoretically well supported,” the empirical evidence is “decidedly mixed” (Baum and Philip 2008, 48). Several studies find evidence of diversionary aggression in US foreign policy (Clark 2003; DeRouen 2000; DeRouen and Peake 2002; Fordham 1998a,b; Hess and Orphanides 1995; Howell and Pevehouse 2005; James and Hristoulas 1994; James and Oneal 1991; Levy 1989a, 1989b; Clifton and Bickers 1992; Ostrom and Job 1986) and elsewhere (Bennett 2000; Dassel and Reinhardt 1999; Davies 2002; Enterline and Gleditsch 2000; Gelpi 1997; Heldt 1999; Lebow 1981; Mansfield and Snyder 1995; Oneal and Tir 2006; Russett 1990; Sobek 2007; Tir 2010). Yet skeptics have amassed opposing evidence (Chiozza and Goemans 2003, 2004; Foster and Palmer 2006; Gowa 1998; Johnston 1998; Leeds and Davis 1997; Lian and Oneal 1993; Meernik 2004, 2000; Meernik and Waterman 1996; Moore and Lanoue 2003; Potter 2007). Some cases are hard to reconcile with the theory: in Britain, there were rallies in the Falklands War and the Gulf War but not in other cases in which rallies would be expected, such as the Korean, Suez, and Kosovo wars (Lai and Reiter 2005). Some go so far as to call diversionary aggression a “myth” (Meernik and Waterman 1996).

Others have developed scope conditions for diversionary aggression. It is more likely between states with pre-standing rivalries (Mitchell and Prins 2004), when leaders are accountable (Carter 2018; Kisangani and Pickering 2011), and in mature democracies, consolidating autocracies, and transitional polities (Pickering and Kisangani 2005). It is less likely when states avoid provoking troubled rivals (Clark 2003; Fordham 2005; Leeds and Davis 1997; Miller 1999). Diversion appears more likely to produce a rally when supported by Security Council authorization (Chapman 2011; Chapman and Reiter 2004), when the White House draws attention to a dispute (Baker and Oneal 2001), and in conditions of media attention, popular leadership, divided government, non election years, and first terms (Colaresi 2007). Most recently, scholars have asked whether diversion occurs outside democracies. They find some autocracies, especially single party regimes, divert as well (Carter 2018; Pickering and Kisangani 2010).

One familiar argument is the so-called diversionary (or “scapegoat”) theory of war. It suggests that leaders who are worried about their popularity at home will try to divert attention from their failures by provoking a crisis with a foreign power and maybe even using force against it. Drawing on this logic, some Americans now worry that President Donald Trump will decide to attack a country like Iran or Venezuela in the run-up to the presidential election and especially if he thinks he’s likely to lose. This outcome strikes me as unlikely, even if one ignores the logical and empirical flaws in the theory itself. War is always a gamble, and should things go badly—even a little bit—it would hammer the last nail in the coffin of Trump’s declining fortunes. Moreover, none of the countries Trump might consider going after pose an imminent threat to U.S. security, and even his staunchest supporters may wonder why he is wasting time and money going after Iran or Venezuela at a moment when thousands of Americans are dying preventable deaths at home. Even a successful military action won’t put Americans back to work, create the sort of testing-and-tracing regime that competent governments around the world have been able to implement already, or hasten the development of a vaccine. The same logic is likely to guide the decisions of other world leaders too. Another familiar folk theory is “military Keynesianism.” War generates a lot of economic demand, and it can sometimes lift depressed economies out of the doldrums and back toward prosperity and full employment. The obvious case in point here is World War II, which did help the U.S economy finally escape the quicksand of the Great Depression. Those who are convinced that great powers go to war primarily to keep Big Business (or the arms industry) happy are naturally drawn to this sort of argument, and they might worry that governments looking at bleak economic forecasts will try to restart their economies through some sort of military adventure. I doubt it. It takes a really big war to generate a significant stimulus, and it is hard to imagine any country launching a large-scale war—with all its attendant risks—at a moment when debt levels are already soaring. More importantly, there are lots of easier and more direct ways to stimulate the economy—infrastructure spending, unemployment insurance, even “helicopter payments”—and launching a war has to be one of the least efficient methods available. The threat of war usually spooks investors too, which any politician with their eye on the stock market would be loath to do. Economic downturns can encourage war in some special circumstances, especially when a war would enable a country facing severe hardships to capture something of immediate and significant value. Saddam Hussein’s decision to seize Kuwait in 1990 fits this model perfectly: The Iraqi economy was in terrible shape after its long war with Iran; unemployment was threatening Saddam’s domestic position; Kuwait’s vast oil riches were a considerable prize; and seizing the lightly armed emirate was exceedingly easy to do. Iraq also owed Kuwait a lot of money, and a hostile takeover by Baghdad would wipe those debts off the books overnight. In this case, Iraq’s parlous economic condition clearly made war more likely. Yet I cannot think of any country in similar circumstances today. Now is hardly the time for Russia to try to grab more of Ukraine—if it even wanted to—or for China to make a play for Taiwan, because the costs of doing so would clearly outweigh the economic benefits. Even conquering an oil-rich country—the sort of greedy acquisitiveness that Trump occasionally hints at—doesn’t look attractive when there’s a vast glut on the market. I might be worried if some weak and defenseless country somehow came to possess the entire global stock of a successful coronavirus vaccine, but that scenario is not even remotely possible. If one takes a longer-term perspective, however, a sustained economic depression could make war more likely by strengthening fascist or xenophobic political movements, fueling protectionism and hypernationalism, and making it more difficult for countries to reach mutually acceptable bargains with each other. The history of the 1930s shows where such trends can lead, although the economic effects of the Depression are hardly the only reason world politics took such a deadly turn in the 1930s. Nationalism, xenophobia, and authoritarian rule were making a comeback well before COVID-19 struck, but the economic misery now occurring in every corner of the world could intensify these trends and leave us in a more war-prone condition when fear of the virus has diminished. On balance, however, I do not think that even the extraordinary economic conditions we are witnessing today are going to have much impact on the likelihood of war. Why? First of all, if depressions were a powerful cause of war, there would be a lot more of the latter. To take one example, the United States has suffered 40 or more recessions since the country was founded, yet it has fought perhaps 20 interstate wars, most of them unrelated to the state of the economy. To paraphrase the economist Paul Samuelson’s famous quip about the stock market, if recessions were a powerful cause of war, they would have predicted “nine out of the last five (or fewer).” Second, states do not start wars unless they believe they will win a quick and relatively cheap victory. As John Mearsheimer showed in his classic book Conventional Deterrence, national leaders avoid war when they are convinced it will be long, bloody, costly, and uncertain. To choose war, political leaders have to convince themselves they can either win a quick, cheap, and decisive victory or achieve some limited objective at low cost. Europe went to war in 1914 with each side believing it would win a rapid and easy victory, and Nazi Germany developed the strategy of blitzkrieg in order to subdue its foes as quickly and cheaply as possible. Iraq attacked Iran in 1980 because Saddam believed the Islamic Republic was in disarray and would be easy to defeat, and George W. Bush invaded Iraq in 2003 convinced the war would be short, successful, and pay for itself. The fact that each of these leaders miscalculated badly does not alter the main point: No matter what a country’s economic condition might be, its leaders will not go to war unless they think they can do so quickly, cheaply, and with a reasonable probability of success. Third, and most important, the primary motivation for most wars is the desire for security, not economic gain. For this reason, the odds of war increase when states believe the long-term balance of power may be shifting against them, when they are convinced that adversaries are unalterably hostile and cannot be accommodated, and when they are confident they can reverse the unfavorable trends and establish a secure position if they act now. The historian A.J.P. Taylor once observed that “every war between Great Powers [between 1848 and 1918] … started as a preventive war, not as a war of conquest,” and that remains true of most wars fought since then. The bottom line: Economic conditions (i.e., a depression) may affect the broader political environment in which decisions for war or peace are made, but they are only one factor among many and rarely the most significant. Even if the COVID-19 pandemic has large, lasting, and negative effects on the world economy—as seems quite likely—it is not likely to affect the probability of war very much, especially in the short term. To be sure, I can’t rule out another powerful cause of war—stupidity—especially when it is so much in evidence in some quarters these days. So there is no guarantee that we won’t see misguided leaders stumbling into another foolish bloodletting. But given that it’s hard to find any rays of sunshine at this particular moment in history, I’m going to hope I’m right about this one.

In recent years, a great many studies of the real-world impact of patenting on innovation and economic growth (many available for free on ssrn.com) point to its beneficial effects. Arrow (1962), Griliches (1963), Schmookler (1966), Kitch (1977), Reinganum (1981), Tirole (1988), Klemperer (1990), Romer (1990), Giulbert and Shapiro (1990), Grossman and Helpman (1991), Aghion and Howitt (1992), Scotchmer (1999), and Gallini (2002) all found that patents foster ex ante innovation — meaning, they induce people to invent because of the prospect of reward.

Invention, it has been shown, is driven primarily not by genius or happenstance but rather by markets and the expectation of the profit that can be gained by securing the patent rights to new technologies. Zorina Khan of Bowdoin College and the late Kenneth Sokoloff at UCLA found that among the “great inventors” of the 19th century, “their patterns of patenting were procyclical [and] responded to expected profit opportunities.” And as Khan noted elsewhere, “Ordinary people [are] stimulated by higher perceived returns or demand-side incentives to make long-term commitments to inventive activity.”

Third, we reason that patent protection of AI-made inventions would boost efficiency in research and development, leading to more innovation in useful products and processes. The investors are encouraged by economic returns via licensing and sales from the exclusive patent rights in AI-made inventions. “[The] wealth-generating characteristics of innovation fundamentally justify a broad interpretation of patentable subject matter.” In the pharmaceutical industry, the best-selling drug Humira for treating arthritis made almost 2 billion for its patent owner in 2018. . Every time a news outlet reported that a drug may treat COVID-19, the holder of the drug patent would have an astonishing jump in its asset valuation The pharmaceutical companies desire the financial yield from patent rights to compensate for the expensive and long drug development process—the process usually cost billions and require 10–12 years before the drug is even placed on the market. The highly lucrative market and the efficiency boost by the AI technology would encourage the industry to engage in more AI strategies to make new inventions.

On the other hand, the labor theory provides that an inventor has an inherent right to the fruits of his labor and the patent right is awarded for the hard work that the inventor contributes to his creation. To develop an AI system, the substantial amount of work by AI professionals (including programmers, data suppliers, trainers, data scientists, etc.) deserves patent rights. The AI programmer drafts algorithms as the AI building block. The data supplier provides the AI system with data to learn from. The trainer teaches and corrects the AI system in the learning process. The data scientist assists data supplier and trainer to sort out data suitable for the AI function. A successful AI system may require labor from a large group of collaborative professionals and their consistent work through the lifetime of the system. We note the difference between rewarding patent rights and the designation of inventorship or ownership. Even with a grant of patent rights to the invention, the inventorship may not necessarily flow to the AI professionals if their contribution is not creative.

As the competition intensifies, many policymakers and analysts are caught up in the blow-by-blow of this industrial policy race. However, by focusing on these high-profile policies, they risk overlooking a fundamental driver of innovation: a system of secure and market-based intellectual property (IP) rights. IP rights are foundational for a strong innovation system. By converting ideas into property, secure IP rights allow firms to safely license their innovations, fostering more collaboration across the economy. A secure IP system also gives market actors the confidence to share their expertise and information with others, expanding the knowledge base of the innovation system. Further, the temporary ownership of an innovation afforded by an effective patent system provides the rents and hence the incentive for entrepreneurs and investors to take on the risks of driving new ideas to the market. For these reasons, the community of inventors, entrepreneurs, and start-ups repeatedly emphasizes the importance of secure IP rights in providing a path to market entry, growth, and fair participation. This view is validated when taken in the aggregate: academic studies find that secure IP rights positively affect innovation and economic growth in developed economies

For instance, in the United States, the Department of Commerce has estimated that IP-intensive industries support at least 45 million jobs and contribute more than $6 trillion (38.2 percent of) U.S. gross domestic product (GDP).46 Likewise, the aforementioned 2021 joint EUIPO/EPO study shows a strong, positive correlation between IPR and economic performance.47 It states that “IP-owning firms represent a significantly larger proportion of economic activity and employment across Europe,” with IP-intensive industries contributing 45 percent of GDP (€6.6 trillion, or US$7.9 trillion).48 The study also shows that IP-intensive industries directly or indirectly contribute to 38.9 percent of European employment, and IP generates higher wages and greater revenue per employee, especially for SMEs.49 Elsewhere, Statistics Canada has reported that 18.2 percent of all Canadian businesses hold some form of IP, predominantly trademarks.50 Of those IP-owners, 19 percent have a female as the primary decision-maker, and 10.1 percent have an Indigenous primary decision-maker. Canada also boasts that 47.8 percent of businesses in the clean technology industry and 47.8 percent in its information and cultural industries own at least one form of IP. Similarly, reports from IP Key, EUIPO, the International Trademark Association (INTA), and others also highlight these trends in Latin America. The reports find that, in 2019, IP-intensive industries’ contributions were 41.9 percent of GDP in Argentina, 47.8 percent in Mexico, 48.9 percent in Uruguay, 49.9 percent in Chile, and 55 percent in Peru.51 Trademark-intensive industries alone accounted for an average of 18 percent employment and a 19 percent wage premium in an INTA study of Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Guatemala, Mexico, Panama, and Peru.52 These figures underscore the reality that robust IPR and protections fuel high-value-added, innovation-based economic growth in nations worldwide.

Despite overwhelming evidence supporting IP’s vital import, the misleading anti-IP campaign continues to influence Congress, the Biden administration, and international bodies.14 Most opponents of robust IP protection distrust big business and oppose private markets. At the heart of their opposition lies the belief that redistribution should trump growth and innovation. For them, weakening IP only hurts capitalists while helping the billions of workers and consumers around the world. For them, the impoverished masses in the developing world are hurt by IP. For them, global interests trump American interests. For them, the masses deserve free goods and services. For them, shareholders (and not employees) benefit from IP. For them, big companies benefit from IP, and not small and medium-sized enterprises (SMEs). And for them, IP hurts innovation. In other words, they know that if they are to advance their agenda of elimination of IPR they must paint IP as completely worthless, and even harmful, because it only enriches the rich and powerful. Anti-IP advocates make claims that are flat-out wrong and ignore data, the historical record, and voluminous academic evidence to the contrary. Indeed, IP creates jobs, empowers creators, and generates export revenues. It’s a nice narrative and one that anti-IP advocates and economic progressives such as the Electronic Frontier Foundation (EFF), Public Knowledge, Joe Stiglitz, Dean Baker, and Arjun Jayadev—some of the loudest opponents of IP—assert in their quest. Many people, including those who should know better, are taken in by it, usually because they are good-hearted individuals who support making the world a better place. But the claims anti-IP advocates make often are flat-out wrong and ignore data, the historical record, and voluminous academic evidence to the contrary. Indeed, IP creates jobs, empowers creators and innovators, and generates export revenues. IP also promotes creativity and provides consumers with better products and services.15

For decades, the United States was the leading advocate for a global trading system that respected and enforced intellectual property rights (IPR), both because the U.S. economy and millions of jobs depended on IPR and because policymakers understood how important IPR were to global advancement. Without that persistent and forceful U.S. voice, IPR around the world would have been considerably weaker, to the detriment of technological and other forms of progress. Unfortunately, today, U.S. policymakers have walked away from that critical role, all too often arguing for weaker, not stronger, IPR and enforcement. In large part this is because many, including many in the Biden administration, have come under the influence of anti-IP proselytizers who see IP as a tool for corporate enrichment that limits access by working people, both at home, and abroad, especially in developing nations.1 For them, weak IP is a critical tool in the equity agenda: enabling cheaper drugs, free content, low-priced clean energy tech in less developed nations, and other redistributionist goals. There are two key problems with America’s abandonment of IP leadership. First, the job of the U.S. government is to first and foremost promote American welfare, not global welfare. There is no doubt that giving away valuable U.S. IP to developing nations would help the latter (at least in the short run) the same way giving them hundreds of billions of dollars would help them. But it would hurt American companies, creators, and jobs and the overall economy. Second, weak IP will not help the rest of the world in the moderate to long term because it would reduce the incentives and resources needed for innovation to help solve global challenges. Climate change requires much better and cleaner technology. Giving U.S. clean energy IP to developing nation hurts that task, not helps it. The world needs not just drug access, but much better drugs. Weak IP hurts that. Great content—in the form of movies, books, music, photographs, and more—depends on IP. Arguing that IP is archaic and irrelevant in the digital age and that strong IP hurts the third-world “proletariat” while only helping U.S. “capitalists,” many policymakers have succumbed to a view that supports weakening IPR and opposes expanding existing rights. As policymakers seek to preserve and advance America’s lead in a range of advanced industries, especially vis- à-vis China, they should be strengthening U.S. commitment to strong IP protection, including fighting to protect U.S. innovators and creators from IP theft.2 Without that, a key tool in protecting U.S. advanced industry leadership will be tossed away. Many nations, including the “Global South,” would like nothing more than to see a drastically weakened global IP regime. China, in particular, is in favor of this because it enables the country to more easily steal and otherwise obtain the IP that is so necessary to its continued industrial and military advance, while developing nations get free resources Americans paid hundreds of billions of dollars to develop. Without strong IP leadership, American allies that believe in strong IPR will have a much harder time advancing their agenda.3 And that is likely to lead to countries that want everything for free to set the agenda.4 The result is a weaker U.S. economy and less global innovation.5

As the competition intensifies, many policymakers and analysts are caught up in the blow-by-blow of this industrial policy race. However, by focusing on these high-profile policies, they risk overlooking a fundamental driver of innovation: a system of secure and market-based intellectual property (IP) rights.

IP rights are foundational for a strong innovation system. By converting ideas into property, secure IP rights allow firms to safely license their innovations, fostering more collaboration across the economy. A secure IP system also gives market actors the confidence to share their expertise and information with others, expanding the knowledge base of the innovation system. Further, the temporary ownership of an innovation afforded by an effective patent system provides the rents and hence the incentive for entrepreneurs and investors to take on the risks of driving new ideas to the market.

Fee Diversion The backlog and application pendency problems can be attributed largely to the glaring mismatch between the resources and capacity of the USPTO and its significant workload. The USPTO needs more examiners, more review board members, more money to pay its employees and an upgrade of its outdated technology infrastructure. Despite the agency’s best efforts, however, Congress has made these goals unachievable. The USPTO has been a self-supported agency since 1990, meaning that all expenses needed to run the agency must come from income generated in the office. This in itself is not problematic, and the USPTO has generally taken in more than enough in patent application fees to support itself. The problem lies in Congress’s diversion of fees from the USPTO. Instead of allowing the USPTO to keep and utilize all of the fees that it collects, Congress has, through its annual appropriations process, diverted significant amounts of money from the USPTO to other, unrelated federal programs. Since 1990, Congress has diverted some $800 million USPTO fees. Patent experts and commentators have long targeted fee diversion as a significant factor in causing the USPTO’s inability to keep pace with the number and complexity of the applications that it now receives. A Report of the National Academy of Public Administration estimates the current backlog of unexamined patent applications is in fact the direct result of fee diversion. The report estimates that if the USPTO had not experienced fee diversion, then the average application pendency time would have averaged slightly over 21 months as compared with the 30 months to 40 months that it currently takes to process a patent application.

Executive Summary On May 10, 2024, the United States Patent and Trademark Office (USPTO) issued a notice of proposed rulemaking to add a new requirement for terminal disclaimers filed to obviate nonstatutory double patenting rejections to the public for comment. Comments can be submitted via this link until July 9, 2024. The proposed rule “would require terminal disclaimers filed to obviate nonstatutory double patenting to include an agreement” that ties the patent’s fate to the patentability of claims in related patents. Specifically, the patent with the terminal disclaimer would “be enforceable only if the patent is not tied and has never been tied directly or indirectly to a patent by one or more terminal disclaimers filed to obviate nonstatutory double patenting in which: any claim has been finally held unpatentable or invalid as anticipated or obvious by a Federal court in a civil action or by the USPTO, and all appeal rights have been exhausted; or a statutory disclaimer of a claim is filed after any challenge based on anticipation or obviousness to that claim has been made.”1 If the proposed rule goes into effect, the change would be a significant departure from current practice and a detriment to patentees. Proposed Rule Under the proposed rule, terminal disclaimers would include an agreement that the patent with the terminal disclaimer will not be enforceable if any claim of the second patent (for which the terminal disclaimer was filed to obviate a nonstatutory double patenting) is invalidated by prior art. Terminal disclaimers, including those with the new language, would continue to be unidirectional. Therefore, only the patent with the terminal disclaimer and not the conflicting patent would be encumbered by the language. The Potential Effect From the USPTO’s perspective, with the proposed rule, if there is a dispute involving multiple patents tied by terminal disclaimers, the dispute could be focused on addressing the validity of the claims of a single patent. This would in effect lower costs of challenging multiple related patents and result in a faster resolution. However, the proposed rule would have the significant substantive effect of compelling a conditional admission, yet the USPTO’s notice does not identify authority for issuing such a rule other than its base rulemaking authority.2 Yet this authority has long been held to be limited to procedural rules and not to provide authority for substantive changes to the law.3 Moreover, reviewing courts look unfavorably on USPTO attempts to overrule binding case law.4 Additionally, the proposed rule operates in a disproportionate manner. While nonstatutory double patenting operates on a claim level (claims of a patent application are patentably indistinct from claims of a reference patent/patent application), terminal disclaimers operate on a patent level (disclaiming the term of a patent). The rule would render the patent with the terminal disclaimer unenforceable if any claim of the second patent (for which the terminal disclaimer was filed to obviate a nonstatutory double patenting) is invalidated by prior art. To be clear, just one claim in the second patent needs to be found invalid as being anticipated or obvious for the patent having the terminal disclaimer to be unenforceable. The proposed rule change could also significantly raise the cost and complication of examination involving nonstatutory double patenting. Because terminal disclaimers currently do not constitute an admission regarding validity, many terminal disclaimers are filed for expediency. The proposed rule would upend this practice and convert the current non-admission into a mandatory substantive admission. Under the proposed rule, filing a terminal disclaimer would present the risk that a patent’s enforceability could depend on the strength of a single claim in another patent. In view of the risk associated, implementation of the proposed rule would likely slow patent prosecution at the USPTO, increase nonstatutory double patenting challenges by patent applicants, and further increase continuation application filings to circumvent nonstatutory double patenting rejections. Taken together, in practice the proposed rule may counter its intended purpose and result in increased costs and delays during the prosecution of patent applications at the USPTO.