In an election year, bipartisan issues are hard to come by. However, protecting American innovation from foreign threats, like those posed by China, is a cause policymakers from all political parties should align behind.
Many of China’s damaging practices — like stealing Americans’ personal information and providing domestic firms massive subsidies to dominate global markets — are becoming more obvious.
But others are sleeper issues that need more attention to ensure we prevent serious harm to our technology future.
Patent Trolls
One critical example is the increasing risk of serious damage to US-based innovators through highly technical IP cases in our courts as well as the International Trade Commission (ITC), a little-known government agency.
Originally designed to protect American industry, the ITC, like our courts, is now being exploited by opaquely funded, non-productive patent trolls at our expense.
Patent trolls are also called patent assertion entities (PAEs). These entities acquire unused and low-quality patents and then scour through them to find hooks for damaging litigation against American companies. Filing these lawsuits is their sole business; they make nothing and do nothing productive.
ITC Abuse
Typically, patent disputes are heard in federal district court, where a judge can take steps to prevent outrageous claims of damage from alleged infringement. For example, a PAE would not be entitled to an injunction to get allegedly infringing products banned from the US market.
So trolls have begun to see the advantages of filing litigation at the ITC and have even made it their forum of choice.
This is because, unlike district courts, the ITC has only one remedy for patent disputes: an outright ban from the US market on all products that may involve the patent. Yes, this means a total US market ban of the final product, even if the patent is related to a very marginal part of a highly complex product, like a car, smartphone, or laptop.
National Security
ITC abuse is a growing problem that threatens America’s national security. Patent trolls are typically backed by third parties, who provide the financing for the case in exchange for a share of the proceeds.
The national security problem comes partly from the fact that no one knows where the money is really coming from. The world of third-party litigation funding is so opaque that Russian billionaires with close connections to Vladimir Putin have used it to evade international sanctions. Despite this threat, the ITC’s rules do not require the disclosure of third-party litigation funding.
Our national security experts have warned that China will take advantage of any opportunity to undermine the major innovator companies operating in the US. And it is a boon to be able to operate so anonymously.
Sovereign wealth funds and other opportunistic entities — including from China — are weaponizing litigation and threatening critical injury to America’s technology edge. As just one example, last year, court filings in Delaware made it clear that the Chinese-based company Purplevine IP is behind several intellectual property lawsuits in the US.
The ITC is a rich source of advantage: ITC suits allow parties to gain access to sensitive information through discovery, tie US companies up in lengthy and burdensome litigation costing millions of dollars, and gain competitive advantages for their companies in American markets, while the foreign funders behind these cases remain hidden.
Updating Regulation
The problem of opaque players in the American legal system has become so serious that the Foreign Agents Registration Act (FARA) Unit at the Department of Justice plans to update its regulations for the first time in nearly 30 years to require more extensive disclosures of foreign ties in interactions with the US government Executive Branch and Congress.
As far as litigation goes, the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party released a report stating it will determine what safeguards are needed to prevent foreign adversaries from obtaining intellectual property through third-party litigation funding.
The report recommended enhanced disclosures of foreign adversary funding of litigation in federal court. This is a start, but the recommendation needs to be extended to the ITC.
Transparency
It is also critical to take other steps to root out these shadowy funders at the ITC and in all US courts. Bringing more transparency to the world of third-party litigation is only one piece of the puzzle.
Weeding out Chinese influence in our patent system means reforming the ITC more broadly so patent trolls and their sovereign wealth funders cannot weaponize the American legal system.
Fortunately, there is legislation in Congress that will modernize the ITC and protect it against manipulation from foreign adversaries. The Advancing America’s Interests Act (AAIA) would ensure that Section 337 investigations at the ITC operate as Congress intended by protecting productive, innovative domestic companies — not patent trolls — against unfair imports.
The ITC would have to ensure there is a genuine domestic industry affirmatively advocating as a complainant, not just a troll. It also would have to take seriously its obligation to ensure the broad public interest would be served by a sweeping product ban, especially when a troll is asking for that ban.
Patent protections drive US innovation policy which is critical to maintaining economic and national security. Allowing PAEs to weaponize patents at the expense of US companies must be stopped.
Shining light on anonymous litigation financers and reforming the ITC by passing the AAIA are critical steps in mitigating avoidable threats and deterring bad actors.
George Landrith is President of Frontiers of Freedom, a think tank founded by former US Senator Malcolm Wallop to promote the principles of peace through strength.
The views and opinions expressed here are those of the author and do not necessarily reflect the editorial position of The Defense Post.
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