[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]








  INTERNATIONAL IP ENFORCEMENT: PROTECTING PATENTS, TRADE SECRETS AND 
                             MARKET ACCESS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INTELLECTUAL PROPERTY,
                     COMPETITION, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 27, 2012

                               __________

                           Serial No. 112-119

                               __________

         Printed for the use of the Committee on the Judiciary











      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

           Richard Hertling, Staff Director and Chief Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

  Subcommittee on Intellectual Property, Competition, and the Internet

                   BOB GOODLATTE, Virginia, Chairman

                   BEN QUAYLE, Arizona, Vice-Chairman

F. JAMES SENSENBRENNER, Jr.,         MELVIN L. WATT, North Carolina
Wisconsin                            JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
STEVE CHABOT, Ohio                   JUDY CHU, California
DARRELL E. ISSA, California          TED DEUTCH, Florida
MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
JIM JORDAN, Ohio                     JERROLD NADLER, New York
TED POE, Texas                       ZOE LOFGREN, California
JASON CHAFFETZ, Utah                 SHEILA JACKSON LEE, Texas
TIM GRIFFIN, Arkansas                MAXINE WATERS, California
TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
SANDY ADAMS, Florida                   Georgia
MARK AMODEI, Nevada

                     Blaine Merritt, Chief Counsel

                   Stephanie Moore, Minority Counsel










                            C O N T E N T S

                              ----------                              

                             JUNE 27, 2012

                                                                   Page

                           OPENING STATEMENTS

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Subcommittee on 
  Intellectual Property, Competition, and the Internet...........     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Intellectual Property, Competition, and the Internet........     3
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Chair, Committee on the Judiciary..........     4

                                WITNESS

The Honorable Teresa Stanek Rea, Deputy Under Secretary of 
  Commerce for Intellectual Property and Deputy Director of the 
  United States Patent and Trademark Office, United States 
  Department of Commerce
  Oral Testimony.................................................     6
  Prepared Statement.............................................     9

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Biotechnology Industry Organization....    32

 
  INTERNATIONAL IP ENFORCEMENT: PROTECTING PATENTS, TRADE SECRETS AND 
                             MARKET ACCESS

                              ----------                              


                        WEDNESDAY, JUNE 27, 2012

              House of Representatives,    
         Subcommittee on Intellectual Property,    
                     Competition, and the Internet,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:06 a.m., in 
room 2141, Rayburn Office Building, the Honorable Bob Goodlatte 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Goodlatte, Quayle, Smith, 
Sensenbrenner, Coble, Chabot, Jordan, Marino, Adams, Watt, 
Berman, Deutch, Lofgren, and Waters.
    Staff Present: (Majority) Vishal Amin, Counsel; Olivia Lee, 
Clerk; and (Minority) Stephanie Moore, Subcommittee Chief 
Counsel.
    Mr. Goodlatte. Good morning. This hearing of the 
Subcommittee on Intellectual Property, Competition, and the 
Internet of the House Judiciary Committee will come to order. 
And I'll recognize myself for an opening statement.
    Today, we are holding an oversight hearing on the Obama 
administration's international IP enforcement efforts, focusing 
specifically on international patent, trade secret, and market 
access issues to raise the spotlight on the problems that 
American companies face when seeking, enforcing, and using 
patents overseas.
    This Subcommittee held a hearing in April with industry 
stakeholders to look at the patent systems in foreign countries 
and whether they meet global trading standards. The fundamental 
question we sought to answer was whether we have a level or an 
unlevel playing field abroad for American innovators.
    What we learned is that much work needs to be done to level 
the playing field for American innovators.
    When American businesses seek to sell their goods abroad, 
they must be able to compete fairly. Our trading partners must 
live up to their international obligations and not discriminate 
against U.S. companies or fields of technology when it comes to 
patentability and market access.
    When the latest patented chip design of a U.S. technology 
company is infringed, or a foreign government subjects an 
American patented pharmaceutical drug to a compulsory license 
or endless challenges to effectively block market access, the 
IP enforcement issues implicated have a direct and negative 
impact on free markets and fair trade.
    World Trade Organization members are required to make 
patents available for inventions in all fields of technology. 
However, many countries discriminate based on the place of 
invention, field of technology, or whether products are 
imported or locally produced.
    For example, countries like Brazil and India limit the 
scope of patent-eligible subject matter in a way that makes it 
difficult, if not impossible, for a U.S. innovator to get 
patent protection.
    Another field where foreign competitors have engaged in 
protectionist practices is trade secrets. Certain foreign 
governments have begun adopting policies that undermine trade 
secrets and disadvantage American companies. These policies 
include, one, requiring companies to provide trade secret 
information to a local partner or a government agency as a 
condition of investment or market access; and, two, testing or 
certification programs that require companies to disclose 
confidential information in order to sell their product in the 
foreign market.
    When U.S. companies are forced to give their confidential 
business information to the government authority, there is 
usually a lack of adequate safeguards to protect it. Some U.S. 
companies have decided to avoid the Chinese and Indian markets 
altogether, rather than lose their trade secrets.
    Some countries, like South Korea, China, and India, are 
looking at using compulsory licensing in the trade secret 
space. The foreign regulators in these countries can 
potentially compel new licensing of a trade secret to a third 
party. This is done to help a local competitor that claims that 
it needs access to the trade secret in order to compete.
    All of these practices point to the fact that the U.S. 
needs to be more vigilant in ensuring an international market 
that is fair for U.S. companies looking to compete.
    Today, we will examine what the U.S. is doing to ensure 
this is indeed the case.
    Some have argued that the Obama administration has taken a 
narrow approach when it comes to the concerns of the American 
innovative companies in the patents, trade secrets, and market-
access space. They point to the Administration's lack of focus 
on international patent issues, generally, as well as the lack 
of a strong public response, when, in March, the Indian 
Government took the unprecedented step of issuing a compulsory 
license on a pharmaceutical patent.
    Trade agreements like the Trans-Pacific Partnership 
Agreement, or TPP, provide platforms for the U.S. to exert 
pressure on other countries to level the playing field when it 
comes to these issues. It has come to our attention that some 
provisions being discussed in the context of the TPP 
negotiations could weaken, rather than strengthen, certain 
intellectual property laws abroad, whether it be requirements 
for plain packaging of certain products or pharmaceutical test 
data protection issues.
    I look forward to continue to work to ensure that these 
negotiations result in stronger, not weaker, commitments by 
other countries to enhance their IP laws.
    I want to commend the PTO for the work they have done in 
the context of their IP attache program, their international 
policy advocacy, and the training and capacity-building 
programs they are conducting on the ground in targeted 
countries.
    Today, I hope to hear more about the USPTO's plans to do 
more to expand the U.S. Government's efforts to find real 
solutions to these unfair trade practices that distort free 
market trade and, in the end, hinder American job creation.
    I now am pleased to recognize the Ranking Member of the 
Subcommittee, the gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Chairman Goodlatte. And I also thank 
you publicly for accommodating some schedules of some other 
witnesses who we wanted to testify. And I'm sure we'll get a 
chance to hear from them later on this important subject, which 
has continuing and important implications.
    I want to welcome our witness, Deputy Under Secretary Rea, 
to her first appearance before this Subcommittee, and what I 
understand is her first her appearance before any Committee of 
Congress. She brings an impressive body of work prior to 
joining the U.S. Patent and Trademark Office and will, no 
doubt, share with us today additional achievements in her 
current capacity.
    This hearing, as the Chairman has indicated, is a follow-up 
to a hearing we held in April, in which we heard from a number 
of witnesses from stakeholder industries and academia.
    Today, we pivot to look at developments in enforcement in 
the increasingly relevant and sometimes complex international 
patent arena.
    Just last month at the meeting of the G-8 at Camp David to 
address global, economic, and political challenges, the group 
emerged with a declaration that stated, in part, quote, ``Given 
the importance of intellectual property rights to stimulating 
job and economic growth, we affirm the significance of high 
standards for intellectual property rights protection and 
enforcement,'' close quote.
    While this commitment is welcomed, it must be embraced by 
the broader global community. And more importantly, it must be 
honored.
    The U.S. takes pride in our IP-intensive industries, which 
collectively produce 27.1 million jobs for our citizens. But we 
continue to hear that, for some of those industries, barriers 
to access to some of the world's fastest growing markets is 
deliberately stymied by protectionist practices of foreign 
governments, lack of intellectual property enforcement, and 
other tactics that discourage and impede the ability of U.S. 
companies to compete on a level playing field.
    These practices may affect entire industries, like the 
information technology sector, which, according to a recent 
report by the Business Software Alliance, called, ``Lockout: 
How a New Wave of Trade Protectionism Is Spreading through the 
World's Fastest-Growing IT Markets--and What to Do about it,'' 
may be required to provide local licensing of its intellectual 
property as a condition to entering the market. Or they may 
deny a valid trademark of a U.S. company, like True Religion, 
whose largest supplier, Cone Mills, is in my congressional 
district, forcing them to instead litigate, which, although 
successful, quite often results in an unenforceable judgment of 
millions of dollars.
    In addition to these policy challenges, there are also 
practical administrative hurdles for American companies. Small 
American businesses and startups are often saddled with high 
application fees for patent protection in other countries, as 
was noted in the PTO report earlier this year.
    Although we provided some fee relief to micro-entities in 
the America Invents Act, lots of other countries do not have 
the same practices and policies.
    Similarly, despite our efforts at global harmonization, the 
absence of a grace period in many other patent-issuing 
countries continues to place our inventors at a disadvantage. 
Because the laws of many foreign countries prohibit the grant 
of a patent where an invention was disclosed prior to the date 
of the application, the grace period effectively limits the 
patent to within the borders of the United States.
    Finally, we must remain ever vigilant in our efforts to 
enhance America's standing in the competitive international 
market and to guard against unfair foreign encroachments on our 
intellectual property rights. But we also have an obligation to 
be good global citizens, particularly where health and safety 
concerns are concerned, so that our enforcement policies do not 
unfairly disrupt, exploit, or decimate the economies of 
developing countries.
    Our colleague, Mr. Berman, has worked tirelessly over the 
years in his capacities both on the Judiciary Committee and on 
the Foreign Affairs Committee to promote and support a dynamic 
and nimble IP attache corps, which through diplomacy, 
negotiation, and relationship-building may well be suited to 
helping achieve those dual goals.
    This is an important hearing, Mr. Chairman. I thank the 
Chairman for convening it. And again, I thank him for 
accommodating our other witnesses. That means we'll be having 
some more hearings on this issue, so I appreciate it and yield 
back.
    Mr. Goodlatte. I thank the gentleman.
    And it's now my pleasure to recognize the Chairman of the 
Judiciary Committee, the gentleman from Texas, Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    America's economic success has been built on innovation. 
But as we develop new technologies and products, foreign 
governments have disadvantaged American companies by imposing 
barriers to market access.
    During the Bush administration, intellectual property 
enforcement involved patents, trademarks, copyrights, trade 
secrets, and market access.
    The Bush administration established an IP attache program 
in 2006 and a Global IP Academy at the Patent and Trademark 
Office. These work directly with trading partners to promote IP 
protection and enforcement, and to advance U.S. economic and 
political interests.
    It elevated important IP enforcement cases, so that they 
could be raised at the Cabinet level with foreign governments. 
And President Bush appointed the first IP coordinator, which 
was housed at the Department of Commerce.
    During those years, China joined the World Trade 
Organization, India passed a patent law, and other countries in 
Asia and Latin America began to modernize their IP systems. 
Many of the IP enforcement issues of today were just starting 
to arise back then.
    The Bush administration had the foresight to establish new 
programs, hold our trading partners accountable by filing IP 
cases at the WTO, and use all of our trade tools to promote 
effective IP enforcement in all areas of intellectual property, 
including patents and trade secrets.
    So it is disappointing that the IP enforcement coordinator 
is not here today, even though we had informed her office of 
this hearing in early May.
    I understand that the coordinator chose to travel to Oregon 
instead of appear before this Committee. I had hoped to get 
better cooperation from an office that this Committee 
established 4 years ago.
    This Administration's approach to international IP 
enforcement issues has been too weak. But it is not too late 
for it to take a more comprehensive approach to IP enforcement.
    As the Administration develops their next joint strategic 
plan, they must expand their approach. The Administration 
should ensure that a significant part of IP enforcement 
includes the issues around patents, trade secrets, and market 
access.
    When foreign governments engage in practices that devalue 
the IP of American innovators, Federal officials need to 
respond strongly and swiftly. Appropriate responses should 
include filing IP cases at the WTO, something that we haven't 
seen in the last 3 years.
    Under President Bush, the U.S. filed 24 WTO cases, which 
included two IP cases. Under President Obama, the U.S. has 
filed eight cases and none on IP.
    In the absence of WTO IP enforcement actions, many foreign 
countries will continue to ignore legal reforms and create 
major barriers to trade for U.S. companies. Many of these 
patent-specific problems have intensified over the past 3 
years.
    These global problems require real-world solutions that go 
beyond simply being listed in the annual United States Trade 
Representative's Special 301 watch list or a government report. 
They go to the very heart of our innovative companies' ability 
to compete on the global playing field.
    The U.S. patent system is designed to be fair. It meets our 
international obligations and does not discriminate against any 
field of technology.
    The same cannot be said of the patent systems around the 
world. When American companies seek protection in foreign 
markets, they see their patent applications being held up, as 
patent approval times approach a decade in some countries.
    They see their patents subject to lengthy pre-grant and 
post-grant challenges that further reduce their patent term. 
And they continue to face obstruction by foreign courts and 
administrative agencies when trying to bring their product into 
the local market.
    Those foreign countries not only violate their 
international commitments, but also create a significant 
negative economic impact that hits the U.S. economy and 
domestic jobs.
    I plan to introduce the Promoting a Level Playing Field for 
American Industry, Innovators, and Job Creators Act. This IP 
attache training and capacity-building bill is based on 
concepts developed at the PTO.
    It will improve the IP attache program and U.S. Government 
IP training as it aligns policy priorities and brings them 
under the U.S. Patent and Trademark Office. It ensures that our 
IP efforts abroad are in line with compelling U.S. economic 
interests.
    The goal is to focus our efforts to deal with IP issues at 
their source and use all of our trading tools as we work with 
other countries.
    As the U.S. Government works with our trading partners to 
find solutions, we can ensure that the solutions reached are in 
line with compelling U.S. economic interests and job creation.
    Thank you, Mr. Chairman. I yield back.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Without objection, other Members' opening statements will 
be made a part of the record.
    Ms. Rea, we are delighted to have you with us today as our 
distinguished witness, and your written statement will be 
entered into the record in its entirety. And we ask that you 
summarize your testimony in about 5 minutes.
    As is the custom of this Committee, before we formally 
introduce you, we'd ask that you stand and be sworn.
    [Witness sworn.]
    Mr. Goodlatte. Thank you very much.
    Our witness today is the Honorable Teresa Stanek Rea, the 
Deputy Under Secretary of Commerce for Intellectual Property 
and Deputy Director of the U.S. Patent and Trademark Office.
    Deputy Under Secretary Rea joined the USPTO in 2011 and had 
previously served as a partner in Crowell & Moring's D.C. 
office, where she focused on IP and dispute resolution related 
to pharmaceutical, biotechnology, and other life-science 
issues. She also served as a past president of the American 
Intellectual Property Law Association.
    Earlier in her career, she worked for Ethyl Corporation and 
at a boutique law firm in Alexandria, Virginia.
    Ms. Rea received her law degree from Wayne State University 
and a Bachelor of Science Degree in Pharmacy from the 
University of Michigan.
    Welcome, Deputy Director Rea.
    Ms. Rea. Thank you so much.
    Mr. Goodlatte. You may want to pull that microphone close 
to you.

  TESTIMONY OF THE HONORABLE TERESA STANEK REA, DEPUTY UNDER 
  SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DEPUTY 
  DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, 
              UNITED STATES DEPARTMENT OF COMMERCE

    Ms. Rea. Chairman Goodlatte, Ranking Member Watt, Chairman 
Smith, and distinguished Members of the Subcommittee, thank you 
so much for inviting me to be here with you today. And thank 
you for this opportunity to discuss the United States Patent 
and Trademark Office's efforts toward improving the 
international enforcement of intellectual property rights held 
by U.S. innovators.
    Mr. Chairman, while I've been at the USPTO for just over 16 
months, I have spent a good portion of my legal career, as you 
know, working in the field of biotechnology and pharmaceutical 
patents. I am a registered pharmacist in the State of Michigan, 
and I have worked for many years in a hospital setting. And 
this experience has provided me with a unique perspective from 
which I approach my job.
    It is absolutely clear to me that we cannot overstate the 
importance of IP to our economy. The recent Department of 
Commerce report, as was indicated earlier, found that IP-
intensive industries support at least 40 million jobs and 
contribute more than $5 trillion, or 35 percent of U.S. gross 
domestic product.
    And as stated by the Commerce Department's Acting Secretary 
Blank, she indicated strong intellectual property protections 
encourage our businesses to pursue the next great idea, which 
is vital to maintaining America's competitive edge and driving 
overall prosperity.
    Mr. Chairman, we are proud of the array of programs and 
initiatives we have at the USPTO that benefit American 
innovators doing business in the global marketplace.
    A significant problem with overseas IP enforcement is the 
lack of training available to responsible foreign officials. 
Many foreign legal systems have minimal experience in enforcing 
IP laws and adjudicating IP disputes.
    The U.S. Patent and Trademark Office has developed and 
conducted rigorous capacity-building programs in key countries 
and regions, focusing on training foreign enforcement 
officials, including police, prosecutors, customs officials, as 
well as the judiciary themselves. Also, we continue to provide 
training and resources that help guide U.S. companies as they 
enter into global markets, especially when they face particular 
challenges to enforcing their rights.
    Through our Global Intellectual Property Academy, also 
known as GIPA, we have greatly expanded IP rights training, 
capacity-building, and technical assistance offerings to 
promote improved IP protection and enforcement.
    Over the last year and a half, our Global Intellectual 
Property Academy has conducted almost 200 training programs, 
both domestically and abroad, reaching more than 6,000 foreign 
government officials, representing approximately 140 countries. 
Now, during that same period, we also trained more than 2,000 
representatives of small- and medium-sized U.S. enterprises at 
programs throughout the United States to help them navigate 
that terrain.
    GIPA has also produced seven e-learning modules on IP 
protection and enforcement, several of which are actually 
available in languages other than English. And those modules 
have received more than 20,000 hits since they were first 
placed on the USPTO website.
    Now, Mr. Chairman, we are particularly proud of the 
important work done by our IP attaches, and they're stationed 
at U.S. Embassies and missions around the world. These IP 
experts are dedicated to promoting high standards of IP 
protection and enforcement internationally for the benefit of 
U.S. rights-holders.
    They are frequently called on to play two significant 
roles. First, they coordinate and identify ways to effectively 
address the challenges faced by U.S. companies. And second, 
they work with the host government to consider changes that 
improve the effectiveness of their IP systems.
    In addition to our attache postings, we also have two USPTO 
employees on detail to the USTR and the U.S. Permanent Mission 
to the U.N. office in Geneva, supporting U.S. objectives 
relating to IP matters that arise in the course of the World 
Trade Organization, the World Intellectual Property 
Organization, and other international organizations.
    Now, since entering this position, Mr. Chairman, I have had 
the opportunity to meet many of the USPTO IP attaches currently 
serving in our Embassies throughout the world, and I can attest 
to the valuable role that they play in facilitating informed 
discussions related to the creation of effective IP laws and 
the challenges U.S. companies face in enforcing their rights. I 
know that their work has also received very favorable reviews 
by the business community.
    Mr. Chairman, in light of the increasing concerns by U.S. 
rights-holders on the importance of protecting their trade 
secrets from misappropriation, the USPTO is emphasizing this 
area in our domestic and foreign policy objectives, 
particularly as they relate to China. USPTO attorneys are 
undertaking a comprehensive study of Chinese laws and other 
legal measures governing trade secrets, and are discussing with 
Chinese Government officials changes that can facilitate a more 
effective protection regime in China.
    Mr. Chairman, my written statement provides more detailed 
information on our initiatives and programs, all with the goal 
of achieving effective IP protection and enforcement for U.S. 
innovators doing business in the global marketplace.
    Mr. Chairman, we look forward to continuing to work with 
the Committee, the leadership at the Department of Commerce, 
our colleagues within the Administration, and our stakeholders, 
toward that goal. And we do appreciate your continued support 
for all 10,000 employees at the U.S. Patent and Trademark 
Office. Thank you.
    [The prepared statement of Ms. Rea follows:]
    
    
    
                               __________

    Mr. Goodlatte. Well, thank you, Deputy Director Rea. I'll 
begin the questioning.
    In the patent world, there are many hurdles that a foreign 
country can raise to prevent a company from selling a product 
based on a lawfully granted patent. But in recent years, we've 
seen countries like Brazil, Thailand, and India using the 
threat of a compulsory license as a negotiating strategy to 
those American companies to manufacture or license their 
products to local companies at government-mandated prices.
    Recently, India took the unprecedented step of issuing a 
compulsory license against a Bayer oncology drug, stating, 
among other reasons, that the patented drug was not being 
sufficiently worked in India, because it was not locally 
manufactured.
    What steps did the Administration take and should be doing 
now to ensure that countries think twice about using a 
compulsory license simply as a negotiating strategy or to 
facilitate their budget planning?
    Ms. Rea. Thank you, Mr. Chairman.
    Actually, on that particular issue, I can pretty much speak 
from the heart.
    As a pharmacist, as someone who has worked in both a drug 
store and a hospital setting, I can tell you that 
pharmaceuticals are something that we all need and that there 
is a global need for those. Unfortunately, compulsory licenses 
dissuade pharmaceutical and biotech companies from innovating 
or from bringing their product into countries that grant 
compulsory licenses.
    In the case of India, I have to tell you, I was quite 
dismayed and surprised when they did indeed decide to grant 
that compulsory license for a reason that I think did not meet 
international standards and was not due to, for instance, a 
national crisis.
    What we do at the USPTO, is we have somebody on the ground 
right now in India, in the Embassy in Delhi, who constantly 
engages with all of the respective offices in India to discuss 
with them the importance of not granting a compulsory license 
in a situation where it is not warranted.
    Unfortunately, our education efforts on that issue to date 
have not yet been successful. I'm not sure if you were aware of 
it, but that compulsory license was granted by Commissioner 
Kurian on the very last day he left the Indian Patent Office as 
Commissioner.
    Mr. Goodlatte. Was that granting appealed?
    Ms. Rea. I'm sorry?
    Mr. Goodlatte. Was it appealed?
    Ms. Rea. Yes. It's currently being ongoing discussed and 
appealed at this time legally. But we're also working with 
trying to continue our discussions with their equivalent of the 
U.S. FDA and their regulatory authorities.
    We're engaging in as many discussions as we can with them, 
outside of just the Indian Patent Office context. But we are 
doing everything we can to respect the rights of U.S. 
innovators.
    Unfortunately, from my perspective, I think that perhaps 
the loser in all of this will actually be the Indian people, 
the Indian patients, where major pharmaceutical companies will 
actually delay bringing pharmaceuticals into those countries.
    Mr. Goodlatte. Well, let me just say that I appreciate that 
concern, but here's the problem: Whenever you have a country 
that doesn't treat our pharmaceutical manufacturers fairly in 
the process and they both issue compulsory licenses or threaten 
to do so, and have mandated prices--price controls, if you 
will--that's an untenable combination, because the fact of the 
matter is, if the company refuses to offer the drug in India, 
they simply acquire the drug, reverse engineer it, and 
compulsory license it to a local Indian company. How do we stop 
that?
    Ms. Rea. I can tell you that reverse-engineering some of 
these very sophisticated anti-cancer or chemotherapy drugs is 
actually exceedingly complex. If it was a small molecule or 
something that someone took orally, those can be more easily 
reverse-engineered and identified.
    For the country of India to gear up and to make some of 
these very sophisticated biotech molecules, it takes really 
quite a long time.
    Mr. Goodlatte. But they've done it in this instance?
    Ms. Rea. That's what I understand. But perhaps they started 
a bit earlier than I would've anticipated, but it takes a very 
long time for them to gear up and do that.
    From the USPTO perspective, education, IP awareness, 
teaming with them, constantly being there on the ground, is 
perhaps the best weapon that we have. Because we think that, in 
the long term, they do indeed want to be a good player in the 
international community. And so I think education and our 
efforts out front in trying to stop this in the future----
    Mr. Goodlatte. Let me ask you another question before my 
time expires.
    As opposed to criminal activity, these international patent 
and trade secret problems in the civil law space seem to be 
driven directly by foreign governments to benefit their 
domestic industries. And it seems like they've been getting a 
free pass as they devalue the patented innovations of American 
companies. If there was one thing that we could do immediately 
to improve this global situation, what would it be?
    Ms. Rea. I think get a little bit more on track, both 
procedurally and substantively, with patent harmonization 
issues.
    As you know, because of your great efforts----
    Mr. Goodlatte. And I would think that making the compulsory 
license issue a part of those international intellectual 
property negotiations would be critical part of that.
    In other words, I understand why countries want to have a 
compulsory license. If they have a life-saving drug and a 
company chooses not to sell it in a particular market, they're 
going to use their compulsory license.
    On the other hand, if they're going to make it unattractive 
to sell the drug in the market by forcing the company to 
manufacture it locally or by mandating price controls that are 
unfair--and unfair, by the way, to U.S. consumers, who wind up 
subsidizing the cost of developing the drug at the same time 
that the country that compulsory licenses it gets to not only 
do that, but also sell it at a lower price, again, unfair to 
U.S. consumers.
    So, to me, this needs to be front and center a priority 
issue. It's not new to the current Administration. It's been a 
problem for quite awhile now. That needs to be injected into 
that process, and I hope very aggressively.
    Ms. Rea. We do. I, personally, have engaged in discussions 
with various agencies of the Indian Government on this issue. 
And it continues to be part of the ongoing effort within the 
U.S. Patent and Trademark Office with our external affairs 
division, which sort of oversees our IP attaches.
    So this is front and center, and we are consistent in 
trying to stop those efforts and in trying to stop the granting 
of further compulsory licenses.
    Mr. Goodlatte. Can a WTO case be brought on this dispute 
with India if the appeal does not succeed?
    Ms. Rea. That is actually an appropriate question. Since I 
work with a different agency, based on my limited knowledge, I 
think that that would be one of the tools in our toolkit that 
perhaps should be considered.
    Mr. Goodlatte. Thank you very much.
    The gentleman from North Carolina, Mr. Watt, is recognized.
    Mr. Watt. Thank you, Mr. Chairman.
    And I'm happy to see that the Chairman is coming to our 
position that a number of issues need to be included in 
discussions in these trade agreements. Not only does not 
negotiating about compulsory licenses have an adverse impact on 
businesses, but not negotiating about labor conditions and 
employment conditions in those countries have an adverse impact 
on our workers.
    So we seem to be coming closer together on some of these 
issues. And I'm happy to see that.
    Mr. Goodlatte. If the gentleman would yield?
    Mr. Watt. Yes, sir.
    Mr. Goodlatte. I'd say that the former is true, but not the 
latter, I think the compulsory license used in conjunction with 
other issues directly related to trade.
    But I certainly appreciate the gentleman----
    Mr. Watt. And employment conditions is directly related to 
trade, I would assure the gentleman.
    But, you know, I thought that we were getting closer 
together, but maybe I misread what the Chairman was saying.
    But there are some interesting challenges in negotiating, 
formally or informally, respect for intellectual property in 
developing countries.
    And, Ms. Rea, maybe you could tell us or just list some of 
those challenges that the United States encounters in these 
negotiations.
    Ms. Rea. Culturally, a lot of countries come from a 
different perspective from what we do. They have different 
legal systems. They have different issues that they're 
struggling with.
    One thing that we all have in common is we all have the 
need for vibrant economies, and we all have the need for jobs. 
So when we discuss with people, even with individuals from 
other countries, even on intellectual property issues, we try 
and establish things as if they're a global playing field and 
that we all have the very same interests and concerns.
    Some countries have not had an intellectual property system 
or a patent system in place for very long, so they're getting 
familiar with how things are working. Their judiciary sometimes 
needs to be brought up to speed.
    So with our educational efforts through that Global 
Intellectual Property Academy of ours, we actually also train 
judges from various countries. Director Kappos, about 3 or 4 
weeks ago, attended a program in Beijing that brought together, 
I believe it was eight of the judges from our Court of Appeals 
for the Federal Circuit, which we think of as our own patent 
court. And he brought together individuals from the supreme 
court of China. There were over 1,000 attendees, and they were 
able to observe the interaction between the judiciary in 
contrasting things in the context of IP.
    So I think that getting everyone, when we sit down at these 
negotiations, down to actually making positive progress, we've 
got to realize what our differences are, try and develop more 
similarities, and then negotiations get a little bit more 
efficient.
    Mr. Watt. I thank you for that response. And that leads me 
actually to a second question that I had, because some people 
have raised questions about whether our officials should be 
talking to the whole range of players in these discussions.
    I presume that Director Kappos met with stakeholders in the 
tech and pharmaceutical industries to discuss the impact of 
various proposals on these sectors domestically and 
internationally during the America Invents Act. Is that the 
case, that you're aware of?
    Ms. Rea. Most of our interaction that I'm aware of occurred 
after the America Invents Act actually went into place.
    We do reach out to our stakeholders. We do have ongoing 
discussions, but it's important for them to align us with their 
industries to make sure that, for instance, our implementing 
legislation for the America Invents Act, that we are on target 
and that it is going to work as intended.
    So having discussions with stakeholders--whether they're 
small, medium, large corporations; whether they're 
universities; whether they're the independent inventor 
community--it is essential that we speak to our constituencies 
so we do not remain out of touch.
    So we do have discussions. I wouldn't say they're ongoing 
discussions. But from time-to-time, we do discuss with them.
    Whenever we publish something in the Federal Register, we 
have a Notice of Proposed Rulemaking, we do get a vibrant 
variety of responses from small, medium, large businesses; 
universities; and independent inventors.
    Mr. Watt. All right, thank you.
    I see my time has expired, Mr. Chairman. I yield back.
    Mr. Goodlatte. I thank the gentleman.
    The Chair is now pleased to recognize the gentleman from 
Arizona, Mr. Quayle, the Vice Chairwman of the Subcommittee.
    Mr. Quayle. Thank you, Mr. Chairman.
    Thank you, Ms. Rea, for being here today.
    China has indicated that they plan to increase the amount 
that they spend on R&D to about 2.5 percent of their GDP and 
double the number of patents that they grant by 2015. And 
they'll expect that their patents will be enforced around the 
world, yet they fail to protect the patents of U.S. researchers 
that they have spent years developing.
    To what extent do you think it is a problem for the U.S. 
and global economy if countries like China don't reciprocate in 
protecting our IP and the jobs, exports, and other 
contributions they create?
    Ms. Rea. Thank you. That's a good question.
    I actually am pleased that China is going to spend that 
much effort in innovating, because I think getting everybody to 
innovate is exactly what we want to do.
    And you're correct that, in the coming years ahead, there 
will be a surge of patents that will go through every country 
of the world, including the United States.
    Now enforcement of those patents is indeed critical. And 
seeing how their legal system handles them, it has to be done 
correctly.
    Right now, China's legal system, with respect to IP, 
doesn't yet have the years of experience that our country has 
had, because patents and copyrights were the foundation of this 
country. So we have a lot more experience in how to handle 
them.
    I can tell you from personal on-the-ground experience, I 
met with stakeholders in three different cities in China in 
2011, and I got to hear the on-the-ground frustrations and 
difficulties that companies were having in China. And the 
judicial system was frequently mentioned.
    I must tell you that within certain courts, in certain 
areas of China, there are some what I consider best practices. 
And so what we're trying to do is to identify where there's a 
best practice, where is the introduction of evidence, for 
instance, being done in what we consider to be a fair and 
proper manner, and to get those best practices and to piecemeal 
come up with the best way for the judiciary to handle these 
enforcement issues.
    I think that Chief Judge Rader of the Court of Appeals for 
the Federal Circuit, the program that he had in Beijing last 
month, getting judges together to talk about common issues and 
how IP should be handled, and for the judges to understand how 
our judges think about IP and how they approach it, helps.
    Mr. Quayle. But one of the things that I'm just worried 
about is that, as they continue to grow and expand the number 
of patents that they provide, and there's no reciprocity with 
the patents that our inventors and our innovators are 
developing, the danger that it poses to people and companies 
here in the United States, when they have patents that are 
violated on a regular basis by China, and if they're increasing 
the number of patents, how are we going to be able to best 
protect our own IP from the United States in China, whether 
they're going through the patent process there and violating a 
patent that is already in place in the United States?
    Ms. Rea. Just as China is new and has put an increased 
emphasis on innovation, China's patent office--it's called 
SIPO--is also undergoing dramatic change with how they're 
handling patent applications. And we have one-on-one 
discussions--I have one-on-one discussions with individuals in 
the Chinese intellectual property office, talking about the 
patent procedure and any frustrations that U.S. innovators have 
felt.
    I can also tell you, on the judicial side, their courts are 
dramatically changing. So with our on-the-ground attaches, our 
constant communication with our counterparts in China, the 
increase in innovation, the increased number of Chinese patents 
will change their system to the benefit of not just U.S. 
innovators but also Chinese innovators.
    Mr. Quayle. Okay.
    Ms. Rea. Because much to your surprise, you're probably 
going to find that Chinese innovators themselves do 
occasionally have frustrations with their legal system, and so 
that this is a common problem. And I think that we are in a 
dramatic place of change right now.
    Mr. Quayle. Okay, thank you.
    Now the Administration is currently negotiating a wide-
range trade agreement with 10 other countries in the Asia 
Pacific known as the Trans-Pacific Partnership. This agreement 
will serve as a docking station for other countries to join in 
the future, including possibly China.
    To that point, just last week, Canada and Mexico were 
invited to join.
    Given the scale of this agreement, it is critical that we 
propose and secure IP protections that reflect U.S. law. With 
respect to pharmaceutical IP protections, is the Administration 
doing everything it can to ensure the strongest protections, 
including 12 years of data protection for biologics?
    Ms. Rea. We are. We are doing exactly that right now. We 
view that the Trans-Pacific Partnership provides a good venue 
to make sure that we get appropriate data protection, and that 
that 12 years of data exclusivity is something that we are 
definitely trying to negotiate for right now.
    I understand that the TPP will be meeting in San Diego next 
week. It is indeed one of their issues.
    Now, I don't know if that specific issue is on their agenda 
for next week, because there are many issues that are being 
gone through with the TPP, the Trans-Pacific Partnership, but 
it is on their agenda.
    We are constantly pushing to make sure that data protection 
remains as high on their list as possible.
    We don't just use TPP as the venue. We approach data 
protection from a wide variety of directions to make sure we 
have a consistent story, and everybody understands our position 
and the needs of U.S. innovators.
    Mr. Quayle. Okay, great. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Goodlatte. I thank the gentleman.
    The gentleman from California, Mr. Berman, is recognized 
for 5 minutes.
    Mr. Berman. Well, thank you very much, Mr. Chairman.
    And I take it, Ms. Rea, from your answer to the Ranking 
Member's questions, that, in fact, you and other PTO officials 
meet regularly with high-tech companies that hold patents and 
trademarks and otherwise utilize PTO services. And that these 
meetings not only occur in PTO offices in Virginia, but at the 
headquarters of these companies. I think that makes sense. I 
think that's the smart and the right thing to do.
    And just to add to this, if you could just quickly tell me 
whether you think you could do the job, and the office could do 
the job it has to do, without such meetings?
    Ms. Rea. We need input from the user and shareholder and 
innovator community. And in order to best serve the American 
public, we have to know how business operates and what they 
need. So communicating with them is critical.
    I wouldn't say we talk to them a lot, because we are really 
busy in the USPTO. But we talk to them when appropriate.
    It is actually rare when we actually have the luxury of 
time to go visit somebody directly. Usually, we try and get 
groups of people together, if convenient, for very brief 
meetings. And sometimes it's a spinoff from another meeting.
    But I think that to maintain the best system that we can--
and right now we are in the midst of an awful lot of rulemaking 
with the America Invents Act. And in particular, with that new 
inter-parties review, post-grant review, where we've issued a 
U.S. patent that comes back to us, we want to make sure we're 
designing that as good as possible.
    Mr. Berman. Great. Let me turn to a different subject.
    You mentioned WIPO at the end of your testimony. Actually, 
in large part, because of my colleague Ms. Lofgren I have been 
closely following reports that WIPO officials have been 
transferring computers, firewalls, and other technological 
devices to the governments of North Korea and Iran.
    Needless to say, we find this highly distressing, not only 
because it potentially violates a slew of U.N. Security Council 
resolutions, and, very possibly, our country's policies on 
internet freedom, but also because these technology transfers 
were carried out by an organization largely funded by U.S. 
inventors.
    What actions is the PTO taking to ensure an independent 
external investigation into why and how this happened? And has 
the WIPO director general agreed to requests by the U.S. for 
such an investigation?
    Ms. Rea. I have to tell you that the leadership that the 
U.S. Patent and Trademark Office was disappointed when they 
got, to say the least, that information.
    We are not taking the lead in the investigation right now. 
There is an active, ongoing investigation. The Department of 
State is handling that at this time.
    From what I understand, Director General Francis Gurry has 
not yet been fully open as to all of the issues and that more 
information will likely be forthcoming.
    So we are processing and handling all of our clients' PCT 
applications as usual. The World Intellectual Property 
Organization is operating in our U.S. innovators' and 
stakeholders' best interest.
    But this issue is something that's particularly distressing 
to us at the U.S. Patent and Trademark Office. And then, in 
collaboration with other U.S. Government agencies, we will do 
and handle it in the way that's appropriate.
    Mr. Berman. Well, and I certainly think particularly the 
State Department has to be aggressive in getting to the bottom 
of this and making sure it doesn't recur.
    Thank you. I yield back, Mr. Chairman.
    Mr. Goodlatte. I thank the gentleman.
    The gentleman from Pennsylvania, Mr. Marino, is recognized 
for 5 minutes.
    Mr. Marino. Thank you, Chairman.
    Good morning.
    Ms. Rea. Good morning.
    Mr. Marino. It's a pleasure to talk with you.
    You touched on this issue a little bit, but perhaps you can 
expand on it a little more for me.
    China, the most blatant IP thief, along with Russia, has 
implemented barriers that have a severe negative impact on U.S. 
trade and patent protections. Can you explain what and how 
these barriers or compulsory licenses negatively impact our 
economy?
    And equally important, what are we doing to seriously 
address and counter--other than meetings--what I consider 
criminal activity on the Chinese part?
    Ms. Rea. Thank you, Congressman Marino. That's actually a 
good question.
    The U.S. Patent and Trademark Office is collaborating with 
other U.S. Government agencies to try and minimize or totally 
remove these biases that occur right now with certain 
countries.
    China is just a very large country undergoing a great deal 
of change right now, so it is truly taking a lot of our 
resources in external affairs right now.
    What we're doing is we're collaborating with other U.S. 
Government agencies. Having our IP attaches on the ground in 
seven different countries has been actually--or six different 
countries--has been very efficient. And we're able to talk one-
on-one having boots on the ground to try and move things along.
    I do think that there has been positive movement and that 
communicating and having discussions works. And our training 
and education programs are also very good.
    Participating and making sure the right language is in 
these international trade agreements is also something that's 
first and foremost.
    Mr. Marino. May I stop you there, please.
    Are we collaborating with any other countries in 
conjunction?
    Ms. Rea. Well, that's actually a good question, because we 
do collaborate with other countries in what I consider the most 
productive sense--is that the five biggest patent offices in 
the world, where I believe 74 percent of all patent 
applications are filed, is the USPTO, the European Patent 
Office, Japan, Korea, and China.
    And these five patent offices, we all get together and we 
talk about practices, problems, issues. It's existed for 5 
years so far. And we are making what I consider to be 
significant progress.
    Mr. Marino. One of my areas of study is China, in general. 
I've been studying China for 20 years. And China reminds me a 
little bit like my 8-year-old, who, when dad says, ``Don't do 
this.'' He says, ``Okay, dad, I won't,'' and then continues to 
do it.
    Is China taking us seriously? And are we doing anything to, 
I guess for a lack of a better term, threaten China to the 
extent that we're going to have a negative impact on your trade 
with the United States?
    Ms. Rea. I do think China does take us seriously. They have 
modified some things, how they're handled, and what their 
behavior is.
    I think China is trying to be a proper global player right 
now. So I do think that we are in the middle of a lot of change 
right now with China. I hope that they continue in this 
positive direction.
    And so, actually, communicating with them has been 
effective so far.
    Mr. Marino. Thank you, Madam Secretary. Good answers.
    And I yield back my time.
    Ms. Rea. Thank you so much.
    Mr. Goodlatte. I thank the gentleman.
    The gentlewoman from California, Ms. Lofgren, is recognized 
for 5 minutes.
    Ms. Lofgren. Thank you, Mr. Chairman.
    And before asking my questions, since I represent Silicon 
Valley, it would not be right for me to address anybody from 
the PTO without saying: How's it going on the selection of our 
next patent office?
    Ms. Rea. We are actively working on the identification of 
our additional satellite offices.
    Ms. Lofgren. As you know, a quarter of all the patents in 
the country come from Silicon Valley.
    Ms. Rea. And they have great weather.
    Ms. Lofgren. They do have. It's 71 degrees in San Jose 
today.
    I just wanted to, first, thank you for being here, and 
express a couple of concerns and then really get into a 
question.
    We've seen ACTA kind of explode over in Europe. I don't 
think it's going to go anywhere. And I think one of the reasons 
why is the perceived lack of transparency in the negotiation of 
that matter. Whether or not that's correct, that's the 
perception.
    And I think the TPP is also being negotiated 
confidentially. And my belief is that because of the lack of 
transparency, TPP is quite likely to suffer the same fate as 
ACTA.
    And so here's the question: We have a leaked version of the 
TPP in May. And it seemed to indicate, if that was accurate, I 
don't know; I really should sit down in a closed session and 
find out that the U.S. is really seeking to transport 
enforcement of our IP laws. But I didn't find the exceptions 
and safeguard, like fair use, that we enjoy in this country.
    So the concern and question is whether, under the treaty, 
people would have the same freedom as they would in the United 
States vis-a-vis copyright.
    And going to the WIPO issue, and I know that you've taken 
an important role. And that's proper that the U.S. should play 
an important role with WIPO. The moral rights issue that has 
been extended does not appear to have the same kind of fair use 
exceptions that we find in U.S. Copyright Law. And as you're 
aware, it's quite common now, especially for young people, to 
do mashups and other manipulations of other documents that has 
generally been seen as protected under U.S. law.
    So here's the question: In both the TPP as well as the WIPO 
provisions, are we just exporting enforcement and not rights?
    And what can we do to make this a more transparent process? 
Because to work hard, and I know you do work hard, and have a 
measure that may have merit in some regards absolutely just 
blow up because of suspicion is really not a positive thing.
    Ms. Rea. Okay, thank you.
    I can tell you I have not seen the most recent TPP draft, 
because I do a great deal of reading. But that one didn't make 
it to the top of my pile.
    Ms. Lofgren. Okay.
    Ms. Rea. But I can tell you that we do look at rights, as 
well as enforcement. And as to the transparency issue, I can 
get back to my colleagues and get back to you on that, because 
I don't know why things mechanistically or procedurally were 
handled that way, if it's just tradition or in the past. Maybe 
we should reconsider or relook at it. I'm not familiar with why 
it's handled in a certain way. So maybe we can get back to you 
on that issue.
    Ms. Lofgren. Could we do that? And maybe I could make an 
appointment with you offline and talk about this issue. I know 
it's not entirely up to you. It's the trade representative. 
Maybe we should pull him into this discussion as well, because 
I think it's a severe concern in the United States and, really, 
internationally.
    Just a final note on the issue raised by Mr. Berman, I want 
to give him tremendous credit for his position, not only in 
this Committee, but also Foreign Affairs, for leading up an 
investigation on the WIPO. I just think it's an outrage. 
Really, it's an outrage that WIPO would be transferring 
material, violating the sanctions that we have, to North Korea 
and Iran.
    And this stuff, I mean, basically, it's funded by U.S. 
inventors. So, yes, you're right. It's the State Department, 
but I think if American inventors knew that their funding was 
being used to send firewalls and other material to Iran and to 
North Korea, they'd be furious. And I'd like to say I'm 
furious.
    So I hope that the PTO will be more vigorous publicly in 
the concern about this. Certainly, I intend to be. And Mr. 
Berman has shown tremendous leadership in this.
    But I think it's something that merits our loud objection 
and insistence on correction.
    With that, my time is up. And I yield back, Mr. Chairman.
    Mr. Goodlatte. I thank the gentlewoman.
    The gentlewoman from Florida, Ms. Adams, is recognized for 
5 minutes.
    Ms. Adams. Thank you, Mr. Chairman. I've been sitting here, 
and I've heard a lot about a lot of talking, significant 
progress.
    Can you expound on that just a little bit? Like what kind 
of progress?
    Ms. Rea. How about if I take it down to a very granular 
level?
    Ms. Adams. Okay.
    Ms. Rea. We have an IP attache in Guangzhou in southern 
China. And there was a U.S. rights-holder that had a lot of 
difficulties with somebody allegedly infringing his patents in 
China. And there's something that I've never been to, but it's 
huge and so I'd like to go there someday, it's called the 
Canton trade fair or trade show. It's like the biggest in the 
world. Perhaps Congressman Marino is aware of it.
    But it's huge. It's supposed to be a giant event.
    Ms. Adams. Can we kind of----
    Ms. Rea. An individual at a booth who actually was the 
culprit who was infringing a U.S. company, our IP attache from 
Guangzhou brought the U.S. rights-holder there, along with 
enforcement personnel, and that individual who was doing the 
infringement was kicked out of the Canton trade show.
    So that was one very granular detail on something that we 
did.
    Ms. Adams. So he was kicked out?
    Ms. Rea. Pardon me?
    Ms. Adams. He was kicked out?
    Ms. Rea. Yes.
    Ms. Adams. Any other enforcement action taken on this 
person or just allowed to leave?
    Ms. Rea. You know, I don't know about the follow-up.
    Ms. Adams. Okay.
    Ms. Rea. I just happened to hear it, because it had just 
happened when I had been there.
    Ms. Adams. All right. Well, that's what I'm trying to get 
to, is what kind of follow-up do we have. And I'd be interested 
in hearing that.
    You know, foreign countries have already used compulsory 
licensing in the pharmaceutical space, but what about clean 
energy technologies? Do you know if any foreign governments are 
raising this as an option instead of paying for environmental 
technologies?
    Ms. Rea. Off the top of my head, I'm not aware of anything 
in the green technology area, but I know that that's a very 
sensitive area at this time. Perhaps some of my colleagues back 
at the PTO are working on that. But that has----
    Ms. Adams. Can you get us the answer to that question?
    Ms. Rea. Yes. We'll get back to you.
    Ms. Adams. All countries that have signed onto the TRIPS 
Agreement have committed to not discriminate against any field 
of technology when it comes to patenting. What types of 
restrictions have you seen in some of these foreign markets 
that go directly against this commitment?
    Ms. Rea. I think that the compulsory license that was 
recently granted in India on the anti-cancer drug I think was 
anti-TRIPS type behavior. Some of the behaviors in patent 
offices, even with getting patents granted, the requirements, 
some of that could be considered to be anti-TRIPS, but I'm not 
certain.
    But I think the compulsory license, unfortunately, does not 
comply with the TRIPS Agreement. That's probably the most 
egregious that I could think about right now.
    Ms. Adams. In tying patent rights to domestic manufacture 
and actual use in country appears to be the new trick that 
countries are employing to nullify legally granted patent 
rights. Brazil and India are countries that require a patentee 
to make use of a patent in the country, basically forcing a 
domestic manufacturing requirement on foreign companies.
    The Chinese Patent Office has made a ``Made in China'' 
requirement, requiring inventions that have a tangential link--
I hate that word--to China to be filed in China, first, or risk 
losing patent protection.
    What is the next threat or legal trick that you are just 
starting to see coming up on the horizon?
    Ms. Rea. I can't think of anything new that I've seen 
recently. I think that we've just made progress on some well-
identified issues. I can't think of anything I've seen 
recently.
    Ms. Adams. And progress, can you give us some of that 
progress? You say you've made progress. What type of progress?
    Ms. Rea. Actually, if I can digress one moment to our IP 
attaches on the ground in China. They actually attend court 
hearings. They actually participate. They actually provide 
input. I think of it as handholding the U.S. innovator, if 
they're having difficulty in China.
    They will take them to agencies and navigate things. There 
have been positive outcomes.
    I can't name one specifically right now. I can't think of a 
name of a company, so I do apologize.
    Ms. Adams. Well, I like the fact that you're giving us some 
kind of, you know----
    Ms. Rea. Something tangible.
    Ms. Adams. Yes.
    Ms. Rea. Okay.
    Ms. Adams. Because, you know, we keep talking and talking 
and talking. What I'd like to hear is what you just said, is 
that you do have your attaches working with our patent-holders 
when the infringements happen in the courts in these other 
countries.
    And I yield back.
    Ms. Rea. Thank you.
    Mr. Goodlatte. I thank the gentlewoman.
    The gentlewoman from California, Ms. Waters, is recognized 
for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman and Members.
    A lot of the questions today have centered around the same 
kind of issues that I am concerned with. The scope of the IP 
theft in China imposes massive harm on U.S. companies and the 
U.S. economy. China is not only a worldwide leader in piracy, 
but it is also a worldwide leader in creating IP-related market 
barriers for foreign countries.
    Losses to IP-intensive industries from IP infringement in 
China was estimated at about $48 billion in 2009.
    And even though, Ms. Rea, you have indicated steps that are 
being taken, one of the reasons I suppose so many Members of 
this Committee are concerned about the IP theft is that China's 
reputation, not only in the IP area but in pharmaceuticals and 
other areas does not appear to have improved substantially, 
that we have pharmaceutical products that are still coming out 
that are fake. And I have been concerned for a long time about 
baby food that's coming out of China.
    So you're in a position where, you know, you're trying to 
explain the improvements that you're making, but because we 
hold such suspicion about China in so many other areas, it does 
not help you in talking about improvement.
    And while I appreciate the discussion that you had about 
having kicked out this particular business from the Canton 
Trade Fair, that's one instance of what appears to be an effort 
to clean this piracy up.
    I'm really looking for substantial public policy. I'm 
really, you know, wondering what our trade office is doing. And 
I'm looking for, I guess, significant changes or improvements 
or ways by which we can penalize.
    So aside from what you have described, can you think of 
anything else that would make us feel better about China and 
this IP theft?
    Ms. Rea. Congresswoman Waters, China is undergoing so much 
change right now, that this communication, education, and 
training that we provide to China I happen to think is 
invaluable. Right now, they are in the midst of a major change 
to their copyright law, as well as a major change to their 
trademark law.
    We are constantly providing input and discussing with them 
at different agencies, different levels, what changes we would 
like to see. Because especially in the area of counterfeiting, 
when it comes to trademarks, we want to make sure that the U.S. 
consumer and the U.S. innovator is adequately protected. I 
believe in the Trademark Act, they're in their third draft 
right now. They make substantive changes to their draft 
trademark law based on input that they have received from the 
United States and perhaps other countries.
    So those communications and talk and change actually are 
beneficial, because that's the foundation for how they're going 
to handle things.
    In terms of any substantive change, I don't have anything 
more specific than that at this time. And if we think of 
something, I will get back to you.
    Ms. Waters. Thank you very much. I yield back.
    Mr. Goodlatte. I thank the gentlewoman.
    And I have an additional question, which may prompt an 
additional question by the Ranking Member or Ms. Waters, if 
they would like to pursue further questions.
    Ms. Rea, the U.S. Government used to have in place a China 
case referral mechanism process, whereby companies could bring 
specific issues or cases to the Commerce Department. And after 
an interagency review, particularly egregious or unique cases 
would be raised to the Cabinet level for direct engagement with 
their Chinese counterparts.
    Do you think that a case referral mechanism process should 
be reestablished and possibly expanded beyond just China to 
include other key countries in Asia and Latin America as well?
    Ms. Rea. It's hard, Chairman Goodlatte, for me to address 
that, because we get so many of our stakeholders and so many 
individuals in our user community already come to the USPTO 
with what their issues are, and so we are already holding their 
banner and being their advocate. And we are working with 
countries such as China with the JCCT, the Joint Commission on 
Commerce and Trade. And we're going through these issues right 
now.
    I think that perhaps a mechanism such as that would be 
helpful. I just need a clearer idea of how it would operate, 
because right now I think that the business community might be 
frustrated with how business is oftentimes handled in countries 
such as China.
    But I think that we try and balance things out and get our 
user community, our stakeholders, what they need, so they can 
get efficient operation of business.
    So I'm not familiar with the earlier program that the U.S. 
Government had. And I can't envision how it would operate. If 
it goes up to the Cabinet level, they're pretty busy right now.
    Mr. Goodlatte. I have no doubt they're busy. But certainly 
raising trade issues to the highest level possible would be, 
certainly, an important undertaking for job creation in the 
United States.
    And I would ask that you take that back and discuss that 
with Director Kappos. And maybe you could respond or he could 
respond, either one, to the Committee and let us know whether 
you think this is something that you could recommend that the 
Administration take to a higher level.
    Ms. Rea. We would be pleased to do that. Thank you.
    Mr. Goodlatte. Thank you.
    Does the gentleman from North Carolina have any additional 
questions?
    Mr. Watt. No, Mr. Chairman. I appreciate it.
    Ms. Rea. Thank you.
    Mr. Goodlatte. I thank you.
    And, Ms. Rea, this has been a very helpful hearing, and we 
appreciate your participation today. And we thank you very much 
for that.
    Without objection, all Members will have 5 legislative days 
to submit to the Chair additional written questions for the 
witness, which we will forward and ask the witness to respond 
as promptly as she can, so that her answers may be made a part 
of the record.
    And without objection, all Members will have 5 legislative 
days to submit any additional materials for inclusion in the 
record.
    And with that, I would like to, again, thank Deputy 
Director Rea. And this hearing is adjourned.
    [Whereupon, at 11:15 a.m., the Subcommittee was adjourned.]









                            A P P E N D I X

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               Material Submitted for the Hearing Record

     Prepared Statement of the Biotechnology Industry Organization



                                 
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