The Pro-patent Policy and a Scheme for the Northeast Asian Economic Community

February 14, 2003
HARAKENZO World Patent & Trademark Patent Law Firm
Leo LEE, Patent Attorney in Korea

Table of Contents

Introduction
1. Why pro-patent now?
2. A model for the pro-patent policy and requirements for its success
3. A scheme for the Northeast Asian Economic Community: a true model

Introduction
Recently, the intellectual property system in Japan has been changed so rapidly that it is hard for one to follow it. For example, last year's amendment to the Patent Law of Japan included the following innovative contents: it was made clear that a computer program and the like can be a "product"; the concept of "practicing" the invention was expanded; an information disclosure statement system was introduced; and the provision for indirect infringement was revised.
There are some other issues that are to be reflected in the future amendment, or that are under discussion toward future amendment. Such issues include: the movement toward protecting some medical acts by the grant of patents; the revision of fees and annual fees in order to ensure satisfactory examinations and to reduce costs for maintaining patents; the creation of a substantive function of a patent court by the concentration of jurisdictions; the revision of the employee's invention system; and the reinforcement of compensations by introducing punitive damages as in the United States. It can be said that some, if not all, of these changes are based on the pro-patent policy.
This article first considers the background of the pro-patent policy from the viewpoint of the struggling Japanese economy. Then, the requirements for the success of the pro-patent policy are discussed, turning back to the essence of the intellectual properties. Finally, this article advocates for the Northeast Asian Economic Community as the goal for the pro-patent policy.

1. Why pro-patent now?
By nature, the patent system (hereinafter, the terms "patent system" and "patent right" may be replaced by "intellectual property system" and "intellectual property right", respectively) has great importance in the economic and industrial policies of a country, and changes rapidly or gradually in accordance with the change of the economic and industrial policies of the country.
Sooner or later, the pro-patent and the anti-patent reflect the change in the industrial environment. Also, the pro-patent and the anti-patent are a matter of balance between the protection of inventions and the utilization of inventions (Article 1 of the Patent Law), which are the two columns that supports the patent system.
A patent right is a right to an invention, in other words, a right to a technical idea, which is an intangible property. Intangible properties are too abstract, and cannot be actually possessed. A patent right is just a piece of paper, unless someone utilizes it in order to produce a tangible property.
The Japanese economy has been in a slump and unpredictable since the collapse of the bubble economy. The immovable properties fell heavily in price, and there is no prospect for recovery. The manufacturing industry is creating more and more deficits as developing countries such as China catch up with Japan. In short, the economy of tangible properties, which has supported Japanese economy, is declining.
When all is said, the pro-patent policy is a part of the fundamental economic reform program that aims to energize and, in the long run, resurrect the economy through reasonable evaluation and more active usage of intangible properties, based on the perception about the reality that tangible properties can no longer support the economy.
In many cases, a policy is about choosing between two things. However, there is often no choice but to choose one of the two.
In this respect, a policy is taken as a logical consequence, rather than as a result of free choice. To some extent, the current pro-patent policy is also a logical consequence, as long as the economy of manufacturing industry cannot resurrect the Japanese economy.

2. A model for the pro-patent policy and requirements for its success Then, what kind of an economic environment, or a model, the pro-patent policy aims to provide?
The pro-patent policy is a part of the economic and industrial policy of a country. However, it cannot succeed if its scope is limited to one country. This is because the economic globalization, especially the growth of China (although China is taken as an example, late industrial countries such as Korea and Taiwan are included), is the major reason for the slump of the Japanese economy. Therefore, an economic policy that does not clearly suggests how to deal with China, which is now the most threatening production base, is a mere symptomatic treatment.
Like it or not, Japan will have to make use of its current advantages in research and development abilities to deal with China. Therefore, the model for the success of the pro-patent policy will be one in which
Japan and China are tentatively regarded as a unit, Japan conducts research and development while products are made in China, and China pays loyalty to Japan.
To realize this model, the following two conditions must be met.
The first is a domestic condition. Human resources should be reallocated from the production sector to the research and development sector. In the long term, this is to be achieved through education (by educating creative persons; the educational reform program that started under the banner of "power to live, relaxed education" may fall into this category), and, in the short term, through lay-offs. However, the educational reform will require too much time to bare fruits, and the structural reform will involve considerable sacrifices.
The second is an external condition, a condition on the side of China. Will China raise its protection standard for intellectual properties as much as we expect? In other words, will China pay loyalties to Japan without protesting? Considering China's recent change in attitude toward intellectual properties, we can be to some extent optimistic in this respect.
Let's assume that somehow these two conditions are met.
Will this model work well to resurrect Japanese economy?
First, there is one think to have in mind. If the production sector is moved to China, technology transfer to China is inevitable, and China will gradually change from a production base to a country where the research and development sector accounts for a great ratio. Of course the technology standard will also improve in Japan, but its speed will be much faster in China. Ultimately, the disparity in technological standard between the two countries will become smaller, which means the loyalty from China to Japan will also decrease. This phenomenon is not entirely new; it is clear from the experience of the United States, an advanced pro-patent country.
It was in the 1980's, during the long recession, when the United States launched its full-fledged pro-patent policy. At that time, the United States was suffering from the influx of counterfeit goods from developing countries, as a result of the advanced transfer of the production sector from the United States to developing countries. The pro-patent policy was introduced in this background. Its object was to protect the industry and intellectual properties of the United States by enhancing the protection of patent rights. The pro-patent policy led to an economic boom in the United States in the 1990's. However, there is growing concern that the situation will not be the same in the 21st century. Although there are multiple reasons for this concern, in short, this is because developing countries have gradually become less dependent on the United States. Where there is a production base, there is technological development, which leads to research and development.
In order to overcome such a situation, it is necessary to constantly explore new technological fields and to expand the subject matters for which patent rights are granted. The IT (Information Technology) and the biotechnology, which have been recent trends, are good examples.
Even in these new fields, however, developing countries will eventually catch up with the developed countries. Besides, it is not certain whether there will always be new fields to explore.
The more fundamental measure starts with the idea that intangible property rights are worthless unless they lead to production, as described. More specifically, the production sector should be revived, maintaining a balance with the research and development sector. If everyone were only engaged with research and development, who would produce goods?
Would it be possible to continue research and development without being backed up by production? In short, each economic sector must account for at least a minimal ratio, no matter how far the economic globalization will be advanced.
The revival or maintenance of the production sector may no longer be a pro-patent policy, because the revival of the production sector involves, to some extent, if not inevitably, the restriction on patent rights. In other words, when tangible properties are valued, intangible properties are relatively disvalued.

3. A plan for the Northeast Asian Economic Community: a true model
Although a minimal ratio should be maintained for each economic sector, it is not necessary that this is achieved within one country. It may be jointly achieved by Japan and China. That is, the model of the economic community or the economic union in Europe may be adopted.
In Europe, the common currency "Euro" had been prepared since years ago and was successfully launched, while the economic community of Japan and China is yet to take the first step. Moreover, there are many challenges for the economic community of Japan and China: the differences in economic systems, cultures and histories, and the geographical distance, to name a few. When the Korean Peninsula is taken into consideration, which may contribute to solve the problem of the geographical distance, the current situation in the Northeast Asia concerning the nuclear development by North Korea makes the challenges even more complex.
At this time, however, it is impossible to uphold economic nationalism against the trend of globalization and the block economy.
Given the situation, the plan for the (North)east Asian Economic Community, no matter how much time and effort it requires to realize, may be the only solution for Japan and (North)east Asian countries to jointly prevail.
Although now is not the right time to make a judgment, the American economy seems to be declining, and the pro-patent policy seems to be taking a backward step (in recent patent infringement lawsuits, many judgments seems to require stricter conditions for the exercise of patent rights).
Isn't it because the United States did not, or could not, aim to build a community where both can jointly prevail?
Whether to adopt the pro-patent policy or the anti-patent policy is not a matter of right or wrong. It is inevitably determined by a given economic environment. Likewise, the resurgence of the Japanese economy should be jointly achieved at least with Northeast Asian countries.
What is required now is the sympathy for its necessity and the guts to do it. If we have the guts, the Economic Community may be realized in the not-so-distant future.
When the Northeast Asian Economic Community is steadily advanced, the borders in economy and intellectual property rights will be meaningless. The resurgence of the Japanese economy will no longer be a problem for Japan only, but will be a problem for the Community as a whole. The patent policy in Japan will be discussed in the context of how the unified patent system within the region, where there is a possibility of doing so, should be. In this regard, the above-described model, in which Japan conducts research and development while products are made in China, and China pays loyalty to Japan, should be changed. The new model should be such one in which research/development and production are balanced, and intellectual properties are reasonably respected beyond borders within the Economic Community.