Concerns about the approach taken on well-intentioned legislation led to House Judiciary Committee Chairman Jim Jordan’s (R-OH) withdrawing the bill from the committee’s scheduled consideration. This episode illustrates the importance and value of procedural norms and regular order in the making of public policy. It also highlights how valid concerns can arrive at inadvisable remedies.

One Approach

The Prohibiting Adversarial Patents Act (H.R. 5475) seeks to curtail Communist China’s and other adversaries’ acquisition of cutting-edge technologies through their financing of state-owned, -sponsored, or -backed entities that use the U.S. patent system to their national advantage and to the United States’ detriment.

On September 14, Congressman Scott Fitzgerald (R-WI) introduced the Prohibiting Adversarial Patents Act. He was joined by several cosponsors, including Select Committee on China Chairman Mike Gallagher (R-WI), Judiciary Subcommittee on Courts, Intellectual Property, and the Internet Chairman Darrell Issa (R-CA), and Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions Chairman Blaine Luetkemeyer (R-MO).

To accomplish its purpose, PAPA would bar the issuance of a U.S. patent on an invention to anyone tied to a foreign adversary. Patents would be denied to someone connected with an entity listed on a U.S. sanctions list, such the U.S. Entity List, due to its posing a potential national security threat. Further, any U.S. patent issued to or owned by any such party would become unenforceable.

H.R. 5475 would also require disclosure in patent applications of any ties the applicant has or has had with state-sponsored entities, including an ownership interest, associated with a “foreign adversary.” The legislation specifies China, Cuba, Iran, North Korea, Russia, and Venezuela.

This approach—denying patents or making patents unenforceable when the patentee or patent owner has certain political and financial connections to an adversarial nation—seemed to some lawmakers a straightforward, effective way of blocking China’s and others’ tactics for achieving technological superiority.

Another Perspective

Other lawmakers, innovative and patent-dependent companies and organizations, and intellectual property experts sounded alarms about PAPA. Among their concerns was that PAPA would add new considerations, in addition to novelty, usefulness, and nonobviousness, to patent examination. Beyond existing factors related to an invention’s merit, extraneous considerations would be required. Considering patent applicants’ nationality, politics, associations and the like would set a precedent that many find troubling and dangerous. The U.S. intellectual property system is premised on the notion that patents are offered on a democratic basis that considers only the merit of an invention. Those concerned about the new direction PAPA would introduce into American patenting cited the qualities the Founders singled out as fundamental to the U.S. patent system.

Relatedly, PAPA’s approach is regarded by critics as setting a dangerous precedent. Opponents say it would set the stage for adding more conditions and constraints to the patent applicant—both in the American system and in other nations’ patent regimes.

Other concerns raised about H.R. 5475 include that such a patent policy would invite China’s and other nations’ retaliation. American inventors and U.S. companies seeking to obtain patents in other countries, including China, would likely face rejection. American innovators could encounter political payback over perceived maltreatment of those nations’ nationals seeking patents in this country.

In addition, those concerned by PAPA’s direction warn of harms to U.S. patent reliability. Many believe cancellation or denial of some patents would destabilize patent reliability and risk undercutting the value of patented technologies. There are fears that PAPA would threaten American innovation and the commercialization of new technologies. The reduction of access to patents here and in other nations would make it more difficult to create new markets and bring new products to market, and it would likely forestall or reduce revenues from patent licensing.

Thus, many American innovators think this legislation would jeopardize the current U.S. edge in IP licensing. The United States enjoys a trade surplus of $127 billion in charges for the use of IP. IP licensing revenue constitutes a source of funding for U.S. companies’ research and development. In the trade context, this means foreign entities are paying American IP owners—typically the most innovative firms in essential economic sectors—to fund their cutting-edge R&D.

Procedural Considerations

A key factor in PAPA’s sudden removal from committee markup was the lack of regular order and procedural due process in how it got there. In the seven weeks from H.R. 5475’s introduction until its scheduled markup in the full Judiciary Committee, no hearings were held on the bill, in subcommittee or full committee.

The IP Subcommittee had not been afforded the opportunity of vetting the legislation with witness testimony and input from interested parties. Members of the subcommittee of jurisdiction never had the chance to amend the bill, where the critiques of witnesses and stakeholders might be acted upon. Thus, the members having the greatest expertise on the substantive IP issues never received the opportunity of applying their knowledge and judgment to major patent legislation before the full committee membership became involved.

No meaningful record was compiled on PAPA because these usual procedural norms were skipped. This left both subcommittee and full committee members with insufficient information for assessing the impactful bill.

But for the fast action of several lawmakers whose experience and expertise in IP led them immediately to spot reasons for concern, PAPA might have been fast-tracked to enactment—blocking Chinese and other adversaries’ use of U.S. patenting with a giant leap away from the Founders’ democratized, merit-based patent system that has marvelously benefitted average Americans who have a novel idea.

Most telling that PAPA is well intentioned but poor policy is the fact that the Select Committee on China omitted the measure from its 150 policy recommendations in its “Select Committee Report on Winning the Economic Competition Against China.”

This near miss exemplifies why respecting procedural protections, such as subcommittee hearings and markups, is tremendously important. Regular order serves as a safeguard against unwise lawmaking.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].