This week courts have given us two different and contradictory verdicts about intermediary liability.

In a case going all the way back to 2018, Cox Communications, the cable and broadband company, was accused of failing to live up to its legal obligation to limit music piracy.

To simplify, Cox had an obligation to cancel the accounts of users who had been warned multiple times about engaging in music piracy, but Cox did not. Cox of course had a financial interest in not cancelling users accounts.

So Cox was sued by the major music labels, and the labels won in lower courts. But this week the Supreme Court continued its skepticism of intermediary liability by finding that Cox was not liable, because Cox did not “actively encourage infringement.”

According to the New York Times, “in its opinion released on Wednesday, the court said a company was not liable for “merely providing a service to the general public with knowledge that it will be used by some to infringe copyrights.”

Writing for the court, Justice Clarence Thomas said a provider like Cox was liable “only if it intended that the provided service be used for infringement” and if it, for instance, “actively encourages infringement.”

So, an intermediary has to intend for something to happen, and actively encourage that thing to happen, in order to incur liability.

The Court’s unanimous 9-0 decision is of course definitive, even if it seems to fly in the face of some provisions of the Digital Millenium Copyright Act (DMCA).

At IPI, we’ve never been comfortable with intermediary liability, even though we’re also uncomfortable with copyright piracy.

But that leads us to two other cases this week, where in Los Angeles on Wednesday, a jury decided in favor of a plaintiff who had claimed that Meta and YouTube hooked her with addictive features — a verdict validating a novel legal strategy holding the companies accountable for personal injury. And a day earlier in New Mexico, a jury found Meta liable for failing to safeguard users of its apps from child predators.

So, let’s get this straight: Intermediaries are not liable for their users’ illegal activity unless they intend it and actively encourage it, but they are liable for harm to their users, including self-harm, even if they don’t intend it and don’t actively encourage it.

Now, of course the details of the cases are different, and details matter.

Still, the Supreme Court is not a fan of intermediary liability, and that’s a good thing. Which means if Meta and Google appeal all the way to the Supreme Court, there is a reasonable chance that they will succeed.

June 27, 2025

The Honorable Howard Lutnick 
Secretary of Commerce
1401 Constitution Avenue, NW
Washington, DC 20230

Dear Secretary Lutnick:

We sincerely appreciate your and President Trump’s continuing efforts to fix the many problems left to you by the Biden Administration. We know you are dealing with an array of significant challenges and applaud the work you have done thus far. We write to bring to your attention another example of Biden Administration injustice that we believe merits your prompt attention.

The undersigned conservative organizations are strong supporters of property rights and applaud the steps the Administration has already taken to support a strong patent system which drives tremendous innovation and economic activity. We are extremely concerned about the Biden Administration’s tolerance of the abuse of the Inter Partes Review (IPR) process, and urge you to take immediate steps to remedy those matters.

This matter concerns the United States patent system, the integrity of which has been eroded by misguided policies heavily influenced by opponents of strong property rights. We applaud the work of the Acting Director of the United States Patent and Trademark Office (USPTO), Coke Morgan Stewart, who has demonstrated bold leadership in swiftly rescinding Biden Administration policies that enabled large companies to weaponize the administrative state against American inventors and entrepreneurs.

For example, former USPTO Director Kathi Vidal created an arbitrary and widely criticized “compelling merits” standard in a June 21, 2022 policy memo, which she wielded to institute administrative proceedings against issued patents that Article III courts previously had found valid and infringed. Acting Director Stewart rescinded that policy on February 28, 2025, and she has vacated proceedings against patent owners that would not otherwise have been instituted.

Yet despite all of this progress, it has come to our attention that the USPTO continues to defend two of the most egregious and high-profile applications of the repudiated “compelling merits” standard. These cases are currently pending before the United States Court of Appeals for the Federal Circuit: VLSI Tech. LLC v. OpenSky Indus., LLC & Intel Corp., Nos. 23-2158, 23-2159 (Fed. Cir.), and VLSI Tech. LLC v. Patent Quality Assurance LLC & Intel Corp., Nos. 23-2298, 23-2354 (Fed. Cir.). The USPTO has intervened in these appeals to defend the decisions of the Biden Administration, but should—in our view—request immediate remands to the agency.

In these cases, former Director Vidal personally intervened and handed Intel Corporation—her former client—an unwarranted opportunity to revive challenges to VLSI Technology LLC’s patents previously rejected by the PTAB after a jury determined that Intel infringed those patents and owed VLSI billions of dollars in damages. These inter partes review (IPR) patent challenges never should have been permitted in the first place. They were requested by mysterious shell entities and—in Director Vidal’s own words—abused “the IPR process, the patent system, and the USPTO.” See OpenSky Indus., LLC v. VLSI Tech. LLC, IPR2021-01064, Paper 102 (PTAB Oct. 4, 2022); Patent Quality Assurance, LLC v. VLSI Tech. LLC, IPR2021-01229, Paper 102 (PTAB Dec. 22, 2022). Former Director Vidal should have terminated those proceedings.

But that is not what she did. Instead, former Director Vidal expressly invoked her “compelling merits” standard to enable statutorily time-barred petitioner Intel Corporation to step into the shoes of these shell entities. She also suppressed and sealed an anonymous whistleblower report linking Intel to one of these abusive shell entities. That result is not only legally suspect, but also plainly unfair. Intel already had attempted to challenge these same patents during the first Trump Administration. Intel lost and was statutorily barred from bring further challenges. Moreover, a jury found the patent infringed to the tune of over $2 billion in damages, and an Article III court also rejected Intel’s validity challenges.

Acting Director Stewart has not only rescinded the policy underlying this miscarriage of justice, she also stated her disagreement with these outcomes. In a brief recently submitted to the Federal Circuit in the pending appeals, the USPTO unequivocally states that “the current Acting Director would not have similarly decided this case, particularly in view of the fact that petitioner had engaged in serious misconduct and the fact that the joined party was otherwise time barred and had prior IPR petitions denied . . . .” We fail to understand how the PTO continues to defend these Biden Administration decisions that countenance “serious misconduct.”

We ask that you consider directing the agency to request an immediate remand of these matters from the Federal Circuit back to the USPTO. Once these cases are remanded, the agency can conduct a full and honest investigation under the authority granted to it, consistent with the facts and the law, free of the political influence and manipulation that has created this situation. Indeed, we take no position on the ultimate merits, but believe proceedings from the government should be fair and free of abuse, misconduct, and gamesmanship. Further, it is not too much to ask that the PTO understand who or what is bankrolling Open Sky and PQA.

By securing remand of these cases to the USPTO, you will have restored integrity to the process, struck a blow against swamp culture, and reverse the abuses allowed during the Biden Administration. Conducting a thorough investigation will send a powerful message to abusers of the patent system: the Trump Administration will hold those who engage in “serious misconduct” accountable and such parties will no longer be allowed to run roughshod over the inventors and entrepreneurs whose ingenuity and investment propel innovation.

We applaud your and President Trump’s leadership in addressing the very significant problem of government agencies being captured by special interests and taking actions contrary to the interests of American workers, taxpayers, and our economy. You have made important progress in the Administration’s early days, and we look forward to seeing more in the days ahead.

We thank you in advance for your consideration of this important matter.

Sincerely,

George Landrith, President
Frontiers of Freedom Institute

James Edwards, Executive Director
Conservatives for Property Rights

John Schlafly, Treasurer
Eagle Forum Education & Legal Defense Fund
Phyllis Schlafly Eagles

Dick Patten, President
American Business Defense Council

Horace Cooper, Director
Project 21

Colin Hanna, Founder & President
Let Freedom Ring

James L. Martin, Founder & Chairman
60 Plus Association

Saulius “Saul” Anuzis, President
American Association of Senior Citizens

Chuck Muth, President
Citizen Outreach

Khaled Saffuri, President
National Interest Foundation

Kerri Toloczko, Chairman
SWFL Center-Right Coalition

Susan Taylor, President
Strengthening America for All

John Cooper, President
Defending America Foundation

Nicholas Willis, President
Americans for Liberty & Security

Mark Thomas, Founder
Freedom & Prosperity Caucus

Brian Crawford, President
The Last Best Hope on Earth Institute

Charles Sauer, President
Market Institue

Gerard Scimeca, Chairman
Consumer Action for a Strong Economy

David Wallace, Founder
Restore America's Mission

Tom Giovanetti, President
Institute for Policy Innovation

Ryan Ellis, President
Center for a Free Economy

Larry Harvey Policy Consultant

C. Preston Noell, III, President
Tradition, Family, Property, Inc.

Steve Pociask, Founder & Chairman
American Consumer Institute

Robert Romano, Executive Director
Americans for Limited Government

Timothy H. Lee, VP of Legal Affairs
Center for Individual Freedom

CC: Coke Morgan Stewart, Acting Under Secretary of Commerce for Intellectual Property and Acting Director of the United States Patent and Trademark Office

A Big Mac costs more in San Francisco than it does in Baton Rouge. And it costs more in Switzerland, but less in Mexico. 

Some prices vary from moment to moment. Your Uber ride could cost three different prices within the same hour, depending on demand. And of course, on any given flight passengers on the same flight may have paid a dozen different prices, depending on when they purchased.

Even a pint of strawberries might have different prices at the same grocery store, depending on the week or even the day that you shop.

This is called differential pricing, or dynamic pricing, and it’s how markets work to match customers with products and services based on supply and demand.

But when government steps in and tries to control pricing, market mechanisms get disrupted, supply and demand is set aside, both consumers and producers are harmed.

Americans generally pay more for name-brand prescription drugs (though NOT for generics) than those in other countries, but only partially because of differential pricing. It’s mostly because other governments exert price controls on drugs. The problem is not that Americans pay too much; it’s that other countries pay too little. They distort their prices, which causes distortions in our prices.

The solution to this is to insist that foreign countries bear more of their share of drug prices, and this can only be done through trade agreements. But of course, these days we’re into blowing up trade agreements, not strengthening them.

But instead of insisting that other countries pay a fair price for drugs, the Trump administration is advocating the opposite—importing foreign price controls to the U.S. The Trump administration doesn’t like importing underwear from Vietnam but loves the idea of importing Vietnam’s price controls on pharmaceuticals.

Specifically, the Trump administration is pushing Congress to include in its budget reconciliation package a provision that would limit the Medicaid reimbursement price to what other countries pay. They’re calling this MFN, or “Most Favored Nation” pricing, which is ironic, since the Trump administration decries the extension of Most Favored Nation status to China. You would think the acronym would be toxic.

Drug manufacturers already lose money due to the Medicaid reimbursement formula, but importing foreign price controls would squeeze them even further. In the current populist moment, putting the squeeze on drug manufacturers might feel good, and Congress might save a little money, but there are unseen costs.

A critical concept in market economics is “the seen versus the unseen.” It’s easy to see the supposed benefits of price controls, but they are short-term, and ignore the unseen impact of reduced investment, less innovation, and delayed or even forgone treatments and cures.

Implementing MFN for Medicaid drug reimbursement would be a long-term structural disaster in exchange for perceived short-term benefits. There are better ways to address our entitlements crisis, and Congress should pursue them.

February 5, 2025

BEFORE THE

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

Washington D.C.

Docket ID: USTR-2024-0024, Request for Comment on the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance.

The Honorable Juan Millán
Acting United States Trade Representative
Office of the United States Trade Representative
600 17^th Street NW
Washington, DC 20508

Dear Acting United State Trade Representative Millán:

I and my colleagues at the Institute for Policy Innovation (IPI) would like to thank the Office of the United States Trade Representative for inviting comment on the Section 301 proceeding into China’s targeting of the semiconductor industry, and for considering our input.

The Institute for Policy Innovation is a non-profit, non-partisan public policy “think tank” based in Irving, Texas, and founded in 1987 to research, develop and promote innovative and non-partisan solutions to today’s public policy problems. IPI is a public foundation, supported wholly by contributions from individuals, businesses and other non-profit foundations.

We at IPI believe in free trade, as in the most liberal trade policies possible. We generally oppose government interfering in a transaction between a willing seller and a willing buyer, regardless of whether that transaction crosses political borders. We’re fond of saying “countries don’t trade; people do.”

However, every policy position and principle must consider national security, which is among the most vital functions of government. Genuine national security concerns should always factor into any government policy decision. Too often recently national security has been used as a pretext for old fashioned protectionism and zero-sum thinking on trade, and we are critics of such pretext. However, the matter upon which we comment today is a genuine and obvious national security matter.

Through tightened export controls and the CHIPS Act, the United States has continued to expand policies to protect domestic semiconductor manufacturing capabilities—policies that encompass both industrial competitiveness and national security components. Initiatives to bolster U.S. semiconductor production, and thereby improve supply chain security, have been supported by each of the past three presidential administrations (Obama-Biden, Trump-Pence, Biden-Harris); Republican and Democrat lawmakers; and even U.S.-allied nations, including Japan and the Netherlands, which are dominant suppliers of lithography semiconductor equipment.

So long as China maintains its ideology and poses a threat to the free nations of the world, reducing our dependence on China for critical chips and depriving China of advanced technology are in the national security interests of the United States. Further, while total semiconductor supply chain self-sufficiency (i.e., no reliance on foreign suppliers) is inadvisable and unfeasible, preventing China from monopolizing the legacy chip market, including upstream inputs like Silicon Carbide (SiC) substrates and wafers, is necessary for America to have a secure and reliable supply via domestic production and  “friend-shoring”—reorienting global supply chains away from adversarial countries to those with which the U.S. has normalized relations.

As the USTR’s investigation docket notes, China has “nearly doubled its global share of foundational logic semiconductors production capacity” over the past six years. CIO magazine reported in December 2024 that China is poised to account for more than 60% of new global capacity for legacy chips by 2030, which is “supported by billions of dollars in subsidies, wage-suppressing labor practices, and state-directed technology transfers.”

The Chinese Communist Party (CCP) remains committed to achieving dominance in emerging high-tech industries, as outlined by the national “Made in China 2025” plan, which is predicated on state-funded subsidization. Last year China established its “largest-ever” semiconductor investment fund, a $47.5 billion initiative spearheaded by the country’s six largest state-owned banks. This third and largest round of financing indicates the Chinese government is “doubling down” on its strategy to create overcapacity and thereby price out competitors.

SiC production is the latest industry targeted by the CCP to consolidate semiconductor supply chains. SiC wafers have become a preferred semiconductor base material because of their improved performance, especially in high-power applications, such as electric vehicles (EVs), aerospace technology, solar panels, and defense systems. Late last year media reported that Chinese oversupply depressed prices for six-inch SiC wafers to about 25% below manufacturing costs and caused eight-inch SiC wafer prices to fall 50% in six months.

Those trends corroborate that the Chinese government and its state-sponsored companies are applying the same strategy China used to monopolize global LED, renewable energy, and battery manufacturing markets, among others. That is, leverage state subsidies to bolster domestic production, deflate market prices, and force out free-market competitors.

Unlike China’s dominance in the other markets, its gains in SiC substrates wafer production pose a threat to the United States’ national security. SiC-wafer semiconductors are a critical component of EV powertrains, battery chargers, rail transit, and electrical power grids. If China is allowed to gain an even tighter grip on SiC production, U.S. supply chains for these important industries will become even more dependent on one of our country’s biggest adversaries.

Likewise, U.S. national defense systems could become dependent on Chinese suppliers in the same way. Many flagship defense networks—particularly radar-dependent systems, like the Aegis Missile Defense, avionics systems, and satellite programs—rely on SiC-wafer chips, which can operate in harsh conditions. Supply-chain dependence on China could jeopardize the integrity and functionality of these (and other) defense systems. American military leaders and reports consistently identify China as the greatest threat to U.S. national security, and it’s reasonable to assume that in the event of a military conflict with China or one of its allies, China would sever sales to the United States, significantly disrupting supply chains.

IPI commends the USTR and related U.S. government agencies for working to strengthen America’s semiconductor supply chains. IPI supports USTR’s Section 301 investigation and believes evidence warrants trade controls to prevent China from subverting U.S. legacy chip and particularly SiC-wafer semiconductor manufacturing.

Thank you for your consideration. I am available to answer questions and welcome the opportunity to discuss these issues with USTR leadership in greater detail.

Sincerely,

Tom Giovanetti
President
Institute for Policy Innovation (IPI)

As President Joe Biden and Democratic presidential nominee Kamala Harris tour the country touting cuts in prescription drug prices, the real costs will be in cures never invented. And you can already see that trend not only in drug companies cutting back on new-medicine development, but also in employee downsizing and the decline of small biotech and life-science companies where many of tomorrow’s drugs are developed today.

The lifeblood of medical innovation is research and development (R&D) spending. Innovator pharmaceutical companies spend billions of dollars every year identifying, developing, testing and, hopefully, releasing potential cures. The vast majority of those drugs won’t make it through the U.S. Food and Drug Administration approval process. Those that do have greatly improved or saved countless lives. 

But the R&D process isn’t cheap, and the number of approved drugs can vary significantly by year. For example, the FDA approved 55 new drugs in 2023 (the second-highest annual number) but only 37 in 2022 and 50 in 2021. 

Most of those newly approved drugs were years, if not decades, in the making. And once they are released their patents may have only eight-to-10 years left before they are ripe for generic competition. 

On the surface, a “responsive” government seems like a good idea.
 
But the Founders recognized the tendency of elected politicians to chase the approval of voters could lead to bad policy and the trampling of rights, which is why they designed a system of checks and balances to slow down the responsiveness of government.
 
The way I have often responded is “we don’t want a responsive government; we want a limited government.”
 
A “rush to legislate” is almost always a bad idea. It’s better to let new innovations and technologies play out, and then only regulate or legislate if discrete problems have become obvious. Otherwise, we run the risk of letting precaution get in the way of innovation.
 
We see this rush to legislate in many areas of public policy, but today perhaps the best example is the concerns and fears about artificial intelligence (AI). At both the state and federal levels, legislators are rushing to “get out in front” of the issue and show voters they are being responsive.
 
Of course, protecting ordinary Americans and public figures against abuses facilitated by generative AI is a worthy goal. But many of the so-called “digital replica” bills currently moving in state legislatures go too far in creating unintentional legal liability for innocent bystanders. They could also violate First Amendment free speech protections.
 
Furthermore, in most cases existing law is adequate to cover the majority of concerns. States and the federal government already have laws against deceptive trade practices, fraud and deception, and laws governing name, image and likeness (NIL). Misappropriating someone’s likeness is already punishable under existing law.
 
But that hasn’t stopped states from moving legislation that could, in some cases, make it illegal for you to use color correction on a photo of a performer that you post on social media. Tennessee has already passed its ELVIS Act, which thankfully was significantly amended before passage, to address these concerns and to narrowly target performers’ rights. But many state efforts are far broader, as is the proposed federal No AI Fraud Act.
 
Imagine the minefield these digital replica bills would have created for the movie “Forest Gump,” for instance, where actor Tom Hanks was digitally edited into a host of historical footages. Without First Amendment fair-use protections, much of the film might have been subject to legal liability under these new digital replica bills. The same could be said about the current streaming hit “For All Mankind,” which is an alternate history of the Space Age in which, for instance, John Lennon is not murdered and lives into the Reagan administration and is portrayed as criticizing President Reagan.
 
Again, it’s eminently reasonable to protect performers as well as ordinary Americans against abusive uses of AI. But legislators should be cautious in their rush to legislate on AI to not rule out tools that can be used for innovation and creativity, especially when existing law covers most concerns.

The Department of Justice recently announced that eBay has “agreed to pay $59 million and to enhance its compliance program to resolve allegations that it violated the Controlled Substances Act (CSA) in connection with thousands of pill presses and encapsulating machines that were sold through its website.” Those pill-press purchases are just one more sign that drug counterfeiting operations are on the rise, and consumers should be very aware of these dangerous scams.
 
The purchasers of the pill presses and encapsulating machines are almost certainly criminals who plan to produce counterfeit versions of prescription drugs currently on the market.
 
At least that’s what the DoJ thinks. “‘Through its website, eBay made it easy for individuals across the country to obtain the type of dangerous machines that are often used to make counterfeit pills. Our investigation revealed that some of these machines were even sold to individuals who were later convicted of drug related crimes,' said U.S. Attorney Nikolas P. Kerest for the District of Vermont."
 
Of course, one of the primary ingredients put into these counterfeit pills is fentanyl, which is wreaking havoc on so many lives these days. DEA Administrator Anne Milgram says, “Fentanyl—pressed into fake pills that look like real prescription medications—is killing Americans. Drug traffickers buy the tools to make fake pills, like pill presses, online.”
 
People buy these pills often persuaded they are the same drug being sold in U.S. pharmacies, only at a much lower price. And a bipartisan group of U.S. politicians has perpetuated this idea.
 
In the past, the fakes were produced by criminals, often operating in foreign countries such as China. The purchase of the pill presses through eBay implies more criminals are now operating domestically. Selling fake pills laced with fentanyl that look like brand-name drugs can be very profitable—and very deadly.
 
For decades the Institute for Policy Innovation has been warning about counterfeit and compromised drugs bought online.
 
When we highlighted the risks counterfeit drug sites posed, their defenders often replied “show me the bodies.” We said there were some and there would be more if the online fakes continued to appear. Today, there are, sadly, lots of dead bodies, and more coming.
 
And if an explosion of fake pills wasn’t bad enough, criminals are now producing fake injectable drugs, primarily the new weight-loss drugs Zepbound (Eli Lilly) and Wegovy (Novo Nordisk). Making large-molecule, injectable drugs is more complicated and more costly for legitimate manufacturers. And demand is outstripping supply, opening the door for criminals to sell to unsuspecting consumers.
 
Counterfeit drugs, whether pills or injectables, are dangerous. Consumers should always check with their doctor and rely only on legitimate, trusted sources.

Americans have long dreamed of a weight-loss drug that would help the pounds fall off. The good news is we now have those drugs. The bad news is the new drugs are in high demand, leading to short supplies. Plus, they can be expensive if insurance won’t cover them for weight loss. As a result, criminals are producing and selling counterfeit versions of the drugs that could have very serious side effects. 

No one should be surprised. Counterfeit prescription drugs are a decades-old problem. The fakes are usually produced in developing countries and sold online, claiming to be the same U.S. Food and Drug Administration (FDA)-approved drugs that you can buy at a U.S. pharmacy, only at a much lower cost. They may even claim to be coming from Canada. 

And it’s not just criminals making those assertions. A bipartisan group of politicians has made the same claims, even setting up state or municipal importation schemes to help patients buy prescription drugs, supposedly from Canada.

Virtually all of those schemes eventually failed, primarily for lack of use, though that hasn’t stopped new efforts. The importation failures are in part because the Affordable Care Act (ObamaCare), Medicare and Medicaid all have prescription drug coverage, so the allure of buying prescription drugs online from foreign sources has declined.  

But that’s changing with the growing demand for the new injectable weight-loss drugs: Eli Lilly’s Zepbound and Novo Nordisk’s Wegovy. (Note: Lilly’s Mounjaro and Novo Nordisk’s Ozempic are approved only for diabetes, but have been prescribed off-label for weight loss.)

The FDA has seen a significant increase in trafficking of counterfeit versions of these weight-loss drugs and has begun seizing suspected counterfeits as well as counterfeit needles used to inject them. In January, the FDA published letters warning two online vendors to stop selling “unapproved versions” of the weight-loss drugs.

Drug manufacturers are also getting involved. Last October, Lilly announced it was suing 11 foreign-based online pharmacies to stop them from selling and distributing products supposedly having the active ingredients in Mounjaro. Reuters reports, “Lilly said testing of AustroPeptide’s an online pharmacy allegedly based in China product purporting to contain the Mounjaro main ingredient tirzepatide showed it actually was ‘nothing more than sugar alcohol.’” 

Lilly has also sued 10 U.S. medical spas, wellness centers and compounding pharmacies in several states that are selling products claiming to have the active ingredient.

In some cases, counterfeit drugs have little or none of the active ingredient. Indeed, they may contain chemicals that can harm the patient. In other cases, the drug may have been compromised by not keeping it refrigerated, putting it in an unsterile vile or bottle, or holding it long past its expiration date.

That’s why drug manufacturers and the FDA closely monitor a drug’s “chain of custody” to ensure it was made in an authorized facility and transported properly. When patients are harmed by fake drugs, they may blame, and maybe even sue, the manufacturer, even though the manufacturer had no role in making the counterfeit and warned against buying from unapproved sources. 

And it’s not just a U.S. problem. “In October, the European Medicines Agency warned injection pens ‘falsely’ labeled as diabetes medicine Ozempic had been found in the European Union and the U.K.” 

The World Health Organization (WHO) announced in January that “global shortages last year of popular diabetes medicines that are also used for weight loss, such as Novo Nordisk’s Ozempic, had been linked to rising reports of suspected counterfeits.” 

A further complicating factor: While millions may want the drugs for weight loss — Goldman Sachs analysts are predicting 15 million adult users by 2030 — diabetics will need the drugs, yet they are also facing shortages because of the increased demand.  

This fake-drug explosion could be a real threat to consumer safety. Patients need to take the FDA and WHO warnings seriously. I did a search for the drugs online and found websites claiming to have the drugs — even generic versions of the drug, which do not exist yet — for affordable prices. Some say you don’t need a prescription. They claim their “clinicians” are standing by to talk to you.  

Be sure you talk to your doctor before you take a chance on something that may be a counterfeit drug. And listen to Dr. Sajani Shah, chief of the Weight and Wellness Center at Tufts Medical Center in Boston: “You don’t know where you’re getting these medications — if you get them at all — how they’re being processed, if they’re sterilized, and you can become very sick,” said Shah. “You have to be really careful because things, especially that you inject into yourself, you could have a very detrimental effect on your health.”  

January 18, 2024

The Honorable Kathi Vidal
Director United States Patent and Trademark Office
P.O. Box 1450
Alexandria, VA  22313-1450 

Dear Director Vidal 

Thank you for the opportunity to provide these comments in response to USPTO's request for input on the upcoming meetings at the World Intellectual Property Organization's Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge, and Folklore. 

I am a resident scholar with the Institute for Policy Innovation, a 37-year-old Texas-based nonprofit NGO promoting economic growth and innovation. I am very familiar with and appreciative of USPTO's commitment to protecting patent rights and ensuring American leadership in such areas as the life sciences and biotechnology. It is clear that a strong intellectual property framework benefits our economy in a wide range of areas. I am thankful for USPTO’s efforts to promote and sustain such a framework. 

That's why I'm troubled by the initiative currently under way at the World Intellectual Property Organization. The proposal would require additional information in patent applications specifying the "genetic resources" involved in an invention and their geographical origins. These proposed new Patent Disclosure Requirements (PDRs) would weaken intellectual property rights and threaten American innovation. 

Proponents argue that these requirements would increase the flow of resources into countries of origin. In fact, the opposite would likely happen, as researchers seek to avoid use of genetic resources from countries with especially burdensome requirements or questionable claims of prior use. 

Indeed, I recall that several years ago Hindu scholars were combing through the Vedas in an effort to find any reference to plants, animals or other substances they might use to claim that the active ingredient in some new drug was really based on Hindu traditional medicine. Behind the scheme was an effort to demand royalties from pharmaceutical companies, even if there had been no reliance on Vedic literature. If the United States were to affirm WIPO’s effort to add genetic resources and other information to patent disclosures, it would break decades of precedent. 

Implementing PDRs for genetic resources would increase bureaucracy and red tape in global patent and licensure processes. It would inject a high degree of legal uncertainty into an already complex patent application system, deterring private sector investment. Additionally, enforcing compliance with the PDR would slow down the patent application process and impose heavy additional burdens of evaluation on the USPTO. 

Even more troubling, the addition of PDRs may allow countries to take advantage of the scientists and companies conducting research and development on site. The prospect of countries levying arbitrary or burdensome fees or demanding royalties could discourage investment into the very countries WIPO is interested in benefiting. American pharmaceutical and technological leadership is a result of strong partnerships both domestically and internationally. The proposed new PDRs might create perverse incentives undermining these partnerships, leading to a breakdown of international cooperation. 

Unfortunately, this initiative at WIPO is only the latest in a string of international and home-grown efforts to weaken American IP protections. The World Trade Organization is currently considering a waiver of patent protection for all COVID-19 diagnostics and therapeutics. It would follow a precedent-setting decision in 2022 to void international patent rights on COVID-19 vaccines. Domestically, an administration interagency group has suggested that under existing law the government has the new-found authority to seize and relicense patents on inventions derived however slightly from government-funded research whenever bureaucrats deem the commercial product's price is too high. 

All of these efforts will chill investor confidence and hamper innovation, even if some eventually prove to be illegal or unsuccessful. 

Through both Republican and Democratic administrations, protecting patent rights has been a top priority of the U.S. government because IP rights are foundational to our economy. That bipartisan commitment to IP has made the United States a global leader in life sciences investment. 

U.S. opposition to this WIPO proposal would help restore confidence in the commitment of the government to protect intellectual property at home and globally. I urge you to abandon any efforts that would serve to undermine the country’s long and well-founded commitment to ensuring IP protections.

Sincerely,

Merrill Matthews, Ph.D.
Resident Scholar
Institute for Policy Innovation

President Joe Biden is once again bypassing Congress’s constitutional check on executive power by unilaterally imposing a new provision to a 43-year-old law that has been debated and rejected numerous times.  

However, this time Biden’s scheme doesn’t just target the pharmaceutical industry, he’s threatening any and every industry, academic institution and researcher that receives even a whiff of federal funding.  

The bipartisan Patent and Trademark Act Amendments of 1980, also known as Bayh-Dole, allows universities, medical schools and research institutions to use federal funds for research to develop innovative technology and products. These institutions and inventors can then file patent applications, license their discoveries and try to generate revenue that can help cover the costs of university programs.   

But creating something of value in a university lab isn’t the same as manufacturing a product, pricing it and marketing it to the public. That’s why Bayh-Dole allows universities and research institutions to license their innovations to businesses that have the capital, manufacturing plants and marketing expertise to bring an innovation to market.  

The law has certainly benefited the prescription-drug industry, which has brought numerous, important drugs to market under Bayh-Dole. And researchers at universities and medical schools are working constantly to find the next life-saving drug. Drug companies often pay research institutions to license a discovery, and then invest hundreds of millions and even billions of dollars for the testing, clinical trials and manufacturing to bring the promising research to the public.   

But the drug industry is only one of many industries that have benefited from the law. The federal government provides research funds to a wide array of colleges and universities, research organizations and even private companies, focusing on health, energy, agriculture, science, technology and other areas. Think semiconductors, clean energy products such as batteries, gene-editing to improve drought-resistant crops, etc.  

But if a grant recipient has created an important new discovery or invention and, for some reason, hasn’t made a good-faith effort to bring it to market, Bayh-Dole permits the government to “march in,” seize the patent and license it to a company without the patent holder’s consent.  

These march-in rights are meant to ensure commercialization of a product. They were never meant to be a price-setting mechanism. Yet that’s exactly what Biden now wants to do.  

The White House “Fact Sheet” released on Dec. 7 states, “The Biden-Harris Administration believes taxpayer-funded drugs and other taxpayer-funded inventions should be available and affordable to the public.” (Emphasis added.) It’s that “other taxpayer-funded inventions” that should be a red flag to all researchers, universities and other research institutions.   

Bayh-Dole was intended to make inventions “available,” but “affordable” was never part of the deal. And that’s the part Biden hopes to change by executive fiat.  

While the prescription drug industry has been the one usually (though unsuccessfully so far) targeted for march-in rights, Biden has just opened the door to any and all taxpayer-funded research and innovation if bureaucrats don’t like the price.  

In short, there is no invention that receives — or has received — taxpayer funding, regardless of how miniscule the amount, that is safe from government takeover.   

Although the White House Fact Sheet and talking points imply that taxpayers are funding the lion’s share of the research that went into creating a new discovery or invention, taxpayer funding may represent only a fraction of the funds needed to develop, test and bring a new invention to market. Yet there is apparently no funding threshold below which the White House wouldn’t consider imposing march-in rights.  

In addition, special interests of all types would be lobbying bureaucrats and politicians, trying to convince them that products created under Bayh-Dole were unaffordable and should trigger the law’s march-in rights. We know that will happen because it has already happened several times with certain prescription drugs. The National Institutes of Health has denied those petitions because price considerations do not trigger march-in rights — at least, not yet. 

While the prescription drug industry and patients have a lot to lose if Biden’s price-control scheme is successful, they won’t be the only ones. Any research or invention, any patent, any college, university or other research institute that has any connection with taxpayer funding is threatened by Biden’s proposal. And that threat will have a huge negative impact on innovation.   

Who is going to invent if the government can come in, at the urging of special interest groups, and seize a patent just because the government doesn’t like the price? When the government goes marching in, innovation goes marching out.  

Air pollution from Canadian wildfires is just one of the problems we face from our neighbor to the north. A Canadian company weaponizing intellectual property rights could do major damage to the U.S. tech sector.

Bell Northern Research has been around since the 1970s, formed when Bell Canada and Northern Electric combined some of their operations. The name is now a complete misnomer – the current company called Bell Northern Research has nothing to do with either Bell Labs, research or innovation.

Rather, deploying an increasingly popular litigation strategy built on dicey claims to extract profits, it merely sues other companies for patent infringement. In recent years, the company filed more than two dozen complaints against numerous companies, claiming those firms have improperly incorporated Bell Northern intellectual property in their devices. Litigation attacks are just the beginning; it is also filing complaints before the US International Trade Commission (ITC).

The ITC has become a favored venue for extortionate patent trolls. The trade agency has just one penalty to hand out – a heavy-handed product import ban known as an exclusion order. And although Congress set up guardrails in the ITC statute to try to be sure this ban was not abused, recent ITC policies have broken down those guardrails.

This makes the ITC an ideal venue for patent trolls like Bell Northern to extort big settlements from companies who, ironically, are actually contributing to the US innovation economy by hiring US workers and investing in facilities and other equipment in the US. These companies often are forced to pay up on bad claims to avoid the risk of being blocked from the entire US market.

In the most recent example, Bell Northern is targeting nearly every product that relates to home internet connectivity, including, as the ITC investigation notice states, “semiconductor devices, and specifically undiced wafers, diced wafers, packaged chips and chipsets both attached and unattached to printed circuit boards and modules; personal and tablet computers; and routers, gateways, and networking devices having wireless communication capabilities, and components thereof.”

An ITC ruling in Bell Northern’s favor would wreak havoc with consumers and the companies that supply them with tech devices. The firms Bell Northern names in their latest ITC filing include US companies and productive multinationals like ASUS Computer International, Laird Connectivity, Qualcomm Technologies, MediaTek, and NXP USA, among  other tech businesses.

Unfortunately, this type of behavior is hardly unique to Bell Northern. Lawsuits like Bell Northern’s are a symptom of a much larger ITC problem.  Companies that don’t make anything, classified as patent assertion entities (PAEs), have been alerted to the opportunities at the ITC and are increasingly running this same play.  Since 2018, there has been a five-fold increase in these types of cases.  As with Bell Northern, the business model consists solely of acquiring often old intellectual property rights of questionable validity and then weaponizing them to demand undeserved payoffs from legitimate companies that actually serve consumers, create jobs and support economic growth.

As Bell Northern’s latest suit highlights, tech companies are often targeted by patent trolls, because tech-intensive devices may potentially implicate thousands of individual patents and patented components.  Even the most trivial or dubious patent allows a troll to threaten a total US market ban against any product that might involve that patent. 

The threat of an exclusion order against a laptop or phone can be so disruptive to supply chains and product manufacturing cycles that accused companies have little choice but to accede to the shakedown. The choice is simply between the lesser of two evils. But America suffers.

The harm caused by patent trolls is significant. One study found companies that settle with trolls end up reducing investments in research and development by an average of more than $160 million over the following two years. That means less innovation and fewer new products for consumers.

The direct economic costs are substantial too. Estimates show annual patent trolls annually cost over $29 billion for the companies they attack, decreasing productivity and driving up the retail prices of the products they sell.

While the ITC is supposed to protect American industries from unfair competition by imported products, the trolls have found a way to leverage the ITC to extract their pay while also hurting productive companies who are contributing to the US economy.  Fortunately, there is a solution to the ITC’s troll problem that is easier than controlling those Canadian wildfires – a common sense proposal, the Advancing America’s Interests Act (AAIA).

This bill would protect the rights of all inventors, large and small, who are actually working to turn their patents into real products, whether alone or through partnerships or licenses.  At the same time, it would prevent trolls from misusing the ITC to line their own pockets. The AAIA would reform and modernize the ITC, and better enable it to protect U.S. industries, workers and consumers from frivolous but costly patent infringement claims.

The ITC has an important job to do – protecting American companies from unfair foreign trade practices, but trolls are abusing this important agency. The AAIA will allow it to return to that mission and keep patent trolls out of the ITC.

BEFORE THE
UNITED STATES PATENT AND TRADEMARK OFFICE
Washington D.C.

Docket No. PTO-P-2020-0022
United States Patent and Trademark Office
The Honorable Kathi Vidal
U.S. Patent and Trademark Office
600 Dulany StreetAlexandria, VA 22314 

Dear Director Vidal:

The Institute for Policy Innovation (IPI) appreciates the opportunity to provide these comments to the United States Patent and Trademark Office concerning potential changes to proceedings before the Patent Trial and Appeal Board (PTAB). 

The Institute for Policy Innovation is a non-profit, non-partisan public policy "think tank" based in Irving, Texas. IPI is supported wholly by contributions from individuals, businesses, and other non-profit foundations. I am a resident scholar with IPI. I am also a past president of the Health Economics Roundtable for the National Association for Business Economics, the largest trade association of business economists.

 IPI is also an accredited NGO with the World Intellectual Property Organization (WIPO) in Geneva, Switzerland, and thus we were the first organization to begin hosting an annual World IP Day event in Washington DC almost twenty years ago.

IPI reaffirms the truth, borne out time and again by experience, that intellectual property rights are vital to American innovation. When these rights are secure, economic actors small and large are free to invest and experiment with confidence that they will reap the fruit of their sacrifices if they are successful. When people cannot be certain that these rights are secure, the risks of innovation become too high for rational actors to assume. This applies to inventors themselves, the entrepreneurs who develop their work into commercial products, and to the investors who fund this work. 

In such circumstances, it is especially difficult for small businesses and startups, which cannot rely on the same financial resources as larger or more established competitors, to assume the costs necessary for innovation. Early-stage startups typically have little to no revenue. Their biggest assets are their intellectual property and the talent of the people who work to develop it. In the absence of reliable and certain intellectual property rights, investment in innovation will dry up—with disastrous effects for the U.S. economy.

As the USPTO considers potential reforms of its internal patent review processes, this concern should be front of mind. New rules should ensure all innovators, regardless of size, can rely on robust intellectual property protection, while safeguarding a review process for those cases where it is genuinely necessary. 

Indeed, past and ongoing abuses at PTAB proceedings make it urgent that we maintain current protections and even improve them. A number of companies have devised a well-rehearsed strategy of repeatedly using patent challenges to pursue "efficient" infringement of intellectual property developed by competitors. By challenging the claims of patentholders whenever and however possible, these companies subject innovators to lengthy and costly proceedings—burdens many of them are unable to bear. 

It is no coincidence that almost all of the top 10 PTAB petitioners are high-tech companies such as Samsung. It is also worth noting that approximately one-third of all patents with PTAB proceedings ending in FY2022 were found invalid either in whole or in part, despite the rigorous USPTO review each patent underwent prior to issue. 

Commendably, USPTO has implemented reforms meant to limit abuse of PTAB proceedings. The Fintiv factors laid out in 2020 are an effective means for reducing the breadth and frequency of process abuse. The Fintiv factors provide guidance to the PTAB on when not to institute a review if proceedings in federal court are already underway on the same issues. Under such circumstances, PTAB review is duplicative, unnecessary and an additional expense for patentholders whose patents are being challenged. Yet USPTO Director Kathi Vidal determined in 2022 that Fintiv factors should be attenuated and a PTAB review should proceed only if the Board determines a challenge has "compelling merits." 

The courts are quite capable of resolving the vast majority of patent disputes on the merits. There is no need for patentholders to be subject to duplicative proceedings when a trial court will soon decide validity on the same merits. Indeed, further reforms to the process should move in the direction of more, not less, protection of quiet title for those who assume the risks of innovation. 

Uncertainty is one of the greatest deterrents to robust economic activity. Its effects ripple across markets and nations. If clear, reasonable limits are not imposed on the means for presenting and prosecuting patent challenges before the PTAB, uncertainty will become the rule for every innovator in this country. 

Respectfully, 

Merrill Matthews, PhD
Research Fellow
Institute for Policy Innovation

BEFORE THE
UNITED STATES PATENT AND TRADEMARK OFFICE
Washington D.C.

Docket No. PTO-P-2020-0022
United States Patent and Trademark Office
The Honorable Kathi Vidal
U.S. Patent and Trademark Office
600 Dulany Street
Alexandria, VA 22314 

Dear Director Vidal:

The Institute for Policy Innovation (IPI) appreciates the opportunity to provide these comments to the United States Patent and Trademark Office concerning potential changes to proceedings before the Patent Trial and Appeal Board (PTAB). 

The Institute for Policy Innovation is a non-profit, non-partisan public policy "think tank" based in Irving, Texas. IPI is supported wholly by contributions from individuals, businesses, and other non-profit foundations. IPI is also an accredited NGO with the World Intellectual Property Organization (WIPO) in Geneva, Switzerland, and thus we were the first organization to begin hosting an annual World IP Day event in Washington DC almost twenty years ago.

I am Tom Giovanetti, President of the Institute for Policy Innovation. I have represented IPI at various WIPO meetings and sessions, offered interventions, and met with key WIPO executives. I also write and speak on a variety of intellectual property issues.

Having tracked the issues related to innovation and economic growth throughout my career, I have gained valuable insights into the challenges faced by inventors and small businesses within the federal court system and PTAB proceedings. These challenges, which I will outline below, highlight the need for a more equitable environment that fosters innovation and supports the growth of small enterprises.

In the federal court system, an inventor's damages are limited to a reasonable royalty that cannot exceed the costs of financing a lawsuit within the federal court, and even less so in the PTAB. This holds true even when a case is litigated on a contingency basis, which is why contingency agreements typically do not cover PTAB proceedings. When faced with an infringement lawsuit, a defendant only needs to engage in legal proceedings within the federal court for less than a year, providing ample opportunity to appeal to the PTAB.

Considering that the majority of appeals are granted and most granted appeals result in the nullification of the concerned patents, if the PTAB fails to nullify the patent, more petitions can be submitted by other parties. In fact, an inventor, whether they have alleged infringement or not, is exposed to all petitions, regardless of whether they are filed by a person or entity outside the U.S. or not. Essentially, there is no cap on the number of petitions that can be filed against an inventor, arguing the invalidity of a patent.

On the other hand, the current draft of the proposed small/micro entity regulations does not provide any safeguards for small enterprises that have either procured or licensed patent rights initially granted to a university or a comparable research institution. According to the rules of the Patent Office, an "entity eligible for reduced patent fees" must "not have more than 500 employees." It is evident that no university with a research division advanced enough to secure patents employs less than 500 individuals. The Bayh-Dole Act explicitly gives small businesses preference in acquiring patent rights through technology transfer, and it is unjust for their patents to not receive similar protection from IPR proceedings simply because they originated from U.S. research institutions.

In summary, the current federal court system and PTAB proceedings present challenges for inventors and small businesses alike. Inventors face limitations on damages and the potential for multiple petitions arguing the invalidity of their patents, while small businesses that have procured or licensed patent rights from research institutions may not receive the same protections as other small entities. It is crucial to address these issues in order to create a more equitable environment for all parties involved in the patent process.

Accordingly, I ask USPTO to consider the following policy changes:

A PETITION SHALL BE DENIED UPON REQUEST OF THE PATENT OWNER PROVIDED THAT THE ASSIGNMENT RECORDATION AT THE OFFICE DEMONSTRATES THAT ONE OR MORE NAMED INVENTORS HOLDS A CONTROLLING OWNERSHIP IN THE PATENT.

A PETITION SHALL BE DENIED UPON REQUEST OF THE PATENT OWNER WHO MEETS THE NET WORTH REQUIREMENTS OF 12 CFR § 1071.103.

A PETITION SHALL BE DENIED UPON REQUEST OF THE PATENT OWNER WHO HAS COMMERCIALIZED THE SUBJECT MATTER OF AT LEAST ONE OF THE CLAIMS EITHER DIRECTLY OR THROUGH A LICENSEE.

Respectfully, 

Thomas A. Giovanetti, President
Institute for Policy Innovation

Lisa R. Barton
Secretary to the Commission
U.S. International Trade Commission
Room 112A
500 E Street SW
Washington, DC 20436 

Written comments regarding Investigation No. 332-596. These comments do not contain Confidential Business Information (CBI).

Merrill Matthews, PhD
Resident Scholar
Institute for Policy Innovation
1320 Greenway Drive, Ste. 820
Irving, TX 75038 USA 

May 3, 2023

RE: Investigation No. 332-596

Commissioners Johanson, Schmidtlein, Kearns, Stayin, and Karpel:

 I and my colleagues at the Institute for Policy Innovation (IPI) would like to thank the U.S. International Trade Commission for the opportunity to comment on a proposed extension of the TRIPS intellectual property waiver for Covid-19 diagnostics and therapeutics.

The Institute for Policy Innovation is a non-profit, non-partisan public policy “think tank” based in Irving, Texas, and founded in 1987 to research, develop and promote innovative and non-partisan solutions to today’s public policy problems. IPI is supported wholly by contributions from individuals, businesses and non-profit foundations.

By way of background, I am a resident scholar with IPI. I am also a past president of the Health Economics Roundtable for the National Association for Business Economics, the largest trade association of business economists. And I currently serve as Chair of the Texas Advisory Committee to the U.S. Commission on Civil Rights.

I am writing to express strong opposition to any extension of the misguided waiver of commitments to protect intellectual property for Covid-19 diagnostics and therapeutics.

Doubling down on a fundamentally misguided IP waiver would represent a profound failure to learn the policy lessons of the pandemic—and undermine the U.S. response to future pandemics. In addition, it would signal to our most innovative firms that their intellectual property—and consequently, their substantial R&D investments—are no longer valued in America.

While the Covid-19 pandemic offered plenty of opportunities for policy missteps, one of the most egregious blunders was the June 2022 TRIPS waiver. After more than two years of furious negotiation, the World Trade Organization followed the pleas of India, South Africa, and dozens of other low-income nations to waive commitments to protect IP for Covid-19 vaccines on the mistaken belief that this would speed global access.

Unfortunately, this was a solution in search of a problem. The TRIPS waiver did nothing to speed global vaccine access. Waiving IP commitments for Covid-19 vaccines, especially the highly effective Pfizer and Moderna vaccines developed here in the United States, failed to incentivize R&D or distribution, and indeed ignored the true cause of access delays: manufacturing and distribution challenges. Export controls proved a significant bottleneck for ramping up vaccine production. A shortage of cold storage, limited shipping capacity, and crumbling medical infrastructure impeded access around the globe. These are challenges that cannot be fixed by IP waivers. Even when tireless medical professionals were able to bring lifesaving shots to patients, they encountered severe vaccine hesitancy.

These were difficult challenges, but American manufacturers, policymakers, and medical professionals surmounted them with great effort. Globally, the United States assisted in the administration of more than 12.7 billion Covid-19 shots—and more than 72 percent of the world’s population was inoculated against the virus.

As a result, it is clear that intellectual property did not limit the global vaccine rollout. On the contrary, IP fueled the years of research and development that created America’s effective Covid-19 vaccines.

Moderna and Pfizer, working with BioNTech, developed the first trials of their mRNA vaccine candidates just two days after Chinese researchers and whistleblowers revealed Covid-19’s genetic sequence. Indeed, by April 2021 vaccines were broadly available to the general population. 

This rapid rollout was the result of more than a decade of research into the promising new field of mRNA research. Thanks to the confidence provided by America’s iron-clad commitment to both global and domestic IP protections, firms were able to identify viable vaccine candidates underpinned by this revolutionary mRNA tech in just days, and run accelerated trials to ensure shots got in arms as quickly as possible. The speed with which these companies were able to develop, test, manufacture and deliver these vaccines was a modern-day miracle. And the companies did it mostly with their own capital, based on the assurance of strong U.S. IP protections.

Some advocates push for the expanding the TRIPS waiver to diagnostics and therapeutics based on the mistaken theory that handing developing countries valuable American IP will jump-start their nascent biopharmaceutical and diagnostic industries. But developing and manufacturing vaccines is a complex process that requires significant investment, infrastructure and expertise.

Even if IP commitments were waived with the stroke of a pen, developing countries would be hard-pressed to have the capacity or the funds to manufacture their own vaccines. The cost of setting up a dedicated mRNA facility can run north of $200 million—and that’s before manufacturers try to address the severe staffing shortage of skilled life science labor.

Even with extant manufacturing capacity, timing vaccine demand proved challenging.

Consider India’s Serum Institute (SI). After concerted advocacy, SI succeeded in inking technology transfer agreements to manufacture AstraZeneca’s vaccine. But by December 2022, the Institute was forced to halt production after stockpiling 200 million doses that ultimately went to waste. As the pandemic wound down, the real reason for the TRIPS waiver became clear—developing economies with generic manufacturers want to keep the idea of accessing U.S. technology through “compulsory licensing” alive and well. What advocates for an IP waiver miss is that undermining U.S. intellectual property for short-term gains reduces the incentives for world-leading American firms to invest in critical R&D.

Take drug development. New drugs require billions of dollars and years of research, development and clinical trials with no guarantee of success—indeed, failures far outnumber successes.

Innovators and investors take these enormous risks because they know that if successful, strong and predictable IP rights will protect their ability to recoup their massive investment in a new drug (as well as the cost of their many failures). Voiding IP rights on the global stage introduces enormous uncertainty for these firms—and the consequences of reduced R&D spending and risk-taking will be felt most acutely by patients seeking new treatments.

In addition, undermining IP cuts our future pandemic preparedness efforts off at the knee. It not an exaggeration to assert that without those IP protections, development and production of the mRNA vaccines would have taken much longer, if at all. And hundreds of thousands, if not millions, more people would have died of Covid-19 as a result.

The U.S. life science industry nimbly rose to the challenge posed by Covid-19 precisely because drug companies were able to rely on the rule of law, knowing that their investments, research, and expertise would be backstopped by strong IP protections. This expectation also fueled more than 370 separate voluntary manufacturing and licensing deals. Policymakers should carefully consider the industry’s strong track record of voluntary partnership, rather than rushing to the failed precedent of the original TRIPS waiver.

With the original TRIPS waiver, policymakers wrought far too much damage to our innovation ecosystem. Extending this IP waiver to Covid-19 diagnostics and therapeutics, while a win for developing countries looking for a free lunch of American know-how and geopolitical rivals hoping to weaken America’s innovation capacity, would be a catastrophic blow to U.S. leadership on the world stage and the rule of law.

I and my colleagues at IPI respectfully urge the U.S. International Trade Commission to stand up for American innovators, investors, and risk-takers—and recommend no further extension of an IP waiver to Covid-19 diagnostics and therapeutics. Thank you for the opportunity to comment on this matter of crucial importance for American innovation.

Respectfully,
Merrill Matthews, PhD
Resident Scholar
Institute for Policy Innovation

My father, Norman Latker, was patent counsel for the National Institutes of Health in the 1960s and ’70s, and among the principal architects of the 1980 Bayh-Dole Act (“Team Biden Looks for an Excuse to Impose Drug Price Controls” by Merrill Matthews, op-ed, April 27). He drafted the “march-in rights” outlining strict criteria that government had to satisfy to seize intellectual-property rights from inventors. It now appears the government intends to circumvent his safeguards, creating a path to impose price controls on drugs that merely don’t align with its sense of acceptable pricing. My father would have been appalled.

Bayh-Dole’s purpose was to afford inventors, rather than government agencies, patent rights for novel advances. “Market forces do a far better job of disseminating such inventions to society than government bureaucracies,” my father wrote. The bipartisan bill’s passage unleashed a torrent of new investment into research and development, sparking a biotech revolution.

The Biden administration hopes to use a more than 40-year-old law to confiscate patents and impose price controls on prescription drugs. These are the government’s current target, but the administration’s actions could affect virtually any discovery developed at a university, medical school or research institution that receives even minimal government financial support.

The bipartisan Bayh-Dole Act, also known as the Patent and Trademark Act Amendments of 1980, allows universities, medical schools and research institutions to use federal funds for research to develop innovative technology and products. These institutions can then file patent applications, license their discoveries, and try to generate revenue that can help cover the costs of university programs. Some of this revenue usually goes to the inventors, acknowledging a principle that Abraham Lincoln aptly articulated: The patent system adds “the fuel of interest to the fire of genius.”

UCLA’s Dr. Dennis Salmon, who has received numerous National Institutes of Health research grants, helped discover a gene common in a very aggressive form of breast cancer in the 1980s. That initial research led to the development of Genentech’s anticancer drug Herceptin.

Creating something of value in a university lab isn’t the same as manufacturing a product, pricing it and marketing it to the public. That’s why Bayh-Dole allows universities and research institutions to license their innovations to businesses that have the capital, factories and marketing expertise to bring an innovation to market.

One of the primary beneficiaries of Bayh-Dole is the prescription-drug industry. Researchers at universities and medical schools are working constantly to find the next life-saving drug. Drug companies often pay universities or other public research institutions to license a discovery and bring promising research to the public. These companies invest hundreds of millions and even billions of dollars for the costly clinical trials required to bring a new drug to market. This system has worked remarkably well for 43 years.

But the Biden administration is grumbling over the price of a few prescription drugs and is looking to use a provision in Bayh-Dole known as march-in rights to impose price controls on drugs developed through these partnerships.

Under Bayh-Dole, march-in rights allow the government to step in and license a patent without the holder’s approval if there hasn’t been a good-faith effort to bring an important innovation or discovery to market. These rights are meant to ensure commercialization of a product, not set its price.

Concerned groups have petitioned the NIH several times to use march-in rights to lower the price of prescription drugs. In 2004 petitioners urged the NIH to use march-in rights for Norvir, an HIV treatment, and Xalatan, for glaucoma, and in both 2016 and 2023 for Xtandi, a prostate-cancer drug. NIH denied all of those requests because the drugs were in the market, just not at the lower price available in some other countries.

Recognizing the current roadblock to imposing price controls, Health and Human Services secretary Xavier Becerra and the Commerce Department on March 21 announced the formation of a Bayh-Dole working group to “develop a framework for the implementation of the march-in provision” in which several factors, including price, can be considered when triggering march-in rights.

Put simply, the Biden administration is searching for some justification to claim that the law allows the government to impose price controls on certain prescription drugs. But prescription-drug companies aren’t the only beneficiaries of federally funded research. Any industry that has relied on government-backed research could become a future target.

In 2020, 10 federal agencies provided more than $40 billion in federal funds for research at universities and related institutions. HHS was the leader at $23 billion, followed by the National Science Foundation, the Energy and Defense Departments, the National Aeronautics and Space Administration and the U.S. Department of Agriculture. If Mr. Becerra’s effort to expand Bayh-Dole’s march-in provision is successful, accepting money from these or other federal agencies could put a researcher’s patent at risk.

A professor at the University of Nevada, Reno, was awarded a $1.55 million NSF grant in 2021 to conduct research on drought tolerance and water-use efficiency in plants. If new patented seeds were to emerge from his research, they might be subject to march-in rights.

And in January, the Energy Department announced it would provide $125 million “for basic research on rechargeable batteries.” That funding may lead to patentable discoveries. But if Mr. Becerra gets his way, the government could march in if it doesn’t like the final price of a product developed under the patent.

If the Biden administration can use march-in rights to impose price controls on prescription drugs, it or a future administration could do so for any innovation that benefited from federal funding. It is vital to the future of American innovation that march-in orders not be abused for political purposes.

The local news often carries stories of someone – a police officer, a firefighter or sometimes just a regular citizen – who goes above and beyond the call of duty to save another person. That life-saver is praised as a hero. But if you’re a drug company that creates a new vaccine that saves hundreds of thousands of lives, Democrats will reward you with demonization and, worse yet, price controls.

At the beginning of 2020, several pharmaceutical manufacturers perceived COVID-19 could become a global pandemic. The companies didn’t wait for the government to give them a thumbs up or for Congress to approve funding. 

They committed their expertise and resources (i.e., money they made selling other life-saving drugs) to finding a new vaccine. And they did, in record time. Instead of the 10 to 12 years it would normally take to create a new drug, several drug companies had invented a vaccine, tested it in clinical trials and were rolling out doses in less than a year. By the time Joe Biden took the oath of office in January 2021, some 1 million Americans were being vaccinated daily.

Today, more than 1 million Americans have died from COVID, according to the U.S. Centers for Disease Control and Prevention’s (CDC) COVID-19 tracker. It could have been many more. According to a CDC study published in July: “In this modeling study, COVID-19 vaccination was estimated to prevent 27 million SARS-CoV-2 infections, 1.6 million COVID-19–associated hospitalizations, and 235,000 COVID-19–associated deaths among vaccinated persons 18 years or older from December 1, 2020, to September 30, 2021.” 

Regardless of the exact number of lives saved, the drug companies came to the rescue by creating vaccines and treatments (e.g., Paxlovid) in record time. And yet Democrats are denouncing them and imposing price controls on some of their products. 

Here’s how Sen. Elizabeth Warren (D-Mass.) and several of her Democratic colleagues expressed their sentiments in a letter last march: “The large, across-the-board price increases of popular, brand name prescription drugs appear to be an example of pharmaceutical companies taking advantage of their abusive market power to expand already-large profits. And the coordinated and timely price increases ring of political opportunism.”

Actually, according to the Bureau of Labor Statistics, drug prices are up just 2.5 percent over the past year, considerably less than, well, just about everything else. But it is true that some of the newest drugs can be very expensive. There are reasons for that.

The U.S. pharmaceutical industry is one of the most research and development (R&D) intensive industries in the country. A few years ago, I calculated the average cost of creating a new, Food and Drug Administration (FDA)-approved drug. It was $1.6 billion.

In addition, the companies have been increasingly focusing on diseases that affect only a small number of people, referred to as “orphan drugs.” That means the R&D and production costs can be spread over only a few thousand patients, not millions, which increases the per-patient treatment cost. That’s not price gouging or “abusive market power,” as Warren asserts. It’s just math.

But the biggest sham in the Democrats new prescription drug bill is what they refer to as “negotiations” for drugs used by Medicare patients. If a drug company refuses to accept the government’s price, the government will take up to 95 percent of the targeted drug’s revenue. Not profits, mind you, but revenue from the drug’s sale. 

How many potential drugs could be affected by the Democrats’ new policy? Several studies have weighed in with their estimates. The initial number of drugs affected will be small, but that number grows over time.

Defenders argue that the threat to innovation is small. But ask yourself how many companies will invest $1 billion-$2 billion to develop a new drug when there is no guarantee of final FDA approval. And if it is approved, government price controls are guaranteed.

The pharmaceutical industry recently explained, “With more than 8,000 medicines in development, 74% of which are potentially first-in-class, patients have more reasons to be optimistic than ever before.” Will patients still be as optimistic if Democrats pass their price controls?

How many of those 8,000 medicines won’t make the cut? Will it be new cancer drugs? A cure for Alzheimer’s? Parkinson’s? Arthritis? Or the companies’ ability to respond quickly to the next pandemic?

Remember, drug companies jumped into the COVID-19 fight with their own resources when Dr. Anthony Fauci was still ridiculing the idea of the public wearing masks.

We’ll never know what new drugs might have been developed but won’t be under the Democrats’ price controls. But if your doctor tells you a new drug that might have cured your debilitating or deadly disease has been scrapped because of cost concerns, be sure you remember that the next time you vote.

For 20 years most Democrats and some Republicans have pushed the idea of allowing Americans to import prescription drugs from other countries, outside of the normal U.S. Food and Drug Administration’s process that seeks to ensure safety in both the manufacturing of drugs and their chain of custody to the point of sale. Most recently, some members of Congress want an importation provision included in the FDA Safety and Landmark Advancements Act, which reauthorizes the 1992 Prescription Drug User Fee Act (PDUFA).
 
And for just as long the Institute for Policy Innovation (IPI) has been warning that importation is extremely dangerous—now more so than ever.
 
Yet last summer President Joe Biden issued an executive order promoting drug importation, falsely claiming it would enhance competition. 

In his July 9, 2021, “Executive Order on Promoting Competition in the American Economy,” Biden says: “To reduce the cost of covered prescription drug products to the American consumer without imposing additional risk to public health and safety, the Commissioner of Food and Drugs shall work with States and Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.” 

To be clear, it is impossible for any state, Indian tribe or other entity, including businesses, to import prescription drugs “without imposing additional risk to public health and safety”—even if those drugs are allegedly coming from a perceived safe source like Canada. 

That’s because drug counterfeiting is rampant. Just go to the Partnership for Safe Medicine’s website and look at all the news stories documenting counterfeit drugs in every state in the country. 
 
President Trump also pushed state efforts to create importation programs. Florida tried, but the program collapsed—as has every other state importation scheme.
 
The fact is the United States is facing an opioid crisis. Provisional government data indicate some 108,000 people died from drug overdoses last year, up from 94,000 in 2020.
 
Dr. Nora Volkow, director of the National Institute on Drug Abuse, recently warned, "These past three years we have seen an increase of contamination of other illicit drugs with fentanyl, be it cocaine, be methamphetamine, and more recently, illicit prescription drugs."
 
While some illicit opioids are now manufactured in the states, much of it is coming from other countries. For example, the U.S. Attorney’s Office in Oregon announced last March, “U.S. Drug Enforcement Administration (DEA) agents based in Portland began investigating a drug trafficking organization led by Luis Antonio Beltran Arrendondo, 32, of Las Vegas, who was suspected of importing counterfeit oxycodone pills containing fentanyl and heroin from Mexico into California, and transporting it to Oregon and Washington State for distribution.”
 
And while most of the counterfeit drugs are pills—in part because they are easier to make and transport—counterfeit injectable drugs are also available, and equally if not more dangerous. 
 
When IPI began warning of the safety threat posed by various drug importation schemes, importation proponents shouted, “Show us the bodies!” We replied that the bodies would be coming if importation efforts continued to grow. Tragically, the bodies—many of whom are victims of counterfeit drugs—are everywhere.

The Honorable Katherine C. Tai 
United States Trade Representative 
Office of the United State Trade Representative 
600 17th Street NW 
Washington, DC 20508

The Honorable Gina Raimondo 
Commerce Secretary 
United States Department of Commerce 
1401 Constitution Ave., NW 
Washington, DC 20230

Dear Ambassador Tai and Secretary Raimondo:

We write in opposition to the proposal before the World Trade Organisation (WTO) to undermine intellectual property rights for COVID-19 vaccines. Rather than supporting proposals that undermine American medical innovation to the benefit of foreign rivals like Communist China, we urge you to pursue proposals that help American workers and businesses through measures that reduce government interference, lower taxes, and help promote American competitiveness. 

As you know, the Director-General of the WTO introduced a draft proposal to waive IP protections for COVID-19 vaccines that exist under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Supporters of this latest proposal are pushing for it to be adopted ahead of the WTO’s Ministerial Conference on June 12-15. If adopted, WTO members including China and Russia would be permitted to use compulsory licensing to seize the patents of American developed COVID-19 vaccines. 

This proposal is not necessary because there is no global shortage of vaccines. If anything, the world may be seeing an oversupply of vaccines due to extensive investment in production, increased competition, and slowing demand. In fact, in India manufacturers have slowed down manufacturing of new vaccines after production resulted in 200 million doses of stock – far more than was needed.

While this proposal would do nothing to fight COVID-19, it would undermine the development of vaccines and treatments for future deadly pandemics. Developing new medicines is a costly, risky, and time-consuming process. A manufacturer must invest an average of $2.6 billion and ten years in research and development, according to the Tufts Center for the Study of Drug Development. In all, just 10 to 20 percent of medicines that begin clinical trials are approved. Strong IP rights are key toward ensuring manufacturers are incentivized to innovate, ensure medicines are safe and effective, and have the resources to invest in the next generation of cures. Without protections, highly effective COVID-19 vaccines would not have been completed or distributed as quickly as they were. Allowing the seizure of IP through a TRIPS waiver would undermine this system of medical innovation.

This proposal will also help America’s geopolitical rivals including Communist China and Russia. If approved, the proposal would allow foreign countries to immediately seize patents and clinical data of American businesses in order to attempt to produce COVID-19 vaccines. This would give foreign countries access to sensitive and valuable proprietary information belonging to American businesses.  

There would be little protections available -- while the draft proposal “encourages” countries like China to opt out of the waiver if they do not need the IP, every country would be eligible to participate in the waiver if they so choose. Even if a more geographically restricted waiver were implemented, China would still acquire US trade secrets and technology via other countries.

China has an extensive record of repeatedly violating property rights and stealing IP from American businesses, so it is likely they would use this opportunity to again seize American IP rights. According to some reports, Chinese IP theft costs the U.S. $225 billion to $600 billion each year in counterfeit goods, pirated software, and theft of trade secrets.

Undermining IP rights will also harm American competitiveness and workers. IP supports millions of high-paying jobs across the country. According to the United States Patent and Trademark Office (USPTO), IP-intensive industries accounted for $7.8 trillion in GDP in 2019, or 41 percent of the economy. These industries accounted for 47.2 million jobs, or 33 percent of total U.S. employment.

Pharmaceutical manufacturers are no exception – these businesses invest over $100 billion in the U.S. economy every year, directly supporting over 800,000 jobs. When indirect jobs are included, pharmaceutical innovation supports 4 million jobs and $1.1 trillion in total economic impact. These jobs are high paying – the average compensation is over $126,000 – more than double the $60,000 average compensation in the U.S.

We urge you to reject the proposed TRIPS waiver before the WTO to allow foreign countries to seize the IP of American innovators. The proposal is unnecessary given the strong global supply of COVID-19 vaccines and would instead undermine the development of the next generation of treatments. It will help America’s geopolitical rivals like Communist China at the expense of American businesses and workers.

Sincerely, 

Grover Norquist
President, Americans for Tax Reform

Phil Kerpen
President, American Commitment

Dee Stewart
President, Americans for a Balanced Budget

Marty Connors
Chair, Alabama Center/Right Coalition

Lisa B. Nelson
CEO, American Legislative Exchange Council

Michael Bowman
President, ALEC Action

Bob Carlstrom
President, AMAC Action

Stephen Pociask
President and CEO, American Consumer Institute

Dick Patten
President, American Business Defense Council

Ryan Ellis
President, Center for a Free Economy

Jeffrey Mazzella
President, Center for Individual Freedom

Ginevra Joyce-Myers
Executive Director, Center for Innovation and Free Enterprise

Chuck Muth
President, Citizen Outreach

Tom Schatz
President, Citizens Against Government Waste

Curt Levey
President, Committee for Justice

Ashley Baker
Director of Public Policy, Committee for Justice

James Edwards
Executive Director, Conservatives for Property Rights

Matthew Kandrach
President, Consumer Action for a Strong Economy

Katie McAuliffe
Executive Director, Digital Liberty


Ed Martin
President, Eagle Forum Education & Legal Defense Fund

Adam Brandon
President, Freedomworks

George Landrith
President, Frontiers for Freedom

Jessica Anderson
Executive Director, Heritage Action

Heather R. Higgins
CEO, Independent Women’s Voice

Bartlett Cleland
Executive Director, Innovation Economy Alliance

Tom Giovanetti
President, Institute for Policy Innovation

Seton Motley
President, Less Government

Charles Sauer
President, Market Institute

Tim W. Jones
Chair, Missouri Center-Right Coalition
Former Speaker, Missouri House of Representatives

Pete Sepp
President, National Taxpayers Union

 Doug Kellogg
Executive Director, Ohioans for Tax Reform

Tom Hebert
Executive Director, Open Competition Center

Wayne Winegarden
Sr. Fellow Business and Economics/Director, Center for Medical Economics and Innovation, Pacific Research Institute

Stephen Stepanek
President, Pine Tree Public Policy Institute

William O’Brien
Chairman, Pine Tree Public Policy Institute

Lorenzo Montanari
Executive Director, Property Rights Alliance

Jim Martin
Founder and Chairman, 60 Plus Association

Saul Anuzis
President, 60 Plus Association

Karen Kerrigan
President and CEO, Small Business & Entrepreneurship Council

David Williams
President, Taxpayers Protection Alliance

Kent Kaiser
Executive Director, Trade Alliance to Promote Prosperity

People tend to think of “innovation” as new breakthrough technologies, but innovation is actually much broader than just technology and more granular than just breakthroughs. Practically speaking, what brings about innovation and why should we care if innovation is taking place or not? 

Fundamentally, innovation is a response to a perceived need or possible benefit, and may be expressed as a new product, service or idea, but may also be an incremental improvement in a product, service or idea that already exists. Innovation is most usually the end result of experimentation that leads to a better outcome for one person or for many. 

The elements of innovation have been written about often, that is, various descriptions of the environment conducive to innovation within a company or organization. Less attention seems to be given to the necessary environment that allows innovation to flourish, such as the legislative or regulatory landscape. 

Over the last few years, the term “permissionless innovation” has gained traction when speaking of innovation policy. But what is permissionless innovation? Adam Thierer, Senior Research Fellow at Mercatus Center, who did not coin the term but who has done a great deal to popularize it, defines it thus: “Permissionless innovation refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention will bring serious harm to society, innovation should be allowed to continue unabated and problems, if any develop, can be addressed later.” 

This describes an environment where generous boundaries permit abundant risk-taking and trial and error, but it doesn’t imply anarchy. It doesn’t mean ignoring existing laws related to property rights or health and safety. Instead, it means that innovators, inventors and creators are given the room to innovate without government prejudging a direction or outcome via regulation or legislation. This seems obvious, that for innovation to truly happen that people would need the freedom of thought and action to improve upon an existing situation or product. 

In sharp contrast to permissionless innovation is the “precautionary principle.” Britannica defines the principle as an “approach in policy making that legitimizes the adoption of preventative measures to address potential risks to the public or environment associated with certain activities or policies.” This risk-adverse approach is fundamentally pessimistic, assuming that innovation frequently leads to harm. Maybe even worse, by definition this principle is an uninformed approach to policy-making. Rather than policy based on evidence of concrete potential harm, preventative regulations are enacted in anticipation of worst-case hypotheticals. 

For the sake of our economy, for the promise of a better quality of life, and greater discovery, we should allow permissionless innovation unless harm can be demonstrated. And even then, such regulation should be minimal and flexible. 

Want to learn more? Listen to our recent podcast on this topic.  

Innovation is messy, unpredictable and difficult. It’s not a straight-line processes. That’s why you simply cannot use current technology to predict future innovation. No one knew, for example, that 4G wireless technology, because it was faster and smoother than 3G, would enable applications like Uber and Lyft that transformed an entire industry and provided new forms of consumer convenience and worker flexibility. 

What we do know is that certain policy environments create greater opportunity for innovation than others. As an example, just compare Europe to the United States when it comes to the technology industry. Europe, despite being even larger than the U.S., does not hold a candle to the innovation force of this country. There are many factors and differences between the U.S. and Europe, but what is clear is that the U.S. has figured out something that the rest of the world has not: Heavy-handed tax and regulatory policies do not lead to greater invention. 

This then is why populism, with its calls for more (European style) regulation on tech companies, is so troubling. And populism is on a tear both on the left and right. In pandering to popular sentiments, frustrations and dissatisfactions, populism provides bread and circuses rather than sound public policy that serves the country now as well as tomorrow. 

Tech populism, in its current iteration, wants to tear down and refashion everything from broadband to social media to software through government power. Remaking whole industries in the fashion that politicians, not the marketplace nor the people, decide. Even worse, in most cases it is not the majority demanding change but rather the political class whipping their base up into a frenzy so that politicians and consultants can extract their respective winnings. 

That politicians so quickly surrender principle to grievance politics is a betrayal. But it gets worse. Such populist thinking is also tearing away at supposed principled thought leadership, as IPI wrote last week. 

Some argue that innovation will still happen regardless of the policy environment. They fail to grasp innovation’s nature and appreciate the innovation ecosystem. As with most ecosystems it is interconnected and, in many ways, delicate. Poor government choices can destroy it as easily as poor government choices have led to disastrous fires out west or led to poor levee management and flooding. 

The time is now to choose sides, either for continued American leadership in innovation and creativity or to becoming just one more innovation also-ran.

For 20 years the Institute for Policy Innovation has echoed warnings from the Food and Drug Administration (FDA), law enforcement officials, drug manufacturers and pharmacists about the dangers posed by counterfeit and compromised prescription drugs.
 
Many elected officials—mayors, governors, some congressmen, and even presidents—and, of course, the counterfeit drug profiteers, dismissed the warnings. They assured the public that individuals could buy the exact same prescription drugs from foreign websites—referred to as “importation”—that patients could buy from their trusted, local brick-and-mortar pharmacy, only for a lot less money.
 
President Trump made that claim. And now President Biden is doubling down, as he said in August:
 
I’ve ordered the FDA to work with states and Tribes to import prescription drugs safely from Canada.  These are drugs that the FDA has determined are safe. And they’re going to make sure the drugs get to the states and Tribes safely. …
 
That is a lie—much like his promise to leave behind no American citizens in Afghanistan.
 
The FDA approves drugs for sale in the U.S., but only if they have been made in FDA-approved facilities and follow a rigorous chain of custody to ensure they were never mishandled or compromised.
 
The FDA has not determined imported drugs are safe because the FDA has no authority to go to Canada and inspect those drugs. They may be the same drugs, or they may be counterfeits that include substances that can kill.
 
Even as Biden assures us he can guarantee the safety of imported drugs, the U.S. Drug Enforcement Administration last week began its “One Pill Can Kill” campaign. According to the DEA:
 
The Drug Enforcement Administration warns the American public of the alarming increase in the lethality and availability of fake prescription pills containing fentanyl and methamphetamine. International and domestic criminal drug networks are mass-producing fake pills, falsely marketing them as legitimate prescription pills, and killing unsuspecting Americans. … Pills purchased outside of a licensed pharmacy are illegal, dangerous, and potentially lethal.
 
DEA and its law enforcement partners are seizing deadly fake pills at record rates. More than 9.5 million counterfeit pills were seized so far this year, which is more than the last two years combined.
 
Drug traffickers are using fake pills to exploit the opioid crisis and prescription drug misuse in the United States, bringing overdose deaths and violence to American communities.
 
While most of the fake pills are opioid knockoffs, there are many others—including Viagra. And while counterfeits usually come in pill form, there are cases of fake injectable biologics.
 
Even as the DEA waves red flags, Biden’s safety guarantees are likely to reassure some people that importing their prescription drugs from an unknown foreign website is safe.
 
Two decades ago, when IPI began warning about counterfeit prescription drugs, importation proponents responded by saying,  “Show us the bodies!”
 
Sadly, we now have them.

Not long ago, a shade-tree mechanic with average skills could fix whatever was wrong with your car. These days, cars are far more advanced. On-board computers allow cars to diagnose themselves for most common problems and make engines run more efficiently while squeezing out more power than ever before.

All this advanced technology has put the shade-tree mechanic pretty much out of business. Working on a car today requires advanced training and technical ability. The technology inside and outside the car consists of patented software, chip designs and proprietary systems. But the benefit to consumers has been enormous. These inventions are covered by patents to encourage and reward innovation.

American innovation is dependent on the protection of intellectual property. It encourages innovation by discouraging theft. But there are those who are philosophically opposed to intellectual property protection. Left-leaning public interest law firms and activist groups led by U.S. PIRG, an association of public-interest law firms, have been trying for years to undermine intellectual-property protection through “right to repair” campaigns in state legislatures. During this legislative session they are pushing their anti-innovation agenda in the guise of a “right to repair” advanced medical devices.

In my state, Texas, Rep. Thresa Meza has introduced a bill this session titled the Medical Device Right to Repair Act. This bill would require manufacturers of highly advanced medical devices like MRI machines, CT scanners and PE-scan systems to disclose confidential and patented design and service information. 

A “right to repair” sounds reasonable, but forcing manufacturers to disclose their proprietary technologies would erode the incentive for innovation and endanger patients. Today the Food and Drug Administration regulates and monitors medical-device safety. The FDA demands that original equipment manufacturers follow its guidelines regarding software updates, patches and more-comprehensive repair jobs. The uncertified third-party service providers who would conduct repairs if these bills pass aren’t regulated by the FDA. There’s no assurance they will follow FDA standards.

Forcing disclosure of these advanced medical technologies and opening them up to uncertified technicians may also represent a cybersecurity threat. You may be troubled by the idea that voting machines can be hacked, but what about opening up MRI machines and PET scanners? Patients could be endangered by sabotaged medical devices, but they might also suffer from malfunctions that cause inaccurate test results and thus unidentified medical problems. Such concerns also include direct theft of American innovation by bad actors seeking advanced U.S. technology, such as China.

“Right to repair” sounds sympathetic but it’s a wolf in sheep’s clothing. It’s not being pushed by small repair businesses but by ideological public-interest law firms and activists as an attack on intellectual property.

State legislators in Texas and elsewhere would be making a terrible mistake by falling for this bait and switch, risking the health of patients and opening up the medical device industry to dangerous and unfair vulnerabilities.

The annual World IP Day recognition for 2021 is Monday, April 26. And yes, we know this isn’t one of the major dates on everyone’s calendar! So why bring it up?

The reason is that at the Institute for Policy Innovation we believe that intellectual property—indeed, all property—is critically important. Property rights are the foundation of a market economy. If you don’t have clear property rights, no one can really enter into contracts to buy and sell anything. That’s why free-market advocates consider property rights to be so critical. And it’s why we are always sensitive to government encroachments on property rights.

“Intellectual property” applies to copyright, patents, trademarks, and trade secrets—property rights that are based on creation and invention. And the federal government’s obligation to create and maintain a system of intellectual property rights is mandated in the U.S. Constitution’s 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."

One reason the U.S. economy has been the most creative and inventive in the world is because of our historically strong patent and copyright system. And even though today most products may actually be manufactured elsewhere, the United States is still the home of creation and invention, whether it’s patents for high-tech products or biotech medicines, copyright for music, movies and TV shows, or trademarks for powerful global brands. 

It’s our belief that the foundation of an innovative economy depends at least in part on a strong system of protection for intellectual property rights, and that’s why we push back on attempts to weaken those protections.

So that’s why one of the key policy issues we work on at IPI is intellectual property. And it’s why for 16 years we have sponsored the leading World IP Day event in the nation’s capital. Because of the pandemic, this year’s event, like last year’s, is virtual. But this year we are doing two separate World IP Day virtual events. 

On Monday, April 26, we’re doing a patent-focused event entitled “Patents and the Vaccines.” And on Thursday, April 29, we’re doing a copyright-focused event entitled “The Problem of Streaming Piracy.”

We hope you can join us for these two virtual briefings by clicking on the (separate) registration links above. And if not, the events will be archived on our website and our YouTube channel.

The Institute for Policy Innovation has long warned against individuals and state and local officials seeking to import prescription drugs that bypass the U.S. Food and Drug Administration’s policies and oversight.
 
Such warnings sometimes go unheeded, most recently by Florida Governor Ron DeSantis, who is trying to create an importation scheme so Floridians can import prescription drugs from Canada—though no one is really sure that’s where the drugs will come from.
 
But the coronavirus pandemic and an unprecedented effort to develop a Covid-19 vaccine and distribute it across the globe have shined a spotlight on the problem: Criminals who seek to profit from the public’s fear by selling fake or compromised products that claim to be a Covid-19 vaccine or treatment.
 
Here is Europol’s recent announcement.
 
In April this year, Europol announced the potential harm of offline and online scams offering alleged versions of the COVID-19 vaccine. Projections were also made in relation to the announcement of a genuine vaccine and the reaction of organised sic crime to adapt its methods to meet demand.
 
These projections were later confirmed in Europol’s November report, where it was identified that the distribution of substandard and counterfeit pharmaceutical products, including preventative sic COVID-19 vaccines had remained a consistent pandemic-related criminal activity.
 
And here’s the FDA’s comments.
 
The FDA is working with vaccine and drug manufacturers to develop new vaccines for and find more drugs to treat COVID-19 as quickly as possible. Meanwhile, some people and companies are trying to profit from this pandemic by selling unproven and illegally marketed products that make false claims, such as being effective against the coronavirus.
 
The point is clear: Criminals and organized crime want to exploit the public’s and political leaders’ fears by claiming they have doses of a Covid-19 vaccine for sale.
 
And law enforcement agencies know that many people, perhaps millions around the globe, will be tempted to take the chance.
 
But given the difficulty in manufacturing, storing and transporting the Covid-19 vaccines—especially Pfizer’s and Moderna’s messenger RNA vaccines—there is virtually no chance that any group outside of the manufacturers will have true, non-compromised doses.
 
Sadly, because a number of U.S. politicians have long claimed that importing prescription drugs outside of the FDA’s oversight and chain of custody is perfectly safe—“It’s the exact same drug you can get in the U.S. only much cheaper”—some Americans will be open to the notion of buying a coronavirus vaccine or treatment online from a website with the picture of a Canadian flag.
 
For those who have bought drugs online from other countries and haven’t run into problems yet, please don’t think that means an online-purchased Covid-19 vaccine will be genuine. 
 
It would be tragedy if someone seeking to avoid death from Covid-19 were to end up dead because of a fake Covid-19 vaccine.

What if a governor gave a prescription drug importation party and nobody came?
 
Worse yet, what if a governor waved $30 million, provided by taxpayers, to encourage businesses to come to his prescription drug importation party—and still nobody came?
 
As reported in a Kaiser Health News story that appeared in the Miami Herald, that’s what happened in Florida.
 
Florida Governor Ron DeSantis, a Republican whose scheme is backed by President Donald Trump, has been trying to set up a state-based program so that Floridians can buy prescription drugs from allegedly Canadian pharmacies at lower prices.
 
It’s not a new idea, a handful of states and cities have tried setting up (illegal) importation schemes for more than two decades.
 
For example, Minnesota under former Republican Governor Tim Pawlenty and Illinois under former Democratic Governor Rod Blagojevich developed state-based importation schemes in the mid-2000s. A few cities also tried, primarily for the benefit of city employees.
 
Those projects all died from lack of participation. But like socialism, bad ideas continue to find an audience no matter how badly they fail.
 
There is a difference in the new importation push, however. It’s apparently legal.
 
As the Kaiser story notes, “A 2003 law allows drug importation from Canada, but only if the head of the federal Department of Health and Human Services deems it safe and cost-effective.”
 
No HHS secretary, Republican or Democrat, has been willing to make that certification—until Secretary Alex Azar.  As the former president of Eli Lilly, one of the country’s top drug makers, we suspect Azar has reservations about the safety of imported drugs and doubtless condemned importation in years past.
 
Moreover, with the passage of the Medicare Prescription Drug Act in 2003 and the Affordable Care Act in 2010, the vast majority of Americans have prescription drug coverage. So what’s the point?
 
And Florida’s plan precludes biologics because they must be carefully handled and are easily compromised. Yet they tend to be the most expensive drugs, with the highest out-of-pocket copays—in large part thanks to Obamacare. 
 
But President Trump promised to lower drug prices, and importation is one of his solutions, even though the U.S. Food and Drug Administration knows it cannot ensure the safety of these imported drugs.
 
There are numerous resources that track fake and compromised medicines that are already coming into the country. Legitimizing importation will only open that door much wider.
 
At a time when the news is filled with stories of various scurrilous individuals and governments trying to hack our computers, our security systems and even our elections for fun and profit, why would anyone think they can trust a foreign-based prescription drug website that claims it’s in Canada?
 
It may be that DeSantis will eventually find a company willing to establish a Florida importation program, especially if he throws more money at it.
 
If so, he may be able to get some drugs to Floridians cheaper, but that doesn’t mean they will be as safe as what consumers get at their local drugstore.

When people think of innovation at this moment, odds are they are thinking about innovation in the biotech and pharmaceutical sector, as the industry scrambles to invent a dependable vaccine for COVID-19, more reliable tests and other treatments. The immediate need for such innovation is real, but the U.S. economy has a constant, ongoing need for innovation across all industry sectors because we are no longer the cheapest place to make things or to grow things. We are the place that invents and innovates things.

As such, our economy depends on a robust innovation ecosystem. That means we must maintain a system of abundant risk-capital, affordable and accessible quality educational options, a culture of risk-taking, and a strong intellectual property system so that if an invention succeeds, those who took the risks have a chance to reap the rewards.

Disaster Averted

Both the culture of risk-taking and the intellectual property system dodged a massive threat this year, thanks to the Court of Appeals of Texas, Fourth District, which overturned the absurd nearly $740 million judgment in Title Source v. HouseCanary and stipulated a new trial.

Title Source v. HouseCanary seemed destined to go down as one of the most anti-innovation rulings since the advent of financial technology. Fortunately, on June 3, the Texas Court of Appeals overturned the record-setting $740 million judgment and ordered a new trial. As the case returns to the trial court, the most significant difference is the likely inclusion of testimony from HouseCanary whistleblowers, who only came forward following the conclusion of the first trial. However, if the whistleblowers’ sworn testimony provided for the court record is any indication, it is tough to fathom the new jury reaching the same conclusions as the initial panel. 

At the onset of the dispute, real estate service provider Title Source (now Amrock) sued fintech company HouseCanary for failing to produce a mobile app that HouseCanary was contractually required to produce. As a Hail Mary defensive strategy, HouseCanary countersued, making the claim that Amrock had misappropriated their confidential data and technology, and the counter-claim paid off in a windfall: a Texas jury awarded  HouseCanary almost three-quarters of a billion dollars in compensatory and punitive damages.

The result was astounding, both for having emerged out of a countersuit and for the staggering scale of the remedy, with awarded damages more than 140 times greater than the original $5 million annual contract between the companies.

Immediately following the conclusion of the first trial, a former HouseCanary executive-turned whistleblower revealed that the jury’s finding was based on inaccurate information. That disclosure led to the sworn testimony of four former HouseCanary executives, who testified “there was never a working version of the app,” and that HouseCanary CEO Jeremy Sicklick instructed employees “to make misrepresentations to Title Source about the status of the HouseCanary products.” But the judge overseeing the case did not vacate the jury’s verdict following these revelations.

Reinstating the Award Would Undermine Innovation

Had the trial court’s ruling been upheld, its implications would have extended far beyond the parties named. Intellectual property protection facilitates licensing deals and mitigates risk in an already risky innovation system. Enormous jackpot verdicts like the one in HouseCanary undermine the licensing system. Who would risk entering into a $5 million licensing deal if the downside can be more than $700 million in damages?

Overturning the trial court ruling benefits startups as well as large corporations. It allows established companies like Amrock to continue to collaborate with smaller firms, knowing that, although there will always be some bad actors who engage in surreptitious behavior to extort remuneration from business partners, they no longer need to fear that a misinformed jury, void of checks and balances, could cost them hundreds of millions of dollars.

Especially as the U.S. economy tries to pull out of the COVID-19 slump, we need to ensure that innovation and risk-taking are not hindered by uninformed, punitive jackpot jury verdicts far in excess of their value. The economic fallout of the COVID-19 pandemic has simultaneously increased the importance of innovation and reduced corporate risk tolerance. Since companies must assume risk when pursuing innovation, they need reassurance that their exposure is worthwhile. This is especially true for the tech sector, which is driven by research and development.

Litigation abuse far predates COVID-19, but its consequences have been magnified as companies scramble to protect themselves against unprecedented threats. Given its prominence, the Amrock v. HouseCanary case will inform corporate assessments of risk related to collaboration and partnerships for years to come, and industry experts and the legal community will be closely following the case as it moves forward towards a new trial.