Looking Forward to LeadershIP with Kirti Gupta – The Six Five

By Patrick Moorhead - April 8, 2024

On this episode of The Six Five, host Patrick Moorhead is joined by Cornerstone Research‘s Kirti Gupta VP & Chief Economist, Global Tech. Kirti brings a wealth of experience from her 20 years at Qualcomm and shares her insights into the LeadershIP 2024 conference, the critical role of technology and innovation policies, and the challenges facing the US in maintaining its competitive edge in the global tech landscape.

The discussion covers:

  • An overview of the LeadershIP 2024 conference, its evolution, and the significance of its new partnership with CSIS.
  • The dichotomy between open ecosystems and closed models in today’s economy and the impact on innovation.
  • The strategic considerations of national security and the dangers of technological monopolies from a country perspective.
  • Examining which innovation model will triumph in the face of global competition, and the role of financial resources.
  • The effects of diminishing intellectual property rights in the US, and the necessity of protecting these rights to ensure competitiveness.
  • The potential lag of the US behind other jurisdictions in implementing regulations similar to the EU’s Digital Markets Act, and the implications.

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Transcript:

Patrick Moorhead: The Six Five is back and we are talking about intellectual property, innovation policy, national defense, and of course we have to talk about AI because it is 2024. We’ve extensively talked about this wheel of innovation, how companies invest with different countries and different companies are doing. And it is fascinating and with AI or generative AI coming into the forefront, it just opens up another big opportunity to go through these and discuss public policy, what it means to countries, people, and everything in between. I can’t imagine a better person to have on the show back on The Six Five. Kirti, it’s great to see you.

Kirti Gupta: Great to see you again, Patrick. Thanks for having me back.

Patrick Moorhead: Yeah, maybe a great place to start is I think maybe the last time we talked, you were at Qualcomm, and I think you were there for over 20 years, but you are working for a different organization now. Maybe talk a little bit about what the organization is and what it does and what you’re doing there.

Kirti Gupta: Yeah, I’ll start with that. I was at Qualcomm for a little over 20 years and finally as the company’s Chief Economist. And right now I am the Chief Economist of Global Technologies at Cornerstone Research, which does litigation, regulation, expert work for different kinds of litigation issues and my specialization is of course in intellectual property and I trust in tech. And I wear the hat at this think tank called Center of Strategic International Studies, CSIS, which is a national security defense think tank and is really beginning to focus a lot more on innovation policy issues.

Patrick Moorhead: That’s wonderful. And I think the last time we talked, we talked about LeadershIP 2023 and gosh, where did the year go? LeadershIP 2023 is coming and it has a new home at CSIS. Can you talk a little bit about what is CSIS? What’s LeadershIP Conference and maybe talk about what this year’s focus is?

Kirti Gupta: LeadershIP, as you know, Patrick and for our audience was designed to bring together different communities. And by the way, LeadershIP stands for LeadershIP with IP capitalized.

Patrick Moorhead: The IP, yes.

Kirti Gupta: So for different communities to come together and discuss, debate, unite and lead on the critical intellectual property and issues that industry is dealing with. And industry often deals with a moving set of issues on the intellectual property front, sometimes leading to litigation and other licensing issues that policy makers need to be focusing on and that innovation and intellectual property experts or academic study. So how do we make this all relevant under a common roof and really have these communities talk to each other really with the goal of informed policymaking and informed businesses?

And the reason that it has found its new home at CSIS is I think, it’s a very critical moment in time and it’s a really good opportunity to bring together the innovation and intellectual property focus at the intersection with the national security, economic competitiveness issues that are critical for our economy today. And I think one of the things that we are trying to do here is we are trying to underline the fact that most of the… In our economy today, national competitiveness is formed competitiveness.

Patrick Moorhead: Yes.

Kirti Gupta: Because gone are the days where most of the R&D in the United States was being funded by the public sector, governments, et cetera, universities. Most of the R&D dollars, if you look at the data, are spent by the private sector, and a lot of innovation comes from the private sector. So if we don’t have the means to create and maintain the right incentives for innovation from our firms, we will lose the geotechnological race that we all find ourselves in. So I think it’s a really great time for LeadershIP to be joining hands with CSIS and bringing the national security, economic security aspect to this conversation.

Patrick Moorhead: Yeah, it’s a noble cause. It’s an important cause. And I’ve been in the industry longer than I would like to admit. I’m also a student of history. In my spare time I read history books and some of those are about technological history. And I do think we’re in a phase right now where particularly this AI, it’s as big as the beginning of the internet. And we all saw what that type of innovation, that open innovation brought, and here we are at a similar junction. We’re seeing closed approaches, we’re seeing open approaches to really all models. I mean it’s been in the public eye of AI, but tell us what we’re seeing, what’s the latest and greatest in terms of open and closed ways of approaching things?

Kirti Gupta: Let me zero in on AI because that’s where you started. One of the conversations we have often at CSIS is the amount of level playing field that these technologies have created in terms of the national security, economic competitiveness priorities. It’s a big paradigm shift. And that’s why it’s no surprise that a lot of nations around the world are focusing on how to be winners in the technological race. AI in particular is seeing a lot of focus from policy makers across the world on different kinds of regulation. I think Stanford had a study on the number of regulations that passed, around 135 different laws from 37 different nations in 2023 alone. So it’s a patchwork.

But if we step back and look at the questions that are being asked, it’s really asking questions about safety and security, algorithmic bias, hallucinations, whose IP is it? What should be patentable or not? A number of questions that society is asking about in new technology that have been asked but not yet been answered, and some of those questions you’re seeing playing out in litigation in the real world again, because those questions have been asked and are not yet answered.

In terms of bringing this back to LeadershIP, we do have a panel on artificial intelligence and intellectual property and there are two broad set of questions at the intersection of AI and IP. Of course, when I mean IP, I mean patents and copyrights and trade secrets. So let me just talk about this very broadly. The first question is, now that you can invent using assistance of AI, what’s patentable, what’s copyrightable and what’s not? That’s a big question and the US Patent and Trademark office has been doing some hearings on this, getting comments of thousands of different stakeholders and there have been a few lawsuits about this to try to figure out where to draw that line. And I think it’s a very difficult question for us to try to answer as-

Patrick Moorhead: Well, it is, and particularly it even goes back to the early days of the internet, which was what can be crawled by a search engine. We had very similar discussions back in the early days of the internet and those made its way through the court system. And we are here today where you can present certain amount of information in a search result, and I’m not under the delusion that generative AI is exactly the same, it’s not, but I’m seeing very similar types of arguments and discussions on both sides.

So there’s been some discussion in the context of national security that hey, we should go with the big companies, the big companies because they’re the best to compete with let’s say an adversary overseas. But it’s interesting, if I look at where most of the innovation has come from in 30 years, it didn’t start with the largest companies. It actually started with the smaller companies who ended up getting very, very big. I mean in the early 2000s, Google was barely even a player, and now look at them. Microsoft certainly was a small company when it started back in the 80s, and look at where we are now. But from a national security perspective, is it better to put all of your eggs in one basket or is it to diffuse technology over maybe smaller different players? What are your thoughts on that?

Kirti Gupta: I think taking a broad view as an innovation scholar, I would say that one of the things that makes the United States one of the most innovative economies in the world is because we follow a market-based economy. We follow an approach where we let all different kinds of innovation models play and flourish with as many degrees of freedom as possible. So to me, looking at the innovation economy writ large, I would say that there are three broad ways in which companies are able to spend the R&D investments that they need to. One is, Patrick, you have an idea and you invest in that idea. You are not able to manufacture a product based on that idea, you’re a startup or a small company or you’re a university, but you can license out that idea to others. So we need to have a strong licensing regime and intellectual property regime to be able to allow those small players to flourish.

But there are other ways of innovating. You can be taking those ideas and finding the best way to manufacture those ideas into products, first to market, economy of scale, other kinds of efficiencies like network effects, and you should be able to utilize them to innovate. And that has been one of the ways in which some of large American companies have gotten to where they are, some that you mentioned, and succeeded in the marketplace. And then the third broader way is subsidies, state funded. We are trying to spur innovation with the Chips and Science Act in semiconductors, again with more manufacturing being shored and re-shored back to the United States.

But there is, make no mistake, there is an understanding there that even if we put state subsidies like a sizable amount, like 56 billion dollars in Chips and Science Act, we have to create a public-private partnership. We have to bring the private investment in. So I think it’s really important if US didn’t have an innovation policy, which it doesn’t, to think about, I mean a broad unified innovation policy, we just don’t have a centralized one, to think about how do we create these strong public-private partnerships to spur innovation. I think that’s what’s missing right now.

Patrick Moorhead: And would that be an example of the Chips Act? Would that be private-public partnerships or is it something different? Because Kirti, what we are up against right now is different as we’ve ever seen, is we’ve got a top-down model where money is no object, that governments are spending particularly in Asia. And I’m curious, what type of model innovation is best to compete with that?

Kirti Gupta: Yeah, so that’s a really important point. So I think let’s step back, and by the way, Patrick, I would like to bring this conversation back to IP at some point.

Patrick Moorhead: Sure.

Kirti Gupta: You’re right. We are competing in a global economy where there are other innovation models that are much more centralized. There is more state subsidy, more funding from the government. And the question we need to ask ourselves is, is that a model that the United States can totally or partially follow and succeed? I’d like to share the story with you here of somewhere I read about the waning days of USSR when Mikhail Gorbachev sends one of his aides to study the market for bread in London. And he goes around the city and he finds that there are no lines for bread ever and there’s no shortage of bread. So he asks his host, “Who’s in charge of distributing bread in the city?” And of course the answer he gets is, “Well, no one,” because centralized systems don’t work as well.

So I thought that question has been long asked and settled, and we are right now in a period of angst because of the geopolitical tension that we live in, that we are struggling to keep and maintain our technological innovation edge. But if we pigeonhole ourselves into this one model of innovation, we are trying to do this with the help of pure subsidies, it’s far more likely that we’re going to fail. We have succeeded so far because of creating and maintaining these different models of innovation and let the markets have many more degrees of freedom. So I think we should be, and that’s one of the goals here of our conversation at LeadershIP, we should be very conscientious about creating public-private partnerships to solve the innovation challenges facing our firms and our economy today.

Patrick Moorhead: Appreciate that. Let me pull this back to IP. So I can’t claim IP expert like you can. It’s one of the things that as an industry analyst my company weighs in on. But what is super clear to me is that we’re, the US very specifically, seems to be harming itself with our ability to compete because we’re watering down IP productions. And it’s very simple, you don’t need to be an IP expert to understand this, but if you demotivate companies from doing something economically, then they are not going to invest in that.

And therefore, if companies who create the core intellectual property to keep us competitive, they won’t invest the billions, the tens of billions, the hundreds of billions of dollars, to do it. So I have to ask, what do we do? What I’m seeing is policy or actions of some companies who don’t find core intellectual property valuable are demotivating this even more even here. What do we need to do to turn the corner here?

Kirti Gupta: So there will always be disputes in terms of different businesses and different companies trying to hash out which intellectual property is valid, which one’s enforceable, which one’s actually being infringed and how much it should be valued at. Those discussions are part of the economy, they have to exist, they will exist, and questions on the merits will have to be determined by the courts and other arbitration bodies. But I think it’s really important for policymakers to not put their thumb on the scale and really favor any one method of innovation over another and let all of them be in the menu of options, let us say, for firms to choose from. And one of the things that we have seen in the last several years vis-a-vis intellectual property is that in this global tech competition, we are seeing a lot more activity on intellectual property from countries like China than in the United States.

Let’s start by just the number of patent filings. China ranks number one in the patent filings in the world IP Office Index for the last several years. There are special quotas and incentives for filing patents in China that have been studied by scholars like Mark Cohen to the T, like why are there spikes in filings in certain months and so on. So there are special quotas for patent filing. Then let’s talk about the question of enforcement. There are four specialized IP courts that have been established in China in the last 20 years. There are, in terms of patent litigation, there are four or five times the number of patent litigation lawsuits filed in China than in the United States. A docket is much larger. So it is becoming a very important IP jurisdiction, but at the same time we are not seeing those kinds of trends in the United States. There has been a lot of discussion about injunctions.

In the United States, there was a historic ruling on eBay versus Merck Exchange that has been largely said to dilute the number of, or the conditions in which injunctions are made available. Or let me just pause and explain to our audience what injunctions mean. It means that if Patrick has a patent and I have a product that infringes on his patents, he can’t get a court order that easily to stop me from selling that product that infringes on his intellectual property. And if it’s really hard for him to stop me from doing that, what it then does is that it changes the incentive for me to license or to negotiate a license with Patrick.

So those questions have been asked for the last almost 20 years in this world of intellectual property about what that ruling has meant and how much that has changed the incentives of negotiation on intellectual property outside the courtroom, and therefore how much has it changed the incentives for people who are thinking about inventing in this particular menu of options in this way. There are other types of questions about what’s patentable subject matter, we covered that, about different ways in which patents are being challenged in the patent office.

And there are legislation right now that is pending in the name of Prevail and PIRA Act in the Congress, on some of these patent issues. I think the long and the short of it is that there are many questions that are being asked in terms of policy and the law about patents right now in the United States in the backdrop of a lot of action in other countries like China that we need to hash out and discuss at a place like LeadershIP.

Patrick Moorhead: I just find it ironic where the US started and where we are and where countries like China started and where they’re going. In a way, I’ve seen an argument that China’s doing more to protect their intellectual property than the US is. I’m sure that can be debated, everything can be debated here, but I still find even the fact that we have that debate fascinating. I want to shift to you-

Kirti Gupta: It’s really important to get the data out. That question that you just said, I think there are some really good academics out there that some of them will be at LeadershIP, some of them I would like to bring them, they’re looking at the actual lawsuits in China involving foreign companies and asking them empirical question, whether it’s true that in aggregate the decisions are being made more in favor of domestic companies or not. And I think it’s a really valid empirical question that may not have the obvious answer that some people are thinking about. But go ahead, Patrick. Sorry to interrupt.

Patrick Moorhead: No, no, that was a great follow on. And balkanization, what we’re seeing right now, I mean in aggregate, I think you can argue that if we look inward and maybe have two or just three different ways as opposed to seven different ways to manage this, I don’t think it’ll lead to more innovation, it’ll actually lead to less. So I wanted to shift to free markets, competition. We saw the EU create the Digital Market Acts that sets up gatekeepers and certain, not calling them monopolists, but gatekeepers that have a certain level of power, gatekeepers for consumers and other technologies and gatekeepers there.

Now, the US isn’t doing much of anything like this. We look to be suing companies instead of actually having something like this. And it appears that Japan, Korea, Australia and the UK are considering this DMA-like legislation. Is it a bad thing or a good thing that the US on one hand it’s like, “Hey, we’re not setting up laws that could potentially reduce innovation,” that’s one part of the argument. On the other hand, “It’s my gosh, we’ve never been at a time when the big companies have been this big with this much power. We need to do something to enhance innovation and increase competition and lower prices.” Where do you sit on this?

Kirti Gupta: So certainly we are living in a world where there is now far more scrutiny and regulation towards big tech, what we call GAFA companies sometimes, than there ever was before. And it started with, as you Patrick noted, with the Digital Markets Act in Europe. And in one way, Europeans or the DMA tends to have what we call in our world a Brussels effect that doesn’t happen with US regulation per se. So there’s much more likely that, like you said, some of the countries, Australia, Japan, India, etc, following the commission approach, in the past we’ve seen that, than following the DOJ and FTC and there’s reason for that. Let me just pause here and remind our audience that there are in the only last 25 years, over 130 competition authorities, antitrust authorities around the world. Simply put, there aren’t a hundred jurisdictions with the rule of law.

So it creates a very interesting patchwork for big companies to be able to navigate and we’ve seen that firsthand many times, so I think that we are going to see as we are seeing more of this. I think that if you’re asking for my view, the US approach where there isn’t a regulation, but there is going to be, we are seeing more litigation in the courtrooms, is going to ask these questions in far more of a public eye. We are going to be able to see the record and the facts much more so than we would have the opportunity to observe in other jurisdictions.

So it’s a really good question for us to come back to next year and look at the facts and see what happened. What’s interesting right now is to think about where this goes and I think that we are probably all going to be able to see that. You and I can argue about whether this is a good thing or a bad thing, but it’s happened, the ship has sailed. The Brussels effect is it’s very likely to continue.

Patrick Moorhead: No, I appreciate that and I like to have issues as black and white, but these very much are shades of gray and to be determined, I think history will-

Kirti Gupta: In terms of the questions of the innovation economy, I think we should go back to that point of we need to have the different menu of options of innovation. And one of the things that concerns me is again, that we don’t have a overarching innovation policy that combines the goals of intellectual property and competition and other vehicles under a common umbrella working in the same direction. So hopefully we can avoid conflicts between those, but sometimes we’ve seen those in the past. So let me give you some examples of the things that we’re going to talk about at the conference where there are global developments happening that affect US industries without fully realizing that global developments have effect on US industries.

A couple of those are on standards. On standard essential patents, there is currently pending legislation now, regulation in the European Union, about some kind of regulation for patents that are relevant or specific to standards like 5G technology standards that will be powering and connecting your cars in the future and your IOT devices in the future. Although that would be European regulation, it would affect US industry. Another area is whether or not some drugs for certain pharmaceuticals should be covered under compulsory licensing regimes. And similarly, whether there should be march-in rights for governments to come in and decide what should be the price and licensing of patents that were generated from partly government funded research, and this is a big step back after the Bayh-Dole Act. So those are questions that are actually affecting the US industry’s decision-making today that we should be thinking about carefully.

Patrick Moorhead: It’s been a fascinating discussion. Kirti, I wanted to give you the last word. Is there anything that I should have asked you that I didn’t ask you that would be relevant for the LeadershIP conference coming up?

Kirti Gupta: At LeadershIP, one thing I do want to remind everybody, we have at the intersection of intellectual property, innovation and national security, experts coming that are thinking about innovation and IP from a national security angle. So one of the things that I’ve been trying to drive in this conversation and we would want to have at LeadershIP is what should an overarching innovation policy in our nation look like and how should we be doing a coordinated interagency dialogue to create one?

Patrick Moorhead: I love it. How do you get to LeadershIP? Is it online? Is it in person only?

Kirti Gupta: Please visit us at www.ipLeadershIP.org. You could attend in person in Washington DC at the headquarters of CSIS, Center for Strategic International Studies, or you could join us virtually. We would love to see you either way.

Patrick Moorhead: That’s great. Kirti, I want to thank you for coming on The Six Five. Again, these conversations always stretch my brain and it is an affirmation of who are the experts in these issues and who aren’t, and you’re certainly in the top echelon of that. It’s exciting. Thanks for coming on the show.

Kirti Gupta: Thank you Patrick for having me.

Patrick Moorhead: This is Pat Moorhead with The Six Five and of course, Moor Insights and Strategies. Signing off here with Kirti Gupta, VP and Chief Economist of Global Technology at Cornerstone Research. Check out the show notes, a link to the LeadershIP 2024 Conference, background on Kirti. Have a great morning, afternoon, evening, wherever you are on the planet. Take care.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.