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The great-power competition between the United States and China is a defining feature of the first part of this century, but there’s little agreement on how it should be characterised. Some call it an ‘enduring rivalry’ analogous to the one between Germany and Britain prior to the last century’s two world wars. Others worry that America is like Sparta (the dominant power) and China is like Athens (the rising power) in the 5th century BC: the two are ‘destined for war’. The problem, of course, is that a belief in the inevitability of conflict can become a self-fulfilling prophecy.

‘Enduring rivalry’ itself is a misleading term. Just think of all the phases the Sino-American relationship has gone through since the Chinese Communist Party came to power in 1949. In the 1950s, American and Chinese soldiers were killing each other on the Korean peninsula. In the 1970s, after US President Richard Nixon’s historic visit to China, the two countries cooperated closely to counterbalance the Soviet Union. In the 1990s, economic engagement increased, and the US supported China’s entry into the World Trade Organization. Not until after 2016 did we enter the current phase of great-power competition, with one US official describing China as a ‘pacing threat’—meaning ‘the only country that can pose a systemic challenge’ to America ‘economically, technologically, politically and militarily.’

Senior sources from high-tech, gaming and financial services companies explain how they succeed in their inter partes reviews and covered business method actions to invalidate broad patents filed by non-practising entities

Businesses have had seven years to work out how best to use the US Patent Trial and Appeal Board (PTAB) to invalidate overly broad patents belonging to non-practising entities (NPEs).

Over the past decade, Congress has come to recognize the threat invalid patents 1pose to innovation. 2These invalid patents, issued by the United States Patent and Trademark Office (PTO or "Patent Office"), can stifle innovation by precluding competitors from utilizing the patented technology 3or by subjecting competitors to a looming [*962] threat of significant infringement damages. 4When the Patent Office improperly issues these invalid patents, patent owners are able to monopolize technology that should otherwise remain in the public domain. Recognizing the threat that invalid patents pose, Congress established several post-issuance proceedings, including inter partes review (IPR), to "provide a more efficient system for challenging patents that should not have issued" 5to encourage direct competitors and other third parties to file and obtain invalidity rulings on these patents. 6By obtaining an invalidity ruling on these patents, competitors can open the technology to public use, helping drive innovation.

The specific points of opposition in individual comments vary, but in many cases the overarching sentiment is consistent. Restricting access to the PTAB, as proposed in the ANPRM and PREVAIL Act, will increase costs and directly harm productive participants in the economy. Congress intended for the PTAB to be an open, more efficient alternative to costly litigation and settlements. Rolling back access will be a drag on the economy and a burden for businesses, small and large. 

Business and labor groups, and patent policy experts, submitted comments emphasizing the economic damage and higher costs that the changes to PTAB review would catalyze:

A core theme in these comments is that weak patents are frequently used to delay medical progress and competition – increasing costs for patients and reducing access to potentially life-saving medicines and technologies. These organizations all align on the importance of protecting existing PTAB processes, so that PTAB review can continue being used as a tool to challenge questionable patents and therefore promote medical innovation.

“...In the life sciences industry, weak patents that do not actually claim a novel, innovative invention, can nonetheless delay generic or biosimilar competition for many years. To combat those delays, Mylan has filed well over 100 inter partes reviews (“IPRs”), taking advantage of Patent Trial and Appeal Board’s (“PTAB”) efficient and streamlined process to challenge weak patents that would otherwise delay patient access to life-saving medicines. Those patent challenges have allowed patients to benefit from earlier access to competition for more than $35 billion in annual brand costs…” – Mylan Pharmaceuticals (A global healthcare company that provides critical access to quality lifesaving medicines)

https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1919&context=aulr&httpsredir=1&referer=

D. Constitutional Competencies: Leveraging Expertise

On Nov 8, the US Senate Judiciary IP Subcommittee held a key hearing on the PREVAIL ACT – The “Promoting and Respecting Economically Vital American Innovation Leadership Act.” PREVAIL is a bipartisan proposal from Senators Coons (D-DE) and Tillis (R-NC) who are looking to strengthen the power of patents. The proposal here is directed toward AIA trials — generally attempting to make it more difficult to invalidate patent claims via IPR.  Key provisions include:

Imposing standing requirements to restrict who can file AIA patent challenges.

The root cause of this dysfunction has been the sorting of Americans into two warring tribes, liberal and conservative, Democrat and Republican. Over time, this hyperpartisan competition has played out to a stalemate in Congress, with legislative majorities that are so small and tenuous that every issue is now viewed through the lens of how it could tip the next election.

And so it was with a handful of bills meant to end the anticompetitive business practices of Apple, Amazon, Facebook and Google. By early 2022, all had been voted out of committees in both chambers with bipartisan majorities. All had broad support from voters, knowledgeable experts, regulators and the White House. Yet not one was taken up by the full House and Senate.

The Perryman study also points out that restrictions on USPTO review will increase costs for the federal government by reducing tax receipts and raising procurement expenses. The decline in U.S. business activity will reduce tax receipts by -$96.4 million over the next 10 years while simultaneously increasing procurement costs by $106.4 million. This means that, in total, the new proposals represent a $202.9 million cost increase for the federal government. The economic data speaks for itself, but as we have previously discussed on Patent Progress the proposals are not only economically damaging, they are also overwhelmingly unpopular. An analysis by Unified Patents found that out of the 14,500 comments submitted in response to the USPTO’s ANPRM, more than 95% of all public comments – and nearly 85% of unique comments – oppose some aspect of the proposals. 

The restrictions on patent validity review contained in the ANPRM and PREVAIL Act have no upside. From a policy standpoint, they are extremely costly. Politically, they are wildly unpopular. It’s critical that Director Vidal and leaders in Congress consider the widespread, negative implications of increasing discretionary denials of patent challenges before proceeding with the proposals that are under consideration. 

For the role of USPTO Director, we expect the lobbying to be heated between IP-intensive industries that would like to see the legacy of Director Iancu continue and those from sectors like technology, software and consumer electronics, which will be working to try to reverse much of what he has accomplished. As a case in point, several big tech companies have actually taken Director Iancu to court to try to stop his ongoing efforts to reform the PTAB.

Biden on China and Big Tech

In the final analysis, the case for a PTAB off-ramp is unclear for much the same reason that administrative patent revocation under the AIA has been troublesome in the first place. At its core, the design of the PTAB is to make it easier to invalidate poor-quality patents, but to do so, it must necessarily make it easier to invalidate all patents-in the hope that the punishments at the end would fall disproportionately on poor-quality patents.100 Although this problem could be managed, it could not be avoided entirely because poor-quality patents cannot reliably be identified up front; if they could, there would be no need for review at all. 101

The inverse is also true. Procedures that make it easier to preserve the validity of particular patents unavoidably make it easier to preserve the validity of all patents by diminishing the relative cost-savings associated with PTAB review for petitioners who otherwise seek a cheaper, faster, and more expert alternative than the district courts for litigating the validity of patents.

Last week, Unified Patents released an analysis of the more than 14,500 public comments submitted in response to the ANPRM. The analysis confirms what anyone would conclude from taking just a cursory look through the posted comments – the public overwhelmingly opposes any new restrictions to Patent Trial and Appeal Board (PTAB) review. In fact, more than 95% of all comments submitted and more than 75% of unique comments submitted object to the ANPRM’s proposals. 

The PREVAIL Act was introduced just days after the ANPRM public comment period closed and bill sponsors apparently didn’t heed the public’s input. Many of the same types of proposals that appear in the ANPRM – geared toward restricting access to the PTAB and making invalid patents more difficult to challenge – are also reflected in the PREVAIL Act. This is perhaps unsurprising, given that PREVAIL is primarily a rebrand of the STRONGER Act, which has been repeatedly introduced, but failed to move, in numerous prior Congresses. 

The U.S. has become the world’s largest market for such financing, accounting for over half of the global total. While much of this activity may simply be opportunistic—an investor sees a chance to generate returns—not all of it is benign. Other motivations can include intentionally inflicting costs on firms, distracting a target company with protracted litigation, or causing reputational harm that in turn impacts investor sentiment. Research has found that trolls are more likely to sue firms with large cash balances and on the eve of significant events like mergers or initial public offerings. Annual legal losses to patent trolls totaled $29 billion in 2011 according to one study, a full tenth of total private sector R&D investment that year.

Furthermore, a lawsuit loss to an NPE caused firm R&D investment to drop by an average of $160 million over the following two years, according to a Harvard Business School study. Many of these lawsuits occur thanks to continuation patents—incremental innovations that bear no real resemblance to the original patents, depress innovation, and can later be exploited by trolls.

The impact on American innovation is devastating. According to one study, each year, patent trolls create $29 billion in direct, out-of-pocket costs from the companies they go after. Another study found that the companies that settle with patent trolls, or lose to them in court, wind up reducing investments in research and development by an average of more than $160 million over the next two years. Massive amounts of money are being drained from the hardworking people who are driving our economy forward to instead line the pockets of wealthy investors who are offering no goods or services of their own.

The problem is especially threatening for progress in areas like the renewable energy sector, an industry where products often rely on hundreds or even thousands of underlying patents. U.S. leadership in green technology is critical both to curb emissions and because renewable energy has the potential to be a hub of innovation and strategic advantage for decades to come.

There are also risks to not leading the broad scale introduction of 3D printing. The 3D printing leaders will gain an advantage in national security with the ability to make faster, stronger, lighter tools and access to supplies on demand. Those who are not prepared for the industry to grow also see more domestic risks. As more and more information is transferred rather than goods, and a broader group has access to manufacturing capabilities, there are concerns that people will make things that are unsafe. This could include counterfeit products or otherwise regulated items, such as weapons. Industry leaders and policymakers need to act together to mitigate risks.

National security

3D printing allows a path to a more sustainable future by localizing and simplifying the supply chain. A model on the sustainability of 3D printing demonstrates that CO2 emissions could be reduced by 130.5 to 525.5 Mt by 2025, including a 5% reduction in manufacturing emission intensities due to 3D printing. The analysis goes on to state that if 3D printing could be more applicable at higher production volumes, it could theoretically decouple energy and CO2 emissions from economic activity.36

Sustainability benefits of 3D printing occur throughout the value chain from pre-production, to production, inventory, product use, and service.

In 2013 an Oxford Study indicated that up to one half of all jobs in the United States are at risk of being fully automated in the next 20 years. More recently, the McKinsey Global Institute posited a lesser number; that up to one-fifth of the global workforce will be affected by 2030. That study suggests that up to one-third of the workforce in richer nations like the United States and Germany will be replaced.

Even if the percentage only ends up being 12% to 22% in the US, as the McKinsey report suggests, such unemployment rates would be the greatest percentage of job loss in the United States since the Great Depression. In those years literally a quarter of all Americans were out of work. Remember, these most recent predictions are estimates for just 12 years away. So, in a very real way, the clock is ticking…

Today, many developed economies are struggling to keep their workforce employed, continuing to strive for higher-value labor. According to the World Economic Forum report on The Future of Jobs, the Fourth Industrial Revolution is expected to decrease low-skilled jobs globally, which will be offset by the creation of new higher-skilled, more lucrative jobs to support new technologies and business models. 24 3D printing will disrupt the existing manufacturing structure and redistribute jobs across the globe. In this context, 3D printing leadership in the new global economy becomes even more critical; countries that lead development of the 3D ecosystem will capture the influx of new digital manufacturing jobs that will be created in the future, in addition to accelerating development of new business models that define employment opportunities for the future workforce.

The implication of this global job redistribution will vary by economy. There are three key profiles of countries that are best positioned to lead the new employment landscape: Countries that currently have a base in manufacturing, countries that have high consumption, but manufacturing has dropped in recent years, and countries that do not currently have manufacturing but have a consumer base.

3D printing is poised to disrupt $4 to 6 trillion (USD) of the current global economy over the next five to 10 years. This is the segment of the existing economy that has greatest potential to be redistributed across the globe.

The global manufacturing sector is valued at approximately $12 trillion, which accounts for design, production, and distribution of all global goods. There are five key industries that have the greatest potential to be transformed by 3D printing: Heavy Industry, Automotive, Consumer Products, Healthcare and Medical, and Aerospace. These five industries are estimated to account for 76% of the global manufacturing sector, totaling $9 trillion per year of total output. Based on results of a survey by industry experts, 23% to 40% of parts in these industries will be manufactured by 3D printing in the next five to 10 years, meaning $2 to $3 trillion of the global manufacturing sector will likely be impacted by 3D printing in the next five to 10 years.

Various countries are beginning to think through what this massive shift in manufacturing means for them. See Figure 8, which compares consumption versus manufacturing. Countries that have high consumption have an opportunity to grow local manufacturing, while companies that have large manufacturing bases with low consumption need to act quickly to maintain the base.

China is driving hard to maintain manufacturing competitiveness. They see 3D printing as both an opportunity and a risk to their manufacturing economy, and are investing heavily including $132 million allocated to 3D printing R&D. It is critical for them to remain competitive to maintain the manufacturing export sector. 1, 51