本間忠良 衝撃の新刊 知的財産権と独占禁止法－－反独占の思想と戦略本間忠良の「技術と競争ワークショップ」はhttp://www.tadhomma.sakura.ne.jp/へ移動しました。これからもよろしく。
本間忠良 衝撃の新刊 知的財産権と独占禁止法－－反独占の思想と戦略
経済法あてはめ演習60選（日本語）Antimonopoly
Act Exercise 60 Cases
情報革命についてのエッセイとゴシップ（日本語） Essays and News on Information Revolution
INDEX
1. Background:
1.1. United States:
1.2. EC:
2. TRIPS Agreement:
2.1. General -- Preamble:
2.2. General Provisions and Basic Principles:
2.3. Standards:
2.3.1. Copyright:
2.3.2. Trademark:
2.3.3.Geographical Indications and Industrial Design:
2.3.4. Patents:
2.3.5. IC Layout Designs and Undisclosed Information:
2.3.6. Anti-competitive Practices:
2.4. Enforcement:
2.4.1. General:
2.4.2. Section 337:
2.4.3. Border Measures:
2.5. Dispute Settlement:
2.6. Other Provisions:
3. Post-TRIPS Moves:
3.1. WIPO Copyright and Performances/Phonograms Treaties:
3.2. Proposed OECD Multilateral Agreement on Investment
(MAI):
4. Technology Trade Balances:
5. Conclusions:
5.1. Evaluation:
5.2. Future Outlook:
5.2.1. Industries:
5.2.2. Individuals:
5.2.3. Intellectual Property:
5.2.4. Technology and Competition:
It is undeniable that intellectual property systems promote technological innovation. This has been a leading principle in the Trade-Related Aspects of Intellectual Property Rights ("TRIPS") negotiation since 1987. It is also undeniable, however, that the monopoly created by intellectual property systems causes social inefficiency (1).
Now that we have almost achieved the first goal by the TRIPS Agreement, our next task seems to be a search for a balance between the social advantage obtained from the innovative effect, and the disadvantage incurred from the monopoly effect, of intellectual property systems.
The purpose of this paper is to describe the TRIPS Agreement and its developments in light of their possible conflicts with the principles of free competition.
As a background, it may be helpful to first touch upon the problems that the United States ("U. S.") and European Community/Union ("EC" or "EU" as the case may be) have been confronted with, because they were the two major driving forces in promoting current world intellectual property regime, sometimes in coordination and sometimes in conflict.
History of the U. S. patent system in the 20th century was that of patent-antitrust conflict. In 1890, Sherman Act was enacted to counter widespread trust and cartel practices then prevalent in the U. S. In 1914, Clayton Act was enacted to reinforce Sherman Act. The second and the third quarters of the 20th century were dominated by a strong antitrust, therefore, "anti-patent" ethos (2).
The role of the judicial courts is especially important in the U. S. Through
a series of federal court decisions, certain licensing practices by patent
owners were held as either patent misuse or antitrust violation.
Most cases before World War II concentrated on the tie-in practices by
patent owners who compelled licensees to buy unpatented materials or services
from the patent owner or his affiliates (3). Legal tools
used to cope with this practice were mostly patent misuse. Unfortunately,
however, patent misuse is only usable as a defense against a patent infringement
claim.
As restrictive business practices became more sophisticated due to technological progress (4), and as more affirmative actions were required particularly by the Department of Justice, antitrust laws came on the scene (5). After World War II, a copyright tie-in in motion-picture block-booking was held illegal (6).
The federal courts held illegal such practices as royalty payment obligation beyond patent term (7), discriminatory royalty (8), abusive royalty (9), mandatory package license (10) and licensee's obligation not to contest validity of the licensed patent (11).
These decisions were restated in the so-called "Nine No-No's", an unwritten guideline made public by the Department of Justice in around 1975 (12). This marked the culmination of the long "anti-patent" era of the U. S. Under the influence of the so-called "Chicago School" thinking, Department of Justice replaced its former per-se illegal approach with a more "pro-patent" rule-of-reason approach in its 1988 Antitrust Enforcement Guidelines for International Operations (13).
Although this general policy is maintained in the current 1995 DOJ Antitrust Guidelines for Licensing of Intellectual Property (14), the latter also admits that there still remain some conducts to be tested under the per-se illegal rule. This trend is consistent with recent actions by the Department of Justice and the Federal Trade Commission against Microsoft and Intel, respectively.
In 1983, under the pressure of fast growing deficit in the U. S. commodity trade, President Reagan summoned a "Competitiveness Committee" and asked what to do to improve competitiveness of the U. S. trade. In 1985, the committee returned a "Young Report" nicknamed after its chairman's name. The report definitely recommended stronger protection of intellectual property throughout the world as a key to the reconstruction of the U. S. trade.
In 1982, Reagan Administration successfully persuaded the Congress to establish the Court of Appeals for the Federal Circuit ("CAFC"), an exclusive patent appellate court, consisting of 12 judges who are experts in patent law and various technological areas. In place of conservative circuit judges appointed during long "anti-patent" years, Reagan Administration appointed patent-friendly judges to this newly established court. For fairness' sake, however, it should be pointed out that the CAFC has grown up from its "pro-patent" infancy to its recent-year maturity with more balanced view between the benefits of suppliers and consumers.
In 1986, the U. S. proposed at the ministerial conference of General Agreement on Tariffs and Trade ("GATT") held at Punta del Este, Uruguay, an agenda for the stronger protection of intellectual property rights. Japan joined the U. S. Most developing countries objected. Even EC was skeptical about the U. S. intention. After heated discussion and intensive bargaining, however, the ministerial conference at last adopted the proposal but with much weaker mandate than originally proposed.
Faced with the resistance of developing countries, the U. S. enacted the
so-called Special Section 301 of the Omnibus Trade and Competitiveness
Act of 1988. The United States Trade Representative ("USTR")
did not designate priority countries for the first two years saying that
good-faith negotiations were going on in Uruguay Round. After the Brussels
ministerial conference failed in December 1990, however, the U. S. no longer
hesitated to resort to its trade weapon as shown in the table below. In
December 1993, Agreement to establish World Trade Organization ("WTO")
including the TRIPS Agreement was agreed upon at last.
| 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 |
| ---- | ---- | India | India | India | (India) | ---- | ---- | Paraguay | ---- | ---- | Ukraine | |
| Thailand | Thailand | Thailand | (Argentina) | |||||||||
| China | Taiwan | Brazil | China | China | ||||||||
| WTO Complaints: | Sweden | Greece | Argentina | |||||||||
| Ireland | EU | Brazil | ||||||||||
| Denmark | Denmark | |||||||||||
| 306 Monitoring: | China | China | ||||||||||
| Paraguay | Paraguay | |||||||||||
| Out-of-Cycle: | Malaysia | Italy | ||||||||||
| Korea | ||||||||||||
| Macau | ||||||||||||
It seems that, since the advent of the WTO, the U. S. has been turning from a rigid application of the Special Section 301 ("Mutual Assured Destruction" strategy in the nuclear deterrence terminology) to a wider mixture of its trade measures including the use of the multilateral dispute settlement system ("Flexible Response" strategy) (15).
Also, this seems to be an admission by the U. S. that the world intellectual property regime has already been completed by the TRIPS Agreement and that the basic U. S. intellectual property policy has changed from the creation of a regime to the utilization of established institutions. In April 1998, U. S., EU, Japan and Canada each proposed possible agenda for the new WTO round, among which no intellectual property was mentioned any more. World seems to be turning back from an activist to a moderate attitude towards intellectual property protection.
One of the most remarkable features of the history of the U. S. patent system is its large swing from "anti-patent" to "pro-patent" philosophies in the middle of the 1980's.. This coincides with another remarkable psychological outburst of the U. S. patent advocates: a property-right fetishism. One of the earliest CAFC decisions says in 1983 as follows (16):
A patent, under the statute, is property. Nowhere in any statute is a patent described as a monopoly. The patent right is but the right to exclude others, the very definition of "property." The property right represented by a patent, like other property rights, may be used in a scheme violative of antitrust laws... The antitrust laws, enacted long after the original patent law, deal with appropriation of what should belong to others.
The Reagan Administration's campaign for the stronger protection of intellectual property did not stop at patents. In 1980, Congress amended Copyright Act to add the definition of a computer program. In 1983, the Third Circuit Court decided that even an operating system stored in a read-only memory is protected as a work of authorship, even though it is not human-readable (17). In 1986, the same Third Circuit decided that sequence, structure and organization of a computer program might be protected by copyright (18). The last-mentioned decision ignited a series of court decisions commonly called "look and feel" decisions. This is in line with the explosive use of doctrine of equivalents in patent jury trials, both occurred in the latter half of the 1980's.
Also for fairness' sake, a back-swing of the U. S. intellectual property pendulum should be noted: At least one circuit court expressly rejected Whelan doctrine (19). At least two courts held reverse-engineering legal on certain conditions (20). Also, Federal Supreme Court declared in 1996 that interpretation of a patent including its claim languages belongs to the court rather than a jury (21). This decision is expected to stop patent trials as a show business. In 1997, Federal Supreme Court, while reconfirming its prior ruling made nearly half a century ago establishing the doctrine of equivalents (22), circumscribed its application first by introducing the element-by-element determination and second by reversing the burden of proof in demonstrating that an amendment made during the prosecution does not affect its patentability ("prosecution history estoppel") (23).
Stronger protection of software in the U. S. corresponds to its historical shift from Industrial Revolution into Information Age. In February 1996, U. S. Patent and Trademark Office made public its examination guideline for computer-related inventions (24) as the result of a series of court decisions. This guideline has come very close to patenting software itself.
In pre-war Europe, intellectual property rights were frequently used to back up blockism economy. Cartels and Konzerns were the predominant industrial structures there. After the war, however, everything has changed. An anti-blockist GATT was established in 1947. Article 30 of the EC Treaty of 1958 prohibits any restriction to the free movement of goods between Member States. Although legitimate exercise of intellectual property rights is permitted under Article 36, it is only subject to very severe qualifications. Also, Article 85, Section 1 prohibits all agreements between undertakings that restrict competition.
In 1966, European Court of Justice ("ECJ") decided that the division of the common market based on the exercise of trademark was illegal under Article 85, Section 1 (25). In 1971, ECJ decided that the prohibition of parallel import of musical records based on trademark was illegal under Article 30 (26). This principle was extended to patent (27), unfair competition (28), copyright (29), and industrial design (30). Thus, the use of intellectual property rights against free movement of goods among member states is definitely prohibited.
However, ECJ traditionally permitted the use of intellectual property rights against parallel import from outside (31). The TRIPS Agreement has made this discrimination impossible under its Article 3, National Treatment and Article 4, Most Favored Nation Treatment (32).
Article 85, Section 3 of the EC Treaty provides that European Commission may declare an exemption from Section 1 if an agreement between undertakings, however anti-competitive it may be, contributes to technological and economic progress and benefits consumers (33). Based on this Section, Committee issued various regulations that exempt certain categories of agreements between undertakings from the prohibition under Section 1. Group exemptions naturally focus upon the territorial restrictions because of EC's desire for a single market. One of the latest group exemption regulations is that of technology transfer amended in 1996 (34). Generally speaking, EC group exemptions are turning more and more lenient to rent-accumulation through private division of market in the name of an exercise of national intellectual property rights.
In this connection, a unique feature of EC intellectual property policies should be pointed out. Unlike the U. S. that is mainly concerned with increasing intellectual property owners' revenues, EC regards its information-cultural policies as one of the most important tools for the integration of Europe. EC is also trying to maintain its cultural influence upon African people who understand European language since their colonial years. This explains French Government's enthusiasm and heavy subsidy for its motion picture industry. One of the most serious crises Uruguay Round met in 1993 was a U. S.-EC dispute over an EC Broadcast Directive of 1989 that required EC TV stations to play EC-made entertainment programs by more than 50% (35). EC regards Hollywood and Karaoke as enemies of its cultural integration.
Article-by-article interpretation of the TRIPS Agreement is a tedious task. This paper will therefore try to explain major provisions of the Agreement from a realist's point of view, that is, what economics and politics have resulted, or may result from, such provisions. The TRIPS Agreement occupies 38 pages in English version of the Legal Text published by GATT. It consists of Preamble and seven Parts with seventy-three Articles.
The first paragraph of Preamble sets forth the desire of Members "to reduce distortions and impediments to international trade." This sentence was derived directly from the Punta del Este Ministerial Declaration of 1986.
The U. S. and Japan jointly proposed that the purpose of the TRIPS negotiation should be "to reduce distortions and impediments to international trade arising from the lack of adequate and effective protection of intellectual property rights (underline added)." Ministers did not agree to the U. S.-Japanese view that the lack of protection of intellectual property rights was a cause of distortions and impediments to international trade. They simply deleted the latter half of the proposal and made it neutral.
This change shows that reduction of distortions and impediments to international trade is now more important than protection of intellectual property rights per se: Ministers saw a higher value in the free trade principle than intellectual property protection. This is one of the most remarkable differences between the TRIPS Agreement and conventional intellectual property treaties such as Paris and Berne Conventions that are more interested in the protection of intellectual property than international trade.
The fourth and fifth paragraphs should be read as a pair, setting forth two contradicting views about the essence of intellectual property rights. The fourth paragraph represents a uniquely American belief that intellectual property rights are nothing different from the sacred ownership right in tangible assets that is beyond governmental control. The fifth paragraph sets forth most others' view that intellectual property rights are nothing but a policy tool that national governments can grant or revoke at will for the progress of industry.
Part I provides General Provisions and Basic Principles of the TRIPS Agreement. The second sentence of Article 1, Paragraph 1 says, "Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement." This provision raises a fundamental question: Is the TRIPS Agreement an "optimum" standard or a "minimum" standard of the substantive and procedural protection of intellectual property rights? If it is a minimum standard, what does it mean?
The U. S. amended, as part of its Uruguay Round Agreement Act ("URAA"), the Special Section 301 that empowers USTR to identify, investigate and take action against those countries with inadequate or ineffective protection of intellectual property rights. The Special Section 301 as amended by the URAA now says, "A foreign country may be determined to deny adequate and effective protection of intellectual property rights, notwithstanding the fact that the foreign country may be in compliance with the specific obligations of the TRIPS Agreement." The U. S. apparently understands that the TRIPS Agreement is a minimum standard and that it is free to compel others to raise their standard of intellectual property protection.
It is true that some earliest drafts of the TRIPS Agreement used the term "minimum standard", but the very fact that negotiators carefully eliminated the word "minimum" and inserted the proviso that such protection shall not contravene the provisions of the TRIPS Agreement shows that it is not a "minimum" but an "optimum" standard. For example, Article 55 of the TRIPS Agreement permits the Customs to detain goods suspected to infringe certain intellectual property rights within a period not exceeding ten days. If some Member becomes so friendly to intellectual property owners as to extend this ten-day period to, say, thirty days, is it TRIPS consistent? The answer must be "No." This ten-day period is the "optimum" balance between the interests of intellectual property owners and consumers. If the U. S. takes a unilateral measure against a Member that meets the TRIPS standard, it is against the WTO Dispute Settlement Understanding that prohibits a unilateral trade measure.Article 2, Paragraph 2 provides that nothing in Parts I to IV of the Agreement shall derogate from the obligations under existing intellectual property treaties such as Paris, Berne and Rome Conventions and Washington Treaty. This is commonly called a "Paris-Berne plus" approach. The Berne Copyright Convention was a headache to the U. S. during the TRIPS negotiation: The U. S. Copyright Act has no general moral right that is the very heart of the Berne Convention. The EC had criticized the U. S. for the lack of moral right during the earlier half of the TRIPS negotiation until it turned silent possibly in exchange for some trade concession.
Another headache to the U. S. has been the Rome Convention even up to the present time: Because the U. S. is not a member of the Rome Convention, it is not entitled to the national treatment granted under the Convention. Therefore, it is not entitled to the dividend of the levies collected in many European countries from audiovisual equipment manufacturers in compensation for allegedly widespread home-taping. This dispute, together with EC's 1989 Broadcast Directive and its cultural exception to audiovisual services, is still open between the U. S. and EU. They are not among the built-in agendas in the WTO and are being negotiated between the two.
Article 3 has reconfirmed the principle of national treatment already established in existing intellectual property treaties. Unlike Article III of GATT that ensures national treatment for imported goods, the TRIPS Agreement provides for national treatment to the citizens -- human beings -- of foreign Members.
Article 4 is a historic breakthrough in the world of technology and trade: It has introduced into intellectual property systems for the first time most favored nation treatment that has long been a leading principle in international trade of goods. The most favored nation treatment provided by the TRIPS Agreement is for the benefit of foreign citizens, unlike that of GATT for imported goods. This is an important link between international trade and intellectual property systems.
In 1986, Korea amended its Patent Act to grant pharmaceutical product patents
only to the U. S. inventors. Such "sweetheart deal" has become
illegal under the TRIPS Agreement. It is doubtful if the World Intellectual
Property Organization ("WIPO") of the United Nations could have
done this.
Article 6 may cause a serious problem to the future of our world trade
if handled wrongly: The TRIPS negotiators could not reach a final agreement
on the parallel import issue. To an economist, intellectual property right
is nothing but a monopoly, and the prohibition of parallel import based
on an intellectual property right is nothing but a private division of
market that distorts trade in itself. To a lawyer, the exhaustion doctrine
that favors parallel import is a general rule of reason unaffected by national
borders. The exhaustion doctrine is an integral part of any intellectual
property system, national or international. If a Member denies this doctrine
to certain imports while granting it to domestic goods or imports from
friendly countries, it will be a violation of national treatment and most
favored nation treatment principles of GATT and the TRIPS Agreement.
Japan took an ambivalent position in this issue during the TRIPS negotiation reflecting its then split court decisions. However, because of the Supreme Court decision in 1997 in favor of parallel import despite the existence of parallel patents, Japan is believed to vote for the parallel import, if this issue arises again in international trade forum.
In view of a couple of recent magazine articles that were apparently creating a misleading -- almost negative -- impression about this 1997 Supreme Court decision, it is necessary to discuss the case in more detail here: The key paragraph of the decision reads as follows:
[T]he patentee is not permitted to enforce his patent right in Japan against ... the third parties or subsequent purchasers who purchased the product from the [first] purchaser, except where the patentee has agreed with the [first] purchaser [to exclude Japan from the territories for sale or use]... and has explicitly indicated the same on the patented product (brackets added).
Authors of such articles assert that Japanese patent owners can stop importation of a patented product, if they have agreed with the first purchaser and indicated on the patented product, for example, that the product is "For sale and use in Germany only".
This interpretation is wrong. The language of the decision has a simple logical structure: Without an agreement and indication, patent owners cannot stop importation. It does not say, "With an agreement or indication, patent owners can stop importation." An inverse proposition is not always true. Considering the basic tone of the decision in favor of free trade, no reverse inference is possible. The decision is not conclusive about the hypothetical case where there is such agreement or indication (36).
Article 8, Paragraph 2 of the TRIPS Agreement gives Members, at a glance, free hand to adopt measures to prevent abuse of intellectual property rights or the practices which unreasonably restrain trade, etc. It is, however, only subject to a proviso that they are consistent with the provision of the TRIPS Agreement. This issue will be discussed later in conjunction with Article 40, Paragraph 2.
Part II provides substantive standards for each intellectual property right. Section 1 is for copyright and neighboring rights. As discussed before, the second sentence of Article 9, Paragraph 1 relieves the U. S. from establishing federal moral rights. This is as it were the Berne minus approach.
As the background of Article 9, paragraph 2 and Article 10, an important U. S. federal court decision should be remembered. The Third Circuit court decision in Whelan v. Jaslow, supra, applied to a computer program case a method long established in non-computer, literary copyright infringement cases. The court said, "Copyright protection extends, beyond the code itself, to the sequence, structure and organization of a computer program." This decision has established a presumption of infringement against later developed software that is substantially similar to earlier one. It had an effect of protecting the interest of the first-comer in the sacrifice of later comers.
Two related provisions reflect this conflict of interests between the first-comer and later-comers: Article 9, Paragraph 2 provides that copyright does not protect ideas, and Article 10 provides that computer programs are protected as literary works.
Articles 11 and 14 grant copyright owners an exclusive right against unauthorized rental of computer programs, audio CD's and video tapes. The strength of these exclusive rights decreases in this order: In computer programs, prohibition is unconditional. CD rental is prohibited except in Japan where audio rental shops are paying multi-million dollars a year to authors and sound recording companies as copyright and neighboring right royalties. Video tape rental is prohibited only if motion picture industry shows widespread copying practice that materially impairs their interests. This reflects a dilemma of the U. S. motion picture industry between decreasing number of moviegoers and increasing amount of royalties from video rental shops. The impairment standard will probably be tested when digital home videos or DVD's becomes more popular.
The pettiness of these TRIPS provisions may need some excuse: These formerly petty industries have already grown to a scale larger than conventional coal-mining or steel-making industries long regarded as the most vital industries to our national security and welfare.
Copyright is gaining much popularity in the U. S. as a powerful weapon to stop parallel import. USTR's Trade Estimate Reports are complaining every year of parallel import practices of books and CD's in English speaking countries. Realizing the difficulty to legitimatize prohibition of parallel import in multilateral fora such as WTO, the U. S. Executive Branch seems to be turning to a much easier course, bilateral negotiation (37).
Now let us think about multimedia. Multimedia may be defined as a social system in which various social sectors including individuals, homes, businesses, mass media, libraries and public sectors are connected each other in a computer network through which digital information flows bidirectionally, in multi-mega bytes per second, in letter, number, graphic or sound form. In order for a multimedia to take off, it is essential for a society to have a blanket licensing system for related intellectual property rights, especially copyright and patent. Otherwise, a major social system may stop entirely some day by an injunction decision granted to a copyright or patent owner who asserts his or her exclusive right on a piece of information flowing in the network or on an essential network component. Article 13 for copyright, and Articles 30 and 31 for patents may make such blanket licensing system possible.
Section 2, "Trademark", Article 20 sets forth two competing views of the trademark: The first sentence emphasizes its distinguishing function reflecting the interests of industrialized countries, while the last sentence emphasizes its origin identification function as supported by developing countries (38). Trademarks has been a conventional weapon used by the U. S. to stop parallel import (39) and its future direction should be watched carefully.
Section 3, "Geographical Indications" was brought into the Agreement at an insistence of France. It prohibits the use of false geographical indications for wines and spirits, even where there is no possible confusion by consumers. Article 24, Paragraph 4 provides for an exception for good-faith users and users for more than ten years. This "grandfather clause" proposed by the U. S. saved most of its California wines such as Paul Masson's "Porto" (40).
Section 4, "Industrial Design" does not seem to have major problems presently. Industrial designs are being protected by design patent in the U. S. and by patent-type design right in Japan. Because of the difficulty in registering designs and in determining infringement, there are strong policy proposals mainly from the EU fashion industry to protect designs by copyright or unfair competition law. Japan amended its Unfair Competition Law in 1993, inter alia, to protect product designs for three years.
Section 5, "Patents" has many problems. The most serious problem is the lack of common understanding among Members as to why patents should be protected. As illustrated in the 1983 CAFC decision, supra, the most popular view held in the U. S. is that because intellectual property is a property, it should be protected per se (41). India raised this question in 1989 during the TRIPS negotiation but other countries almost ignored it. GATT, historically being a place for bargaining, was not an ideal forum to solve such philosophical questions. Yet, this question arises every time we have different opinions on specific matters.
Article 27, Paragraph 1 says, "Patents shall be available for any inventions, whether products or processes, in all fields of technology." In the past, many developing countries only protected "process" patents, particularly in drug field. They are now obligated to adopt "product" patent for their drugs after certain transitional period. Then, a new drug product will be protected by an exclusive right, regardless of what processes were used to make it. An Indian diplomat told the press that drug prices will rise due to patent monopoly with more to die as the result (42).
Article 28 confers patent owners an exclusive importation right, in addition to conventional "make", "sell" and "use" rights. In the past, the U. S. federal district courts could not stop import of infringing goods. Intellectual property owners could only enjoin their domestic sale after they have crossed the border. As the result of this provision and the conforming amendment of the U. S. laws, the importance of the International Trade Commission ("ITC") would be much diminished. This will be discussed later again.
Article 31 relates to the so-called "compulsory licensing". During the TRIPS negotiation, the U. S. stepped back from its original position of totally abolishing compulsory licensing, after other countries pointed out its own federal compulsory acquisition system. According to the TRIPS Agreement, a compulsory license should be granted only case by case, and only after the user has made efforts to obtain normal license from the patent holder on reasonable commercial terms within a reasonable period. Members can waive this requirement in case of a national emergency. The U. S. semiconductor industry was successful at Subparagraph (c) in limiting such compulsory license to public non-commercial use or to a remedy from anti-competitive practices.
Article 33 provides that the life of patent shall be at least twenty years. As a result of the TRIPS Agreement, the U. S. amended its Patent Act granting a patent life of at least twenty years from the filing of a patent application. New law does not apply retroactively. Before this amendment, life of a patent used to be seventeen years from its grant. Under the old law, for example, a patent application of more than thirty-years old became a patent to everyone's surprise. With such patent, an inventor was given a weapon to kill established industries that did not imagine such patent application existed at all. People call such patents "submarine patents". Owners of submarine patents are currently campaigning against the new law. They are proposing instead a patent life of twenty years from the filing of an application or seventeen years from the grant of a patent, whichever is longer.
Section 6, "IC Layout Designs", Article 36 has reconfirmed current U. S. and Japanese systems: Both grant the right-holders an exclusive right against unauthorized importation of infringing IC chips as well as goods incorporating such chips. Article 38 extends the eight-year protection once agreed in Washington Treaty to ten years.
Section 7, "Undisclosed Information", Article 39, Paragraph 2 relates to trade secrets. Under this provision, an owner of undisclosed information should be granted a right to an injunction and damage recovery against its unauthorized disclosure, acquisition and use, in a manner contrary to honest commercial practices such as breach of contract or confidence, either intentional or by gross negligence. From the continental law tradition, trade secrets cannot be an intellectual property "right". A property right in continental laws means a claim against all outside world, whereas trade secrets can only be enforced against willful or negligent misappropriators (43).
Paragraph 3 protects the information, secret or not, submitted by a drug company to its government agency for approval. This is one of the monuments of the U. S. drug industry that had such a strong influence over the Administration's policy-making. The USTR's Special Section 301 statements since 1997 show her increasing attention to this matter.
Intellectual property rights create a monopoly at least in the market of protected products or services. Monopoly always produces social inefficiency, regardless of whether it is exercised unilaterally or jointly. It can only be justified by the innovative effect of intellectual property right systems. If exercise of intellectual property right is contrary to innovation, therefore, such right should be held unenforceable. This is the basis of prohibition against anti-competitive practices disguised as an exercise of intellectual property rights. Section 8 "Control of Anti-competitive Practices in Contractual Licenses," Article 40, Paragraph 2 is one of the most important achievements of the TRIPS Agreement in suppressing joint exercise of monopoly power by an intellectual property license agreement. Unilateral exercise of intellectual property right is governed by Article 8, Paragraph 2.
Article 40, Paragraph 2 is not an obligatory provision: Members may or may not prohibit anti-competitive licensing practices. We have to keep in mind, however, that both the U. S. and EU already have two of the most powerful competition laws in the world against an abusive exercise of intellectual property rights. This tension between strong intellectual property laws and strong competition laws has greatly strengthened their international competitiveness while at the same time reducing their own social inefficiency. The phrase "consistently with the other provisions of this Agreement", together with the proviso in Article 8, Paragraph 2, reflects such tension.
Part III, "Enforcement" provides procedural standards for the enforcement of substantive standards given in Part II. Sections 1, 2 and 3 deal with domestic civil and administrative procedures and confirm the principle of due process of law.
The U. S. Tariff Act Section 337 empowers the ITC to issue an exclusion order or a cease and desist order against an import that infringes U. S. intellectual property rights. A GATT panel in Akzo case declared in 1989 that the Section 337 was in violation of the national treatment provision of GATT (44). Article 41, Paragraph 2 of the TRIPS Agreement only says, "Procedures concerning enforcement of intellectual property rights shall..not..entail unreasonable time-limits.." Despite this poor result of the TRIPS negotiation, the U. S. amended its Section 337 in compliance with Akzo decision:
First, there are a couple of cosmetic amendments to accommodate GATT national treatment provision such as avoiding double forum, enabling the importer to file a counterclaim and abolishing the twelve-month time limit.
However, what is more important in understanding the U. S. trade thinking is its willingness to suppress the general exclusion order that was not even totally held illegal by the GATT Panel. A general exclusion order can exclude the importation of all goods that are covered by a piece of U. S. intellectual property right, regardless of whether they are being imported by legitimate licensees. There is an alternative -- a limited exclusion order specifying the name of the manufacturer or importer, but the very existence of the general exclusion order has made importers excessively cautious about U. S. intellectual property rights.
The URAA limited the ITC's use of general exclusion order only to the following two cases: (1) where it is necessary to prevent circumvention of limited exclusion order, or (2) where there is a pattern of violation and it is difficult to identify the source of infringing products. This may mark the end of Section 337 as a major trade barrier into the U. S. Future trade disputes concerning intellectual property rights may be decided mainly before the federal district courts newly vested with the power to enforce importation right.
Section 4, "Special Requirements Related to Border Measures" relates to the detention by the Customs of the imports suspected to infringe certain intellectual property right of the importing country. The TRIPS Agreement has divided intellectual property rights into two different categories, copyright and trademark on one hand, and other intellectual property rights on the other. The former is given a stronger protection than the latter.
Article 51 requests Members to grant copyright and trademark owners a right to file an application with the Customs to suspend imports suspected to infringe their rights -- pirated and counterfeit goods. In the case of pirated or counterfeit goods, the Customs has no choice but to initiate an investigation. In the case of other intellectual property rights, Members are free whether to give such application right or not.
Article 53, Paragraph 2, and Article 55 are tricky provisions. Careful attention should be paid to the condition at the beginning of Article 53, Paragraph 2, "Where pursuant to an application under this Section", and also to the word "applicant" in the first line of Article 55: If a Member has decided to give an application right to the owners of intellectual property rights other than copyright and trademark, its Customs can suspend importation of suspected goods only for ten to twenty days. After that, the Customs has to release suspended goods if the importer posts a security bond, unless a "duly empowered authority" issues a provisional relief. It is not clear whether this "duly empowered authority" is limited to a judicial court or includes Metropolitan Customs Headquarters. It seems that the U. S. and Japan have taken the latter position and did not grant the ten to twenty-day limitation of detention period nor the release by a security bond.
The U. S. border measures consist of the Customs Regulation Section 133 for trademark and copyright and the Tariff Act Section 337 particularly for patents. The two played an important role in the late 1980's to deter importation of lap-top personal computers (45) from Japan and to handicap Japan-made IC's (46), respectively.
The U. S. failed to add IC layout design to its Customs Regulation Section 133 due to lack of consensus among affected industries, whereas Japan amended in 1995 a regulation under its Tariff Rates Act Section 21 to cover IC layout designs. The remaining problem is how the Customs officers could identify infringing IC chips. A microscopic inspection alone does not tell anything about the copying of IC layout design. If they adopt a substantial similarity test used for computer programs, they will have a despotic power to detain import of almost all modern machines and equipment. Out of about 160 notifications made to the Japanese Customs up to the present time, however, most are for fashion and character goods (trademark) and none is for IC layout designs or computer programs (copyright) fortunately. Here is a clear contrast between the active-offensive use by the U. S. and the passive-defensive use by Japan of their trade measures (47).
Part V, "Dispute Settlement", Article 64, Paragraph 2 is the product of a difficult negotiation on the very eve of the agreement. This provision has put the disputes on the TRIPS Agreement short of its violation -- the so-called "non-violation case" -- out of the WTO dispute settlement system for five years. Members cannot file a complaint with the WTO for intellectual property non-violation cases. What is more important is the fact that unilateral measures are not prohibited. It is not clear from the public record why countries agreed to such a radical departure from the WTO dispute settlement system.
Part VI, Articles 65 and 66 grant transitional periods of one year to developed
countries, five years to developing countries and eleven years to least
developed countries. In Part VII, Article 70, Paragraphs 8 and 9, another
monument of the U. S. drug industry is found in the so-called "mailbox
and pipeline protections of drugs". They are among the most favorite
issues raised in the USTR's statement on the Special Section 301 for 1998.
The Diplomatic Conference of WIPO held in Geneva, Switzerland in December, 1996 adopted two copyright-related treaties, after three weeks' negotiation and under the pressure of two conflicting U. S. lobbying groups.
These are the WIPO Copyright Treaty and the Performances and Phonograms Treaty (48). The latter roughly corresponds to the neighboring rights in Rome Convention countries. Each treaty is to take effect if and when ratified by thirty countries. The two treaties are to extend current copyright and neighboring right protection to digital network applications.
First, the Copyright Treaty is to establish the right of communication to the public that prohibits unauthorized public communication of copyrighted works either by wire or wireless means (Article 8).
Second, both treaties are to establish the right of making available to the public protected works in such a way that the public may make an access to these works from their individual terminals, in other words, an uploading right that prohibits unauthorized uploading of protected works (Articles 8 and 14, respectively).
Third, both are to establish a distribution right that prohibits unauthorized distribution of protected works (Articles 6 and 8, respectively). However, contracting parties are free to determine the conditions of the exhaustion of the right after the first sale of the protected works. During the committee negotiation, the U. S. insisted upon the inclusion of importation concept into the distribution right to legitimatize prohibition of parallel import of copyrighted works. This effort proved unsuccessful. This is a continuation of a dispute during the TRIPS negotiation that failed to establish copyright importation right unlike trademark, patent and IC maskwork. Japanese Copyright Act currently grants distribution right only for the cinematographic work and therefore lacks copyright exhaustion provision entirely. The two treaties request contracting parties to establish general distribution right. Japan is now confronted with the difficult task of how to design its exhaustion system, inter alia, how to handle parallel import issue.
Fourth, the treaties intend to make it unlawful to circumvent technological measures installed in hardware to protect intellectual property (Articles 11 and 18, respectively). Currently, in the digital audio recording application such as MD's, the U. S. by Audio Home Recording Act, and Japan by administrative guidance, require recorder manufacturers to incorporate in their products a device named Serial Copy Management System ("SCMS") that limits reproduction of CD's to only one generation. In antitrust context, this constitutes a tie-in practice compelling MD buyers to buy an unwanted SCMS chip costing considerable dollars a piece. Currently, it is a fun for consumers to deactivate this unproductive device. Making such circumvention unlawful is like making all computers and electronics education unlawful.
Fifth, both make it unlawful to remove or tamper with Rights Management Information, including any code, about the right-owner or the conditions of use of the work (Articles 12 and 19, respectively). This may look innocent at a glimpse. Suspicion arises, however, that this may have something to do with parallel import issue, too. Software manufacturers are inclined to put a district code in their software and to permit only the player devices that can decode it to play such software. Deactivating such district code was another intellectual challenge to consumers, but it would become unlawful if the treaties take effect.
Lastly, the WIPO committee draft had contained provisions to make unlawful temporary storage of protected works in a computer memory, for example, during the browsing on the Internet (draft Article 7). However, it had met strong oppositions even from the U. S. telecommunications and Internet industries and was finally abandoned. If this were adopted, it would certainly have created a legendary "use right" for the benefit of copyright owners. Using a cook book is not a copyright infringement unlike copying it. Under the committee proposal, reading a CD-ROM cook book on a computer screen would constitute copyright infringement because part of the cook book is at least temporarily stored in a computer memory.
These issues caused a controversy between the two most influential industries in the U. S. Copyright-dependent industries, such as motion picture, sound recording and computer software, strongly supported these rights, because with such rights they could enforce their rights upon the Internet and bulletin board service providers and, hopefully, upon telecommunications companies as contributory or vicarious infringers, instead of suing millions of users as direct infringers who are allegedly reproducing protected works during up- and down-loading. Under conventional copyright concept, reproduction means fixation of a work on a tangible media and therefore only downloading is the suspected act.
As a result of the National Information Infrastructure ("NII") White Paper published in 1995 by an executive task force, an NII Copyright Bill was introduced in both houses during the 104th Congress (1995 through 96) to establish a transmission right in favor of copyright owners. However, it was finally abandoned under the strong opposition from on-line-service providers and telecommunications companies.
During the second session of the 105th Congress (1998), a compromise was reached among the industries concerned and on May 14, 1998 the Digital Millennium Copyright Bill (S. 2037) that will implement the two WIPO Treaties passed the Senate unanimously. On August 4, 1998 the House of Representatives passed a similar bill (H. R. 2281). Although they do not match completely, two bills are expected to be combined by a conference into a single bill to be singed by the President during this session.
Resulting amendment to Copyright Act would prohibit manufacture, import and sale of systems used to circumvent copyright protection and copyright information on electronic networks. It would generally exempt on-line service providers from liability for simply transmitting information on the Internet.
The amendment may affect developing and newly industrialized countries, because, according to a Congressional Hearing report, they are becoming increasingly the transmission bases of infringing works and that the U. S. copyright owners are incurring more and more injuries therefrom. This implies that the U. S. may use its Special Section 301 to coerce foreign countries to adopt similar laws within coming years.
The Organization for Economic Cooperation and Development ("OECD") had been drafting a Multilateral Agreement on Investment ("MAI") and the U. S. had expected to reach an agreement in 1997 (49). Although this plan seems to be abandoned at least temporarily, its contents are still worth a careful study because it would certainly be proposed for the new WTO round.
The purpose of MAI would be to protect investments as well as investors in the territory of each Contracting Party. MAI would have a strong dispute settlement mechanism including investors' right to sue infringing Contracting Party, a nation, before a dispute settlement panel. Non-OECD countries would be invited or coerced to join MAI in due course.
The definition of "investment" included "all forms of intellectual property." If this comes up to the new WTO round, it might have the substantive and enforcement standards possibly different from those of the TRIPS Agreement. In order to avoid legal uncertainties to be arisen from such differences, for example, the term "intellectual property" should be defined in more finite and closed fashion, because its protection would be legally enforceable upon a nation by a private party. Next, its current anti-expropriation clause may most probably conflict with the compulsory licensing provisions of national patent laws that are TRIPS consistent.
On the other hand, its anti-restrictive business practices ("RBP")
clause is welcome for consumer welfare and therefore for industrial and
technological developments, because the TRIPS Agreement almost lacked the
devices against misuse and anti-competitive exercise of intellectual property
rights, except a couple of voluntary provisions in Articles 8 and 40.
Countries pay and receive prices for technology transfer across their national
borders. The profits and losses from such transactions are shown in Graph
1 entitled "Technology Trade Balances". Although its sources
may not be as accurate as those for commodity trade, a general picture
may easily be drawn from the graph. Among the industrialized countries,
the U. S. alone has been recording a huge surplus every year for the past
quarter of a century, with the highest of $17 billion in 1994. United Kingdom
("UK") almost breaks even. France, Germany and Japan are recording
increasing deficit every year. Total of Others is the mirror image of the
U. S. with the lowest of $12 billion in 1994 (49.5).
Graph 1: Technology Trade Balance ($100M)
Graph 2: Technology Trade Balance/Nominal GDP (%)
Prepared by Tad Homma using the data from the Annual White Paper on
Science & Technology, Government Science & Technology Office
Graph 2 is the technology trade balances of industrialized countries divided by their respective gross national products ("GDP"). Graph 2 represents average unit prices of technologies exported or imported. As seen, the price of a piece of the U. S. technology has increased nearly twofold in seven years since 1985. This shows the dramatic success of the Young Report of 1985 (50).
Compared with the highly practical and moral-free provisions of GATT 1994 and General Agreement on Trade in Services ("GATS"), elder sisters of WTO family, the moral and ideological nature of the TRIPS Agreement still looks alien. Moreover, while GATT and GATS mostly request Members to refrain from certain protectionist acts, the TRIPS Agreement requests Members affirmative actions to make new laws and to enforce them vigorously.
If one takes the purpose of the TRIPS Agreement as a trade promotion of such commodities as audiovisual cassettes or computer software discs, it would be on the same level as conventional free-trade mechanisms of GATT or GATS. If one regards the TRIPS Agreement as a surrogate for protracted WIPO harmonization treaty as most Japanese representatives believed during the negotiation, it is also easily understandable. On the contrary, the TRIPS Agreement far exceeds them in scope and depth. Then, what is the TRIPS Agreement?
Only explanation the U. S. representatives could give during the negotiation was a simplistic dogmas that (1) because intellectual property is a property, it should be protected per se, and (2) because technology dissemination is hindered where protection of intellectual property is weak, stronger protection promotes it. The former is nothing but a capitalist fetishism and the latter is logically wrong (an inverse proposition is not always true). The meaning of the TRIPS Agreement lies in more depth.
Confronted with the emergence of new players in international trade such as Asian, African and former socialist countries, the U. S. is struggling to restore the Western business ethics consisting of principles of sacred property rights and due process of law that had been self-evident in traditional Trans-Atlantic trade (51). In coming years, other moral and ideological standards such as environment or human right will likewise enter the world of international trade.
Looking at history is a convenient way to understand new phenomena, with a precaution that history never repeats itself. In 1815, after the collapse of the Napoleonic hegemony, an international organization named Holy Alliance was formed to maintain the Restoration regime (until 1845). It did not hesitate to suppress domestic cultural/educational policies of its member as well as non-member states to stop re-emergence of a dangerous thinking of a republic. We can most plausibly explain the TRIPS Agreement as one of the efforts by the U. S. to establish ethical standards of the world trading regime for the coming century.
It is amazing that the Young Report of 1985, chaired by the president of a computer company, could not foresee the arrival of an age of computer and network. Even the TRIPS Agreement, started in 1987, did nothing about Internet copyright. WIPO Treaties of 1996 is trying to patch up a wide gap between the fast-growing computer technology and lingering laws.
The use of computer and network is making businesses more and more lean, agile and flexible (52). As the length of time from ordering and delivery is shortened by the use of computer and network, world-wide stock of industrial products and parts is expected to decrease in half by the end of the century (53).
Life-cycles of industrial products are becoming shorter and shorter. Investment should be recovered in less than a year. Only lean, agile and flexible companies could survive this busy world.
When the "final mile" between homes and local telephone stations has been replaced by optical cables, information revolution will take fire. A "contents revolution" is under way in which computer graphics and sounds will free individual artists from various educational-factional constraints. Desk-top-publishing by individuals authors is threatening large publishing companies. Internet music library will replace CD's. An unprecedented populist arts will replace current commercial arts based on a handful of star artists protected by heavy manufacturing and advertising investments.
These processes inevitably entail copying and processing of digitized information by individuals. Trying to stop these by a piece of law or an anti-copying gadget is like trying to stop huge ocean waves with a sand castle.
It is a fun to watch how intellectual property laws are trying to adapt themselves to this fast growing technologies. Recently, intellectual property laws of industrialized countries are being amended almost year by year making authors busy to revise their textbooks.
It is well-known that examination of patent application is fairly liberal in the U. S. (54) Japan, long proud of its conservative examination standard, has suddenly turned to a generous patent grantor under its "pro-patent" policy (55). Introduction of software patent and abolishment of pre-grant opposition both occurred in 1997 may accelerate this trend. The TRIPS Agreement has achieved a strong international protection of intellectual property rights. WIPO and OECD are trying to expand it.
Strong doubts arise: Are the 50- and 20-year exclusive-right protections under copyright and patent laws really providing an incentive for innovation to industries and individuals with more and more short-range plans for the recovery of their investment? Are not they suppressing them instead? Is not the accumulation in Japan of more than 100,000 patents every year including software patents, nearly 70% of which being not used by anyone including their owners (56), burdening the industry, particularly small venture-type companies, requiring them to maintain a corps of patent experts who do nothing but investigating others' patents and creating their own?
It seems that intellectual property systems of the world, absolutist survivors through French Revolution, is again confronted with another revolution -- information revolution. In order to make the soft-landing of this historic conflict possible, we need a strong antitrust constraint to enable consumers to counterbalance possible intellectual property stampedes.
It is time also for developing countries to begin searching for an optimum balance between the social efficiency and the monopoly created by intellectual property systems. Returning to the former weak protection of intellectual property is not realistic. Any optimum balance between the benefits of inventors and consumers, creators and users, software and hardware suppliers, and industrialized and industrializing countries will only be achieved in a tension between strong intellectual property laws and strong competition laws.
Articles 8 and 40 of the TRIPS Agreement anticipate future international negotiation on the so-called restrictive business practices in technology licensing transactions, and a new negotiation agenda, Trade and Competition, has emerged at the WTO Singapore Ministerial Conference in December, 1996.
1 Neither of these "undeniable" propositions is free from controversy. The incentive effects of intellectual property systems have never been plausibly measured either with contemporary or historical evidences. Rather, a renowned historian is skeptical about it: "It is at least possible that without the apparatus of the patent system discovery might have developed quite as rapidly as it did." T. S. ASHTON, THE INDUSTRIAL REVOLUTION, 1760-1830 (London: Oxford University Press, 1948) at 11 (1971 reprint). It is true that there are some surveys showing that business executives in certain developed countries believed (or were led to believe) that intellectual property systems promote innovation or that their decisions whether to invest to developing countries were affected by the intellectual property protection afforded there. UNCTAD, THE TRIPS AGREEMENT AND DEVELOPING COUNTRIES (United Nations Conference on Trade and Development, New York and Geneva, 1996) at 2 and 17. It may not be realistic to measure an incentive effect of a 50- to 20-year protection of intellectual property vis-a-vis an individual creator who is busy developing a new product of only a 1- to 2-year life-cycle. An incentive is only conceivable as a symbol around which creators' expectations for a reward for their efforts converge. Or, in the broadest meaning of the word "incentive", intellectual property systems may be justified as the least harmful to the society among various rent-creating systems including cartels, private monopolization and taxes.
On the other hand, social inefficiencies created by intellectual property
systems are actual at least in a static sense and supported by business
experiences, to say nothing of misuse and antitrust violation: The winner-take-all
nature of the patent and the "look-and-feel" copyright systems
cause a loss from duplicative investments. An injunctive relief common
to all intellectual property systems makes the price of an intellectual
property license a ransom. Asymmetry of price information
between possible licensors and licensees makes price determination through
market mechanism almost impossible. The territorial nature of national
intellectual property systems divides the world market in pieces. Manufacturers
have to employ hundreds of patent experts who do nothing but patenting
others' inventions. A dominant operating system "locks in" compatible
application programs and the latter make the former more dominant ad
infinitum. With no registration or disclosure system, the 50-year protection
of software subroutines produced daily will eventually amount to a huge
mine field to our descendants, etc.
2 In this paper, I am using undefined
vulgarisms "pro-patent" and "anti-patent" liberally
to represent general attitudes for and against intellectual property in
general. A "pro-patent" policy proposal has just appeared in
Japan in a desperate attempt to stimulate stagnant investments. See, e.
g., Nikkei Shimbun ("NIKKEI"), Editorial, January 20, 1998.
3 E. g., Motion Picture Patents v. Universal Film
Manufacturing, 243 U. S. 502 (1917); Carbice of America v. American Patent
Development, 238 U. S. 27 (1931); Leitch Manufacturing v. Barber, 302 U.
S. 458 (1937); B. B. Chemical v. Elmer Ellis/Magic Tape, 314 U. S. 495
(1942); Morton Salt v. G. S. Suppiger, 314 U. S. 488 (1942); and National
Lockwasher v. George Garrett, 137 F. 2d 225 (3rd Cir. 1943).
4 E. g., Ira McCullough v. Kammerer, 166 F. 2d 759 (9th Cir. 1948).
5 E. g., International Business Machines v. U. S., 298 U. S. 131 1085 (1936); International Salt v. U. S., 332 U. S. 392 (1947).
6 E. g., U. S. v. Loew's, 371 U. S. 38 (1962).
7 Walter Brulotte v. Thys, 379 U. S. 29 (1964).
8 Laitram v. King Crab, 244 F. Supp. 9 (D. Ala. 1965).
9 American Photocopy v. Rovico, 359 F. 2d 745 (7th Cir.
1966).
10 Zenith Radio v. Hazeltine Research, 395 U. S. 100 (1969).
11 Lear v. John Adkins, 395 U. S. 653 (1969).
12 E. g., Wilson, Bruce B., "DOJ Luncheon Speech, Law on Licensing Practices: Myth or Reality? Or Straight Talk from "Alice in Wonderland,"" a speech made before the American Patent Law Association, Washington, D. C., January 21, 1975.
13 U. S. Department of Justice, "Antitrust Enforcement Guidelines for International Operations", CCH TRAD. REG. REP. 24 (November 10, 1988).
14 U. S. Department of Justice, "DOJ Antitrust Guidelines of Licensing of Intellectual Property" (April 13, 1995), reprinted in BNA: PATENT, TRADEMARK & COPYRIGHT JOURNAL ("PTCJ"), vol. 49, at 714.
15There was a change in the U. S. nuclear deterrence strategy during the Kennedy Administration from a "Mutual Assured Destruction" strategy to a "Flexible Response" strategy. The former consisted of maintaining an assured-destruction, second-strike capability and the latter added to it conventional war and "Limited Nuclear War" alternatives. AlEXANDER L. GEORGE and RICHARD SMOKE, DETERRENCE IN AMERICAN FOREIGN POLICY -- Theory and Practice (New York: Columbia University Press, 1974) at 42. It is interesting to note a strange parallelism between the U. S. nuclear deterrence and international trade strategies.
16 Schenck v. Nortron, 713 F. 2d 782 (Fed. Cir. 1983). Also, "An intellectual property owner's rights to exclude are similar to the rights enjoyed by owners of other forms of private property," DOJ Guidelines for Licensing of Intellectual Property", supra. The similarity between intellectual property and other forms of (tangible) property stops at their names, however. There is no such thing as stealing others intellectual "property". Owners of other (tangible) forms of property can never enjoin making, selling, using or copying of substantially similar or equivalent property owned by others, which patent and copyright owners can. The monopoly enjoyed by an owner of a tangible property is confined to that particular piece of property, while a patent or copyright owner has a monopoly at least in the market of patented or copyrighted products or services. Also see n. 41, infra.
17 Apple Computer v. Franklin Computer, 545 F.Supp. 812 (E.D.Pa. 1982)/714 F.2d. 1240 (3d. Cir.,1983).
18 Whelan v. Jaslow, 727 F. 2d 1222 (3d Cir. 1986).
19 Computer Associates v. Altai, CA 2, Nos 91-7893/7935 (2d Cir. 6.22.1992).
20 Sega v. Accolade, 977 F. 2d 1510 (9th Cir. 1992); and Atari v. Nintendo, 975 F. 2d 832 (Fed. Cir. 1992).
21 Markman v. Westview, 116 S. Ct. 1384, 134 L. Ed. 2d 577 , 64 USLW 4263, 38 USPQ 2d 1461 (1996).
22 Graver Tank v. Linde Air Products, 339 U. S. 605 (1950).
23 Warner-Jenkinson v. Hilton Davis Chemical, -- U. S. --, 117 S. Ct. 1040 (1997).
24 Patent and Trademark Office, United States Department of Commerce, "Examination Guidelines for Computer-Related Inventions", 61 FR 7484 (February 28, 1996), reprinted in PTCJ, vol. 51, at 426.
25 Consten & Grundig v. Commission (1966), [1966] CMLR 234.
26 Deutsche Grammonphon v. Metro-SB-Grossmarkte, [1970]
CMLR 435.
27 Centrafarm v. Sterling (1974), [1974] 2 CMLR 120; Merck
v. Stephar (1981), [1981] 3 CMLR 463.
28 Dansk Supermarked v. Imerco (1981), [1981] 3 CMLR 590.
29 Musik-Vertrieb Membran v. GEMA (1981), [1981] 2 CMLR 44.
30 Keurkoop v. Nancy Kean (1982), [1983] 2 CMLR 47.
31 EMI v. CBS (1976), [1976] 2 CMLR 235 / Polydor v. Harlequin Record Shop, [1982] 1 CMLR 677.
32 If EU prohibits parallel import from outside while permitting it between Member States, it is against Article 3 of the TRIPS Agreement. If a Member State prohibits parallel import from outside while permitting it from other Member States, it is against Article 4. Fully aware of this dilemma, EC proposed a footnote to Article 6 during the Uruguay Round to the effect that EC should be regarded as a single entity in regard to the exhaustion issue. This proposal had first been dropped from the final draft due to a clerical error but was never recovered due to lack of consensus.
33 E. g., Nungesser & Eisele v. Commission (1982), [1983] 1 CMLR 278.
34 EEC Commission Regulation No. 240/96 on Technology Transfer Agreements (1996).
35 Directive 89/552/EC (1989).
36 BBS Kraftfahlzeugtechnik AG and BBS Japan, Inc., petitioner v. Rasimex Japan, Inc., et al, respondent, Supreme Court Heisei 7 (o) No. 1988 (July 1, 1997), J. of S. Ct., No. 1198 (July 15, 1997):
(Summary) The Judgment is in favor of the importer (Rasimex) of a patented product (aluminum wheels) rejecting an appeal made by the patent owner (BBS). Part 1 of the Opinion relates the factual and procedural backgrounds of the case. Part 2 summarizes the arguments made by both parties. Part 3, occupying majority of pages of the decision, gives the opinion of the court in reaching the decision. Chapter 1 of Part 3 concludes that the present case should be decided only in light of the Japanese Patent Act and not by the Paris Convention nor by the doctrine of territoriality. Chapter 2 states that the doctrine of exhaustion is based on Article 1 of the Japanese Patent Act ("The purpose of the Act is to promote invention and thereby to contribute to the development of industries"). Chapter 3 denies the so-called doctrine of international exhaustion saying that a patent right in Japan and its corresponding patent in an exporting country are different rights. Chapter 5 is the conclusion of the opinion.
Chapter 4 (summarized and translated by Tad Homma, brackets added): Now, considering the balance between the distribution of products in international trade and the right of a patentee, it is safely be said that, in light of the situation that international trade is progressing extremely widely and highly in modern society, the highest degree of respect to the freedom of distribution of products including importation is required, even where a Japanese trader imports into Japan the product [first] sold in another country and puts the same into distribution into the [Japanese] market. And whereas, even in the economic transactions in another country, a transaction is achieved on the basis that a seller generally transfers all of his rights on the merchandise to the purchaser and the purchaser acquires all of the rights owned by the seller, it is naturally expected that, where a patentee has sold a patented product in another country, the [first] purchaser or the third parties who purchased the same from the [first] purchaser may import into Japan, use or further sell to others as a business, in light of the above-mentioned situation of international trade in modern society. Considering these points, the patentee is not permitted to enforce his patent right in Japan [1] against the [first] purchaser of the product except where the patentee has agreed with the [first] purchaser to exclude Japan from the territories for sale or use or [2] against the third parties or subsequent purchasers who purchased the product from the [first] purchaser except where the patentee has agreed with the [first] purchaser as above-mentioned and has explicitly indicated the same on the patented product. In other words, (1) in light of the above-mentioned fact that a patented product sold in another country is naturally expected to be imported into Japan subsequently, the sale of a product by the patentee in another country without any reservation should be interpreted as a grant of rights to the [first] and subsequent purchasers to control the product in Japan without any patent restriction. (2) Focusing upon the right of the patentee on the other hand, it should be permitted for a patentee to make a reservation of right, upon the sale of a patented product in another country, to enforce his patent right in Japan, and where the patentee has agreed with the [first] purchaser and has explicitly indicated the same on the patented product, the subsequent purchasers can recognize the attached restriction to that effect even if third parties have intervened during the distribution of the product and can decide at his free will whether or not to purchase the product in the face of such restriction. (3) And the sale of the patented product in another country by subsidiaries or affiliates who can be regarded as same as the patentee should be interpreted as the sale of the product by the patentee himself, and (4) the need to protect the belief in free trade of the purchaser of a patented product does not differ depending upon whether or not the patentee has a parallel patent right at the place of first sale of the patented product.
(Points): (1) The opinion says in essence: "You are not permitted to enforce your patent right in Japan, except where there is an agreement and indication to exclude Japan from the licensed territory." It is logically wrong to interpret this as: "You are permitted to enforce your patent right in Japan, where there is an agreement and indication to exclude Japan from licensed territory." The opinion is written in an inverse proposition (If not p, then not q) and it is a hornbook logic that an inverse proposition is not always true. A proposition "if Joan is a schoolgirl, she is a woman" is true, but its inverse implication "if Joan is not a schoolgirl, she is not a woman" is false. The opinion is silent about the hypothetical situation where there is an agreement or indication to exclude Japan from licensed territory. (2) A reverse interpretation is only possible when elimination of an exception brings the principle back. In the above opinion, however, the principle is "the highest degree of respect to the freedom of distribution of products including importation" and the exception is the permission "for a patentee to make a reservation of right, upon the sale of a patented product in other countries, to enforce his patent right in Japan." (3) The opinion is also silent about the legality of such "reservation". It gives no absolution to such agreement or indication. It may be in violation of the Japanese Antimonopoly Act under certain circumstances. Also see ECJ's Grundig-Consten and Nungesser decisions, supra.
37 Federal Supreme Court does not seem to be in full agreement with the Executive Branch. It coldly refers to the trade agreements restricting parallel import heretofore concluded between the Executive Branch and five countries: Cambodia. Trinidad Topago, Jamaica, Ecuador and Sri Lanca (none ratified). Quality King Distributor v. L'anza Research International, S. Ct., No. 96-1470, 55 PTCJ 400 (1998).
38 Unlike other types of intellectual property, trademark protection is being justified in a somewhat easygoing way. Even a report written by UNCTAD, a long-standing critic against strong protection of intellectual property rights, refers to it as being "straightforward". UNCTAD, op. cit. at 42. Everybody says that trademark protects goodwill consisting of reputation for good quality and services but few are so straightforward as to say that it actually protects advertising investments.
39 K-Mart v. Cartier/47th Street Photo Shop v. Coalition to Preserve the Integrity of American Trademarks ("COPIAT") / U. S. v. COPIAT, 486 U. S. 281 (1988).
40 But came too late to save Suntory's "Akadama Port Wine" that had changed name too hastily to less favorable "Akadama Sweet Wine".
41 Many contributors in ADAM D. MOORE, ed., INTELLECTUAL PROPERTY -- Moral, Legal, and International Dilemmas (Lanham, Md.: Rowman & Littlefield Publishers, 1997) support this view based on Lockean "property" model. Even UNCTAD is not immune from this influence. UNCTAD, op. cit. at 13. However, there are strong arguments against such "property" approach in that it may easily become prey to a property right fetishism, supra. See, e. g., PETER DRAHOS, A PHILOSOPY OF INTELLECTUAL PROPERTY (Aldershot, England: Dartmouth Publishing Co., 1996) at 101.
42 Asahi Shimbun, October 10, 1991.
43 Advocates of intellectual property protection in MOORE, op. cit, who are trying to justify property rights in "ideas" are only marginally successful for trade secrets.
44 United States - Section 337 of the Tariff Act of 1930, Report by the Panel reported on November 23, 1988 and adopted on November 7, 1989 (L/6439), Basic Instruments and Selected Documents, GATT, 36S/345.
45 In 1987, the Seattle Customs seized personal computers ("PC's") made by Matsushita under the U. S. Customs Regulation Section 133 alleging that Matsushita's Basic Input-Output Systems ("BIOS") infringed a copyright recorded by IBM. According to the Customs, 32% of Matsushita's BIOS lines were found similar to IBM's. Matsushita gave up importation to the U. S. Most other Japanese PC manufacturers had similar experiences. This seems to have been a part of the U. S. attempts to protect its PC industry from the then fast-growing import of Japan-made lap-top PC's utilizing a liquid crystal screen only available in Japan at that time. In the same year, the USTR decided to levy 100% import duty to Japan-made PC's under alleged violation of the U. S. Trade Act Section 301 which lasted for four years.
46 As part of the trade offensive against Japan-made IC's in the late 1980's, Texas Instruments sued Japanese and Korean IC manufacturers before the ITC in 1986 and is said to have earned nearly $1 billion by settlements (American Lawyer, March 1992).
47 This coincides with the defensive nature of Japanese companies in their patent application behavior: Majority of Japanese patent applications is for defensive purposes, i. e., as a counterforce against patent offensive by others, rather than for monopolizing patented product/process market. Japanese companies are filing far more patent applications in Japan than in foreign countries, whereas U. S. and European companies are filing far more and fast-growing proportion of patent applications in foreign countries than their home countries. PATENT OFFICE OF JAPAN, ANNUAL REPORT OF PATENT ADMINISTRATION -- POLICY ASPECTS, 1998 <http://www.jpo-miti.go.jp/ siryo/siryo.htm (98/08/06)>. Japanese industry is, so to speak, a passive and sometimes reluctant follower of the U. S. "pro-patent" policy.
48 World Intellectual Property Report (London: BNA) Volume 11, Number 2 (February 1997).
49 Contrary to the desire of the U. S., the negotiation has dragged for a year and is expected to delay further mainly due to the resistance of the European Union for cultural reasons. NIKKEI, April 29, 1998. It is expected that the MAI negotiation will be absorbed into the proposed new ("Millennium"?) Round of WTO. To negotiate trade matters, WTO is far better a forum than OECD, a club only for industrialized countries: A rule only applicable to a group of countries is worse than no rule.
49.5 The picture updated as of 05-5-27 looks more weird (this time in Billion Yen).
50 Graph 2 can also be interpreted as the annual membership fees for an intellectual property club run by the U. S. Generally speaking, UK is an honorary member free of charge, while membership fees for France, Germany and Japan are roughly 0.1% of their gross national products. For lack of reliable GDP number for the entire world, the GDP's of the top thirty countries in Others category were added to simulate the total GDP of Others. It amounted to about 150% of Japan's GDP. Because Others category shows a technology trade deficit about 3 times as much as Japan in 1994, the membership fee for Others may be around 0.2% of its GDP. The U. S. annual surplus in technology trade balance roughly corresponds to one-fifth of its commodity trade deficit.
Is the above picture anything to be complained of? A trade balance is not the same as a profit and loss statement of a private company. PAUL KRUGMAN, POP INTERNATIONALISM (Cambridge, Mass.: The MIT Press, 1997), at 6. Despite a common saying that information age has come, someone still must make hardware. A large amount of money constantly flows two ways between the manufacturing sector and the service sector to which intellectual property owners belong. A comparative advantage model between commodities and services had apparently been in motion until Reagan Administration intervened in 1985 to artificially raise the price of U. S.-made technologies.
51 Robert Keohane suggests a possibility of an ideological hegemony. ROBERT O. KEOHANE, AFTER HEGEMONY -- Cooperation and Discord in the World Political Economy (Princeton, New Jersey, Princeton University Press, 1984). He also emphasizes the importance of defining or establishing "property rights" as the basis of an international regime but did not say that his "property rights"include intellectual property rights. Id., at 11, 18, 62, 87 and 97.
52 E. g., FEDERAL TRADE COMMISSION STAFF REPORT,
ANTICIPATING THE 21ST CENTURY-- COMPETITION POLICY IN THE NEW HIGH-TECH,
GLOBAL MARKET PLACE, Volume I (U.S. Federal Trade Commission, May 1996).
<http://www.ftc.gov/opp/global/gc_v1.pdf>
53 See, e. g., NIKKEI, January 8, 1998.
54 In 1996, the USPTO granted 109,000 utility patents
out of 195,000 applications (http://www.uspto.gov/ web/offices). Nearly
40% of granted patent is said to be invalidated or held unenforceable during
infringement actions.
55 While the number of patent application had been maintained
stable at about 400,000 from 1992 through 1996, number of patent grant
suddenly increased to more than 200,000 in 1996 from less than 100,000
from 1992 through 1995 (http://www.jpo-miti.go.jp/siryo/tourui.htm (98/05/22)).
Grant/application ratio now approximately matched the U. S.
56 See, e. g., NIKKEI, September 4, 1996.