American manufacturers cannot afford more patent abuse

The U.S. economy is under immense pressure. Americans are experiencing inflated prices and a volatile stock market, which means an uncertain retirement plan and an uneven job market. Manufacturers are struggling amid disrupted global supply chains, intellectual property theft, and unfair trade practices. The record-breaking plunge in the stock market in early August offers evidence that despite some topline positives, the possibility of a looming recession is fueling fear and doubt among American companies, investors, and consumers.

The COVID-19 pandemic proved that a strong domestic manufacturing base is key to maintaining a stable economy and robust national security. When worried Americans, including our essential healthcare providers, needed gloves, ventilators, masks, and other forms of personal protective gear, China reduced exports and increased prices on them and leveraged its industrial capacity against us even when Americans were in dire need.

That’s why, more than ever, America needs policies that protect manufacturers, encourage production, and deter predatory commercial conduct from foreign adversaries.

My former Congressional District in South Carolina is a manufacturing powerhouse and has been leading the charge on this front for the past eight years. We prioritized pro-growth policies that defended American intellectual property from abuse and malevolent actors. As a result, real progress was made with strong patent protections, which enabled companies such as BMW, Michelin, and Volvo to create high-paying, high-tech jobs for tens of thousands of my fellow citizens right here in the Palmetto State.

But some in Congress seem to want to take us backward. The recently introduced RESTORE Act would bring back automatic injunctions against businesses found liable for patent infringement rather than adhering to the four-factor test required for injunctive relief outlined in the Supreme Court’s unanimous eBay vs. MercExchange decision in 2006. Since then, Congress has rejected automatic injunctions time and again, and this latest attempt to impose unreasonable restrictions on American manufacturers should be no exception.

We don’t need to look far to see how devastating this bill would be. South Carolina is now one of the leading automobile manufacturers in the country, generating $27 billion in economic impact each year. If a patent troll decided to start suing automakers for using Wi-Fi in their factories, something patent trolls have already done to target manufacturers across the United States, the results could be devastating.

Under the current law, if automakers were found liable for using this commonplace technology, they would pay damages and then continue doing their work of making cars, creating jobs, and strengthening our economy. If, however, the RESTORE Act becomes law, the consequences would be much more severe. A permanent injunction might mean the automaker has to shut down the factory, lay off workers, and stop manufacturing cars. Not only is this deleterious for workers and our economy, but it is also nonsensical.

This problem is even more dire once one realizes trolls often enjoy financial backing from secretive foreign-based investors, including oligarchs and sovereign wealth funds, without any disclosure of their backers or their intentions required. The RESTORE Act would give these bad actors an automatic injunction, empowering them to abuse our courtrooms with impunity, more so than they do now.

Even though a lack of universal disclosure requirements obscures the full extent of foreign influence, we do know a Chinese-backed entity, PurpleVineIP, recently supported patent infringement lawsuits against technology competitors in federal court in Delaware. Meanwhile, massive litigation finance firms have admitted to partnerships with anonymous sovereign wealth funds to do the bidding of foreign countries in American courtrooms.

If Congress were to pass the RESTORE Act, it would only magnify this problem by empowering patent trolls to pursue more frivolous cases, leaving American companies no choice but to accept unfair settlements.

Some claim this bill is needed to protect real producers when monetary damages are not sufficient relief. When the Supreme Court ruled unanimously in the eBay decision that injunctions for infringement should only be granted when irreparable harm is proven, critics said it made injunctive relief in patent cases “significantly more difficult and significantly more rare.” What they leave out, however, is that in the nearly 20 years since the eBay decision, injunctive relief became more difficult for non-practicing entities but remained equally accessible for real producers that actually innovate and sell goods.

The RESTORE Act not only tries to solve a problem that does not exist, it worsens a problem that does — the threat of foreign abuses to our manufacturing base.

Washington, D.C., should focus on defending American intellectual property rights from bad-faith foreign actors so American workers and entrepreneurs can do what they do best: create the products, jobs, and economy that the world envies.

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Trey Gowdy represented South Carolina’s 4th District in the U.S. House of Representatives from 2011-19. Prior to serving in Congress, he was a federal prosecutor and solicitor in South Carolina.