IP Protection Matters
IP Protection Matters is a podcast interview series examining notable issues related to the protection of and threats to intellectual property. IP Protection Matters is a project of the Center for Individual Freedom.
A Center for Individual Freedom production
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Transcription

Giachino (00:05.0019 - 00:33.0970)

Welcome to IP Protection Matters. I'm your host, Rene Giachino. Today, we are joined by Congressman Nathaniel Moran, who serves the First Congressional District of Texas. We will be talking today about legislative efforts to maintain intellectual property protections in America and the importance of maintaining America's status as the world's leader in innovation and national security. Representative Moran, thank you so much and welcome to IP Protection Matters.

Moran (00:34.0159 - 01:05.0486)

Renee, it is so great to be with you today. I'm grateful that we have this podcast where folks can actually learn more about what we're doing legislatively in Washington, DC to protect intellectual property. You're exactly right - IP does matter. I know your listeners understand that, but there's a whole lot of folks out there that I don't think quite yet [know] how important it is for us to protect our intellectual property. It's absolutely critical to our national security, to our economy and to so many other facets of our life.

Giachino (01:05.0835 - 01:52.0309)

Thank you for being a leader in Congress. You're spearheading efforts to promote and protect intellectual property. Let's start with your efforts to modernize the Patent Trial and Appeal Board, PTAB as it's commonly referred to. Last spring in a bipartisan effort together with Representative Ross from North Carolina you reintroduced the PREVAIL Act. Like any other legislative effort, it stands for something else, which is Promoting and Respecting Economically Vital American Innovation Leadership. Likewise, there's been a bipartisan effort on the Senate side with a companion bill, which is really exciting. Can you first share with us what motivated you to lead this effort to reintroduce this legislation?

Moran (01:53.0059 - 03:43.0199)

Renee, as you know, what happens so often is we get great inventors out there that toil with blood, sweat and tears to get to a place where they actually have a patent that really is valid and enforceable. Then what they find is that there's a judicial system out there that allows infringers or others to take advantage of multiple bites of the apple to try to invalidate their patents or try to get the result that they want by forum shopping and frankly, by running over the doctrines of res judicata and collateral estoppel to finally get to an opinion that they want. That's to the detriment of these creators that have done so much work.

It seemed to me that as we looked at the system that we said there cannot be that many bites of the apple by that many people to put, especially the small guys, in a box to have to defend their patents over and over again. We've got to reform the system so that we do have additional opportunities to make sure that we have fairness in the PTAB system and that we require it to have a little stricter standing guidelines. We [need to] have stricter requirements for burden of proof along the way - things that match the federal district court system that we have come to love. So that people can't circumvent that Article III system and just find the result that they want through PTAB.

There's a lot more we can break down than that, but the truth is we just want to protect the intellectual property full bundle of rights by those creators, and we do not want to allow folks to get several bites of the apple just to get at least one forum where they can get the result that they want.

Giachino (03:43.0449 - 04:10.0759)

Congressman, what is the current status of the legislation? We read every day about all of the different hurdles that Congress is having to go through. I know right now there's talk even of another shutdown. So it seems that [with] certain legislation it's hard. This was the second time that it's been introduced and we thank you again for doing that. What is the current status of the legislation, and what does your crystal ball show?

Moran (04:11.0320 - 05:59.0890)

Renee, unfortunately, a lot of great legislation, particularly legislation that is hard to understand, thoughtful or very unique, doesn't make the nightly news because it doesn't have maybe the sex appeal that other things do. What happens to them oftentimes is it takes years to get them done. That's just the unfortunate truth about it. You get a good piece of legislation and then you’ve got to wait for the committee of jurisdiction, and in this case it would be Judiciary [Committee], to pick it up and say now's the moment that we have an issue that is bringing this to the forefront.

Luckily, we've done the work ahead of time to get it prepared and ready and we've got the bicameral, bipartisan support on it. Judiciary will look at that and say, now's the time. Let's push it forward. That's generally what happens. Sometimes you can work on a piece of legislation for years before it gets pulled up off the bench, so to speak. Sometimes you do a piece of legislation and like a month later, something happens in the world or something becomes a headline, that now everybody says we need to do something about reforming the PTAB system, protecting litigants from multiple bites of the apple and making sure that our systems are consistent between the federal court system and our PTAB system.

All of a sudden they're going to say, oh wait a minute, you mean we've already got a bill filed and we've already got bipartisan bicameral support on this? Oh yeah, let's pull it up. So, the work comes before the opportunity comes and it shouldn't deter us. We should continue to do the work, continue to communicate the messages out so that others become aware of the problem and become aware that the solution is on the table and ready to go.

Giachino (06:00.0170 - 06:49.0182)

Awareness is a big part of moving something forward like this. On that note, I've been hearing a lot about the Congressional Inventions Caucus. What I understand to be a bipartisan, bicameral caucus where they're bringing together Members of Congress who have an interest, like you, in innovation, patent and copyright laws, business, finance and strategic issues to gain that deeper understanding of how these complex issues interact and impact our nation's economy.

Is that an entity or a caucus that you've become a member of, and is it something you would encourage other members of Congress to do? It does sound like education is going to be a big part of moving forward things like the PREVAIL Act. We will talk momentarily about [the] RESTORE [Act] as well.

Moran (06:49.0682 - 09:16.0219)

I have not become a member of that caucus yet. My office, typically just as a matter of rule, typically doesn't get involved in caucuses deeply. It is a caucus that's doing great work. Every little ounce of momentum we can get in that regard is super important. So we're glad that they're pushing those aspects out.

But here's what we do. We look at the lens of every body of jurisdiction that we're in, every committee of jurisdiction. I'm on the Ways and Means Committee, the Ethics Committee and the China Select Committee. Particularly when we look at Ways and Means and China Select, my office consistently is looking at Members across the aisle and on our side of the aisle on those committees and saying, OK, what can we do from a patent perspective to protect intellectual property rights and who can we work with on the committee of jurisdiction that could handle that? We're working on something now, and I know we're going to get to the RESTORE Act, but I'll just give you a preview of something we haven't talked about in public.

We're working on a bill to be filed in the Ways and Means Committee that would help to rehome intellectual property rights that are currently held overseas. Right now there's a whole lot of trapped IP overseas that is overseas because there were tax favorable elements to the tax codes in other jurisdictions and in other countries around the world and there were tax code provisions that were not favorable in the United States. So, we think that one of the best ways to protect IP in the long term is to incentivize companies that are multinational companies to rehome their intellectual property rights back into the US.

That means helping them to overcome what I would call is an exit fee when they're trying to pull those intellectual property rights back from another country into the United States. That country is going to charge them a fee, and we want to be able to let them reclaim that fee in some way here in the United States through our tax code. That'll give them the incentive to bring it here. Once it's here, it helps us to 1) protect it better, 2) it helps to give additional jurisdiction for our courts to protect it better, and then 3) it's going to help bring additional revenue because now we're able to tax an asset that's here domestically as opposed to the way it's taxed overseas where other countries benefit from that.

Giachino (09:16.0530 - 10:28.0580)

That is incredibly exciting and thank you for announcing that great news here on IP Protection Matters. It certainly fits with what we're hearing from the Administration in terms of these pro-growth policies to both increase American competitiveness and innovation, but as you've pointed out, it's so important to bring that R&D back to US shores and essentially encourage them to develop and locate those IP products in the United States. That'll take me to Texas.

Let's talk about, if we can for a minute, the impact that IP has had on your home state. I recently read a study by the US Chamber of Commerce that found that IP-intensive jobs offer significantly higher wages, and Texas had strong wage premiums for IP jobs. In fact, you led the nation with 32.5 billion (with a B) in IP-related exports.

Are there any stories that come to your mind that you can share or any instances [where] you've witnessed the impact of IP on your constituency and fellow residents of Texas?

Moran (10:29.0070 - 12:30.0659)

Yes. There's certainly a momentum here in Texas. It's not just in Austin. That is where everybody thinks about initially. But it is across the state of Texas where intellectual property companies, folks that are looking to be inventors and have creative situation, understand that Texas is one of the best places to do that because regulations are low. There's high protections for businesses here, and it is a great place to work. There's no income tax. It is a pretty good place to work if you want to be somewhere in the United States.

You're right, here in Texas, one of the things that we recognize is that if you're in a job that's intellectual property related, you're probably going to make close to $25,000 more than the average person in a job in Texas. That's significant. I've got some kids in college right now and one of them is an engineer-minded individual, and I encourage her all the time that this is the future in employment. The higher skilled you can get, particularly in technology, science, math and engineering, the better off you're going to be because we know that's going to lead to that research and development, that intellectual property development, and the technology advancement that our future is built on.

But let's go back to the reason why we're talking. We're talking about protecting that because it will not matter for our economy if we encourage our kiddos and the next generation to be creators and to come up with great inventions, if we do not fully protect those inventions. And if we do not fully protect those inventions, people say, well, what is the incentive? Why would I do that if I'm not going to be compensated for that? If the bundle of property rights that I have related to my hard work is not fully protected, why would I do that? And that then undercuts and belies our notion of innovation. Innovation is what drives our economy.

Giachino (12:30.0989 - 13:02.0299)

Our guest is Congressman Nathaniel Moran, who serves the First Congressional District of Texas. [We are] talking about IP protection. Let's close out our conversation on the PREVAIL Act by addressing what it means from a national security standpoint. Certainly your comments speak to the importance of safeguarding intellectual property from an economic standpoint, but what does it mean from a national security standpoint, Congressman?

Moran (13:02.0460 - 15:38.0020)

This pulls in my China Select Committee work because we've had some hearings on this. Here's exactly what will happen if we do not protect our intellectual property. China will come in and they will use bad business practices, theft of our IP, to come in and undercut our companies here in the United States. They will then undercut the price. They will run our companies out of business. Now they control certain critical technologies that then we are dependent upon, and then they will sell it to us because they're now going to be the only source for those technologies. They will sell it to us and we'll put that technology in our infrastructure, our water, our sewer, our electric systems, our radar systems, our lidar systems and our interspatial systems.

It is already happening where this is occurring. Now all of a sudden these technologies that China will hold dominance on will be in our critical infrastructure. And that presents a real national security problem for us because that can then be used to switch off in a time of conflict against us. They would immediately have the ability to mess with our telecom systems, our satellite systems or our critical water, sewer, infrastructure systems and electricity systems if they hold the technology or the software and the hardware that's in it.

That has already begun to happen and we’ve seen that. It puts us in a precarious position. Even if we didn't get into a direct conflict, the threat of that gives them the negotiating leverage on so many different levels, and that's not what the United States wants. We need to hold our intellectual property rights tightly. We need to protect our colleges and universities from having research institutions be a conduit through which the CCP takes that information and then takes it back to China.

We have 600,000 students from China in the United States. Believe it or not, not all those students have good intentions. A lot of those are over here and are going to use that research opportunity to take that intellectual property back to China. China is funding a lot of that research, which gives them access to those colleges and university systems. They are indeed taking our intellectual property right out from under us.

Giachino (15:38.0330 - 16:34.0119)

That perfectly sets us up for our next discussion, and that involves another example of bipartisanship and [your] efforts together with Congresswoman Dean from Pennsylvania to reintroduce the RESTORE Act - Realizing Engineering, Science and Technology Opportunities by Restoring Exclusive Patent Rights. Can you give us a cliff notes version of what this proposed legislation seeks to accomplish and why it is so important?

Together with the PREVAIL Act, there is some crossover, although the PREVAIL Act certainly deals much more with the PTAB. But I think both of them together envision for us an arena where we can continue to find these cures and advance technology on American soil and protect our innovators. Give us the background a little bit on the reintroduction of the RESTORE Act.

Moran (16:34.0419 - 19:49.0520)

Let me give you the summary version of it because it's a pretty short bill. Just a couple of paragraphs. Here's what it basically says is, if you have a patent and you go through a trial and it is found to be valid and enforceable and that there is an infringement that has occurred, then you have a rebuttable presumption to a permanent injunction as to the infringers. This helps to restore the full bundle of property rights for that patent holder. Let me tell you why that's important. 1) it's important because it gives them the motivation to actually create. But 2), it's important because otherwise, if we don't give a full protection of the IP right, those inventors are going to want to go to a court over in China to try to enforce their rights, and we don't want them to do that. They're going to go to some other jurisdiction.

We want them to enforce their rights here in the United States under the guise of our judicial system. It's really important too because as you look back at why we need to do this, you look back at the eBay decision back from 2006 and when eBay set out its four factors to say what it thought should be the test for issuing a permanent injunction. You look at that third factor, the bounds of hardships. That became really problematic for a number of patent holders because if you didn't really have manufacturing going on, then trying to tell a court after you've been infringed and after it's been found to be valid and enforceable patent, to try to tell the court then that the balance of hardship should weigh in your favor and you should get a permanent injunction was tough. It was difficult if you weren't an actual producer and weren't actually in competition with the infringer.

I thought that swung the pendulum way too far the other way, and I think the statistics showed that because you went from having about 94% of the cases where all those factors were in play of getting a valid enforceable patent and it being infringed after a final determination by court. In 94% of the cases before eBay, you got a permanent injunction. Now you're looking at about 72% or 73% of those cases where you get a permanent injunction. That's not near the amount of permanent injunction you need, and so you need to have that rebuttable presumption to say, you know what, we're going to fully protect that. That provides fair market value, also stability for those, particularly the exclusive licensing and rights for patent holders when they want to provide an exclusive license to somebody.

I saw a study that showed that exclusive license value decreased after eBay because you're trying to license something where somebody's saying I may not have that full bundle of rights. Somebody might be able to infringe and all I'm going to be able to do is get monetary damages after a long trial. Then that infringer could keep infringing, and then I have to go back to court, and then I have to go back to enforcement. And the little guys can't do that over and over and over again, and the big guys know that.

Giachino (19:49.0939 - 20:04.0819)

This legislation is critically important to our innovation ecosystem, starting with our small startups and the individual inventors and then going all the way to our universities and even the multinational companies, isn't that right?

Moran (20:04.0949 - 21:27.0750)

Yes, that is exactly right. It really is. What we're trying to do certainly helps everybody. We've talked about three specific pieces of legislation. I think regardless of whether or not you're a small patent holder or a large patent holder, whether or not you manufacture or you don't manufacture, everybody, I think, will benefit from all of the resetting because the greater problem that we have is our difficulty with outside jurisdictions like China, infringement from China and our pushback against countries like that. It's not the internal fight.

We just need to make sure that everybody has a level playing field. That big, small and medium inventors are all protected, that the systems are not unequal within our system. That being our PTAB system or the International Trade Court or the federal district court system. We want all three of those to really run parallel. We don't want to have people to have the option to go to all three.

They just need to go to one and have their dispute settled. Then let's move on. As a lawyer for 20 years, I can tell you that surety is what everybody needs in the system and in the process so that their expectation about the process and understanding of the process helps to guide their future decisions in business.

Giachino (21:28.0089 - 21:51.0109)

Congressman, is your crystal ball any clearer on the possibility or the likelihood of this legislation passing this session? The smaller the legislation maybe the more likely it is that people will in fact read it and jump on board with it. It sounds like this is teed up beautifully to be passed this legislative session. What's your crystal ball showing here?

Moran (21:51.0410 - 22:45.0750)

You're talking to a glass half full kind of guy. I always see the silver lining. So, I'm always hopeful. There is always the possibility that it could come up in a moment's notice and get attached to a piece of legislation when there is that issue that everybody, all of a sudden, they have that light bulb moment on and says, oh yes, absolutely, we’ve got to take care of that.

Because we've done some great work making this bipartisan and bicameral, it's easier to push those along. I so appreciate the partnership of [Representative] Deborah Ross on the first bill and then [Representative] Madeleine Dean on the second bill that we're talking about. Two very intelligent, hardworking ladies in Congress that I like working with on these issues because they're smart, they're diligent and they're hungry to see the same answers that I am in the world of intellectual property.

Giachino (22:45.0969 - 23:10.0290)

Speaking of intelligent and hardworking, in presentation after presentation and remarks after remarks, you've been quoted as saying, “we can grow the economy only through innovation.”

That being said, I'm going to ask you to close our discussion today with any parting thoughts that you have as they relate to that quote, or quite frankly, anything else that you'd like to add to this incredible discussion today.

Moran (23:10.0599 - 23:58.0750)

I’m just thankful for all those companies out there that are doing the innovation day in and day out. Don't despair. We haven't forgotten about you in Congress. I think that's probably the parting message. So much of what gets said and done on TV every night, these headlines that you see, that may be the cultural issue of the day or the six second headline of the moment, but truly there are a lot of us on both sides of the aisle that are concerned about and focused on these critically important issues like protecting intellectual property and making sure that we get it right. And we are listening to the industry and we're trying to do our best to craft legislation that protects that innovation and protects our way of life.

Giachino (23:59.0310 - 24:14.0189)

Congressman Nathaniel Moran, thank you so much for the hard work that you and your fellow Members in Congress are doing. Thank you for understanding and helping to explain why IP protection matters. We appreciate your time today and I wish you a wonderful afternoon. Thank you.

Moran (24:14.0270 - 24:15.0069)

Thanks, Renee. Have a great day.

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