RATCLIFFE: How U.S. Patent Litigation Threatens National Security

Much ink has been spilled by national security experts on the ways foreign adversaries, such as China, Russia, and Iran wield political and economic influence to expand their power and undermine the United States’ global standing.

Numerous threats demand our attention and often capture headlines, such as military buildups, cyber espionage, and disinformation campaigns. Alongside these more high-profile hazards, there is a quietly growing and increasingly pressing national security concern: foreign actors’ attacks on American businesses and intellectual property through our judicial system.

To understand their strategy, it’s important to grasp the current landscape of U.S. patent litigation. Approximately 60 percent of all U.S. patent litigation is brought by non-practicing entities, often called “patent trolls.” Shell companies are created to buy up broad, unused patents and weaponize them through lawsuits targeting businesses. Nefarious third parties — including foreign adversaries — can fund patent trolls and use lawsuits to access sensitive information, gain an unfair competitive advantage, and advance future litigation campaigns against the same company and others in the industry. This practice reflects a potentially coordinated attempt to use lawsuits to steal intellectual property from American businesses.

Broad and invasive court-ordered discovery in patent infringement cases requires divulging a company’s crown jewels — which might include critical confidential information like source code, engineering specifications, and detailed financial data — to hostile actors funding lawsuits or operating behind a patent troll shell company. This information can take months to gather, diverting key personnel away from their primary tasks and racking up huge legal bills. Despite the use of protective orders, bad actors can still manipulate this process by taking photographs of source code, failing to return documents, and engaging in careless handling of highly sensitive information. And a major ransomware attack against a leading eDiscovery service provider highlights that no system is immune from compromise, regardless of security precautions.

There are serious concerns that foreign adversaries are funding lawsuits against American companies in the defense industry and other highly sensitive sectors. The impact of these attacks, however, carries consequences for businesses across all industries. The information that could be uncovered would allow litigants and their funders to replicate technologies and strategies, empowering them to anticipate and counter American innovations. This not only undermines the competitive edge of individual companies but weakens the nation’s overall standing as a global leader. 

Last month, a Bloomberg Law investigation uncovered that Russian oligarchs with ties to Vladimir Putin are pouring funds into U.S. courts through third-party litigation. Recently, it came to light that an investment entity based in the People’s Republic of China is funding patent litigation here in the U.S. A recent op-ed in The Wall Street Journal highlighted how a patent troll is repeatedly targeting U.S. semiconductor manufacturer Intel. The shell company is a subsidiary of a hedge fund that is majority-owned by a sovereign wealth investor. 

This is likely only the tip of the iceberg. 

During my tenure as the Director of National Intelligence under President Trump, and while serving on the Homeland Security and Judiciary committees in Congress, we recognized patent trolls’ ability to exploit our judicial system and serve as puppets for adversaries participating in U.S. litigation as undisclosed third parties. State attorneys general, House Speaker Mike Johnson, and Sens. John Kennedy of Louisiana and Marco Rubio and Rick Scott of Florida have recently raised serious concerns about the looming threat of foreign adversaries funneling money into litigation against U.S. companies. 

To preserve our nation’s security and prevent economic harm, we need to ensure that the American intellectual property system protects American businesses and innovation. This includes heightened disclosure requirements for litigation funding in our courts. This basic level of transparency is critical to ending this kind of foreign meddling, as funders would no longer be able to fly under the radar. We cannot continue to be left in the dark about who is influencing our judicial system. 

It’s time to sound the alarm and stop attacks on U.S. intellectual property. America must act to prevent this form of manipulation by foreign competitors. American businesses and the security of our nation may never recover from this assault if it remains in the shadows.

John Ratcliffe is an American politician and attorney who served as the Director of National Intelligence from 2020 to 2021. He previously served as the U.S. representative for Texas’s 4th district from 2015 to 2020.