Intellectual Property Rights In Science, Technology, And Economic Performance

International Comparisons

Francis W. Rushing

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429714313
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book discusses the economic, political, legal, and social concerns of the world's governments on intellectual property rights. It analyzes the systems of both developed and developing economies and draws a clear picture of the status of intellectual property regimes around the world.

Part One
Introduction

1
Intellectual Property Rights in the 1990s

Problems and Solutions

Carole Ganz Brown and Francis W. Rushing

The Problems

The 1474 Venetian statute considered to be the prototype for modern patent systems says in its preamble:

We have among us men of great genius, apt to invent and discover ingenious devices.... Now, if such provision were made for the works and devices discovered by such persons, so that others who may see them could not build them and take the inventor's honor away, more men would then apply their genius, would discover, and would build devices of great utility to our commonwealth.1/

Since then few institutions have stirred such heated debate over so many centuries as the protection of intellectual property.

This volume is a direct consequence of such debate. From the editors' perspective, the time for a new look at the conceptual foundations of intellectual property systems seems appropriate. Until recently, discussion was remarkedly devoid of hard evidence, as distinguished from advocacy. But during the last few years, impartial scholarly work has been accomplished on the effects of differing intellectual property policies on the nature, costs, and risks of research and development (R&D). Our task in this volume is to use these insights to advance national and international policymaking in intellectual property protection, science, technology, and economic performance.

Frequently, at the center of such debate are proposals to waive inventors' exclusive rights in favor of a public interest in wider availability. Even so, no one doubts that the protection of intellectual property does have an impact. There are almost surely innovations that would not occur or that would be delayed in the absence of protection. Protection has also been used, and will presumably continue to be used, to exclude competitors. Sometimes such exclusion is an essential part of the incentive to innovate. But under other circumstances, protection may lead to rewards beyond what is required to call forth the necessary innovative effort. In addition, monopoly power may slow the dissemination of new ideas, processes, and innovations; the cross-fertilization of ideas; and the broadening of basic knowledge to build other technological advances.

The essential problem is to strike a balance: enough protection to sustain incentives to the innovator, but not too much protection to allow for the maximization of the social good.

Given this conceptual framework, the chapters that follow review the evidence on experiences in the United States, other industrial countries, and the developing world. They also consider the kinds of innovative activities national governments seek to stimulate by conferring rights to intellectual property and the essential logic of the intellectual property-innovation nexus.

Some nations completely exclude certain products and processes from patent protection such as pharmaceuticals and food-related inventions. These categories are most commonly singled out for special treatment ostensibly because they are considered especially important to public health and welfare. The rationale for such exceptions is somewhat paradoxical. If patents encourage innovation, one might be particularly concerned about maintaining strong incentives for medicinal and nutritional invention.

One extenuating consideration is that in developing nations, many more patents are held by foreigners than by domestic citizens, and the control of health-related technologies by foreign interests is viewed with concern. Whatever the rationale, this volume considers these international differences in patent policy from the perspective of their possible effects on innovation. Overall, developing countries are drawing a balance between the "free" use of ideas and incentives to the inventor; however, they tend to draw this balance much further in favor of "free" use of ideas than do their industrialized counterparts.

Today, the United States and other industrial country policymakers are engaging in significant efforts to seek stronger intellectual property protection worldwide and diminish international infringement of their products and innovative activity. The U.S. government has taken a trade-oriented approach to international protection issues--an approach that consists of multilateral and bilateral negotiations and unilateral trade measures. This strategy is being implemented in a dynamic world economy in which the forces propelling development are new: the importance of industrial country markets to economic development, the technical revolutions in microelectronics and biotechnology demanding new kinds of protection, and the restructuring of the economies of most countries. This volume summarizes the most important of these changes and considers the policy implications for strengthened protection in developing countries.

At the international level, an effective intellectual property rights regime must also achieve a balance between policies that promote worldwide diffusion of new science and technology and the proprietary interests of researchers, companies, and nations. At the national level, ongoing political and policy processes consider the relevant dimensions of the problem and some balance is likely to emerge. At the global level, however, there do not appear to be international institutions with the capability to balance these diverse interests. This makes it difficult to accomplish the kind of international agreement that would extend intellectual property rights systems worldwide. Thus, to begin to do this effectively, nations seek to:

1. strengthen the economic and legal foundations of intellectual property protection;
2. better understand the emerging technologies demanding new forms of protection unfettered by historical differences among nations;
3. better relate protection to national industrial and economic development policies;
4. improve understanding of the attitudes of academic and business organizations to strengthened protection; and
5. suggest innovative approaches to achieving constructive consensus among nations on balancing national interests with advancing the flows of science and technology across national borders.

The Evidence

In the chapter which follows, Edwin Mansfield examines the relationships among intellectual property, technology, and economic growth. He emphasizes that the schism between industrial and developing countries in their perception of intellectual property is very real. Developing countries think of intellectual property--the results of science and technology--as a public good. On the other hand, industrial countries view intellectual property primarily as a means of maintaining a competitive edge in the marketplace as well as of providing monetary returns to the individual investor.

Mansfield goes on to say that industrial countries should assist developing ones in technological advancement. But weak intellectual property protection would not be the mechanism to achieve this objective. Mansfield also believes that reducing rewards for invention in an already weak incentive system does not make sense.

Richard Levin complements Mansfield's conclusions by making several important distinctions:

1. One must look at individual industries to determine what constitutes adequate protection.
2. In all cases, one cannot simply look at the number of patents, but must also take into consideration the value of those patents.
3. The evidence is weak that stronger protection alone increases investment in R&D. Importantly, however, other factors should be taken into consideration such as the diffusion that results from patent protection, and the freer mobility of researchers. Rapid information flow is conducive to rapid technological advance (the licensing of the transistor by AT&T Laboratories being the most powerful example).

From this, several conclusions follow:

1. More technical advance from stronger appropriability is not a given because other policies and conditions must be present.
2. Since industries differ widely in the conditions necessary to appropriate returns from their technology, industrial country efforts to strengthen intellectual property protection should be targeted to specific industries.
3. Pharmaceuticals and fine chemicals are areas in which protection is needed, and thus the United States should focus its efforts on strengthening protection for these industries in other countries.2/

In Chapter 3, Richard P. Rozek develops criteria to prioritize the industries and countries which the United States and other industrial nations believe have a need to enhance their intellectual property protection system. These criteria include:

1. the extent of damages to intellectual property owners by unauthorized use of their property in other countries;
2. the level and effectiveness of protection in certain nations;
3. the prospects for change to strengthen protection.

Overall, today's climate is one in which a significantly improved basis for more constructive dialogue among the United States, its industrial partners, and the developing countries can be achieved.

Anne Wells Branscomb considers new property rights for computer technologies in Chapter 4. The traditional intellectual property system is breaking down in the wake of these new information and communication technologies. Further, intellectual property rights should not be limited to discussion of patents, as the use of copyrights in protecting software, the "crown jewels" of the information economy, demonstrates. The line between forms of protection has begun to erode, and in dealing with new technologies, current protection requirements cannot be easily met and should move toward a less costly and more flexible system. Technologists must be partners in advancing these new laws.

Software is joined by other new technologies and applications in deviating from past patterns of protection. For instance, biotechnology is a new challenge to the question of whether to protect advances and what form the protection should take. Kevin O'Connor addresses these issues.3/

The authors of the ten chapters that follow focus on national and individual firm intellectual property protection policies in the developing countries of Brazil, India, Korea, Taiwan, Singapore, and Thailand, and the industrial countries of the United States, Japan, and Western Europe.

Claudio R. Frischtak enumerates "gaps" in intellectual property protection in Brazil:

1. Legislative gaps result from the fact that some products (such as pharmaceuticals) as well as processes are not patentable.
2. Trade secret law is nonexistent in Brazil.
3. The patent office is small and understaffed, leading to administrative gaps.
4. To litigate intellectual property matters in Brazilian counts is not easy, resulting in judicial gaps.

According to Frischtak, it is in Brazil's own interest to strengthen the many factors that drive technological change and advancement. The nature of these factors depends very much on the size and nature of the firm. Those areas in which the strengthening of protection would have a major impact must be chosen carefully. One should take into consideration that Brazil still spends a relatively small proportion of its GNP on R&D of which the government finances 80 percent and the private sector finances only 20 percent.

Frischtak goes on to say that weak protection cuts off creation of new technology and lowers the innovation rate. Strategies to strengthen protection in Brazil should focus on areas that would benefit from strengthened protection; these are areas in which Brazil exhibits growing national capabilities, such as software. Strengthened protection for such areas as pharmaceuticals, on the other hand, will only emerge in five to ten years.

The chapters of Flavio Grynszpan and Robert M. Sherwood are directed towards understanding the "business culture" of Brazil and the influence of this culture on protection. Grynszpan analyzes the disparities among various sectors of the Brazilian economy in their tendencies to oppose or advocate intellectual property protection. State supported firms show little support for intellectual property protection while firms in the advanced or emerging technologies demonstrate support. Awareness of the need for and benefits from intellectual property protection is a prerequisite for building a constituency for protection in Brazil.

Overall, Brazilian science and technology-related activities lack confidence in the system of protection, and this does not make for an atmosphere of innovation. Sherwood cites many examples of this atmosphere:

1. Lack of trade secret protection inhibits mobility of researchers in Brazil, a country that traditionally has more mobility than Western Europe and the United States.
2. Lack of protection leads to diminished investments in R&D in both large and small companies, and a reluctance of highly-trained scientists and engineers to work for industry.
3. The paucity of small businesses in Brazil may be related to the lack of protection as well as the lack of venture capital.
4. Within R&D organizations, researchers are reluctant to communicate with one another for fear of disclosure of trade secrets.
5. Academics appear to favor protection because they do not wish to exclude the possibility of commercialization of their research.

International transfers of technology are also adversely affected by lack of protection. The Brazilian military has problems in getting up-to-date foreign suppliers of technology. Foreign sources in general seem unwilling to provide technology without protection, and the problem of Brazilian researchers leaving firms with foreign technology appears particularly threatening to foreign suppliers.

In Chapter 8, Falguni Sen examines the relationship between protection and the management of R&D in India. He assesses the Indian government to be extremely opposed to strengthening protection. One reason may be that the government funds approximately 90 percent of R&D, and there is no business community to counterbalance the government. Indian R&D funding is similar to Brazil in this respect.

The change in Indian government policy toward weak protection came in the early 1970s. Importantly, those industries in which protection plays a strong role, such as pharmaceuticals, are denied protection. Further, the Indian government gives itself broad rights to use patents. These policies, the Indian government holds, break up foreign monopolies, and encourage the development of indigenous technology. In contrast to these areas, software is protected in India by copyright provisions. While one cannot prove a causal link, the general conclusion is that protection of software played a role in the accomplishment by India of international partnerships in software development.

Gunda Schumann focuses on the critical question faced by developing countries: Are the overall technological and economic advances gained from strong protection sufficient to offset the short-term gains from weak protection? Strong protection is beneficial when used in conjunction with a package of other development policies such as human resources improvements, investments in R&D, export-oriented strategies, and willingness to allow international competition for domestic products. Further, countries adopting these policies realize the positive role of direct foreign investment in development and the importance of diversified economies.

In countries such as Korea, attitudinal changes towards strong protection probably occur in association with their own indigenous technological development. Another factor is that in Korea 80 percent of the R&D is private as compared with the large amounts of public funding of R&D in countries such as Brazil and India. Overall, intellectual property systems cannot be taken independently of the other development policies followed by a country, and the strength of the private sector.

In Chapter 10, Ashoka Mody reemphasizes a point made by Edwin Mansfield--the standoff between developing and industrial countries with respect to protection is quite dramatic. Intellectual property protection is likely to become an even more important issue in the future because increasing amounts of R&D are needed to produce new products. In addition, nonlegal means of appropriating the returns from intellectual property are becoming weaker, thereby putting pressures on the need to strengthen the legal environment for protection. Finally, the rate at which technology is being bought or exchanged has increased. These factors will lead over the next decade to higher prices and/or l...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Foreword
• Foreword
• Acknowledgments
• PART I INTRODUCTION
• PART II ISSUES IN INTELLECTUAL PROPERTY RIGHTS
• PART III INTERNATIONAL COMPARISONS: DEVELOPING COUNTRIES
• PART IV INTERNATIONAL COMPARISONS: DEVELOPED COUNTRIES
• PART V CONCLUSION
• Appendix A: Symposium Agenda
• Appendix B: Symposium Attendees
• About the Contributors