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gress are probably toward such strengthening, presumably based on the judgment that it will increase the rents accruing to U.S. firms. Given that the U.S. share of all intellectual property is declining as non-U.S. research increases, this is probably a shortsighted position.

Thus, when one looks at the law as applied by courts, one is forced to retreat somewhat from the sense that the patent system is adapting relatively well in the biotechnology sector. The doctrine may be evolving rapidly enough to reduce the overall number of cases, but the expenses of these cases—and the still unsolved international issues—suggest a significant burden for the industry. It is at least possible that this burden falls disproportionately on the newer, smaller, more innovative firms.

Informal Approaches

Business has its ways of adapting to the difficulties of applying intellectual property systems. For example, the American Society for Composers, Authors, and Publishers is a privately created network that resolves the practical problems of collecting and distributing royalties in the musical area where there are so many individual performances of copyrighted works. Such systems are as much part of the effective body of law as are the formal statutes.71

On the basis of anecdotal evidence, the "normal" pattern of intellectual property enforcement is an industry-wide cross-license arrangement in which any payments by one firm to another are based on a very rough comparison of the relative value of the intellectual property contributed by each firm.72 The firm with more patents collects from the firm with fewer patents, with little attention to the value of specific claims. The system thus rewards innovation while avoiding expensive litigation (which is saved for the cases in which a firm makes a serious challenge of the balance). This pattern was, for example, typical of the electronics industry prior to Texas Instrument's challenge of Japanese firms in 1986,73 a challenge that triggered a round of litigation that may now be ending. The cross-license is a natural response

   

Trade Sanctions 1 (1990). The GATT panel's concerns go to certain procedural differences between ITC and District Court enforcement of patent rights against import; the problem discussed in the text is not yet on the reform agenda (and was not posed to the GATT panel), but is probably much more important than the issues identified by the panel.

71  

See Intellectual Property Rights in an Age of Electronics and Information, supra at 269-71.

72  

Consider, for example, the arrangements in the auto and the aircraft industries considered in U.S. v. Automobile Manufacturers Assn., Inc., 1969 Trade Cases par. 72,907 (DC Cal. 1969), modified, 1982-83 Trade Cases par. 65,088; and U.S. v. Manufacturers Aircraft Assn.. Inc., 1976-1 Trade Cases par. 60,810 (DCNY 1975).

73  

See Texas Instruments, Inc. v. United States International Trade Commission, 871 F.2d 1054 (CAFC 1989).



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