EABC Statement to PCAST

1

• EABC Statement to PCAST
• Barriers to Trans-Atlantic RD Cooperation
• October 5, 2004
• Michael C. Maibach
• President CEO
• European-American Business Council

2
EABC Member Companies European-American
Business Council 2004
3
The EABC Strategic VisionOpen Atlantic
4
Open AtlanticOpen, Competitive National
EnvironmentsProduce World-Class Innovation
Environments

• Globalization High-Impact High-Opportunity
• Driving Everything We Ignore It At Our Peril
• An Open Atlantic Is the Way Forward
• Open Trade - largely a reality
• Open Investment expand to all sectors e.g.
  airlines
• Open Standards to drive economies of scale
  spur innovation
• Open Regulatory MRAs - Tested once, accepted
  everywhere
• E.g. engines, drugs, chemicals, food consumer
  products
• Next Trans-Atlantic Global Professional MRAs
  
• To advance digital exports - health care,
  services education
• All Impact Technology Investment Cooperation

5
Trans-Atlantic DisconnectsUndermine
Trans-Atlantic Collaboration

• Trans-Atlantic trade disputes (beef bananas vs.
  mutual interests)
• Trans-Atlantic threat assessments (Supply chain
  security mgmt)
• Trans-Atlantic investment restrictions (e.g. US
  airlines, networks)
• Non-Harmonized IP protection (global standards
  needed)
• Disconnected anti-trust policies cases (GE,
  Microsoft)
• Divergent regulatory philosophies regimes
  (REACH Directive)
• Napoleonic Code vs. Common Law approaches

6
6 Brief CasesAreas That May Merit Additional
Study

• EU Clash of IP Competition Policies
• EU-US Patent System Discontinuities
• EU RD Program Intellectual Property Controls
• US Post-9/11 Visa Process Delays
• US H-1B Visa Proposed US PhD Exemption
• EU-US Different Engine Standards

7
1. EU IP Competition PolicyImpact on Joint
Ventures

• US firm licensed product process IP to a
  EU-based competitor.
• Goal add supply capacity within that companys
  national borders.
• Contract stipulated that the EU company would not
  produce or sell the licensed product outside of
  their national borders.
• Once production began, EU company sued their US
  partner on anti-trust grounds. EU court
  invalidated provisions of the license that
  precluded EU-wide manufacturing sales.
• Result the US company in effect helped create a
  pan-European competitor where none existed prior
  to the signing of the license.
• The US company now reluctant to enter into other
  Trans-Atlantic JVs.

8
2. Trans-AtlanticPatent Disconnect

• EU US Patent Processes Are Out of Sync
• US Uses First to Invent
• EU Uses First to File
• Disconnects length of protection patent
  application timing issues
• EU has 25 national patent systems
• Lack of Patent Harmonization Can Have
  Consequences
• May affect when where firms file
• Can increase company IP costs, e.g. EU25 25
  potential filings
• May increase litigation frequency cost.
• May discourages Trans-Atlantic joint RD

9
3. EU RD ContractsFramework Program 6 (FP6)

• EU has 50-50 matching funds Framework Program
  RD projects.
• March 2003 EU replaced FP5 rules with FP6
  rules.
• Requires 60-day notice before FP6 program IP can
  be transferred out of the EU.
• EU can then decide to deny the IP transfer within
  this 60-day period.
• EU FP6 rule envisions that companies can will
  use IP only within EU borders.
• The reality is that global companies
• Transfer IP quickly within worldwide operations
• Cross-license IP to other firms to avoid
  litigation to keep cycles of innovation
  spinning, e.g. the high-tech industry is heavily
  cross-licensed.
• Cross-licensing agreements are confidential
  details cannot be shared with government.
• Suggested solution
• Require general IP transfer pre-notification when
  companies apply to participate in an FP6 program.
• EU would at that time decide whether that company
  should be allowed to work on a given project.

10
4. Trans-AtlanticVisa Processes

• Post-9/11 World has impacted the US visa process.
  Example
• US firm funded Chemistry PhD of UK national at a
  US university.
• Chemist graduated in early 2001 obtained an
  H-1B visa.
• He joined his sponsors US research team.
• Now he wishes to attend a wedding in the UK.
• US visa procedures have changed since he got his
  H-1B.
• US re-entry process could take 2-4 weeks, or even
  be denied.
• Rather than do additional screening now, it would
  be done during his trip.
• US RD team would incur the loss of his work for
  an unknown period.

11
5. In-sourcingUS H-1B Visa Reform

• US H-1B cap ranged from 65,000 195,000 from
  1997 - today.
• Today it is 65,000
• For the 6th time since 1997 - US H-1B Visas have
  hit their cap
• DHS just announced that on October 1st the 65,000
  cap was reached on the first day of filings.
• Hundreds of university students (many from the
  EU) will complete their US-paid education and be
  asked to leave our country.
• This is a form of out-sourcing talent.
• Reform Staple a Green Card to all US PhD
  diplomas in science, math, engineering
  exempting them from H-1B caps entirely.

12
6. Trans-Atlantic Engine Standards

• EU US have different diesel engine standards
• Emissions
• Safety
• Result
• Dual emission RD programs
• Dual safety RD programs
• Dual testing programs
• Loss of economies of scale
• Thus, loss of exports
• And lost opportunity costs.

13
The EABC Strategic VisionOpen Atlantic