Imagine Nike without the swoosh, McDonald's 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.