The surprising way Trump can unleash America’s economic comeback

In his address to a joint session of Congress, the president predicted that "our country is on the verge of a comeback the likes of which the world has never witnessed." That prediction is backed up by his recent announcements of massive new private sector investments in AI infrastructure and new executive orders to ensure that the U.S. leads the world in the industries of the future.  

In order to fulfill the promise that those actions suggest, however, it’s essential that President Donald Trump support steps to shore up America’s intellectual property system, the cornerstone of our innovation economy, rooting out malicious foreign interests and installing new leadership to help guide the comeback.

To start, we need to address the fact that legal damages for patent infringement are no longer calculated reliably. U.S. courts have strayed from commonsense assessments to the detriment of American innovation.

When a company is sued for patent infringement, the potential damages should be limited to the specific value of the underlying technology. Unfortunately, this narrow focus has become more relaxed, and plaintiffs are now asserting damages calculations far greater than their intellectual property’s value.

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Consider the advanced chips powering AI technologies. Each chip contains thousands of parts, many of which are covered by separate patents. If a plaintiff accuses a chipmaker of patent infringement, it should be able to claim only damages limited to the value its patented invention adds to the chip’s value. Instead, courts are increasingly awarding damages based on the entire chip’s value.

The outcome is unreasonably large damages awards. In 2024, verdicts greater than $10 million, $50 million, and $100 million in patent cases were up over prior years. We are even seeing cases where damages reach into the billions. Excessive damages are an unjust financial drain for high-tech manufacturers and an array of other innovative companies forced to pay more than they should owe.

Bloated damages are chum in the legal waters. Chum attracts sharks. In this case, non-practicing entities (NPEs) – which do not invent devices or techniques, or build and sell products – but collect patents to bring, and profit from, lawsuits claiming infringement. More than half of all patent infringement lawsuits in the U.S. are now initiated by NPEs, as the patent lawsuit business has attracted a surge of outside capital.

The possibility of winning eye-popping damages has caught the attention of litigation investors who fund legal actions in exchange for a share of any financial return. Litigation investment is a big business, totaling more than $15 billion in the U.S. today; and patent cases have been the largest category for new financial commitments in recent years.

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NPEs pursuing large damages awards are ideal investment vehicles, particularly because in many jurisdictions the investor is allowed to remain anonymous. President Trump’s CIA Director John Ratcliffe referred to NPEs by their more familiar colloquial name "patent trolls" when he explained the trouble with this arrangement, namely that "by funding patent trolls – shell companies whose sole purpose is to file patent infringement lawsuits – nefarious third parties, including foreign adversaries, can use intellectual property to attack U.S. companies through lawsuits."

U.S. patent grants to global competitors are surging. In 2024, China-based companies saw a 32% increase in U.S. patents granted and foreign companies are making plays for superiority across a range of cutting-edge industries. Among them, a Chinese startup, DeepSeek, released an AI model that challenges the best that American companies have to offer. 

It is crucial that we strengthen the rules governing our intellectual property system so that American innovators are not further hampered by those who attempt to game the system.

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Three reforms are necessary to address root causes of this abuse. First, federal courts should reassert their role as evidentiary gatekeepers, ensuring that unreliable expert testimony, which inflates damages, is not presented to the jury. We can’t expect juries to make accurate decisions if they are fed bad information by supposed experts.

Second, Congress should pass Rep. Darrell Issa’s Litigation Transparency Act, a simple transparency measure mandating that litigation investors disclose their involvement in cases.

And finally, the Trump administration must bolster the U.S. Patent Office’s Patent Trial Appeal Board (PTAB) to give our innovators resources to deter and defend against abuse. The PTAB, and the administrative patent judges (APJs) who serve there, are tasked with invalidating bad patents, many of which are being used by NPEs to extort productive companies. 

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APJs do their jobs much more efficiently than the federal courts and the PTAB is funded by fees, not by taxpayers. The president’s new nominee to lead the Patent Office, John Squires, would be wise to ensure the PTAB can continue this important work.

Right-sizing damages awards, increasing judicial transparency, and empowering the Patent Office’s patent quality review will remove barriers to economic progress and prevent our competitors from undermining American industries. All should be priorities for policymakers in the days to come.