The federal government has awoken in recent years to the competitive threat China poses to the United States and its global leadership.1 In addition to Beijing’s increasingly aggressive military posturing, especially with regard to Taiwan,2 China seeks to displace U.S. global technological leadership by leapfrogging its innovation economy past the U.S. The Chinese Communist Party (CCP) is investing heavily in next-generation technologies and deploying Chinese-built technologies—such as self-driving cars, artificial intelligence, and mobile telecommunications—in the global innovation economy. If successful, China will benefit economically from becoming a global technological leader, but the CCP also seeks to embed in these technologies its authoritarian and collectivist values and policies, just as the U.S. embedded in the foundational technologies of the modern internet in the 1980s and 1990s its values of openness, transparency, and freedom.
Among many proposals of how to deal with this new competitive threat, one bill has been introduced in Congress that mistakenly attempts to nullify China’s unique technological and economic challenge to the U.S.: the Prohibiting Adversarial Patents Act (PAPA).3 PAPA would bar certain Chinese entities, such as Huawei, from obtaining U.S. patents, and for any patents these Chinese entities already own, they would be prohibited from enforcing them against infringers in U.S. courts. According to its co-sponsor, Representative Blaine Luetkemeyer, PAPA would “cut off hostile actors from further infiltrating our economy.”4
Although well-intentioned in defense of U.S. national security, PAPA is a profoundly misguided effort in achieving this goal. If enacted into law, PAPA or a similar bill would be ineffective in its specific purpose. Even worse, it would likely harm the U.S. innovation economy and continued U.S. global technological leadership by undercutting the U.S. patent system as an efficient property rights system that has always secured equal rights to all innovators according to the rule of law.
The U.S. Patent System Promotes Innovation and Economic Growth with Property Rights
From the first Patent Act of 1790 through today, the U.S. has defined and secured patents as property rights. This was one of the unique U.S. contributions to patent law: securing the same property rights as farmers, merchants, and other productive creators.5 Thus, the U.S. patent system secures to all innovators their rights and discloses all technologies in the U.S. In promoting disclosure of new innovations and serving as a launchpad for commercial transactions, the patent system has been the engine driving growth in the U.S. innovation economy—from the Industrial Revolution to the mobile and AI revolutions in the 21st century.
This is not an accident. The Founders empowered Congress in the Constitution to create a patent system in which inventors were secured an “exclusive right” in their discoveries—the property right we call a patent.6 This was the first time that a government was authorized in its founding charter to secure to innovators the fruits of their productive labors.7Scholars in economics, law, history, and political science who have studied the U.S. patent system and innovation policy have all concluded that patents have been a key driver of the U.S. economy’s explosive growth from the 19th century through today.8 The patent system is essential for U.S. technological and economic leadership in the global innovation economy.
PAPA Undermines Economic Function of U.S. Patents as Property Rights
The proponents of PAPA fundamentally misunderstand how the U.S. patent system has functioned successfully as a property rights system. Property rights work when they secure the same exclusive rights to everyone regardless of personal characteristics or national identity.9 This is why property rights function successfully only under the rule of law in a political system with stable legal institutions like courts.10 For this reason, personal characteristics or nationality of a property owner should be irrelevant to one’s right to create, use, and sell a valued asset in the free market.
The U.S. patent system has exemplified par excellence these aspirational ideals of the rule of law and property rights: an innovator who creates a new, useful, and nonobvious invention, and who properly discloses this invention in their application with the U.S. Patent and Trademark Office (USPTO), receives a patent. Their sex, race, age, or national identity does not matter. This is why the U.S. patent system became the marvel of the world in the 19th century as a launchpad for successful, growing innovation economies; in the words of one award-winning economist, it “democratized invention.”11 Thus, many other countries copied the U.S. patent system in the late 19th century—including China in the 21st century as the CCP sought to spur its own innovation economy.
PAPA fundamentally subverts the nature and function of the U.S. patent system as a property rights system. For the first time, PAPA would officially inject national identity into the patent system as a legal requirement, making an inventor’s nationality a legal condition for obtaining a patent or enforcing a patent the inventor already received. In sum, PAPA undermines the rule of law in the equal protection of property rights that is the founding ideal of the U.S. and, consistent with the recognition of patents in the Constitution, has been a bedrock principle of the legal rules and precedents governing the U.S. patent system.
A Misguided and Counterproductive Effort at Securing U.S. National Security Interests
Beyond undermining the nature and function of the U.S. patent system, PAPA would also be ineffective in achieving its goal of promoting U.S. economic and national security interests. This is the case for two reasons.
First, PAPA advocates misunderstand how the U.S. patent system works, which secures a property right in a new invention in exchange for the disclosure of this invention to the public. In patent law, this is known as the “quid pro quo” of the patent system; unlike in politics, this is a laudable exchange long characterized as a “social contract” between the inventor and society, riffing on the idea of a “social contract” in the creation of a republican government that is formed to secure the rights of life, liberty, and property.12 As public legal documents, patents serve the same function as deeds in homes—providing certainty and security in the property rights to facilitate commercial transactions like licensing of inventions.
The disclosure function of the patent system is one reason why James Madison recognized in The Federalist No. 43 that the “public good fully coincides in [patents] with the claims of individuals.”13 The full disclosure of inventions, unlike with trade secrets, promotes even more innovation. Once people know how to make and use an invention, they can create their own inventions that do not infringe the patent to compete in the marketplace. Other innovators can also improve on prior inventions, such as Thomas Edison inventing and patenting in 1892 a better carbon transmitter for Alexander Graham Bell’s telephone,14 patented earlier in 1876.15 Edison’s transmitter became the new standard transmitter for all Bell telephones. This is how the innovation economy grows and society flourishes—through the publication of inventions in patents.
For this reason, Huawei obtaining a U.S. patent is a good thing for the U.S. If the invention is a real technological innovation, then Huawei’s patent publicly discloses this invention in English and in a format easily recognized and understood by scientists, engineers, and lawyers working in the U.S. innovation economy. Huawei’s patent in China—written in Chinese—does not do this. If China’s inventors are in fact creating cutting-edge technologies, it benefits the U.S. innovation economy to have these technologies published and disclosed in the U.S. through the patent system.
In sum, there is no technological, economic, or military advantage gained by China obtaining U.S. patents for the innovations created by Chinese scientists and engineers, and there are significant technological and economic advantages for U.S. innovators from Chinese inventors obtaining U.S. patents. If PAPA were enacted into law and Chinese innovators were barred from obtaining U.S. patents, the U.S. would be at a disadvantage. Chinese entities would still have access to the patents obtained by U.S. innovators that are published on the USPTO website. But U.S. innovators would no longer have the same access to technologies invented in China. For this reason, PAPA would undermine its supporters’ stated objective in advancing U.S. economic and national security interests by placing U.S. innovators at a disadvantage relative to innovators in China.
Second, PAPA would be self-defeating as a matter of global politics. By injecting national identity into the U.S. patent system, it would start a Balkanization process in which countries promote their own industrial policies in their own patent systems, favoring their own domestic companies or other national interests. Countries will close off their patent systems to U.S. innovators in the same way the U.S. closes off its patent system under PAPA. Since patents are property rights obtained and licensed under the domestic laws of each country, U.S. innovators and creators would be denied the right to reap the fruits of their labors in other countries. In those countries that respond to PAPA by barring U.S. inventors from their patent systems, companies or state entities would still access all U.S. patents published on the USPTO’s website, and they would then simply steal and copy these inventions in the countries where U.S. inventors cannot similarly protect their patent rights. This would only magnify the problems of industrial espionage and massive intellectual property theft by the CCP, which PAPA supporters claim the bill will help redress.
Even worse, the CCP would further exploit PAPA for its own political and economic advantages in its continuing lawfare against U.S. and European innovators. As is well known, the CCP has misused its antitrust agency and its courts to promote the interests of domestic Chinese companies like Huawei or Oppo to the disadvantage of U.S. and European innovators.16 In one case, a Wuhan court issued an anti-suit injunction through secretive processes without due process to try to force a patent owner to terminate a separate patent infringement lawsuit in a U.S. court.17 This was part of a lawfare policy by the CCP to force patent lawsuits to be heard only in Chinese courts so that China can set the terms for global patent licensing and litigation in ways that favor its own domestic companies like Huawei. Recently, a Chinese court artificially depressed royalty rates paid by a Chinese smartphone manufacturer to the U.S. and European innovators for use of the patented mobile telecommunications technologies like 5G.18
In closing the doors to the USPTO and to U.S. courts for inventors from China or other countries, China would recognize the obvious fundamental change in the U.S. patent system implemented by PAPA. The CCP would exploit PAPA to rationalize its own domestic industrial policies that discriminate against U.S. innovators. If PAPA were enacted into law, the next time U.S. officials rightly criticized China for abusing its patent laws and courts to promote its own domestic industrial policies favoring Chinese companies, CCP officials would respond that the U.S. now does this too by prohibiting ownership and enforcement of U.S. patents by Chinese inventors. The CCP may become even more aggressive and explicitly protectionist, and a new form of lawfare between the U.S. and China in their respective patent laws would spill over as other countries emulate the new protectionism being embedded in the Chinese and U.S. patent systems.
Conclusion
It is undeniable that the CCP’s theft of U.S. intellectual property is of legitimate concern,19 as does its increasingly aggressive military threat to the U.S. and its allies. These actions require serious policy responses by the U.S., but altering the U.S. patent system as a neutral property rights system is the wrong approach. PAPA is not a properly devised policy response to the CCP’s economic and military threats—it is the proverbial bull in a china shop. It undermines the U.S. patent system and, as a short-sighted protectionist effort, will fail to achieve its own objectives.
In past global conflicts between the U.S. and authoritarian regimes, the U.S. did not win by emulating the other countries’ domestic policies. The U.S. defeated the Soviet Union in the Cold War through its commitment to the rule of law and property rights, including in its patent system. The U.S. will win against its new global competitor in the 21st century by remaining committed to its founding ideals, which include securing reliable and effective patent rights to all inventors.