Intellectual property Rights and Economic Development

by Aiden Bedford and Rui Sihombing.

The transfer of ideas and technology throughout all of the human history has been a critical factor in the collective advancement of humanity. All innovations, from the wheel, to the stirrup, to the furrow plough, were shared amongst all who came into contact with these simple mechanical marvels. Take the hypothetical scenario in which people from the past could see into the future. Witnessing the discussion around intellectual property rights (IPRs) it is almost certain that the notion that someone could own an idea would be a distinctly foreign one.

Yet that is not the case today. Not only is it accepted as a given amongst most ordinary people that intellectual property rights are necessarily goods, it has come to be a central axiom within the field of development economics. Mainstream economists argue that IPRs are crucial for the process of development to occur. Without them, the necessary incentive structures to develop new technologies, innovate and accumulate sophisticated labour-saving capital will be demised. Without such an institutional framework, these impoverished nations will remain as such, in perpetuity. This line of rhetoric is best surmised by the US-based National Law Centre for Inter-American free Trade which stated that, “the historical record in the industrialized countries, which began as developing countries, demonstrates that intellectual property protections has been one of the most powerful; instruments for economic development, export growth, and the diffusion of new technologies, are and culture.”

(Just as a note for late: The United States itself had patent laws which allowed patents to be granted without any proof of originality till 1836).

The first nation to industrialize was Britain and consequently there is much debate as to why it happened there. Was it a labour shortage? Good institutions and strict property rights? Possibly. No one knows for certain. Yet what is a certainty is that the basis for the industrialization of the continental Europe was entirely dependent on technology transfer from Britain. Surprisingly, despite what the National Law Centre for Inter-American free Trade would have you believe, the game of catch-up for those nations who were not so as developed as their neighbours on the British Isles was not one that occurred on the basis of formal intellectual property rights recognition. While some transfers of technology were legitimate, a significant portion of these “transfers” occurred through illegitimate means. State sponsored theft, espionage, explicit disregard for foreign IPRs and lax domestic IP law all constituted the means by which most nations managed to catch up to the British.

Another nation which fooled the United Kingdom in undergoing industrialization was the Netherlands. Yet here contrary to this narrative we have been sold we see no evidence of strict system of IP laws. They first introduced patent laws in 1817, and then abolished then in 1896. Yet even during this short time, Dutch patent laws were so lax that an individual could patent an imported invention and there was not penalty for using patented products without permission, as long as it was necessary part of running a business.

Yet this is not an isolated case. Switzerland which is today the most industrialized nation on Earth on per capita basis, did not provide any protection to any form of intellectual property till 1888. Germany, which was allowing the illegal sale of counterfeit Sheffield steel cutlery with fake logos, went on in 1907 to threaten Switzerland with trade sanctions in retaliations to their continued unlicensed use of German chemical and pharmaceutical innovations. The Swiss took their time however, it would be another 47 years before their patent law resembled the stringency of other advanced countries (although much to the dismay of the Germans — chemical substances remained unpatentable until 1978).

It is a curios case, the, that the description of the development process as given to us by the National Law Centre for Inter-American free Trade bears almost no resemblance to the historical record. So why is this important? Well, the developing nations are exactly that today: Developing. Not much progress has been made since the 1990s when the signatory nations to the WTO were required to institute strict domestic IP laws, and recognize the IP of foreign nations.

We must ask then, regardless of how well intentioned these people may or may not be, based solely on how ill-informed many defenders of the trade related IPRs are in relation to the historical importance of the IPRs in promoting economic development, weather a different set of rules are indeed necessary, more desirable and indeed simply just fair. New rules should be drafted and the same allowances be made to these nations in their own game of catch-up. A more lax system to encourage the proliferation of ideas — and maybe some thievery here and there.