Today, U.S. Deputy Secretary of Commerce Bruce Andrews delivered remarks at a conference hosted by the United States Patent and Trademark Office (USPTO) and George Mason University’s Center for the Protection of Intellectual Property. The Department of Commerce is committed to promoting the commercialization of technologies through licensing and promoting licensing of U.S. technologies overseas, including to under-licensed economies such as China.

During his remarks, Deputy Secretary Andrews underscored the idea that licensing advances innovation and promotes job creation while accounting for a significant portion of U.S. trade. Since 2009, technology exports have exceeded $100 billion annually, reaching $130 billion in 2014.

Deputy Secretary Andrews stated the Trans-Pacific Partnership is a critical measure to expand U.S. services exports, citing a White House Council of Economic Advisors report that showed royalty payments to U.S. companies increased by an average of 15 percent whenever a country enacts stronger IP laws.

Remarks as Prepared for Delivery

Thank you for that warm welcome. I want to begin by thanking my good friend Michelle Lee, our Undersecretary for Intellectual Property, for that kind introduction. Both Secretary Pritzker and I agree that we are so fortunate to have Michelle leading the U.S. Patent and Trademark Office. I also want to thank the USPTO and George Mason University’s Center for the Protection of Intellectual Property for bringing together a diverse group of business leaders, policymakers, and academics. 

Today’s conference is entitled the Economic Contributions of Technology Licensing. But I would argue it is about far more than that. It’s about the ability of the United States to compete in the 21st century.

Our Founding Fathers saw innovation and scientific discovery as the highest callings of a free and democratic people. So when they enshrined the Progress Clause into the Constitution and secured commercial rights for authors and inventors, they did more than pave the way for the world’s most robust IP laws. They also built a powerful incentive for innovation into our economy. President Lincoln said it best when he credited the patent system with “adding the fuel of interest to the fire of genius.”

The practice of licensing patented technologies dates all the way back to the 1840s. It was then that a patent officer named Charles Fleischmann helped his friend demonstrate his patented technology to an Austro-Hungarian prince. That friend was Samuel Morse. That technology was the telegraph. And that license led to the first installation of the U.S.-based telegraph system in Europe.

During the industrial revolution, inventors further embraced licensing to commercialize their discoveries. Charles Goodyear, for example, never actually manufactured tires. He patented the process for vulcanizing rubber and licensed it to a company that made the modern tire available to the world. Likewise, Thomas Edison licensed his patent for the incandescent lightbulb to several entities. Eventually, they merged into the iconic company we know today as General Electric.

Today, licensing is ubiquitous in every field. It allows businesses to innovate in the marketplace, and inventors to focus on their next big idea. It delivers investment returns on the research done on the campuses of our universities, in the labs of our private research facilities, and in agencies throughout our federal government.

Every year, research at our renowned universities leads to newly-patented technologies. Licensing those patents provide our universities with revenue they can reinvest in their programs and supplies the private sector with new technologies to introduce into the marketplace. Between 1997 and 2007, university licensing added nearly a half a trillion dollars to U.S. economic output. For example, the 156 drugs licensed by our universities represent a fifth of the most clinically-significant drugs approved by the FDA in the past thirty years.

One advantage of our patent system is that businesses constantly find new and novel ways to commercialize technologies. Take Protein Design Lab, for example. In the late 1990s, this research firm became a multibillion dollar enterprise by licensing its monoclonal antibody technology. Doing so led to the introduction of new, life-saving medications like Humira and Herceptin into the marketplace. It’s incredible to think that as recently as 2013, Protein Design Lab’s patent underpinned three of the industry’s top selling drugs. Or take my former employer, Ford Motor Company.  Ford recently made nearly 650 patents related to electric vehicles available for licensing. Their hope is to accelerate innovation across the automobile industry.

Of course, today I’m most interested in talking about the Department of Commerce. Patent licensing is one of the primary ways that we – and agencies throughout the federal government – promote private sector innovation. Everyone here knows why government-funded research is vital to our economy: it promotes innovation long before there’s a viable private sector interest. From finding new cures to improving energy efficiency, the public has a profound interest in supporting scientific exploration. And when government-backed research yields new patents, licensing allows for their commercialization by the private sector – benefiting all of us.

At the Department of Commerce, we license patents awarded to our scientists at our National Institute of Standards and Technology (or NIST), National Oceans and Atmospheric Administration (or NOAA), and National Telecommunications Information Administration (or NTIA). 

For example, NIST has recently licensed new patents for preventing cyber-attacks, identifying methane leaks, and improving detection of trace explosives.

At NOAA, we recently licensed a downloadable flat-screen version of our Science-On-a-Sphere technology – giving the private sector access to a revolutionary new way to explore climate, plate tectonics and other trends in Earth sciences.

In 2011, President Obama issued an executive order directing federal agencies to license more of their patents – and the Department of Commerce to oversee this effort. Each year, NIST reports to Congress on how the transfer of technology from government to industry grows our economy. For example, Department of Defense’s licenses generated private sector sales of more than $36 billion between 2000 and 2011.And DoD isn’t even the top supplier of licensed patents in the federal government: it’s actually the Department of Agriculture. Later, some of our colleagues from USDA will share some of the patents they license each year –from methods for breeding plants to testing for food safety.

Clearly, our patent and licensing system contributed to our rise as the world’s most innovative economy. And at the Department of Commerce, we see it as vital to our nation’s economic future. Let me explain why. Today, the U.S. exports more technology than ever before. Since 2009, our annual technology exports have totaled over $100 billion. In 2014, that jumped to $130 billion. That’s an extraordinary number; it accounts for 45 percent of all licensing-related exports across all OECD countries. No other nation comes close. But if we want to remain the world leader in innovation, we must strengthen IP rights for American innovators in today’s interconnected, globalized economy.

One of the greatest challenges we face is competing in under-licensed economies, especially in China. We know that China continues to grant low quality patents, that the Chinese court system often awards little to no damages for infringement and that IP theft and underpayment of royalties for licensed works remains a serious problem.

These are some of the issues we’ve raised through the U.S.-China Joint Commission on Commerce and Trade (or JCCT) – our bilateral trade forum with the Chinese government. There’s been notable progress in recent years. In 2014, China agreed to – and I quote – “treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights.” The Chinese government also recognized the freedom of private enterprises to negotiate their own licensing terms – a clear departure from the compulsory agreements often forced upon companies in return for market access. We expect that as infrastructure and manufacturing contribute less to the Chinese economy, the growth of China’s services and technology industries may spur the adoption of stronger IP laws.  We continue to provide feedback to China on potential reforms. And, we’re working with Chinese experts in IP to better quantify the economic costs of infringement. That’s one of the USPTO’s main objectives for this July’s conference with Renmin University in Beijing.

In addition to advocating for internal reforms, we must look outside the Chinese economy and work towards creating a truly global licensing regime. Securing the passage of the Trans-Pacific Partnership is a great place to start. Many of you provided valuable insight during negotiations over TPP’s intellectual property provisions. Others helped pass Trade Promotion Authority from Congress last summer. So I know this group is more than familiar with TPP’s benefits for America’s patent holders.

According to the White House Council of Economic Advisors, royalty payments to U.S. companies increase by an average of 15 percent whenever a country enacts stronger IP laws. So just imagine the opportunities made possible when we pass TPP into law and give America’s patent holders access to markets that represent 40 percent of global GDP.

Anyone working in the licensing space knows that the innovations unleashed by the Internet have spurred huge growth in digital and services-related trade. And you know that our position as the global leader in services exports – from FinTech to cloud computing to professional services – is indisputably linked to our robust patent licensing regime. That’s why we need the voices of America’s patent holders and licensors to make a strong case for TPP. Too often, our debates over trade dwell on the past instead of what we must do to succeed in the future. We know that globalization is increasing competition for our companies, just as digitization changes how our people work. Yet these forces will continue at full speed whether we embrace new trade agreements or we reject them. The reality is that trade agreements did not create these forces. Trade agreements are how we shape these forces. As America’s patent holders and licensors, you have an important perspective to offer. You can share how greater access to new markets will mean greater returns on American innovation, more investment in our economy, and more high-paying jobs for our people. Your voice is essential if we are to see TPP signed into law.

TPP is an opportunity to advance our vision for a truly global licensing framework – One that makes it easier for a research university in Wisconsin to transfer technology to a manufacturer in Japan, or an inventor in Virginia to license patents not just to companies across the country but also around the world. One that encourages a more collaborative, global research environment. And one that promotes the sharing of ideas, and ultimately, shared prosperity. 

Today’s program is exactly the kind of dialogue we need – one that brings us together as policymakers, as business leaders, as economists and academics. By encouraging the licensing and commercialization of patented technologies around the world, together we can set the stage for another century of American innovation. Together, we can write the rules of the 21st century global economy to both promote – and protect – innovation. And together, we can secure a more productive economy and prosperous future for the American people.