Apple v. Biden: A Patently Absurd Approach to Innovation

SACRAMENTO — If you find yourself at a libertarian gathering (not usually recommended) and are a mischievous sort who wants to start a squabble that might lead to fisticuffs, don’t raise the usual hot-button issues of, say, the wisdom of driver’s licenses, age-of-consent laws, or bans on the individual ownership of nuclear weapons. Instead, bring up the issue of patents. Few other matters separate the movement into warring factions and lead to contentious outcomes.

Noting this dispute over intellectual property rights, Roderick Long in 1995 (it’s a longstanding dispute, after all) aptly summarized the positions. One side sees patents (and copyrights) as “one more instance of an individual’s rightful claim to the product of his labor.” The other sees “one more instance of undeserved monopoly privilege granted by government.” It’s complicated by the Constitution’s patent and copyright clause, which grants the feds authority in this area.

A decision this year by the not-libertarian-in-the-slightest Biden administration offers insight into why those who value private property and innovation get so hot and bothered by the matter. The decision reminds us of the need for common ground among agitated factions. Quite simply, Congress can leave the patent system in place — but limit the ability of patent seekers to use one bureaucracy to do an end run around decisions by the Patent Trial and Appeal Board.

The case involves a company called AliveCor, which accused Apple of violating its three patents related to its heart-monitoring system by using a heart-rate detection monitor in the Apple Watch. This is a fabulous innovation. It’s one reason my sister and I bought one for my 88-year-old mom. There’s even a much-reported case of the watch’s ECG-like function detecting an irregular heartbeat in a 36-year-old British man — thus saving his life. Apple points to hundreds of users who say the device saved their lives.

In this case, the International Trade Commission found that Apple infringed on AliveCor’s patents and called for a potential ban (though it’s delayed) on sales of Apple Watch. Essentially, a regulatory body designed largely to protect American firms from foreign intellectual-property intrusions inserted itself into a largely domestic dispute, even though the patent trial board found AliveCor’s patents to be invalid, as an article in the Hill explained. President Joe Biden could have vetoed that decision but declined to do so.

The traditional way to hash out patent issues is through the federal courts or, since the passage of the Leahy–Smith America Invents Act in 2011, the Patent Trial and Appeal Board at the U.S. Patent and Trademark Office. It’s an admittedly flawed system. Often, patent seekers gain monopolies on technologies and then can stop — or demand payments — from innovators who want to develop the technology. Sometimes, the regulators lack the specific expertise (especially in the highly specialized computer world) to make such a determination. Other times, they grant overly broad patents.

One article from the National Research Council of the National Academies of Sciences notes that with “[Thomas] Edison’s incandescent lamp and the Wright brothers’ airplane stabilization and steering system … broad pioneering patents were exercised in a manner that at least temporarily deterred competitors from making further improvements.” It’s a particular problem when “patent holders either aggressively enforced their rights or refused to enter into licensing agreements.” The patent system is designed to promote innovation by protecting the investments of innovators — not be used to stifle advancements.

The current system forces companies to spend their time in costly litigation rather than in research and development. That’s especially the case with those non-practicing entities (sometimes called “patent trolls”) that “acquire huge patent portfolios to assert infringement claims on others who are actually trying to innovate,” explains my R Street Institute colleague Wayne Brough, who notes that they profit from litigation rather than innovation.

That’s not the case with the Apple and AliveCor dispute, which is a legitimate disagreement over patent ownership, but AliveCor filed its complaint through the International Trade Commission, doing an end run around the courts. Nevertheless, the nation clearly needs ITC reform.

As R Street further explains, Section 337 of the Smoot-Hawley Tariff Act of 1930 empowered the ITC to immerse itself in patent disputes — but it was never meant to circumvent patent office decisions and, ultimately, the rulings of the federal courts. Federal legislation needs to limit the agency’s authority to legitimate trade issues, and the recently introduced Advancing America’s Interests Act does just that.

Unlike those libertarian disputes, most of these disagreements are so vicious not because of the philosophy behind them but because of their financial implications. Whatever one’s overall view of the patent system, it’s not about to be tossed aside. The best we can hope for are some reforms that discourage anti-competitive practices.