Intellectual Property Rights and East Asian Renaissance

The panel discussion began with reports by a corporate practitioner and a policy official on the theme of "Intellectual Property Rights and Growth of the World Economy." These were followed by a discussion featuring experts from Japan, the U.S., and China on IPR issues, policies, and prospects.

In a presentation titled "Canon's Corporate Management and Intellectual Property in East Asia," Mr. Tanaka, Senior Managing Director of Canon Inc., focused on the current real-world intellectual property environment and responses to the issues faced.

Asia accounts for a growing share of production and sales. Although firms pay little attention to IPR protection when selecting sites for production, they step up IPR activities when economic development turns the site into a mass-consumption region.

The first major IPR issue faced is the collection of royalties. Since royalties can only be levied on the portion of IPR relating to transactions, IPR issues are involved when the head office collects funds from affiliates. Naturally this also involves transfer pricing tax system issues.

Problems with counterfeit products are addressed through direct enforcement of IPR. Enforcement of trademark and design rights is particularly common, and in serious cases involving production of goods interchangeable with Canon-brand products we enforce patent rights.

IPR protection issues differ completely at each different stage of overseas expansion, such as establishment of sales companies and establishment of R&D companies.

Sound global economic development requires the promotion of innovation and the establishment of IPR systems to protect technologies that emerge from such innovation.

Currently counterfeit products not only damage brands, but are also linked to public safety issues and organized crime. Moreover, IPR systems differ between countries and regions, and there are even greater gaps in the way such systems are enforced. Firms conduct their business activities bearing in mind these issues. Japan and other developed countries need to actively support the building of IPR systems in East Asia.

In a presentation titled "Japan's Efforts Concerning Intellectual Property," Mr. Suzuki, Deputy Director-General of the Economic and Industrial Policy Bureau at METI, provided a comprehensive report on government initiatives to date.

Innovation and the IPR systems that protect it are crucial in aiming for higher productivity. Considering that approximately 30% of Japanese companies' profits are generated overseas, the building of IPR systems needs to be considered from a global perspective.

IPR-related risks include delayed conferring of examination rights, increases in the uncertainty of rights or disputes over them due to differences in systems and examination processes, and problems involving counterfeit products. It is especially important that patent examination systems should as far as possible offer consistent quality.

Inter-agency work-sharing to reduce the burden of examining repeat applications is an example of government efforts to date. Japan, the U.S., Korea, the UK, and Germany are already participating in this scheme, which dramatically cuts examination periods by having patent examination agencies send data to their counterparts in other countries. In future we intend to promote the additional participation of APEC and other countries or regions.

Intellectual property systems also need to be put in place in developing countries, and Japan is actively supporting this process while at the same time taking measures against counterfeit and pirated products.

There is a broad range of issues associated with counterfeit products in developing countries, including patent rights, trademark rights, and copyright. The government particularly intends to advocate such measures as the Treaty for the Prevention of the Proliferation of Counterfeits and Pirated Versions.

The trend toward horizontally specialized innovation spurs outsourcing and joint development initiatives, so we need to take an international approach to technology standardization and intellectual property strategy. Since Japan has strengths in the content business, it also views copyright protection as a key issue.

From the perspective of maintaining and strengthening competitiveness we must also consider technology outflow prevention measures seen in many other countries, as a way of appropriately managing technology information.

Professor Maskus made the following comments: What are the implications for developing countries? It has been pointed out that one aspect of IPR is burdens such as higher prices, and if we actually go to these countries we can see that another aspect is hindrance of innovation and growth for local companies.

Private and public mechanisms are necessary in order for global public goods such as vaccines and genes to be widely used. Patent-holders try to control supply, but IPR also serves to increase the potential for licensing. There is a need to develop new licensing and technology development models to promote the spread of technology while protecting rights.

Mr. Chen made the following comments: Two points are attracting attention: How to harmonize patent protection and the fact that patents are one criterion determining the extent of a country's economic development. IPR protects innovation and the accumulation of knowledge, but it is also important to maintain a balance with economic development.

Professor Wakasugi made the following comments: There are discrepancies between countries in the patent systems and the way they are actually operated, and something needs to be done to bridge these gaps. The price differentiation mentioned by Professor Maskus may provide a key. Rather than thinking of a uniform system, it is important to take the perspective of how best to incorporate diversity into the system.

At present WTO dispute settlement procedures provide a powerful mechanism for resolving international disputes over intellectual property. However, the procedures could become unworkable if such disputes proliferate. There is a need to consider both the existing dispute settlement procedures and the creation of new rules.

Professor Sawa made the following point: We have heard the view that excessive protection of intellectual property hinders further innovation, yet assuming that patents have limited terms and that people develop alternative technologies aimed at avoiding patent infringements, protection is not necessarily a factor obstructing innovation.

Professor Wakasugi replied as follows: The system is efficient if the profits a patent-holder can gain during the period of protection offered by a patent are sufficient to fully recoup the investment that was required. Currently patents are issued for a uniform period of 20 years, but considering that the pace of innovation has increased, the question of patent periods should be discussed.

Mr. Tanaka replied as follows: There is no single and absolute technology. Alternative technologies exist, so strong protection does not necessarily lead to harmful effects on further innovation. Even if the fundamental patent expires, peripheral technologies are still required, so it is unlikely that competitors will catch up immediately. Various circumstances should be considered in deciding the period of protection.

Professor Maskus replied as follows: When considering international harmonization, there is a need to decide benchmarks for the scope and period of protection. I believe there is no problem with short protection periods for industries where technology progresses at a rapid rate, but selecting industries is politically difficult.

Professor Sawa made the following point: Inventions made by universities and public institutes are important in fields such as regenerative medicine, and there are moves to patent such inventions. In some cases intellectual property may be a private good and in others it is a public good, and we need to think about how to consider these circumstances.

Mr. Tanaka replied as follows: The IPR system was originally devised for the purpose of promoting industry, and the issue of where to make the distinction between science and technology must be discussed.

Mr. Suzuki replied as follows: The WTO compulsory licensing policy allows for use of intellectual property when there is a public requirement. If the question of international public goods is to be discussed, it must be included in future debate over international harmonization of patent systems.

Q: What is the background to the recent U.S. rethinking of TRIPS-Plus strategy in its bilateral agreements?

Regarding price differentiation and IPR, I think parallel imports become a problem if differential pricing is implemented. Am I right in understanding that parallel imports should be restricted?

A (Professor Maskus): It was realized that U.S. firms could gain little benefit under TRIPS-Plus from developing countries with small markets, and that partner countries were showing little interest in the "plus" clauses. Concerning price differentiation, there may be an impact depending on market circumstances, and I think some form of restriction on parallel imports is necessary.

The development of Asia holds major historic potential rivaling that of the Italian Renaissance. The core of this potential perhaps lies in how boldly and dynamically intellectual creativity is exercised. Intellectual property systems form the infrastructure supporting such creativity.

However, as we have heard in today's discussion, much further research is required into various related issues, problems, and questions of diversity. RIETI will continue to collaborate with KIER to conduct research on the potential of East Asia.