Deep Dive Episode 39 – Pepperdine Law Review’s 2019 Symposium Opening Address: Qualcomm’s Donald J. Rosenberg
This Deep Dive episode brings you the opening address from the Pepperdine Law Review’s 2019 Symposium “Regulating Tech: Present Challenges and Possible Solutions”. The address was delivered by Donald J. Rosenberg, Executive Vice President, General Counsel, and Corporate Secretary at Qualcomm, who spoke on patent law and the dangers of regulatory capture in the emerging tech sector.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
Operator: Welcome to Free Lunch, the podcast of The Federalist Society’s Regulatory Transparency Project. All expressions of opinion are those of the speakers. On March 1, RTP cosponsored a symposium at Pepperdine Law School with the Pepperdine Law Review titled “Regulating Tech: Present Challenges and Possible Solutions.” Today we bring you the opening address for the conference with Donald J. Rosenberg, Executive Vice President, General Counsel, and Corporate Secretary for Qualcomm. We hope you enjoy it.
Donald Rosenberg: Thank you. Thank you for that introduction, and thank you for inviting me here. In particular, I want to thank Dean Reuter who originally talked to me about it. And it was a pleasure to come here, frankly, when I saw the topic, and I want to get into it. I will say in advance, I guess, various disclaimers. So you probably know, although you may not, that Qualcomm has been involved in a number of matters around the world for the last several years. We still have many, many matters pending, including at regulatory agencies, but also private litigation. And so I’ve tried to plan my remarks so that I don’t touch on anything that is too sensitive for me to talk about. So if you’re looking for more insight than I’m giving you, that’s the reason.
So this forum, as I said, I was going to say, could not be more timely, but frankly, I’m very happy you’re doing it. I wish others had done it sooner, or you had done it sooner, but that’s not a criticism. At least you’re doing it. This has been going on for quite some time, and I want to give you a little bit of background. I spend a lot of my time — I’m also the Head of Government Affairs in Qualcomm, so I spend a lot of my time with legislators and policymakers, both in the United States and in multiple places abroad. And quite often, as part of that process, answering one of the questions that you’ve framed today is critical. How can government regulators and legislators avoid stifling opportunity, function more efficiently, and enact and enforce sensible and effective regulatory schemes?
The answer is that regulators must keep in mind that regulation and legislation may or may not serve to improve the allocation of resources in a particular industry compared to the outcome in the absence of regulation. Successful identification of a market imperfection is a necessary but not sufficient condition to justify regulation on economic grounds. Once a potential market imperfection has been identified, the proposed regulatory solution must itself survive a rigorous economic cost-based analysis, one that factors in the potential for imperfect regulation and unintended consequences as well as the effect of alternative solutions that can develop without government intervention.
Evaluating the costs and benefits of regulatory alternatives requires a solid understanding of market imperfections and the particular market imperfection that supposedly is being solved as well as mechanisms used by the market participants themselves to have mitigated the effects of those imperfections. Unfortunately, too often, governments seek to impose regulations in the absence of evidence of market failure. We have seen this where regulators with a solution are searching for a problem. But we have also seen this where their proposed solution doesn’t pass basic cost-benefit analysis. The proposed solution would cause, in effect, more harm than good.
There is something else that regulators need to keep in mind when it comes to specific sectors like 5G, which I’ll get to in a little while, and something called the internet of things, subjects that are near and dear to my company’s heart, which I’ll talk a little bit more about later. One of the key dangers is regulatory capture. Regulatory capture is a form of government failure when a regulatory agency created to act in the public interest instead, wittingly or unwittingly, advances the commercial or political concerns of special interest groups or specific companies. The key danger here is that certain regulations that shift economic rents from one group of companies to another may have far-reaching implications beyond merely changing how the slices of the pie are divided. They may, in fact, have significant value effects resulting in shrinking that pie for all.
So in addition to following the economic framework I’ve just set forth, what are some additional safeguards when it comes to regulation and enforcement? And I’m going to talk about testing theory and empirical data. As someone who has worked at the intersection of law and economics for three innovative companies, as you’ve heard, I am, as I said, quite gratified that these difficult questions are being asked at symposia like this. Academic discussions are invaluable, but regulation must be based on real-world data, not theory. And enforcement must be based on properly applying the law to the facts of a particular case rather than theoretical speculation of what could be or what might have been.
Yet all too often, governments base regulation and enforcement on theory alone. But theories have testable implications. Did the activity at issue actually cause higher prices? Did it reduce innovation? Government officials must test their theories using the empirical evidence available, and there is plenty of empirical evidence widely available, just digging for it, not too deeply. In addition, all regulation and enforcement of that regulation must be framed, carried out, and solidly based in the rule of law. The rule of law: this is a deceptively simple phrase, and I certainly hear it very often in all kinds of places. It’s the all-important ingredient for an economy that wishes to nurture and promote innovation.
When decisions are made in the private sector, in essence, when decisions about risks being taken, money invested at one place, in one direction or another, what country to perhaps invest in and establish a position in, when jobs are created or not, the certainty of a given legal environment is among the most important factors. We invest with the goal of recouping and multiplying that investment. We may gamble on the strength of our ideas and plans, which Qualcomm does all the time. Our research into the Gs, and I’ll get to that in a minute, often takes close to ten years of research, and development, and investment. So we can gamble, as we do, on the strength of those ideas and how much the market place will like them.
My engineering colleagues often boast about what the founders used to say too, which is that we’re going to invent, but we’ll probably not think of all the uses to which our inventions will be put once they’re out in the market place, and that has proven true over, and over, and over again. I can give you example after example of things that are ubiquitous, things that you take for granted, that but for the inventions of my company and others that just would not exist. One example that just popped to mind is Uber. You can look at the process by which you hire an Uber car. Every step of the way is an element of something that Qualcomm invented in that process.
So those are the risks you take. But the certainty of a given legal environment is, as I said, among the most important factors. We don’t want to gamble on the stability of the rule of law. I’ll give you an example that I briefly describe now and then come back to because it is in so many headlines, and I’ve referred to it a few times, and it’s 5G. And you may have heard something about 5G unless you’ve been living under a rock someplace, or in law school. And most people will tell you a lot about 5G and know nothing about it. It’s amazing to me. I spend a lot of time — I’ve spent a lot of time over the last several months in Washington D.C., pretty much weekly, and I’ve got a lot of interest in 5G there, which I’m very pleased about. But describing it, explaining it, enlightening people as to what 5G means and what it will do is an interesting task. It’s good because they know there’s something important there. What I have to do is fill in the blanks.
I’m going to give you a very quick primer, very quick, so don’t expect much. So let’s go back. The first generation of mobile communications, 1G, had brick-sized phones. Most of you in this room don’t remember that. I do. And you had a handful of users, literally, I mean, just a few users around the world. And these things were expensive. They were unreliable. All they did was analog voice communication, and they did that really poorly. Your calls would be dropped often. The brick would run out of power. There were a lot of problems with those, but it was an enormous innovation.
The second generation introduced digital voice service. That was less likely to have the problems I described, like dropping calls, and it was available to many more people, and ultimately, cheaper to use, so typical advancement of technology. 3G ushered in the mobile internet, mobile computing, and the proliferation of apps, application programs that we all know about. 4G, which is often called LTE, and I’ll give you something that you could use at the next cocktail party. What does LTE stand for? Long-term evolution. Don’t ask me why, but those are the words.
It was made possible — I think I actually could probably tell you a little bit as to why, but I won’t bother. And that made possible what we have come to expect of mobile broadband — streaming video, audio, instantaneous ride-hailing. I forgot I had put that in there. Uber. The explosion of social media. Just to step out of the framework here, Qualcomm literally was the company that provided the foundation for all that we appreciate today from the communication device we hold in our hand. You may have heard of something called CDMA. It’s another one I’ll give you that just occurred to me, the acronym — code-division multiple access. I’m not an engineer, but I play one in the . . .
But that was an incredible breakthrough. It was a technology that actually had existed and, frankly, had been used to some extent during World War II by the U.S. But the small number of founders, seven founders at Qualcomm—and I’ve talked to Irwin Jacobs who came up with the idea several times about it—decided that they could adapt this technology to cell phone mobile communications. Now, you’ve got to remember, this was in the 1980s. It was an incredible step. In fact, Irwin likes to point to a Stanford physics professor at the time who, when he heard about it, said, “It defies the laws of physics. It can’t happen.”
But all that ultimately led to what we have today, the ability to have this kind of massive data flowing back and forth instantaneously. And as they say, we underappreciate this because it just seems natural. And most people think that there’s magic in the device. There is, but it’s the technology that’s underlying it, not the pretty device itself or the ease with which you can manipulate things on it. Okay, enough from my . . .
So as I said, we take all this connectivity for granted, but the engineering behind the evolutions of these Gs, these generations, really, as I said, would have seemed impossible just 20 years ago. 5G can be appreciated when you think about a world in which not just people, but all things are connected. And this is the connection between 5G and IoT, or internet of things, that you hear all the time. Cars will be connected to other cars, and to the road, and frankly, to everything around it. Why? You have to have sensors in cars if they’re going to have autonomous driving because one car has to know that another one is coming around the corner, or that someone’s about to step into the street, or to distinguish between that person and a plastic bag that’s in front of the car. These are all sensors, and they need to communicate with one another.
5G is bringing that level of communication capability, and — instantaneous. It’s something latency, which is the time between when a signal is sent and when it’s received. You don’t notice it. Your ear doesn’t even detect it when you’re talking to people and your eye when you’re looking at it. But there is a latency factor in all of this, and one of the things that we work on constantly is reducing that latency factor. Once we get to 5G, there can be almost no latency because, as I just described, you have connectivity of cars, and in life and death situations. You have doctors who will be connected to your personal medical devices. They can’t wait a few seconds for a response when something is critical.
There are augmented reality concepts that we haven’t thought about today but some of which are obvious. Augmented reality is going to be used pretty ubiquitously, actually. It’s going to help people do simple things like shop and learn. It’s going to help you explore the world around you, or the world far away from you. It’s a phenomenal process that’s only just begun. You hear augmented reality. You hear virtual reality. These are things that are going to happen. They’re all going to happen because of 5G.
The other thing about 5G which probably goes without saying, but I should say it, is it’s going to speed up not just the latency issue, it’s going to speed up the communication. It’s going to increase the ability to have massive amounts of data flowing back and forth into your hands. And that couldn’t be done without 5G. And it’s going to do it using less power and more efficiently. And that’s critical to what 5G is all about.
The billions of connections, literally billions of connections that 5G is going to facilitate and making those connections, very importantly, secure and well as instantaneous is what’s critical here. In addition to impacting all the industries I described, it’s going to impact our industrial makeup. Organizations from auto manufacturers, manufacturing distribution, emergency services are all going to take advantage of the capabilities of 5G, and they’re going to do so by creating new private networks in many situations. And the reason you can do that is because they’re going to be smaller baseband units. I don’t want to get into detail, but you know about antennas, you know about all the communications that go on.
Now, we’re going to have more dense, smaller communication vehicles between you and the network. That’s all going to happen. The privacy point, the security point, very critical for 5G, and therefore, very critical for industries who are going to use it. This is another critical factor that most people don’t appreciate. 5G that’s going to be introduced this year — there will be 5G capability introduced this year, thanks to us having worked with pretty much every carrier around the world. That’s only the beginning of 5G. 5G is going to roll out over the next several years, maybe five years or more, and they are going to be applications and new technological advances in 5G that are going to bring is, as I said, doing things that we’re not even anticipating today.
And it’s purposely designed so, as I said, these industries, these other industries — up until now mobile communications is basically been you and your phone. Now we have all these things talking to one another. That’s mobile communications. That’s connectivity. And all of them are going to take advantage of this cellular connectivity that I talked about. And it wouldn’t have been possible before, and the scale of that is going to be allowed and facilitated by 5G as it expands is going to be fairly phenomenal.
So why do I bring 5G up and talk so much about it in the context of government regulators and legislators and why they should avoid stifling opportunity and innovation? These generational changes that I’ve talked about in mobile communications don’t just appear overnight. They didn’t just appear overnight. They require significant efforts in research and development, as I’ve said before, and the resources necessary to support those efforts. We’re talking about billions and billions of dollars in investment. Each G represents the solving of tens of thousands—I’m not exaggerating—tens of thousands of technical and engineering problems. And it requires international cooperation at some level in developing what are basically telecom standards. This requires participation and consensus-building among a disparate group of national, commercial, and scientific parties all working together for the common good.
And I’ll get back to the rule of law — well, I’ll talk about standards right now. Like 3G and 4G, 5G is the responsibility of the standard-setting organization known as 3GPP. Don’t bother learning what that is. It’s a handful of companies, and it literally is today a handful of companies only that are spending the resources inventing technologies. They come together with many, many other companies who will develop products that implement those technologies.
Think about the process for a moment. Engineers from rival inventing companies, rival product makers, rival wireless network operators, all from different countries and continents, discussing, testing, striving to agree upon tens of thousands of different technical solutions that ultimately make a standard like 5G. They judge each technical solution using a merit-based consensus-building approach. This process has been at the foundation of a technological revolution that spawned myriad new industries, and millions of new jobs, and well over one trillion dollars in economic growth up until now. It’s the fusion, almost the perfect fusion of self-interest—nothing wrong with that—with the recognition that some problems are best solved by working together.
I’m just stating the obvious, I’m sure, but there can’t be a better example of why a standard is required than in mobile connectivity. If you want to make sure you’re able to talk to somebody in Japan just as easily as you’re talking to somebody in San Diego right now, you need to have certain agreements about the standards process. If you want to have multiple network operators in multiple countries around the world, they have to agree on certain standards. You can’t have one with a private standard here, and another here, and trying to talk together. So from its inception, of course, standards have been a critical aspect of mobile communications. This model of international intercorporate cooperation is responsible for the fastest growing and most widely adopted technology in history.
As I mentioned earlier, we take it for granted that every few months, there will be a new smartphone model from a different company, or in the U.S., Apple or Samsung. That’s basically it. By the way, there are basically three phone providers in the U.S. at this point. It’s Apple, Samsung, and LG; two Korean companies and Apple. And they’ll have new — these new devices will have new functions, new capabilities, and you’ll immediately consider them indispensable, even though they weren’t imaginable a few days ago, as will I. And they’re all for a price that steadily declines in relation to the value of these new technologies, thanks in part to thriving competition and the ease of entry of new handset makers into this market.
My primary example of ease of entry, for anybody who’s willing to listen, is a company in Cupertino called Apple. We may not recall that just a little over ten years ago, 2007, Apple decided to enter the phone business, the cellular phone business. They did that in the face of competition from the likes of Nokia who, if any of you spent any time in Europe in the old days, knew that phones were called Nokias back then. That’s how powerful. Motorola — major provider of technology. Blackberry. And what’s interesting as I name all of those, and I tell you, and those who remember can recall the power that those companies had in 2007 and 2008. Some of you who weren’t that cognizant back then don’t even know why I’m talking about them because as I often say, they’ve been relegated to the dustbin of history. Why? Because Apple has pretty much taken over. Apple, Samsung, as I said, LG, and a whole host of Chinese device makers.
But I use Apple as the example of ease of entry which is the competition concept that regulators think a lot about. And it was easy for them to enter, and I’m not saying any — I happen to have been there in 2007. I’m not saying anything that’s inappropriate at this point, but it was Apple who went to the market in 2007 and now a few months ago reached the trillion-dollar mark in market cap. It’s a pretty extraordinary development, and it certainly says a lot, in my opinion, about the competitive nature of this industry.
So back to the standard process. The inventing companies that are involved agree that if their patented technology is adopted into the standard, so companies like Qualcomm, Huawei, Ericsson, Samsung, who are doing a lot of research and coming up with what they think is the best technological solution — I apologize, I’m going over time, but I’ll try to speed up, put on my New York speed, as I told somebody. Try to figure out how I can…
So the inventing companies, the few inventing companies offer their technology, but they do so at a price. If they have technology that they have intellectual property on, like patents — in our case we have something in the range of 130,000 issued and applied for patents in our portfolio. But if you have patents on the standard-essential patent, that is the standard technology, then in contributing it, you give up certain rights. You give up in the first instance the fundamental right of a patent, at least in the first instance. And the fundamental right of a patent is the right to exclude.
If I have a patent, I can keep you out of my — think about it as a fenced-in real property. I can keep you out of that property for 20 years, let’s say. Or I can let you in on terms that I choose to let you in. But in the first instance, I say, “Look, I’m going to agree to license, let you in, certain people in, anybody who is practicing that standard, that full standard. That’s the price I pay for having you accept my technology, which by the way, I invested billions in and spent maybe up to ten years inventing. But I get it. All I want is a return.” And I don’t even have the stick that I would normally have in the first instance to say, “And if you don’t pay me, I’m coming after you with an infringement action,” because in the first instance, I have to offer you a license. I have to say, “Here’s a license.”
And it’s got to be on fair, reasonable, and non-discriminatory terms: FRAND. That’s the European version. There’s a U.S. version. We don’t think of fair, we just go reasonable and non-discriminatory. But essentially, it’s fair, reasonable, and non-discriminatory, which means there’s some kind of cap, not defined, necessarily, but as we have often argued, as I say all the time, it is defined. It’s defined by market dynamics, and it gets defined in that way, which is a point I’ll make as to why regulators probably step aside.
But that fair, reasonable, and non-discriminatory license is what we have to offer, and anyone who says, “I want to build a phone and I need access to your intellectual property,” — now access, of course, is an interesting concept. They all have access to it. One of the things people forget — I’m sorry, I’m going off a little bit here, but one of the things that people forget about patents is it’s a social bargain, a social contract. You often think — people generally sometimes think that, gee, you’re just handed a patent by the government. That’s a monopoly. You shouldn’t be able to abuse that thing that the government gave you.
Well, the government didn’t give you the patent. You applied for the patent. You spent three or four years or more convincing patent examiners that this was, in fact, new, novel, non-obvious, all the elements of what’s required, really tough stuff to get over to have a patent issued to you. And you also made enormous contributions in that process. You had to file specifications that describe in intricate detail your technology and your invention, and you had to define very clearly the parameters of that invention, so-called claims. You can’t just say, “Here’s new technology, and I’m going to take it all.” It’s, “I’m going to narrowly define what claims I’m going to make based on this new technology.”
That is now in the public domain. Anybody can read it, anybody can access it, and anybody can design to it. So unlike real property or personal property, I can’t stop you from taking my property physically. You take it because you go read about it, and then you can go implement it. The only thing I have is the rule of law. But even where the rule of law is strong, take the United States, it takes time, it takes money, and the dynamic of litigation or dispute resolution is something that, often, companies just can’t deal with on a long-term basis.
Most of the wireless evolution that I’ve talked about, for most of that period of time, regulators pretty much respected the FRAND agreements between standards organizations and the inventing companies. And the result being competition and benefits to consumers would seem to make wireless telecommunications, in my mind, the epitome of what balanced regulation can make possible. This regulation, though, was really designed by the participants within the standards body, and the regulators pretty much had a hands-off approach because, as I said, it’s multiple parties at every level of the industrial chain agreeing by consensus to reach that.
So it sounded like a good process, and now it’s at risk. And it has been at risk, that balance, for some time. There’ve been recent enforcement actions all around the world that have put a thumb on the scale in favor of one group of participants in the industry, what we call the technology implementers. You can assume I’m talking about device makers, the phone makers, and they benefit from the use, as I said, of the fundamental technology that we’ve innovated. And that thumb on the scale provides an advantage, a benefit, over those who have created these fundamental technologies that will drive the entire 5G ecosystem.
And among the many dangers of such an approach is the far-reaching implications beyond merely shifting rents or value from one company to another, which is really what this is about. But it can instead significantly harm innovation beyond that, and consumers. This is because this 5G and IoT value chain that I was talking about is complex. It’s multilateral. It’s a vertical chain with many participants. You’ve got 5G and IoT layers of technology, which is what we’re involved in. There’s the very core communication layers that I’m talking about, and then you’ve got the fundamental building blocks for the entire supply chain: data layers, application layers, and process layers. Given that the companies participating in each of these layers are complimentary, there are strong interdependencies among them, such as the value generated by the entire IoT chain depends on the success of companies at each individual layer.
The conditions for success are very clear. First, companies at all layers must have the ability and the incentive to invest, and they must choose to then actually invest. Secondly, each layer — the most efficient technologies at each layer must be selected. And in addition, the overall price or total cost of ownership needs to be sufficiently compelling for a consumer.
The solution to facilitating this nascent IoT ecosystem is, in my opinion, threefold. Enforcers and courts should appreciate that certain companies do not care about consumer welfare or growing the pie, and they only seek to take more slices of the pie for themselves. They also, regulators, should recognize that fundamental technology innovators like Qualcomm and a few others have to be incentivized to invest in future research and development that will grow the overall pie. And the focus of any scrutiny by regulators should be on performance, real-world evidence of the amount of innovation and value created by companies at each layer, as opposed to simply counting the number of players at each level.
This leads back to the regulatory scheme of this conference and my focus on the rule of law. Specifically, global antitrust and competition regulation is what I want to focus on briefly. Today there are more than 130 competition agencies around the world, many if not most of them operating without the benefit of a mature legal environment. While most major jurisdictions agree at least in principle that the goal of antitrust is to promote consumer welfare, in many foreign jurisdictions, decisions are, in fact, driven by industrial policy and other non-competition factors.
Compounding the problem, there is little substantive convergence on legal procedural norms, at least in practice. There are no international safeguards in place to prevent local antitrust from being used as an industrial policy tool to protect domestic champions or to prevent competition regulators from acting when influential and powerful companies simply don’t like how much they are paying, for example, for intellectual property rights. There is nothing to prevent multinationals in this environment from weaponizing antitrust law to stir up regulators against their competitors or suppliers.
In recent years, we’ve seen a very troubling trend overseas of investigations of large foreign companies’ enforcement actions that fail to meet the requirements of basic due process and that raise concerns about the impartiality and accuracy of the decision-making process. We have reason to be concerned that the lack of respect for due process could result in arbitrary decisions not based on the rule of law and sound economic evidence. These concerns are particularly serious in those jurisdictions in which domestic entities that have economic strength and strategic importance may benefit from an outcome of an investigation. And with antitrust authorities often left to define the limits of their own power, I’m not sure any jurisdiction is immune to these problems.
So how should lawmakers and regulators who seek the right balance put in place the needed checks and balances? What, in fact, should these checks and balances be? Originally, in jurisdictions with well-developed rule of laws, optimally, the judiciary plays this role, or at least should play this role. But there’s no global system, leaving the private sector to deal with a patchwork approach, one jurisdiction at a time. Years ago, I called this is lowest common denominator. If you’re a global company trying to figure out how to do business effectively and not subject yourself to competition problems, you have to figure out who the most aggressive enforcer agency is in the world, and then adapt to that enforcer. And then you have to do that around the world because you can’t have different policies in different countries.
So we can hope for things like the OECD, The Organization for Economic Co-operation and Development, or ICN, the International Competition Network, who gather regularly and try to nudge countries to accept and stick to best practices and things like due process. But it hasn’t worked well so far. I’m not saying give up on it, but it just hasn’t worked well. And the world at the moment is, frankly, at somewhat of a nadir when it comes to international cooperation. So we can hope that other elements of a given government like those who worry about innovation, not competition, those who worry about trade and economic growth, not competition, will exert appropriate pressure on regulators to keep regulation and enforcement on a level playing field, at least hope in the context of market-based economies, anyway. And by this, I mean with the least amount of uncertainty of the kind I mentioned earlier.
Standards essential patents like those I have described now, probably in too much detail, are a good example. Case in point: there is a theory most famously posited in 2007, an interesting year, that standards-essential patents pose a competition threat because the invention companies that contributed those technologies to a standard and therefore own standard-essential patents could hold up product makers, demanding exorbitant royalties.
There’s much I could say, unfortunately, about this, and I’m so way over time, I apologize. But I won’t get into the detail, but for now, it’s enough, I think, to remind you of two points I made earlier. To have technologies included in a standard, invention companies must agree to license at the terms I described to all device makers who want a license. And in the 12 years since this theory was put forth, and even before that, but certainly, in those 12 years, evidence from the smartphone space, and that includes both standards and patents, is quite to the contrary of what the holdup theory would claim. Output has grown exponentially. Competition in semiconductors is thriving. Wireless service providers have dropped — prices have dropped relative to overall consumer price index. Prices in SEP reliant industries in the United States have declined faster than prices in non-standard essential patent-intensive industries. In other words, this is an overall thriving industry which cautions great care about disrupting the carefully balanced FRAND ecosystem that I described.
Almost done. Despite the evidence, the theory has nonetheless stuck around, this theory of holdup, even in some quarters of the United States government. It’s why some of those regulators have adopted an approach that treats standards-essential patents as a potential competition problem. To that point, the serious practitioners of innovation economics who rely on empirical data rather than theory are very worried that standards-essential patents could very much be weakened. I think they already have been to some extent. And this, of course, in turn, would imperil the standards process which I said was so essential. Since invention companies will contribute their technologies to a standard like 5G only if they can recoup the billions of dollars and years spent in R&D, without strong intellectual property protection for standardized technology, the continuing development of 5G and even 6G beyond that would be significantly diminished.
Now, fortunately, there are others in the U.S. government who have recognized this risk and have stepped into the debate, specifically most recently, Makan Delrahim, Assistant Attorney General at the Justice Department for the Antitrust Division. And in a series of speeches, Makan has suggested antitrust enforcers have, in his words, “strayed too far, undermining incentives for IP creators who are entitled to an appropriate award for developing breakthrough technologies.” That was a quote. He argues that the application of antitrust law without empirical evidence is a threat to innovation, consumers, and businesses. And in what I consider to be a model of enforcement and humility, he has forcefully made the case for why common law and contracts law are up to resolving any problems in this area without regulatory intervention.
He goes on to say, and I’ll, exclude some of Makan’s quotes here, but I commend you — he’s given about six speeches now in various functions, and I commend you to look them up and use your connectivity to bring them down, read them. Regulators can avoid stifling opportunity and innovation while enacting and enforcing sensible and effective regulatory regimes, refrain from imposing economic regulation, absent evidence that there’s an identifiable market failure, and the proposed regulatory solution survives a rigorous economic cost-based benefit analysis.
In other words, stick to the same philosophy that doctors do: First rule, do no harm. Or as others have said, if it’s not broken, don’t try to fix it. Refrain from regulation and enforcement actions based upon theory alone and instead ensure that any theoretical harms are backed by empirical evidence. That’s the key message that I’d like to convey to regulators as they proceed in this very endangered environment. Thank you, and I apologize for having gone so far over. I’m, apparently, fairly passionate about this subject.