U.S. and Hong Kong (2000)

Remarks of

Q. TODD DICKINSON

UNDER SECRETARY OF COMMERCE
FOR INTELLECTUAL PROPERTY
AND
DIRECTOR OF THE
UNITED STATES PATENT & TRADEMARK OFFICE

at the

HONG KONG DEPARTMENT OF INTELLECTUAL PROPERTY

HONG KONG, CHINA
OCTOBER 14, 2000
3:00 PM

INTRODUCTION

Good afternoon. I am honored to be here today. This is actually my first visit to Hong Kong, and though it is a short one, I can already tell you that I intend to return to this beautiful and vibrant city.

And it really is an honor to join you, and to talk about some of the exciting developments in intellectual property, including trade aspects of intellectual property between the United States and Hong Kong. I know I speak for our entire delegation when I say that to have the opportunity to work with so many distinguished leaders is a privilege for us. I want particularly to thank Director Stephen Selby of the Intellectual Property Department for his kind introduction, and for his support in these efforts, as well as Deputy Secretary for Commerce and Industry Kenneth Mak.

We recognize the significance of working together, and we are pleased to have this opportunity. I am quite sure that as we continue to meet, and exchange ideas, we will not only discover that we share the same goals, but that we share the same challenges.

And that is why, as we continue to rely upon the "gifts of genius"-the basis of our work- we must press forward as partners, and as friends. For only then can we ensure that our good fortune will withstand the test of time.

It is a particularly auspicious era for the intellectual property community. Never in history has society benefited so much from information in the purest sense of the word. And, while we can't always measure this commodity, it is certainly a natural resource nonetheless. In fact, in this day and age, it is probably our most valuable asset by its very nature. Fluid and intangible, though, it calls for strong protection. It is difficult but necessary for us to defend these seemingly fragile assets, despite their fragility, have become the driving force of our economies, and ones that will define both economic growth and technological development in the 21st century.

This meeting today signifies the importance of collaboration, as well, as we enter into a new millennium defined by information. By communicating on these important issues together, we are confirming what has been evident for the better part of this decade: that we depend on one another. Now more than ever, our bonds become even stronger as information technologies continue to unite our respective interests.

To some, that may seem problematic. But I welcome this interdependence. I welcome it because the more we work together, the more we learn to share our experiences; the more we teach others what we have learned, the closer we come to guaranteeing opportunities and prosperity for all of our citizens.

And after many years of working in intellectual property, and now as the current Under Secretary and Director of the USPTO, I have seen first hand what this collaboration, and what strong intellectual property rights mean, for global and domestic prosperity.

Evidence of this interconnectedness, and the related prosperity, is especially clear when we look at the trade between Asia and the United States. Regionally, US exports to Asia are up 11% from a year ago, while imports from the region into the US have increased by more than 21%.

And more and more of our exports are intellectual property based. Of course, this increase in trade in such goods and services continues to heighten the need for effective enforcement. After all, with effective enforcement, goods flow and prosperity is secured. But without that effective enforcement, trade withers and we fail to reach our goals. And I'll address this in a little more detail later on.

We're also looking forward to coming up with solutions as creative as the technologies that have generated these questions- and make no mistake, they are extremely interesting and challenging technologies. They are technologies that demand an expansion in capability from the intellectual property system designed to protect them.

Now, some might even call these new technologies unimaginable. In my office, at the turn of the last century, a third of all the patent applications that were filed were filed on one particular technology- bicycle technology, an important technology at the turn of the last century, particularly before the motor car was widely available.

Today we deal with an extraordinarily broad range of technologies that present controversies and challenges undreamed of: business methods, gene sequences, bioinformatics, nanotechnology, combinatorial chemistry. And we need to learn how to deal with, and adapt the intellectual property systems that we have, to these technological advances.

USPTO INTERNATIONAL ACTIVITY

Of course, let me say that meetings like this are just one of the many key elements that we need to implement in order to ensure that IP policies work, and that they work in tandem to protect creators. Furthermore, we must work together against the balkanization of intellectual property rights, so that every inventor, every artist, every writer, feels confident in the new global marketplace.

We also need to partner with international organizations to reach these goals; indeed, we have formed a very strong partnership with the World Intellectual Property Organization (WIPO) in assisting developing countries to meet international IP standards, particularly those under TRIPs. And I'll talk a little more about that, and some of our other initiatives, later.

But let me say now that our work with Intellectual Property Offices throughout Asia, including the Hong Kong Intellectual Property Department, and the world, is something that as Under Secretary I am very proud of.

GLOBAL PATENT

And, really, it is just that type of collaborative work that is essential if, for example, we want to continue our efforts regarding the development and the establishment of a global patent system, which I'd like to talk about now in some detail.

As global trade increases and multinational businesses grow, worldwide patent protection is becoming increasingly important, and we believe that many national and regional patent systems are simply too cumbersome and expensive. This leads to duplicative and wasteful efforts in obtaining worldwide patent protection, which unquestionably, these days, deters and stifles trade.

I know no one wants to see that kind of development, and so I want to say to you today that in order to get to the point where the rights of inventors will be universally recognized, we need to tackle both procedural and substantive patent law issues. These changes also make fiscal sense. We're all interested in decreasing costs, and adopting cost-saving measures -such as taking advantage of the search and examination results of other industrial property offices -will allow us to operate efficiently and effectively.

Similarly, advances in information and communication technology will not only allow us, but, in many ways, require us, to make our electronic systems converge, again a boon as we try to make our IP system as effective as possible.

PATENT LAW TREATY

Another important issue the USPTO is working on, particularly this year, is the Patent Law Treaty, or PLT. In our efforts to secure this treaty, last spring I led our delegation to the WIPO Diplomatic Conference in Geneva, where we successfully concluded with the signing of the PLT by 43 WIPO member states, including my country, the United States.

As many of you know, the PLT's principal goal is to provide uniform filing requirements and formal procedures throughout its member countries - to, again, reduce the high costs of complying with various (and sometimes inconsistent) national and regional requirements. In so doing, the PLT would also reduce the risks incurred by the loss of valuable IP rights due to filing errors.

Essentially, the PLT would take the requirement standards from the Patent Cooperation Treaty and transport them into national patent systems. These would then be the maximum formal obligations a PLT country could impose on patent applicants. By providing more consistent treatment of applications and prosecution procedures, the PLT will allow applicants to develop worldwide protection with greater confidence and at reduced costs.

And right now, in our country, the USPTO is in the process of preparing a ratification package for the PLT and is drafting the necessary implementing legislation, which in my country is necessary to bring it into effect.

PATENT COOPERATION TREATY

Now, regarding the Patent Cooperation Treaty (PCT), we are also working to streamline the processing of international applications; and to that end, we need to revise the PCT.

Although the PCT has had some success in providing patent protection in a number of worldwide markets, we believe that it is not living up to its full potential. And the principle reason, I think, is that it has become too rule-bound and costly to administer.

And, as a former practitioner myself, I know that many inventors and patent applicants in the United States refuse to use the system because of its complexity and perceived inefficiency. That is why we are seeking to simplify and streamline the treaty, and to make the PCT more "user friendly."

The reform proposal which we've put forward, and which the WTO actually just took up earlier last month, would allow applicants to prepare a relatively simplified patent application in a single format -- preferably in electronic form. This would be accepted by all patent offices, throughout the world, as a national patent application or as an international PCT patent application.

The processing of such an application -whether national, international or both -could be accomplished in a much more seamless fashion than it is today, minimizing distinctions between those two. In addition, the system could move away from its current, non-binding patentability opinions, and adopt procedures where substantive rights may eventually be granted through the PCT channel.

Our proposed changes to the PCT would be accomplished in two stages. In the first stage, we propose that the PCT be amended to simplify certain procedures. These revisions -- which could take place within the next five years -- include simplification of filing date requirements, residence and nationality requirements, and demand requirements. They also include acceptance of fees for postponing national processing, electronic publication of applications and transmission of search and examination results between offices.

Now, the second stage of reform includes a much more comprehensive overhaul of the entire PCT system. These measures -- a more long-term undertaking -- would incorporate the regionalization of current search and examination authorities and elimination of distinctions between national and international applications.

It would also include relaxation of timing for designated country processing, as well as adoption of positive examination results in originating countries or certain authorities that have agreed to be bound by these results.

Now, last fall in Berlin, we unveiled it to our Trilateral partners. And, as I mentioned earlier, it has been warmly received at WIPO by the Director General and his staff, and has been introduced in the last session of Governing Bodies. They have agreed to form a committee to look into PCT simplification.

WIPO COPYRIGHT

Let me now address another aspect of international cooperation. We've seen a lot of very good work internationally. There have been a whole series of treaties and other considerations over the last four or five years which have really moved us much more aggressively towards an international system. In the area of copyright, we've had the WIPO copyright treaties, which, again, have become very important as we move towards global protection.

The WIPO Copyright Treaty (WCT) and The WIPO Performers and Phonograms Treaty (WPPT), make changes in the international copyright standards established by the Berne Convention, including clarifying copyright protection of computer software and databases.

In our country, we are well on our way to implementing these treaties, and the Asian-Pacific region's involvement was key in the negotiations of both. That is an exciting development and clearly one of the most effective collaborative tools we have.

We've implemented the two treaties in our country by a statute called the Digital Millennium Copyright Act, signed into US law in 1998, and, as far as the treaties go, our former Secretary of Commerce Daley deposited them a year ago last September. We are truly proud to be a part of them.

And, while internationally we are still not completely unified on this point, I feel confident that going forward we can answer our concerns together.

MADRID PROTOCOL

New technology asks us not to forget trademarks, either; as our digital age moves forward, so does the necessity to streamline the registration for trademark applications. And in this area, we're extremely encouraged by recent developments. For example, there's the Trademark Law Treaty, the mirror equivalent of the Patent Law Treaty. Negotiated the year before last, it is well on its way to coming into effect in our country, as we've already passed the implementing legislation.

We're also encouraged regarding recent developments regarding the Madrid Protocol . In the U.S., our President sent the treaty to the Senate for approval approximately one month ago. Now it is currently before the Senate Foreign Relations Committee, where the week before last they heard testimony on the treaty. There is some hope that the Senate will act on the treaty before the session of Congress ends, which may be this week or the end of next week.

We are hopeful they will move forward, although there is, apparently, a sticking point; nonetheless, we are confident that this point will be clarified and that we will be able to move forward aggressively. This one-stop, streamlined registration process for trademark applications is necessary to ensure that our achievements in the digital age do not outpace our procedures.

AV TREATY

With regards to other efforts, we also need to look towards protecting audio/visual performers rights. The WPPT that I mentioned only covers sound recordings -- that is, musicians. So, since 1996, in the U.S. we have been working, as have a number of other nations, on audio/visual performers rights. The protection of these performers' rights is important because, in the digital era, an actor's image can be cut and pasted digitally, manipulated, and inserted into works they had absolutely no involvement in. This is obviously a clear violation of their intellectual property rights.

So, we're looking forward to negotiating a treaty that protects these rights when we attend the Diplomatic Conference that's currently scheduled for December of this year, to be held in Geneva.

INTERNET ENFORCEMENT

Of course, probably one of the most important issues that we are dealing with together is the issue of enforcement as it relates to the Internet. And it is appropriate that in talking about this, we are in Hong Kong, which has really become both a leader in Internet usage and has rapidly developed into a leader in Internet protection.

Hong Kong has one of Asia's highest levels of Internet penetration, and is now a major force in the world of commerce. No doubt it is also on its way to becoming a leader in the new world of the Internet.

In the United States, we are experiencing a similar explosion. We see in this exponential growth significant opportunity for expanding electronic commerce, and for unleashing information and knowledge across borders unlike ever before. And the impact of the Internet on economic growth and cultural change will continue to be immense. The IP-intensive information and entertainment industries, in particular, are already large users of the Internet for e-commerce. And as their usage increases, they stand to reap significant benefits from worldwide commerce in their goods and services.

Now, it obviously doesn't take a specialist in IP to recognize the commercial power of the Internet. Let me give you a few numbers that highlight its impact in the United States. According to a 1999 report prepared for the International Intellectual Property Alliance a private sector coalition in the U.S., which represents copyright-based industries, our core copyright industries areas such as music, motion pictures, and computer software -- accounted for $348 billion in value added to our economy in 1997. That's about 4.3% of our Gross Domestic Product (GDP). Taking all copyright industries together, they accounted for $530 billion in value added, or approximately 6.5% of GDP. That's the largest sector of our GDP in the United States.

Employment in our core copyright industries grew three times the rate of national employment growth between 1977 and 1997, employing about 7 million workers. Needless to say, that's a lot of people whose livelihoods depend on intellectual property. In addition, the core copyright industries generated an estimated $67 billion in foreign sales and exports in 1997.

Now, that's the good news.

As we know, however, the technologies unleashed by the Internet, coupled with the sheer scope of the Web's reach, is extraordinary. As an example, I was in Hanoi about two weeks ago; while there, I was able to download my home email from a cyber caf. Pretty amazing, but this same ease of access provides an array of opportunities to pirate intellectual property. We face challenges in piracy and counterfeiting unlike those we've ever seen before, and these threaten to diminish the awesome power of our increasingly digital and global economy.

Not surprisingly, two of the U.S. copyright industries most intensely affected by piracy and the unauthorized use of their works on the Internet are the software and music industries. For example, two associations in the U.S., the Business Software Alliance, and the Software and Information Industry Association, estimate losses to the worldwide software industry of $12 billion annually from all types of piracy.

Another association, the Motion Picture Association of America, or the MPAA, estimates that video piracy costs the American motion picture industry 2.5 billion dollars a year in lost revenues. And the Recording Industry Association of America reports losses of more than $4 billion. Overall, U.S. copyright industries losses to piracy worldwide are estimated at $22 billion a year.

That translates into lost income for authors, composers and other "creators," but it also means lost jobs for the employees who do the pressing, for the engineers, for others in the industries that are affected, lost revenues to the businesses themselves and to their shareholders, and loss of foreign royalties for American workers and industry.

Clearly, these problems aren't just going to go away. And as you all know, they're not limited to just one country or one type of economy. And here let me just say that this government's work on enforcement is to be commended- your great strides in fighting piracy and other violations are exemplary. Indeed, I want to applaud Hong Kong's progress in intellectual property enforcement over the past year and a half. Hong Kong in many ways has been transformed from a regional "hot spot," to a trend-setter in the area of intellectual property enforcement, and one that we can now cite to others in the region as a model of how to tackle an entrenched piracy problem.

It's also been a leader in another aspect of enforcement, an area that sometimes get overlooked, and that's the public awareness aspect. We need to make sure that the public understands and respects intellectual property, and respects the rule of law that supports it. And we need to make sure they understand the harm to a developing country that counterfeiting and piracy cause. And, more importantly, perhaps, we need to make sure that people understand the advantages to a developing country of having an economic base supported by a strong intellectual property system.

But clearly, now more than ever, we must recognize the importance of enforcement. And that's why, given the realities of the digital age, we, in the United States, join you in attacking piracy head-on, working to equip American intellectual property owners and law enforcement authorities with better legal tools to protect their good and services here and at home.

As I mentioned before, we have adopted the Digital Millennium Copyright Act, which brings our copyright law into the 21st century, and also the No Electronic Theft Act, which addresses a variety of illegal actions on the Internet.

We also are undertaking a new, formal inter-agency coordination effort on IP-related enforcement through the National Intellectual Property Law Enforcement Coordination Council, or NIPLECC. I'm one co-chair, the Assistant Attorney General for Criminal Activity is the other co-chair; it includes the Customs Commissioner, the Deputy Trade Representative, the Under Secretary for International Trade, and the Under Secretary of State.

NIPLECC is intended to coordinate international intellectual property enforcement activities, as well as domestic activities.

And we're very confident that the Council will serve as a vehicle through which our Federal agencies can partner with industry, in particular, to develop strategies for dealing with these enforcement issues, and particularly the issue of Internet piracy. The Council also looks forward to a dialogue with industry; I think that's one of the components that's been missing so far, and I'm pleased to report that dialogue will begin this November in our offices in Washington with our first public hearing.

I touched on the two copyright treaties earlier, but I want to return to them because their relevance to this question of the Internet, and Internet enforcement, cannot be overstated. Nor can compliance, by all countries that are members of the WTO, with the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPs.

Now, these WIPO Internet Treaties are particularly important for dealing with the threats to core copyright industries I mentioned earlier.

Both of the Treaties require 30 countries to ratify them before they become effective. And it's amazing to realize that it's been almost four years since those treaties were first negotiated; at the time they were negotiated, most observers expected they'd be ratified very promptly. They haven't been, and that's a problem.

So far, only 19 countries, including the United States, have ratified the WCT and only 16 countries have ratified the WPPT. And we're committed to working internationally to make sure that we reach that 30-country threshold in order to bring those treaties into force.

Those treaties, the TRIPs Agreement, and other legal norms are still not enough, in and of themselves, to combat piracy of intellectual property goods and services. That is why the United States is also engaged in a number of efforts to ensure that our trading partners have the technical means and the political will to put these legal tools to work. So we are committed to the partnerships that promise to foster this environment.

Just this past September, we sponsored a regional symposium for nations of the Western Hemisphere, including Canada and Latin America. And, right on the heels of this conference and workshop, we sponsored along with WIPO a regional conference - held in Thailand - on intellectual property geared towards the Asia Pacific region.

Both of these conferences, featuring government officials from each respective region, allowed us to highlight the problem of protecting intellectual property in the Digital Age, and to begin to explore ways to combat the problem.

Now this has become increasingly important, and especially critical, in recent months in the wake of the January 1st, 2000 deadline for most developed and developing countries who are members of the WTO to have domestic laws and enforcement mechanisms in compliance with the standards set forth under the TRIPs Agreement.

As a result, we in the U.S., and also both the EPO and the JPO and others, are receiving large numbers of requests for technical assistance in reviewing IP legislation and assisting developing countries to create an integrated enforcement system. And by "integrated" we mean a system consisting of civil, criminal and administrative procedures and remedies, as well as border measures.

The assistance provided by the U.S. through the USPTO -- includes training government and law enforcement officials and participating in workshops sponsored by international and regional organizations. We have several programs in our offices, one called the Visiting Scholars Program, that brings people from around the world to the USPTO. We also now have an enforcement program, that follows on the heels of the Visitors Scholars Program, twice a year.

These workshops aid countries in meeting their obligations in a couple of ways.

First, from a structural point of view, by having the laws and procedures in place to conform with TRIPs requirements. And, second, from an effective enforcement point of view, by having the experience and capability to enforce IP rights using the structural mechanisms established in compliance with TRIPs.

In addition, because of the growing problem of Internet piracy, we are also being called upon to aid in developing enforcement mechanisms to deal with this threat. These countries will need assistance in understanding and implementing the WIPO Internet Treaties to establish the legal framework to combat piracy.

That is why the focus of our Internet-oriented efforts has been to assist countries in adapting the enforcement models appropriate for conventional hard goods - CDs, cassettes, floppy disks, etc. -- to the realities of cyberspace transmission of copyrighted works.

To meet our technical assistance requirements under TRIPs and to continue to assist developing countries in establishing IP protection regimes, we have continued to expand these activities; for example, last year we added another four attorneys to our office, we're likely to add another six next year, and we will continue to expand to meet the heightened need for technical assistance generated by this 2000 deadline.

USPTO I.P. ENFORCEMENT PROGRAMS

As I mentioned earlier, we continue sponsoring important enforcement activities in our office; for example, we joined with the WIPO and others to provide developing economies with a weeklong Washington-based program. Participants included Hong Kong, China, Thailand, India, the Philippines, Israel, Egypt -a number of developing and developed countries. And we'll continue to do that through the WIPO Worldwide Training Academy as well .

That summarizes just some of the activities we've undertaken to ensure that the intellectual property regimes and intellectual property enforcement mechanisms worldwide are where they need to be.

CONCLUSION

But at the heart of the matter is the need to establish partnerships and facilitate the discourse so vital towards ensuring all of our prosperity. And without this discourse, the concepts of compliance, streamlining, and consensus building become obsolete.

Now, it is tempting sometimes, particularly for a large country like mine, to work only on the problems that are national in scope, on the challenges that are right outside one's door. And we're often guilty at times of putting international matters second to domestic ones. Of course, if history has taught us nothing else, we know that in reality, international matters, if they are ignored, quickly will also become domestic concerns. And that by promoting international partnering, we are not only supporting global security - be it economic or otherwise - we are also contributing to our own domestic agenda.

That is why we are so honored to be here today with all of you. We are pleased to have this opportunity to listen, to learn from, and to contribute to our partners and friends. It's been a great pleasure to speak with you this afternoon on these important issues, and now I look forward to responding to any questions you may have.

Thank you very much.