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VOICES FROM THE INDUSTRY: Protecting property rights means thinking globally Effect on Indiana business Taking action

April 18, 2005

Last month, 10 members of the U.S. House of Representatives asked the Bush administration to initiate trade disputes before the World Trade Organization and to identify nations that don't protect intellectual property rights under U.S. trade law.

The Representa tives pointed to a number of countries-Brazil, China, Pakistan, Russia and Thailand-that have been identified in the "National Trade Estimate Report on Foreign Trade Barriers" as having poor enforcement of trademarks and copyrights.

While the lawmakers' concerns are valid, the expression of the problem is flawed in that it describes international intellectual property rights enforcement as a matter of "U.S. intellectual property rights." This is a misnomer.

Patents, trademarks and copyrights registered in the United States are not enforceable outside the United States. Intellectual property rights must be issued by the nation of concern before they can be enforced there. In other words, if an American firm wants to protect intellectual property in China, that company must file for that protection in China, not rely on its U.S. protections.

Filing for such protection involves engaging an attorney in the country where protection is being sought, translating documents to the local language and paying filing and periodic fees to maintain the registration.

How does a foreign nation's failure to grant and enforce intellectual property rights affect Indiana?

Multinational enterprises employ thousands of Hoosiers. If a product "knockoff" is purportedly protected in another country by intellectual property registration, profits are transferred from the legitimate developer of the idea to a "pirate." When the owner/developer of the registered intellectual property is a United States enterprise, our nation's gross domestic product is reduced; when it's an Indiana company, the state's economy is affected, and Hoosier workers lose jobs. Multiplied by thousands or millions of occurrences, the financial impact is tremendous.

How do Indiana multinational enterprises respond to the challenge of enforcing their intellectual property rights in countries identified in the NTE?

First, by investing in protection. Intellectual property is a "pay-to-play" activity: Registration of intellectual property in a country is a pre-condition to protection of that intellectual property. Despite poor enforcement, Indiana multinationals do try to protect their intellectual property in NTE nations. For example, patent applications filed from July 1, 2002, to June 30, 2003, show Eli Lilly registered 41 percent of its U.S. patent applications in China, Columbus-based Cummins Inc. registered 8 percent of the number of its U.S. applications in China, and Dow AgroSciences registered 61 percent of its U.S. applications in China. In other words, Indiana businesses appear to be selectively filing patent applications in China despite the tilted playing field.

Today's angst concerning the nations in the NTE report echoes the concern expressed about Japan in the 1990s. Japan was connected to a number of complaints about "patent flooding" and counterfeit brand-name goods. Japan even considered legalization of reverse-engineering of software programs.

As a result of pressure from the United States and Europe (and a wake-up call from its own industry), Japan was compelled to address its intellectual property laws and enact agreements that better protect intellectual property rights. Another factor driving this shift by Japan was its growing economy and increasing dependence on protecting its own innovations and technology exports.

NTE-listed nations can be expected to make moves toward better intellectual property protection as their economies move to intellectual property development.

As a developing economy, Japan followed the path of protecting local industry by adopting national policy. Today the nations identified in the NTE report are developing markets. For example, China is a net importer of technology. Its policy offers little respect for intellectual property rights. However, as China's technological base expands, intellectual property enforcement policy will likely follow.

Multinationals understand that intellectual property registration is the first step in protecting intellectual property. Without registration, there is no opportunity for enforcement.

Moreover, intellectual property rights registered today have a life of 20 years for patents, a longer life for copyrights and an indefinite life for trademarks. Failure to register intellectual property rights today forecloses enforcement tomorrow.

What is the answer to problems of intellectual property enforcement in developing nations? I'd take the long view.

Recognize how the U.S. economy will be damaged by tepid enforcement.

Urge pressure on our government, possibly including WTO actions.

Register and maintain strategic intellectual properties in anticipation for better IP enforcement as the economies of the nations on the NTE report mature.

Take strategic enforcement action as the playing field levels.

If history is a guide, IP enforcement will improve. Owners of intellectual property who take action to protect their property internationally now will reap added rewards as NTE nations-and the rest of the world-recognize the economic benefits of protecting all intellectual property.



Ladd is a patent lawyer and a partner at Baker & Daniels where he concentrates his practice on intellectual property issues. Views expressed are the writer's.
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