Intellectual Property And Economic Development

Robert M Sherwood

• Publisher: Taylor & Francis
• Year: 2019
• Print ISBN: 9780367015671
• eBook ISBN: 9780429714528
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Speaking very roughly, countries with advanced economies tend to be those displaying intellectual property protection systems in which the public has a basic degree of confidence. Those systems, when they are thought about at all rather than taken for granted, are thought of as reasonably effective in safeguarding innovation and creative expression

1
Intellectual Property Protection as Infrastructure

Speaking very roughly, countries with advanced economies tend to be those displaying intellectual property protection systems in which the public has a basic degree of confidence. Those systems, when they are thought about at all rather than taken for granted, are thought of as reasonably effective in safeguarding innovation and creative expression. Conversely, the countries which are in varying stages of developing or "catching up, " tend to have protection systems in which their populations do not have much confidence.

The literature is replete with studies of the relation of innovation to economic growth, but the relation between intellectul property protection and innovation in developing countries rests largely on conjecture. This book seeks to remedy that weakness.

The Unexamined Intersection

Legal protection for innovation has been the leaven of economic development for many countries. Habits of mind and patterns of activity which release human creativity and generate new technology have been fostered by innovation protection. Protection of industrial and commercial secrets through the "trade secret," protection of creative expressions through copyright, protection of inventions by patents, and protection of commercial names through trademarks, has played a beneficial role in boosting economic growth in those countries.

Yet for countries now striving to develop economically, the concept of intellectual property protection appears to present a threat for some minds. It is portrayed variously as a device to further enrich the developed countries, as a means of enhancing trade advantages or as an instrument for suppression of newly industrializing countries. Given this "bad press," a fresh examination of the role which intellectual property protection plays in developing countries is challenging.

Such an examination is difficult for a second reason. The intersection of intellectual property protection with economic development in the developing world has been largely unexamined by scholars. Although patents have been studied in various ways for their role in developed country economies, literature relevant to developing countries is scant. Moreover, economic theory has not encouraged study of this intersection until very recently. However, as noted in Chapter 3, study of the intersection is becoming a matter of importance for understanding the speed and the pathways of global knowledge diffusion, the build-up of tacit knowledge, and growth differentials among countries.

This book is intended to aid examination of this intersection and is written for both policy makers and scholars. Its central materials are drawn from case examples and surveys which illustrate the impact that weak protective systems are having on a range of discrete grass roots activities in developing countries. They examine research activity at traditional technology source points, including universities, research parks and small and large businesses. They report the impact of nonprotection on linkages both among those sources of technology and between those sources and the marketplace. They explore the impact of nonprotection on efforts to provide both private and public financial support for new technology. The book then examines the influence which given sets of intellectual property laws and practices are having on formal and informal institutions and patterns of behavior. Over 20 years of business and legal experience in many of the countries mentioned has provided information and perspective for this study. Much of the specific case material is derived from over 14 weeks of intensive research, primarily in Brazil and to a lesser extent in Mexico.

The Trade Context

As is well known, in 1986, at the urging of the United States and other developed countries, the topic of intellectual property protection in developing countries was raised as an issue in the context of the international trading system. When the Uruguay Round of multilateral trade negotiations was initiated under the General Agreement on Tariffs and Trade (GATT), a working group on the topic of Trade-Related Intellectual Property matters (or TRIPs) was included after hard bargaining and strong opposition from some developing countries, particularly Brazil and India. The text of the Ministerial Declaration on this topic¹ states:

Trade Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods.

In order to reduce the distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade, the negotiations shall aim to clarify GATT provisions and elaborate as appropriate new rules and disciplines.

Negotiations shall aim to develop a multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods, taking into account work already undertaken in the GATT.

These negotiations shall be without prejudice to other complementary initiatives that may be taken in the World Intellectual Property Organization and elsewhere to deal with these matters.

The attempt to elaborate new rules and disciplines and clarify existing GATT trade rules has been driven by the growing awareness that in many countries the level or strength of protection for intellectual property is not adequate or effective to safeguard innovation and creative expression. Various surveys of the degree to which protection is available have been made. The leading survey is the result of a questionnaire administered by the United States International Trade Commission (ITC) which was reported in February 1988.² Several hundred internationally active United States companies were asked for their view of the adequacy of protection for intellectual property in countries outside the United States. In responding, these companies indicated they found weaknesses and difficulties with the protective systems of over 40 countries, most of them developing countries.

Although the ITC report is commonly cited for the dollar losses suffered by United States companies abroad as a result of weak intellectual property protection,³ it contains considerable information about the types of deficiencies identified in the legal regimes of the various countries. This information is organized by country under the categories of copyright, patent, trade secrets, trademarks and mask works.

Another source for information on protective system deficiencies in specific countries was completed in 1988 by Michael Gadbaw and Timothy Richards.⁴ They surveyed seven countries: Argentina, Brazil, India, Mexico, Korea, Singapore and Taiwan. Using a common format for these countries, they examined the political setting of each, then examined the state of the law under each of the five categories of protection (patents, copyright, etc,) and catalogued concerns expressed by United States interests under each category.⁵

Certain business or trade associations, based in Washington, D.C., have also compiled lists of countries exhibiting weak protection for various types of intellectual property and these may also be taken as some indication of deficiencies in the countries listed. Examples are the various monographs issued by the International Intellectual Property Alliance (the "Copyright Alliance"), the National Agricultural Chemical Association (NACA), and the Pharmaceutical Manufacturers Association (PMA) among others.⁶ While each of these groups has a bias, they provide some indication of the negative influence of weak protection on the development potential of these countries.

The United States Department of State, in response to a statutory mandate, produced its own catalogue of intellectual property deficiencies in early 1989⁷ The United States Department of Commerce has also produced several assessments of the condition of intellectual property protection in various countries. Like the others, they are compiled largely from reports received from United States commercial interests.

Raising the topic of intellectual property protection as a trade issue has inadvertently framed consideration of intellectual property protection in the developing world as a study of confrontation between developed and developing nations. India and Brazil, in particular, initially complained that any effort to impose standards for protection was inappropriate,⁸ They expressed the view that the World intellectual Property Organization (WIPO) would be a forum better qualified to handle questions of intellectual property protection. The United States, in contrast, preferred the GATT setting on two grounds. First, there is no dispute settlement mechanism in WIPO, whereas the GATT has at least a rudimentary mechanism which has worked reasonably well.⁹ One of the objectives of the Round was to strengthen this mechanism. Second, since the WIPO is governed by an unweighted vote of its members, more than half of whom are developing countries, the United States and some of its close trading partners felt this would not be an appropriate forum in which to seek stronger protection in the developing countries.¹⁰

As the Round progressed, India stressed the need for special consideration of the needs of countries in development.¹¹ By this India meant specifically that developing countries should remain free to utilize exceptionally brief patent periods and other provisions which, in effect, weaken protection of intellectual property.

To the extent that the insertion of intellectual property into the trade arena has engendered an impression of confrontation, a long harbored supposition has been reenforced. It is the assumption that somehow, since the developed countries are insisting on strong protection for intellectual property, then such protection must be harmful to developing countries. This has tended to obscure consideration of the potential which strong protection for new technology may have precisely for the development process in the developing countries.

If raising the intellectual property issue in the trade context has misdirected analysis in this manner, is there an alternative context which would encourage examination of the topic along more revealing lines? It is submitted that viewing intellectual property protection as an important aspect of a country's infrastructure would focus attention and analysis on its role in the economic development process rather than on trade conflicts.

The Infrastructure Context

What, then, is the role of intellectual property protection in the economic development of a developing country? This is the question examined by this book. It can be usefully viewed as a question of infrastructure.

The concept of infrastructure has proven useful in examining economic development. Roads, irrigation, sewers, schools, water supply, health care and electrical systems are among the preconditions thought beneficial for development. Creation of infrastructure is accorded priority because of this.

Although largely invisible, an intellectual property system which protects innovation and creative expression may be viewed as a helpful precondition to creating and using new technology which boosts economic growth and aids development. From this point of view, the intellectual property protection system may be considered as a valuable part of a country's infrastructure.

Limited Methodologies

Methodologies for examining the question of the infrastructural role which intellectual property protection plays in Third World economic development need to be fashioned. Since most developing countries have relatively weak protective systems for innovation and artistic expression, opportunities to study this question tend to be limited. Two basic lines of inquiry are available. The first is to examine situations where a noticeable change in the protective system has occurred, giving the opportunity to study activity both before and after the change. An example would be a study of Singapore focussed on the introduction of modern copyright protection in 1987. Other changed legal regimes which might be studied would include upgraded patent protection in Mexico in early 1987; introduction of updated patent, copyright and trademark protection in Korea in early 1987; introduction of partial patent protection in China in 1985; introduction of copyright protection for software in Brazil in December 1987; and improvements in Taiwan's treatment of patents and copyright in 1987. The limited nature of many of these changes, however, restricts the opportunities for this line of inquiry.

The second line of possible inquiry is to examine ongoing patterns of economic activity for indications of both negative and positive effects derived from the lack of protection where there has been no change in the protective system. Pursuit of a methodology for doing so, however, is easily frustrated by the difficulty of counting things which do not take place. For example, how many inventions are not made in a particular country because of the lack of adequate protection there? How many start-up firms do not receive venture capital because they do not dare to reveal to potential investors the secrets of their technology? How many firms do not conduct systematic research because competitors can readily steal their research results?

As noted above, there has been a tendency in some minds to the supposition that protection of intellectual property is harmful to developing countries. In the absence of careful examination, this view has tended to be influential. It is sometimes stated, for example, that a developing country benefits from imitation in the early stages of its industrialization. Or again, that protection for intellectual property is appropriate only after a country has attained world-class capability. An aphorism mentioned from time to time suggests that imitation necessarily precedes innovation. Free riding is considered a necessity to abet the advancement of countries in development.

The supposition behind these statements, aside from being largely unexamined, tends to ignore the possibility that the development process would benefit from having strong and adequate protection for innovation and creative expression.

The connection between technology and economic growth has been established in recent years, at least in the setting of the developed ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Acknowledgments
• 1 Intellectual Property Protection as Infrastructure
• 2 What Intellectual Property Is
• 3 How Intellectual Property Works
• 4 Intellectual Property and Economics
• 5 Case Materials from Brazil and Mexico
• 6 Reflections on the Case Materials
• 7 The Myths of Weak Protection
• 8 The Cost of Protection
• 9 Protection: Powerful Development Tool
• Appendixes
• Bibliography
• Index