Innovation Policy CONNECTion – January 13, 2015

The 114th Congress Convened on January 6, 2015

When the new Congress convened, the House consisted of 246 Republicans and 188 Democrats, with one seat vacant. The Senate is now 54 Republicans, 44 Democrats and 2 Independents. Approaching deadlines and recently lapsed programs will help drive action in Congress this year. For example, the Export-Import Bank (Ex-Im) supports U.S. exports by providing insurance and loans to help foreign buyers purchase U.S. products. The bank’s charter was extended through June under the continuing appropriations resolution, H.J.Res 124, enacted in September, but unless reauthorized the bank wouldn’t be able to issue new financing. Also, more than 50 temporary tax incentives were renewed for 2014 under H.R.5771, allowing a wide range of businesses and individuals to claim them during the 2015 filing season. These “tax extenders” expired Dec. 31, 2014, less than two weeks after the legislation was signed into law.  Congress may not revisit the issue again until the end of 2015, before the 2016 filing season, which has been the trend for dealing with extenders over the past several years. However, some lawmakers have said the tax breaks should be addressed through a comprehensive overhaul of the tax code. This would provide an opportunity to make some provisions permanent and eliminate others for good, instead of revisiting the issue every year or two.

Intellectual Property

Rep. Darrell Issa just announced that patents will be the subject of one of his panel’s very first meetings this year. He and full Judiciary Committee Chairman Bob Goodlatte plan to reintroduce the Innovation Act “sooner rather than later.” While Rep. Issa is interested in adding a little to the measure, he expects it’ll probably look a lot like the one that the House passed in late 2013. Issa also noted that associations representing universities, technology companies, biotech and pharmaceutical firms are all looking to tweak various rules that govern the patent system and accumulating wish lists could complicate chances for patent reform in the new Congress.  So while Issa believes a patent reform bill that cleared the House last year could be a starting point for addressing frivolous litigation, he also believes the debate easily could dredge up other issues in copyright, like the new war between Google and the movie studios. Issa did say he would try to bring all parties to the table. Issa also blasted the PTO for poor management at a hearing last year and said he may want to tack on provisions aimed at encouraging better management of that agency.

On the positive side, Congressman Scott Peters has just been appointed to the Judiciary Committee, and he has been an ardent opponent of any weakening of the patent system that would adversely affect innovation.

Net Neutrality

FCC Chairman Tom Wheeler has offered his clearest roadmap to date on net neutrality. He’s circulating a proposal among commissioners by Feb. 5, holding vote on Feb. 26 and pretty much backing utility regulation of broadband. However, incoming Senate Commerce Committee Chairman John Thune said that he’d like to move a bill ‘that might be an alternative to Title II’ – and those plans are getting a little firmer. Republicans are likely to drop such a bill next month, in hopes of preempting Wheeler’s official announcement of the new rules.The bill would establish a new ‘Title X’ provision of the Communications Act under which telco’s would be held to strict net neutrality principles – which would supersede any regulation under ‘Title II’. Former Congressman Rick Boucher who chaired the key subcommittee has written a good explanation that can be accessed by clicking here.

Repeal of Medical Device Tax

On January 7, Reps. Paulsen and Kind introduced their bill, the Protect Medical Innovation Act, H.R.160, with 254 cosponsors.  Senators Hatch and Klobuchar introduced their version of repeal legislation today, S.149, the Medical Device Access  and Innovation Protection Act. This version of repeal legislation is supported by a bipartisan group of 10 Senators, with five Republicans and five Democrats. A letter endorsed by a broad, multi-industry coalition of companies advocating for prompt consideration of repeal is being sent to Congressional leadership. CONNECT is a signatory.

Skilled Immigration

Sen. Orrin Hatch is set to reintroduce his high-skilled immigration bill this week. Hatch’s Immigration Innovation – or I-Squared Act would raise the yearly cap on H-1B, or “high-skilled,” visas from 65,000 up to 195,000 and remove limits on the number of high-skilled visas for employees with advanced degrees. Hatch’s bill would also enable visa holders’ spouses to work, increase visa holders’ ability to move between jobs, recapture unused green cards from previous years and eliminate yearly per-country caps for employment-based visa petitioners. The bill already has bipartisan backing, with Democratic Sens. Amy Klobuchar, Chris Coons and Richard Blumenthal, as well as Republican Sens. Jeff Flake and Marco Rubio, as original co-sponsors. The bill is the first tech immigration bill this Congress.

Tax/Small Business Legislation

The House of Representatives voted to make it easier to reduce taxes, passing a rule on the first day of the new session to let lawmakers assume that lower levies boost the economy and cover some of their own budgetary costs. The adoption of so-called dynamic scoring gives Republicans greater leeway to adopt tax policies that otherwise, would have been scored as increasing the U.S. budget deficit.

SBA Seeking Comments on Proposed Rule Amendments to the National Defense Authorization

The SBA is seeking comments from small businesses that contract or subcontract with the Department of Defense. The proposed amendments make changes to regulations relating to the non-manufacturer rule by proposing to allow a joint venture to qualify as a small business for government procurement. Additionally, the SBA is requesting comments regarding procedures for the NAICS code. The deadline to submit comments is February 27, 2015. To read the proposed rules, click here. To submit comments, click here.

$75 Million in State Tax Credits Available

The California Competes Tax Credit is an income tax credit available to businesses that want to come to California or stay and grow in California. The Governor’s Office of Business and Economic Development (GO-Biz) will be hosting a workshop on January 23, 2015 on how to apply for this credit. The tax credits are negotiated by GO-Biz and approved by the California Competes Tax Credit Committee. The application period opened on January 5, 2015 and will close on February 2, 2015. More information can be found on the program here.The online application for the credit can be accessed here.

Workshop Details:

Friday, January 23, 2015 1:30 – 2:30 p.m. San Diego Miramar College Business & Math Building, M110 10440 Black Mountain Road, San Diego, CA 92126

To attend this free workshop, register here

CONNECT Files COMMENT on Net Neutrality with FCC

Today, Connect filed a comment with the FCC on its proposed rulemaking regarding “net neutrality.” CONNECT supports a “hands off the net” market oriented approach that encourages incentives to invest which has been phenomenally successful over the last 20 years. You can see the filing here.

House Judiciary Committee hears from USPTO on Patent Reform

On July 30, the House Judiciary Committee held an oversight hearing on the functioning of the Patent and Trademark Office.  Click for the Committee’s agenda and the prepared statement of acting PTO director Michelle Lee. The key takeaway: she believes there’s still room for ‘legislative reform’ on fee-shifting, even after the Supreme Court decided two high-profile cases on the issue earlier this spring and gave the courts more room to force the losing party in a patent suit to pay the winner’s legal fees. “Companies could benefit from greater certainty about when fees could be shifted and when they could not,” Lee said. Throughout the rest of the hearing, lawmakers rocketed from one major patent policy issue to another – several, including House Judiciary Chairman Bob Goodlatte, took the opportunity to push for the patent reforms they spent the last year working toward. Still others pressed Lee for more information about the agency’s implementation of the Alice v. CLS decision, its IP attache program, its so-called ‘submarine’ patents and even its backlog in cases at the new PTAB appeals board. Lee, the panel’s sole witness, held her own sidestepping tough questions about the controversial business method patent program and the agency’s ongoing implementation of the Alice decision, which is affecting some patents already in the pipeline for approval.

Innovation Crossroads: “We have to set policies and pass laws that allow technology to flourish”

Guest Blog by UC San Diego Extension, John B. Freeman

What are the best ways to ensure that technology continues to grow and prosper in San Diego? How do federal policies hinder that growth?

Those were major themes discussed in the first “Innovation Crossroads: Creating a Policy Climate for Global Innovation in San Diego,” a two-hour panel session held Saturday, May 31, at Qualcomm Hall.

The invitation-only forum featured two of the region’s hi-tech visionaries, Paul Jacobs, executive chairman of Qualcomm; and Greg Lucier, former chairman and CEO of Life Technologies, now chairman of the Sanford-Burnham Medical Research Institute in La Jolla.

Joining them was Congressional Rep. Scott Peters (D-San Diego), with Steve Clemons, editor-at-large of The Atlantic magazine, serving as moderator.

The event was co-presented by UC San Diego Extension and CONNECT.

The spirited discussion gave Jacobs and Lucier free reign to reflect on how far their respective companies have come, along with San Diego’s ascendency as a world-wide tech sector.

Back in the mid-1980s, when Qualcomm was first started by Jacobs’ father, Irwin Jacobs, virtually all it took to lure top hi-tech talent to San Diego was a trip to the beach amid sunny skies, said Jacobs.

“As long as we did that and kept them away from real estate agents,” he said, “we would get them. And actually, that still works for San Diego because the price of real estate looks pretty attractive compared to other places [around the world].”

Federal and state taxes, however, don’t look so attractive to Jacobs, especially for companies such as Qualcomm that have large oversees operations. Current policy requires that federal taxes be paid if that income is brought back into the U.S.

Qualcomm employs two-thirds of its workforce in the U.S., largely in San Diego, with 95 percent of revenues generated outside the US.

Lucier heartily agreed with Jacobs that offshore tax laws needed to be changed by Congress.

“The system we have today was fine 25 years ago,” he said, “but now it’s a global economy. U.S. companies are making tons of money oversees and they have no incentive to bring that money back to the United States. … It’s so freakin’ simple, it’s unbelievable.”

Peters decried what he termed “anachronistic laws,” adding, “In a lot of ways, government hasn’t caught up with technology. We have to set policies and pass laws that allow technology to flourish.”

Other headache-inducing issues for Qualcomm and other locally-based global firms are strict post-911 immigration policies that prevent the world’s best and brightest minds from coming to San Diego – and staying.

Said Jacobs: “The world still comes here [but] then they go back because we don’t let them stay.” He added that top executives of overseas firms often encounter roadblocks to freely traveling to San Diego for business.

“They say, ‘Look, if you don’t want me here, then I’m not gonna come. Why should I do business with you?’” he said. “It’s a perfect storm of really stupid policy.”

Added Lucier: “The problem isn’t with students coming to the United States. The issue is, they’re not staying here once they get a degree.”

One surprising theme focused on an oft-heard complaint among local commuters: snarled traffic around Qualcomm’s lineup of buildings on Sorrento Mesa.

Qualcomm likely won’t build another facility in San Diego because of worsened traffic in recent years, said Jacobs, citing Austin, Texas as a possible alternate locale. “We’re having employees being forced to leave early because of the traffic. It’s a loss-of-productivity issue.”

Peters assured Jacobs that he would look into the matter with local officials.

– John B.B. Freeman


On behalf of a San Diego regional initiative to attract manufacturing investment to San Diego, CONNECT is pleased to announce that the U.S. Department of Commerce has selected Southern California as one of 12 manufacturing communities to receive the Investing in Manufacturing Communities Partnership (IMCP) designation. The Southern California partnership, Advanced Manufacturing Partnership Southern California (AMP SoCal), was led by USC and includes the Counties of San Diego, Orange, Los Angeles and Ventura. This designation will open preferential access to $1.3 billion in federal assistance for local aerospace and advanced manufacturing in Southern California and will be a great tool for not only for our regional job creation efforts but across the four counties.

CONNECT led the San Diego County initiative which includes, Biocom, City of San Diego, CleanTECH San Diego, East County Economic Development Council, North County Economic Development Council, San Diego Regional Economic Development Corporation, San Diego Workforce Partnership, Sapphire Energy, South County Economic Development Council, UC San Diego, and Unified Port of San Diego.

The Investing in Manufacturing Communities Partnership (IMCP) initiative is a U.S. Commerce Department-led program designed to accelerate the resurgence of manufacturing in communities nationwide by supporting the development of long-term economic development strategies that help communities attract and expand private investment in the manufacturing sector and increase international trade and exports. Over 70 applications, including one from Northern California, were submitted and the 12 were selected by an interagency panel, based on the strength of their economic development plans, the potential for impact in their communities, and the depths of their partnerships across the public and private sector to carry out their plans.

The San Diego partnership of AMP SoCal will focus on workforce development and training, creating a robust supplier network, development of new enterprises that manufacture products for the future, commercialization and access to capital for technologies originally developed for defense purposes, and infrastructure and trade development.


CONNECT has assisted in the formation and development of more than 3,000 companies in the San Diego region and is widely regarded as one of the world’s most successful organizations linking inventors and entrepreneurs with the resources they need for commercialization of innovative products in high tech and life sciences. The program has been modeled in more than 50 regions around the world. CONNECT has been recognized by Time, Inc. and Entrepreneur magazines and in 2011 won the national State Science and Technology Institute’s 2011 Excellence in Tech Based Economic Development Award for Building Entrepreneurial Capacity. In 2010 CONNECT was the recipient of the Innovation in Economic Development Award from the U.S. Department of Commerce for creation of Regional Innovation Clusters. CONNECT manages the San Diego, Imperial Valley, Inland SoCal Innovation Hub (iHub) designated by the state of California Governor’s Office of Business & Economic Development in 2010. Key to our success has been the unique “culture of collaboration” between research organizations, capital sources, professional service providers and the established industries. For information on CONNECT or its programs, contact us at (858) 964-1300 or visit


Updates on Medical Device Tax and Patent Reform

Medical Device Tax

Based on discussions with Senate staff, it is now certain there will be no amendment vote to postpone/repeal the device tax on the extenders legislation this week. Senator Hagan talked to Majority Leader Reid about it directly, and was shut down immediately. Republicans have tried to push Reid on it, but he has drawn a hard line around anything ACA related on extenders. There are already almost 60 votes for cloture on the extenders package w/o any amendments. It is expected that Wyden and Reid will make “related” changes to the package to get past 60, so, all that is left at this point is a messaging exercise. The goal will be to have Senator Klobuchar file the amendment, Hatch will cosponsor, and supporters will try to get other Ds and Rs signed on. While the floor process and debate time is still uncertain,  Seantors Hatch and Klobuchar will push to carve out time to raise and discuss during the debate on the extenders package.

Patent Reform 2.0

For the first time in weeks, the Senate Judiciary Committee schedule for the week ahead didn’t list a markup for a patent reform measure. It’s too soon to rule it out entirely, but several industry representatives have said they’re not expecting the committee to schedule a vote on the effort again until next week at the earliest. And at the very least, we know that any markup would not happen at the usual Thursday morning time this week, since Chairman Patrick Leahy will be at a wreath-laying ceremony for National Police Week at that time. That’s not stopping outside groups from continuing to push, however: The Main Street Patent Coalition is sending yet another letter up to the committee this morning, with a specific emphasis on their support for the litigation reform compromise brokered by Sens. Chuck Schumer and John Cornyn.

Rep. Peters Welcomes USPTO Official for Stakeholder Roundtable in San Diego

SAN DIEGO, CA – Today, the Office of Congressman Scott Peters (CA-52), CONNECT, and Business Forward welcomed Andrew Byrnes, Chief of Staff at the United States Patent and Trade Office (USPTO), to San Diego. Mr. Byrnes attended a roundtable event with local industry leaders to hear about the unique innovation economy growing in the San Diego region.

“San Diego is home to a growing number of companies and researchers who are developing innovative technologies and therapies,” Rep. Peters said. “I’m glad Mr. Byrnes was able to get out to San Diego to hear from regional leaders about the work that is happening in our area. During my time in Congress I’ve consistently been working to find ways to showcase San Diego to policymakers and administration officials in Washington, D.C., and this continues that effort.”

“We greatly appreciate Congressman Peters’ efforts in arranging this meeting. CONNECT is pleased to host what will assuredly be an interesting exchange of views on current proposed legislation as well as the new regulations proposed by the USPTO,” said Gary Klein, VP of Public Policy, at CONNECT.

“Today’s briefing allowed some of America’s most successful inventors to brief the PTO on how reforms enacted by the America Invents Act are affecting their research and their business decisions,” said Jim Doyle, president of Business Forward. “With further reforms being debated on Capitol Hill, new trade deals in negotiation in Asia and Europe, and new technologies disrupting industry after industry, PTO counts on feedback like this more than ever.”

Mr. Byrnes spoke at the roundtable event with business leaders at the CONNECT headquarters in La Jolla. This event gave San Diego stakeholders an opportunity to discuss how to build a smarter set of intellectual property laws for the 21st century, and get updated on key actions being taken to help businesses focus on innovating, not litigating.