ALLIED CORP. SPENT 13 YEARS and more than $75 million developing a metals-manufacturing process. But when 11 German and Japanese companies copied Allied's process and exported their goods here, the patent laws were useless to stop them.
Infringement of intellectual property rights is costing U.S. businesses more than 130,000 jobs and $5.5 billion in sales each year, due in part to a gaping patent-law loophole.U.S. law protects unique manufacturing processes -- but only in America. Offshore firms can copy patented processes and then sell their goods here. The only recourse is to drag offenders before the International Trade Commission (ITC), a costly option that provides no money damages. "Moreover," says Yale Law School professor Stephen L. Carter, "an unfair trade procedure can end up being highly political. A strong patent law offers far better protection than the ITC."
The problem is acute now because process patents have become the backbone of many of this country's strongest industries. It used to be that the most noteworthy inventions were products -- say, a television or a photocopier. But now the process developed for making a product often is the crucial edge in such businesses as chemicals, computers, fiber optics, and strategic materials.
In biotechnology, almost all competition is based on process patents. Companies device new methods to replicate products found in nature, such as interferon and human growth hormone. "Processes are, in effect, the only products of many of the companies," says Al Halluin, general patent and trademark counsel for Cetus Corp. "Take insulin: what companies are working on now are new ways of producing it."
Aid may be in sight. Last year, a bill passed in the House and the Senate Judiciary Committees would make it illegal to import, sell, or use a product made offshore by a pirated process. The measure has a good chance of passage in 1986.