Senate Commerce Committee Holds Hearing on Innovation and Competitiveness

March 15, 2006. The Senate Commerce Committee (SCC) held a hearing titled "Innovation and Competitiveness Legislation".

Sen. John Ensign (R-NV) presided. Sen. George Allen (R-VA), a member of the SCC, participated. Sen. Gordon Smith (R-OR) attended, but did not speak or ask questions. Sen. Max Baucus (D-MT) testified as a witness; see, prepared testimony [PDF]. Sen. Joe Lieberman (D-CT) also testified as a witness; see, prepared testimony [PDF]. Sen. Daniel Inouye (D-HI), the ranking Democrat on the SCC, did not attend, but submitted a statement for the record.

Sen. Ensign, Sen. Allen, Sen. Smith, Sen. Lieberman, and others, introduced S 2109, the "National Innovation Act of 2005", on December 15, 2005. The bill now has 23 cosponsors. See also, S 2309, the "National Innovation Act -- Commerce Provisions".

See also, HR 4654, the "National Innovation Act of 2006", introduced in the House on January 3, 2006, by Rep. Adam Schiff (D-CA) and others.

There is also the "Protecting America's Competitive Edge", or "PACE", legislation introduced by Sen. Pete Domenici (R-NM), Sen. Jeff Bingaman (D-NM), Sen. Lamar Alexander (R-TN), and others, on January 26, 2006. There are three PACE bills, organized by subject matter and committee jurisdiction. See, S 2199, the "PACE-Finance Act", which addresses, among other topics, the research and development (R&D) tax credit, S 2198, the "PACE-Education Act", and S 2198, the PACE-Energy Act".

The March 15 hearing, while titled "Innovation and Competitiveness Legislation", was more precisely a discussion of certain parts of certain bills. For example, except for a few isolated statements, there was no discussion, of how pending legislation regarding the copyright system, or patent system, might affect innovation and competitiveness. The witnesses and Senators spoke mostly about federal taxation and spending, including making permanent the R&D tax credit, and spending more of the federal budget on education and research. Also, there was no debate or disagreement.

The SCC heard from four witnesses. Three witnesses represented large U.S. corporations. The fourth represented a group that represents large corporations and research universities in lobbying the Congress for more federal spending on research, and on math, science and engineering (MSE) education.

The participants did not offer explanations of the concepts of competitiveness or innovation. Some used the two terms interchangeably. The witnesses spoke generally of U.S. competitiveness with other nations as a prospective problem which may arise if the Congress does not take action. They said that the problem will arise as a result of circumstances such as disparities in MSE education. Some witnesses spoke of innovation as a process or "ecosystem" that adds to economic growth and competitiveness.

In summary, they argued that the U.S. government should spend more on research and on MSE education, and encourage companies to conduct more research, that this will increase innovation by companies and universities, which in turn will make the U.S. more competitive.

See, prepared testimony [4 pages in PDF] of Craig Barrett (Chairman of Intel), prepared testimony [16 pages in PDF] of Norman Augustine (Chairman of Lockheed Martin), prepared testimony [10 pages in PDF] of John Kelly (IBM), and prepared testimony [14 pages in PDF] of Deborah Smith (Council on Competitiveness).

The hearing also touched on several other issues.

H1B Visas. Sen. Allen said that we should "staple a green card or visa" to diplomas awarded in certain fields.

Intel's Barrett wrote in his prepared testimony that "We must continue to attract the most talented students from other countries -- and keep them here after they graduate, to work and build new companies and industries in the U.S. Yet our visa policies today work against these goals: H1B visas are limited in number compared to our needs, and the backlog for those seeking permanent resident alien status is becoming a huge obstacle to keeping foreign graduates in the U.S. -- particularly when there are superb opportunities for those graduates in their home countries as well."

IBM's Kelly said that covered degrees should include electrical engineering, and certain areas of programming, for graduates with "high performance grades".

Patent Reform. Intel's Barrett raised patent reform in his written testimony. He wrote that "The patent system is in disrepair. We need ... more and better paid examiners; better search tools including expanded databases in computing technologies, semiconductors, and software".

He continued that "The point of the patent system is to encourage innovation and the use, for the benefit of society, of those innovations. Today, the system is beset by ``patent speculators´´, parties who buy up patent claims in the secondary market for the purpose of pursuing often specious claims of infringement. The hope is to use existing judicial rules on remedies and damages to extract large settlements. We need to rebalance the laws to return to the fundamental premise: the patent system exists for the benefit of society at large, and should not simply become a tool for the game of ``legal jeopardy´´."

Sen. Allen made a reference to the importance of intellectual property, but otherwise, the participants at this hearing did not talk about IP law.

S 2109 addresses patent reform, but only in a "sense of the Congress" section.

Telecom Regulation. Intel's Barrett wrote in his prepared testimony that "Our government should adopt telecom policies that encourage broadband deployment and facilities-based competition and, at the same time, assure consumers full access to Internet content and use of related applications and devices. Also, the radio spectrum needs substantial reform." He added that "we need to give licensees more flexibility and allow more unlicensed use where appropriate."

He elaborated in response to questions from Sen. Allen that one promising way to provide more spectrum for broadband wireless services would be to allow use of unused, or white space in, spectrum allocated for broadcasting. He said that this can be done without interference, and would be especially viable in rural areas.

Innovation Ecosystems. IBM's Kelly and the Council on Competitiveness's Smith both spoke about innovation as a product of an "innovation ecosystem", without defining and explaining this term.

Kelly wrote that "In the Industrial Age, innovation primarily was the result of work by individuals or small groups within an enterprise."

He did not write that people no longer innovate. But he did write that "Companies are innovating", alone, or in collaboration with other companies, universities, and government agencies. The ecosystem innovates.

Moreover, wrote Kelly, the nature of innovation has changed. Innovation is no longer just about new ideas. It is about transforming them into new value.

In contrast, Intel's Barrett said "I think we need to choose to compete in three specific areas. One is with smart people. Second is with smart ideas. And the third is an environment to let smart people with smart ideas to be successful."

TLJ asked Barrett after the hearing if there is any difference of opinion regarding innovation by people versus innovation by ecosystems. He said that there is not, and that the panel of witnesses is in agreement.

In a related matter, IBM's Nicholas Donofrio gave a speech in Singapore regarding the future of innovation. ZDNet Asia published a story in its web site on March 15, 2006, titled "IBM: The 'next big thing' no longer exists". The author is Jeanne Lim. The story states that Donofrio said "The fact is that innovation was a little different in the 20th century [than it is today]. It's [now] not easy to come up with greater and different things", and "If you're looking for the next big thing, stop looking. There's no such thing as the next big thing". [Brackets in ZDNet Asia story.]

IBM did not respond to requests from TLJ for a copy of Donofrio's speech.