In China And India, Stronger Intellectual Property Is Unnecessary
from the red-herring dept
This is the fifth post in a series of posts looking at the question of intellectual property rights in both China and India. We’ll be adding new posts to this series each week for the next few weeks.
Access Is More Important Than "Incentive"
China and India are countries of enormous internal economic differences, primarily stemming from productivity gaps. The technologies that enable world-class economic efficiency in some parts of China and India need to be diffused throughout the country, but the monopoly pricing associated with IPR limits the ability of the poor to access empowering technology.
Despite the presence of high-tech hubs like Bangalore and Hyderabad, India ranks 63rd out of 72 surveyed countries for the Technology Achievement Index (Dahlman 2005). In China, Beijing and Shanghai have knowledge-intensities 6.1 and 5.3 times the national average, respectively (Dahlman 2001). These disparities indicate an inability to effectively diffuse innovations, likely resulting from the higher prices and protectionism associated with increased intellectual property. The low productivity in most Indian enterprises indicates an enormous opportunity to make better use of existing knowledge; one analysis “implies that the output of the Indian economy could be as much as 4.8 times higher if enterprises were to absorb and use the knowledge that already exists in the economy” (Dutz 2007). Intellectual property is certainly an important factor, but not the only factor preventing this diffusion: after all, India’s remarkable agricultural productivity growth known as the Green Revolution took place prior to global intellectual property harmonization.
Because R&D requires much more than financial incentives (educated workforce, infrastructure, etc.), close to 80% of global R&D is carried out in the developed world. Therefore, innovation in the developing world is more appropriately adoption and adaptation of existing technology. Instead of hoping that increased intellectual property will attract it (likely a fool’s errand), there are other ways to access global knowledge such as reverse engineering, imitation, utilizing diaspora linkages and networks, and simply purchasing knowledge-embodying goods. Even with broadly condemned intellectual property policy, China and India remain highly desirable locations for the R&D labs of major international corporations. Several surveys indicate that India is the preferred location for innovation centers, likely stemming from the critical mass of low-cost, highly-skilled knowledge workers – the average annual salary of a scientist or engineer in India is $22,600, compared to $90,000 in the United States. Additionally, given the ability to digitize and internationally transfer much of their work, India is attractive regardless of concerns about intellectual property infringement (Dutz 2007). And the benefit to India is impressive:
“Between 1998 and 2003, MNCs made $1.3 billion in R&D investments in India. More than 300 MNCs are setting up R&D and technical centers in India. They employ 80,000 scientists and engineers and spend about $4 billion a year. Planned investment totals $4.7 billion… The growth of MNC R&D centers generates positive spillovers to the Indian economy, with the demonstration effect to indigenous corporations being the most critical” (Dutz 2007).
Although MNCs state their preference for higher intellectual property, a recent study noted that “it is unlikely that product patents will make a dramatic difference to their choices;” instead a change in IP will likely most affect domestic firms who are increasing amount and type of R&D without the incentive of intellectual property (Lanjouw 1997). India, and China where a similar trend is present and increasing, can further their attractiveness to FDI through tax breaks, increased liberalization and actively utilizing their diaspora.
Unnecessary for Innovation. Period.
Stronger intellectual property may also be unnecessary in another way. Although they are promoted as a tool for enhancing economic competitiveness, readers of Techdirt will know that their effectiveness is, at most, questionable. In the 1980s, there was a boom in American patenting activity, seemingly corresponding with changes to intellectual property laws that were made in response to worries about diminishing national competitiveness (Dahlman 2001). A measure of useful innovation, Total Factor Productivity, should have increased accordingly with the rise in useful, novel and non-obvious inventions, but this has not been the case (Boldrin 2008), providing compelling evidence that, contrary to common usage, patent activity is not equitable with economic benefits.
But even if we take patent activity as a reliable indicator of useful innovation, the case for stronger IP is doubtful. Strengthened intellectual property is unlikely to have caused the increase in American patenting in the 1980s: a study of patent reforms over 150 years in 60 countries confirms “that reforms have few positive effects on patent applications by entities based in the country undertaking the policy change” (Lerner 2002).
If traditional patents are not indicative of innovation and productivity-enhancement, is it possible that newer, related exclusive rights could do so? One such right, known as Plant Breeder’s Rights, provides patent-like protection to agricultural innovations. Here again, the evidence fails to provide compelling support for monopoly rights. The premier international treaties on the subject, the PVPA/UPOV, have not led to an increase in experimental or commercial wheat yields; instead, agricultural rights take away from the public domain seeds by allowing commercial entities to patent hardly novel strains. When enforced, these exclusive rights price previously affordable agricultural inputs beyond the means of the millions of subsistence farmers in China and India (Boldrin 2008).
Instead of focusing on intellectual property as the sole source of incentive for innovation, China and India should actively explore and promote ways in which to promote investment in public goods without bringing the distortions of monopoly rights. As legal scholar Larry Lessig writes in The Future of Ideas, “There is no necessity to marry the incentive to innovate to conferral of monopoly power in innovations” (Lessig 2002). Digital, networked technology expands the ability for people to collaborate across time and space, significantly decreasing the up-front costs of innovation that intellectual property seeks to recuperate through exclusive rights. Models of open source innovation have proven spectacularly successful in software development where innovation is a cumulative and competitive process (Jaffe 2004). Open licensing models also hold promise in biotechnology where much of the research costs are provided by academic researchers who have an interest in promoting knowledge widely (Kapczynkski 2005). In fact, IT and biotechnology were successful in large part due to the freely available research made possible by university knowledge (So 2008). Funding can also be provided by non-profit entities such as government-awarded prizes for socially desirable innovations (Love 2007). Finally, even in a market without intellectual property, large up-front costs associated with innovation can be recouped through trade secrecy and the first-mover advantage (Jaffe 2004).
Other posts in this series:
- Do China And India Really Want Stronger Intellectual Property?
- A Brief History Of Intellectual Property In China And India
- Why Might China And India Want To Strengthen National Intellectual Property Policy?
- Why Increased IP In China And India Is Likely To Disproportionately Benefit The Developed World
- In China And India, Stronger Intellectual Property Is Unnecessary
- There Is No Harmony In A Patent Thicket
- The Way Forward On Intellectual Property For China And India
Filed Under: china, developing nations, india, intellectual property, patents
Comments on “In China And India, Stronger Intellectual Property Is Unnecessary”
Is this over yet?
Emulation or imitation
I’m really enjoying this series. If it takes too much concentration for you, feel free to skip these articles. No one is making you read them.
Anyway, I find it extremely ironic that countries with so many have-nots would be so eager to adopt a system that is one of the greatest tools of the haves at maintaining an unfair advantage over the have-nots. Don’t they see that foreign companies are going to swoop in and lock up the patent market before most locals have even figured out that it even exists?
It seems as if China and India want to emulate the characteristics of foreign markets that provide the high standard of living they want for their own people. But in their zeal they are simply copying anything they can without examining the costs and benefits of individual systems. They may not realize that our standard of living may be in spite of some of these characteristics rather than because of them. Sadly, the people that will be most affected by such mistakes have neither the knowledge nor the voice to prevent it.
Wish there was something that could be done from this end to help it. Anyway, really enjoying this series and hope to see more like it in the future.
Re: Emulation or imitation
It’s a highly speculative link fest that reads more like a grad thesis. I trust that the author got a good mark for it, but it is the sort of thing that would be better displayed on another website and given a short link to the complete series once off of techdirt.
It has been a long, long deal, and much of what is in there about China isn’t exactly on point. I think it is a result of writing a paper based on collecting other people’s comments rather than actually doing it yourself, but I could be wrong.
Emulation or imitation
‘meow-meow’, says the cat.
‘ruff-ruff’, says the dog.
‘wah-
“It’s a highly speculative link fest that reads more like a grad thesis. I trust that the author got a good mark for it, but it is the sort of thing that would be better displayed on another website and given a short link to the complete series once off of techdirt.
It has been a long, long deal, and much of what is in there about China isn’t exactly on point. I think it is a result of writing a paper based on collecting other people’s comments rather than actually doing it yourself, but I could be wrong.”
-wah’, says the baby
Re: Emulation or imitation
A truly deep, meaningful comment.
Re: Emulation or imitation
Kevin is citing actual sources, while you source a preschooler’s toy.
You make a very insightful point, indeed. If I may add to your preschool toy elucidation, as that seems to be the level of your comprehension, don’t pull on the string too hard, as you’ll break it.
Mr. Donovan,
It seems to me that you obsesse far, far too much in your constant references to IPR as “holding back innovation” in developing countries. You treat IPR as if it consists solely of patents and copyrights, a view that most certainly will change over time as you come to realize that these two bodies of law are but merely a subset of a much larger class of “competition law. Know-how, show-how, trade secrets, confidential information, contracts, etc. all form an integral part of the legal “tools” at the disposal of MNCs. If patent and copyright law were to disappear off the face of the earth tomorrow, a whole host of other legal mechanisms stand at the ready to pick up the slack, and pick up the slack they will in ways that will almost certainly cause even the most ardent anti-patent and anti-copyright advocates to give pause for concern…some of them even being likely to call for their reinstitution in one form or another.
Whatever may be their downside, at least patent and copyright law have the beneficial effect of being relatively predictable and imbued with a large number of defenses that can be sucessfully asserted against rights holders. In stark contrast, there are significantly fewer defenses when it comes to the other bodies of law that can be used in their place.
Rail against patent and copyright law if you feel you must, but I daresy that at some time in the future as you become more familiar with how companies go about conducting business you will come to realize that they are not the “devil incarnate” as some would have you believe. It would be a foolhardy company indeed that believes patents and copyrights are the only or most effective aspects of law upon which to base its business operations.
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It seems to me that you obsesse far, far too much in your constant references to IPR as “holding back innovation” in developing countries. You treat IPR as if it consists solely of patents and copyrights, a view that most certainly will change over time as you come to realize that these two bodies of law are but merely a subset of a much larger class of “competition law.
That’s a neat little twist. Rather than *actually* respond to the question of whether or not it holds back innovation (of which there is significant evidence) you make a statement as if you are going to disprove, but then say something totally different.
If patent and copyright law were to disappear off the face of the earth tomorrow, a whole host of other legal mechanisms stand at the ready to pick up the slack, and pick up the slack they will in ways that will almost certainly cause even the most ardent anti-patent and anti-copyright advocates to give pause for concern…some of them even being likely to call for their reinstitution in one form or another.
Yes, that’s why none of those things were actually problems in societies without patents and copyrights… but why let facts get in the way?
Whatever may be their downside, at least patent and copyright law have the beneficial effect of being relatively predictable and imbued with a large number of defenses that can be sucessfully asserted against rights holders.
Yes, predictably innovation hindering. You think predictably bad is a good thing?
Rail against patent and copyright law if you feel you must, but I daresy that at some time in the future as you become more familiar with how companies go about conducting business you will come to realize that they are not the “devil incarnate” as some would have you believe.
I don’t see how you can read Kevin’s well researched, detailed and cited writeup and claim he’s arguing that they are “the devil incarnate.” I like how you fail to refute a SINGLE point in there, and simply respond with “you don’t know nuthing.”
You must be a patent attorney.
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mike: name one russian/indian/chinese musician — not one who is here in the states and happens to be a foreign national (like avril or celine being canadian), but someone who “broke through” in one of the countries which historically lacks IPR. then ask yourself why everyone else including those in other countries can name lots of american musicians.
i think the reason the previous AC writes off kevin’s “well researched” article is because it’s it reads like an essay written by a college kid in a poli sci course (maybe because it is). it might be undergrad poli sci B+ material, but it’s definitely not on par to “the industry”. not only does kevin lack a reputation, but everything in his argument has been extensively argued before, exactly on his issue. as a result, his article should be 60% or more direct quotations. even when supreme court justices (or posner or easterbrook — the most cited judges of all time) write law comments, they’re easily 30% quotations or more.
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Name a Russian act?
Tatu.
A great Russian act that broke through international markets using the Howard Stern school of marketing.
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Sigh……
This is a series of articles about “emerging” countries, and among its points is the importance of establishing an industrial base that in many respects appear to mirror what you have often written about concerning Switzerland. i.e., a heavy reliance on reverse engineering and trade secrets. I find it difficult, if not impossible, to equate such an approach with being “innovative”. Copying per se is not innovation. While trade secrets may involve under their protective cover some measure of “innovation”, the widespread benefits of such “innovation” is difficult to achieve and be dispersed when retained under a cloak of secrecy. Moreover, even trade secrets can be equated with “government monopolies” as you define the term because their existence is crafted by law and their enforcement is subject to judicial enforcement.
In technological fields of endeavor I do not equate “copy-catting” with innovation. I reserve that term for when users of the associated technology begin to expand upon the existing knowledge base…in some ways similar to what transpires in the field of copyright when one takes an existing work and expands upon it via the creation of a transformative work. Rather than a slavish copy, intellectual creativity has been employed to create something that did not previously exist.
While a country can doubtless increase its economic lot by copying the work of others, true growth in large measure depends upon taking such work and expanding upon it to add technological value. In my experience it is at this point that a sea change begins to emerge. Adding technological value in many areas requires a concerted effort to support R&D, and it follows as a normal matter of the human condition that those who commit to R&D for adding to pre-existing technological knowledge are naturally prone to try and protect their investment. Whether or not you agree with the means employed, to date the mechanisms of patents and copyrights are employed in many instances as a potential investment protection measure.
For all their warts, these two mechanisms do have at least one beneficial characteristic…they are generally well understood, they offer some measure of stability and predictability, and they have a large interpretive base that to varying degrees provide limits on how they may be employed within the bounds of law. Merely by way of one example, the “first sale doctrine” imposes such a limit. Unique to the area of copyright is the “fair use doctrine”.
My reference to other laws standing in the wings and at the ready was merely to note that these other laws are not so limited, and in many instances can result in draconian measures that are much more difficult to successfully challenge.
Quite some time ago I cited an article by a noted academic that was directed to this very issue. I believe you stated you would read it, but the lack of any response thereafter suggests to me that it was overlooked. Alas, I do not have the cite at hand or I would again link to it.
I am curious why you feel the need to ponder if I am an attorney. I say this only because no matter what my professional status, what I note above largely reflects the thinking of most corporate executives. They do not, of course, go through life stating “we will invent because of patents” or “we will author because of copyrights”. What they do do in the vast majority of circumstances is obsesse over what “legal tools” are at hand to try and preserve their investment. Of course, they also obsesse over many other business matters as well, such as establishing good customer relationships, effective marketing, strategic associations with other companies, the insitution of tight internal fiscal controls, etc. It is the rare company indeed that places the advice and counsel of attorneys at the forefront of its business decision-making process.
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This is a series of articles about “emerging” countries, and among its points is the importance of establishing an industrial base that in many respects appear to mirror what you have often written about concerning Switzerland. i.e., a heavy reliance on reverse engineering and trade secrets. I find it difficult, if not impossible, to equate such an approach with being “innovative”. Copying per se is not innovation.
Heh. You really ought to look at the research one of these days. Copying per se may not be innovative, but these firms don’t stop at copying. Being just a copycat isn’t very good business. Improving the offerings is a good business. Thus it’s the COMPETITION that leads to innovation.
While trade secrets may involve under their protective cover some measure of “innovation”, the widespread benefits of such “innovation” is difficult to achieve and be dispersed when retained under a cloak of secrecy. Moreover, even trade secrets can be equated with “government monopolies” as you define the term because their existence is crafted by law and their enforcement is subject to judicial enforcement.
Assumes, incorrectly, that the problem is actual “copying.” That’s rarely the case. What’s more common are independent entities creating the same thing themselves. Trade secrets have no impact there.
While a country can doubtless increase its economic lot by copying the work of others, true growth in large measure depends upon taking such work and expanding upon it to add technological value.
Indeed. And that’s exactly what happens — thanks to competition, not patents.
it follows as a normal matter of the human condition that those who commit to R&D for adding to pre-existing technological knowledge are naturally prone to try and protect their investment. Whether or not you agree with the means employed, to date the mechanisms of patents and copyrights are employed in many instances as a potential investment protection measure.
Yes, protectionism is normal. That does not mean it’s good or healthy (even for those who get it).
For all their warts, these two mechanisms do have at least one beneficial characteristic…they are generally well understood, they offer some measure of stability and predictability, and they have a large interpretive base that to varying degrees provide limits on how they may be employed within the bounds of law.
Yes, but if the result of that predictability is a NET NEGATIVE on society, who in their right mind would want to keep it… other than the patent lawyers and parasites who profit from it?
Quite some time ago I cited an article by a noted academic that was directed to this very issue. I believe you stated you would read it, but the lack of any response thereafter suggests to me that it was overlooked. Alas, I do not have the cite at hand or I would again link to it.
Ahhhhhh. You’re MLS. Funny. Wasn’t it just a month ago you promised that you’d post under your real name.
Funny.
No, I read that paper. I didn’t have time to write up anything on it, but there were massive problems with it and it was wholly unconvincing. I didn’t think it was worth wasting time over debunking since it was so narrowly focused.
I am curious why you feel the need to ponder if I am an attorney. I say this only because no matter what my professional status, what I note above largely reflects the thinking of most corporate executives.
Your reasoning made it clear that you profited unfairly from the system. I didn’t realize you were MLS, though, in retrospect, it should have been obvious from your language.
Funny, I’ll point out that you still haven’t actually responded to any of the evidence Kevin presented.
shills
Jaffe, Lemley and Lerner are shills for Microsoft, et al…
As below, Mr. Lemley is paid by those pushing patent “deform” and therefore biased …
© 2007 Mark A. Lemley & Carl Shapiro. We are grateful to Apple Computer, Cisco
Systems, Intel, Micron Technology, Microsoft, and SAP for funding the research reported in this Article. We emphasize that our conclusions are our own, not theirs.
http://271patent.blogspot.com/2008/08/patent-reform-crawling-back-in-2008.html
http://ipbiz.blogspot.com/2009/02/more-on-lemley-and-intellectual.html
Re: shills
As below, Mr. Lemley is paid by those pushing patent “deform” and therefore biased …
Hahahahhaha. Yes, that explains why Lemley just came out with an entire book against the patent reform bill in Congress.
Credibility? You ain’t gone any.
In the meantime, you talk about Lemley being a shill and then you point to IPBiz?!? HA!
“Wasn’t it just a month ago you promised that you’d post under your real name.”
Yes. For reasons unknown every time I clean out my IE tracks I lose many cookies that I have designated to be retained. Techdirt appears to be one of those that gets scrubbed no matter what I do (my Google preferences is another).
Hence, sometimes it is just easier to say “screw it” and go with the flow of automatically being named an AC. From my presentations, however, it should be relatively clear who I am.
As for “refuting” all or part of the article, it was not my intent to do so in my original comment. My intent was merely to note that the elimination of patents and copyrights would likely have little impact for enhancing “innovation” given a whole raft of legal substitutes that can easily fill the gap…some of which give an entirely new meaning to the word “draconian”.
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As for “refuting” all or part of the article, it was not my intent to do so in my original comment. My intent was merely to note that the elimination of patents and copyrights would likely have little impact for enhancing “innovation” given a whole raft of legal substitutes that can easily fill the gap…some of which give an entirely new meaning to the word “draconian”.
If that were true then there would be ample evidence of that happening in societies without patent protection or with weak patent protection. So you’ve got a pretty big problem in supporting your claim, because the evidence says that did NOT happen in those societies…
So…?
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Good point, but I do believe that as foreign investment in such countries rise there will be pressure brought to bear for much stronger judicial enforcement of contracts, torts, unfair competition, etc.
Good lawyers use laws as tools. If one of the tools is broken or lost, they simply look for another one that will suit a client’s needs. Hence my opinion that even the wholesale elimination of patent and copyright laws would simply substitute one “devil” for another.
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Good lawyers use laws as tools. If one of the tools is broken or lost, they simply look for another one that will suit a client’s needs. Hence my opinion that even the wholesale elimination of patent and copyright laws would simply substitute one “devil” for another.
Then why not deal with each devil rather than pretending that “oh well, we know this devil, and we know it’s bad, but let’s not do anything about it.”
re: superfluous anti-charismatic floating .......
Actually, you ‘source’ the childs toy, I never mentioned it…,
my point was…
If you don’t like a posted article, don’t participate in the discussion.
But,
please,
please don’t whine like a baby…
gee, looks like your
‘as that seems to be the level of your comprehension, don’t pull on the string too hard, as you’ll break it.’
might be applied to yourself.
don’t strain yourself to badly trying to understand the humor of my comments.
and as always- Have a great day!
“Then why not deal with each devil rather than pretending that “oh well, we know this devil, and we know it’s bad, but let’s not do anything about it.””
Perhaps one simple example is to note that I find it far easier to invalidate an overreaching patent than an overreaching contract.
Moreover, at least within the US the elimination of federal patent and copyright law would have profound consequences, not the least of which is that it would likely open a door through which each state could pass and enact its own version of what it perceives as being in the public good.
Quite honestly, as I read the academic papers published by those with a jaundiced view towards patents and copyrights I am surprised that none of them (to my knowledge) have taken the argument to the next level; namely, does Article 1, Section 8, Clause 8 empower the federal government to declare that no rights, federal or state, may be accorded to authors and inventors?
Now THAT would be an interesting paper to read because it goes to the very heart of the debate.
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Funny.
Mike guessed that you were a patent attorney (in his first comment, last line).
You asked, “I am curious why you feel the need to ponder if I am an attorney.”
Maybe just because it’s fun to guess at something, and find out if you’re right. It’s best if Mike does it despite the fact that you didn’t use jargon, refer to your job at all, but just argue a specific position.
It’s also relevant to the argument, because you may have some bias. Safe to say that what’s good for patent attorneys is not necessarily what’s good for society.
You never did answer Mike, but now you wrote:
“Perhaps one simple example is to note that I find it far easier to invalidate an overreaching patent than an overreaching contract.”
So I guess that Mike was right. That’s funny.
To be clear, there’s nothing inherently wrong with being a patent attorney. There’s surely good ones and bad ones, and surely both types post comments here and add to the discussion, as I’m glad you do.