Following this agreement, there was the TRIPs (trade-related aspects of intellectual property rights) agreement in 1995. It requires its member countries, among others, to make patent protection available for any inventions, whether products or processes, in all fields of technology, with only with a few specified exceptions, and to make the term of protection at least as long as twenty years from the filing date.

Subsequently, Japan has taken the initiative by making patent reform one of the cornerstones of its domestic reform initiative. Japanese policymakers and industrialists have recognized the increasing importance of intellectual property system in an economy where investments in intangibles have become very substantial. Many of them also believe that stronger protection of intellectual property rights in the United States since the beginning of the 1980s has been an important factor in the impressive recovery of the U.S. economy, which was fueled substantially by innovations in information technology (IT) and biotechnology, which depend significantly on IPR (although not necessarily on patents). The reform in Japan has become deep and extensive in the 2000s, including the implementation of the series of action plans coordinated by the Intellectual Property Policy Headquarters headed by the prime minister beginning in 2002, the enactment of the Basic Law on Intellectual Property in 2003, and the establishment of the Intellectual Property High Court in 2005.

Although it is too early to evaluate the economic effects of the overall reform of the intellectual property system, the experiences of the past decade or so have highlighted new challenges as well as provided useful policy experiments. This paper analyzes three major challenges facing patent systems in Japan and in the United States for the purpose of promoting innovations. Section 2 provides a brief discussion of the patent system reform in Japan in recent years. Section 3 covers the need for efficient patent examination to handle the rapidly growing number of patent applications and their growing complexity as well as to ensure high patent quality. Section 4 discusses efficient use of information disclosed in patent documents for industrial research. The question is how efficiently a firm is using this information in its R&D and patenting behavior. Section 5 discusses the patent thicket problem in standard development and other cumulative technology areas. This section clarifies how more patents may actually hamper innovation. Each section discusses brief policy directions for the future.

Although this section focuses on the changes since the early 1990s, it is worthwhile to note that important measures were already taken in the 1970s and the 1980s. The first measure was the introduction of product patent in 1976, and the second one was the liberalization of multiple claims for a patent in 1988. Before the change, a patent could accommodate only one claim, which made it difficult to protect the parts as well as the whole of an invention. The effect of