Oct 27 2014
Oct 27 2014
Recognizes Utah’s $7 Billion Nutritional Products Industry
Oct 22 2014
Chairman of Senate Republican High-Tech Task Force Calls for Pro-Technology, Pro-Innovation Policies
Sen. Orrin Hatch, R-Utah, unveiled an innovation agenda for the 114th Congress today in a speech at Overstock.com’s corporate headquarters. Sen. Hatch, who serves as Chairman of the Senate Republican High-Tech Task Force, laid out a plan to ensure that the United States continues to foster an environment that encourages research and innovation by addressing abusive patent litigation, protecting trade secrets, modernizing the Electronic Communications Privacy Act, strengthening cybersecurity, reforming immigration policy for high-skilled workers, reducing regulatory and tax burdens for innovators, and removing barriers to digital trade.
As Republicans seek to end Senate gridlock and advance policies that promote economic growth and make America more prosperous, Sen. Hatch’s innovation agenda is a critical priority for the next Congress.
Our constitutional values teach that the federal government has an important role to play in fostering entrepreneurship and economic growth. But it should not be one of heavy-handed regulator. Rather, government’s proper role is to act as a facilitator, creating an environment that encourages research and development to drive our prosperity and quality of life in the decades to come. As chairman of the Senate Republican High-Tech Task Force, I have been working with colleagues and stakeholders to develop an innovation agenda for the coming Congress.
On Addressing Patent Trolls:
In particular, we must enact legislation to combat abusive patent litigation. ...Through common-sense reforms to our patent laws – including fee shifting, heightened pleading and discovery standards, and a mechanism to enable recovery of fees against shell companies – we can ensure that American resources are used to innovate and create jobs, not wasted to settle or litigate frivolous claims.
On Protecting Trade Secrets:
Another way to protect America’s innovation is to create a harmonized, uniform federal standard for protecting trade secrets.
Trade secrets, such as customer lists, formulas, and manufacturing processes, are an essential form of intellectual property... It’s time to enact trade secret legislation that enables U.S. companies to protect their trade secrets in federal court.
On Balancing Privacy and Responsible Data Storage:
We are long overdue to update the Electronic Communications Privacy Act – or ECPA – to require a warrant for all e-mail content within the United States and to safeguard data stored abroad from improper government access. ... Congress must ensure that law enforcement has the tools to execute search warrants where necessary, so long as officials comply with the laws of the foreign country where the electronic data is stored. ... Overregulation, however, is not the answer. Any new data policies must balance consumer privacy and the benefits of big data in people’s lives.
On Enhancing America’s Competitive Workforce:
Central to innovation is enhancing America’s competitive workforce. We can do this by streamlining the hiring process for high-skilled individuals entering the United States … [and] investing in STEM education and training.
Heading into the 114th Congress, Democrats must drop their insistence on immediate comprehensive reform, particularly when individual elements—like high-skilled immigration—can win broad support and help pave the way for additional and more far-reaching reforms in the future.
The full remarks are pasted below.
Senator Orrin G. Hatch
An Innovation Agenda for the 114th Congress
Remarks as prepared for delivery
Overstock.com Corporate Office – Salt Lake City, Utah
Tuesday, October 21, 2014
It’s great to be with you this afternoon. Thank you for taking time from your busy schedules to be here.
As I travel around the state and throughout the country, I am often asked why Congress doesn’t do more to enact pro-technology, pro-innovation policies. After all, in most of our communities, high-tech job growth is consistently faster than other areas of the private sector.
Here in Utah, we have nearly 100,000 people working in the tech industry—a sector that is growing at five times the rate of the national economy. Throughout the nation, demand for high-tech jobs is expected to surpass demand for jobs in other sectors until at least 2020. So every state in the country has a vested interest in keeping our technology industry at the forefront of the global economy.
America has made extraordinary strides in innovation. For decades, we have been the world’s leader in developing new technologies and advancing the Internet age. But we are not the only nation in the hunt. Across the globe, and particularly in China and other parts of Asia, our international competitors are working furiously to catch up. If the United States is to enjoy continued success in the technology arena, policymakers must ensure a legal and regulatory landscape that will enable our innovators to thrive.
As we seek to encourage innovation, however, we must also recognize limits on what government can and should do. Our constitutional values teach that the federal government has an important role to play in fostering entrepreneurship and economic growth. But it should not be one of heavy-handed regulator. Rather, government’s proper role is to act as a facilitator, creating an environment that encourages research and development to drive our prosperity and quality of life in the decades to come.
As chairman of the Senate Republican High-Tech Task Force, I have been working with colleagues and stakeholders to develop an innovation agenda for the coming Congress. Recently, I gave a high-level overview of this agenda during a policy speech at the Reagan Ranch in California. Today I would like to speak in greater detail about some of the initiatives that I believe are critical to ensuring the continued success of our high-tech economy.
I. Protect America’s Innovation and Inventiveness
First, Congress must act to protect America’s innovation and inventiveness. An essential part of fostering innovation is protecting legitimate intellectual property rights.
Patent Litigation Reform
In particular, we must enact legislation to combat abusive patent litigation. As you well know, patent trolls are having a crippling effect on innovation and growth across all sectors of our economy—ranging from main street businesses to America’s largest technology companies. A recent study found that abusive patent litigation costs our economy $60 billion each year.
Through abusive and meritless litigation, patent trolls—which are often shell companies that do not make or sell anything—seek to extort settlements from innovators throughout the country. These settlements divert capital that could otherwise be used for innovative research or technological development.
Many patent trolls target small businesses that do not have the resources to defend themselves in court. Even though these small businesses have done nothing wrong, they often agree to unwarranted settlements to avoid costly litigation. And those who do fight back are forced to spend millions in litigation costs, often with no chance of enforcing a court-ordered award against a judgment-proof plaintiff.
Through common-sense reforms to our patent laws—including fee shifting, heightened pleading and discovery standards, and a mechanism to enable recovery of fees against shell companies—we can ensure that American resources are used to innovate and create jobs, not wasted to settle or litigate frivolous claims.
I intend to do everything in my power next Congress to pass such legislation.
Protecting Trade Secrets
Another way to protect America’s innovation is to create a harmonized, uniform federal standard for protecting trade secrets.
Trade secrets, such as customer lists, formulas, and manufacturing processes, are an essential form of intellectual property. Yet, trade secrets are the only form of U.S. intellectual property where misuse does not provide its owner with a federal private right of action. Currently, trade secret owners must rely on state courts or federal prosecutors to protect their rights.
The multistate procedural and jurisdictional issues that arise in such cases are costly and complicated, and the Department of Justice lacks the resources to prosecute many such cases. These systemic issues put companies at a great disadvantage, since the victims of trade secret theft need to recover information quickly before it crosses state lines or leaves the country.
Unfortunately, in today’s global information age, there are endless examples of how easy—and rewarding—it can be to steal trade secrets. In June 2013, the Wall Street Journal reported that authorities arrested a former engineer for a medical-device maker after he attempted to relocate to India with trade secrets he stole from his former employer. As a staff engineer, the employee had substantial access to the company’s trade secrets, including a self-administered disposable pen injector still in development. Weeks before quitting, the employee downloaded an estimated 8,000 files, including many related to the pen in development, onto external hard drives and thumb drives. The sheer amount of stolen intellectual property was enormous.
While the maximum penalty for trade secrets theft is 10 years in prison and a $250,000 fine, few of these thefts actually result in federal prosecutions. And while $250,000 may sound like a steep penalty, most stolen trade secrets amount to tens or even hundreds of millions of dollars in lost profits and sales. Even when thefts are prosecuted, victim companies rarely recover the full extent of their loss.
According to the FBI, when Greg Chung stole Boeing trade secrets related to the U.S. Space Shuttle and gave them to China, he gave away an estimated $2 billion in trade secrets. Even though Mr. Chung was sentenced to more than 15 years in prison, Boeing received no compensation for its staggering loss of technology.
It is past time to enact trade secret legislation that enables U.S. companies to protect their trade secrets in federal court.
Combating Online Piracy
A final priority for protecting America’s innovation and inventiveness is developing policies to foster a voluntary and self-regulatory framework to combat online piracy. For too long we have seen digital thieves steal vast amounts of content on the Internet. A 2014 Business Software Alliance survey confirmed that globally a full 43 percent of PC software was installed without proper licensing. The survey found that the commercial value of these unlicensed installations was $62.7 billion, with emerging economies continuing to account for the majority.
Now is the time for Congress and industry stakeholders to come together with a renewed focus to combat online piracy.
II. Ensure Responsible Data Stewardship
The second element of an innovation agenda must involve ensuring responsible data stewardship. With new forms of electronic communication and data storage, policymakers must act so that our nation’s privacy laws correspond to present realities and keep up with technological advances.
Most immediately, we are long overdue to update the Electronic Communications Privacy Act—or ECPA—to require a warrant for all e-mail content within the United States and to safeguard data stored abroad from improper government access.
Enacted in 1986, ECPA prohibits communications service providers from intercepting or disclosing e-mail, telephone conservations, or data stored electronically, unless such disclosure is authorized. Virtually everyone agrees that Americans should enjoy the same privacy protections in their online communications that they do in their offline communications. But Congress has not adequately updated the law since its enactment and technological developments have resulted in disparate treatment.
As currently written, ECPA requires law enforcement to obtain a warrant for e-mails that are less than six months old, but only a subpoena to access older electronic communications. Think about your own e-mail account. You might have hundreds of e-mails that you’ve received over many years.
Additionally, ECPA has allowed law enforcement to access e-mail that has been opened with just a subpoena, even though a search warrant would be required for a printout of the same communication sitting on your desk. These conflicting standards should cause great concern to everyone who values personal privacy.
To make matters more complicated, ECPA is silent on the privacy standard for accessing data stored abroad. For that reason alone, Congress should amend the law. Storing digital information around the world – a practice that did not exist when ECPA became law – is now routine. Moreover, the federal government has taken advantage of this statutory silence to apply its own standard, requiring access to data abroad if the company storing it has a presence in the United States.
This presents unique challenges for a number of industries, which increasingly face a conflict between American law and the law of the countries where the electronic data is stored. Additionally, if the U.S. expects to extend its warrants extraterritorially, we should not be surprised if other countries—including China and Russia—seek to do the same for e-mails of Americans and others stored in this country. Congress must ensure that law enforcement has the tools to execute search warrants where necessary, so long as officials comply with the laws of the foreign country where the electronic data is stored.
In addition to updating ECPA, we must support policies that protect consumer privacy while promoting the benefits of data-driven technologies.
New technologies to create, analyze, and disseminate vast quantities of data fuel an increasingly important set of social and economic activities in nearly every sector of our economy. These data-driven technologies offer great potential for improving health care, education, financial services, consumer products, and even sports.
The possibilities of data-driven technologies are endless, and have already provided consumers with more choices. But at the same time our big-data economy presents privacy and transparency challenges that merit everyone’s attention. Some have advocated for new, burdensome regulations. Overregulation, however, is not the answer. Any new data policies must balance consumer privacy and the benefits of big data in people’s lives.
III. Protect America’s Critical Infrastructure
A third element of our innovation agenda must be protecting America’s critical infrastructure. Computers control nearly everything we use in our daily lives. They control our cars, phones, water supplies, power grids, financial services, retail networks, food production, and in many respects, our military capabilities. Fortunately, our adversaries have not succeeded in physically damaging our nation’s interdependent critical infrastructure. But we remain vulnerable to persistent threats from cyber criminals.
Let me outline a few guiding principles that should be included in any cybersecurity legislation.
First, Congress must provide proper incentives, like liability protection, to encourage the private sector to share cyber-threat information with the government. Currently, businesses are reluctant to share information because they fear legal repercussions. But the government and the private sector must work together to fend off cyber-attacks.
Cybersecurity legislation must also strike the right balance between protecting our nation’s computing infrastructure and protecting individual privacy rights. Thus, information sharing between businesses and the government must be tailored to the recipients’ actual security responsibilities.
A voluntary, non-regulatory approach is most likely to yield consensus legislation. DHS and other government agencies can provide advice and resources to improve our nation’s cybersecurity posture, but—as in other areas—additional, burdensome regulations are not the answer.
Finally, and perhaps most importantly, we must build a strong cybersecurity workforce. Enacting cybersecurity legislation will mean little if there are no trained professionals prepared to tackle our nation’s cyber challenges. We must encourage our young people and attract high-skilled workers from around the world to take up cyber-related disciplines.
IV. Spur High-Tech Investment Through Tax Reform
A fourth part of any innovation agenda is spurring high-tech investment through tax reform.
For example, we should incentivize businesses to invest in research and development by making the R&D tax credit permanent. This tax credit has existed as a temporary provision in the tax code since its inception 33 years ago. In that time, the R&D tax credit has sunset 16 times. In fact, the credit technically does not exist at this moment because it expired at the end of 2013. The temporary nature of the R&D tax credit, along with these frequent sunsets, make it a less reliable – and hence less effective – incentive. Congress should make it permanent. I’m glad the House passed a bill to do just that. I’ve introduced legislation in the Senate that would do the same.
We also need to lower the corporate tax rate. At 35 percent, our corporate tax rate is the highest in the developed world and is a chokehold on the economy. That is unacceptable. I hope we can get the corporate tax rate down to 25 percent, if not lower.
In addition, we need to transition to a territorial tax system. Right now, American companies are taxed on their worldwide income. But the trend in the developed world is to tax corporations in their home country only on the profits they make at home. Japan and the UK were just the latest major countries to transition from a worldwide tax system to a territorial system. If the U.S. transitioned to a territorial tax system, our businesses would be able to compete much more effectively in the global marketplace.
I’m sure all of you have read the news about U.S. corporate inversions, where a U.S. company changes its corporate structure to move its tax domicile offshore and become a foreign company. Such inversions are happening in large measure because of our high corporate tax rate, and our worldwide tax system. And they demonstrate just how dysfunctional the U.S. tax code has become.
By reforming our tax code, we can boost prosperity and encourage the entrepreneurial spirit that has made this nation great.
V. Enhance America’s Competitive Workforce
A fifth element central to innovation is enhancing America’s competitive workforce. We can do this by streamlining the hiring process for high-skilled individuals entering the United States to work in STEM-related fields. Equally important is investing in STEM education and training.
Our high-skilled worker shortage has become a crisis. In April, for the second year in a row, the government reached its current H-1B quota just five days after it began accepting applications. Employers submitted 172,500 petitions for just 85,000 available visas. American companies were thus unable to hire nearly 90,000 high-skilled workers they need to help grow their domestic businesses, develop innovative technologies, and compete with international competitors.
Despite this growing crisis, Senate Democrats and President Obama have insisted on an all-or-nothing approach to immigration reform. They demand comprehensive reform that addresses all of our immigration problems in a single bill, or nothing at all. I am not opposed to a comprehensive approach. In fact, I joined many colleagues on both sides of the aisle last year to support such a bill in the Senate.
But heading into the 114th Congress, Democrats must drop their insistence on immediate comprehensive reform, particularly when individual elements—like high-skilled immigration—can win broad support and help pave the way for additional and more far-reaching reforms in the future.
VI. Foster a Modern, Competitive, and Open Internet
A sixth element of our innovation agenda is fostering a modern, competitive, and open Internet. This requires promoting private-sector innovation and deployment of broadband networks while simultaneously limiting unnecessary and burdensome Internet regulations. Net neutrality is a terrible idea. The last thing we need is government telling ISPs how to carve up bandwidth. Keep the Internet free and it will continue to drive our economy forward.
In addition to promoting broadband investment, Congress should support policies that encourage increased deployment and adoption of mobile online services and content, including increased access to licensed and unlicensed spectrum.
VII. Eliminate Corrosive Barriers to Trade
To spur innovation we must also seek to eliminate corrosive barriers to trade. U.S. companies doing business overseas face significant tariff barriers and a proliferation of behind-the-border barriers to trade in goods and services. These obstacles include discriminatory technical regulations and standards that deviate from international norms.
A more balanced trade environment will require U.S. trading partners to allow cross-border data flows and eliminate data localization mandates and other impediments to digital trade. We must also work with our partners to raise the standard of intellectual property protections across the globe to the level currently found in U.S. law.
VIII. Improve Antitrust Review and Standards-setting Processes
A final ingredient in our innovation agenda is improving antitrust review and standards-setting processes. This can be accomplished by promoting responsible enforcement of our nation’s antitrust laws and supporting cost-effective measures to streamline the antitrust review process. We must also ensure that the standards-setting process is functioning effectively and establish policies that enable companies to compete on reasonable and non-discriminatory terms.
These priorities form an ambitious and comprehensive innovation agenda. Fostering technological development in the ways I have suggested will strengthen our economy while keeping government in its proper constitutional role—as a helpful partner, not an all-present planner. I welcome your input on how best to implement this strategy going forward.