New York Times
14 October 2002
Steve Lohr
http://query.nytimes.com/search/abstract?res=F30D15F93B5E0C778DDDA90994DA404482

Debate on Intellectual Property

In the 19th century, the United States was both a rapidly industrializing nation and - as Charles Dickens, among others, knew all too well - a bold pirate of intellectual property.

But these days, when it comes to dealing with developing nations around the world, the United States seems to be ignoring its own swashbuckling heritage. Or at least that's the implication of a recent report by the international Commission on Intellectual Property Rights. The report recommends that the World Trade Organization's treaty on intellectual property rights be made much more flexible so that developing nations, 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 like computer software, pharmaceuticals and biotechnology. But Americans can look back to this nation's 19th-century experience in book publishing, for example, to understand the developing world's viewpoint.

Back then, American law offered copyright protection - but only to citizens and residents of the United States. The works of English authors were copied with abandon and sold cheap to an American public hungry for books. This so irritated Mr. Dickens - whose "Christmas Carol" sold for 6 cents a copy in America, versus $2.50 in England - that he toured the United States in 1842, urging the adoption of international copyright protection as being 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 intellectual property protection abroad. So Congress passed a copyright act extending protection to foreign works in return for similar treatment for American authors overseas.

Indeed, the economies that were shining success stories of development, from the United States in the 19th century to Japan and its East Asian neighbors like 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 United States-led push for stronger intellectual property rights worldwide.

As part of a sweeping trade deal reached in 1994, the member nations of the World Trade Organization 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 1990's that the "American model" - free trade, wide-open capital markets and strong intellectual property protection - was the sure way to global prosperity.

But just as the prescriptions of the International Monetary Fund are now being questioned, as prosperity has proved elusive for countries like Brazil and Argentina, so are the W.T.O.'s intellectual property rules.

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

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

The United States does stand to gain the most from stronger intellectual property protections, most of which must be in effect by 2005, under Trips. A World Bank study estimates that American companies would pocket an additional $19 billion a year in royalties, while developing nations like China, Mexico, Brazil and India - net importers of intellectual property - 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 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. 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 United States Supreme Court heard a challenge to a 1998 law that extended copyrights in this country 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 D. Sachs, a development economist at Columbia University. "The danger with Trips is that it will mostly hurt the developing countries' access to ideas."

The report of the intellectual property rights commission, which was sponsored by the British government, includes a long list of recommendations, some of which would be anathema to American companies:

Encourage developing nations to make greater use of compulsory licensing of drugs.
Allow more "reverse engineering" of software programs - that is, copying a product by studying and making educated assumptions about the underlying code.
Permit "cracking" of software used to protect copyrighted digital media, if the country determines that the copy-protection technology limits the fair use of digital text, video or music.

The commission's report comes amid a growing backlash in developing countries against the imposition of a strong global system of intellectual property rights. The lightning-rod issue has been the AIDS epidemic, and the resulting confrontation between developing nations and the pharmaceutical industry.

Facing a public outcry and the threat of compulsory licensing in countries like South Africa, Brazil and India, the pharmaceutical companies began cutting prices by 80 percent or more on drugs for use in treating AIDS-related ailments in developing nations two years ago.

The World Trade Organization, at its meeting last November in Doha, Qatar, issued a declaration that public health matters must be weighed equally with intellectual property rights. As part of the Doha declaration, the trade organization allowed the world's least developed nations, mostly in Africa, to exempt pharmaceuticals from patent protection until 2016. (The intellectual property rights commission recommends that exemption for the poorest nations be extended to all fields of technology.)

Whether the AIDS episode was a single, isolated case or a sign of a changing relationship between the developing counties and the pharmaceutical industry is uncertain. But emboldened developing countries could invoke the public health argument for diseases like heart disease and diabetes - and the increasing sophistication of generic drug makers in India and China could give them alternate sources of supply.

"H.I.V.-AIDS is what made everybody think about this," said Dr. Jim Yong Kim, a professor at the Harvard Medical School and an expert on health projects in poor countries. "But I think access to medicine will be on the table much more broadly in the developing world."

The pharmaceutical makers insist that they responded quickly to the AIDS crisis, working cooperatively with the United Nations and other international agencies. But the industry says focusing on low-cost drugs alone ignores the more significant chronic hurdles to treating diseases of all kinds in developing nations - lack of public health infrastructure, education, financing and political will. There are 35,000 people in Africa being treated under the international program begun two years ago, while an estimated 30 million people have H.I.V. in Africa.

"There is plenty of supply," said Harvey E. Bale Jr., director general of the International Federation of Pharmaceutical Manufacturers Associations in Geneva. "Access is not the issue."

Those who defend the Trips global standards for intellectual property protection say that a strong patent system not only fuels innovation but provides the best way for developing nations to attract investment and encourage a rapid transfer of technology. China, for example, has steadily given foreign companies a greater measure of protection for intellectual property and last year signed on to Trips, when the nation joined the World Trade Organization.

"There is no doubt that has played an important role in attracting R. & D. investment in China," said Brad Smith, the general counsel of Microsoft. In June, Microsoft announced that it would spend $700 million over the next three years in China in education, training and research, and in investments in local companies.

In the end, the debate over intellectual property rights, like the controversy over I.M.F. policies in developing nations, 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, as it stands, reflects "a mentality borne of the American triumphalism of the 1990's," said Mr. Sachs of Columbia. "There is a widespread sense that that approach to development policy has to be recalibrated."

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