A Policy that Punishes American Ingenuity
At the Asia-Pacific Economic Cooperation forum in Osaka last week, the downsized U.S. negotiating team-the budget crisis kept Bill Clinton in Washington-pursued an international agenda that constituents increasingly mistrust. Seventy percent of Americans now believe that the recent free-trade accords are harming the United States. Boeing’s growing Asian procurement-utterly ignored two years ago when President Clinton addressed the forum in a 747 hanger-is fueling a major labor dispute. Ballyhooed initiatives, like Commerce Secretary Ronald H. Brown’s trip to China last year, do little but transfer big-company technology and manufacturing skills overseas in exchange for token royalties.
American’s growing perception that Washington’s policies only protect profits, not people, is fanning alarming extremism on both the left ant the right. Nowhere is this more evident than in a little-noticed, but critical battle being waged over U.S. patent laws.
Invention is one of the things American does best. By offering the strongest patent protection, the United States has stimulated more creativity and new industries than anywhere else-and an annual $30 billion intellectual property trade surplus. Small wonder that foreign companies, particularly in Japan and Europe, dream of weakening such laws and obtaining breakthrough technologies without rewarding American inventors.
Precisely this opportunity beckoned when Clinton appointed Bruce A. Lehman-a Washington lawyer who represented big companies like Microsoft and Lotus Development but lacked any patent experience-to head the U.S. Patent Office. Lehman quickly concluded the patent system needed a radical overhaul. To achieve it, he cut a deal with Wataru Asou, his Japanese counterpart, in early 1994, a deal that may rank as one of the most lopsided agreements in U.S. history.
Under the Lehman, Asou accord, Japan applications in English-provided that the much more expensive Japanese translations that Americans long complained of were also filed two months later, subject, of course, to additional fees.
In return, the United States would scrap its 17-year patent-protection term, which runs from the day a patent is granted, in favor of a 20-year term extending from the day an application is filed-with no time credited for any delays that might occur during the interim review period. This was followed by an agreement between Brown and Japanese Ambassador Takakazu Kuriyama, in August 1994, that the U.S. patent applications would be publicly opened 18 months after filing, rather than when the patent was actually granted.
When the dust settled, Lehman and Brown had exchanged U.S. patent revisions that gutted protection of the most complex, time-consuming and thus potentially lucrative American inventions-and handed the multinationals the early access to U.S. technology development they had long craved-in return for only the most trivial administrative concessions from Japan.
The more important an invention -a microchip or a biomedical device, for example-the longer it usually takes for the Patent Office to review an application. Under traditional U.S. rules, inventors can count on a full 17 years of protection from the day their patents are granted. Under the Lehman-Brown accords, a patent that took 15 years to grant-would be entitled to just five years of protection.
Congressional hostility to these arrangements seemed to scuttle the patent revision effort by the middle of 1994. But after the Brown-Kuriyama accord, the Clinton Administration surreptitiously appended language changing U.S. patent terms and publication procedures into enabling legislation for the General Agreement on Tariffs and Trade.
Angry members of Congress of all political stripes demanded hearings on the patent modifications. In November 1994, Clinton was forced to promise not to veto any subsequent patent legislation. Congress might pass as a condition of GATT approval. But when a House bill restoring the 17-year patent term came up last January, corporate and foreign lobbyists attacked with a vengeance. Individuals brave enough to oppose weakening U.S. patent protection were branded by giant corporations as paranoid xenophobes unfit for a world of international cooperation.
Yet, suspicion about how cheaply Washington values the economic interests of ordinary citizens is more than justified. Former Sen. Bob Packwood’s recently released diaries, for example, detail how he willingly ambushed an American inventor, during 989 hearings on alleged Japanese unfair-trading practices, for a Mitsubishi lobbyist’s promise to pay his wife a mere $7,500. And when the corporate lobby and Administration were challenged to justify their changes in long-settled U.S. patent law, all they could muster were vapid anecdotes, if not outright misrepresentations.
Proponents of diluting patent protection first contended that the Lehman and Brown agreements were binding. But Congress has no obligation to rubber-stamp ill-considered decisions made by inexperienced political appointees.
Administration officials and their multinational allies next raised the specter of “submarine patents”-the possibility that crafty inventors would deliberately impede their applications’ review until lucrative markets developed for their ideas, only to later “surface” and “torpedo” innocent businesses with multimillion-dollar patent-infringement claims. When pressed, however, the Patent Office conceded that, for the last several decades only one in nearly 8,000 applications had taken longer than 20 years to process. Of the 600 cases Lehman later contended fit the dreaded “submarine patent’ profile, 60% were delayed for national security reasons, not inventor malfeasance.
Finally, patent diluters retreated to “harmonization,” the notion that all economic rules should be the same everywhere. Since patent terms in Europe and Japan, they reasoned,, extend 20 years from filing, and both European and Japanese applications are opened at 18 months, GATT requires the United States to adopt identical provisions.
Quite the contrary, GATT expressly mandates only a minimum of 20 years to assure that “have-not” countries provide at least some period of patent protection. Its intent is to elevate each nation’s economic laws to the highest possible level, not reduce them to the lowest common denominator.
Given such weak justifications, why would the foreign-policy elite want to cripple America’s premier patent system?
Giant multinationals like GM and IBM don’t compete with new ideas; they try to dominate and stabilize markets with their size and distribution capabilities. The more cheaply they can buy the components they sell under their brand names, the higher their profits and stock prices-even if that means shifting hundreds of thousands of jobs overseas and depriving creative Americans of a reasonable return for their efforts. This plays right into the hand of Japan and other countries that do care about sustaining domestic jobs, technologies, and skills-countries that are only too happen to jump on the anti-U.S. patent-rights bandwagon.
The political result is increasing distressing for the United States, the failure of official trade policy to deliver on its promised benefits, and the destruction, by well-funded lawyer- and lobbyist-attack squads, of any credible alternative to elite Washington policy. Woefully underfunded inventor groups who opposed the proposed patent changes, for example, have had to plead their case via Internet e-mail and low-budget Web pages in the face of official media indifference.
Legislation to reverse the patent-law revisions is currently bottled up in the House Judiciary Committee. If the legislation fails, the result will not just be bad news for U.S, inventors, but yet another signal that the responsive government so many now seek is fading away.
David Friedman, president of an international business consulting firm, is an urban economist and fellow of the MIT-Japan Program.
by David Friedman
Los Angeles Times, Sunday, November 19, 1995