Restrictive IP Policies Could Limit Innovation Opportunity

“By creating barriers to foreign IP applications, through pending congressional legislation as well as current procedure at the USPTO, the United States is not fostering global competition, therefore hindering innovation opportunity and economic growth.”

In the wake of fraudulent IP applications from foreign nations—namely China—the United States has recently enacted or called for policies that require foreign entities to complete more thorough IP applications. For instance, in August, we heard about the new USPTO rule requiring all foreign trademark applicants and registrants to be represented by a licensed U.S. attorney when filing. According to the USPTO website, this is intended to “increase USPTO customer compliance with U.S. trademark law and USPTO regulations, improve the accuracy of trademark submissions to the USPTO and safeguard the integrity of the U.S. trademark register.” And then just last week, news broke that the USPTO had issued new instructions requiring trademark examiners to ask applicants for proof of legal residence in the United States to enforce this new rule (note: these instructions have since been rolled back).

The reasoning behind these legislations, or proposed legislations, seems to be that by making the IP application process more involved and more challenging, the USPTO will limit the number of foreign IP applications received—and therefore the number of fraudulent applications received. This will undoubtedly work, but is it the right approach?

Despite volume control measures, bad actors can still find ways to submit fraudulent IP applications, and by making applicants jump through too many hoops to secure IP protection, the United States could limit real innovation opportunity. Let’s assess.

Foreign IP Fuels U.S. Business

Competition fuels innovation, which leads to new businesses and new opportunities. This contributes to a strong economy, plentiful jobs and progress, all of which are necessary to keep a country ahead.

Let’s look at, for example, the race to 5G. The competition between the United States and China to become the first to achieve the widescale implementation of 5G networks is driving the telecommunications industry forward. Some of the biggest U.S. brands—Qualcomm, Verizon, AT&T, Google and more—are putting dollars and manpower behind researching and developing 5G networks, racing against each other and Chinese companies like Huawei to become the first dominant player for on 5G worldwide. With more than 10,000 patents in the United States and the highest number of standard essential patents (SEPs) for 5G in the world, Huawei—whether people like it or not—is enticing other companies to build out their research and development teams so that they can try to get ahead of the curve when it comes to new innovations in the 5G space.

This 5G race has also led to the creation of jobs and centers of innovations across the United States. For example, Verizon opened four 5G labs across the country in 2018, giving local startups, universities and technology companies the opportunity to develop, test and refine tomorrow’s 5G solutions. AT&T Labs, AT&T’s research and development wing, currently employs more than 10,000 people in the United States, and Qualcomm employs more than 10,000 people in the United States in engineering alone.

By creating barriers to foreign IP applications, through pending congressional legislation as well as current procedure at the USPTO, the United States is not fostering that global competition, therefore hindering innovation opportunity and economic growth.

U.S Business Cannot Afford to Face Backlash from China

However, it’s not just about risking opportunities at home, but also for U.S. businesses abroad.

By singling out foreign, and specifically Chinese, applicants, we also open the door to receive potential backlash from China. China could easily put a rule in place to make non-residents take extra steps to file for IP— just as the United States. has done. While there’s no evidence of the country doing that yet, there’s also nothing stopping them from placing extra scrutiny on U.S. applications or not granting as many trademarks to U.S. applicants. We’ve seen how China retaliated during the trade war when the country’s wellbeing was at stake—what is stopping them from doing the same thing here?

With China being a high-growth market—and the second leading economy in the world, with an annual GDP of $12.24 trillion—it’s critical that we don’t allow this to happen. Any retaliation from China could make it challenging for American businesses to protect their IP there—and capitalize on the tremendous potential China offers to vendors.

We Must Think Globally

To drive continued innovation and economic gains, the United States should think critically about the mandates it sets for IP. In today’s turbulent political landscape—one that could be poised for change in the next 14 months—we should pay close attention to the ideas put forth by leaders and potential leaders about how they approach relations with China and IP dealings more specifically. China presents a huge opportunity for U.S. business, and leaders should be wary of anything that puts that opportunity at risk.

We must make the IP application process equal for all who file, whether that be requiring everyone to obtain a U.S. attorney when filing or eliminating that requirement across the board. At least then, the playing field is level and everyone would get to participate in the innovation process.

And to address fraud, specifically, we can count on existing laws to protect ourselves. In the United States, if a company believes someone has copied or infringed their IP, they have the right to contest inventorship or validity. Trademark holders can take infringers to federal court and sue for damages, an injunction or the forfeiture of infringed goods. The USPTO also has an extensive trademark examining procedure in place, and piloted a third party reporting system in 2018 to help flag fraudulent and inaccurate applications. What’s already in place is well positioned to ensure IP rights are honored.

While tensions are still high with China, regulations such as the trademark law could make or break how the United States fares in the global tech war—and in the global economy more broadly.

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