Under Secretary Rogan House Testimony

Statement of

The Honorable James E. Rogan

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

before the

Subcommittee on Commerce, Justice, State and the Judiciary
Committee on Appropriations
U.S. House of Representatives
Ashburn, Virginia
April 23,2002

Mr. Chairman and members of the subcommittee:

Thank you for this opportunity to appear before you to discuss the United States Patent and Trademark Office's (USPTO) role in the protection of intellectual property. As under secretary of commerce for intellectual property and director of the USPTO, I am very concerned about protecting the rights of U.S. intellectual property owners abroad and appreciate the attention you are bringing to this important topic.

Mr. Chairman, you have long appreciated the economic importance of intellectual property to our economy. Thanks to your leadership, the Dulles Corridor has become a high- tech haven and a catalyst for economic opportunity throughout the region. In fact, U.S. News and World Report has even dubbed the state of Virginia "The Silicon Dominion."

As we see first-hand here in Northern Virginia, intellectual property (IP)-including patents, trademarks, and copyrights-has become increasingly vital to our nation's economic competitiveness, our standard of living, and our global security. In fact, according to the International Intellectual Property Alliance, IP industries represent the largest single sector of the American economy-almost 5 percent of Gross Domestic Product (GDP)-and employ over 4 million Americans. Copyright industries, for example, are creating jobs at three times the rate of the rest of the U.S. economy.

As the importance of IP assets in our global economy has increased, so too have the USPTO's activities in the international arena. Indeed, in addition to the examination and issuance of patents and trademarks, USPTO works to promote protection of the intellectual property of American innovators on both the domestic and international levels.

Under the American Inventors Protection Act of 1999 (P.L. 106-113), the USPTO is directed to advise the president, through the secretary of commerce, and all federal agencies, on national and international intellectual property policy issues including intellectual property protection in other countries. USPTO is also authorized by the AIPA to provide guidance, conduct programs and studies and otherwise interact with foreign intellectual property offices and international intergovernmental organizations on matters involving the protection of intellectual property.

In keeping with this directive, the USPTO continues to be active in a number of different venues to streamline and strengthen protection for patents, trademarks, and copyrights abroad. Through our Office of Legislative and International Affairs, we: (1) help negotiate and work with Congress to implement international IP treaties; (2) provide technical assistance to foreign governments that are looking to develop or improve their IP laws and systems; (3) train foreign IP officials on IP enforcement; (4) draft/review IP sections in bilateral investment treaties and trade agreements; (5) advise the Office of the U.S. Trade Representative (USTR) on intellectual property issues in the World Trade Organization; and (6) work with USTR and industry on the annual review of IP protection and enforcement under the Special 301 provisions of the Trade Act of 1974. The USPTO also serves as co-chair of the National Intellectual Property Law Enforcement Coordination Council, which coordinates domestic and international IP law enforcement among federal and foreign entities.

Our goal in the international arena is to move toward greater consistency in intellectual property protection around the world. Just as the framers of the Constitution created standard intellectual property rules for the nation, we are working to develop consistent rules for the rest of the world.

In the patents area, we are striving for uniform treatment of patent applications and patent grants worldwide, which will reduce costs for American patent owners in obtaining and preserving their IP rights abroad. Today, the cost to U.S. companies and inventors of applying for and obtaining separate patents in individual countries is often prohibitive. Therefore, USPTO is leading efforts to reform the Patent Cooperation Treaty, which implements the concept of a single international patent application. To help cut procedural red tape, we are preparing proposed legislation for the implementation and ratification of the recently negotiated Patent Law Treaty. We also are in the early stages of discussions at the World Intellectual Property Organization (WIPO) regarding possibilities for a more rationalized worldwide patent system that would allow inventors to receive international protection by filing a single patent application.

In the trademark area, we are working with Congress with respect to implementation of international IP agreements such as the Madrid Protocol. Once ratified by the Senate, the Madrid Protocol will enable a U.S. trademark owner to have his mark protected in a number of countries by simply filing one application at our office, in one language, with one set of fees in U.S. dollars. It truly represents one-stop shopping, cutting costly and time-consuming red tape. A streamlined system for filing for trademark registration in other countries would help all U.S. businesses, especially small and medium-sized businesses that have a hard time affording to file separate trademark applications country-by-country.

With respect to copyrights, we continue to work to bring copyright law in line with the digital age. Back in 1996, we led efforts to adopt the two WIPO "Internet treaties"-the WIPO Copyright Treaty (WCT) and the WIPO Performers and Phonograms Treaty (WPPT). The WCT and the WPPT establish important new international norms related to the right to make a work available to the public through interactive media. They also provide for the protection of copyright management information and technological measures used to protect copyrighted works. The United States has made the entry into force of these treaties one of our top IP priorities, and we are very pleased that the WCT entered into force last month and that the WPPT will do so on May 20, 2002.

As might be expected, a significant part of our international efforts at the USPTO are devoted to strengthening IP enforcement abroad and combating IP piracy. With the growing importance of intellectual property assets, the need for enforcement of these rights abroad has increased substantially. For example,IP protection is critical for U.S. exports, with more than 50 percent of our exports now dependent on some< form of IP protection.

When the IP provisions of Article I, Section 8 of the Constitution were adopted, the Barbary Pirates were menacing U.S. and European merchant ships in the Mediterranean. Today, our nation faces piracy of a different sort: the illegal duplication of software, music, DVDs, and other digitized information. This piracy comes with a high price. Last year U.S. copyright industries reported losses of nearly $22 billion due to piracy overseas. According to the Business Software Alliance, software piracy alone cost the U.S. economy over 118,000 jobs and $5.7 billion in wage losses in the year 2000. By 2008, those numbers will rise to 175,000 lost jobs, $7.3 billion in lost wages and $1.6 billion in lost tax revenues.

Because American IP owners compete in a global marketplace, we need to expand our efforts to promote IP protection internationally. We need to make sure that American IP owners have sufficient legal tools to fight piracy. We also need to provide technical assistance to foreign entities on drafting and implementing effective IP laws and training on enforcement of IP rights. The USPTO has a dedicated team of professionals in our Office of Legislative and International Affairs doing just that.

The World Trade Organization's (WTO) Trade- Related Aspects of Intellectual Property Rights Agreement (TRIPs) sets minimum standards of protection for the various forms of intellectual property and requires WTO members to provide for "effective enforcement" of intellectual property rights. The TRIPs Agreement incorporates a dispute settlement procedure that allows a member to resolve WTO violations. TRIPs also includes detailed provisions on civil, criminal and border enforcement measures designed to protect the owners of intellectual property rights. Over the last several years, the USPTO has assisted countries around the world to establish adequate enforcement mechanisms to meet their obligations under the TRIPs Agreement. In bilateral negotiations, USPTO is working closely with USTR to seek assurances from our trading partners of even higher levels of intellectual property enforcement than those set forth in TRIPs.

The USPTO conducts an array of enforcement training programs in the United States and abroad to improve the environment for intellectual property enforcement. Let me briefly highlight just a few of the enforcement training activities we have recently undertaken.

In cooperation with the WIPO, USPTO conducts a semi-annual "Academy of Enforcement of Intellectual Property Rights," which has provided training for customs, judicial and law enforcement officials from countries ranging from Albania to Zimbabwe. For instance, in October 2001, USPTO attorneys conducted a one-week IP enforcement program to train IP enforcement officials from Nigeria, Ethiopia, Egypt, and various Central American countries on how best to develop an enforcement system that is TRIPs-compliant. Our next program will take place next month in Arlington and provide foreign officials with a comprehensive program for developing a TRIPs-compliant and effective IP enforcement regime.

In November 2001, we conducted two technical assistance programs in Hanoi and Ho Chi Minh City, Vietnam, on the enforcement of IP rights. The program, cosponsored with the Vietnam National Office of Industrial Property, focused on compliance with the enforcement provisions of the Bilateral Trade Agreement and the TRIPs Agreement. In December 2001, USPTO developed and conducted a technical assistance program for 16 Russian government officials on specific problems in implementing the enforcement obligations in TRIPs.

As you know all too well, Mr. Chairman, one of the areas of greatest concern with respect to IP piracy is Asia, particularly China. The risks of increased piracy mount on a daily basis with rapidly increasing Internet penetration, Napster-like file exchange systems, and involvement of organized crime. Yet, despite WTO commitments, there is little evidence of any prosecutions of Chinese citizens for criminal copyright theft. Even Deng Xiaoping's daughter had her biography of her father pirated by the Chinese press.

As in many countries, some of the most avid consumers and unwitting accomplices of piracy in China are young people. For example, the vast majority of chemistry students are likely to be using pirated copies of such basic academic journals as Chemical Abstracts International. Shockingly, only eight legal copies of this journal were sold in China last year.

China has made some important improvements in the past year, with city governments in Beijing and Shanghai taking the lead in insuring they use legal software products and the closing of a major manufacturer of pirated academic journals. Still, many areas remain essentially "one copy" jurisdictions where only one legitimate copy may be purchased and the rest are reproduced illegally.

With China's WTO accession, the number of fora for an exchange of views on IP matters has increased significantly. In particular, the TRIPs Council at the WTO provides additional opportunities to raise issues on a multilateral, as opposed to a bilateral, basis. We also are undertaking a number of other initiatives.

In January of 2002, USPTO participated with USTR, the Department of Commerce (DOC), the State Department and the Copyright Office in a delegation to China focusing on IP- related issues. Earlier this month, in conjunction with the Departments of Commerce and State, the USPTO conducted an IP enforcement program in China geared towards prosecutors and customs officials. The programs, conducted by a USPTO enforcement specialist who speaks fluent Mandarin, were held in Nanjing and Dalian, two cities where rampant counterfeiting and piracy problems are developing. This is the third such program, and a fourth is planned for this September. We have also worked closely with non-governmental organizations, such as the Quality Brand Protection Committee, U.S. Information Technology Organization, as well as organizations such as the Business Software Alliance and the Motion Picture Association that are on the ground in China.

Intellectual Property issues are on the agenda for DOC Secretary Evans, who is currently in China meeting his counterparts as part of the Joint Committee on Commerce and Trade. The secretary has personally assured me of his intent to raise piracy issues and concerns during his visit. The USPTO also hopes to host members of China's IP judiciary at a conference on specialized IP courts this August.

One of the crucial budgetary issues in this area, which our budget provides for, is funding for staff to address China-related IP issues. Both the Japan Patent Office and European Patent Office have full-time staff on site in China. The EPO office is especially well-funded, and has engaged in a variety of technical assistance IP projects, including projects directed to antipiracy, anticounterfeiting, and legislative drafting.

Lastly, let me say a few words about the National Intellectual Property Law Enforcement Coordination Council (NIPLECC) and the domestic front in the battle against IP piracy. Created by Congress in 1999, NIPLECC helps to coordinate and enhance enforcement training activities across a broad range of federal agencies. Co-chaired by the USPTO director and the assistant attorney general for the Criminal Division, NIPLECC also consists of the under secretary of state for economic, business and agricultural affairs, the deputy United States trade representative, the commissioner of customs, and the under secretary of commerce for international trade

As co-chair of the NIPLECC, I am planning to focus more attention on facilitating enforcement efforts among federal agencies. The Council needs to be far more active in this regard. During my tenure at the USPTO, I will be working with my colleagues on NIPLECC to enhance the Council's activities and to enhance cooperation and partnerships among the other members.

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Mr. Chairman, the demands on USPTO's expertise in the international arena have grown dramatically in the last few years. As we look to the future, these demands most assuredly will increase, alongside our obligations to meeting our core patent and trademark examination functions.

As you know, President Bush and Secretary Evans are firmly committed to ensuring that the USPTO has the resources it needs to protect American innovators. Their FY 2003 budget proposal for the USPTO is a powerful testament to that commitment.

I am hopeful, Mr. Chairman, that with your support, as well as the support of the other distinguished members of the subcommittee, the USPTO will be able to do even more to provide American intellectual property with the protection it requires in today's high-tech, globalized world.