Sui generis solves tech races best – SCPA proves – it was directly responsible for surpassing Japan in semiconductor innovation

Thanks in part to the reverse engineering provisions of the SCPA, semiconductor technology also continued to develop at an exponential rate after the passage of the Act. Early generation semiconductor chip designs typically utilized eight mask layers. By 1992, many designs utilized as many as sixteen or more masks.201 This increase in design complexity made it virtually impossible to effectively copy registered chip designs, which led to a reduction in chip piracy.202 As a result, within six years of the passage of the SCPA, designs were so complex that they were both difficult to copy and often eligible for patent protection. Much of the developed world was also involved in some type of semiconductor chip design and production by this time.203

Interestingly, while some scholars cite the globalization of semiconductor chip design204 and exponential advancements in U.S. semiconductor technology as evidence of the SCPA’s positive impact,205 others cite these developments as catalysts for rendering the SCPA obsolete.206 Nevertheless, for early generation semiconductor designs, such as small logic chips, the SCPA was indeed effective legislation that reduced piracy of these chips, enhanced innovation, and jumpstarted the rebound of the U.S. semiconductor industry.207

Prior to the passage of the SCPA, Japan dominated the worldwide semiconductor chip market.208 Within the first two years of the passage of the Act, U.S. semiconductor chip manufacturers took active steps to regain control of the global market. First, U.S. semiconductor manufacturers focused on improving existing semiconductor manufacturing and design processes in order to produce superior-quality basic chip designs.209 At the same time, they invested heavily in the research and development of higher-margin, design-intensive chips, such as microprocessors, and began their exit from the low-profit basic chip market.210 The Semiconductor Industry Association’s (SIA) historical billing records show that by 1987, the United States began an aggressive upward trajectory in sales in the Americas and worldwide.211 Economists note that “innovation and responsiveness were arguably the strong suit of the [then-]fragmented American [semiconductor] industry.”212 By 1992, Japan and the United States held equal shares of the semiconductor chip market, and, by 1993, the United States surpassed Japan in worldwide market shares.213

Admittedly, as chip designs became more sophisticated and chip topography consisted of more than “mask works,”214 the need for protection under the SCPA ultimately became obsolete. The more sophisticated designs were now virtually impossible to copy and were eligible for the greater scope of protection granted under the Patent Act.215 This shift to the more comprehensive patent paradigm, nevertheless, should not force us to lose sight of that brief period when the SCPA provided much needed “progress gap” protection and had the “wings” effect of increasing the rate of semiconductor design innovation.

Professors Samuelson and Scotchmer correctly posit that it was the reduced rate of “basic” chip piracy, combined with the access allowed under the SCPA reverse engineering provisions, that helped stimulate chip innovation until it reached a patentable level. This increased level of innovation combined with increased technology transfer (second-source patent licensing) had an overall positive economic effect on the semiconductor industry.216 Because the semiconductor industry is a significant portion of the information and communications technology sector, any positive impact on this industry had to positively impact the U.S. economy and ultimately increase our knowledge base in the United States.217 Thus, Congress accurately predicted that the SCPA would stimulate innovation and enhance the public domain, despite its small window of applicability.218