Friday, March 9, 2018

Sapna Kumar: The Fate Of "Innovation Nationalism" In The Age of Trump

One of the biggest pieces of news last week was that President Trump will be imposing tariffs on foreign steel and aluminum because, he tweets, IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY.  Innovation Nationalism, a timely new article by Professor Sapna Kumar at University of Houston School of Law, explains the role that innovation and patent law play in the "global resurgence of nationalism" in the age of Trump. After reading her article, I think Trump should replace this tweet with: IF YOU DON'T HAVE PATENTS, YOU DON'T HAVE A COUNTRY.

Drawing on various disciplines, Kumar defines nationalism generally as "creation of a shared national identity" that is "independent of language, race, religion, [or] economic status." (5). Kumar focuses mainly on what she calls "economic nationalism," which is where nations adopt "economic policies that discriminate in favor of [their own countries.]" (6). Although "[e]conomic nationalism is often treated as being synonymous with protectionist policies, such as levying tariffs on imported goods [,]" Kumar asserts that "[e]conomic nationalism is far broader than protectionism—extending to economic policies made to advance a shared national identity that exists independent of race and religion." (4).

Kumar's basic thesis is that in the United States, innovation has become a part of the United States' national identity. (1) ("Over the past several decades, the government has cultivated an identity of the United States as being an innovative country.") Kumar further argues that the United States' "innovation nationalism" (her term) has had a major impact on U.S. patent policy. (19-30).

In Kumar's view, there are several ways patent policy has been used to cultivate the United States' national identity as an innovative country.  There are a ton of complexities to this discussion. Anyone interested in international IP law should read the full draft of Innovation Nationalism.  I'll just give a skeletal outline here.

Domestic Patent Law

The first way Kumar says patents can be used to promote "innovation nationalism" is to strengthen domestic patent rights.

As Will Hubbard at University of Baltimore School of Law observed in his 2013 article Competitive Patent Law, strengthening U.S. patents isn't necessarily good for the United States or for U.S. inventors. The reason is that foreign inventors can get U.S. patents too. "U.S. inventors," Hubbard writes, "are ... struggling to maintain dominance in the U.S. Patent and Trademark Office. Since 2008, foreign inventors have received more than 50% of the patents issued by the U.S. Patent and Trademark Office." (Hubbard, 14). Foreign companies that get U.S. patents gain exclusive rights to operate within U.S. markets. Depending on who ends up owning those foreign patents, the profits will presumably go to foreign companies, not U.S. companies.

Kumar addresses this issue, explaining that
[a]t first glance, it might appear that domestic patent policy can’t be related to economic nationalism. The Patent Act applies equally to domestic and foreign inventors, as is required by the TRIPS Agreement, and provisions that were blatantly discriminatory to foreign inventors [were] removed under the America Invents Act. (21).
So the idea that strengthening U.S. patent rights constitutes a "pro-U.S." policy isn't quite accurate. (Kumar adds more nuance to this point, noting that even when U.S. inventors are the main beneficiaries of stronger U.S. patents, "expanding patent and other IP rights out indefinitely does not necessarily promote innovation, let alone domestic economic growth...") (20).)

But Kumar argues, creatively, that "even purely domestic patent policy can also be quasi- protectionist." (21) (emphasis added).

There are two ways this "quasi-protectionism" theory works. First, U.S. patent law can favor certain industries more than others, "creating an artificial subsidy to chosen domestic industries to help them better compete on the international market." (21). For instance, by protecting software patents pre-Alice, the U.S. patent system was potentially more helpful for innovators in Silicon Valley than it was for other countries with less established software industries. Kumar gives the example of the pharmaceutical industry, where she asserts that "pharmaceutical companies have been successful in extending IP protection on blockbuster drugs through additional patents or regulatory exclusivities and have also successfully resisted price controls." (24).

The second way domestic U.S. patent law is "quasi-protectionist" is less direct. Here is the argument.  Kumar asserts that "U.S. patent policy advances economic nationalism to the extent that the patent system is used to reinforce or support a nationalistic identity...of innovativeness." (21).  In other words, simply by having a stronger patent regime, the United States cultivates the identity of being innovative, which in turn indirectly benefits the United States. (24). For instance, in the pharmaceutical example, "[i]n addition to economic benefits that the United States enjoys from its pharmaceutical industry, it can furthermore bolster its identity as an innovative country." (24)

So how exactly does cultivating an identity of innovativeness help the U.S. economically? Not entirely clear. But this point seems quite important to Kumar's thesis and is worth spelling out further. I can think of a few hypotheses off the top of my head. Maybe U.S. companies benefit when trying to raise money because they are simply seen as more innovative, sort of like signaling? Maybe U.S. inventors are more likely to be hired abroad?  Kumar discusses the idea of a cultivating an identity of innovativeness for its own sake in a short section of the paper. (17-19). I would appreciate more specifics from Kumar on precisely how merely being perceived as innovative can help the U.S. vis foreign countries.

At any rate, this is a very compelling idea: stronger patents contributes to an identity of being innovative, which (somehow) helps the country economically.

International Patent Law

The second way patent law can be used to promote "innovation nationalism" is to "requir[e] trading partners to adopt U.S.-style patent and intellectual property laws[]" through trade agreements like TRIPS. (1, 26-29). (Kumar also discusses the International Trade Commission (ITC)'s authority to exclude imports that infringe U.S. patent rights under this heading, though I am not sure why this doesn't count as a mechanism for enforcing domestic patent rights?) (24-25).

The gist is that the United States can protect its own national interests by encouraging other countries to adopt laws that end up protecting the rights of American patent owners in foreign markets and thereby protecting the commercial aspects of U.S. research. This is usually effectuated through trade agreements in which open access to U.S. markets is made conditional on adopting U.S.-style IP laws in the trading partner's home country. (27).  Again, TRIPS does not help only U.S. companies. Foreign companies can also benefit from domestic patent protection. But to the extent treaties like TRIPS make it more practicable for U.S. companies to protect U.S.-generated IP abroad, it does help the United States.

To me, the ability of the United States to protect its patent rights abroad is a crucial piece of any policy centered on economic nationalism. To give one example, in their recent article, Bayh-Dole Without BordersLisa Larrimore Ouellette and Daniel Hemel observe that an under-appreciated feature of making federal funding for research work as an economic policy is ensuring that U.S. companies are able to protect the results of that federally-funded research abroad.  (Hemel & Ouellete, 285) ("We call this the ‘internalization theory’ of Bayh–Dole, and as far as we know, it is an aspect of the Bayh–Dole regime that has gone unmentioned in the literature thus far.")

 John Duffy has also made a similar observation about the role of international patent harmonization, writing in Global Harmony And Diversity that "[t]he most compelling justification for harmonization in patent law mirrors the justification for creating a patent system in the first place, for both are efforts to account for the positive externalities associated with the creation of technical information."  (Duffy, 693).

I have also referred this "internalization principle" in the context of U.S. state innovation policies. As I observed in Patent Nationally, Innovate Locally, U.S. states and localities provide significant funding for research conducted in their borders, both to promote "innovation" per se, and to attract companies into the jurisdiction for economic development and job-creation reasons. Without the ability to protect patents generated from this research outside of individual U.S. states' borders, these policies would be far more difficult to justify.

Yet this is where Kumar observes something terribly disturbing: "[u]nder the Trump administration ... innovation nationalism is beginning to come into conflict with nativism and cultural traditionalism." (33) (emphasis added).

The main way in which this anti-innovation nationalism has manifested is in Trump's rejection of the Trans-Pacific Partnership (TPP), which contained a (controversial) chapter on international intellectual property protections.  As discussed by Margot Kaminski and others, the proposed chapter would have included a section on patents. Among other things, it would have required stronger protection for minor improvements.*

Here is Kumar's summary of the trajectory of protection for U.S. patents abroad, first under Obama, and then under Trump.
"Obama and prior presidents recognized that bilateral and multilateral trade agreements provided the United States with an opportunity to get other countries to adopt broad patent protection that benefitted major U.S. innovators. 
Trump, by contrast, has expressed great disdain for trade agreements, maintaining that they enriched foreign elites and victimize U.S. workers. 
During his campaign, Trump criticized the TPP as a “potential disaster” for the United States, claiming that it hurt U.S. manufacturing. Upon abandoning the agreement as president, Trump proclaimed it to be a “[g]reat thing for the American worker.” 
In taking this position, Trump has turned away from innovation nationalism. By walking away from the TPP agreement, Trump threw away from major IP benefits for various industries including longer patent terms for drugs, additional protections for biologic medicines, and longer copyright and trademark terms of protection.  

So let's assume Kumar is right and the United States has been cultivating an identity of being uber innovative, and this has been working more or less pretty well. Forming a national identity around being innovative only works if you can prevent everyone else from copying you. This means the Trump administration's turn towards "nativism and cultural traditionalism" is bad not just because it is so often coupled with racism and xenophobia. It is also in direct conflict with our identity as an innovative country. In Kumar's words, "Trump has attempted to promote the United States as a strong, sovereign nation that will swiftly retaliate against its enemies, regardless of the cost to innovation." (1).

Not good, folks.

* Section 8.1. of the TPP would have read
Each Party shall make patents available for any invention, whether a product or process, in all fields of technology, provided that the invention is new, involves an inventive step, and is capable of industrial application. In addition, the Parties confirm that: patents shall be available for any new forms, uses, or methods of using a known product; and a new form, use, or method of using a known product may satisfy the criteria for patentability, even if such invention does not result in the enhancement of the known efficacy of that product. (Trans-Pacific Partnership, Intellectual Property Rights Chapter (draft Feb. 10, 2011), art. 8.1)

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