# Presentation: 371853

## EABC Statement to PCAST
“Barriers to Trans-Atlantic R&D Cooperation”

October 5, 2004

Michael C. Maibach
President & CEO
European-American Business Council

***“******Barriers to Trans-Atlantic R&D Cooperation”***
***October 5, 2004***
***Michael C. Maibach***
***President & CEO***
***European-American Business Council***

## EABC Member Companies  European-American Business Council ~ 2004 

| Adobe Systems
Agilent Technologies
Airbus 
Albemarle
Astra Zeneca
Boeing
BP 
BT
Cisco Systems
Covington & Burling
Credit Industriel et Commercial
DaimlerChrysler
Dell
Deloitte & Touché
Deutsche Telekom | Discovery Communications
EDS
HP
IBM
Intel
Kodak
KPMG
Lyondell
Microsoft
Nokia
Nortel Networks
Oracle
Pernod Ricard
Pfizer | Philips Electronics
Pirelli
PwC	
SAP
Telecom Italia
Thales	
Unilever
VeriSign
Verizon
Vodafone
Volkswagen	
Volvo	
Xerox                   10/01/04
----------------------------------------------
EU: 17 + US: 25 Firms |
| --- | --- | --- |

## The EABC Strategic Vision”Open Atlantic”

## Open Atlantic:Open, Competitive National EnvironmentsProduce 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***

## Trans-Atlantic DisconnectsUndermine 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 Brief CasesAreas That May Merit Additional Study

***EU: Clash of IP & Competition Policies***
***EU-US: Patent System Discontinuities***
***EU: R&D Program Intellectual Property Controls***
***US: Post-9/11 Visa Process Delays***
***US: H-1B Visa – Proposed US PhD Exemption***
***EU-US: Different Engine Standards***

## 1. EU IP & Competition PolicyImpact on Joint Ventures

***US firm licensed product & process IP to a EU-based competitor.***
***Goal: add supply capacity within that company’s 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.***

## 2. Trans-AtlanticPatent 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 R&D*

## 3. EU R&D ContractsFramework Program 6 (FP6)

*EU has 50-50 matching funds “Framework Program” R&D 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.*

## 4. Trans-AtlanticVisa 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 sponsor’s 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 R&D team would incur the loss of his work for an unknown period.***

## 5. In-sourcing:US H-1B Visa Reform

*US H-1B cap ranged from 65,000 – 195,000 from 1997 - today.*
***Today it is 65,000***
*For the 6**th** 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.    *

## 6. Trans-Atlantic Engine Standards

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

## The EABC Strategic Vision”Open Atlantic”