In the next month, the House Judiciary Committee is poised to pass an intellectual property bill that will slow U.S. innovation to a crawl. As an entrepreneur and inventor this is a troubling prospect. The United State is currently an innovative power house. Innovation has helped us grow to a $17.45 trillion Gross Domestic Product, and if left undisturbed we are on track to maintain our top economic position for years to come.
However, our top position isn’t guaranteed, and if Congress weakens patents we are almost guaranteed to lose our top spot even sooner than anticipated.
Why is Intellectual Property so important? Property is the key to capitalism.
In 2012, China filed more patents than the United States. In fact, more patents were filed in China than any other country in the world. However, when Ronald Reagan moved into the White House the Chinese patent office had only existed for two years.
Before China implemented a patent system they needed to recognize that it was economically behind. It needed to recognize that a disdain for capitalism and its support and defense of personal property was hurting their nation as a whole. It was, China was behind almost every other developed country including Japan. A cultural revolution later, political leaders understood that a new direction was needed, and China implemented a patent system.
China is currently on a pace to overtake the U.S. economy by 2021 according the Economist. The Chinese are experiencing this growth by opening up their eyes to capitalism. Has China fully embrace capitalism? No. However, it has embraced property rights and is now reaping the rewards of economic growth around 7 percent of GDP. In the United States, GDP growth is more like 2.25%.
The U.S. was founded on the key tenets of capitalism. Our Founding Fathers knew that a strong patent system would help foster a high-growth economy. They also understood that one of the ways that the United States would be different from England is that here a King or Queen wouldn’t and shouldn’t be granted the power to dole out property rights to supporters. In the end, our founders thought that intellectual property rights were important enough to enshrine them into our Constitution.
Article 1, Section 8 “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;”
Property rights give the owner a reason to invest, a reason to develop, and an asset to sell. The reason is simple: it ensures the ability to protect their idea. If anyone could move into my house and the law assumed that if I, the home owner, attempted to kick them out that I would be guilty then my home would be worth a lot less.
The bill that the Judiciary Committee is planning to consider is HR. 9, the Innovation Act, and it is the same bill that the House passed last Congress. While the forecast is for less votes this year, it is still forecast to pass out of Committee and eventually the House where its destiny in the Senate is still up for grabs.
HR. 9 weakens intellectual property rights by making it harder for small businesses to assert a patent against an infringer and forcing them first to sue Chinese chip manufactures. It makes it more expensive to defend intellectual property by introducing default fee shifting. It makes it more burdensome to find investors because HR. 9 pierces the corporate veil with a provision called “joinder.”
If we were to do a quick thought experiment and think about whether a bill that weakens patent rights would be good for Capitalism or economic growth, the answer comes pretty quickly.
The most troubling part of this legislation is that Congressional Republicans understand what they are doing. They have held several hearings on the bill and have failed to call even one inventor to testify. The minority has invited one: and that one inventor opposed the changes in the bill. Legislators need to listen to the small innovators in their districts. Legislators need to reach out to Universities they represent. Legislators need to ask themselves whether they want to be like pre-cultural revolution communist China and fall behind everyone else or whether they want to continue to stay on top of the economic leaderboard and accelerate the growth of the U.S. economy by supporting Intellectual property instead of harming it.
As an innovator, I hope that they choose growth, instead of less innovation.
Charles Sauer is the president of Entrepreneurs for Growth and co-director of the Inventors Project