Is the Trade War Immolating U.S. Patents?

You are receiving this email because you signed up to receive our free e-letter Gilder's Guideposts, or you purchased a product or service from its publisher, Eagle Financial Publications. [Gilder Guideposts] [Technology Report]( [Tech Report PRO]( [Moonshots]( [Private Reserve]( Is the Trade War Immolating U.S. Patents? by George Gilder and Richard Vigilante 10/30/2024 SPONSORED CONTENT [Stock Super Boom Set To Erupt Nov.7]( On Nov. 7, a certain group of stocks are set to rocket up. This Super Boom hasn't happened for 25 years... ...and it might never happen again. [Click here to discover how to take advantage for a chance to potentially 10X your money in the next year.]( It is axiomatic that developing economies with little native innovation are patent violators, while developed, high-innovation economies are patent protectors. The United States followed just that pattern—Washington urged Americans to steal British technology. So has China. Once a blatant patent violator,  now, China as the world’s leader in new patent filings—46% of all filings in 2022—has become a notable patent enforcer. [Studies]( reveal that plaintiffs win something like 80% of cases. Remarkably, foreign plaintiffs fare better than native Chinese. U.S. technology sanctions now threaten this improvement in Chinese behavior, although it is a Dutch company, ASML, that may bring matters to a head. ASML is perhaps the most envied company in the semiconductor industry. It is the only company in the world that makes the “Extreme Ultraviolet” (EUV) lithography machines now absolutely necessary to etch the circuitry on the world’s most advanced microchips, those in the so called “5nm,” “3nm,” and soon “2nm” nodes. Chips made in “5nm” can pack 150 million or more transistors in a square millimeter of silicon; Taiwan Semiconductor’s “3nm” process is good for 250mm2, and its 2nm process will pass 300mm2. The United States has imposed an absolute ban on exporting these machines to China. China’s biggest and best semiconductor manufacturer, Semiconductor Manufacturing International Corporation (SMIC), has been able to get to only “7nm”—circa 100 million transistors per mm2— because it must use earlier ASML machines. Even sales of older machines may yet be forbidden. [The Biggest Winner of the AI Boom Isn’t Nvidia…]( Nvidia (NVDA) has soared more than 1,700% over the past 5 years. For investors who missed out on the profits, America’s #1 Futurist says AI is converging with a ‘miracle material’ right now, and [one company]( leading the way, could see its shares post 10X gains… The obvious question is why should China not simply appropriate the ASML patents? We impose these sanctions, allegedly, not for wicked protectionist reasons, but as a matter of sacred national security. If the ability to make the most advanced chips really is vital to national security, why should China not violate the ASML patents on the same grounds? There is a moral spirit to commercial law; violation of that spirit erodes the law’s legitimacy. The spirit of patent law is to protect the economic value of intellectual property, normally expressed in licensing fees and patent pooling agreements. Sometimes, the patent holder will refuse a license for economic reasons, but this is risky as it boosts incentives to make the patent unnecessary. Wholly different and a clear violation of the commercial spirit is one nation absolutely forbidding another from buying a product even at the prevailing market price (some $400 million per machine) and not even for a license to make the machine but for the machine itself. What becomes of the moral force behind patent law when the patent is a weapon, today in a trade war, but now openly discussed as a prelude to a real war? 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But it’s a $400 million machine and a matter of “national security.” Why wouldn’t they lay out a billion or half a billion dollars for the top five guys? The next 20 would come cheap. And once that moral barrier is broken, how do we keep trade war from becoming an all-out immolation of the patent system, and industrial espionage routine and morally acceptable? U.S. sanctions threaten the very survival of ASML, which in turn converges exquisitely complex components from dozens of other companies from the United States and around the globe. Sanctions are already depressing sales and profits—and inevitably R&D budgets at dozens of Western tech firms. If, a decade from now, China utterly dominates the global semiconductor industry, it will have U.S. sanctions and Presidents Trump and Biden to thank. P.S. COSM Technology Summit, Oct. 31-Nov. 1, Bellevue Hyatt, Seattle, Washington: This conference is sponsored by the Discovery Institute and me. I’ll be one of the speakers and will address the latest technology trends, including the rapid rollout of artificial intelligence and the huge opportunities that will be provided by graphene. To register, go to [(. Use Promotion Code EAGLE-GG to save $200. Sincerely, [The Editors] George Gilder, Richard Vigilante, Steve Waite, and John Schroeter Editors, Gilder's Guideposts, Technology Report, Technology Report Pro, Moonshots, and Private Reserve About George Gilder: [George Gilder]George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives. He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance. George and his team are the editors of Gilder Technology Report, Gilder Technology Report Pro, Moonshots and Private Reserve. About Us: Eagle Financial Publications is located in Rosslyn, VA. – Blocks from the Capitol. 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