[Ecommerce] Intellectual-property rights and wrongs By Joseph E. Stiglitz

[Manon Ress]

http://www.dailytimes.com.pk/default.asp?page=3Dstory_16-8-2005_pg5_12

Intellectual-property rights and wrongs

By Joseph E. Stiglitz

Last October, the General Assembly of the World Intellectual Property
Org-anization (WIPO) decided to consider what a development-oriented
intellectual property regime might look like. The move was little
noticed, but, in some ways, it was as important as the World Trade
Organization=92s decision that the current round of trade negotiations
be devoted to development. Both decisions acknowledge that the
current rules of the international economic game reflect the
interests of the advanced industrial countries =96 especially of their
big corporations =96 more than the interests of the developing world.

Without intellectual property protection, incentives to engage in
certain types of creative endeavors would be weakened. But there are
high costs associated with intellectual property. Ideas are the most
important input into research, and if intellectual property slows
down the ability to use others=92 ideas, then scientific and
technological progress will suffer.

In fact, many of the most important ideas =96 for example, the
mathematics that underlies the modern computer or the theories behind
atomic energy or lasers =96 are not protected by intellectual property.

Academics spend considerable energy freely disseminating their
research findings. I am pleased when someone uses my ideas on
asymmetric information =96 though I do appreciate them giving me some
credit.

The growth of the =93open source=94 movement on the Internet shows that
not just the most basic ideas, but even products of enormous
immediate commercial value can be produced without intellectual
property protection.

By contrast, an intellectual property regime rewards innovators by
creating a temporary monopoly power, allowing them to charge far
higher prices than they could if there were competition. In the
process, ideas are disseminated and used less than they would be
otherwise.

The economic rationale for intellectual property is that faster
innovation offsets the enormous costs of such inefficiencies. But it
has become increasingly clear that excessively strong or badly
formulated intellectual property rights may actually impede
innovation =96 and not just by increasing the price of research.

Monopolists may have much less incentive to innovate than they would
if they had to compete. Modern research has shown that the great
economist Joseph Schumpeter was wrong in thinking that competition in
innovation leads to a succession of firms. In fact, a monopolist,
once established, may be hard to dislodge, as Microsoft has so amply
demonstrated.

Indeed, once established, a monopoly can use its market power to
squelch competitors, as Microsoft so amply demonstrated in the case
of the Netscape Web browser. Such abuses of market power discourage
innovation.

Moreover, so-called =93patent thickets=94 =96 the fear that some advance
will tread on pre-existing patents, of which the innovator may not
even be aware =96 may also discourage innovation. After the pioneering
work of the Wright brothers and the Curtis brothers, overlapping
patent claims thwarted the development of the airplane, until the
United States government finally forced a patent pool as World War I
loomed. Today, many in the computer industry worry that such a patent
thicket may impede software development.

The creation of any product requires many ideas, and sorting out
their relative contribution to the outcome =96 let alone which ones are
really new =96 can be nearly impossible.

Consider a drug based on traditional knowledge, say, of an herb well
known for its medicinal properties. How important is the contribution
of the American firm that isolates the active ingredient?
Pharmaceutical companies argue that they should be entitled to a full
patent, paying nothing to the developing country from which the
traditional knowledge was taken, even though the country preserves
the biodiversity without which the drug would never have come to
market. Not surprisingly, developing countries see things differently.

Society has always recognized that other values may trump
intellectual property. The need to prevent excessive monopoly power
has led anti-trust authorities to require compulsory licensing (as
the US government did with the telephone company AT&T). When America
faced an anthrax threat in the wake of the September 11, 2001,
terrorist attacks, officials issued a compulsory license for Cipro,
the best-known antidote.

Unfortunately, the trade negotiators who framed the intellectual-
property agreement of the Uruguay trade round of the early 1990=92s
(TRIP=92s) were either unaware of all of this, or more likely,
uninterested. I served on the Clinton administration=92s Council of
Economic Advisors at the time, and it was clear that there was more
interest in pleasing the pharmaceutical and entertainment industries
than in ensuring an intellectual-property regime that was good for
science, let alone for developing countries.

I suspect that most of those who signed the agreement did not fully
understand what they were doing. If they had, would they have
willingly condemned thousands of AIDS sufferers to death because they
might no longer be able to get affordable generic drugs? Had the
question been posed in this way to parliaments around the world, I
believe that TRIP=92s would have been soundly rejected.

Intellectual property is important, but the appropriate intellectual-
property regime for a developing country is different from that for
an advanced industrial country. The TRIP=92s scheme failed to recognize
this. In fact, intellectual property should never have been included
in a trade agreement in the first place, at least partly because its
regulation is demonstrably beyond the competency of trade negotiators.

Besides, an international organization already exists to protect
intellectual property. Hopefully, in WIPO=92s reconsideration of
intellectual property regimes, the voices of the developing world
will be heard more clearly than it was in the WTO negotiations;
hopefully, WIPO will succeed in outlining what a pro-developing
intellectual property regime implies; and hopefully, WTO will listen:
the aim of trade liberalization is to boost development, not hinder
it. dt - ps

(Joseph E. Stiglitz, a Nobel laureate in economics, is Professor of
Economics at Columbia University and was Chairman of the Council of
Economic Advisers to President Clinton and Chief Economist and Senior
Vice President at the World Bank. His most recent book is The Roaring
Nineties: A New History of the World=92s Most Prosperous Decade.)





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Manon Ress
manon.ress@cptech.org
www.cptech.org

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