U.S. Policy and the Threat to American Innovation

For this episode of IPWatchdog Unleashed, Gene Quinn speaks with Brad Watts, who is Vice President for Patents and Innovation Policy at the Global Innovation Policy Center at the U.S. Chamber of Commerce. Recently Brad has written a number of articles posted to the GIPC blog which focus on Biden Administration proposals regarding march-in rights, federal funding for innovation, and biopharma patent and innovation policy. This conversation addresses those issues generally, but also specifically discuss the recently release FDA and USPTO report relating to inaccurate, misleading data that is often misused as a part of IP policy debates on Capitol Hill, the need to properly incentivize innovation, U.S. innovation leadership, and how a strong patent system encourages risk-taking and greater innovation. 

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Transcript

Gene Quinn (00:03.342)
Hi Brad, thanks for being here with us today for this conversation. I see you've been very busy lately. I've been reading what you've been putting out on the chamber. I guess it's the chamber blog on intellectual property and it's the GIPC, right?

Brad Watts (00:21.722)
Yeah, well first, thanks for having me, Gene. You know, I say this privately, but want to say it publicly too. Really appreciate your friendship and all your leadership and just, you know, the platform IP Watchdog provides to so many folks to share their views. I really am enjoying the new newsletter, by the way, so thank you. That's always fun to get in my inbox every morning. But yes, I've been writing quite a bit. So the chamber and the GIPC, we...

Gene Quinn (00:44.461)
Great, great, thanks.

Brad Watts (00:51.642)
have a dedicated landing page where we can publish, you know, hot takes on the latest news and intellectual property that are important, not only to our members, but we think the general public. And so I've been doing a lot of writing recently around the administration's march and rights proposal, which I know you're intimately familiar with, but also been writing a lot about some of the narratives, the fake narratives around life science patents. And so it's nice now after

having spent eight years on the Hill to be on the outside and to share some more of my own perspectives and the perspectives of some of the great members I get to work with.

Gene Quinn (01:34.35)
Yeah, it's, there's a lot going on right now. And, yeah. And, you know, I was just talking to somebody this morning actually, and they asked me what I thought was really happening and why. and maybe before we get into that conversation, we should just, for those people who aren't intimately involved with or following what's been going on lately.

Brad Watts (01:36.314)
To say the least.

Gene Quinn (02:02.318)
Can you give us an idea of what's happening with respect to marching rights and, and even more basic, what are marching rights?

Brad Watts (02:11.386)
Yeah, absolutely. You know, so as you know, Gene, and as many of the listeners probably know, but for those who don't, Marchant rights are this obscure provision of federal law that essentially allows the government to come in and in theory, confiscate the private property of a business who has commercialized a product that was partially federally funded. And now I say obscure for a reason, because for the last 40 years, since the laws enactment,

This provision has never been utilized. More importantly, as our good friend Joe Allen has noted many times, the law was never really intended to be utilized against a company unless they were failing to commercialize a product. Meaning, you wouldn't want the federal government giving, say, $50 ,000 to a lab. That being used to do base foundational research that ultimately leads to this great product and then a company just sitting on it, right? The taxpayer doesn't benefit in that scenario.

But what the law was never meant to do, and again, as Joe, our good friend, has made clear so many times, it was never meant to be used as a mechanism for price control. Now, unfortunately, what has happened is last December, the Biden administration put out this draft interagency guidance that indicated that for the first time, they would consider utilizing margin rights simply because they didn't like the price of a product and the price a company charges. That is...

revolutionary. Again, in 40 years since the laws enactment, that has never been the interpretation. In fact, as recently as early 2023, the Biden administration itself reaffirmed that price was not a factor in the utilization of margin rights. And so now we have this totally unprecedented threat that again, for the first time, the government could come in simply because they don't like the price of a product that a business is charging and take that intellectual property from the business. Now,

Some of your listeners may be going, well, that makes sense. If the federal government funded it, then why can't we take it back and the public utilize it? What that argument fails to recognize and appreciate is that when the federal government funds this type of research, number one, they're usually only funding basic research, the type of stuff the private sector can't really do. But number two, the scale of what they're funding is so minuscule compared.

Brad Watts (04:34.266)
to the private sector. And a great example is Xtandi, which has unfortunately become the poster child for Martian rights. I believe Xtandi, when it was originally being developed, you know, base foundational research in UCLA got, I think, a $500 ,000 grant from the federal government, but you can correct me if I'm wrong. But then Astellas came in and literally put in billions of dollars to finally make that product a viable medical product that could be used to treat people.

In essence, you had a private company putting in like 99 % more funding than the federal government to bring this product to market. So when people say that, they fail to recognize the federal government may do a small amount of seed funding, but most of the investment to get these products into your home, to get the benefits from them, they come from the private sector, from free enterprise.

Gene Quinn (05:28.295)
Yeah, I was glad you brought that up because I wanted to go back to that because where you started was you said, you know, the federally, if the federal funding is $50 ,000, for example, that's not an exaggeration, right? I mean, we're talking in many cases about very modest amounts of federal funding and certainly nowhere near enough to commercialize these innovations.

Brad Watts (05:56.474)
Exactly right. I mean, a lot of these federal funds go to, you know, a two or three researcher lab in, say, a university in any community in this country where they do, again, some of that base foundational research. But then what these labs have to do is, as you know well, as our friend Joe knows well, as our friends at the National Venture Capital Association have talked about, those labs and those researchers then have to go out and get funding from venture capitalists, from angel share investors, from financial institutions.

And that funding is 10, 20, 30, 40 sometimes times what the federal funding is. And again, Xtandi is a great example. I did the back of the hand math before this podcast. I think Xtandi was developed like 98 .75 % with private funds, right? Minuscule investment from the feds. And that's actually the benefit of the Bidle Act and this public private framework.

that has worked so well is that the government does seed funding, but then we let free enterprise not only fund the commercialization, but candidly take the risks because that's another thing that's ignored is many of these private actors in tech or manufacturing or green energy, they come in and spend a lot of money and that product ultimately never ends up on the shelf or being something you can buy or use. Why? Because that's the risk of research and development and commercialization. And so not only are we ignoring the fact

private sector invest significantly more. Not only are we ignoring the fact that they're taking a huge risk, we're also essentially, if this guidance were to be finalized, saying to them, and after all of that, and after all that money you've spent, all those start and stops, those failures, if we don't like the price of your product, we're just gonna take it from you. As you can imagine, that's gonna make a lot of people very, very skeptical to wanna invest their hard -earned dollars into a potentially revolutionary or innovative product. And it's not just medicines.

Gene Quinn (07:50.276)
You just, yeah, you just could not possibly afford to do that. if the government could walk in, if you spend 99 % of the R and D that goes into commercializing a product, whatever the product may be, and the government can walk in and because they provided 1 % or less of the funding strip your rights away from you. I mean, that's just the untenable. Nobody would ever do that. And you know, it also addresses the myth that

many in the administration and those who have been opponents of Biden all along just continue to push is that the federal government pays for this innovation. No, the federal government plays an incredibly important role here because the funding, the seed funding, as you call it, that they do provide is directed to things that are so speculative, a for -profit entity could not possibly undertake that research.

And it's intended to be important research. And if it plans pans out, then the private sector needs to take that and walk the product through an enormous amount of additional research and development to commercialize it. And, it's just so easy to fit on the back of a bumper sticker, these slogans, you know, we paid for it. It's ours. No, you didn't. And no, it's not.

Brad Watts (09:18.97)
Well, and the reality too that always frustrates me is when we talk about intellectual property generally, not just in the context of march -in, remember once a product is brought to market and has patent protection, it is for a limited time. And then the entire world can utilize that free of charge to the benefit of humanity, to every other American. Right? That is the beauty of our system. You know, our friend, Brian O'Shaughnessy has, I've heard him say this at several conferences, including, I think, if he watched all live.

But you know, the beauty of the patent system, right, is it broke the old gilded system of the medieval age, right, where knowledge was locked up. And, you know, the Stonemasons Guild, for example, could set whatever price they wanted because they were the only people with the knowledge, with the skills, with the information. The beauty of our intellectual property system, right, is we broke that gilded system and we brought this knowledge into the public domain. But the trade -off is, at least for a limited time,

the people that are taking all that risk have to be able to recoup some investment. That is the beautiful trade off of our system. And the fact that that is so often ignored, I think is a really critical flaw in this debate. And it's scary because, and I remember this well from all the debates around patent eligibility when I worked for Senator Tillis, if you have companies start shifting to other forms of intellectual property protection, like trade secrets, for example.

that knowledge doesn't come into the public domain. So we should actually be rewarding companies for bringing their knowledge into the public domain. And that reward is to protect their intellectual property rights for that limited time period.

Gene Quinn (10:57.6)
Yeah, we're doing it exactly backwards. And it strikes me that we need to have some political leaders with some real backbone to explain this to people. Because I understand, just like probably every American right now, just the pressures that inflation have caused in all of our lives. I heard the other day that nine out of 10 people say inflation is affecting them. And what that means is that one out of 10 are lying.

Brad Watts (11:06.458)
Okay.

Gene Quinn (11:27.134)
You know, because inflation is affected 10 out of 10 of us, all of us. Now, many of us here that are listening to this podcast, you and I, we're lucky, we're fortunate enough. We have good careers, we have good jobs. We can still put food on the table. We're not in jeopardy, but there are a lot of Americans that are in jeopardy in this economy. But that doesn't mean that inflation hasn't affected everybody. It touches everything. Go to the grocery store and it's alarming and how much things cost.

And drugs are no different drugs always cost more than what we want them to cost, except for when you take a drug that is no longer on patent, you know, and when I tell people that when you feel the worst and you go to the pharmacy is going to usually be when your bill is the cheapest, right? Because those drugs, those frontline antibiotics and other treatments.

are no longer on patent and you can get, you know, a two week course for a few dollars, literally a few dollars. It's cheaper not to use your insurance so you don't have to make the copay. and that's the benefit here. And what I think we need is we need some real leaders with some backbone to stand up and say, look, we understand. Unfortunately, not everybody is going to get the latest in greatest and the newest, but the system is set up. So society benefits as a whole.

And we don't have any people that, because that, I guess, you know, on cable news in the 24 seven news cycle, that kind of truth just doesn't sell. It does. It's true as it is as beneficial as the patent system is to the benefit of society. It doesn't fit on a bumper sticker. And, you know, in the DC area and people outside the DC area are always shocked to hear this, but there were billboards patents kill.

You know, at bus stops, the Metro and literally huge billboards on the side of the road, patents kill. And it's just a narrative that is, it's wrong and it's, it's unhelpful and it's harmful because you can't possibly, the inventions we're talking about wanting more and more are just so expensive. You can't expect a private company to pay 99 % plus of the R and D to get it across the finish line.

Gene Quinn (13:51.13)
And that in many cases, that will be many hundreds of millions of dollars, sometimes even billions of dollars, and then have it potentially evaporate because, because it's too expensive today. so short -sighted.

Brad Watts (14:05.562)
You know, absolutely. And there are a couple of things I'll point out too, a couple of things you said that jogged, you know, my mind and key points I want to make in response to that, because I think you're hitting the nail on the head on a lot of key things. But, you know, first and most importantly, I mean, I remember this great quote from our mutual friend Bob Armitage when I worked on the Hill, you know, that the price of a pharmaceutical that has never developed is zero, right?

that we want companies to bring new products to market because that's ultimately gonna save lives. And again, because of the trade -off of our system, when things go off patent, the prices of those products go down significantly, significantly. And you have not only the base product itself, but new innovations, right? Different forms of dosages that improve compliance, different delivery mechanisms. But second, I'd point out too that

you know, the key thing that's lost in this margin rights debate is it's not really going to do anything to pharmaceutical companies. I believe it was Chris Israel's organization that he's executive director of, and I'm blanking on the name, his inventor and investor group. But I think they put out, it was either them or a friend, Joe Allen, put out a, you know, a white paper that showed, you know, between like 2008 and 2020.

Only 8 % of the pharmaceutical products that made it through FDA approval received any level of federal funding. And again, that's very small. But this is really going to impact though critical and emerging technologies. Think semiconductors or telecom. Think manufacturing while we're trying to reshore manufacturing. But also think about, again, universities across the country that are doing cutting -edge research on everything from like textiles to rubber manufacturing.

If they get federal grants, they could be subject to this. And the reality is right now, everyone is making this a quote unquote life science or pharma issue because they want to beat up on that industry. But do we really want to set a precedent that where at the moment an industry becomes politically unpopular, the federal government is going to come in and confiscate their property? You know, to me, that is not a rule of law system. And to me,

Brad Watts (16:15.834)
you know, the bedrock of our free enterprise system, which is something we're vigorously committed to defending at the chamber, is respect for property rights and the rule of law. To your point, if you don't have that, what company is going to make this type of investment? And then to your final point about leaders, I wish we had more, but I am thankful for the ones we do have who are being vocal. People like my former boss, Tom Tillis, people like Senator Chris Coons, you know, in the house.

You have people like Congressman Ockensloss, for example, from Massachusetts and countless others that I can't name off the top of my head. But the great thing about this is that you have members, Democrats and Republicans, liberals and conservatives, who are standing up against this policy because they recognize this is not good for American innovation. And what's good for American innovation is good for Americans.

Gene Quinn (17:10.232)
Yeah, there's a lot there and I couldn't agree with you more. I mean, one of the other things to point out too is that simply because a patented drug goes off patent does not guarantee that there's going to be a generic. And most of the time, over 50%, I think it's close to 70 % of the time or more, there is no generic. And the reason is because the marketplace isn't big enough.

So not shockingly, you have these generic companies focusing on the drugs that make the most money, but this policy applies across the board to every drug, every pharmaceutical, every biotech company, and then others as you point out. It applies to everybody. We just did recently our patent portfolio management program, and we had a couple dozen.

high ranking in house council that were there and I asked the simple question and and for context only a couple of them were in the life sciences area everybody else almost all of them were outside the life sciences area and I asked them how many of you are concerned about the terminal disclaimer proposal for example and a hundred percent of people are worried about it even though many of them are in industries where it's just not

An issue, it doesn't come up or it doesn't come up often. It comes up in the life sciences area all the time, but people I think are starting to clue in to the fact that the, the changes that they're making to affect what they say will affect drug prices, which won't do anything about drug prices. But what they're doing on the pharmaceutical front is going to have major repercussions for everybody through the entire industry. They want to make it in the.

terminal disclaimer proposal. They came out and said, we want to make it cheaper and easier to challenge patents. they want to, they want to charge you through the teeth for a continuation. They want to limit the number of claims you can, can get and, prosecution latches between the courts and the agency. Now, there's a presumption that if the prosecution has gone on longer than six years, it's presumed latches. Well, newsflash.

Gene Quinn (19:32.661)
Over half of these things go on longer than six years. And it's not because the applicant is dragging their feet. It's because it takes time. And the other reality is examiners don't like to give broad protection initially or early on. They become more comfortable with the technology over time, more comfortable with the prior art. And then you make little nuanced claim amendments and you wind up getting something much broader.

Brad Watts (19:32.666)
you

Gene Quinn (19:56.885)
later than you ever did earlier, but it doesn't mean that you weren't entitled to it earlier. You were entitled to it earlier. You just couldn't get it. You know, so all of these things are going to really impact, the system. And there's so much happening right now between, you know, marching rights and, and terminal disclaimers and prosecution latches, like I was saying, and, you know, the office has come out with guidance on

on obviousness, they come out with guidance on AI. I mean, it has been, I remember when I started doing IP watch, I would sit around sometimes and wonder what could I possibly write about? Not because there was so much, it was because there was so little. Now I sit around wondering what am I gonna write about? What are we gonna talk about? Because you have to pick and choose. You know, it's so much, it almost feels intentional, like we're being overwhelmed.

Brad Watts (20:37.082)
You

Brad Watts (20:47.706)
You know, there is a lot going on, that is true. You know, but we're uniquely positioned at GIPC. We represent all of America's innovative industries, right? Almost every sector. And our members span everything from high tech to chips makers to life sciences to software developers. And you know,

multiple filings we've made over the last two years, and I know you've seen them and have been generous enough to cover them, we've made the same point consistently, which is it does not seem to be a matter of good public policy to make changes to the patent system writ large based on an unfavorable and candidly unfair and inaccurate view of one industry, right? Because as you note, when you change,

because we have a unitary patent system, when you change examination practices or you change rules or standards, it applies to every technology and art sector, right? And one of the points we've made consistently in all of our filings is that it just doesn't seem like a good idea to make these broad economy -wide changes just because you don't like one specific industry's practices.

And I think there's a real concern with that, right? Because as you know, I mean, you're a patent practitioner, different industries, you know, operate differently. They have different requirements in their art areas. You know, as you know, the examination process maybe has rigorous or less rigorous in some art sectors as in others. And so when you take the sledgehammer approach, I think the risk of a bad public policy outcome is much higher.

Particularly because, and this goes to something you referenced earlier, my recent blog posts, especially because recent reports from the SPTO itself debunks many of these narratives around, you know, so -called quote unquote bad behaviors in the life science industry. So, you know, if our expert agency itself has done its due diligence and found that many of these rumors are just that, rumors,

Brad Watts (23:05.466)
I think that should call into question the need to make some of these drastic changes.

Gene Quinn (23:10.965)
Yeah, were you surprised at all by what the patent office, in I guess conjunction with the FDA, came out with, or was that what you expected? And let me tell you where I'm going with that is, I think if you actually go through and read it, like you come to the conclusion that you just offered, which is that a lot of this iMac data, maybe most of it, if not almost all of it, is untrustworthy. If not...

completely made up or, or, or in my mind, I think it has to be fraudulent, right? You can't say that a drug has a hundred patents on it and count all of the abandoned applications, you know, as, as a, as a issued patent, cause it's that's, that's false. It's just not. So some of these drugs that they say have, have, you know, close to a hundred patents really have like four or five patents covering them. And so it's so false that it is, it's, it's, it's hard to believe that it could be made accidentally.

But I didn't see where the FDA and the USPTO came right out and said that this data is, is false. they went like drug by drug and explain what is true, which I think is useful, very useful to get that information out there, but it would have been nice to see a conclusion that, you know, Hey, beware of this data because it's, it's historically unreliable. I didn't see that.

Brad Watts (24:35.674)
So your summation, I think, is 100 % accurate. There was not a straight yes or no, this data is reliable or not. I'm also kind of an old fashioned believer if it looks like a duck, walks like a duck, quacks like a duck, it's a duck. And as you noted, the agency went through a number of product examples and contrasted what was claimed with what was reality. And in many of those cases, lots of what was claimed was not in fact reality. So, you know, I encourage your viewers and listeners to draw their own conclusions about that. As I noted in my blog, there were plenty of times that certain data, you know, claimed that a product had decades worth of monopolies and, you know, decades, literally decades. But for one of those products, PTO found that it only had 16 years of market exclusivity. You know, similarly,

The PTO found that generics routinely come to market while patents are still in force before the expiration of the base product's patents. So again, you're right, the PTO did not make a straight up yes or no, the status reliable. That said, I would encourage people to read the report and go through product by product and do a cross comparison and ask yourself, how is the claim so vastly different from what America's expert agencies found?

Gene Quinn (26:28.045)
Yeah, you know, and the funny thing about some of this iMac data, we probably need to put it in air quotes, data, because it's not really data, in my opinion, if it is made up. But they have made claims about certain pharmaceuticals that no generic will be available for decades, when in fact, at the time that they're making that statement, a generic has already existed on the market for years.

You know, and that's why it's so hard for me to believe that this is just accidental. It seems like it's overwhelming because trying to overwhelm us and trying to get, because you almost have to say, no, no, no, they just, what they're saying, everything is wrong. And people aren't predisposed to believe that everything somebody says is wrong. and then it makes, I think the pro pat inside look like they're just complainers and whiners when in fact they are, they do need to set the record.

straight about these, these things. It's, it's so frustrating, to, to see, and, and the claim that some of these claims about the, this drug will get 40 or 50 years worth of patent protection. I mean, that's just false. That's just not how it works. You know, these are, these are, continuations. These are continuations in part. And, and you're only going to get from the date of the original application and.

and, and the reality is, yes, the law allows pharmaceuticals to get an additional five years a term to compensate for the FDA process, but the FDA process takes eight, 10, 12 years. The additional five years is hardly compensatory and you usually wind up with protection on the order of 12 to 16 years maximum, absolute maximum, sometimes less. And, you know,

We want these drugs. We don't want, I mean, I suppose it's perfectly fine for these companies to be engaged in the lifestyle drugs. I mean, those are, it's an important part of life, you know, but I would prefer that they keep that to a minimum and focus on the next antibiotic, the cure for cancer, the next thing that is going to be some great advance that's going to benefit society and take on major disease. But

Gene Quinn (28:51.789)
I don't know how you can do that in this environment. You know, we haven't even talked about trips, right? Much of the rest of the world, if you come up with something that truly is life -saving, they're just going to march in and take it. You know, and now the U S is talking about doing that too. This is, these are, these are scary times. If what we want is we want a thriving pharmaceutical industry, which I think we do because it leads to great benefits down the road for us, for our children, for our grandchildren.

Brad Watts (28:57.978)
Hahaha

Gene Quinn (29:21.645)
then we need to be making different choices.

Brad Watts (29:24.73)
Yeah, I mean, so a couple of things there. First, you know, there's this famous quote in DC, and I think it's actually a quote from the president, Mr. Biden, but don't hold me to that. But, you know, he once talked about how you never should presume someone's motives. You just look at their actions. And so I don't want to presume for the folks who publish this data what their motives were, right? I always try to assume people operating good things.

With that said, we now have this report from PTO. I think we can conclusively say that at least in part, you know, again, the PTO didn't do a whole full analysis. So, but at least in part, that data is not accurate. It's not accurate. It's not reliable. And regardless of the intention, that is now just, I think, a fact from the agency and policymakers, regulators need to take it as that. These are now the facts.

and let's operate with the facts. So we have the facts. To your point now, knowing these facts, knowing that many of the claims regarding life science patenting practices are not accurate, we need to put in place policies that incentivize innovation, that incentivize research, that to your point, incentivize not only, you know, the next generation of lifesaving treatments and cures, but I would say even to those lifestyles.

medications because again, it may seem small to us, right? But a lifestyle medication for one person might drastically improve their quality of life, make them more productive, more healthy, more active in their community, right? Just because the society writ large may not see the benefit of that. That doesn't mean for that person who's taking it. It's not a life changing or life altering medication.

Gene Quinn (31:13.773)
Right. And some of those drugs came about because they were trying to find different solutions to different, much broader problems. I mean, I want the people to look under as many rocks as you can find. I mean, we live in a time when it's very exciting. I mean, this is not our grandparents universe. And certainly, you know, you look at the way people lived 100, 200, 300 years ago, we are, we're so lucky. We're just so lucky to have the innovation that we have now.

Brad Watts (31:20.026)
Exactly.

Gene Quinn (31:43.629)
And the system has always been set up so that this generation pays it forward. And I fear that this generation with these choices, these policy choices and decisions will not only not be paying it forward, but will dismantle some of the great successes we've had.

Brad Watts (32:03.258)
Well, and I mean, I think this all boils down to, you know, to the basic premise of what the chamber does, what GIPC does, is to let free enterprise do what it does best and develop that next big thing. Right? And that involves a lot of risk, a lot of potential for failure. But to your point, these innovations can change the world. And it's not just medical innovation, right? I mean, it's things like, I mean, I think about my grandmother who

you know, up until I was probably seven or eight, my dad's mother, you know, she didn't have a dryer, right? Because it was too expensive. I mean, you know, she didn't have a lot of money. This was Alabama, rural South. She had to air dry her clothes. When she finally got a dryer, do you know how much time that added back to her day that she could use for more productive purposes for her work, for her personal hobbies, for her leisure, right? We often think about innovation in terms like these

big sexy things, right? A phone or a computer or this cancer -curing drug, and those are great too. But there's all sorts of innovations that make our daily lives easier, that free up our time for family, for friends, for faith, for community, to be more productive, to generate more revenue, to earn more money that we can spend on the things we like. Those are just as important, right? And those are the things that are at risk too, if we don't have the right policies in place. You know, I'm 34, so I'm a little young, but...

I assume the productivity level of American workers from the 1980s till now is probably much higher. Why? Because think about how much technology has just enabled us to have more time to be productive and more time for ourselves, right? How much easier our lives are. You know, those innovations are at risk too, right? And I know this well, working for Senator Tillis, there are so many universities in North

Carolina that are doing cutting edge research on things that we would never think about, but that will make our lives better. Like for example, at North Carolina State University, you know, their textile program, the amount of research they're doing on like flame retardant materials. It doesn't sound like a big sexy thing, but you know, when we're talking about someone not getting burned, that's a big deal. So I just, you know, one of the things I try to emphasize in my

Brad Watts (34:25.786)
and my speeches and my interactions with members of Congress, the public, is those things are just as important too. And if we upend the innovation environment because you want to utilize false narratives about a politically unpopular industry, you jeopardize all that as well.

Gene Quinn (34:33.325)
you

Gene Quinn (34:42.061)
Well, you do and we know that this is the case right we saw this happen with the trips waiver for the kovat vaccines and we saw it play out right right before our eyes and Apropos for what we're talking about here now There was this feeling among many that well the government paid for these vaccines. They should be free Well, no, the government actually did not pay for the research and development on those vaccines. If you look at

the patent history of those the first some of the earliest patents were to Johnson and Johnson and they were issued in 2002 2003. So they were filed a full 20 years or more before this pandemic even happened. So did the government provide critical funding at that moment in time when it looked very bleak? Yes, they did. Did the government

clear red tape. Yes, the government was very helpful in getting these things across the finish line into the market. But that does not mean that the government funded these things that research was going on for a full generation. And then on top of that, once this whole debate happened and there was a decision made that they were going to allow to some extent countries to ignore these COVID related patents.

the director, I think it was the director general in the United nations or somebody in a high ranking position in the United nations that this is wonderful. This is great. It's going to work so well for COVID. We need to start to expand this program to ignore intellectual property rights. And he specifically cited green and clean technologies. It's like, look, if you want to save the world, amen. I'm an environmentalist. I love the outdoors. I would love.

to have everything powered by the sun. We are not there yet. We have to get there. And the way to get there is to allow innovators to have rights. And like Lincoln, what Lincoln said, the fire of creative genius. And the way I always explain this is let the patent system tickle the greed gene. And we're going to get an awful lot out of the private sector if at the end of the day, they know if they win, if they get something,

Gene Quinn (37:02.445)
valuable, they're going to get a period of time when it is theirs. And we should be allowing more of that, not less.

Brad Watts (37:09.914)
Well, I mean, the thing is free enterprise is not a dirty word, right? Free enterprise is a good thing. And, you know, one thing I want to make clear, and I make this clear in my advocacy too, and you said it spot on, it's not that there isn't a role for government. You know, part of what made Bayh -Dole so successful, right, that framework is it encouraged public -private partnership, each party doing what they do best.

the government providing that small amount of seed funding to do this really abstract pie in the sky basic research to see what's feasible. And the private sector coming in and using their vast resources and networks to try to commercialize that. It's a win -win for everyone when those partnerships work. And the reality is before this guidance was issued in December, this framework worked well. I mean, the economist, I forget what the famous quote is from the economist, but,

I think called the vital like the single most inspired piece of legislation in the 20th century in the United States. I mean, I think it's evident that that framework worked well, each party again doing what they do best. You know, to your point about trips, you're exactly right. I mean, private free enterprise, private sector businesses are going to lead the way. And my boss, Tom Quagman, says this all the time, not only on green energy, but all these other transformational things we want.

societally, right? Because again, free enterprise can leverage those resources and those market dynamics to effectively deliver products to consumers and in a cost effective way.

Gene Quinn (38:49.485)
You know, and this is not a 20th or 21st century issue, right? The whole patent system in America was designed to allow people to do what they do best. And if you look at the early inventors, 80 % or more of them did not even have a high school education, as you would imagine from an largely agriculture society. But they were inventing and they were licensing and selling their patent rights to entities that had the

channels of distribution that had the manufacturing capability. And so this has been by design for over 225 years. And I'm sure you know this story because you're, you've spent a lot of time in, in DC. A lot of people around the country don't know who was the first licensee in America. And the first licensee in America was president George Washington. You know, back then the president had to actually sign the patent. So we have this historic relic where you have,

or historic fact really is what it is, is that the earliest patents, most of them were signed by two presidents, George Washington and then Thomas Jefferson wasn't one of the examiners. James Madison for a while was, I think Monroe was as well. And so you would see these patents were signed by two US presidents, so the founding fathers.

Brad Watts (40:11.61)
you

Gene Quinn (40:14.893)
The third patent Washington ever had cross his desk as president dealt with improvements to a gristmill and he owned the largest gristmill in the colonies and the largest gristmill in the country. And he summoned the inventor and said, I want to pay you to install this and train my people how to use it. Now, I, the way I always tell people is if the man we were willing to make king was willing to license and not steal, then why isn't licensing a model that works for everybody?

Brad Watts (40:46.362)
Well, I mean, it should be. And, you know, one of the things I really liked about what you just said is talking about how ingenuity is kind of in the lifeblood of our country, right? And, you know, to me, it all boils back to one big idea, whether you're a big business, a small business, an independent inventor, a researcher in a lab. We want to encourage you to take the risk of failing. You know, what I mean by that is to

tinker with those ideas, chart that uncharted course, right? Knowing that nine times out of 10, you may fail, but it's that one time out of 10, you're successful. And then you have a strong, protectable intellectual property right that you can license and commercialize. We want people to take those risks and they're only going to take them if they have robust, protectable intellectual property rights. You know, that is the beauty of American ingenuity, right? You may have that independent inventor in a garage

working nights and weekends for 20 years to refine that product. And they finally get it right and they can bring it to market because they have protectable intellectual property rights. And going back to your point about TRIPS, you know, a shout out to my colleague, Kelly Anderson at GIPC, who really took the bull by the horns on this when it was first announced and helped lead the industry opposition to the TRIPS waiver. But you're so right, Gene, like when the US government is sending signals to

foreign nations, particularly nations that maybe don't have as robust of intellectual property protections as we do, that it's okay to confiscate property from private businesses to force a compulsory license. You know, that's very damaging. That's very damaging. And as you noted, it's not going to stop with pharmaceuticals. You know, and the chamber has been on record with our concern about that, that other industries are going to get swept up into this. And again, if we know, and we do know, that private sector free enterprise is going to have to lead the way.

on all these critical technologies of the future, sending that type of signal to them is not a way to incentivize them to do.

Gene Quinn (42:53.229)
No, it's exactly backwards. We know what incentives can do. Our tax code is just ridiculously long, right? But it has so many things in it that, okay, well, we want people to own homes so you can write off the interest on your home mortgage, right? We know that works. We know when a lot of these tax incentives,

produce the outcome that we want. And we know for sure throughout history, we have had great patent laws in the U S that have led to the precise things we want. And there's a couple of pivot moments. By Dole is one of them. I mean, whether people like this or don't like it, it has just worked. You had a situation where zero, zero, none, zero, literally none of the drugs that were created

through federally funded research at universities ever made the market prior to Bidol being passed. And Bidol gets passed and now we're up to 153, 155, whatever the number is of drugs. And a lot of those drugs relate to treatments for cancer, for example, treatments for heart disease. And it was just such a Byzantine process to license things.

from the federal government that nobody could do it. Nobody did it. We know what this world looks like because we've seen it. We know what this world also looks like before we had a federal circuit and you had all these different courts and the joke was not the Supreme court had never seen a patent that it liked. and the regional circuits had never seen a patent that they liked because none of them were valid. And at least some of these things have to be valid. Now we can talk about

at a separate conversation, whether or not we've taken steps backwards. I think we have. I don't think this federal circuit sees their job as creating a uniform patent policy. And I think we've taken substantial steps back on validity and that sort of thing. But we know in the world of the seventies, prior to the CAFC, there was very little patent activity. There was not a lot of research and development.

Gene Quinn (45:12.242)
The patent boom was specifically to address our concern with Japan taking over technological leadership in the world because they were well on their way to doing it. I think they probably had already done it, you know, we, but we weren't so far behind that we couldn't, we couldn't take it back. And we did through good, smart patent policy and, and, created the federal circuit. Those things helped America win the technology race against the Japanese in the eighties.

Brad Watts (45:42.266)
And you know the reality is, and this may be a good high note to end on, but

You know, my good friend Suzanne Harrison, who used to be the chair of PPAC, talked about this too, right? That, you know, the court of appeals for the federal circuit, all these different policies came out of this basically shock and awe moment in the 80s where the US said, we're going to have to do something if we want to be the world's leader, if we want to continue to be, right? That we were kind of at an existential point where policymakers, the public said, no, we have to have a national consensus about innovation.

and drive ourselves to the new heights of the coming century.

I say that to say, we have a history and a track record of being able to do this, right? Promoting innovation, right? Incentivizing those life changing and life altering technologies from the foam all the way to the newest cure and treatment. We did it before and we can do it again. Part of why at the chamber we've been so focused on the narrative around intellectual property rights and you're well aware of that because you were so generous to sign our IP principles document.

But part of why we've been so focused on that is because before we can do any of that, we have to have the right frame of mind. We have to have the right paradigm about how we talk about intellectual property rights as the foundation, the cornerstone for that kind of national innovation vision. And so, you know, my view is yes, times are tough. Yes, these policies are good. But maybe I'm overly optimistic and maybe I shouldn't be after the many years I've spent in DC, but

Brad Watts (47:27.578)
I'm kind of a firm believer that we've had that aha moment before. We've realized where we are and where we could be. And I'm a firm believer we can have that aha moment again, and that the 21st century can still be an American century if we get our policies and our procedures right. Now, the flip side of that is if we get it wrong, you know, if some of these things like the implementation of this Marching Rights Guidance or an expansion of the trip waiver happen,

We may forfeit our global innovation leadership. And you know, one point we've made consistently at the chamber is that that's not an outcome anyone should want where we forfeit the ability to be the world's global leader. That's not good for our economy. That's obviously not good for our national security. It's not good for free enterprise, but most importantly, it's not good for consumers because when we lead, number one, our citizens get the products first. And number two,

we get to set the global standards for their use. And our standards are based on the rule of law, democracy, individual liberty, and human rights. And you know, our good friend Andre, Andre, Andre Ayanku, I almost said Andrew Ayanku, Andre Ayanku has made this point too, right? If other countries set those standards, they may not set them with the same democratic rule of law norms that we do.

Gene Quinn (48:50.958)
Well, and certainly there's so many of these innovations moving forward. Maybe this will be what gets us out of these doldrums relate to national securities if not directly indirectly through economic security, but AI for example Cyber security is directly those are two areas of technology that getting it right has enormous consequences and we want to make sure that

American companies, American innovators are leading that world rather than others. And as you know, the investment in AI companies in China outpaces the investment in AI companies in the United States. And that's not a good world. That's not a good trend. We need to turn this around and maybe it will be the economic and national security interests of the US.

vis -a -vis some of our largest, you know, not antagonistic counterparts. I don't think we're, I'm not talking about going to war, but we are in some ways on a need to be on war footing from a business perspective so that America and American companies define the future, not China and Chinese companies, for example.

Maybe that will be what gets us out of this. I've been a little bit surprised that that hasn't resonated more already. but do you think that's going to be what ultimately turns things around or is there some other moment that you're looking at?

Brad Watts (50:29.946)
I don't know. I do think we're coming up on a fulcrum point, right? You know, I think if we don't have a robust defense of free enterprise and we don't give our companies, our businesses of all sizes, big, small, medium, that ability to do what they do best, we're going to start seeing the lost advantages as a country, right? Economically, socially, new products, new ideas.

I hope we don't get to that point where we see that negative outcome because if you're at that point, you're already behind. But I think if that were to happen, if we start falling behind on these groundbreaking innovations, that would quickly cause a shift. But I hope we don't have to wait to that point for that to happen. But I am encouraged, I will say, because more and more lawmakers on the Hill since when I started in 2015 and before I left are talking now about intellectual property.

protecting American businesses and innovation. You know, when I started on the Hill in 2015, or even when Senator Tillis became IP subcommittee chairman in 2020, you had a handful of members and staffers really talking about intellectual property, a handful. Lots of people are talking about it now. And that alone is an encouraging sign for me that more lawmakers, even if you don't agree with them on 100 % of how they talk about IP,

are focused on IP and focused on the need to protect American companies, to ensure American companies can innovate, and it's bipartisan. I count that as a win. And I think the wins are slowly shifting back to the pro -innovation narrative. To your point, these billboards, they quote unquote, patents kill. I think at least for policymakers, the wins are shifting away from

that narrative being predominant. And there is a recognition that America's most innovative industries are really doing great things. And we need to make sure government, you know, again, to your point, there is a small role for them to play, like under the BiDole framework. But by and large, if we can keep the government from mucking things up with bad policies, I think we all societally benefit from that.

Gene Quinn (52:46.473)
No, I agree. And that's probably a good place to end on a positive note because I do believe things are going to eventually turn around. I'm a little surprised they haven't turned around already, but there are some early signs, early reasons to be optimistic. So we have that to hope for.

Brad Watts (53:05.146)
Well, and I would say to, I mean, maybe before ending, I'd say to just look at the number of lawmakers who've been elected in recent years, who are honed in on intellectual property as a key part of their legacy and legislative agenda. You have Ms. Ross from North Carolina, you know, who is a freshman, became a leader on intellectual property. You have Mr. Kiley from California, right? I mean, again, you correct me if I'm wrong. I mean, you've been in the DC world longer than I have, but

When I started on the Hill, it was rare for a lawmaker to come in and want to take up something as wonky and weighty and as difficult as intellectual property. And for me, seeing these members come in and saying from day one, no, this is a priority for me, that is an encouraging sign.

Gene Quinn (53:51.622)
Yeah, I would agree with that. We always joke that nobody votes based on patent policy. And that's the unfortunate reality. I know people that vote in ways where they have a lot of reason to know that their vote is going to lead to patent policy that they disagree with. And they still cast a vote. Patents are such a small part of the reason why people vote, if at all.

so it has historically not been something that politicians focus on. there's always been a few, you know, and for many years now it's been senators, Tillis and Coons that have been leading the charge. It has been interesting to see some of the newer folks who are entering Congress want this, you know, aggressively want this to be a part of their portfolio and a part of whatever their legacy winds up being, which I do think is a, is a good thing. It does speak to.

the broader importance of innovation generally. And people are starting to recognize the importance of the patent system and leading that about. I mean, hey, you know, this is not something that's new. Lincoln figured this out in the 1850s about how important patents were. And maybe not shockingly, right? So he's the only president to actually have been a patented inventor. But, you know, we're not talking about reinventing the wheel. In a lot of ways, we're talking about going back to the old design.

Brad Watts (55:00.41)
Hahaha!

Gene Quinn (55:17.636)
that worked at a time when so much of the rest of the world is looking at our old blueprint and saying, you know, I think that old blueprint worked pretty well for the U S maybe we'll try that. So you see stronger, better rights in throughout Europe, stronger, better rights in South America. You even see stronger, better rights in a lot of regards in China. now none of those, I don't think approximate what we used to have available.

in the, in the U S but they certainly have picked the old U S model ahead of what we're doing now. And, and that's another reason to be a little bit worried because as that traction gains, I mean, Europe has got, is, is a marketplace that's 50 % larger than the United States. You know, as Europe has the unified patent court and, and, and, and, and, patent rights are easier to get in a lot of places that

that will be a location that will become quite attractive. And hopefully the US doesn't have to hit rock bottom before we start to realize that we need to make the US an attractive marketplace again.

Brad Watts (56:27.802)
I hope so too. And I have to run, you can edit this out, I have to run and get my dog from the vet. But maybe I can end with one thing I've said before. And I've said this on Eli Masour's Clause 8 podcast, which is even in ancient times, go back to the ancient Hermetic philosophers, right? Who believed they had received this knowledge from the Egyptians, the cradle of humanity. One of the key tenants of the Hermetic tradition was that

Gene Quinn (56:35.427)
Sure, go ahead.

Brad Watts (56:57.178)
The pursuit of knowledge is the pursuit of God. Pursuit of knowledge is the pursuit of God. I am confident that we as a society can get back to a point where we think the pursuit and protection of knowledge is a worthy endeavor and something we should encourage and not demonize.

Gene Quinn (57:16.611)
Amen to that. I hope that happens. And I really appreciate your time today, Brad. It's been a great conversation.

Brad Watts (57:22.714)
Gene, you're a good friend to me. You've been a good mentor. And anytime I get to get on a call with you and talk intellectual property is a good afternoon.

Gene Quinn (57:31.267)
Well, good, I'm glad. Thank you so much.