Inventing America presents The U.S. Patent System: Promoting U.S. Job Creations, Competitiveness, and National Security
Good morning. Thank you for the kind introduction, Holly, and thank you to Inventing America for inviting me to speak here today.
As Chairman of the House of Representatives Subcommittee that has jurisdiction over the patent system, I think that the title of today's program has it exactly right when it links the patent system to promoting job creation, competitiveness, and national security. The details of how the patent system is best optimized to achieve these goals can get highly technical and nuanced but the reason we have to engage in these debates and discussions is simple—innovation is the key to the future, and patents are a bedrock mechanism of how we incentivize innovation in this country.
We are fortunate at this point in American history to have a heritage that includes a culture that lauds the garage inventor—the person with a great idea that goes on to create a multi-billion dollar company, maybe creating a new industry sector along the way. It's easy to think that the machine of our innovation economy will keep cranking out winners. But this machine only runs because our country and our economy have long provided key inputs—an educated workforce, the rule of law, and even freedom of speech that creates an environment hospitable to letting people pursue ideas that may seem unorthodox at the time. The patent system is one of those key inputs. But as those in this room are no doubt aware, the patent system has undergone a series of changes over the past decade and a half. Which raises the question: when you tinker with the inputs of our innovation engine, what impact do you have on the output?
I remember, for example, two years ago the surprise when the U.S. Chamber's International IP Index, which ranks the strength of different patent systems around the world, put the U.S. patent system at twelfth place. Of course, we rebounded last year back up to second place, where we remain this year according the latest report that came out last week.
I am pleased to see the turnaround, but I am concerned about how lasting this recovery might be. This is because the report itself gives an explanation for its assessment of the strength or weakness of the patent system-in-question. For the U.S., the report lists four "key areas of strength." Two of these four relate to administrative changes made by USPTO Director Andrei Iancu—specifically, Director Iancu's changes to the procedures of post-grant proceedings at the Patent Trial and Appeal Board and his guidance on assessing patent eligible subject matter under section 101. Director Iancu, who will be speaking next at this conference, should be applauded for his service and stewardship of the patent system.
But we all know that these kinds of administrative changes are not the same as making changes to the law. As a member of Congress, I will readily admit that changing the law is not easy, but in this instance, that is the point. If the perceived strength of the U.S. patent system can fluctuate dramatically based on administrative changes alone, it is reasonable to question whether the law needs to be changed to decrease the degree of regulatory authority delegated to the Executive branch. In other words, we have to take a step back and ask whether this is how we want our patent system to work. If patents are meant to be the stable basis on which research and development investments are made, what is the impact of having this much change in the system possible without a change to the actual patent laws? I think this is a question we must start to examine in earnest.
While the exact design of Patent Trial and Appeal Board procedures has been the subject of scrutiny since the proceedings first started nearly eight years ago, there is now a more recent and acute challenge to these proceedings. I'm speaking of course about the Federal Circuit's decision in Arthrex v. Smith & Nephew, which concluded that the administrative judges on the Patent Trial and Appeal Board were performing duties in conflict with the requirements of the Appointments Clause of the Constitution. Our Subcommittee's last hearing was on this decision and its implications. The administrative law and patent law experts who were on the panel were unanimous in their support for legislation to address the uncertainty created by this decision. For my part, I made clear that I have concerns with the remedy that the Arthrex court identified for fixing this constitutional problem, namely making administrative patent judges at-will employees instead of having civil service protections. This is a set up that is prone to due process concerns because it incentivizes administrative patent judges to adjudicate with an eye towards preserving their livelihood. If the Appointments Clause requires that a Presidentially-appointed, Senate-confirmed officer have the last word in these cases, that power should be exercised transparently rather than through the ever-present threat of losing one's job.
At the end of the day, I recognize that courts may be constrained in trying to fix the constitutional problem they have identified. Congress is not so constrained, and so I consider it a priority to consider legislative alternatives. In doing so, I think it is worth looking at other models in the administrative state—such as independent commissions—that attempt to balance the need to have politically-appointed officers responsible for decisions with creating a process that preserves hallmarks of adjudication by guaranteeing the neutral application of law to facts. In any case, the bottom line is that Arthrex will continue to generate uncertainty about the fate of the Patent Trial and Appeal Board unless and until this case reaches the Supreme Court. And whatever outcome that will produce, it is likely that the best solution is for Congress to try to fix the issue itself and eliminate uncertainty about the legality of these proceedings.
While I've spoken now at length about how the Patent Trial and Appeal Board is affecting our standing in the U.S. Chamber's IP Index, it is not the only factor that concerns me with respect to ensuring the long-term competitiveness of the U.S. innovation economy. As I alluded to before, there are many inputs to the U.S. innovation machine. Another key input is our human capital in this country. I have been concerned that we, as a country, are not empowering the full range of our residents who might have innovative ideas. We had a hearing last year about the lack of diversity in who is obtaining patents in this country. It is clear that we are leaving talent on the table; something we cannot afford to do if we are to remain competitive.
A related concern that came out of this hearing is the issue of IP awareness: in other words, if you come up with a great idea, do you know enough to consider pursuing patent protection on that idea? To those in this room, familiar with intellectual property, that might seem far too basic a question. But you only need to look at newspaper articles from otherwise informed journalists who frequently confuse patents with trademarks and copyrights. The lesson I learned from our first hearing on diversity is that you cannot take for granted that highly educated people in science and engineering are learning about the patent system and when they should engage with it.
In contrast, I think it's worth noting that some of our major competitors are taking a more proactive stance to educate their citizens about intellectual property. In China, for example, there has been a change in recent years to add questions about intellectual property to the test students take for admission to college. These aren't throwaway questions, either. One question in 2019 asked, for example, why innovations should be protected by patents, and why the term of patent protection should not be indefinite. Another question asked why the protection of intellectual property should include both legislation and enforcement. These are sophisticated questions that required college-bound students to both be aware of intellectual property and to understand its greater role in society.
In our country, in contrast, I am not aware of large scale systematic efforts to promote IP education and awareness. There are certainly many great one-off and local initiatives—for example, the Girl Scout IP patch. In my home state, there are also many local examples of highly motivated professors or individuals who seek to educate innovators and pair up scientists and engineers with lawyers and business people. I hope to explore these efforts with a field hearing in Atlanta later this year. We don't need to necessarily have IP questions on our college entrance exams, but I think it's worth considering what we can do to make IP education more widespread and less dependent on the presence of a few individuals in different communities to take this issue on themselves.
After all, this matters not only to the individuals with great ideas who might be better positioned to start a small business if they protect their ideas with a patent, but it matters to all of us. We need to keep our innovation engine strong and healthy by providing it with best possible inputs. This is the key to ensuring the continued creation of high-paying jobs as well as American competitiveness and national security. As long as I am chairman of the Subcommittee with jurisdiction over a critical input—our patent system—I hope to do my part to ensure that it is optimized to propel us forward into the rest of this century and beyond.
Thank you.