1. Bill Budinger, “Modernizing Patent Law,” Inventor's Digest, September/October 1995, 35.

2. Samson Helfgott characterizes the U.S. system as one whose emphasis is “to protect the patentee,” whereas the Japanese system seeks “to teach industry new innovations.” Samson Helfgott, “Cultural Differences between the U.S. and Japanese Patent Systems,” Journal of the Patent and Trademark Office Society 72 (1990): 231–38.

3. Arthur Wineberg, “The Japanese Patent System: A Non-tariff Barrier to Foreign Businesses?” Journal of World Trade 22 (1988): 12.

4. This also means that there is no unified body of case law that feeds back into the prosecution of patents at the EPO.

5. See, in particular, the “U.S. General Accounting Office Study on Intellectual Property Rights: U.S. Companies' Patent Experiences in Japan” (Washington, D.C.: GAO, 1993) (henceforth GAO Study); and Michael Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” Stanford Law School (unpublished ms., on file with author, 1991).

6. Except in some European countries, which have a simple registration system.

7. For example, in the United States, an administrative reexamination process is available, whereas in other jurisdictions adversarial “opposition” proceedings can be initiated.

8. In 1990 it was estimated that the average interference lasted a year at a cost of about $7,000 per month for each side in attorneys' fees. Further, they often spilled over into lawsuits on appeal, which sharply raised the costs. Andrew H. Thorson and John A. Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” Journal of the Patent and Trademark Office Society 77 (1995): 310–12.

9. Some observers aver that this is mainly because the firms usually agree on a settlement involving a royalty-free license to the second firm. To the extent that this is true, it alleviates some of the problems associated with the absence of prior user rights in the United States.

10. Thorson and Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” 311.

11. GAO Study, 54. Language, according to the report, was one of the biggest hurdles faced by U.S. industry in effectively using the Japanese patent system, which (according to many Japanese lawyers) was often compounded by hasty translation of the application under time pressures.

12. N. Thane Bauz, “Reanimating U.S. Patent Reexamination: Recommendations for Change Based upon a Comparative Study of German Law,” Creighton Law Review 27 (1994): 951.

13. For example, in Japan, prior publication of an innovation anywhere in the world leads to rejection of an application's claim to novelty, whereas in the United States applicants have a grace period of one year after publication within which to file an application.

14. For example, a version of a patented component with slightly improved features may be deemed patentable in the JPO but not in the USPTO. Further, broad “means plus function” type claims, which may be used in the United States, are rarely allowed in Japan. See Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” 9.

15. Helfgott, “Cultural Differences between the U.S. and Japanese Patent Systems,” 234.

16. Simply put, a standard of “patentability” implies a bar that the innovation must clear to be actually considered one by the patent office (e.g., it should be sufficiently novel, or sufficiently nonobvious to persons who are skilled in the relevant art).

17. Jinzo Fujino, “Understanding the Flood of Japanese Patent Applications,” Patent World, July–August 1990, 30–31.

18. The GAO Study indicates that, in 1991, 6.5 percent of all applications were opposed, and each opposed application had an average of 1.8 opponents.

19. Donald M. Spero, “Patent Protection or Piracy—A CEO Views Japan,” Harvard Business Review 68, no. 5 (September–October 1990): 60–67.

20. Robert Girouard, “The Japanese Patent System: Trade and Industrial Policy Implications” (master's thesis, University of California at Berkeley, 1995).

21. Nonetheless, one lawyer we spoke to cautioned us that in biotech patents, some stalling practices are used in Europe, especially by appealing to “Green” political interests.

22. As we have seen, JPO procedures require an applicant to specifically request examination (in seven years), and some applicants choose not to do so based on their commercial assessment of the patent.

23. Employee incentives within Japanese firms, and organization-level incentives to obtain cross-licenses encourage rampant patenting in Japan.

24. Despite changes in the rules of the JPO in 1988 permitting inclusion of multiple claims in a single application, Japanese firms predominantly continue to use their earlier practice of including only a single claim per application. What this means is that to cover the same innovations or set of innovations, more patents are filed in Japan as compared with the United States.

25. Utility models are lesser patents awarded by the patent office; they are subject to a lower standard of patentability and have a shorter duration. Procedurally, however, the utility models were subject to the same type of examination. Recently, the JPO has discontinued examination of utility models and supplanted it with a registration process, with examination being invoked in the event of litigation over infringement.

26. This figure excludes the time taken on parent applications that were “continued” in the successful application. A patent lawyer we spoke to believed that this mismeasurement could be fairly significant in some areas, such as biotechnology.

27. GAO Study. The figure for the JPO was estimated by dividing the number of patents that were pending to be examined in 1991 by the number of patents that were examined in that year. The time taken was less when no oppositions were filed twenty-one to twenty-four months), but commercially important innovations are usually opposed.

28. Samson Helfgott, “Why Must Filing in Europe Be So Costly?” Journal of the Patent and Trademark Office Society 76 (October 1994): 787–92. Helfgott cites results of a recent study conducted by the FICPI (International Federation of Intellectual Property Attorneys) at 788. A large fraction of the costs in Japan can be delayed by deferring examination, since the costs of merely filing an application are quite low.

29. Ibid., 789; 8.3 countries represents the approximate equivalent U.S. market size in Europe.

30. A survey of European patenting costs by the American Intellectual Property Law Association in 1995 (“Position Paper on the Costs of European Patent Prosecution,” October) found that costs in Europe split roughly evenly between official fees, translation costs, and attorney fees.

31. Helfgott, “Why Must Filing in Europe Be So Costly?” 789. Such estimates provided by other authors vary somewhat but are in roughly the same range. For example, see Budinger, “Modernizing Patent Law,” 35: “[I] t costs about $10K to

32. Michael J. Pantuliano, “The U.S. View of European Patent Litigation,” European Intellectual Property Review, no. 9 (1993): 307. For a more detailed analysis of the same topic by the author, see “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” International Patent Litigation (1994 supplement), edited by Michael N. Meller (Washington D.C.: BNA Books, 1994), 1–21.

33. James Maxeiner, “The Expert in U.S. and German Patent Litigation,” IIC: International Review of Industrial Property and Copyright Laws 22 (1991): 595–605.

34. Report of Economic Survey 1995, by the American Intellectual Property Law Association, Fretzer-Kraus Inc.: Washington D.C. (henceforth AIPLA Report), 69–70. One patent attorney warned patent owners that U.S. litigation could take from six months to ten years (with two to five years being common), and out-of-pocket costs could range from $100,000 to $1 million (with an average of about $350,000). John D. Vandenburg, “The Truth about Patent Litigation for Patent Owners Contemplating Suit,” Journal of Patent and Trademark Office Society 73 (1991): 301–8.

35. For example, the Tokyo and Osaka courts in Japan, and the Düsseldorf court in Germany, all have specialized patent divisions and judges with considerable experience in patent cases. In the United Kingdom, the Patents Court (which is the court of the first instance) has had specialized judges for a long time. But only recently was a former patent barrister appointed to the High Court. In the United States, only the Court of Appeals of the Federal Circuit is specialized in patent cases.

36. The CAFC, it is widely believed, has also engendered a stronger pro-patent bias in the U.S. legal system. A 1986 Fortune magazine article declared, “Thanks mostly to a new appeals court, patent holders are winning many more suits against infringers. Damage awards have driven some defendants close to bankruptcy”; quoted in Ronald D. Hantman, “Patent Infringement,” Journal of the Patent and Trademark Office Society 72 (1990): 454–518.

37. In part, legal uncertainty in the United Kingdom is lower because the Patents Court in the Chancellery Division, which is the court of first instance, has traditionally had specialist judges who deal with patent cases.

38. A patent lawyer we spoke to felt that this “English Rule” curbed the incidence of rogue lawsuits filed by lawyers working for clients on a contingency fee basis. However, another lawyer felt that the rule also undermined the fairness of the system by raising the stakes in litigation, and thus making it more risky in marginal cases, especially for small, resource-strapped firms. For a discussion, see Curtis E. A. Karnow, Daily Journal, July 27, 1997, 4.

39. For example, Joshua Lerner, “Patenting in the Shadow of Competitors,” Journal of Law and Economics 38 (1995): 463–95; Edmund Kitch (“The Nature and Function of the Patent System,” Journal of Law and Economics 20 [1977]: 265–90), however, has argued that such protection of technological “prospects” may be the main explanation of how the patent system operates.

40. John Haley, “The Myth of the Reluctant Litigant,” Journal of Japanese Studies 9 (1978): 359; Takao Tanase, “The Management of Disputes: Automobile Accident

41. Wineberg, “The Japanese Patent System,” 18.

42. Mark F. Wachter, “Patent Enforcement in Japan—An American Perspective for Success,” AIPLA Quarterly Journal 19, no. 24 (1991): 59–85.

43. In particular, fees are high because Japanese patent lawyers charge a fraction of the amount at stake in the case, which they keep even if the case is settled favorably very early.

44. Helfand, “How Valid Are U.S. Criticisms of the Japanese Patent System?” 39. See also Osamu Takura, “Practical Aspects of Patent Litigation in Japan” (mimeo, on file with author, 1993), 478. However, in 1992 the Tokyo District Court granted a petition for preliminary injunction against seven Japanese manufacturers of the drug Tagamet.

45. Thorson and Fortkort, “An Analysis of Patent Protection in Japan and the U.S.,” 306–9. In patent law, courts apply the doctrine of equivalents to enlarge the scope of the claims if the allegedly infringing device works on essentially the same principles. In the past, Japanese district courts have applied the doctrine, but were struck down by the appeals courts.

46. Wineberg, “The Japanese Patent System,” 18. Asamura Guidelines: Patent and Utility Models in Japan (Tokyo: Asamura Patent Office, 1991), 22–23. One lawyer we interviewed told us that around 80 percent of patent suits in the United States did not go to trial either, reflecting the high costs of U.S. litigation. However, it is very likely that these suits are settled on much more favorable terms to patent holders than in Japan.

47. Pantuliano, “The U.S. View of European Patent Litigation,” 308.

48. Pantuliano, “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” 11–12.

49. Ibid., 9.

50. Stephen M. Bodenheimer Jr. and John Beton, “Infringement by Equivalents in the United States and Europe: A Comparative Analysis,” European Intellectual Property Review, no. 3 (1993): 83–90. See also Pantuliano, “A U.S. House Counsel's Comparative View of European and Japanese Patent Litigation,” 13.

51. See Table 9.3 and the associated section on patent harmonization for an explication of these changes. Nor are these the only differences between the patent regimes in these countries. Numerous other differences of varying importance abound, but we have covered adequate ground to understand and appreciate ACME's experiences.

52. At the time, product patents (which protect the product from imitation, irrespective of small differences in the method used to manufacture it) were not available in Japan, but this changed in the late 1970s.

53. It is not unusual, however, to receive an office action on an application. One ACME attorney believed that if an application was accepted without any office actions, the “quality” of the application was probably poor, because it did not stretch the limits of the claims that could have been allowed.

54. Since the refiling was done as a “continuation,” ACME did not lose its priority on the invention.

55. This apparently is a normal action when process and product patents covering the same invention are filed simultaneously.

56. Court opinion. (Full citation withheld to protect confidentiality of the company.)

57. Court opinion.

58. “Dimmer of Great Ideas,” Business Tokyo, May 1990, 30–35.

59. Statement of Dr. David A. Duke, Corning Incorporated, before the Senate Subcommittee on Trade of the Committee on Finance, July 1993 (copy available from the Director of Public Policy, Corning Inc., Washington, D.C.). Corning's pioneering innovations in the area of optical fiber received prompt patent protection in the United States in 1971 and 1972. In Japan, however, the patent took five years to issue and five more years to address all the oppositions. In the meantime, a number of licenses were also being negotiated, and exclusion of nonlicensees was a pressing problem. By the time the oppositions were completed, a number of firms had invented around the Corning process, and since only the process patent had been granted, the company had no recourse against them.

60. GAO Study, 30–31. The composition patent issued after seven years of examination and opposition, whereas the process patent took almost ten years.

61. ACME's British patent, enforceable in the effective British courts, proved somewhat useful, for in 1981 the company brought a suit against a British importer of infringing products. Even though some of the claims in the patent were held invalid on a technicality (and had to be modified), ACME negotiated a reasonable settlement with the U.K. firm.

62. Interestingly, ACME faced no direct competition for its products in Germany through “infringement” of its rejected patent. In light of the strong opposition from its competitors, this is an unsolved puzzle for ACME's attorneys.

63. A particularly surprising case was Germany, where ACME had no patent protection for its basic innovation.

64. The Patent Harmonization Treaty (PHT) is focused on the more limited set of countries in the developed world and is more ambitious than TRIPS. But these negotiations have been plagued with problems and were set back severely in January 1994, when the United States announced that it would not seek to resume WIPO negotiations.

65. Two agreements were concluded relating to intellectual property, on January 20 and August 16, 1994.

66. However, there are concerted efforts being made in the United States to reinstate the option of the old “seventeen years from grant” patent term, which would constitute a reversal of U.S. commitments under the U.S.-Japan Framework Agreement(s).

67. This has substantially affected the USPTO, forcing it to accept evidence of inventive acts outside the United States in order to establish priority in its first-to-invent system. Some scholars, however, have argued that the changes in the United States have not gone far enough to honor its “national treatment” treaty commitments under the TRIPS accord. Harold C. Wegner, “TRIPS Boomerang—Obligations for Domestic Reform,” Vanderbilt Journal of Transnational Law 29 (1996): 535–58.

68. As one commentator put it, “[T] he EC's explicit policy objective of achieving

69. Markman v. Westview Instruments, Inc., 116 S.Ct. 1384 38 USPQ2d 1461 1463 (1996), stating that “judges, not juries, are the better suited to find the acquired meaning of patent terms” (at 1470).

70. Specifically, they have been instructed to allow claims unless they are circumscribed by the prior art.

71. Relentless trade pressure—primarily from the United States—appears to be affecting court decisions. And the issuance of some important patents to foreign firms has put pressure on Japanese firms to protect themselves from lawsuits by agreeing to substantial settlements. “When Copying Gets Costly,” The Economist, May 9, 1992, 91.

72. These relate to how examiners approach patent applications and what ideological and procedural biases they continue to hold. Often, supporting institutions and the government machinery are also reluctant to change. One U.S. patent counsel, with recent experience in Japan, was unhappy with the compliance by patent examiners there with the new guidelines and laws.

73. Michael Kirk, former deputy director of the USPTO and former U.S. trade negotiator, at a seminar on “Globalization and the Political Economy,” at the University of California at Berkeley, in spring 1996. Firms are also recognizing this, leading some authors to comment that “meaningful enforcement, in contrast with statutory protection, is emerging as a major issue for the rest of this decade.” Herbert F. Schwartz and Vincent N. Paladino, “Key Shifts in Patent Protection,” Man<aging Intellectual Property, Patent and Design Yearbook (1994), at 8.

74. For example in “discovery” (Article 43), injunctions (Article 44), and damages (Article 45).

75. Shusaku Yamamoto and John Tessensohn, “Doctrine of Equivalents Breakthrough in Japan,” Managing Intellectual Property, July/August 1996, 12–15. The decision (Genentech Inc. v. Sumitomo Pharmaceutical Co. Ltd., H-6 [ne] No. 3292), was dated March 29, 1996, and overturns a first instance ruling in Sumitomo's favor. This is the first time a Japanese appeals court has handed down a decision applying the doctrine of equivalents, although courts of first instance have occasionally done it in the past.

76. In particular the “Yale Study,” which found that patents were important only in the ethical drug industry, and (to a lesser extent in) the chemical industry. See Richard Levin, Alvin Klevorick, Richard Nelson, and Sidney Winker, “Appropriating the Returns from Industrial Research and Development,” Brookings Papers on Economic Activity, no. 3 (1987): 783–831.