US-Japan Cooperation on Patents: Comments on Konno Article

James Zumwalt (Economic Counselor, US Embassy, Tokyo)

Recently newspaper articles have appeared claiming the United States and Japan would mutually recognize each other's patents by the year 2004, such as an article entitled "Disagreement with "American Standard" for Patent Business", which appeared in the July 9, 2002 edition of the Economist (Editor's note: Here, "the Economist" refers to a weekly magazine "Ekonomisuto" published in Japan, and for its English version,
see: http://www.glocom.org/opinions/essays/
200208_konno_disagreement/index.html). There are some misunderstandings in these articles and I would like to take this opportunity to clarify recent agreements between the United States and Japan on patent issues as well as discuss differences in our respective systems.

Two areas of United States patent law that appear to cause some confusion are "business methods" and abstract inventions. "Business methods" is a term that is applied to a number of inventions that can be of a product or process nature as well as more abstract items. United States patent law does not have a "business methods" class. What it does have is a class 705 of inventions that are in the field of "data processing: financial, business practice, management or cost/price determination." This class includes what most people consider to be "business method" inventions but it does not cover all of the items that fall under the common usage of the term "business method". The patent of a business method will not lead to existing business practices being invalidated. A patent can only be granted for an invention that is new, useful and non-obvious. Companies that use common business methods such as airline mileage services have nothing to fear.

Contrary to popular belief, abstract inventions are not patentable in the United States. The United States Supreme Court in 1981 clearly found that "abstract ideas" are not patentable subject matter. Under our system, an invention with a practical application having a "useful, concrete, tangible result" is eligible for patenting. "Business method" inventions must satisfy these criteria just like any other invention.

The United States Patent and Trademark Office (USPTO) and the Japanese Patent Office (JPO) have a long history of cooperation. Just this year USPTO and JPO signed a "Record of Discussion" regarding cooperation with respect to the international workload crisis. Currently, patent offices worldwide are facing an overwhelming number of patent applications. This year in the United States approximately 350,000 applications will be filed. This is on top of the 408,000 applications that are pending.

Since the United States, Japan and Europe account for 85 percent of the world's patents, it makes sense for us to work together. It makes even more sense when you consider that roughly 60 percent of United States domestic filers also file patent applications overseas.

The reason our patent offices can work together is that they both have high standards for patent examinations. A recent statistical study that will be published soon in the Journal of the Patent and Trademark Office Society indicates that USPTO examination compares favorably in terms of examination quality to that in the JPO and the European Patent Office.

According to the record of discussion, the USPTO and JPO have agreed to cooperate by exchanging search results and relying on the results of the search in the other office to the maximum extent practicable. In addition, both offices have agreed to begin a program to look at the possibility of examination recognition. However, all decisions as to whether or not to grant a patent will be made by the particular country's patent office. As USPTO clearly stated in its newly released 21st Century Strategic Plan, "the USPTO will never recommend any changes that would compromise our sovereign right to determine patentability issues or preclude our right to make further examinations when necessary." Correspondingly, we would never ask this of JPO either.

Although we would never ask Japan to compromise its sovereign right to determine patentability, we have encouraged it and other countries to adopt a "practical application" standard for patents. As I stated before, our courts look to see if an invention has a practical application having a "useful, concrete and tangible result" in order to determine whether it is eligible for patenting. Japan, as well as a number of other countries, uses a "technical character" or "technical effect" requirement for inventions. Our concern is that a "technical character"-type requirement generally lacks a comprehensive definition and may lead to defining "invention" in terms of existing industry or technology. As a result, it is possible that such a requirement may potentially stifle the development of new technologies. We believe a "practical application" standard is technologically neutral and takes a broader view of patent eligibility that is more appropriate for knowledge-based economies.

Given the increasing complexity of technology and its importance in our everyday lives, it is clearly in the mutual interest of American and Japanese companies that our governments continue their close cooperation on patent issues. As a major source of technological innovation, Japan has a vital role in establishing worldwide norms for the protection of intellectual property rights.