Honorable Gerald J. Mossinghoff *
The remarks of the Hon. Gerald J. Mossinghoff to the Keio University
International Extenstion Program in Numazu Japan on January 29,
1999 follow. We thank Mr. Mossinghoff for his invaluable service
on the Intellectual Property Executive Committe and for allowing
us to print his remarks.
Mr. President, Mr. Commissioner, Distinguished Guests, Ladies and
I am greatly honored to participate in this very important conference
on Intellectual Property in an Era of Intellectual Renaissance.
Keio University is to be congratulated for their keen insight in
organizing and hosting this program.
In 1776the year of the United States Declaration of Independence
- the international philosopher/economist Adam Smith taught us that
the wealth of any nation rested on three pillars: Labor, Capital
and Natural Resources. Our generation has added a fourth pillarIntellectual
Property in all of its forms. Patents protect new technology. Copyrights
protect literary and artistic works as well as computer software.
Trademarks assure orderly commercial development and consumer protection.
As we move into the twenty-first centurya century characterized
in the 1997 high level Japanese Commission Report as the "Era
of Intellectual Creation"(1)the efficient protection
of intellectual property will assume an entirely new dimension of
importance. To underline the transition to a "knowledge-is
wealth" society, Professor Lester C. Thoreau, writing in the
Harvard Business Review, noted that "for more than a century,
the world's wealthiest human being has been associated with oil;
now he is a knowledge worker."(2) And, in the global economy
that will define the twenty-first century, an effective global system
of intellectual property rights will be critically needed. Although
that principle will apply to all forms of intellectual property,
the most critical taskand in many ways the most challengingwill
be to establish a truly global or world patent system, one that
will serve the needs of multinational research-based industries
as well as small and independent inventors at a cost that will promote,
not hinder, the development of inventions.(3) We are fortunate indeed
that Japan has become a key leader in taking very specific actions
to achieve that goal.
In the United States there is very deep appreciation of the critical
importance of sound intellectual property protection to our national
progress and well-being. That was not always so. As late as the
early 1950's a clear anti-patent philosophy was present among political
and judicial leaders. This led United States Supreme Court Justice
Robert H. Jackson to state in 1949 that "...the only U.S. patent
that is valid is one which this Court has not been able to get its
The U.S. Congress reversed many of the anti-patent rulings of the
Supreme Court when it codified the U.S. patent statute into Title
35 of the U.S. Code in 1952. Still, there was concern that the U.S.
patent system was not serving industry as well as it should. This
was a conclusion reached by President Johnson's Commission on the
Patent System in 1966. That Commission strongly recommended major
changes in the U.S. patent laws in the interest of international
harmonization. These included a first to-file system of priority,
and 18-month publication of applications.(5) Those and other recommendationswhich
I fully supporthave not yet been enacted and remain controversial
in the United States.
The current view of the importance of effective patent protection
can be traced in large part to President Carter's Domestic Review
of Industrial Innovation in 1980. Out of that review came the recommendation
for the creation of the Court of Appeals for the Federal Circuit
as a "vehicle for ensuring a more uniform interpretation of
the patent laws."(6) I was pleased as President Reagan's Commissioner
of Patents and Trademarks to fully support and achieve enactment
of that recommendation. The creation of the Federal Circuit has
done more to restore faith among business leaders in the U.S. patent
system than even its most enthusiastic supporters would have predicted.
The Reagan Administration undertook two other major intellectual
property initiatives that are having a lasting effect:
- President Reagan, supported by his Cabinet Council on Commerce
and Trade, proposed adding intellectual property to the GATT Uruguay
Round. With the full support of Japan, that resulted in the landmark
- The second lasting contribution of the Reagan Administration
in intellectual propertyone that we can all be proud ofwas
the establishment at the U.S. State Department in 1983 of Trilateral
Cooperation among the Japanese Patent Office, the European Patent
Office and the U.S. Patent and Trademark Office.
These achievements laid a solid foundation for the keen appreciation
among political leaders of both political parties of the importance
of intellectual property. Ironically, that importance was recognized
and appreciated by political leaders earlier and in greater depth
than by U.S. financial leaders. In 1997, for example, the financial
community was asking: What do Bill Gates, founder and CEO of Microsoft,
and Andy Grove, CEO of Intel, know that we don't? That question
was prompted by two seemingly inexplicable business decisions by
Microsoft and Intel in 1997.
First came Microsoft's spring announcement that it would pay $425
million to acquire WebTV Networks, a struggling start-up offering
Internet service over television. It was no secret, of course, that
Microsoft was interested in the huge TV-watching marketthe
company would later invest $1 billion in Comcast, a cable TV giant
with millions of subscribers and billions of dollars in cash flow.
But why would Gates pay so dearly for a firm that was losing money
and had attracted, at that time, fewer than 60,000 customers for
Then there was Intel's curious decision to pay a staggering $1.5
billion to acquire Digital Equipment Corp's Alpha chip manufacturing
plant. Why would Intel produce a competitor's chips, especially
when it could barely meet demand for its Pentium chips and was lagging
in development for its next-generation Merced processors? And stranger
still, why would Intel pay nearly a quarter of its annual profits
for such a dubious deal?
In both cases, the press and the pundits were at a loss to explain
the economic logic behind these deals. But to those few in the know,
the answer to both mysteries could be summed up in one world: patents.
Or, more to the point, the secret driving force behind each deal
was the growing economic and strategic importance of patents and
other intellectual property in today's knowledge economy.
In Microsoft's case, for example, insiders disclosed that the company
paid $425 million not so much to acquire WebTV's minuscule business
as to gain its portfolio of 35 key patents relating to the delivery
of Internet content over TV. And as for Intel, the fine print missed
by most of the media at the time revealed that its $1.5 billion
payment to Digital Equipment (since bought by Compaq) was in large
part a settlement of a patent infringement suit that could have
seriously undermined Intel's Pentium revenue flow.
What does it all mean? As Bill Gates told The Washington Post:
"Patents are the new Gold Rush."
Indeed, in the last seven years alone, annual patent licensing
revenues have skyrocketed a staggering 700%, from $15 billion in
1990 to $100 billion in 1997. And some experts speculate that today's
$100 billion patent market may only represent 10% of the true value
of the world's total patent assets. In other words, there may exist
a $1 trillion market in latent patent values, just waiting to be
But the true economic value of patents goes far beyond the revenue
streams that could be tapped from licensing. Across ever-broader
sectors of the global landscape of business, more and more companies
are discovering that patents are among their most valuable (albeit
often hidden) assets. Accordingly to PriceWaterhouseCoopers, at
least two-thirds of the $7 trillion market value of all publicly
traded US companies lies not in their real estate or plant and equipment
anymore, but rather in their intangible assets such as patents and
other intellectual property.
That is two-thirds of the market value of corporate Americaand
it doesn't even show up on the balance sheet! No wonder, then, that
patents that used to be regarded simply as dusty old artifacts to
be kept under lock and key in some corporate legal office are now
being viewed as "Rembrandts in the Closet"key sources
of profit and competitive advantage for businesses that know how
to utilize them.
So it is perhaps not surprising, then, that patent strategy is
emerging as the new Holy Grail of competitive advantage in corporate
America. Smart managers are increasingly using patents as strategic
business tools to leverage innovation, capture and defend markets,
tap into new revenue sources, shape competitive strategies and marketing
plans in order to outflank rivals, find and recruit top technical
talent, and focus joint venture, merger and R&D activities more
effectively on crucial corporate goals.
But as effective as patent systems are now, much more needs to
be done. There is a debilitating redundancy built into the current
national/regional patent search, examination and enforcement systems.
With respect to any important invention, highly skilled patent examiners
around the worldall of whom are scientists or engineers and
many of whom in addition, particularly in the United States, have
legal training analyze the same patent application, search the same
prior art, and perform the same examination before granting virtually
identical patents in their respective jurisdictions. Once granted,
a patent must be enforced individually in each individual jurisdiction.
This unnecessary redundancy drives up the costs of obtaining and
enforcing worldwide patent protection to a level that can only be
afforded by the largest multinational corporations. The senior patent
counsel of one of the world's major research-based pharmaceutical
companies estimates, for example, that it currently costs between
$750,000 and $1,000,000 to obtain comprehensive worldwide patent
protection for an important chemical compound. And that figure is
growing at a rate of 10% each year! The costly duplication of efforts
also adversely impacts the governments themselves, many of which
are looking for ways to reduce the costs associated with patent
protection within fixed or in many cases reduced resources.
Fortunately, in my view we are on the threshold of major new initiatives
to achieve cost-effective international patent protection for new
technology. The Japanese Commission on "Intellectual Property
Rights in the Twenty-First Century" outlined a three step process
that I and many others in the United States fully support:
First, international efforts would include taking the lead in WIPO
discussions on harmonizing legislation and office practices, and
promoting efforts in the development of simple and swift international
patent procurement procedures. The Commission recommended that Japan
urge that the United States adopt automatic publication of patent
applications eighteen months after they are filed, as well as a
first-to-file patent system through bilateral agreements. I agree!
The second step would involve the mutual recognition of patents.
In the Japanese Commission's view, the efforts involved with the
mutual recognition of patent search results, the establishment of
bilateral agreements, and greater harmonization of patent procurement
process, will inevitably progress into the mutual recognition of
These cooperative efforts, in turn, are intended to lead to the
establishment of a Trilateral Patent, recognized in Europe, Japan
and the United States. And, finally, within that framework, these
efforts will ultimately lead to the creation of a global patent
Europe is moving toward that same goal, although in different,
but compatible ways.
On June 24, 1997, the European Commission, acting through DGXV,
released a "green paper" entitled "Promoting Innovation
through Patents." The purpose of the green paper was to stimulate
industry-wide debate on whether users' needs are currently being
met and whether new measures are called for. The paper is structured
in question form to encourage broad consultation with European industry.
A two day hearing was conducted in Luxembourg, November 25 and
26, 1997, in a major effort to solicit European industries' views
on the questions posed in the green paper. At that hearing, European
industry was remarkably united in the view that the current European
patents systems were not serving industry as well as they should
and that a new and revolutionary approach should be followed, not
to improve the present systems but rather to replace them with a
new unitary community patent covering the whole territory of the
We expect to see a European Commission Communication as early as
next montha "white paper"followed by a legislative
proposal later this year in the form of a regulation.
The European Parliament has voiced strong support for a full-fledged
European patent system, noting that the idea from the European Commission
merited "urgent consideration" with a view to implementation
ahead of the enlargement of the European Union into Central and
Although not focused directly on the creation of a World Patent
System, the United States government has moved effectively in two
important areas with this long-range goal in mind.
First, the United States has taken the lead in the World Intellectual
Property Organization to move toward the creation of a global secure
high speed digital network to provide a common automated database
of prior art - so-called "digital libraries"to all
of the patent offices of the world, as well as being available to
the public at large worldwide via the Internet.
Secondly, the USPTO is pushing for significant improvements in
the Patent Cooperation Treaty ("PCT") to make it far more
"user friendly" than it is today. Although the United
States specifically declined to support efforts to establish a first-to-file
system of priority in the WIPO negotiations on a Patent Law Treaty
("PLT")thus removing the centerpiece of the negotiationsit
has remained actively engaged in those negotiations. For example,
the United States is urging that, through the PLT, applicants be
able to file the equivalent of provisional applications, in any
language, with or without claims, to secure an international filing
date in any patent office.
In mid-January I met with the new Acting Commission of Patents
and Trademarks, Q. Todd Dickinson, and he assured me that he is
as interested as his predecessor in enhancing international cooperation
based on the strides we have already made. In my view, he will provide
important and effective leadership in that regard.
In my opinion, the principles and rules governing the protection
of new technology worldwide areor should beno less universal
than the principles governing the design and building of a bridge.
A solid foundation for an effective World Patent System has been
laid. It is now time to complete the structure.(8)
Again, I applaud the Keio University for sponsoring programs such
as this one. Through these very important interactions, we will,
I am sure, achieve effective worldwide protection for new technology.
This, in turn, will stimulate human progress in the new millennium.
* Gerald J. Mossinghoff is Senior Counsel, Oblon, Spivak, McClelland,
Maier & Neustadt, P.C. A former Assistant Secretary of Commerce
and Commissioner of Patents and Trademarks in the Reagan Administration,
Mr. Mossinghoff teaches intellectual property law at the George
Washington University Law School and the George Mason Unversity
School of Law. He is a Fellow in the National Academy of Public
Administration, the author of many articles on patents and other
forms of intellectual property, and serves as a Vice Chairman of
the Federalist Society Intellectual Property Practice Group.
- Toward the Era of Intellectual Creation, Challenges
for Breakthrough, Report of the Commission on Intellectual Property
Rights in the Twenty-first Century to the Commissioner of the
Japanese Patent Office (Apr. 7, 1997).
- Lester C. Thoreau,
Needed: A New System of Intellectual Property Rights, HARV. BUS.
REV., Sept.-Oct. 1997 at 95, 96.
- In these remarks, I
will limit my comments to matters relating to patent systems;
there is insufficient time to discuss copyrights, trademarks and
other forms of intellectual property.
- Jungasen v. Ostby
& Barton Co., 335 U.S. 560 (1949) (dissenting opinion).
- "To Promote the Progress of...Useful Arts"
in an Age of Exploding Technology, Report of the President's Commission
on Patent System, Washington, D.C. (1966). This is not a partisan
matter. The 1966 Commission Report was to President Johnson. In
August 1992, the Advisory Commission on Patent Law Reform reached
virtually identical conclusions in its report to the Secretary
of Commerce in the Bush Administration. The Advisory Commission
on Patent Law Reform, Report to the Secretary of Commerce (Aug.
- Hearings on H.R. 6033, H.R. 6934, H.R. 3806
and H.R. 2414 before the Subcommittee on Courts, Civil Liberties
and the Administration of Justice, House Committee on the Judiciary,
page 797, 96th Cong., 2d Sess. (1980).
- World Intellectual
Property Report, Vol. 13, No.1, page 1 (January 1999).
- A detailed version of what such a system would
look like is outlined in my article "World Patent System
Circa 20XX, A.D." 38 IDEA 529 (Franklin Pierce Law Center
1998), reprinted in 80 Journal of the Patent and Trademark Office
Society 523 (1998).