Sound Thinking on IP
From The Independent
17 September 2002

By Stephen Pollard

Clare Short took major risk yesterday. She exposed us all to a mass outbreak of narcolepsy when she used two words which have long had the power to cure insomnia: intellectual property.

If your eyes have not already glazed over, allow me to explain why she took that risk and why, far from sending people to sleep, intellectual property is now causing some of the most fevered debates on the planet.

Today (Tuesday) in Geneva, the World Trade Organisation’s ‘TRIPS Council’ is meeting to discuss how developing countries can gain access to affordable medicines. TRIPS – the Trade Related Aspects of Intellectual Property Rights Agreement – is the WTO’s attempt to draw up an international agreement on intellectual property. As part of that process, Ms Short was in Geneva yesterday to launch the report of the Commission on Intellectual Property Rights (CIPR), a de facto Royal Commission (with members from the UK, US, Argentina and India) set up by Ms Short to look at the impact of intellectual property on the developing world.

Far from being the dry subject this seems, intellectual property (IP) is the single most important factor in - depending on how one views it - either accelerating, or blocking economic growth in developing countries. The CIPR report argues that, whilst patents are indeed critical in providing an incentive for the private sector to develop medicines which benefit both rich and poor alike, the IP system “hardly plays any role in stimulating research on diseases particularly prevalent in developing countries”. Worse, it worries that patent protection can stall economic growth in poor countries because it’s an inappropriate mechanism in areas with very different economies to the developed world. As the CIPR puts it: “Developed countries often proceed on the assumption that what is good for them is likely to be good for developing countries. But, in the case of developing countries, more and stronger protection is not necessarily better”.

It sounds sensible. A Bangladeshi peasant farmer, after all, not only has a very different job to a German software programmer; he also operates in a very different economic and legal environment. Thus the report argues that intellectual property rights should be looser in the developing world. But its analysis is completely wrong. It is those poorer countries which most need the protection of IP rights. In countries such as India, Brazil and South Africa, all of which have burgeoning knowledge-based industries, investment and growth have been driven at astonishing speed precisely because of the patents and copyright which underpin innovation and creativity.

Patents and copyright are part of the solution to poverty, not its cause. The very worst thing that could happen would be for IP rights to be diminished. Take the relative strengths of India’s software and pharmaceutical industries. Its innovative software industry has grown from nothing to a multibillion dollar enterprise in ten years. But the industry would not even exist were it not for the country's strong copyright protection which allows innovators to profit from their work. India’s pharmaceutical industry, on the other hand, is almost entirely concentrated on manufacturing generic drugs, simply copying existing pharmaceuticals. It carries out virtually no research and development. Why? Because the absence of patent protection means there is no incentive to innovate, since anyone can copy and manufacture any new drug. This is the crux of the matter.

Intriguingly, at the same time as Ms Short was introducing the CIPR report in Geneva yesterday, a very different view was being published by the Centre for the New Europe, a Brussels think tank. 'Ideal Matter: Globalisation and the Intellectual Property Debate' argues that the foundations of all economic activity are property and the rule of law. Property ownership provides people with the incentive to make investments; a farmer who owns his own land will have more incentive to invest in soil conservation, and the land can act as security against loans, enabling those investments to take place. Property rights also enable people to benefit from exchanges; and the rule of law ensures that such transactions are properly enforced. Intellectual property is a fundamental part of that process, and has underpinned much of the world’s economic development in the past century and a half. Patents provide incentives to entrepreneurs to invent new technologies; copyright provides incentives for cultural achievements, from works of art to great literature.

Just as property rights in land create incentives to improve that land, so property rights in the products of the intellect provide incentives to develop better products. Incentives are created for the initial invention as well as further development and improvement of that invention. Countries which still have weak IP protection should thus be strengthening it, not weakening it as the CIPR report suggests. Strengthening IP protection would stimulate local invention and encourage overseas IP-holders to engage in joint projects and investments. Talented and knowledgeable people would be less likely to go overseas in order to use their skills. Trade liberalisation, which has been a fundamental driver of economic development, enabling consumers and producers to benefit from trade with one another across borders, needs also to be accompanied by agreements on international IP protection. Without that, opening up borders makes it simply easier to import copies of protected goods, undermining local producers and innovators.

It’s easy to assume that IP protection is just an excuse for big business and the developed world to keep the developing world down. The truth, as ever, is more complicated. Intellectual property is not some abstruse, esoteric aspect of law; it’s about the very fundamentals of prosperity.

Copyright (c) 2002, The Independent