2005/01 Special Report
The Patent System: Status and Issues
Faculty Fellow, RIETI
Trends in Patents and the Patent System
Japan introduced a patent system at a relatively early stage in its economic development, with the promulgation of an ordinance relating to trademarks in 1884 and to patents in 1885. Japan's modern economic growth began in the mid-1890s, and a patent system designed to promote technological development was introduced at that time as part of a broader effort to build infrastructure, including railways, harbors and the postal system. These systems have provided the foundations for Japan's subsequent economic development.
The Japanese economy started to grow rapidly in the 1950s. With the growth of the Japanese economy and its technological advancement, Japan's patent system started to change. The first major change was the introduction of substance patents in 1975. This took place earlier than in countries such as Switzerland, the Netherlands, Sweden and Canada. This step was taken partly as an effort to "internationally harmonize" the Japanese patent system, but most pharmaceutical and chemical companies in Japan welcomed it as well. Japan's patent system has continued to adapt to the changing nature of companies' technological capabilities and it has contributed to the country's technological progress.
As shown in Figure 1, the number of patents increased dramatically throughout the 1970s and 1980s, supported by R&D expenditures, which also grew rapidly. In the 1990s, the growth of both R&D expenditures and patents slowed amid the economic downturn, but Japan still maintained one of the highest levels of R&D expenditures and patent applications in the world.
Since the introduction of substance patents, various aspects of the patent system, including its enforcement, have continued to change. The general trend has been toward stronger patent protection, a broader range of patentable inventions, extended patent periods for medicines, broader scope of patents, and larger amounts of compensation for damages. In particular, effective enforcement has been necessary to ensure that the system continues to provide incentives for innovation.
The requirements for today's patent system to function properly as part of the basic infrastructure for innovation include the following.
(1) Quality of examinations
Expediting the patent examination process has become a pressing issue, partly as a result of the temporary effects of the reduction in the term for requesting examination from seven years to three, but fundamentally due to the ever-increasing pace of technological advancement. Measures to resolve this issue are already being implemented, such as increasing the number of patent examiners. In taking such measures, however, it is important to maintain the quality of examinations. The patent system grants inventors monopoly rights for a fixed period in order to provide incentives for innovation; the harm arising from granting such rights to inventions that do not deserve them is significant. In addition to the loss of efficiency due to monopolies, such improper patents cause various legal problems.
Many of these problems are highlighted in a book entitled Innovation and its Discontents: How Our Broken Patent System Is Endangering Innovation and Progress, and What to Do About It, which was recently published by Adam B. Jaffe of Brandeis University and Josh Lerner of Harvard University, two leading scholars in economic research on patents. The book highlights the ways in which the so-called pro-patent orientation of the U.S. patent system has wreaked havoc on economic productivity due to the combination of low quality examinations of patents and the strong protection given to patents. It argues that the patent system, which was originally intended to promote innovation, is in fact obstructing it. The U.S. Federal Trade Commission and European commentators have also raised these issues.
Problems with the patent system in the U.S. are also damaging economic productivity in Japan and Europe. Thus, the well-intentioned introduction of speedy examinations, which was intended for "customers," has ultimately led to these negative consequences. Working with limited resources, and faced with more complex and advanced technologies, as well as enormous numbers of examination requests, it is no easy task to provide examinations that are both speedy and accurate. The need for timely examinations has been stressed, and these are of course necessary. However, there is a tendency to take the accuracy of examinations for granted. I would like to emphasize the importance of conducting accurate examinations and providing the necessary resources to ensure such accuracy.
(2) Collective management of patents
A large number of patents may relate to a single product. In some cases there may be several hundred patents or more related to a single technological standard - a veritable "patent thicket." This is especially common with machinery, but even with medicines, where various research tools needed for development processes such as diagnostic and screening methods are now being patented. Those intending to develop a new product must fight their way through the patent thicket. This involves negotiation costs and license fees that can accumulate quickly. These factors hinder the development of new products. To improve this situation, there is a need to devise measures to solve this problem, while ensuring that patents retain their incentive effect. Rather than simply amending the patent system itself, measures outside the system should also be considered, such as efforts by standardization bodies and the possibility of applying the provisions of the Antimonopoly Law. The patent system needs to work smoothly with these other systems.
(3) Scientific research and patents
Modern-day technology depends on scientific advances. Scientific progress has profound meaning as it broadens our knowledge of the world around us. At the same time, advances in industrial technology have come to rely more and more on scientific understanding and thus scientific progress has become vital to innovation in industrial technology. Scientific research has traditionally been conducted on the principle of open science, but now patents are granted to things like experimental methods and genes, which were previously considered outside the bounds of the patent system. If such patents hinder scientific research, they will become a serious problem. To further complicate the issue, universities are strengthening their ties to industry and universities are increasingly undertaking contract research for industry rather than simply to advance scientific knowledge. Under these circumstances, there is a need to clarify the relationship between the principle of open science and the patent system.
(4) Patent statistics
Takahiro Fujimoto of the University of Tokyo points out that public opinion in Japan tends to swing from one extreme to the other. He argues that this is because detailed, empirical and theoretical analysis does not occur or if it does, it is not respected. Given the rapidly growing interest in the patent issue in recent years, there is a growing need for accurate data to inform discussion; patent statistics need to be collated as a basis for such discussion. Patent information is currently organized to facilitate the search for specific technologies and is not readily transformed into statistical data. The collation of patent statistics is progressing in the U.S. and Europe, forming a basis for advanced research and high-quality discussion of patent systems. Japan also took a big step in this direction in 2002, with the publication of an annual report entitled "Results of the Survey of Intellectual Property-Related Activities." I hope to see further examples of such user-friendly patent statistics in the future.
The patent system plays a vital role in our society. It enhances incentives for innovation and ultimately contributes to a higher standard of living. At the same time, care must be taken to ensure that the system promotes continuous creation of superior technologies that will be widely used throughout society and thus improve our lives. The aim must be to create a pro-innovation patent system.
February 16, 2004
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