<nettime> (fwd) Intellectual Property Rights in Knowledge-Based Economy

[t byfield <tbyfield@panix.com>]

----- Forwarded 

Date: Thu, 23 Sep 1999 20:09:22 -0400
From: James Love <love@cptech.org>
To: INFO-POLICY-NOTES <info-policy-notes@essential.org>
Subject: NA project on: Intellectual Property Rights in a 
         Knowledge-Based Economy

INFO-POLICY-NOTES
(list management at http://www.cptech.org/lists.html)


The following is a description of a project on Intellectual Property
Rights in a Knowledge-Based Economy, by the National Academies' Board of
Science, Technology and Economic Policy (STEP).  The project has
apparently already lead to some evaluations of intellectual property
issues by the Clinton Administration.  It proposes an important and far
reaching empirical review of core issues in national policy regarding
intellectual property policy.

  Jamie Love <love@cptech.org>


http://www4.nas.edu/pd/step.nsf/8525648b0070c170852562cb0073ff22/371702b9c0c250a38525674d0061f3a6



        BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY
                                
    Intellectual Property Rights in a Knowledge-Based Economy
                                

Summary of Project

Background
                    
     Policy Context
     Analytical Context

Summary

In advanced industrial economies where, increasingly, intellectual assets
are the principal source of value, productivity, and growth, strong
intellectual property rights (IPRs)-conferred by patents, copyrights, and
penalties for misappropriation of trade secrets-are an important
inducement to invention and investment. For this reason, the extension and
strengthening of IPRs in the United States and elsewhere in the past 25
years were appropriate and probably necessary. It may be that in some
respects those processes should proceed further. On the other hand, there
is growing friction over the assertion and exercise of some IPRs and
claims that in some circumstances they may be discouraging research, its
communication, and use. The question arises whether in some respects IPR
strengthening and extension have proceeded too far. 

To provide answers to guide IPR policy over the next decade and beyond,
the Science, Technology and Economic Policy Board (STEP)  of the National
Research Council (NRC) proposes to undertake a 33-month project in two
phases. In the first 15 months, the Board will organize a major conference
to review the purposes of the IPR legal framework and assess how well
those purposes are being served. The Board will identify whether there are
now or emerging problems of inadequate or over-protection of IPRs that
need attention. In a second phase of approximately 18 months the Board
will form an expert committee to analyze and propose solutions to
particular issues selected from the earlier deliberations. 


Background

Policy Context. For purposes of this proposal, intellectual property
rights (IPRs) refer to patents (governed by federal law and
administration), copyrights (governed by federal law and administration
since 1976), and trade secrets or know-how (governed by state law until
1996). It does not include trademarks and tradenames. From about mid-1800s
to the mid-1970s, federal government IPR policies were relatively stable
and politically unimportant. In the past 20 years, beginning with the
Copyright Act of 1976, federal legislative and diplomatic activities have
increased and several notable judicial decisions have been rendered, most
of them in the direction of increasing the scope and private value
(sometimes called the "strength") of IPRs: 

-    the 1976 Copyright Act leading to copyrights for computer
     software;

-    the 1980 Bayh-Dole Act, enabling small business, university,
     and other nonprofit federal contractors and grantees to
     obtain exclusive rights to their inventions (gradually
     extended to most contractors);

-    the Supreme Court's 1980 decision in Diamond v. Chakrabarty,
     establishing the patentability of genetically engineered
     organisms;

-    the creation in 1982 of the Federal Circuit Court of Appeals
     (FCCA), frequently perceived as strengthening the position
     of patent holders in infringement litigation;

-    the Semiconductor Chip Protection Act of 1984, creating a
     new federally enforceable right to prevent copying of
     semiconductor designs;

-    the 1984 Hatch-Waxman Act extending the patent terms on
     regulated pharmaceuticals;

-    the 1988 Process Patent Amendments Act, blocking the import
     to the United States of foreign products produced by methods
     infringing U.S. process patents;

-    the 1994 Uruguay Round Agreement on Trade-Related Aspects of
     Intellectual Property Protection (TRIPS) and various
     bilateral agreements, ostensibly strengthening foreign IPR
     protection and harmonizing national standards;

-    the Economic Espionage Act of 1996 creating, for the first
     time, federal criminal and civil penalties for theft of
     trade secrets by foreign agents or U.S. citizens; 

-    the Digital Millennium Copyright Act of 1998; and

-    the 1998 FCCA decision upholding the patentability of
     business application software patents.

Not all legislative activity resulted in greater IPR protection.  The term
of a patent was changed so that in some instances the patent has a shorter
or less predictable term and therefore a lesser expected value. Judicial
decisions, too, sometimes limited the scope of protection. The net effect
of the international "harmonization" efforts is unclear. 

Although many groups supported the principal policy changes on the basis
that they increased research incentives, others have expressed concern
that in some circumstances the assertion and exercise of IPRs are
discouraging or may discourage research, its communication, and its
commercial use. These issues can be categorized by their potential
effects: 

1) on the performance and communication of academic research

-    concern that an international agreement favored by the
     European Union and the U.S. Patent and Trademark Office
     (PTO) to extend copyrights to scientific databases will
     inhibit research;

-    concern that expressed gene sequence (EST) and other
     biological material patents will make it prohibitively
     complicated and expensive to conduct research using these
     tools or, alternatively, expose research investigators
     to infringement suits;

-    concern that allowing federal grantees to obtain patents has
     altered their incentives to conduct basic versus applied
     research;

-    concern that universities', researchers', and sponsoring
     companies' financial interests in exploiting academic
     results (by IPRs and otherwise) are inhibiting open, timely
     scientific communication; and

-    concern that universities' and potential industry research
     sponsors' inability to resolve differences over IPRs will
     discourage corporate support of academic research.


2) on personnel mobility and informal technical communication
between rival companies

-    concern that enforcement of new federal trade secrecy laws,
     providing civil and criminal penalties for misappropriation,
     will have a chilling effect on mobility and informal
     know-how trading among firms.


3) on industry investment in R&D and innovation, both radical and
incremental, initial and subsequent innovation

-    concern about the uncertainty of the scope of IPRs;

-    concern that slow and secret patent administration processes
     reduce R&D incentives;

-    concern about high litigation uncertainties and costs, both
     financially and in terms of the time of scientists,
     engineers, and managers; and

-    concern about licensing terms barring probing the
     intellectual content of software or genomic material and
     making modifications and improvements (so-called
     "decompilation")


4) on industry competition and structure

-    concern about the use of patent portfolios to block
     competitors' entry or discourage related research; and

-    concern about the penalties for initial innovators (e.g.,
     business software developers) when IPR protection shifts
     from trade secrecy to patents.


Finally, while the U.S. policy thrust remains in the direction of
strengthening and extending IPRs and harmonizing national IPR regimes at a
high level of protection, it is also true that there are unresolved and
highly contentious policy issues. For example, omnibus patent legislation
remains stalemated in Congress by disputes over provisions establishing
the U.S. Patent and Trademark Office as an independent corporation,
requiring publication of patent applications after 18 months, establishing
a prior use defense to allegations of infringement, and broadening the
participation of third parties in patent reexamination proceedings.
Further, reconciliation of the U.S.  first to invent patent principal with
the first to file principal predominant abroad is not on the table for
discussion because it would be too controversial, raising basic questions
about what patent law should encourage.

Analytical Context. It is well known that the use of, reliance upon, and
effects of intellectual property rights protections vary across industries
and technologies, but until recently there has been remarkably little
empirical research, other than opinion survey research, documenting these
differences. This is beginning to change, and the effects of some of the
policy changes in the 1980s and 1990s are beginning to be investigated.
For example, the creation of the Federal Circuit Court of Appeals was
associated with an increase in patenting that continues and in recent
years has accelerated. This suggests that the effort to strengthen patent
rights has indeed increased their importance and may have contributed to
the growth of industrial R&D funding.  On the other hand, these trends
contrast with recent survey evidence suggesting that U.S. manufacturing
firms in most industries rely more heavily on trade secrecy, lead time,
and technological protections (e.g., encryption) to recoup their R&D
investments than they do on legal mechanisms such as patents and that, if
anything, the effectiveness of patents as a means of appropriating R&D
returns has declined since the early 1980s.  There is very little evidence
about the importance of patents as a means of disseminating technical
information, although this is one of the principal rationales for the
patent system and appears to be an important function of patents in Japan. 

In short, the effects of IPR changes on innovation and technical advance
are highly uncertain -- with respect to either the incentive provided to
the innovator to capture the benefits of his invention, investment, and
effort or the encouragement to the innovator to provide the information to
others who might improve upon it. The project will attempt to synthesize
the results of recent research and resolve differences or propose
additional research to help resolve the differences in findings. 

>From both the policy and analytical points of view, a broad reassessment
of IPR policies is therefore very timely. What have been the costs and
benefits of the actions taken in the last several years? The unintended as
well intended consequences? What should be the direction of IPR policies
in the next decade of two decades? The Academy has addressed some of these
issues but mainly from two points of view-the impact of expanding IPRs on
university research and the technological aspects of protecting
information on the Internet. 


-- 
James Love, Director, Consumer Project on Technology
I can be reached at love@cptech.org, by telephone 202.387.8030,
by fax at 202.234.5176. CPT web page is http://www.cptech.org

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