Business embraces risk. Supply-chain interruptions, slow-growth environments, changing tastes and good old-fashioned competition are all challenges that businesses large and small willingly face. In a healthy economy, risks are balanced with reward, encouraging entrepreneurs to bring new ideas to the market.
No business carries more inherent risk than the business of innovation. Sectors like creative content production, technology and the life sciences carry outsized risk with their heightened rates of failure, high costs of entry and lengthy incubation periods. But in a supportive environment that enables a commensurate return on investment, businesses are willing to face these risks head-on.
Business is far more reluctant to embrace political risk. When deciding where to invest, companies of all shapes and sizes seek a legal framework that reduces the levels of uncertainty that result from arbitrary or abrupt regulatory measures, extraordinary takings and retrospective impingement of private property rights. Intellectual property (IP) protections provide the foundation to safeguard innovation and creativity, protect consumers and incentivize the development of new, 21st-century technology. A strong, respected system of IP rights minimizes political risk and sets capital free to engage in innovative and creative activity.
Legal certainty – strong rights backed by rule of law – has underpinned U.S. leadership in the global knowledge economy. Strong IP protections create the foundation for American creativity and innovation, propelling U.S growth and competitiveness since the Founding Fathers penned IP into our Constitution.
IP is also the bedrock of the U.S. economy. A study released by the U.S. Department of Commerce revealed that IP-intensive industries support 45 million American jobs and contribute $6.6 trillion to the U.S. gross domestic product. To guarantee that IP-intensive industries can continue to propel the economy to new levels of growth, the U.S. must ensure its IP framework remains the best in the world.
Each year, the U.S. Chamber releases its International IP Index, which benchmarks the IP environment around the world. Now in its sixth edition, the 2018 index examines the IP framework in 50 global economies across 40 categories indicative of activity surrounding patent, trademark, copyright, and trade secrets protection.
In the first edition of the index, the U.S. IP system was the premier model of a truly robust and effective IP framework. And while the U.S. remains atop the 2018 index, the leadership gap has narrowed between the U.S. and other global economies. As so many economies are taking steps to improve their IP infrastructure, the U.S. is beginning to fall behind. The six editions of the index expose the regression of U.S. IP protection compared with the advancement of international IP frameworks.
Specifically, the deterioration of the patent system in America places the U.S. at risk of ceding its long-standing position of global leadership. U.S. judicial decisions and administrative IP proceedings have eroded patent protection in America. Supreme Court decisions limiting patent eligibility, mounting legal uncertainty around due process for patents, and the increasing litigation burden placed on patent holders challenge the strength of the U.S. patent system. This deterioration of the patent system jeopardizes investment in the innovative technologies that underpin America’s global competitiveness.
The 2018 index captures the implications of this uncertainty, with the U.S. now ranked 12th in patents in the 2018 report.
However, while patent-protection standards have declined, the U.S. has taken positive steps to strengthen its border enforcement efforts through the Trade Facilitation and Trade Enforcement Act. The index makes it clear: The U.S. places a premium on IP enforcement. U.S. Customs and Border Protection is to be commended for its efforts to further streamline seizures of counterfeit and pirated goods and keep consumers safe.
Still, enforcement isn’t enough. The U.S. must strive for an IP system that is strong in every area for everyone. It is time for America once again to lead on IP. By embracing forward-looking IP reforms, the U.S. can ensure that it keeps the reins on IP-driven innovation before someone else takes them.
Patrick Kilbride is vice president of international intellectual property for the Global Innovation Policy Center at the U.S. Chamber of Commerce.
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