Greatest Institutional Reform since the 19th Century
The Patent Act Reform of 2007
Direction of US Patent Act Reform

The US patent reform attracted worldwide attention including that of Japan because of the potentially significant implications for patent systems in every country.  The patent reform bill, however, has appeared highly unlikely to be passed in the current session in Congress.  Problems including increasing legal costs are mounting and every country is seeking the institutional harmonization of patent systems. Patent system reform is urgently needed.

“The pharmaceutical industry has smashed the bill,” complained the IT industry lobbyists while leaving on the three day vacation that includes Memorial Day, May 26th.

The bill for the patent reform, which finally passed the US House of Representative in September 2007, has appeared highly unlikely to be passed in the current session in Congress after a fierce political battle between the supporters, mainly democrats backed by the IT industry, and the opposition, mainly republicans backed by the pharmaceutical industry.

If the bill passed, this would mark the first big patent act reform since the 19th century.  The US Patent Act Reform attracted the attention of the world because of potentially significant implications of the reform for every nation’s patent system.

Three revisions should be noted in the bill.  First, the bill proposes the change from the first-to-invent system, currently adopted in the US (patents are granted to the first person to invent), to the first-to-file system (patents are granted to the first person to file) adopted in Europe and Japan, and aims to create harmony between international institutions.

Second, the bill intends to limit skyrocketing compensations for patent infringement in litigations to more appropriate levels.  Josef Tasker, senior vice president of the Information Technology Association of America (ITAA), said that, “For inventions that combine existing technologies, the calculation should be made based on their specific contribution to prior art.”  “Particularly, the fair use of software must be approved,” stated the Computer and Communications Industry Association CEO Ed Black.  The bill fully reflects these opinions of the IT industry.

Third, the bill permits persons to file a “petition for cancellation” of effectiveness after patents are granted.  The second and the third points take concerns over recent rising patent-related legal costs into account.

This is where the differences between the IT and pharmaceutical industries lie.  Regarding the second point, the pharmaceutical industry opposes the revision, claiming that limiting compensation might send a misleading signal of weakening the value of patent rights.  Concerning the third point, the period in which a “petition for cancellation” can be filed, the pharmaceutical industry has accepted that the petition can only be filed within 12 months of the patent being issued (known as the “first window”); however, but the industry opposes “the second window” which allows for the filing of a petition for review within 12 months of the petitioner receiving notice from the patent holder alleging infringement by the petition, claiming that the second window will destabilize patent rights.  Compared with the IT industry, the pharmaceutical industry needs a longer development period, higher level of investment spending and more time to commercialize products.  With this in mind, the industry may not be able to tolerate petitions for cancellation at the time of investment cost recovery.

The patent act reform has gone back to square one.  Members of congress will be occupied with election campaigns until the general elections which are held simultaneously with the presidential election in November.  Under the Clinton administration, however, the US saw the previous patent reform bill immediately pass together with the budget bill in the confusing political situation after the general elections; and so, there may still be one last chance to pass the patent reform bill under the Bush administration.

Toward work sharing in patent examination using IT
Under the next US president, the patent reform will have the wind at its back.  Both Democrat Senator Barack Obama and Republican Senator John McCain have shown their strong interest in patent system reform. The trend to revise patent law is no longer reversible.

In particular, Senator Obama is appealing for the reform of the patent examination system “to reduce unproductive and uncertain lawsuits for patent infringements, which discourages innovation.”

For Japan, patent system harmonization with the US, the focal point of worldwide patents, is an important agenda.  The Japan Patent Office commissioner Masahiro Koezuka explains the Office’s awareness of the issue, saying, “We are aware of the importance of constructing new intellectual property infrastructure to deal with the open innovation movement, promoting worldwide cooperation across patent offices under globalization and enhancing the reliability of intellectual property systems.”

Consequently, in December 2007, the Japan Patent Office set up the Committee on Innovation and Intellectual Property (chaired by Mitsubishi Electric co. Chairman Tamotsu Nomaguchi), where the committee members have repeatedly discussed the issues previously touched upon.

The Japan Patent Office intends to actively propose ideas for reform to the world in the near future. Regarding patent examination, “We are going to promote work-sharing among developed countries using IT.  Improvement in efficiency will contribute to improvement in the quality of patents,” Koezuka stated.

While international cooperation is actively pursued, serious division between developed and developing countries, the North-South problem, should not be overlooked.

In developing countries most patent applications are made by developed countries.  Ironically, developing countries are introducing and preparing patent systems to protect the interests of other countries.

In addition, some cases have emerged in which developed counties have been criticized for obtaining samples to develop medical good as “biopiracy” (piracy in bioscience) by the governments of developing countries and NGOs.

As shown in this example, a conflict of interests between developed and developing countries has been revealed, and it is becoming more serious.

Patent reform straddles international harmony and conflict.