Another Giant Sucking Sound: Lost Royalties, Licensing Fees American Firms Lose $60 Billion Annually to Patent Pirates

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BUOYED by his NAFTA victory, President Clinton seeks to project United States leadership in the international economic arena. But Asian and European nations want Washington to soften its stand against unfair traders in the GATT world trade talks. With the pirating of American intellectual property causing a massive transfer of jobs and wealth abroad, the administration needs to link GATT with a tough new strategy to combat pirating and maintain US competitiveness in high-tech and service industries, the foundation of our 21st-century economy.

The Commerce Department and the Office of the US Trade Representative report that American firms lose $60 billion in business annually to foreign companies that copy technologies covered by US and international patents and copyrights without paying royalties or licensing fees. That surpasses last year's $47 billion trade deficit with Japan and doubles the $30 billion to be generated by the administration's 4 cent per gallon fuels tax.

The International Intellectual Property Alliance, a Washington, D.C.-based watchdog group that follows trade issues, finds that computers and software, film and sound cassettes, books, manufactured goods, and pharmaceuticals developed and produced by US firms are favorite targets of patent and copyright pirates.

Director of Central Intelligence James Woolsey and House Intelligence Committee Chairman Dan Glickman (D) of Kansas have suggested that Washington take new steps - which could include targeting foreign companies - to curb this growing form of economic warfare. Trade Representative Kantor has placed several nations on a "priority watch list" for denying US firms equitable market access and for failing to protect intellectual property rights. But the White House has yet to unveil an aggressive strategy to rein in the pirates.

The issue is complicated by trading partners who turn a blind eye in order to shield influential firms, including some Fortune International 500 companies, that are engaged in pirating. GATT negotiators from several nations are demanding that Washington roll back the "Special 301" provision of the 1988 Omnibus Trade and Competitiveness Act, passed specifically by Congress for the purpose of sanctioning nations that allow pirating and other unfair trading practices to flourish. Antipirating measures under discussion by GATT experts lack the stiff penalties that can be a serious deterrent to offenders.

With many pirate companies hiring lawyers and lobbyists who have White House and Capitol Hill experience to make their case in Washington, the administration is under pressure to trade off usage of the Special 301 provision in order to obtain foreign concessions on agriculture subsidies and trade in traditional industries such as machinery, steel, and furniture before Mr. Clinton's authority to conclude the treaty expires on Dec. …