Acquisition, Management and Enforcement of Intellectual Property in a Global Antitrust Environment

Remarks of

James E. Rogan

Under Secretary of Commerce for Intellectual Property
Director of the United States Patent and Trademark office

at the

American Bar Association- Crowell & Moring LLP Roundtable

Luncheon Speech - June 14, 2002



I thank James McKeown and Kimberly Gold, with Crowell & Moring, and Anthony Di Resta and Cherry Hearn, with the American Bar Association, for inviting me to participate in today's roundtable discussion. This forum is a particularly timely one, given the on-going hearings being held by the Federal Trade Commission and the Justice Department on the interplay of intellectual property and antitrust policy. Both venues are welcome opportunities to promote a greater understanding of the patent system and to address the legitimate concerns that have been raised about the nexus between competition and intellectual property.

IP Overview

As the under secretary of intellectual property and director of the United States Patent and Trademark Office (USPTO), I have the privilege of serving at the helm of the agency that is the federal government's tangible expression of commitment to innovation and creativity. It's a commitment that goes back to the first days of our country.

When the Founding Fathers created our new republic, they carefully drafted our Constitution to be limited in scope and federal authority. As they painstakingly crafted the institutions of our new government, the Founders also saw fit to include a clause 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 they 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 their 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 the 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.

For over two centuries, America has benefited immeasurably from that foresight. Today intellectual property-based enterprises represent the largest single sector of the American economy-almost 5 percent of Gross Domestic Product (GDP)-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, U.S. 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 patent system. While no single cause explains economic growth, it's not an accident or a coincidence that the United States stands at the top of both lists.

During my service as an elected official in California, I saw first-hand how our economy transformed from a manufacturing-based system to a knowledge and information-based one. With the decline of defense spending at the end of the Cold War, the economy of my home state of California came close to depression. Some 700,000 jobs were lost with the exodus of defense-related jobs and the ensuing recession. But, in a few short years, California rebounded dramatically and all of those lost jobs were recovered-and more. The jobs did not come from defense-based industries, however. They came from industries based on investment in intellectual property. The future economic vitality of other regions of the U.S.-and economies around the world-will, to a great degree, be determined by their ability to achieve a similar transformation.

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Let me now shift gears slightly and discuss in greater detail the features of our patent system, as they relate to antitrust.

Patent System

The USPTO's role in examining patent applications is to ensure that, under the Patent Act, the claimed invention is new, useful, and non-obvious when measured against all previous inventions. Patent examination does not include an analysis of the potential commercial impact of a patent. Nor does it determine the relevant market in which the invention may be marketed or sold. Patent examiners don't project the economies of scale to be achieved through the invention. In considering the breadth of claims, patent examiners are guided by the principle that a patentee's rights are limited only by the ability to make a fully enabling disclosure of the invention, to provide an adequate written description of the invention, to demonstrate the utility of the invention, and to show the invention is novel and non-obvious in view of what we call the "prior art."

An innovator in a new area of technology may gain what is called a "pioneer patent" that provides broad rights. There's nothing new, nor should there be anything unsettling, about this. The history of patents, and that of America, is replete with examples of inventions that broke new ground. From the telephone to the Internet, from automobiles to plastics, the issuance of patents has not impeded the development of new technologies and resulting industries, despite initial protests over time that some new technology patents would decimate innovation and competition.

As I mentioned earlier, patents are a form of property anticipated by the Constitution. Although a patent allows an inventor to exclude others from using or selling the invention without permission, it is not a monopoly in the antitrust sense. Patent law limits the advantage that a patent confers, and an inventor does not have exclusive rights to his invention forever. Once the term of the patent expires, the invention is in the public domain and may be used or manufactured by anyone.

Even before a patent expires, the recipient of the property grant also must accept a trade-off. In exchange for a patent, inventors must fully disclose their invention for all the world to see. The patent must describe and disclose the invention in enough detail so that someone of ordinary skill in the art could replicate the invention without difficulty. This disclosure permits and facilitates improvements in technology, allowing it to be expanded upon, while building an important database of technological information. It is the social contract upon which the patent system is premised.

By any measure, this is a remarkable agreement. It's analogous to asking a business to teach its competitors how to use its most cutting-edge technology. This disclosure requirement is all the more remarkable because it also allows a competitor to see where the competition's research is heading. It's highly unlikely that many businesses would open these windows into their research and development without obtaining a valuable right in exchange.

The Patent Act also encourages the disclosure of secret information in another way. It creates an incentive for inventors and businesses to publish their new technologies early, even if they do not intend to patent them, since the printed publication of an invention can disqualify another who might independently arrive at the same discovery from obtaining exclusive patents rights for it in the United States.

The result of all of this is that, under our patent system, information that might otherwise remain locked up as a trade secret is now open for inspection. In analyzing the economic effects of the patent system, I believe commentators often ignore this rather significant quid pro quo that society obtains from patent recipients.

* * *

Several independent developments in the last twenty years have notably impacted U.S. patent policy.

One such development has been the expansion of patent subject matter eligibility. As an administrative agency charged with the application of the law as it exists today, the USPTO takes its guidance from Congress and the courts as to what is patentable and what standards we use for granting those patents. We are receptive to a continued broad view of subject matter eligibility, where appropriate, because twenty years ago the Supreme Court instructed us that "Congress intended statutory subject matter to 'include anything under the sun that is made by the hand of man.'" Whenever new technologies are presented for patenting, such as with microorganisms or computer software, however, the entry of patent law into these areas was greeted with predictions of disaster. Yet today the U.S. is the international leader in biotechnology, software, and many other technological areas.

Another development impacting patent policy concerns the area of trade. The United States has made it a key part of its trade policy to create international frameworks for recognizing intellectual property rights. Agreements negotiated through the World Intellectual Property Organization and the World Trade Organization have enhanced the ability of American inventors and holders of intellectual property rights to obtain and enforce parallel rights abroad.

The need for this enhancement has been paramount, particularly in light of the changing nature of our economy that I mentioned earlier.

In that regard, we are pleased to see that the complementary nature of IP rights and competition is internationally recognized-at least in the developed world-and that the mere exercise of intellectual property is not deemed to be anticompetitive. This is key to success in the global marketplace, and we hope that all of our trading partners will adhere to this approach.

In short, over the past two decades the value of patents as business portfolio assets has increased, their validity has become more predictable, and the areas in which patents could be obtained have expanded. Each of these developments enhances the usefulness of patent law as a motivator for innovation. This is reflected in today's unprecedented explosion of patent applications.

Now, some individuals regard the increase in patent filings with suspicion. The USPTO regards this growth with mixed emotions, quite frankly. For a number of years, our agency has been engaged in what sometimes seems an epic struggle to muster sufficient resources to provide the timely and quality services our customers' need. This increase in our workload only makes that task more difficult. Nonetheless, we remain confident that the growth in patent applications is a boon for America's economy and for innovation generally. At the same time, it reinforces how important it is for us to issue high quality patents in a timely manner and to establish a post-grant patent review system that would provide a timely and low cost alternative to patent litigation.

Without the assurance of timely and high quality patents, innovation, technology, and economic growth dramatically suffer. That's why I have recently unveiled an aggressive strategic plan to transform the USPTO from a one-size-fits-all government bureaucracy into a quality-focused, responsive, market-driven intellectual property operation. The plan is an ambitious one, but one that I believe is long overdue

Patent Law and Antitrust

Before I close, let me share a few final thoughts on the nexus of antitrust and intellectual property.

Although patent law and competition law aren't universally congruent, they are highly compatible and serve many similar ends. To the extent that the Patent Act and antitrust laws are based on dissimilar policies, competition regulators are rightfully cautious in assuming that Congress automatically intends the distinctive policies of antitrust laws to trump those underlying the intellectual property system. This is especially true when one contemplates that the foundations for IP protection are found directly in the Constitution.

Over the last two decades, the USPTO, the FTC, and DOJ have helped work within the framework of the patent system to facilitate innovation and productivity in our economy. For instance, licensing guidelines that the FTC and DOJ promulgated in the 1980s helped articulate a balanced view of the value of patent rights. That development allowed creative and inventive enterprises to increasingly see patents not merely as tools for protecting their product market, but as valuable assets that serve broader economic purposes. Based on the value of these assets, a proliferation of start-up firms in the last decade received financing even before they had products to sell.

More recently, in 1995 DOJ and the FTC jointly issued IP Antitrust Guidelines. These guidelines make clear that there is no presumption that intellectual property creates market power in the antitrust context. Consequently, if someone feels that a patent, in and of itself, is too broad and it creates market power, that alone should not be the basis for revoking patent rights. We believe the 1995 guidelines strike the proper balance and should continue to be adhered to.


Practically every major policy dispute in intellectual property centers around the question of where to draw the balance between two principles: the best way to generate intellectual property and the best way to distribute that information. Today, the vitality of our patent system has provided society as a whole with invaluable, market-based incentives to innovate. Let there be no doubt that a return by competition regulators to viewing IP rights with a 1970s-era suspicion would risk interfering with these incentives.

Again, I want to thank Crowell & Moring and the Litigation Section of the ABA for convening this roundtable discussion and for providing me this opportunity to share my thoughts on this topic. The issues surrounding the impact of intellectual property rights on technological innovation and competition are of great national and international significance. And I hope my remarks have underscored the importance that both enforcement agencies and the courts understand the role of patents in encouraging economically beneficial innovation when addressing antitrust allegations.

Thank you.