Global Policy Forum

Steve Lohr

In the 19th century, the United States was both a rapidly industrializing nation and - as Charles Dickens and others knew all too well - a bold pirate of intellectual property. But these days, when it comes to dealing with developing countries around the world, the United States seems to be forgetting its own swashbuckling heritage. At least, that is the implication of a recent report by the international Commission on Intellectual Property Rights, a group sponsored by the British government.

The report recommends that the World Trade Organization's treaty on intellectual property rights be made much more flexible so that developing countries from Brazil to Bangladesh can adopt rules more at their own pace. The global debate over intellectual property rights - patents, copyrights and trademarks - is focused mainly on forward-looking industries such as computer software, pharmaceuticals and biotechnology. But Americans can look back to the 19th-century experience in book publishing, for example, to understand the developing world's viewpoint.

Back then, U.S. law offered copyright protection - but only to its own citizens and residents. The works of English authors were copied with abandon and sold cheaply to an American public hungry for books. This so irritated Dickens - whose "A Christmas Carol" sold for 6 cents a copy in America, considerably less than in England - that he toured the United States in 1842, urging the adoption of international copyright protection in the long-term interest of American authors and publishers.

Such appeals proved unpersuasive until 1891, when the United States had a thriving literary culture and a book industry that wanted its own protections abroad. Congress then passed a copyright act extending protection to foreign works in return for similar treatment for American authors overseas.

The economies that were shining success stories of development, from the United States in the 19th century to Japan and its East Asian neighbors such as Taiwan and South Korea in the 20th, took off under systems of weak intellectual property protection. Technology transfer came easily and inexpensively until domestic skills and local industries were advanced enough that stronger intellectual property protections became a matter of self-interest. But, according to the recent report, this kind of economic-development tactic - copying to jump-start an industry - is endangered by the U.S.-led push for stronger intellectual property rights worldwide.

As part of a sweeping trade deal reached in 1994, World Trade Organization members must adhere to a global agreement known as TRIPS, for Trade-Related Aspects of Intellectual Property Rights. TRIPS stemmed partly from the prevailing belief during the 1990s that the "American model" - free trade, wide-open capital markets and strong intellectual property protection - was the way to global prosperity.

But those prescriptions are now being questioned. "If we cut off imitation strategies for developing countries, we are drastically narrowing the options they have to reach an economic takeoff," said John Barton, a professor at Stanford University law school who led the commission on intellectual property rights.

Many economists regard the 1994 agreement as a triumph for a few industries - mainly pharmaceuticals, software and Hollywood - that stand to gain a lot from the protections and whose interests were championed by the U.S. government. "TRIPS was a matter of powerful companies with intellectual property concerns essentially dictating trade policy," said Keith Maskus, a trade specialist at the University of Colorado.

The United States does stand to gain the most from stronger intellectual property protections. A World Bank study estimates that U.S. companies would pocket an additional $19 billion a year in royalties, while developing nations such as China, Mexico, Brazil and India would pay more to the patent holders.

Intellectual property rights are temporary grants of monopoly intended to give economic incentives for innovative activity. Why toil for months or years to develop a new drug or to think up a clever software program, the thinking goes, unless there is the potential for a big payoff? The intended result is that consumers will pay somewhat higher prices for an individual drug or software program but will benefit from all the additional innovation in the economy.

That is the theory. But even within the United States, there is criticism that the corporate frenzy to patent any technical advance, even business methods, undermines innovation by unnecessarily restricting the flow of ideas. And just last week, the U.S. Supreme Court heard a challenge to a 1998 law that extended copyrights in the United States by 20 years; the law's opponents contend that the extension inhibits public creativity by making it harder for other people to obtain and build upon existing works. But in general, the theory behind intellectual property rights tends to work in rich nations.

The concern about TRIPS is that it is too much of a one-size-fits-all approach that works to the detriment of developing nations. "It would be fine if we lived in a world of all rich people," said Jeffrey Sachs, a development economist at Columbia University. "The danger with TRIPS is that it will mostly hurt the developing countries' access to ideas."

In the end, the debate over intellectual property rights may be more a dispute about speed than direction. Free trade, open financial markets and intellectual property rights are economic goals worth pursuing. But that is not to say that the preferred path is necessarily the straight line of ideological purity. TRIPS reflects "a mentality born of the American triumphalism of the 1990s," Sachs said. "There is a widespread sense that that approach to development policy has to be recalibrated."

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