Intellectual Property Rights and Economic Development

Words by Aiden Bedford

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The transfer of ideas and technology throughout all of 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, became common property, collective knowledge for all who came into contact with these simple mechanical marvels. Take a hypothetical scenario in which the inventor of the stirrup could see into the future, and witness the discussion around intellectual property rights (IPRs). It is almost certain that the person in question would find the notion that someone could own an idea as distinctly foreign.

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 good, it has come to 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 diminished. 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 Center for Inter-American Free Trade who stated that, “the historical record in the industrialized countries, which began as developing countries, demonstrates that intellectual property protection has been one of the most powerful instruments for economic development, export growth, and the diffusion of new technologies, art and culture”.

(the United States itself had patent laws which allowed patents to be granted without any proof of originality till 1836)

The first nation to industrialise 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 industrialisation of the continental Europe was entirely dependent on technology transfer from Britain. Surprisingly, despite what the US-based National Law Center 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 international 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 followed the United Kingdom in undergoing industrialisation was the Netherlands. Yet here contrary to this narrative we have been sold we see no evidence of strict system of IP law. They first introduced patent laws in 1817, and then abolished them 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 no 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 industrialised nation on Earth on a per capita basis, did not provide any protection to any form of intellectual property till 1888. Germany, who was allowing the illegal sale of counterfeit Sheffield steel cutlery with fake logos, went on in 1907 to threaten Switzerland with trade sanctions in retaliation to their continued unlicensed use of German chemical and pharmaceutical inventions. 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 curious then, that the common narrative of economic development as given to us by the US-based National Law Center for Inter-American Free Trade, bears almost no resemblance to the historical record. So why is this important? Well, the developing nations are still 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 recognise the IP of foreign nations.

We must ask then, regardless of how well intentioned the defenders of Intellectual Property Rights may or may not be, based solely on how ill-informed they are in relation to the historical importance of IPRs in promoting economic development, whether a different set of rules are indeed necessary, more desirable and simply just fair. Maybe it is time for 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 technology — with some thievery here and there.

Written by

Adelaide University student magazine since 1932. Edited by Nicholas Birchall, Felix Eldridge, Taylor Fernandez and Larisa Forgac. Email us at onditmag@gmail.com

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