June 28, 2000

REMARKS OF ROBERT STOLL
Administrator for External Affairs
U.S. Trademark and Patent Office
to the First Annual CIPR Conference

It is a pleasure for me to participate in this, the first annual CIPR Conference. I am honored to be included among the prestigious speakers at this event. This year's program covers a wide range of topics regarding international intellectual property law and policy. I'd like to concentrate my remarks on the significance of patent law as an engine of economic development and improvements in human life and then talk a little about a challenge that faces all of us in the future.

Physicist Stephen Hawking recently noted, "The world has changed far more in the past 100 years than in any other century in history. The reason is not political or economic - but technological."

Technological change in the twenty-first century likely will create a world unimaginable except to science fiction writers. Those of us involved in protection of intellectual property, particularly those involved with patents, will have a front row seat for the show.

How can we best prepare for changes we can't always foresee? How do we ensure that our patent systems encourage technological and economic development rather than act as brakes?  I believe that among the best ways is by implementing fully the requirement of Article 27.1 of the WTO Agreement on the Trade-Related Aspects of Intellectual Property (the TRIPS Agreement), making patents available for both product and process inventions in all fields of technology if the inventions are new, involve an inventive step, and are capable of industrial application.

Including exceptions to patentability in patent laws, even those that are permissible under the TRIPs Agreement, eliminates the patent incentive for a country's scientists and innovators to do research and development in that area of technology. Such exceptions discourage investment in the excepted technology. Countries that provide such exceptions fall behind in that area of technology and are forever playing catch-up.

Making patents available in all fields of technology, on the other hand, spurs research and commercial development of products in so-called cutting edge technologies as well as traditional technologies. It encourages the flow of investment capital to all those technologies. Let me give you an example of the changes that can occur through the encouragement provided by a broad patent system.

Because section 101 of the U.S. Patent Law states that utility patents are available for "any new and useful process, machine, manufacture, or composition of matter...", the U.S. Patent and Trademark Office, prior to 1980, interpreted the section, with a few notable exceptions, as not covering living things, including laboratory created micro-organisms. On 16 June 1980, however, the United States Supreme Court ruled, in DIAMOND, COMMISSIONER OF PA TENTS AND TRADEMARKS v. CHAKRABARTY, (447 U.S. 303; 100 S. Ct. 2204 (1980)), that a new, man-made micro-organism that could break down oil was patentable subject matter under section 101 because it comprised a manufacture or composition of matter. In the score of years following that landmark decision, the U.S. Patent and Trademark Office has consistently granted patents on such micro-organisms, including unicellular organisms, bacteria, yeast, fungi and other living organisms, and on non-biological and microbiological processes. In addition, the U.S. Patent and Trademark Office grants patents on both plants and animals. The United States views that change in our interpretation of the U.S. patent law as extremely fortuitous.

The Supreme Court's decision in CHAKRABARTY spurred the development of a new industry - the biotechnology industry. As the biotechnology industry matured, supporting industries have also evolved to provide researchers with tools to facilitate biotechnological research and to commercialize the results successfully. The development of these industries has generated capital and provided jobs but, most important, the biotechnology industry itself has provided enormous benefits in both agriculture and medicine.

Agricultural biotechnology is improving upon the long tradition of plant breeding to design new plants with improved characteristics (e.g., improved yield and viability) by transferring traits through direct manipulation of a plant's genome, rather than by trial and error through conventional plant breeding techniques. It also has resulted in development of new technological solutions in the field of agriculture, for example, frost-inhibiting bacteria, the transfer of genetic traits that impart pesticide resistance, or immunological enhancement of livestock. The agricultural biotechnology industry is helping farmers reduce their dependence on chemical pesticides and herbicides that have adverse environmental effects and, along with plant breeders, is helping to develop new crops with higher productivity and yields.

Pharmaceutical biotechnology is helping to improve human and animal health by developing new pharmaceutical agents and new methods for treating or curing disorders. Over 350 new biotechnological pharmaceuticals and vaccines are in clinical trials today and there are hundreds more in the early developmental stage. Pharmaceutical biotechnology also is developing new processes of diagnosing illness, such as test kits for performing more accurate and informative diagnoses. The biotechnology industry has already produced hundreds of highly accurate tools for diagnosing and treating diseases and other physical afflictions.

Section 101 of our law means that, in the United States, as in most countries, laws of nature, abstract ideas, and mathematical principles are not, as a general rule, patentable subject matter. Because of that, until recently, computer software and methods of doing business generally thought to be non-patentable subject matter.

As was the case with patenting life forms, the U.S. Supreme Court changed that by ruling, in Diamond v. Dehr, a 1981 decision, that the use of software as part of an otherwise patentable process does not render the invention unpatentable. The scope of protection granted has gradually expanded from specific code to the underlying algorithmic step, leading to patents on software and Internet-related inventions.

In 1998, in State Street Bank & Trust Co. v. Signature Financial Group Inc, a case concerning a 1993 patent claiming a "data processing system for managing a financial services configuration of a portfolio established as a partnership", the U.S. Court of Appeals for the Federal Circuit did three very important things. First, the CAFC reaffirmed that software is indeed patentable. Second, the Court validated guidelines the USPTO issued governing the grant of patents related to software. And third, the Court rejected any "business method" exception, stating that, while inventions claiming business methods may be invalid on grounds such as lack of novelty, such inventions were not improper subject matter.

State Street paved the way for applications directed to electronic commerce, business-related Internet applications, and other Internet­related technologies. So far, the number of business method patent applications we have received is small - 2,600 business method applications last year out of more than 270,000 patent applications.

Only 600 business method patents were granted last year out of a total of 160,000 patents issued. These patents are not revolutionary and do not represent threats to innovation. What we're seeing in business methods and Internet patents is very much a reflection of the natural evolution of invention in general. In earlier times, inventions and innovations were made in garages and on workbenches, then they moved to the research laboratory. Today, much invention and innovation is carried out on computers.

The arguments of many of those we oppose issuing business method patents resemble those voiced thirty to forty years ago in the U.S. when polymer chemistry was an emerging technology. At that time, people argued that if broad generic claims were granted on the building blocks of basic polymers, the industry would be devastated. Clearly, that didn't happen.

Back in the mid-1990's, a number of observers argued that patent protection of computer programs threatened to stifle innovation; that software patents would destroy the U.S. software industry. Six years have passed - a lifetime in the today's high-tech world - and I haven't seen any evidence that our patent law has hindered the growth of the U.S. software industry. Quite the contrary, actually.

There is a cost to this broad coverage. In our case, the USPTO is working tirelessly to make sure that our office has the skills and resources to properly examine business method applications. In the last two years, we hired over 500 new examiners in the Technology Center that examines software, computer, and business method applications. In the business methods area itself, we have tripled the number of examiners since 1997.

These examiners have access to more prior art than at any time in our history. Our in-house patent database and our commercial database provider provides access to more than 1,000 databases, including Westlaw, Lexis-Nexis, and Chemical Abstracts. From their desktop computers, patent examiners can also search the full text of over 2.5 million U.S. patents issued since 1971; images of all U.S. patent documents issued since 1790; English-language translations of 3.5 million Japanese patent abstracts; English-language translations of 2.2 million European patent abstracts; IBM technical bulletins - a key database in the software area; and over 5,200 non-patent literature journals.

We have also instituted a number of quality assurance programs, expanded our traditional examiner training, brought in experts to lead specialized training seminars, and held hearings with the private sector on how to expand access to non-patent literature.

Since the time of the CHAKRABARTYdecision I mentioned earlier, the U.S. Patent and Trademark Office has processed thousands of applications directed to plants, animals, microorganisms, proteins, DNA constructs, and plasmids. We have found that parts of cells, such as

genes, are patentable either as a composition of matter or an article of manufacture, so long as they are isolated or purified and have a specific, substantial and credible utility.

In order to ensure the highest standards of utility in genomic inventions, we proposed new "Utility Guidelines" late last year that require patent applicants to explicitly identify, unless already well-established, the specif~c, substantial and credible utility for all inventions, including genes and gene fragments, such as expressed sequence tags (ESTs). In other words, we have raised the standard to ensure that patent applicants demonstrate a "real world" utility.

Much like business method patents, genomic patents have also come under attack in the U.S. In this case, the main concern is that these patents will form an intricate licensing web that will prevent researchers from using genetic discoveries to make other health-related advances.

The issue of access - which come down to licensing - is very important. But patents do not inherently impede access. Access issues get worked out in the marketplace with cross-licensing or more flexible licensing arrangements.

For example, about twenty years ago the USPTO issued a patent to Stanford University and the University of California-San Francisco for the technique invented by Cohen and Boyer to manipulate recombinant DNA. Although the invention was broadly patented, the patent owners established a very modest licensing program for commercial institutions, and they allowed researchers at other academic institutions to use the invention for free. As a result, the biotech industry continued to grow and prosper into the powerhouse it is today.

In the event a patent owner uses its patent in anti-competitive ways, the TRIPs Agreement permits and most countries laws provide for legal solutions. In the United States there is an extensive body of intellectual property anti-trust guidelines put out by the U.S. Justice Department, indicating what generally will and will not be considered anti­-competitive practices.

While some have argued to the contrary, there is nothing revolutionary about genomic patents. In the U.S., we have issued hundreds of patents claiming products extracted from the human body for pharmaceutical or diagnostic use, including clot-busting proteins to treat stroke, cancer antigens for detection of cancer, and antibodies to treat infection.

Human Growth Hormone was originally isolated from human pituitary glands. And we've also issued patents to vitamins derived from the human body. Now we are patenting genes as complex chemicals that are found in the body - for uses other than those they serve in nature.

We believe that history demonstrates that the availability of patent protection, especially in cutting-edge technologies, is vital to the birth -­and growth - of entire industries. The same can be said of protection for other forms of intellectual property as well. Although we should always be watchful, we should not fear expanding patent subject matter eligibility to embrace new fields of technology because there is no evidence that such eligibility alone has resulted in any negative effects on technological progress or on society as a whole, while evidence on the positive side of the coin is overwhelming.

I've referred to the costs involved in the evolution of a patent system, using the U.S. patent system as an example, to address new fields of technology to encourage their development. Those costs, associated with hiring new examiners, training, making databases available, etc., are considerable. This makes it increasingly difficult for countries with limited resources to handle applications in new fields of technology. This adds to the already obvious need for a global system for examining and granting patents.

Applicants for patent protection in most of the CIS countries have the possibility of filing with a regional office, the Eurasian Patent Office and that is a great benefit. Filing under the Patent Cooperation Treaty provides other benefits. The recently completed Patent Law Treaty should facilitate filings further, but the fact is, obtaining patent protection around the world is still extraordinarily expensive and time consuming for applicants. Governments are still committing considerable resources duplicating searches and examinations already done by other governments. A global system is needed.

In order to get to the point where the rights of inventors will be universally recognized without having to seek patent protection in individual countries, we need to tackle both procedural and substantive patent law issues.

Fortunately, I think a number of market forces will aid us in this effort. For example, the increasing pressure on industrial property offices to decrease costs will spur the adoption of cost-saving measures, such as utilizing the search and examination results of other industrial property offices. Similarly, advances in information and communication technology will heighten the need to make our electronic systems converge so that such information can be shared more easily.

As competition for technological advantage and investment increases, many nations will also feel compelled to harmonize their systems and adopt the positive features of other nations. For example, the Japanese Patent Office is proposing a series of revisions to their patent regime to expand remedies for infringement and to shorten the period during which the examination of applications may be deferred. In the U.S., we have recently enacted legislation to provide for early publication of patent applications and expanded reexamination procedures.

Another encouraging development occurred earlier this month in Geneva, when a WIPO Diplomatic Conference completed the Patent Law Treaty (PLT). The PLT's principal goal is to provide uniform filing requirements and formal procedures among the member countries - in order to reduce the high costs of complying with various (and sometimes inconsistent) national and regional requirements. In so doing, the PLT will reduce the risks incurred by the loss of potentially valuable patent rights due to filing errors.

Essentially, the PLT will transport the requirement standards from the Patent Cooperation Treaty into the national patent systems of the member countries.  These standards will then be the maximum formal obligations a PLT country could impose on patent applicants.  By providing more consistent treatment of applications and prosecution procedures, the PLT will allow applicants to develop worldwide protection with greater confidence and at reduced costs.

These are all steps in the direction of a global patent system but we’ve a fair distance to go to achieve that objective.  We will all have to work together if our right holders are to be able to conserve time and resources in obtaining patent protection for their inventions around the world.

In conclusion and on a more general note, let me say that together we have witnessed the explosion of Internet and digital technologies that are transforming economies around the world.  Patent and trademark systems are under increasing pressure to increase efficiency, reduce costs, and simplify procedures.

So the pressure is on all of us to ensure that our intellectual property systems are up to the challenges of the future.  Will our systems be able to adapt quickly to the needs of emerging technologies, while responding more effectively to the needs of current users?  Will we be successful in encouraging the adoption of effective patent and trademark systems in countries currently lacking them?

A U.S. baseball legend, Casey Stengel, once said, “I never make predictions – at least not about the future.”  But let me go out on a limb and say that the discussions here have shown that we are bullish on the future.