What's Ahead in Patents and Trademarks? An Interview with Bruce Lehman

Copyright 1995 by Questel Publishing. Reprinted, with permission, from Inside the PTO, February 27, 1995, premier issue. Special rates available for ASIS members. See notice at end of interview.

Bruce Lehman is the commissioner of the U.S. Patents and Trademark Office (PTO). He is also chair of the Working Group on Intellectual Property of the National Information Infrastructure Task Force, and he will be a featured speaker at the upcoming ASIS Mid-Year Meeting in Minneapolis, Minnesota, May 24-26.

In a wide-ranging interview, PTO Commissioner Bruce Lehman discussed his plans for reorganizing and reengineering the Patent and Trademark Office, the inattention of America's CEOs to their own intellectual property, and the benefits of 20-year terms. He is highly opinionated - what some critics consider arrogant. Yet the weight of logic, if not common sense, is behind most of his ideas, and he has proven to be an indefatigable proponent of U.S. rights in the growing international marketplace.

IPTO: Traditionally the commissioner's job has been a low-key post, described by the National Law Journal, for example, as best suited to "a corporate chief patent counsel near retirement age." Yet, in your first two years in the post you have drawn considerable attention to yourself and intellectual property issues facing the United States, both at home and abroad. Has the attention focused on your office resulted from your efforts, from changes in the economy, or perhaps from both?

Lehman: I think it's a combination of factors, as so often is the case. Times produce certain kinds of people.

First, I don't agree with the National Law Journal's characterization. I think when people have actually looked at what this office does, nobody can assume that this is a low-key post. And I think I certainly have had activist predecessors. I think that President Kennedy's first patent commissioner, David Ladd, was a very activist patent commissioner, and in many ways the structure that we have now in the office was organized by him. We had an activist commissioner certainly in [President Reagan appointee] Gerry Mossinghoff. I think Gerry was the first commissioner who really raised this office to an administration economic policy level. Under Reagan you had what I think was called the Economic Policy Council, and they had an intellectual property committee that was technically chaired by Commerce Secretary [Malcolm] Baldridge, but in effect was really chaired by Mossinghoff. That was the first time - this was in the early 1980s - that all intellectual property policy, not just patents and trademarks, was really brought under the leadership of the commissioner of patents and trademarks. And of course it was during Gerry Mossinghoff's tenure that this position was made assistant secretary of commerce. That was when the office basically became the principal support for the USTR's [United States Trade Representative] efforts at negotiating trade treaties involving intellectual property.

I think that if you really stand back and look at all these other people, you have to question whether I am a product or whether I am the cause of it. But I think clearly it would be much more difficult for me to be an activist if this infrastructure - this policy infrastructure - both inside and outside the Patent and Trademark Office, were not there.

IPTO: Do you think the intellectual property community is aware of that?

Lehman: I think that the average patent lawyer is not aware of that. I think, frankly, private industry is behind the government, partly because private industry hasn't had to negotiate a GATT/TRIPs [General Agreement on Tariffs and Trade/Trade Related Aspects of Intellectual Property Rights] treaty. I find that one of my most frustrating problems is the disconnect between the front office in corporate America and the patent counsel.

Often times corporate CEOs tend to look at the patent operation - whether it is in-house or outside counsel, or a combination of both - as highly technical. It just doesn't bother them until there's a big crisis, and of course by then it's too late. Look at Kodak - the blood on the floor after the Kodak vs. Polaroid case. My own personal feeling is that a corporate CEO is not serving his board of directors and stockholders if he continues [ignoring the role of intellectual property] in the modern world, where technology is everything and where proprietary rights in technology are the difference between being competitive and non-competitive often times. I think that too many corporate CEOs in America just aren't doing their job and it's very frustrating. And I see it in policy making all the time.

There are critical issues - legislative, international issues - and we do not have the level of understanding in corporate America to get in there and advise us. And what they inevitably do is they say, "Let patent counsel take care of it." And you know patent counsel, by and large, are trained to prosecute patent applications in this office. That is a vastly different thing from the stewardship of the crown jewels of a corporation, which is the responsibility of senior management.

You do not find this in the copyright industry. The Hollywood studio chieftains are right in there. There is not a single major information/entertainment operation that doesn't have a very high-powered Washington office that is deeply involved in intellectual property policy.

IPTO: Do you get a sense that both the president and vice president are interested in this subject and really want to make sure that it becomes a part of American business? If corporate America is not really catching on yet to the importance of what they own, and patent counsel cannot thrust themselves upon the corporate CEO and say, "You need my help, wake up and smell the coffee," is it government's role then to educate corporate America?

Lehman: I guess this is the difference between the Democrats and the Republicans. I would say the center of gravity in the Republican Party is utter laissez faire. Always has been. And I think that history shows us that inevitably you cannot trust that, because corporate America is not always that smart.

Unfortunately, I think we clearly know now that the do-gooders having government tell everyone what to do and regulation all about us is equally disastrous. So I think that [a partnership] is what the American people really want. If you look at history it's called prudence - moderation.

If you look at America's competitive advantage in the post-World War II era, overwhelmingly the whole computer industry came out of defense research - MIT, Stanford and Berkeley - and it is no surprise that that is where the computer software industry and computer industries tend to be located. The government seeded that effort. The Internet was a government project upon which we are building the whole information superhighway. The entire aircraft industry of the United States owes its world-leader position to Defense Department development.

I think that is a very good illustration of the inevitable partnership role that is there. I think those who want to deny that, in the interest of some ideological archetype that bears no relationship to the facts in the history of this country and its success, are playing very dangerously with America's future.

IPTO: In regard to the partnership you were just describing, could you discuss the reengineering the PTO is going through?

Lehman: The first thing I did right off the bat was I reorganized the Patent and Trademark Office. The central principle of that reorganization was to consolidate all the functions that related to issuance of a trademark registration or the issuance of a patent under the people responsible for it - the trademark examining corps and the patent examining corps. I attempted to establish a structure in which there would be accountability.

Now we have a series of customer service standards which are still in evolution, but it's just a start. Then we started programs to improve the training of our employees; we have PTO University at this point to raise the level of our clerical employees so that they are not just high school-educated clerks anymore: they are people with all the modern skills that they need. We have a program that we introduced early on to get the patent examiners out of the office for a couple of months at a time to clear their brain cells and go on details in this office and in policy areas - to go downtown to see what the real world looks like. Those were early efforts.

Now our reengineering efforts have progressed much further. We are taking a completely new look at the automation system. We found that basically the system is very sound, but that it's operating like a car that needs a tune-up. It's operating on one cylinder instead of all four because people don't understand how to use it effectively because we don't give them the proper training or follow up training when upgrades come along. That's going to improve our productivity a great deal.

There is nothing other than the absolute [statutory] requirements in the way we do business that is not on the table. We need to really begin this reengineering, reinventing period, and the objective is clear: quality equals customer satisfaction.

IPTO: Can't that be a little difficult to measure sometimes?

Lehman: It is, excepting that I would say this: one of the problems of the Patent Office historically is that it has set up artificial goals and measured itself against that, as opposed to what the customers really want. I think our whole pendency system, which really drives the organization, is that way. We set up very artificial pendency goals. Some of our customers don't even want quick pendency. This gets into that whole issue of 20-year term. A lot of the biotech people could care less whether they get out of the patent office quickly or not. Yet we have established that as a goal. We are also very artificial in the way we count these things - the way we count the disposals of cases. What we really need to look at is our customers getting what they want out of the system.

You can't apply a private sector business model completely to an organization like this. Clearly there are elements of customer satisfaction that are really more policy questions, and that's the hardest thing for me to deal with because different customers have diametrically opposed views of policy quality. Our debate over a 20-year term is a critical example. In an attempt to reach out to our customers, I had a series of hearings with all different groups. One group that is very vocal - and I spent a lot of time listening to - is the computer software industry. Clearly they wanted pre-grant publication, they wanted the very timely processing of patents, and they wanted absolutely to do away with submarine patents, and they wanted the certainty of a fixed term from filing. Well, we've given it to them. And now we find that other people - some of the independent inventors clubs and so on - oppose that, and some people in the biotech industry oppose that, because they like to be able to play with the system to drag out the application because it gives them more flexibility to deal with regulatory delay and so on. It is much more difficult to fix problems that they [one industry] have when the solution they want flies directly in the face of the solution that some other major customer wants.

IPTO: Have you thought of offering different kinds of patents?

Lehman: Up until now, no. But I would say that nothing is off the table, because of course that would require a statutory change. I would love that we would evolve into something like that.

IPTO: In the wake of TRIPs, do you have any plans to pursue additional treaties or harmonization?

Lehman: Well, my feeling is that patent harmonization in the WIPO context is basically dead for the near term. I just don't think it is an effective way of proceeding. The notion that you are going to sit down and negotiate a meaningful patent treaty with 100 countries when, as a practical matter, there really are only three places in the world where you have a real patent system, is ridiculous. We have to deal first with people who really have patent systems. Japan clearly was the one which was most out of whack, and we have tried to deal with them. I think people are very satisfied with the legal quality of a patent they get in Europe. The problem in Europe is really one of cost, and the costs are in many ways prohibitive. If you go to the European Patent Office, your full fees for the life of the patent - getting protection in every designated member country of the European Patent Union - will be $88,000, as opposed to $7,500 in this market. A market from the German border to the Atlantic and from England to the Mediterranean it is going to cost you $88,000. And here you can get a patent that is going to go from Maine to Puerto Rico, the Aleutian Islands to Hawaii, for $7,500. Something is really out of whack.

IPTO: What drives that cost?

Lehman: Several factors. Two of them, which could be reengineered out of existence overnight by policy changes, would probably reduce the cost by half or more, are translation costs and in-country designation fees. They both really stem from the same political problem. It's a basic problem that Europe has and, in my opinion, has got to for its own sake come to terms with.

When [the European Patent Office] was set up you had bureaucracies [patent offices] in each one of the individual countries. Obviously, that [EPO] was very threatening to them. So in return for ceding their national sovereignty, a part of the processing fee for the EPO had to pay designation fees for the countries in which you wanted protection. That money goes back to the countries' patent offices even though they really don't do anything. They were being put out of business and I guess that helped support them. Well, in fact, it is literally a tax on the system and very counterproductive.

Secondly, because of the nationalistic, xenophobic forces that are at work in Europe - one of the most serious problems being whose language is all important - there was an insistence that every patent be translated into every language of every country of the European Patent Union. One third of the cost of a European patent is the translation cost alone, and obviously that is not necessary. This is a sensitive political matter because a lot of Europeans don't want to admit it, but for all practical purposes the English language is the language of technology today. Even if you want to be a little expansive and you throw in German and French, you have it right there. You don't need to go any further. There is not a single university graduate in any one of those countries that doesn't speak one of those three languages. So just for purposes of nationalism, you're adding on tremendous costs. Those two things could be done away with overnight.

The other factor in the European Patent Office is [the bureaucracy]. For everybody that thinks the United States is going to hell in a handbasket because it has a big federal bureaucracy, they haven't seen anything until they've seen Europe. It's bureaucrats heaven over there. The notions that we have about efficiency just are vastly different. They take six weeks of vacation every year. The level of benefits and so on and so forth-it is a very expensive system. IPTO: Is anything being done to wean them off of the translation fees? Lehman: I am the first Patent Commissioner who has really raised it. This is a problem for even a very large company, and of course it is prohibitive for a smaller entrepreneur or inventor. They [small inventors] just aren't focused on the international economy. They think that they strike it rich if they get the U.S. market. That's great, but clearly the well being of the American people as a whole is much more promoted if not only do our inventors have exclusive rights here in the United States, but if we can encourage them to get the worldwide market for their technologies. For some of these guys - maybe they've been engineers spending their whole life earning $40,000 a year and working on this thing in their garage - it's like, "Wow, if I can make $3 million, it's all I need!" But we want them to make $8 million, not $3 million, and we will be pleased as punch if $5 million - paid from foreigners - is flowing back this way to improve our balance of payment status.

It has got to be that way. If we are going to import $30 million in textiles from China, we've got to sell something over there. And that something is going to have to be the stuff of intellectual property. That's why, right now, we are fighting over computer programs and sound recordings and movies. It is not going to do Boeing [Co.] any good to sell China one 767 and then claim five years later that their [China's] aircraft factories are putting out 767 clones in numbers instead of buying them from Boeing. It is very critical that we not get off on the wrong foot with China.

What America has to sell to the world is its genius, and if we don't both get other countries to provide a system that makes a market for that genius and, second, do everything we can to set up market forces that encourage our inventors to exploit that market, we are going to have a very hobbled economy.

IPTO: With regards to digital sound recordings, do you think that in the next couple of years we are going to see passage of a performance rights bill?

Lehman: Yes, I do think we will see it very quickly.

IPTO: As part of an NII package perhaps?

Lehman: I think it will probably pass before the rest of the NII package. But I think it's still a big question mark as to how extensive it will be. We have proposed a full scale performance right for digital broadcasts so that every radio station that broadcasts in digital format would have to pay, just as they do in other countries.

The most recent [Sen. Orrin] Hatch/[Rep. Carlos] Moorhead bill that was introduced exempts radio broadcasts. But even so that will still be a performance right, and it will govern a lot of the new emerging market places-subscription services, cable services and so on. You will see that traditional broadcasting will no longer be the primary public performance mode for these works.

I have a position on this which is really totally clear: I favor a full-scale performance right. I favor strong intellectual property rights for creators. That's the wealth of America, and if you don't acknowledge those rights you have no wealth.

IPTO: In regards to the NII, the Green Paper addresses the issue of copyright education as far as younger people - kindergarten up to high school. But most of the online [Internet] community has for years placed a high value on the ready access to information that is also free. The Green Paper didn't really address how we're going to deal with that existing culture.

Lehman: I think that the marketplace will take care of that.

The reason I say that is because this is not a new problem. This notion that everything that is out there and has no lock and key on it is readily available for the taking I think just does not apply. I think all you see in the computer hacker culture is basically just an extension of our American culture on all property.

Most of the activity that has taken place on [the Internet] has been either e-mail or bulletin board activity, or the exchange of public domain information, like government documents and government information. And that was great because that was enough to build the infrastructure.

But now what is happening is that cyberspace is becoming a marketplace, and as it becomes a marketplace, there will be people who will want to sell valuable products. That's the transition we are now going through. Clearly they need copyright protection. But also, just as clearly, it would be totally naive to assume that they can put their products through the cyberspace marketplace without putting them in a box or a package with a lock, so that the purchaser will not be able to receive them unless they have the key. And that is encryption and digital cash and all these things that are on the way as well.

You're always going to get among these computer hackers the various computer nerds: I'm sure they are going to play with the system. People do that now with the telephone. There are all kinds of telephone hackers. But I think that you have to realize that most Americans find it difficult to program their VCR. The beauty of the new Internet interfaces that are coming is that they are very user friendly and you just use a mouse and click the icons and so on. The mass market will operate at that level and I think it will be pretty easy to protect your work.

The danger will primarily come from the people who operate on a commercial scale-not just individual hackers who try to somehow or other engage in unauthorized use of your work. In any aspect of intellectual property an infringement occurs every day. I mean, infringement occurs every day at every office with a Xerox machine or a photocopying machine. But it is not at a level that causes big dislocations in the companies that produce those products [that are copied], and when it is then you bring about the legal tools to bring it to a halt.


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