Two bills to promote semiconductor manufacturing in the U.S., the American Foundries Act and the CHIPS for America Act, have been introduced in the Senate as part of an effort to revitalize domestic manufacturing.
Julius Krein’s commentary on the issue goes through the particulars of the issue, but I’d like to call attention to an opportunity to improve this policy and other pro-manufacturing policies in the future.
Patent pools, a generally procompetitive agreement among multiple patent-owning firms, function as legal non-aggression pacts for patent infringement If XYZ Inc. puts their patents into a patent pool and ABC Corp. does the same, then either may use the other’s patents free of charge. XYZ and ABC may still license their respective patents to those outside the pool, and–depending on the particulars of a patent pool–selling a patent to a firm outside the pool gives all members of the pool a free license to it.
We have written in the past about the License on Transfer (LOT) Network, which includes heavy hitters like Google, Amazon, eBay, Toyota, and IBM but is primarily designed to help firms of all ages and sizes “eliminate the patent troll threat.”
Patent trolling is a nuisance for larger firms and a serious threat for upstarts, a separate issue from the one at hand. How can we design a patent pool to promote domestic manufacturing and innovation which complements the CHIPS and American Foundries Acts?
Here’s a general framework:
- Recipients of these subsidies will be considered members of a National Manufacturing Patent Pool.
- Member firms may apply for and receive patents as normal, but inventions developed within the scope of the industry to be subsidized (in this case semiconductors) will be placed in the pool.
- The patent holder may use or license the patent as normal, but other members of the pool may use the patented technology in domestic manufacturing freely.
- Use in manufacturing outside the U.S. must be appropriately licensed.
There are countless details to be ironed out, but we can draw from past experience in creating such an institution. Patent pools already exist, of course, and we could borrow language from the Bayh-Dole Act by treating members as “contractors” and inventions from this program as “subject inventions.” The 1956 Bell Labs consent decree also shows that procompetitive policies like royalty-free licensing can increase innovation among licensees.
Whether or not interventions to promote domestic manufacturing are needed, they are certainly in demand, and must be complemented by measures which ensure the benefits go to the domestic manufacturing sector and not just recipients of grants.