Corporate Approaches to Protecting Intellectual Property: Implications for U. S.-Japan High-Technology Competition: Report of a Workshop (1994)

The workshop highlighted fundamental differences in the philosophies of the patent systems in the United States and Japan and in the ways that patents are used by companies in both countries. These differences are reflected in corporate strategies that focus more and more on protecting intellectual property rights (IPR), in the Japanese case often as a vehicle for technology access and diffusion, and in the U.S. case to gain an exclusive position in fundamental technologies —and hence to justify and protect investment in manufacturing facilities.

Workshop participants agreed that the Japanese patent system still represents a significant hurdle for U.S. high-technology companies trying to expand their participation in the Japanese market.1 Many of the difficulties encountered by U.S. companies could be alleviated by their devoting more resources to protecting IPR in Japan (e.g., by developing Japanese language skills and other capabilities that allow for better-crafted and accurately translated Japanese applications). Participants also agreed that changes in the Japanese system would significantly improve the access of U.S. companies. The most serious problems reported by U.S. industry representatives at the workshop were long delays in obtaining Japanese patents and the narrow scope of the patents that eventually issue. Among the most desirable changes Japan could make in its system are: (1) allow foreign language filing as is practiced in the United States in order to relieve the time pressure on translations, lower the cost of filing in Japan, and raise the effectiveness of U.S. patent applications in Japan; (2) eliminate pre-

grant opposition and serial consideration of oppositions in order to reduce the pendency period; (3) adopt a broader doctrine of equivalents; and (4) adopt an effective discovery process, particularly relevant to litigation over process patents.

A wide range of specific policy options was discussed, including options for the U.S. government and for corporations and other organizations (such as universities and research institutions).

The U.S. government has played and will continue to play an important role in IPR through legislation, through negotiations with Japan, and through judicial processes and regulatory reviews. Based on recent experience, legislation has proven effective in addressing specific obstacles faced by U.S. industry in protecting IPR. The 1988 trade act, for example, makes it easier for a U.S. company to sue for infringements of process patents. Suits can be brought against not only the manufacturing company that infringes on the process patent but also the importing company and the user. The provision of copyright protection for software is another example of a significant legal change.

In a number of cases where U.S. companies have brought Japan-related patent problems to the U.S. government, these companies have received strong support in making their grievances known. In some cases, this has resulted in changes in behavior on the part of Japanese companies or the Japanese government. One message that came through quite clearly was that if the United States makes changes in its system, promoting harmonization of international policies (such as adoption of a first-to-file system), the United States should get something significant in return. In preparing for such negotiations, the U.S team needs to analyze carefully what each country will gain and lose from prospective changes.

Several desirable changes in the Japanese system may not be as difficult to bring about as is often assumed. Although workshop participants disagreed on the importance of Japan switching from its unique system of pregrant opposition to a postgrant system as is practiced elsewhere, this is an example of an area where Japan may be willing to adjust its policies. Other changes in the Japanese system that might be pursued in negotiations include increasing the number of examiners; eliminating serial consideration of oppositions as well as pregrant opposition; making it possible to reissue patents and expand claims; adopting a broader doctrine of equivalents; expanding discovery rights on process patents; expediting judicial review; gaining broader protection for patents; adopting a one-year grace period for activities of the inventor and his or her employer prior to filing; and (perhaps the change that would have the broadest and most immediate impact) allowing foreign language filings as is the practice in the United

States and Europe. The workshop discussions indicated that problems that arise from last-minute rushed translations into Japanese cannot be overstated.2

Another more dramatic legislative change was discussed, which would amend the 1974 Trade Act. Introduced in 1993, S. 149 identifies countries (including Japan) that deny substantive standards for patent protection and instructs the U.S. Trade Representative to retaliate. Although the nature of the retaliation is left undefined, one avenue might be to use tariffs to retaliate against trade loss because of inadequate IPR protection. Many workshop participants expressed the view that such legislation would be a “driving force” toward changing foreign systems, but others worried that a unilateral approach might dampen progress in multilateral negotiations. Lack of progress on the multilateral level, however, is a primary reason given for the need for such legislation.

Regardless of what happens in U.S.-Japan negotiations on IPR issues, the United States should be cognizant of the fact that Japanese companies likely will continue to enjoy more access to U.S. research and innovations than vice versa. Generally, Japanese companies have relatively free access to U.S. universities, research labs, and innovative start-up firms, whereas similar high-quality research and development (R& D) generally is not found in such institutions in Japan. The U.S. government is a major supporter of R&D in universities and start-ups and increasingly is an owner of commercially relevant IPR. Additional efforts should be made to ensure that the taxpayers get their money 's worth from R&D they fund and at the same time, to promote partnerships between national laboratories, industry, and universities that enhance technology application as well as development. Global filing of patents should be pursued as well as agreements that promote technology “flowback ” from Japan. Workshop participants discussed one specific legislative proposal that would make it possible for companies cooperating with federal laboratories in technology development to own IPR, at the same time providing added incentives to national laboratory employees who participate.

Finally, it was noted that streamlining the U.S. system should be a goal, regardless of international pressures. However, it was also noted that some members of the U.S. patent bar may oppose changes that reduce litigation.3

U.S. firms have faced significant problems in protecting intellectual property in Japan or vis-à-vis Japanese competitors. Although workshop participants discussed a number of examples of delay in patent approval as well as other problems, in some cases apparent discrimination against a U.S. company has turned out to reflect the inability or unwillingness of U.S. companies to work the Japanese system “the Japanese way.” Getting to know patent examiners, preparing accurate Japanese language translations, and filing narrower claims all were cited as effective approaches to the Japanese system.

It is important to keep in mind that the Japan Patent Office is part of the Ministry of International Trade and Industry (MITI). The most blatant cases of delay have occurred where Japanese industry lags and bringing Japanese companies up to world-class levels is a major policy goal. U.S. companies that have real grievances should bring them to the attention of U.S. government officials and should seek a wide audience for their claims.

Although there is evidence that the U.S. system provides stronger IPR protection than it did ten years ago, there was no agreement at the workshop that U.S. companies have developed effective IPR strategies. A number of successful strategies were outlined, but there was no agreement that these are representative of U.S. industry overall, particularly smaller companies. Some of the things that most savvy U.S. companies are doing include reviewing advertising literature and technical papers in order to judge whether patent infringement is occurring. Some participants suggested that streamlining the U.S. system would allow U.S. companies to pursue more effective strategies. Specifically, a system that allowed an abbreviated early filing to “stamp in” the priority date, with the option of filing a more complete application and requesting examination within a year, would relieve the most severe pressures of the current system or the first-to-file system if adopted here.

In a general sense, companies and other organizations should consider investments in IPR as a necessary component in the effective development, application, and management of technology. CEOs should consider mobilizing accordingly in order to bring IPR issues to public attention.