How Trump Can Propel America’s Economic Revival Through Intellectual Property Reform

How Trump Can Propel America’s Economic Revival Through Intellectual Property Reform

During a recent address to a joint session of Congress, President Trump declared that America is primed for an unprecedented economic rebound. This optimistic outlook is underpinned by substantial announcements regarding private sector investments in artificial intelligence infrastructure. In addition, new executive orders aim to position the United States at the forefront of emerging industries.

To fulfill the potential signaled by these initiatives, it is imperative for President Trump to advocate for the enhancement of America’s intellectual property framework. This system is the foundation of our innovation economy, and it is crucial to eliminate malicious foreign influences while implementing new leadership to successfully steer this economic revival.

The Need for Reliable Patent Infringement Damages

One key issue we must address is the inconsistent calculation of legal damages associated with patent infringement. American courts have veered away from reasonable damage assessments, thus hindering domestic innovation.

When faced with patent infringement lawsuits, companies should only be liable for damages corresponding to the actual value of the disputed technology. Unfortunately, this principle has transformed into a more lenient standard. Plaintiffs now seek compensation that significantly exceeds the true worth of their intellectual property.

The Risks of Excessive Damage Awards

For example, consider the sophisticated chips that power artificial intelligence technologies. Each chip encompasses thousands of components, many of which are protected by individual patents. If a chipmaker faces allegations of patent infringement, it should only indemnify damages tied directly to the incremental value its patented contributions provide to the chip. Nonetheless, courts often award damages calculated on the total value of the chip itself.

This discrepancy leads to unreasonable damages being awarded. In recent years, patent verdicts exceeding $10 million, $50 million, and even $100 million have surged, with some cases reaching into the billions. Such inflated damages place an unjust financial burden on high-tech manufacturers and other innovative firms that are compelled to pay more than their fair share.

Patent Trolls Fueling the Issue

The inflation of damages creates a legal environment ripe for exploitation. Non-practicing entities, often labeled as patent trolls, pursue these lucrative damages. These entities do not invent products or technologies; instead, they acquire patents solely to initiate lawsuits claiming infringement. Remarkably, more than half of all patent infringement cases in the U.S. originate from non-practicing entities, as the patent litigation business has attracted significant investment.

The lucrative possibility of substantial damage awards has not gone unnoticed by outside investors. Today, litigation investments have surged to over $15 billion in the U.S., with patent-related cases representing the largest portion of new financial commitments in recent years.

The Dangers of Anonymity in Litigation Investments

The anonymity allowed for investors in these cases makes the situation even more precarious. Former CIA Director John Ratcliffe highlighted the risks associated with this arrangement, noting that the funding of patent trolls permits nefarious parties, including foreign adversaries, to leverage intellectual property to launch legal attacks against U.S. companies.

Meanwhile, American patent grants to global competitors are rapidly increasing. In 2024, companies in China experienced a 32% rise in patents granted in the United States. Foreign contenders are vying for leadership across numerous advanced industries. For instance, a Chinese startup, DeepSeek, unveiled an AI model that competes with the top offerings from American innovators.

Strengthening the Intellectual Property Framework

It is essential to fortify our intellectual property regulations to safeguard American innovators from being undermined by those who exploit the system.

Three crucial reforms can address the core challenges within our intellectual property landscape. First, federal courts must re-establish their role as evidentiary gatekeepers. This means ensuring that unreliable expert testimony, which tends to inflate damage claims, is not permitted before juries. Without accurate information, juries cannot make informed decisions.

Second, Congress should advance Representative Darrell Issa’s Litigation Transparency Act, which mandates that litigation investors disclose their involvement in cases. This transparency is vital for the integrity of our legal system.

Finally, the Trump administration needs to empower the U.S. Patent Office’s Patent Trial Appeal Board. This board plays a pivotal role in equipping innovators with the resources necessary to defend against abusive practices. The board’s administrative patent judges are critical in invalidating poor-quality patents, many of which non-practicing entities use to extort legitimate companies.

Prioritizing Economic Progress through Intellectual Property Reform

Research shows that the Patent Trial Appeal Board operates more efficiently than federal courts, funded by fees rather than taxpayer dollars. The president’s nominee to lead the Patent Office, John Squires, must prioritize ensuring that the board can maintain its essential work.

Right-sizing damage awards, enhancing judicial transparency, and empowering the Patent Office’s patent quality reviews will help eliminate obstacles to economic advancement. These measures will also thwart attempts by competitors to undermine American industries. For policymakers, these are crucial priorities as we look forward to a brighter economic future.