October was Intellectual Property (IP) Month, the perfect time to reflect on how important our nation’s IP and the rights that protect it are in driving America’s innovation economy. Our Founding Fathers recognized the importance of Intellectual Property Rights (IPR), enshrining them in the U.S. Constitution – foresight that positioned the United States to lead in incubating and capitalizing on Americans’ innovative spirit. Rewarding and protecting legitimate creative capacity has been a hallmark of the United States’ economic success.
Every few decades, the world experiences a major shift in global economic focus driven by innovation, like the printing press in the 15th century, the steam engine of the 18th century, Babbage’s “computer” in the 1820s, and the 21st century iPhone, just to name a few. America’s free market system and its strong IPR regime allow it to take advantage of these advances, and the creators haven’t been the only beneficiaries. According to the U.S. Patent Trade Office (USPTO), salaries in IP-intensive industries are 53% higher than those in non-IP-intensive fields, and roughly 44% ($11.4 trillion) of 2024 U.S. GDP was directly connected to patents in the private sector.
Intellectual property also underpins cutting-edge, lifesaving treatments. A robust framework to protect biopharmaceutical discoveries has spurred innovation in healthcare, rendering previously untreatable maladies manageable and even curable. Erosion of IPR protections discourages R&D investment, potentially putting everyone at risk, as happened with the TRIPS Waiver in 2022, described in ALEC’s Intellectual Property Fuels Our Innovation Economy and Should Not Be Frivolously Surrendered.
The ALEC model Resolution Calling on the Current Presidential Administration to Oppose Efforts at the World Trade Organization to Expand the Trade Related Aspects of Intellectual Property Rights (TRIPS) Waiver Which Would Undermine Global Intellectual Property Rights was adopted to address the problem. Counterfeit items, including drugs, pose another challenge to creators and their creations. At best, counterfeits amount to theft; however, the consequences of counterfeits in healthcare, national security, and certain consumer good supply chains can prove dangerous and even deadly.
Read more in A New Resource to Understand and Combat the Counterfeit Pharmaceutical Trade.
Even America’s enviable IPR mechanisms – the U.S. consistently earns a first-place ranking in the Global Innovation Policy Center’s International IP Index – cannot prevent all IP infringement.
IP theft helped lift the People’s Republic of China’s (PRC’s) fortunes earlier in its economic ascent. Since 1990, there have been 224 instances where U.S. intelligence has caught Chinese actors committing industrial espionage. Over 30 years, China’s share of compute housing increased from 0% to 24% with no prior infrastructure, and it surpassed American energy generation by 26% in 2024, indicating the PRC acquired more IP than the official figures suggest. Days ago, it was revealed that a PRC operative, through her relationship with NVIDIA President and CEO Jensen Huang, may have obtained highly restricted NVIDIA microchips.
However, the PRC is investing heavily in high-tech R&D and catching up in the innovation race. With its own patents to protect and its own innovation to advance, IP theft is no longer China’s preferred tactic. In 2019, China overtook the United States in global patents filed for the first time and is edging closer to the top ten most innovative global economies, according to the World Intellectual Property Organization’s (WIPO) Global Innovation Index. This includes domination in artificial intelligence (AI) patents.
The U.S. leads in technological innovation, a legacy from the framers of the U.S. Constitution who understood the importance of protecting intellectual property. Conversely, IP theft inhibits legitimate market competition and discourages innovation by separating the creator from the reward for their labor and sometimes even endangers the consumer from any productive benefit. Effective IPR with adequate IPR enforcement facilitates the inventions that enhance and sometimes save lives.
For more on IPR, read ALEC’s Intellectual Property Rights Are Natural Rights and the ALEC model State Constitutional Amendment: Jury-Determined Compensation for Property Devaluations Caused by Regulatory Takings.