Statement on Proposed Legislation To Improve Industrial Productivity and Competitiveness

September 12, 1983

Today I am proposing legislation entitled the ``National Productivity and Innovation Act of 1983.'' When enacted, the bill will modify antitrust, patent, and copyright laws in a way that will greatly enhance this country's productivity and the ability of U.S. industry to compete in world markets.

Improving domestic industrial productivity and competitiveness will depend largely on our ability to create and develop new technologies. Technological advances provide our economy with the means to produce new or improved goods and services at lower cost than those already on the market. Over the last 80 years, the development of new technologies accounted for almost half of the growth in our real per capita income. New technology creates jobs and gives this country a competitive edge. The U.S. computer industry, for example, directly provides jobs for about 830,000 people and is a leader in world markets.

New technologies are seldom created by luck; they are instead the result of private and public sector investments of time, money, and effort. With this in mind, we propose to increase Federal funding of research and development (R. & D.) by 17 percent to $47 billion in 1984 and to encourage private sector R. & D. by improving the economic and legal climate for such efforts.

A number of things have already been done to encourage private sector efforts. The Economic Recovery Tax Act of 1981, for example, provides a 25-percent tax credit to firms which invest in additional R. & D. And by reducing inflation and interest rates, our economic program has lowered substantially the cost of conducting research.

When enacted, the National Productivity and Innovation Act will improve the legal climate for technological advancement by clarifying and modifying the Federal antitrust and intellectual property laws. Those laws have a substantial effect on private investment in R. & D. The antitrust laws are designed to protect consumers from anticompetitive conduct. Yet we must recognize that while vigorous competition among independent businesses generally serves the economy best, in some areas, like the creation and development of technology, cooperation is necessary if American industry is to compete internationally. Similarly, the intellectual property laws, such as those dealing with patents and copyrights, encourage competition by providing individuals with exclusive rights to their technology.

My proposed legislation will ensure that the antitrust and intellectual property laws are fully compatible with efficient creation and development of technology, while, at the same time, maintaining strong safeguards against anticompetitive behavior.

Title II of the bill will ensure that antitrust laws do not unnecessarily inhibit the formation of joint R. & D. ventures. Joint ventures often may be necessary to lower the risk and cost associated with R. & D. So long as these ventures do not facilitate price fixing or reduce innovation, such ventures should not be considered a violation of antitrust laws. Nevertheless, the risk remains that some courts may overlook the beneficial aspects of joint R. & D. This risk is unnecessarily magnified by the triple damages awarded to an injured private party who wins an antitrust damage suit.

Title II will reduce the adverse deterrent effect that triple damages have on procompetitive joint R. & D. ventures. The title mandates that the courts may not find a joint R. & D. venture in violation of the antitrust laws without first considering its procompetitive benefits. In addition, title II provides that a joint R. & D. venture that has been fully disclosed to the Department of Justice and the Federal Trade Commission found in violation of antitrust laws may be sued only for the actual damage, plus prejudgment interest, caused by its conduct.

Title III will ensure that antitrust laws encourage procompetitive intellectual property licensing, which greatly enhances our economy's ability to create and develop technology. Intellectual property owners often cannot obtain their legitimate reward from R. & D. unless they license their technology to others. Such licensing enables intellectual property owners to use the superior ability of other enterprises in the marketing of their technology. This can be particularly important for small businesses that do not have sufficient resources to develop the full range of applications of a new technology discovered through their research efforts.

Recognizing the significance of licensing, we have designed title III to ensure intellectual property owners the fruits of their ingenuity. First, the title prohibits courts from condemning an intellectual property licensing arrangement without first considering its procompetitive benefits. Second, the title eliminates the potential of triple damage liability under the antitrust laws for intellectual property licensing. Although those who suffer antitrust injury as a result of licensing could still sue, title III would minimize the deterrence that antitrust laws currently have on beneficial licensing.

Similarly, title IV encourages the procompetitive use of intellectual property. Courts will be able to refuse to enforce a valid patent or copyright because of misuse only after considering the economic ramifications.

Title V of the act increases Federal protection for process patents. Currently, if someone violates a process patent outside the country and then imports the resulting product into the United States, the importer is not guilty of violating patent law. Our bill closes this loophole, permitting the owners of process patents to obtain their rightful reward by preventing such unauthorized use of their technology.

This legislation will, if enacted, stimulate the creation and development of new technology, increase this country's productivity, and enable our industries to compete more effectively in world markets, while continuing to protect the interests of American consumers. I strongly urge Congress to move forward on this proposed legislation and, by doing so, encourage innovation and increase the employment opportunities and standard of living for all Americans.