This volume extends and updates the author's Intellectual Property Rights in the Global Economy (Institute for International Economics, 2000), which dealt with the international economics of intellectual property rights (IPRs), a topic that had sprung to prominence with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) included as part of the WTO package. TRIPS brought IPRs into the international trading regime, and the 15 years since TRIPS set minimum standards for the global IPR system has seen that system strengthened and broadened. Patent, trademark, and copyright laws in developing countries have converged toward those in the developed world, and new standards have been established for protecting geographical indications, plant varieties, computer chip designs, electronic databases, and internet transmissions. Despite this ‘progress’, the pressure on developing countries to upgrade standards remains, a pressure they are of a mind to resist. In these circumstances of change and controversy, an update and assessment from arguably the leading expert on the international economics of IPRs is welcomed. Maskus declares four objectives for this volume: (i) taking stock of recent economic research on IPRs in the global economy; (ii) assessing the changes in the global IPR system since TRIPS; (iii) providing an economic analysis of critical issues in this system; and (iv) examining the inherent conflicts between the private rights endowed by IPRs and the provision of public goods related to them.
Readers will find it useful to have the literature on the diverse types of IPRs summarized and assessed in one place and accompanied by an extensive bibliography. The author applauds the emergence of case studies as an important supplement to the previous (over-) reliance on cross-country regression analysis. He concludes that the evidence on the links between stronger global IPRs and innovation is open to interpretation; that there is little evidence that TRIPS has promoted technology transfer to the poorest economies as promised; or that the TRIPS patent reforms have stimulated research and development (R&D) in medicines to treat the diseases prevalent in those countries. The overall impression left with this reader was of a vast research area, where progress has been made but where much is still to be done, and where there are limits on what empirical economic analysis can be expected to achieve.
Given the increasing globalization of product and factor markets, some attempt to constrain and coordinate national IPR regimes was inevitable, and TRIPS was the outcome. Developing countries have strengthened their regimes in line with their TRIPS commitments, but have pushed back where they can (in the World Intellectual Property Organization, for example). Developed countries have maintained the pressure for stronger regimes (through, for example, the TRIPS-Plus agenda in bilateral preferential trading arrangements). One difficulty in evaluating these pressures from a normative perspective is the absence of a ‘benchmark’ – i.e. a sense of what an ideal global IPR system, treating the world as one, would look like. This is in contrast to trade policy, where free trade can be taken as a reasonable approximation to an ideal world trade regime, since countries typically don't choose to distort their internal trade. While all countries can benefit from multilateral tariff reductions, the imposition of minimum IPR standards benefits the large developed economies (the innovators) at the expense of the large low and middle income economies (the imitators) who had to strengthen their regimes, presumably at the expense of some local firms. This opposition of interests has influenced how IPRs are viewed by the two sides. The author laments that in developed countries IPRs are now too often considered an end in themselves; as a measure of innovation performance or as a strategic means of protecting the competitive position of existing firms. The absence of a legal requirement that patent holders must work patents opens the door to patent trolls whose very actions violate the economic logic of why their patents were awarded. He argues that IPRs should resume their proper role as a means of ‘promoting innovation and creativity, diffusing new goods and ideas around the world, enhancing cultural opportunities, encouraging economic development, and even reducing poverty’ (p. xiv).
One consequence of the strengthening of the global IPR system has been an increase in patent applications accompanied by a decline in the average quality of patents issued. There is little international consistency in patent granting, even among the large developed economies. Maskus cites research where patent applications approved in the US were only 73% likely to be approved in the EU and only 45% likely to be approved in Japan. Given the resource constraints facing national patent offices and the delays in approvals that result, greater collaboration among them is desirable, constrained though it will be by concerns about national sovereignty and fears of a ‘race to the bottom’ in patent-granting standards.
Besides collaboration between national patenting and standard-setting authorities, the critical issues in the author's view include: parallel imports, geographical indications, and international trade in digital goods. The diversity of these issues reflects the diversity of the ‘rights’ collected under the IPR label. The potential for IPRs to allow rights-holders to discriminate across national markets has led to claims for wider use of parallel trade to facilitate arbitrage, and counterclaims that parallel trade may facilitate the importation of counterfeit or unsafe products. In the author's view, the evidence indicates that parallel trade can be regulated to alleviate safety fears, but that parallel trade is likely to be too costly and in insufficient volume to come close to arbitraging away price differences. The main beneficiaries may be the parallel traders, and if rights-holders adjust pricing in response, the main losers may be the often-poor countries that are the source of the parallel exports.
Global copyright infringement is cheap and easy in the digital age. With technology changing rapidly in ways that may be difficult to foresee, the protection of copyrights becomes problematic. The author favours digital licensing regimes and real competition in rights collection societies. Defining and protecting the interests of the custodians of traditional ‘knowledge’ – medical treatments, oral histories, linguistic expressions, music, and the like – remains an unresolved issue. How can we ensure that the traditional custodians are appropriately compensated if this knowledge is exploited commercially by others? A major difficulty in applying IPR rules in these areas lies in establishing and enforcing ownership, since copying is a long-established tradition by which skills are passed on.
Geographical labels provide useful information where a product's origin has a significant bearing on its quality that cannot otherwise be observed prior to purchase. But over time many geographical expressions have become generic, merely indicating the characteristics of the product. The author argues that as long as the label declares actual geographical origin, purchasers are unlikely to be misled or misinformed. Unfortunately, the strict interpretation applied in practice rules out such informative labelling.
Conflicts between private rights and the provision of public goods are highlighted in public health, green technologies, agriculture and the genetic commons, and global access to scientific knowledge. These debates often centre on ethical issues, and the main contribution of economic analysis is to point out the trade-offs involved. One concern here is that some large advanced countries are increasingly viewing IPRs in a ‘protectionist’ way. This shows in the expansion of patent eligibility to discoveries (genetically engineered organisms, for example) that are so closely tied to natural phenomena that they might be considered part of the public domain. Similar concerns arise about access to copyrighted scientific and educational material. Universities are now encouraged to patent the outputs of their publically funded research. While promoted as encouraging its more rapid commercialization, this strategy also meshes nicely with administrators' desires to reduce their dependence on government funding. The expectation is that the commercial products of such publically funded research will be produced domestically.
Overall, this is a fine body of work. It provides an accessible assessment of the issues that face the global IPR system. These issues are varied, often complex and evolving. Rigorous economic analysis is an important input into their resolution, but not the only input. The author's own assessment of his approach and analysis are given in the penultimate paragraph. ‘As an international economist, my role in writing this book has been to illustrate these various controversies and analyse the economic tradeoffs, difficulties, and opportunities they pose. I have tried to bring empirical evidence to bear where it exists. Unfortunately, little reliable and systematic evidence is available once we depart from basic questions of innovation, economic growth, and technology transfer. Thus, one must rely on both basic economic logic and common sense when discussing such issues as the impact of scientific knowledge diffusion and the protection of creativity in poor countries’ (p. 327). There you have it. A world of rapid and continuous change requires flexible institutions and constant monitoring. Predicting the evolution of the global IPR system through the twenty-first century, calls for the skills of the science fiction writer. In the meantime, we eagerly await a further update from this source in a decade or so.
