 and wanted to get started. I want to first of all say thank you all for joining us this morning. Mr. McCoy is on the way. There's all kinds of traffic problems. We've got a crash on the northern Bellway and a crash in the southern Bellway and a red line, of course, is doing the red line thing. So we're slightly delayed in getting started. And he will be here just shortly. But it's not fair to punish the timely for those that can't get here. So I thought we would get started and we've got a very interesting and ample program that we want to review this morning with you. So I'll just say thank you. Thank you all for coming. Just to tell you about my personal professional interests these days and focus, I've become obsessed with the interface between the public and private sector in accomplishing good things in the world. There was a fascinating study that was done about eight years ago now by the World Bank. And the World Bank study was trying to explain what counts for wealth of nations. Is the wealth of a nation determined by the natural resources, the quality of the fishing stocks, the mineral resources under the ground, the climate and agricultural capacities? Was it natural resources? Was it caused by man-made resources, factories, infrastructure, housing stock? Was it a product of human imagination? Or the third category was called intangible wealth, intangible resources, excuse me. And that was things like the sense of legitimacy of government, the protection of intellectual property, the quality of education, the quality of a legal system and a sense of fairness in society, the sense of common purpose among citizens. So this intangible resource that was drawn and overwhelmingly, part of it was a bit of an artifice of the analytic technique they used, but overwhelmingly, the primary cause or source of wealth in the country were these intangible resources. It wasn't the physical or the man-made, it was these intangible resources. And if you think about it, all of those things, the quality, the stability of a currency, the quality of an education system, the legitimacy of courts, all of these things are the product of good government. And where there's good governance, you tend to find wealth and point to places like Singapore or Finland or Norway, where there's quality governance and you find growing wealth. The long list of places where there's poor government and poverty is a high, high correlation. So I'm very interested in this question of how do we promote better lives for people through promoting better governance, better quality government. Now, we're going to explore something really interesting today. And we've got three colleagues that are going to be sharing us insights into innovation. Innovation as business people, trying to make them money. But in every one of these instances, they're also improving the quality of life, the quality of human condition through this. Exactly the role of government. This is what government wants. Now we've had a project here for the last couple of years on the relationship of the profit-seeking private sector to the development agenda. Now that's a little bit of an anomaly in Washington because in Washington, development is if you love AID, you're a Democrat and you love AID and you champion AID. And if you're a Republican, you hate USAID and you criticize it any chance you can. So sterile, pointless debate. What we're all after is people having better lives, stronger and healthier communities, healthier societies. That's something both liberals and conservatives want, maybe for different motivations, but they both want that. It's something that the business community wants. It's something that government wants. We all want to see this grow. So the government has a very keen and I think real interest in helping the private sector make money. Now you wouldn't find that in our narrative in Washington. That is not part of the narrative of Washington. And it's kind of a we-them adversarial sort of relationship, but we need to change the terms of this debate. If we really want to have healthier communities because for security reasons, safety reasons, or humanitarian reasons, it's going to be a better world. It's in our interest to help the private sector champion the improvement of the human condition. And you're going to hear three examples today. Three really interesting examples today of how this is happening. So I think this is a part of an important effort. This is not just about looking at what one or two or three companies is doing for their own bottom line. It's what we're doing to try to create stronger, healthier communities on a global basis. It's good for America and it's good for the world. And we're going to have a chance to explore some of that today. My thanks to Gilead for making possible this event today, but also for the work that they're doing in championing some of these very innovative ideas. Scott, why don't I ask you to come on up and let's get this started for real. My role here is ornamental. And this is Scott Miller and he's going to get us kicked off. Scott, take it over. Thanks everybody for coming. Well, good morning. Let me add my welcome to CSIS. And I would like to welcome all those who are viewing this online on our webcast. We usually have about as many people online as we do in the audience. So that's a good thing. My name's Scott Miller. I'm the William Scholl Chair in the International Business here at CSIS. And it's my pleasure to welcome you to CSIS's facility and to the Commercial Innovation Conference. In Washington, many people, when you use the term innovation, think about product invention, the latest gadget, the latest product. And certainly that's a very important part of innovation with something we're all familiar with and use all the time. However, innovation is much deeper and broader and all kinds of things happen in the production and distribution process that are true innovation and yet often missed by the policy community and often missed by those of us who are consumers or beneficiaries of the technologies. Many of us probably could theorize that there's a lot of innovation in the production process. And it's often unseen. Production innovation is very deep and broad. The most innovative companies do things that make products less expensive, more reliable, better functioning. There's tremendous amount of work that goes on after the product is invented. And think about your own mobile phones. You probably got a mobile phone if you're a Washington type, sometime in the last 20 years, maybe you were an early adopter and you had one of the Gordon Gekko shoe size, Maxwell Smart cellular phones from the great company Motorola. And you look at the level of commercial innovation that's happened in that industry since then and the amount of improvement that's taken place. You can see that. The innovation that's unseen often is innovation in distribution channels. What companies have to do to reach consumers and get adoption of these amazing products. That's really today's conference. Today's conference is about innovative products and they had an important distinction. They're innovative products that required additional further commercial innovation in order to succeed with the consumers they were intended for all along. I'll keep my remarks to sort of what to watch for. And three things that ask you to observe as the presentations go on today. First is that know how matters. That what you'll find in each of the three case studies is that the organizations are quite sophisticated and disciplined and that they experience and represent deep knowledge of both the subject matter and their consumers or patients. There's tremendous amount of energy and devoted way beyond the invention of the chemical or the invention of the device that makes these innovation stories a success. The second theme that's true of all three case studies is that the existing business model for distributing or getting market acceptance of the products was unacceptable. It was inadequate in some way. And that for me is an interesting component. If you look at innovators will tell you that failure is a very important part of success. And one of the ways that things fail is when you have a product that is actually successful meets consumers needs is appealing in many ways. And yet the pieces in place required to get it to the consumer are not, either don't exist or don't allow for full penetration to the market. So this notion of dealing with an, having an innovative successful product and then dealing with an inadequate business model required the invention of the business model which I think you'll find interesting. The third thing is the public policy matters. Public policy in all three of these cases can be either a barrier or a catalyst to commercial innovation. With that as sort of preview of the conference I would like to welcome our first speaker who is gonna establish the policy context. Stan McCoy is assistant US Trade Representative for International Intellectual Property and Innovation from the office of US Trade Representative. Stan has just joined us. We had a, this is not an infrastructure conference but the infrastructure mattered in this case. I will tell you just as an aside I was driving into the building and on the 645 AM traffic report there was an accident on the Beltway in Maryland, an accident on the Beltway in Virginia and there was single tracking on the red line. So in other words, Wednesday. So, in any case, we're delighted Stan could join us. Stan is the chief policy advisor to the United States Trade Representative and the administration agencies on intellectual property and trade issues that is responsible for developing and implementing the US trade policy on intellectual property. The USCR office that Stan manages also coordinates innovation policy trade issues such as those related to pharmaceuticals and medical technology and the intersection between IP trade rules and competition policy. Stan's a long practitioner in this field is viewed as a real expert by those of us who get into the weeds of intellectual property and innovation and we're delighted to welcome him here today. Stan McCoy. Thanks a lot for welcoming me Scott and I'm glad to have the opportunity to speak with all of you and delighted to be able to make a dramatic entrance thanks to the Metro system. It's always keeps us honest on our toes here in Washington. The topic today of commercial innovation is near and dear to the heart of policymakers in Washington. Innovation is that stuff internationally that every economy wants to say that they've got and that they're good at promoting and we're in the fortunate position in the United States of being able to speak truthfully when we say that. But we don't take it for granted. The administration has said many times that America's future economic growth and international competitiveness depends on our continued capacity to innovate. We create jobs and industries for the future by doing what we do best in the United States investing in the creativity and innovation of our people. The president has said that to win the future we must out innovate, out educate and out build the rest of the world. And we must also take responsibility for some of the circumstances that we create for our economy here at home including our deficit, the need to invest in making America stronger, the need to invest in infrastructure. For example, Scott to pick up on your theme and reforming how our government operates so that we can focus on promoting economic growth and preparing for the challenges of the 21st century. So the part of that strategy that I work on trade policy lives in a broader context that I wanna talk about for a couple of minutes because I think if you look at the presentations that we're looking forward to this morning they speak to not only the sort of trade and regulatory context but the broader context in which we can try to catalyze commercial innovation. The administration's innovation strategy is really a pyramid structure and the bottom of that pyramid are the building blocks of American innovation which consists of educating Americans with 21st century skills and creating a world-class workforce, strengthening and broadening American leadership in fundamental research, building a leading physical infrastructure and developing an advanced information technology ecosystem. On top of that base layer of the pyramid you have a number of steps that the administration is taking broadly to try to promote market-based innovation. They include accelerating business innovation with the R&E tax credit, promoting investments in ingenuity through effective intellectual property policy and patent reforms, encouraging high growth and innovation-based entrepreneurship and promoting innovative open and competitive markets at home and around the world in the global economy that we do business in. We're fond of saying at the Office of the U.S. Trade Representative that 95% of the world's consumers live outside the borders of the United States. So that last point about competitive markets in the global marketplace is particularly important. On top of that layer of the pyramid is an additional set of priorities for catalyzing breakthroughs on particular national priorities. Those include unleashing clean energy revolution, accelerating biotechnology, nanotechnology and advanced manufacturing, developing breakthroughs in space applications, breakthroughs in educational and healthcare technologies and so on. So it's on top of those foundations of a strong market that you can then move on to try to catalyze particular priority areas. And of course, it's on top of all of that underlying government policy that we then see the opportunities for the private sector to engage in the kind of innovation that we're gonna talk about here today. The administration is determined to ensure that U.S. trade policy plays its part in helping American companies and workers compete in global markets and create the underlying conditions for innovation and competition to the benefit of businesses and consumers worldwide. That's why we're trying to tackle some of the problems that increasingly affect trade in the 21st century. For example, we're seeking new disciplines in our ongoing trade negotiations to address trade distortions and unfair competition associated with the increasing engagement of large state-owned enterprises in international trade. We're also actively combating localization barriers to trade. Those are measures that are designed to protect, favor or stimulate domestic industries, service providers or intellectual property at the expense of goods, services and IP from other countries. The use of those kinds of measures has dramatically increased in the last few years, especially in some of the world's largest and fastest growing markets. Localization barriers to trade present significant market access obstacles and can block or inhibit U.S. exports in many key markets. They include things like requiring goods to be produced locally, providing preferences for the purchase of domestically manufactured or produced goods and services and requiring firms to transfer technology in order to trade in a foreign market. Those kinds of measures are, in our view, trade-distortive. They create an uneven playing field and they make it harder to engage in commercial innovation. We also want to create some of the conditions in terms of the intellectual property system that will support innovation for both producers and consumers alike. IP is a key source of American jobs and competitiveness and prosperity. According to the Department of Commerce, IP-intensive industries in 2010 directly accounted for 27.1 million American jobs and approximately 34.8% of U.S. GDP. To sustain those vast and vital economic benefits, the United States in 2013 is continuing to seek greater market access for IP-intensive U.S. products and to protect job-supporting innovation as part of a balanced policy that benefits both producers and users of innovative products and services worldwide. We're leaders in the United States in innovative industries ranging from development of high technology to entertainment and the fine arts and we support market-based competition and respect for the work of intellectual property rights holders in every country and you see that reflected both in the trade agreements that have come into force in recent years with Korea, Colombia and Panama and also in our very active ongoing trade agenda in the Trans-Pacific Partnership Trade Negotiations where we're working with that set of partners to advance state-of-the-art high standard provisions and you see opportunities in that regard in our early days, Trans-Pacific Trade and Investment Partnership Negotiations, excuse me, Transatlantic Trade and Investment Partnership Negotiations with Europe. I think both of these opportunities are critical to us and we're spending a lot of time on TPP right now trying to bring home that agreement by the end of the year as our leaders and trade ministers have asked us to do so our major process innovation at USTR right now is learning how to burn the candle at both ends and in the middle at the same time but hopefully with continued very intensive work on that agreement we'll be able to bring home a good result for US innovators and creators and expand jobs and opportunities in the critical Asia Pacific region. That's by no means all we're doing. I wanna come back to the Transatlantic Trade and Investment Partnership in a moment but I do wanna mention some of the other work that we do outside of these major trade negotiations to try to aggressively defend the millions of American jobs that are threatened by theft of US intellectual property around the world. We use our special 301 process for example, we collaborate with trading partners to develop and implement solutions on issues of concern. We develop action plans like the one we're pursuing with Russia following their accession to the WTO. So we've got a very active agenda of trying to set market conditions that allow people to capture value added in their goods and services through intellectual property protections like patents, trademarks and copyrights. Interestingly Scott, when I turn to the examples that we're going to talk about this morning these aren't necessarily your conventional cases of IP or IP related barriers and that I think presents an intriguing possibility because one of the negotiations that we have on the horizon at USTR is in fact an unconventional one from the standpoint of IP. That's our Transatlantic Trade and Investment Partnership with Europe and in that area I think we have a tremendous opportunity right now to look to open up new markets and approach the challenges of IP protection in new ways because we start with that partner in a place where we haven't started in any of our previous trade agreements where we've really got a strong standard of IP protection and enforcement in place already and we're looking to build on that with new disciplines. So one of the things I'd ask you to think about today as we hear about the examples of commercial innovation that we're going to talk about is what opportunities would be presented in a new kind of trade agreement as we're pursuing with the Transatlantic Trade and Investment Partnership to set background conditions that can promote the kind of commercial innovation that we're talking about today. I'm also very interested in the fact that some of the examples we're talking about today involve what I would call secondary value propositions around a product or service that was first developed or brought to market with a different value proposition in mind. So for example, if we're talking about, if we're talking about a water purification product that was not able to be successfully commercialized on the first try, but a secondary value proposition was found where that could be brought to the market in a different way, that may speak to us about opportunities for innovation that are outside the conventional mainstream. And I think it's a challenging question for all of us to look at, say, how do we create conditions for that kind of innovation? That particular innovation was recognized, for example, by the USPTO Patents for Humanity program. I think it's worth asking whether there are other kinds of ways to reinforce secondary value propositions through measures like that. You're also gonna hear from Gilead Sciences today. I know Gilead is a participant in the medicine's patent pool. There's another idea of how you reinforce a secondary value proposition, allow the use of patented innovations that have been developed by the biopharmaceutical innovation, by the biopharmaceutical industry, or by innovators like our own national science initiatives here in the United States to be deployed in new ways and extract new forms of value. So I would be very intrigued, Scott, to learn more about what kinds of conclusions we can draw from the conference in the presentations this morning about unconventional new ways to try to underline secondary value propositions and create conditions that allowed them to take hold and grow and create jobs and innovation opportunities for the United States. Thanks very much. Have a seat. Stan's agreed to take a few questions if there are any. There are basically, here at CSIS, three rules for questions. First, wait for the microphone because we're live webcasting this. Second, when you receive the microphone, introduce yourself and your organization. The third rule is ask the question a formal question. Oh, thank you. Anybody have a question for Stan? Shake off the cobwebs this morning. My name is Ed Gerwin. I'm an international trade consultant. Stan, I have a question. You mentioned the idea of creating background conditions for companies to be able to compete more effectively in international markets. And I know in the ongoing negotiations, particularly in the TPP, there's been much discussion of supply chains. Could you give us an idea of some of the kinds of background conditions that you're trying to set in those negotiations to make supply chains work more effectively? And most importantly, to make sure that American companies can get their fair share of global supply chains so we can create opportunity in jobs here. Yeah, thanks for the question. It's a good one. I think supply chain, I think supply chain issues are all the rage right now. It's one of the 21st century issues that we're looking at in the Trans-Pacific Partnership trade negotiations where we're really trying to grapple with some of the new challenges that we're facing. I think we're still in the midst of working through exactly what it is that we can do. We're also talking in the World Trade Organization right now about trade facilitation, which gets to some of the same issues. How is it that you really get goods and services across borders and ensure we can get goods and services to consumers quickly in a global marketplace? One of the supply chain issues we wrestle with constantly in the intellectual property space is ensuring the integrity of supply chains, including sometimes our own government and defense supply chains against counterfeit goods and the kind of leakage of those goods that can come in and threaten not only commercial actors, but consumers as well. So I think there's a host of challenges there. I'm sure we will only be able to wrestle with a limited number of them in the TPP. I hope that TTIP will present new opportunities to wrestle with some more of those challenges, but I think it's really fertile ground. And when you look at the examples we're gonna talk about today, I was struck by the UPS example where you have basically a packaging product that's treated as an import under some customs rules and what kind of supply chain issues would that create for you if all of a sudden the packaging was introducing a whole new tariff proposition you had to wrestle with. So I think within the concept of supply chain broadly conceived, there's all kinds of problems you could wrestle with and how many of those will come under that rubric for the TPP is something we're still working on. Thank you. Other questions? Yes, sir. My name is Bill Mounce. I'm from the Pacific Northwest and the Northwest Regional Clusters out there. We'd like to ask Scott, how are you doing as the U.S. Trade Representative in reconciling our twin national objectives of trade but also export controls? And specifically with TPP, is that going to be on the same plateau as the Atlantic current state? Thanks. Yeah, so export control is not really my not really my personal area of expertise but I can say that trade and innovation really go hand in hand for us and we're trying to promote all kinds of exports including the area of innovation. Of course, we do have certain export control laws that have to be respected and that's a reality of the trading environment but my experience in the IP space is that those cover a very limited space and we're still very successful in IP exports. I don't know if that matches up with your experience. Given the same, just trying to make sure that the Trans-Pacific Accord is given the same status as the Trans-Atlantic Accord which we have quite a success with. Understood, thanks. Yes, Thelma, up front here. Thanks, I'm Thelma Askem I've seen your advisor here at CSIS and I have kind of a two part question. One is with respect to intellectual property rights protection and the ITC and what you're seeing when you're negotiating with our trading partners, do you see any changes that need to be made there with respect to how we review intellectual property rights protections in the US and what are you pushing for in other countries with respect to how they are going to look at intellectual property rights protection and that leads me to the second question about capacity building in this area and others in your negotiations. We're discussing that a lot within CSIS about how to marry capacity building needs with both private sector and public sector capacity building efforts. Yeah, thanks, that's a great question. In terms of intellectual property and expectations for the Trans-Pacific Partnership we're looking for a high standard agreement on intellectual property, one that will stand alongside the other agreements that we already have in that region with partners like Australia, Singapore, Chile, Peru and the chorus free trade agreement between the United States and South Korea. So a strong IP standard there is critical. We also see it as important to build on that standard in certain ways. There are some 21st century challenges that we haven't addressed in past trade agreements that I think we can address in the TPP. One of them would be theft of trade secrets, for example, very important to the kind of process innovation that we're talking about today because sometimes your innovation is not a patented invention but a way of making the product better, whether you're making glass or paint or dozens of other things. And the ability to hold that information as protected is just increasingly critical around the world and it's critical for U.S. investors who want to be able to participate in a global marketplace that they don't lose that. I'll say that just as one of several examples where I think the TPP gives us an opportunity not only to do what we've done before but to stretch our ambitions into new areas and for the most part we've found our partners in the TPP willing to engage in that discussion with us and work towards the shared goal of an ambitious agreement. So we're now at a critical juncture where we'll see if we can deliver that or not. In terms of capacity building, it's a great point. I think one of the challenges we have in the area of value-added trade is we're talking about not just simple trade propositions where you're dealing with routine customs issues. I think we're going to hear this morning sometimes even routine customs issues aren't so routine but now you're talking about patents, patents, trademarks, copyrights. These can be subtle and difficult matters that require actual rule of law capacity on the part of not just line officials but judges and private attorneys in the system and how do you create that rule of law capacity? Really, what we're talking about when we talk about trade based on innovation is the ability to profit from value-added in the global marketplace that often only exists in the form of a legal fiction, a patent, or a copyright. And in order to capture value from those kinds of operations, you've got to have a rule of law expectation that's met in overseas markets. And that's been a challenge of the last quarter century for U.S. trade policy. But I think you're absolutely right to underline that the capacity-building aspect of that is critical because you can put all kinds of wonderful laws on the books and if the capacity isn't there for judges and law enforcement officials to make them real in practice, then they won't be. Yes, sir. Final question. Thank you, Jill Mahaney, co-founder of Open Revolution. Picking up on the issue of patents, this administration has been refreshingly aggressive against patent squatting and defensive uses of IP rights here domestically. Could you comment on how that does that carry over into your international trade agenda and how do you strike the balance in terms of protecting IP rights with respect to innovation? Yeah, I think it does carry over in the sense that patent quality is really critical for us not only domestically but internationally. And if you look ahead at some of the challenges out there, I mean, you have, for example, in China a coming wave of enormous patent quality problems owing to the fact that a huge proportion of the patents on the books in China are unexamined so-called utility model patents that may be of highly dubious quality. And so I think you will see in overseas markets many of the same challenges that we've been grappling with here domestically and I think we have the opportunity to set a good example in which we underline the importance of a strong patent system with quality patents and the value that that brings home to all of us by also showing our commitment to rooting out low quality patents through initiatives like the existing patent reforms and also addressing the problems of inappropriate behavior by some marginal patent holders through initiatives like the ones that the White House announced last summer with respect to the problems around non-practicing entities. So I think those kinds of initiatives ultimately all share the goal of a strong patent system. We want that domestically. We very much want that internationally as well and I think that we will increasingly see others grappling with the kinds of challenges we're grappling with so it's critical that we set a good example there. Please join me in thanking Stan for his contribution.