An "Intellectual Property Strategy" Which Fences in Information is Unsuitable for the Internet Age

Senior Fellow, RIETI

It may be because Japan is often criticized for not having a proper strategy, that recently created government organizations are often named "Strategic Council on X." One such example is the "Strategic Council on Intellectual Property," which announced on June 20 the "Program for Promoting the Creation, Protection and Exploitation of Intellectual Properties (tentative title)" [PDF:196KB] (as published on the "Prime Minister and His Cabinet" Web site, Japanese only.) Its content, however, does not show the Japanese government's strategy, but is merely a follow-up of the U.S. government's pro-patent strategy.

Strengthening of patents generates an "arms race"

The U.S. government launched a pro-patent policy in the 1980s to protect its high-tech industry from pursuit by Japan, but the courts at that time had a tendency of being anti-patent, and only about 60% of patent infringement lawsuits saw the plaintiff winning the case. In order to carry out the federal government's policy within the judiciary, the Court of Appeals for the Federal Circuit (CAFC) was set up in 1982. Following the establishment of the CAFC, the number of patents which have been allowed after being rejected in the lower courts has increased, and by the 1990s, over 90% of lawsuits on patent infringement saw plaintiffs winning their cases. The CAFC aggressively expanded the scope of patents to include software, DNA and even business methods; as a result US domestic patent application doubled in the 1990s.

The "high court for intellectual property," which is the centerpiece of this Promotion Program, is an imitation of CAFC, but is there any point in establishing a specialty court in a country where only about 200 cases of patent lawsuits appeal to a higher court each year? While it is important to speed up the patent examination process and to increase the number of judges with professional knowledge, such issues can be addressed by changing the procedure and selecting appropriate judges. In other words, there will probably be no major change even with the establishment of a high court for intellectual property, but the key issue here is that this court serves as the symbol of the Japanese government's pro-patent stance.

In the Promotion Program it states that, "We believe it is true that the changes in the U.S. government's attitude towards stressing the importance of intellectual property and the various reforms which took place there in the 1980s...have contributed to increasing the global competitiveness of the U.S. industry and realizing long-term economic growth." But there is no basis for this assumption. According to interviews conducted with U.S. companies, the most effective way to protect technological superiority is to keep the information within the company, while seeking patent protection is ranked as the least. The main reason for firms seeking patent protection is to prevent other companies from imitating their technology and stop them from applying for the same patent. The conclusion of this large-scale empirical study (paper prepared by Wesley M. Cohen, Richard R. Nelson and John P. Walsh, as published on the National Bureau of Economic Research Web site) is that while it is generally doubtful that patents promote technological innovation, it does serve to prevent technological development by other firms.

This is very similar to an arms race. It is only natural that individual firms want to protect themselves through arms (patents), but when all companies make moves to expand their arms, the situation becomes dangerous. The number of patent infringement lawsuits in the United States doubled in the 1990s, and not only did that discourage technological innovation, but legal costs have been a serious burden. Over 30% of the research and development costs of U.S. firms are related to patents, and 55% of venture companies say that, "Patents are the largest interference to research and development." Criticism of the U.S.-led pro-patent policy is strong in Asia as well. If so, then shouldn't the role of Japan be to represent Asia and call for a global "disarmament"?

The need for a policy suited to the information-sharing Internet Age

Even regarding copyright issues, the current Diet passed legislation to extend the copyright of movies from 50 years to 70 years after release. The Promotion Project calls for similar measures to include all copyrighted work, and also investigation into strengthening the "rental rights" of game software, as well as books and magazines. Such policies which hamper the circulation of information contradict the "promotion of content circulation", which is also sought by the Promotion Project. The "right to ban record imports," which prevents the import of inexpensive CDs from abroad, merely protects domestic business and has nothing to do with protecting the rights of the creator.

There are also no grounds for the assumption these policies make, which claim that, "The appropriate protection of intellectual property is instrumental in securing incentive for its creation and bringing about its effective use" (Promotion Project plan page 24). As one can see from how unprecedented technological innovation is taking place in the world of the Internet, where there is unrestricted copying, and from how Linux is threatening the monopoly of Microsoft by making its internal structure an open source, it is possible to promote technological innovation by making information available to all. Asian nations, like South Korea, where information is shared freely, are leading the global broadband trends, while it is the United States, which has the world's strictest copyright protection, that has fallen behind in the broadband initiative.

But this Promotion Project plan mentions the word "Internet" only a few times, and always in the context of being "a tool to violate copyright." If the government on the one hand is promoting the development and procurement of open source products, then how does it seek consistency with its "intellectual property strategy"? The global lesson from information technology use over the past ten years is that all government policy or business initiative which went against the Internet has failed. For Japan to show a global leadership, it is much wiser to seek a policy of promoting technological innovation by disclosing information through measures such as open source, rather than following the already 20 years outdated U.S. policy of concealing information. A policy for enhancing creativity also needs to be one which seeks creativity appropriate for the Internet Age.

June 24, 2003

June 24, 2003