Patent Reform Act Threatens ‘Engine’ of Prosperity

by Bob McCarty

Editor’s Note: Paul R. Hollrah is a senior fellow at the Lincoln Heritage Institute and a contributing editor for Family Security Matters and a number of online publications, including mine, BobMcCarty.com.  Today, I published a piece by Paul that deserves widespread attention.  For that reason, I share it below.

In early February 1997, I received a telephone call from a longtime friend in Washington. He was calling to say that we were being recruited for a very important assignment, an assignment related to national security.

He explained that, in 1996, the Clinton administration agreed to give the People’s Republic of China a complete set of magnetic tapes from the U.S. Patent and Trademarks Office computers, containing every iota of American technology registered with the patent office in the previous 160 years. With the information from those tapes on their computers, the Chinese would know exactly how to make everything we make. But more importantly, by tracking the long-term development of every conceivable kind of technology and extrapolating the path of development into the future, the Chinese could “leap-frog” our own technological development.

No American president could possibly think it was a good idea to do such a thing – unless, of course, he owed a debt of gratitude to the Chinese and he was more concerned about that than he was about the future prosperity of the American people. The American people would never have known how many factories were being built in remote provinces of China, employing workers who were happy to work for two or three dollars a day. When the proposed technology transfer was inadvertently reported in a Commerce Department newsletter, the offer was withdrawn.

But what was potentially more damaging to the United States was contained in a Memorandum of Understanding with the Japanese government, signed by Commerce Secretary Ron Brown… an agreement to introduce legislation in the U.S, Congress that would destroy the U.S. patent system, as we know it. The vehicles for that treachery, already introduced in Congress, were H.400 and S.507, the House and Senate versions of the Omnibus Patent Reform Act of 1997.

Because the legislation was so thoroughly “wired” on both sides of the aisle, our employers were seeking a small team of experienced government relations professionals who’d been in the political arena long enough that many of their longtime friends had risen to become influential members of Congress. They were looking for lobbyists who were on a first-name basis with members of Congress…. men whose reputations in the political world were such that they could ask members of Congress to take certain actions, on faith alone, and expect those requests to be honored.

What made the task so difficult was the fact that the legislation was supported, not only by the president and vice president of the United States, but by the Peoples Republic of China, the Japanese government, the Indonesian Lippo Group, and 80 or 90 of America’s largest multinational corporations… all but assuring the neutrality of the U.S. Chamber of Commerce and the National Association of Manufacturers.

On the day we arrived in Washington, April 12, 1997, we tuned in to C-Span just in time to see the House of Representatives pass H.400 on a voice vote. Not one member of the House of Representatives demanded a roll call vote on a bill that would severely emasculate a core function of the federal government.

When we were finally able to obtain a copy of S.507, we read it very carefully and we were horrified. Never in all of our years as lobbyists had we ever read a worse piece of legislation. If we had ever wondered what it was that the Chinese received in return for the millions of dollars they poured into the Clinton-Gore reelection campaign in 1996, there was no longer any doubt:

• They proposed that the Department of Commerce relinquish control of the U.S. Patent Office and that the patent office become a wholly-owned corporate subsidiary of the federal government.

• They proposed that the patent office be controlled by a six-member advisory board made up of individuals drawn from the private sector, all with vested interests in patent office decisions… i.e., institutionalized conflict of interest.

• They proposed that the patent office be authorized to accept gifts of cash, or anything else of value, without limit, from any and all sources, including individuals, corporations, foreign businessmen, and foreign governments, including those with patents pending.

• They proposed that the patent office be authorized to borrow money and to create debt, without congressional approval, and to retire debt by increasing patent fees… in effect, giving the patent office the power to levy taxes. Under the U.S. Constitution, only the Congress has the power to levy taxes.

• They proposed to repeal that portion of U.S. patent law which required that all technical details of every patent application be held in strict confidence by the patent office until the inventor was given patent protection. Instead, the patent office would be required to make public all technical details of every new patent application just eighteen months after the inventor filed for a patent – on average, two and one-half years before inventors received patent protection.

• They proposed the creation of a system of “patent reexaminations,” wherein any individual or corporation, for a $2,000 filing fee, could cause an existing patent to be reexamined. Under this provision, inventors would be prohibited from using, licensing, or exploiting their patents in any way while their patents were under reexamination. And while reexaminations could take years to complete, the clock would continue to run on an inventor’s seventeen-year patent term. Of course, if the inventor was able to successfully defend his patent, those who wished to steal his technology would have others standing in line to file for additional reexaminations. Rather than face bankruptcy through fighting endless reexaminations, most inventors would gladly sell their rights to their intellectual property for pennies on the dollar.

Clearly, the latter two provisions were included in order to attract the support of America’s largest multinational corporations. If ever there was an invitation to corruption, the Clinton-Gore Omnibus Patent Reform Act of 1997 was it. The bills had no redeeming value whatsoever, and there was nothing in either bill for the American people. But when we saw who was supporting the bills we could understand their motivation.

We were up against the most powerful coalition of political and moneyed interests in the world, and the bill they were supporting was potentially more damaging to the nation’s economy and to intellectual property rights than anything the nation had previously experienced. Our “mission impossible,” if we chose to accept it, was to see to it that neither of the bills would ever reach Bill Clinton’s desk.

Our initial strategy was to find just one senator who’d be willing to stand up and oppose S.507, even to the point of staging a filibuster. Unfortunately, what we found was that no member of the senate, other than Sen. Orrin Hatch (R-Utah), the Senate sponsor, had focused sufficiently on the bill to know what it was all about. Then, on Tuesday May 20, we learned that Hatch had set a “markup” session in the Judiciary Committee for the morning of Thursday, May 22.

We’d been able to learn from friendly sources in the Senate that Hatch had arranged for S.507 to be reported out of his the Judiciary Committee by “unanimous consent,” meaning that, under Senate rules, the bill could then be passed on the floor of the Senate by “unanimous consent” – without debate. The railroad was well-oiled.

On Wednesday, May 21, my associate and I placed a call to our friend, Gov. Don Sundquist (R-Tenn.). After a brief explanation of what we were up against, we asked the governor to call Sen. Fred Thompson (R-Tenn.), a member of the Senate Judiciary Committee, and ask him to object when the bill was called up in committee.

The following day, as Senator Hatch took his seat in the cavernous Judiciary Committee hearing room in the Dirksen Senate Office Building, he was confident that he would pass S.507 out of his committee by unanimous consent. But that was not to be. When Senator Hatch called for the vote on S.507, Senator Thompson rose from his chair, pounded his fist on the table, and shouted, “NO, BY GOD, SENATOR. I OBJECT!”

In that instant, the most damaging piece of legislation in recent memory came to a screeching halt. There would be no “unanimous consent” in the Senate committee, and there would be no “unanimous consent” on the floor of the Senate. S.507 had suddenly become just another Senate bill – subject to all the political give-and-take of the “world’s greatest deliberative body.”

I tell this story now because those who wish to destroy the U.S. patent system, the constitutional wealth-generator that has been the “engine” of our prosperity since the first days of our republic (whoever “they” are), have waged a never-ending attack on the system since the day we defeated them in 1997. This year is no different. When the Senate returns from its August recess, the members will be asked to end a filibuster against passage of H.R. 1249, the Smith-Leahy Patent Reform Act of 2011. It is essentially the same bill that we defeated in 1997 and it deserves the same fate.

If we care about preserving our standard of living for future generations, we should all call our senators and demand that they vote “no” on the motion to invoke cloture.


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Posted Aug 30th 2011 at 2:40 pm in Economics, Regulation, Technology | 65 Comments