IP and Strategic Competition with China: Part IV – Patents, Standards, and Lawfare

Ranking member Congressman Hank Johnson's opening remarks for IP and Strategic Competition with China: Part IV - Patents, Standards, and Lawfare

To watch the hearing: https://judiciary.house.gov/committee-activity/hearings/ip-and-strategic-competition-china-part-iv-patents-standards-and-0

December 18, 2024

Everyone here likely has a mobile phone in their pocket.

We like to think of cell phones as a complete entity. And why wouldn't we? We can't open it up. And we can't see inside. But there is not just one patent on a cell phone. In fact, it is an entity made up of over a thousand patents. Some are owned by the cell phone manufacturer. Some are licensed from the owner. And a few are known as "Standard Essential Patents" or SEPs. These patents are designated SEPs by standards setting organizations. Meaning that they are necessary to make a cell phone work to global standards.
The phones in our pockets are the very same as those in pockets of young people in Damascus, Syria, of women in Tehran, Iran, and dissidents in Hong Kong. My phone, purchased in Atlanta, Georgia, can call someone in Shenzhen, China or Accra, Ghana because it is the same on the inside as other cell phones around the world.

Standard essential patents guarantee worldwide interoperability of our technology. By requiring a universal set of patents for a device, global standards ensure that as technology advances, our machines are interoperable with the world around them.
These standards hinge on inventors being fairly compensated for their inventions, so long as they agree to license their products on fair, reasonable, and non-discriminatory terms, known in the trade as FRAND. We are here today to examine the question of what happens when a country refuses to abide by the international process to which every other country adheres.

Over the last decade, Chinese courts have advanced its government's technology dominance goals through legal decisions that put China out of step with the rest of the world. Courts in China have set royalty rates artificially low for U.S. companies, ruled in favor of anti-suit injunctions that prevent litigants from bringing patent suits in other countries' courts, and otherwise prevented SEP owners from being paid fairly for their inventions.
Transparency in litigation is another problem. Chinese court proceedings are infrequently published, making it difficult for litigants, international courts, and SEP owners to interpret rulings. This absence of clarity has created a complicated system, where the deck is stacked against American companies. One that hard to navigate and where litigants struggle to receive a fair trial.

I'm looking forward to hearing from our witnesses how we should approach this problem. We cannot expect-more less demand-that the United States always come out ahead. Similarly, it would be unwise to lower ourselves to the lowest common denominator. Making our system similarly unfair to litigants who use systems other than the United States or making the system unfair to patent holders will not even the score. Imitating China will not make the U.S. more American.

It will take a worldwide effort to overcome China's overreach on SEPs. International institutions like the World Trade Organization should seriously consider whether nations are meeting their obligations under the TRIPS Agreement. We should be able to turn to international forums for fair adjudication of disputes, including the use of anti-suit injunctions by Chinese courts. By working cooperatively through diplomacy and dialogue, nations disadvantaged by China's unfair decisions can demand a system that provides transparency and due process at a global level.

But America also has an obligation to lead the way. We should invest in making our patent courts faster, get judges on the bench who understand patent law, and attract litigation by having a better process. Other countries will not follow the U.S. blindly. We need to prove we have a better process to incentivize litigation here at home.
I thank my colleague across the aisle, Chairman Issa, for holding this hearing and working with me on a bipartisan basis over the past two years, I thank Ranking Member Nadler for his support and friendship, and I thank the witnesses for being here today.