November 5, 2002

November 5, 2002 | Lecture on Internet And Technology

Reaffirming Intellectual Property in an Information Age

This week marks the bicentennial of the creation of the U.S. Patent Office. In fact, tomorrow night at the Library of Congress I will host a reception and dinner to be attended by nearly 40 inductees of the National Inventors Hall of Fame--the pioneering inventors of our time.

While our anniversary celebration is unlikely to generate many news stories, its significance should not be underestimated. For 200 years, the U.S. Patent and Trademark Office (USPTO) has served as the clearinghouse for American innovation and for promoting intellectual property (IP) rights here and abroad. In turn, these rights--the basic right to benefit from a product of one's thoughts and ideas--have played a critical role in America's evolution into the most technologically advanced, economically vibrant power on earth.

The celebration of the legacy of the USPTO and America's IP system, however, comes at a time of great challenge for the agency and for intellectual property rights generally. An explosion of patent filings and increasingly complex technology threatens to overwhelm the USPTO. The time it takes for a patent application to make it through our agency now averages two years, and without significant changes to the way applications are processed, those average delays will soon reach three to four years. In some complex and critical areas of technology the delay already easily can stretch to three or four years. The failure to provide quality examination and processing in a timely fashion greatly disadvantages U.S. inventors and businesses.

As the USPTO confronts these challenges, the very tenets of the U.S. intellectual property system also are under assault in some quarters. A lack of a clear understanding of how intellectual property works--and just what it protects--is manifesting itself in increasing efforts to undermine the rights of IP owners and weaken American IP laws. From the wholesale pirating of copyrighted music that began with the likes of Napster, to the Senate's recent passage of legislation undermining pharmaceutical companies' patent rights, we seem to
have forgotten the wisdom of our Founding Fathers and the importance of protecting intellectual property.

I mention the Founding Fathers because, as a student of history, I continue to be amazed at the wisdom of the authors of our Constitution. When the Founding Fathers created our new Republic, they carefully drafted our Constitution to be limited in scope and federal authority. However, as they painstakingly crafted the institutions of our new government--the presidency, the courts, the Congress--they also saw fit to include a clause in Article 1, Section 8 anticipating the establishment of a patent system and the protection of intellectual property.

With their attention focused on the birth of a new Republic, why did the Founders feel the need to deal with what appears to be, at first blush, an obscure area of law? The answer is as important to our generation as it was to theirs. They understood that our young, agrarian colony would never grow to be an economic and technological giant unless there was an incentive for inventors to create and for other inventors to study and improve upon those creations. From this foresight came the American systems of patents, trademarks, and copyright protection, which give inventors and authors the ability to enjoy, for a limited period of time, the exclusive economic benefits of their genius.

In 1790, President George Washington signed the bill laying the foundation of the modern American patent system. That same year, the first U.S. patent was granted, and the examiner of that patent was none other than Secretary of State Thomas Jefferson. In 1802, the U.S. Patent Office formally was created, and since that time our office has issued more than 6 million patents and registered more than 2 million trademarks.

For over two centuries, America has profited immeasurably from the strength of our IP system. Today IP-based enterprises represent the largest single sector of the American economy--almost 5 percent of the gross domestic product--and employ over 4 million Americans. More than 50 percent of U.S. exports now depend on some form of IP protection. Perhaps even more telling, American IP exports are greater than the exports of the automobile, agriculture, and aircraft industries combined. Around the world, a high correlation exists between a country's economic strength and the vitality of its IP protection. While no single cause explains economic growth, it's no accident or coincidence that the United States is the established global leader in both of those categories.

Everyone--whether they are an intellectual property owner or not--is a beneficiary of that wonderful gift that the Founders provided in the Constitution.

But as Paul Harvey says, here's "the rest of the story."

USPTO CHALLENGES/STRATEGIC PLAN

The bad news is that the USPTO has become a victim of its own success. As the years go by and as innovation rapidly accelerates, technology does not get easier. Technology becomes much more complex. Nonetheless, the Patent and Trademark Office is still essentially operating under the same model that it was back in 1802.

On the walls of my office over in Crystal City, all along the corridor, you see all of these beautifully framed pieces of art. But it's not the traditional type of art that one sees on the wall--the Renoirs and prints of Picasso and so forth. It's the art that accompanied patent applications one or two centuries ago that didn't just make a profit for their inventor, but truly changed the quality of life for mankind. Everything from the plow, to the cotton gin, to the light bulb ... the list goes on and on.

The amazing thing about those pieces of art, those applications, is that we can frame them on a wall because they were basically one page. There was a sketch of what this new invention will do and there was a description of how it worked.

The technology of today doesn't allow us to hang too many patent applications on the wall. They have become far more complex, and some of them come to our office on CD-ROMs with the equivalent of millions of pages of data.

Because our system was not designed to handle the longer and more technical and more complex applications of today--and because we have not had the funding to keep up with the hiring and training necessary to process these in an efficient and timely manner--we have developed an incredible backlog at the agency. Today, it has reached a crisis mode.

This year we expect to receive about 340,000 new patent applications. Those applications will get in the back of a line and take their place among the 420,000 pending applications that are already waiting to be examined.

As I mentioned earlier, it currently takes on average two years to move a patent application through our office. If the status quo continues, that will soon skyrocket to three or four years--and the quality of those patents will suffer.

President Bush understands the problem our agency faces. He submitted a budget request to Congress that would give us a 21 percent increase, at a time when every non-homeland security, non-national defense agency would receive an average of about a 2 or 3 percent budget increase. The President, Secretary Evans, and some in Congress have also been supportive of my efforts to fundamentally reform the agency and move it away from an 18th century one-size-fits-all bureaucratic model into a market-driven 21st century paradigm.

When the President and the Secretary of Commerce asked for my help in reengineering a better Patent and Trademark Office, we reached out to the private sector--our customers--to identify their needs and hear their ideas. We initiated an aggressive top-to-bottom review of the agency to identify new innovative ways to improve quality and reduce pendency. Based upon that review and those discussions, we put forward a comprehensive plan--the 21st Century Strategic Plan--to transform the agency into an Information Age, e-commerce-based organization that responds rapidly to changing market conditions.

The plan will boost productivity and substantially cut the size of the USPTO's inventory while ensuring that the patents issued and the trademarks registered are of the highest quality. It is built on the premise that American innovators need to obtain enforceable IP rights here and abroad as seamlessly and cost-effectively as possible. A patent office that makes too many mistakes--granting poor quality patents and taking years to issue patents--will starve the engine investing in new technology, more skilled jobs, and better products and services for the American consumer.

These reforms will require change and, as you know, change is not easy in this town. We need Congress to provide us with the funding and statutory changes necessary to implement this new strategy, and we will need our customers to discard some of their outmoded, wasteful filing practices. And when I say we need Congress to give us "the funds," I'm not talking about taxpayer dollars, because the USPTO is fully funded by user fees.

Negotiations on all of these issues are ongoing, and I am hopeful that we will be able to come to an agreement on a plan to reform the Patent and Trademark Office. Doing so will be an essential part of shoring up our nation's intellectual property foundation.

And any potential crack in this foundation is a threat to the economic house that has been built upon it. An objective observer would agree that cracks have begun to appear.

On the copyright front, peer-to-peer file sharing systems--the second generation Napsters of the world--have enabled thousands, millions of individuals to steal copyrighted music. At the same time, pharmaceutical patents are being challenged globally in the name of "access" to medicines.

There seems to be a growing sentiment in some quarters that intellectual property rights aren't as important as other, more tangible property rights--and that, therefore, some degree of infringement is perfectly fine. This is a dangerous approach.

Just as we evict squatters and jail purse-snatchers, we need the same moral sense of right and wrong when it comes to intangible property rights--the patents and copyrights that are the basis for protecting new inventions, new technologies, new creations. Just take a look around and see who is creating wealth, what wealth is created, and how important that created wealth is to our balance of trade, our prosperity in a global economy.

If we ourselves do not respect the laws that protect creations such as software, databases, motion pictures, and other media, what makes us think that a much more IP-hostile world beyond our shores will be lesser thieves and lesser pirates? If we do not ensure effective patent protection for new pharmaceuticals, what incentive will there be for industry to fund the research and development that results in life-saving, silver bullet drugs in the first place?

We know all too well that history repeats when lessons go unlearned. Here, the lessons are clear. We cannot selectively respect property rights, and we cannot selectively repudiate those rights because it suddenly becomes convenient, "trendy" or politically expedient.

CONCLUSION

My signature was affixed to over 150,000 new patents this year. My hope is that each signature executed helped to facilitate a better and more prosperous country that utilizes great innovations for the betterment of mankind.

This modern day application of the Founders' ancient dream for America cannot be realized without a greater understanding of why creative, intangible property--intellectual property--merits the same respect and reverence recognized in the rule of law for one's home or automobile. Without a better understanding of IP and its role in our economy, the vitality of our existing IP laws--and therefore our technological advancement--is at risk.

Intellectual property is the principal engine for the creation of wealth in our society, and I suspect that will become even more the case in this new century. We must not allow the canons of our constitutionally based intellectual property protections to be discarded. Our Founding Fathers' wisdom remains relevant--and the stakes they identified for our nation remain high.

--The Honorable James E. Rogan is Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office.

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