with no golden arches or
Apple without the apple.
Trademarks and patents can make
or break a company.
Most of the inventions that power the
modern world started out as an
idea which was eventually patented.
Put the match in the lighter
and there you are. Over the past
decade, there's been an explosion of
claims from companies and inventors hoping
to carve out their own
slice of the digital age.
We are on the cusp
of truly and extraordinarily revolutionary
technologies. Intellectual property is
turning into a key
battleground between the world's
biggest economic powers.
China now accounts for more than
10 percent of all trademark
applications filed in the U.S.
We now have a peer competitor in
China and we are at a critical
moment for the future
of intellectual property.
More than 14 million trademark
applications were filed worldwide in
2018, up almost 160
percent from 2008.
At the same time, patent applications
have surged more than 70
percent. In the U.S.
alone, intellectual property-intensive
industries contribute
trillions of dollars to
the economy every year.
So what makes trademarks
and patents so valuable?
And why are the U.S.
and China competing for them?
Intellectual property or
IP refers to
patents, trademarks and copyrights.
Inventions, works of art, music, lyrics
and logos are all examples of
IP. Protection for intellectual property
rights in the U.S.
goes all the way
back to the Constitution.
In fact, in the body of the
Constitution itself, the word right is
actually mentioned only once and
it's with respect to intellectual
property rights. Congress passed
legislation laying the foundation
for the patent system in 1790.
And today, the U.S. Patent and
Trademark Office is located here in
Virginia. The agency is
part of the U.S.
Commerce Department. Right here, for
example, we see Thomas Edison
with the electric light bulb.
Right under him, George Eastman.
What the patent system does is
to create a perpetual innovation
machine, a pro-competitive system that
forever creates more and more
innovation. Patents are one category
of intellectual property in the
U.S. They give inventors exclusive rights for
up to 20 years to make
and sell a product that offers
a new solution to a problem.
Prescription drugs are
a good example.
Once a company's patent for a
drug expires, competitors can copy and
sell generics that include
the same ingredients.
You need an inventor to get a
monopoly over their invention for a
short period of time to
recover the investment costs.
The second category of
IP is trademarks.
Logos, slogans and brand names for
a company or individual are all
trademarks. One of the most
well-known trademarks comes from
Coca-Cola. The soda maker trademarked its
signature logo in 1893 and
he does distinguished cans and bottles
around the world ever since.
Trademarks are used to establish
standards for brands for consumers.
So every time you buy a coke,
you know it taste and quality to
expect. Trademarks a s long as
you file periodic renewals and
continue to sell your goods
and services will last forever.
Then there are copyrights.
They protect original works
by authors or artists.
Songs, photographs or novels are
all subject to copyright law.
Copyrights protect works of art.
So think of an entire movie.
You can't just copy a
movie and sell it.
That's why you see the big FBI
warnings when you start a DVD.
The U.S. Patent and Trademark Office
has seen its fair share of
quirky innovations from Eddie Van Halen
guitar support system to Bill
Nye's improved ballet pointe shoe.
Anyone who has an idea for an
invention, except for employees at the
Patent and Trademark Office, can file
an application for a patent.
Unlike trademarks, you don't even have
to show that you're selling
the product. One of the main points
of the patent system is to
encourage innovation from those who
otherwise wouldn't do it.
For many entrepreneurs, investors and
businesses says patents and
trademarks are the
lifeblood of innovation.
They can help turn an idea
into reality and generate millions of
dollars in returns.
Mark Zoske is the CEO
of Seattle-based gourmet salt Company
SaltWorks. The company holds
more than 60 trademarks.
You have the people and you
have your product, your suppliers, but
then you have your trademarks,
which are your territory.
In that space, in the
salt space, it is everything.
Salt was such a commodity that we
really wanted ours to be above a
commodity. So we started with name
brands so that instead of just
promoting the sea salt industry, we
were promoting our sea salt.
Zoske says the trademarks have helped
boost brand loyalty and fend
off imitators. The smaller the company
are, the more important that a
trademark is because if you really
catch fire with something, that's
the only thing that's going to
differentiate you from someone that
has a lot of money that can
put out a nearly identical product.
The U.S. Commerce Department
estimates IP-intensive industries
generated $6.6
trillion in value in 2014, more
than one third of U.S.
GDP. That number is likely to
go up in coming years.
Trademark applications in the U.S.
have roughly doubled over the past
decade as companies place growing
importance on their brands
and move sales online.
There's been a huge change in
trademark registration in the last 10
years because of Amazon and Facebook
and all the Internet commerce
that's going on. In 2008, there
was just around 250,000 U.S.
trademark applications filed.
In 2019, t here was over 450,000.
The digital economy has also contributed
to a surge in patent
applications, especially in fields
like computer technology.
In 2018, more than 600,000 patent
applications were filed in the U.S.
compared to around 260,000
two decades earlier.
There is now a backlog of
more than 500,000 applications at the
patent office. It took 125 years to
issue 1 million patents and it
only took five years to
issue the last million patents.
That tells you a little bit about
the speed of innovation in the
United States. Many of today's biggest
innovations are in the form of
software, machine learning or
artificial intelligence instead of
tangible physical objects.
This can make
evaluating patents harder.
You want to make sure that
there are actual practical inventions that
have a technical character to them.
Tech companies are capitalizing on
intellectual property rights for
computers, smart devices
and software.
California-based chip maker Qualcomm, for
example, generates a large
portion of its sales
by licensing patents.
Tech giants like IBM, Samsung,
Microsoft and Apple apply for
thousands of patents every year.
Patents have the ability to play a
vital role in the economy and in
innovation, but that the bad patents can
also do a huge amount of
damage. Some people, companies and
even countries are trying to
stretch the legal limits when it
comes to cashing in on IP.
The rise of fraudulent trademarks is
one concern among lawmakers in
Washington. The U.S.
trademark register has been inundated
with applications in recent
years, with many coming from China.
The significant concern here is that
a lot of these applications are
fraudulent, meaning that they're making
claims that there's actually
being goods or services sold under
the trademarks in United States
when in fact there are not.
They are essentially photo shopping,
digital photographs that begin
off the Internet, submitting these to
the PTO, saying here is
evidence of our use in commerce.
Barton Beebe, a law professor at
NYU, testified about the growing
number of fraudulent Chinese trademark
applications in the U.S..
In a hearing last year in
front of the Senate Judiciary Subcommittee
on Intellectual Property.
Beebe estimates about 67 percent
of the trademark applications from
China in the apparel goods
category in twenty seventeen were
fraudulent, meaning they didn't correspond
with a real brand.
The problem, he says, is that
these applications are clogging up the
system. We have clients that
have had trademark applications denied
because of these fraudulent registrations,
and we've had to take
additional steps, which typically costs
thousands of dollars to
remove those fraudulent registrations
from the U.S.
trademark register. The U.S.
Patent and Trademark Office implemented a
new rule in August 2019
that required any foreign company registering
for a trademark to use
a U.S.-licensed attorney.
The agency says those steps have
helped reduce the number of
fraudulent filings from China.
Legislation is also on the table.
Senator Chris Coons is co-chair
of the Congressional Trademark
Caucus. There are some compelling initial
proposals about how to deal
with the clouding of
the trademark registry.
But I think we need
to take more active measures.
China's push for trademarks
in the U.S.
is just one example of a bigger
fight over IP between the world's two
biggest economies. As part of
China's rapid economic development, the
government has pursued policies
like force technology transfers,
which require foreign companies to
share their technology, often in
the form of IP in order to
get access to the Chinese market.
What that really means is we'll give
you five or 10 years to sell
your product to our
more than billion consumers.
But 10 or 20 years from now,
that technology is going to be
manufactured here by our companies and then
export it to the rest of
the world. Many American business
leaders warn policies like force
technology transfers have resulted in IP
theft, posing a major risk
to business. A 2017 report by
the IP Commission estimated IP theft
from China and other
countries cost the U.S.
economy between $225 billion and
$600 billion per year.
Basically, what's happened over the last at
least 30 years is one of
the single greatest transfers of wealth
from one country to another.
The intellectual property theft that
has occurred between the United
States and China is
historic in scale.
That's why IP is a key sticking
point in the trade war between the
U.S. and China. The agreement
we signed today includes groundbreaking
provisions in an area of critical
importance to the United States
protecting intellectual property.
The Phase 1 trade agreement
between the two countries pledged
stronger protection against patent
and trademark infringement.
But how it will be
enforced remains to be seen.
Intellectual property theft has been
a major source of contention
between the United States and China
and really is the most important
unresolved issue in our
current trade dispute.
Politicians, policymakers, academics and
investors say economic
success will be determined by who
owns and develops new technologies
like artificial intelligence
and 5G.
China has made it no secret it aims
to be the global leader in these
technologies, and intellectual property is
key to that goal.
Of the 3 million patent applications
filed worldwide in 2018, China
accounted for roughly half.
Its Made in China 2025 industrial
policy funnels investment in areas
like information technology and
high tech robots.
Imagine if instead of Facebook, Amazon
and Google all being American
companies with American headquarters
and mostly American employees.
If all of those companies
in those technologies were
Chinese-developed, Chinese-owned, Chinese-led,
all that additional
wealth and opportunity and influence on
the world stage goes to China
rather than the United States. That
is exactly the competition that
we are in the middle of right now.
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