"Sweeping changes" in the way intellectual-property rights are considered and protected may be necessary to prevent the further erosion of the nation's lead in advanced technology, a presidential commission has concluded.

The rapid pace of progress in new scientific fields has outstripped the country's ability to protect intellectual property -- the ideas, knowledge and techniques that underlie vital new industries such as biotechnology, telecommunications and computers, according to a report released last week by the President's Commission on Industrial Competitiveness.

The existing legal system was not designed to deal with genetically engineered organisms or semiconductor chips. Many developments in these fields are obsolete by the time the law is ready to handle them, the report said.

The United States also lacks the means to protect intellectual property from foreign competitors, the commission found, citing inadequate international agreements and conflicting national interests.

"The continuing stream of new scientific advances calls for rethinking the very concepts derived from earlier centuries on which those intellectual property rules are based. New concepts of what intellectual property is and how it should be protected -- beyond patents, trademarks, trade secrets and copyrights -- may well be needed, as may sweeping changes in intellectual property laws and the ways they are administered and enforced," the report said.

Intellectual property rights are critical to U.S. industrial competitiveness because they provide incentives to innovation, which is "usually the most important edge" this country has in the international marketplace, the commission said.

The commission's committee on technological issues was headed by Ian M. Ross, president of American Telephone & Telegraph Co.'s Bell Laboratories, and Mark Shepherd Jr., chairman of Texas Instruments Inc.

Existing mechanisms such as patents and copyrights provide incentives to innovation by providing inventors with the exclusive rights needed to recover research and development costs, and thus justify the risks associated with pioneering new technologies.

Technological innovation is crucial to both the economy and the national defense, the report said. The commission noted that between one-third and one-half of the growth in U.S. real per capita income can be attributed to technological progress.

To illustrate the problem, the report cites the example of semiconductor chips: Under existing copyright law, the designs imprinted on chips are not protected from duplication. And although chip designs can be patented, they can become obsolete before a patent is granted.

Congress recognized the problem and considered amending the copyright laws, but instead created a special legal mechanism to protect imprinted chip designs. Although based on copyright law, the tailor-made protection has no counterpart in the laws of other countries. So legislators also included provisions designed to encourage other countries to enact similar laws.

Such an ad hoc approach "points to the need to rethink and broaden our concepts of protectable intellectual property," the report said.

The commission found that "only vague guidelines" exist for determining the infringement of software program copyrights. In biotechnology, the scope of patent claims is also unclear, the report noted.

Existing law also fails to provide owners with adequate remedies for violations of intellectual-property rights and thus fails to deter infringement, the commission said.

Infringement actions "are expensive, protracted and frequently unpredictable. Even when the patent holder wins an infringement suit, the damages awarded are unlikely to fully compensate for the injury sustained," it added.

The commission also concluded that the Freedom of Information Act allows U.S. and foreign firms to gain the proprietary information of their competitors. The act also does not define "trade secrets" broadly enough to protect research, testing and manufacturing information, the report said.

An additional problem for U.S. companies is the weakness of international agreements and foreign laws affecting international property. The commission said "it is clear that the policies of many nations, particularly in the developing world, are structured to acquire foreign technologies as quickly and as cheaply as possible."

The commission's report cites many deficiencies in existing intellectual-property law here and abroad, and includes a variety of recommendations:

* Patent lifetimes should be extended to compensate for marketing delays caused by government regulation.

* Patent laws should not allow the importation, sale or use in the United States of a product made abroad by a U.S. patented process.

* Companies should be allowed to obtain patent rights to the intellectual products of federally funded research and research performed in partnership with the public sector.

* The Freedom of Information Act should be amended to prevent firms from obtaining the trade secrets of their competitors. Foreign nationals and U.S. agents of foreign clients should be barred from making Freedom of Information requests. A company should be notified and allowed to protest when its information is requested.

On a broader scale, the commission urged the federal government "to create a national consensus on the importance of intellectual property for a vital economy and to identify the primary causes of deficiencies in intellectual-property protection worldwide."

The commission recommended comprehensive and ongoing review of intellectual-property rights and laws, domestically and internationally. The government should act to strengthen and update U.S. intellectual-property laws and to negotiate more effective international rules for protecting intellectual property, the report said.

"A U.S. policy for the protection of intellectual property is necessary to preserve what is becoming our most valuable industrial resource -- our technology," the report said.