March 2001
The Fantasy of Intellectual Property
by Robert Sherwood
The central idea of this paper is that without support from the judicial system, a nation’s intellectual property system exists largely as a fantasy. National judicial systems in perhaps 80 percent of the world’s countries are poorly prepared for the task of enforcing intellectual property rights. Public expectation that property rights of any kind can be judicially defended is an underpinning of any open economy.
As distinguished from property rights in general, intellectual property rights are particularly vulnerable to infringement, invasion and taking. Thus, if the judicial system is not equipped and willing to support these rights, the objectives of an intellectual property system are defeated. The community expectation that the offer of intellectual property rights will encourage its inventive and creative people is turned to fantasy.
In many developing countries today, there is a growing awareness that intellectual property drives knowledge creation and use. Knowledge is increasingly seen as the most critical factor in development, more important than capital, labour, and natural resources. The 1998/99 World Development Report issued by the World Bank developed this theme extensively. Leaders in Korea, Mexico, and perhaps Brazil and a few other countries are beginning to recognize the intrinsic value of knowledge for economic development. They are also becoming aware that effective intellectual property protection is a critical ingredient in advancing this development factor. They can see that intellectual property fosters precisely the type of knowledge that has a high capacity to produce new technology and, thus, new industries and expanded employment.
Clearly, there are individuals with the ability to invent and create at high levels in every country, even the poorest. They are, in many ways, among a country’s most important natural resources, particularly given the increasing role of knowledge in development. Whether this natural resource is used or wasted will depend to a large degree on the quality of a nation’s intellectual property system.
In a number of countries, intellectual property laws have been upgraded to comply with new international treaty commitments, particularly those found in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization. For many people in developing countries, there is an almost naïve expectation that once intellectual property laws which comply with these treaties are in place, the local talented people will flourish and produce new inventions and creative works. Unfortunately, this expectation suffers from two difficulties.
First, the level of protection provided by TRIPS-compliant laws is probably insufficient to encourage local inventors. The second difficulty is that judicial systems in many countries are not up to the task of effectively handling intellectual property litigation.
As to the first, there are many weaknesses in the TRIPS accord. This international treaty is the result of intense international trade negotiations in the early 1990s. As a trade agreement, it was the product of trade-offs and compromises. Moreover, the mandate of the intellectual property negotiating group sought lessened trade friction, but paid no direct attention to economic development.
For inventors in developing countries, the TRIPS-level of protection is probably not adequate to encourage research and development. In fact, many inventors from developing countries move to more advanced countries where protection is effective for research, or, upon inventing something, patent it abroad rather than in their home country.
The TRIPS Agreement devotes some 20 articles to judicial treatment of intellectual property rights. This blueprint for enforcement is fairly detailed and seemingly lays out an effective approach to securing intellectual property rights. However, the negotiators specifically recognized that the courts in many countries are not up to this task. In Article 41(5), the treaty states that these enforcement articles do not require a country to put in place judicial enforcement measures for intellectual property distinct from those for enforcement of the law in general. It goes on to specify that there is no requirement to distribute resources as between enforcement of intellectual property rights and enforcement of law in general.
While the language is open to some degree of interpretation, it seems to recognize the weakness of judicial systems in many countries. Thus, judicial systems as they currently exist are pretty much what inventors will have to rely on if their rights are infringed. Countries which are criticized before World Trade Organization dispute resolution panels for not providing effective enforcement will surely cite this TRIPS provision in their defense.
It is one thing for a trade agreement to reduce a tariff, and quite another to upgrade an intellectual property system or a judicial system. Both are highly discretionary public institutions. A nation must want these systems to work well if they are to be effective. The pressure of threatened trade sanctions is not likely to provide the impetus for these institutions to be upgraded.
With regard to judicial systems, the case can be made that a nation’s overall economic growth is stunted to an important degree if the judicial system does not function well. Research in Argentina, Brazil, Canada, and Peru is quantifying this substantial negative impact.
The benefits of an intellectual property system for a developing country are largely unappreciated. Because of attention focused on marginal issues, such as the effect of patent protection on pharmaceutical price levels, developing countries have yet to realize the considerable benefits they can garner from robust protection for the efforts of their own inventive people. Some of the inventors working in these countries are world-class. Their disappointment at the ineffective levels of protection available to them will ultimately push these countries toward providing more effective intellectual property systems. At that point, the desire for intellectual property success will press nations to upgrade their judicial system performance. With that, many other aspects of economic life in those countries will also improve.
Copyright, 2001, Robert M. Sherwood.
Robert M. Sherwood is an author and
consultant specializing in the economic effects of intellectual property
in developing countries. He is also researching the economic consequences
of judicial system performance. A selection of his writings is available
at www.kreative.net/ipbenefits
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