Intellectual Property Rights: The Last Barrier to International Free Trade

by Lu Sun October 10 2009, 23:56

 I. Introduction

The world today is highly technologically advanced in that works of art, literature, designs and other goods are highly digitalized.[1] Whereas in previous generations, trade agreements dealt in hard goods that could be accounted for and of which value was readily determined, the commodities of today are digital and informational.[2] These intangible goods are harder to track and almost impossible to value. As such, the goal of international free trade is being impeded by the reluctance of certain companies to invest overseas either directly in new upcoming firms or through trading of patented information.[3]

Some nations are reluctant to stringently enforce, or even create, laws for the protection of intellectual property rights. These nations argue that protection of intellectual property rights through patents and copyrights would raise market prices to a level near a monopolistic environment.[4] The belief is that an innovative foreign company will not pay royalties for the imported product while the domestic company has to do so, thus resulting in the product being more expensive in the importing country.[5] This is the big problem when it comes to trying to break down the remaining barriers of international free trade. Overall, the traditional Northern, or more developed countries have been accused of taking advantage of the poorer, underdeveloped Southern countries for many years. This is reflected in the fact that most of the intellectual property patents are held by individuals residing in these countries.[6] United States business representatives and politicians have four primary complaints about foreign copyright system: (1) the failure of foreign copyright law itself to meet U.S. standards of adequate copyright protection for copyright holders; (2) the lack of strict sanctions to deter potential violators; (3) the lack of government efforts to enforce the law; and (4) the lack of judges and lawyers who have experience with intellectual property issues.[7] This paper will argue that despite the fact that the trend is beginning to change, countries such as China and Brazil have seen increases in applications for patents, this problem will never be solved unless the underdeveloped countries fundamentally change their views on intellectual property laws.

II. Background

Although the World Trade Organization (“WTO”) and World Intellectual Property Organization (“WIPO”) currently help dictate multilateral trade agreements, the fact of the matter is that enforcement and general respect to these agreements still widely varies from country to country.[8] The source of these differing attitudes towards intellectual property law can be seen in the history of the countries. For example, in China, a country whose history has been primarily communist, traditionally believes that intellectual property should not be protected as strictly as the United States. Magistrates in the Tang Dynasty in early China were also eager to avoid the formal legal system and so encouraged parties to resolve disputes amicably between themselves.[9] In contrast, the United States’ patent law can be seen in the case of Twentieth Century Music Corp. v. Aiken, in which the Court states:

The creative work is to be encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and other arts. The immediate effect of our copyright law is to secure a fair return for an “author's” [or artist's] creative labor. But the ultimate aim is ... to stimulate artistic creativity for the public good. The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors and artists.[10]

Enforcement in China is lax especially when put into context of the Chinese legal system in which many of the most minor crimes are punished more severely than in Western countries.[11] It is this lack of enforcement that is troubling. The National Intellectual Property Law Enforcement Coordination Council was established in 1999 and is charged with coordinating domestic and international intellectual property law enforcement among federal and foreign entities.[12] However, the problem lies not in coordinating domestic and international property law, the problem is in the valuation and subsequent enforcement of these laws.

This lack of enforcement or respect of intellectual property rights could be seen in the famous Nelfinavir scandal in 2001 in which Brazil “became the first country to break an international patent when it began producing the generic drug ‘Nelfinavir’ in order to address its huge AIDS problems.”[13] According to Brazilian national law, one can bypass a patent if the holder is abusing his position as a monopolist.[14] The holder of the Nelfinavir patent, a Swiss pharmaceutical company named Roche, argued that they had conceded to give the Brazilian government a discount of 13% on the drug following extensive talks between the two parties.[15] The true fact of the matter was that Brazil spends over $300m per year on Nelfinavir alone because the country has the highest number of AIDS infected patients in South-America.[16] In bypassing the international patent for Nelfinavir and thus producing a similar drug domestically, Brazil cut its spending by nearly 40%.[17] Attempts to punish Brazil in the WTO negotiations were subsequently dropped in June 2001 due to the public outrage over the case.[18] This sets a daunting precedent in that it shows so-called “public good” is allowed to override established international law.

III. Analysis
 

Problems arise when considering the integration of two phenomena: the explosive growth of digital technology, and the movement toward a uniform international copyright legal system.[19] First, these trends make it difficult to create a system of intellectual property rights that is compatible with all nations, cultures, and societies.[20] Second, traditional Western copyright concepts, which are predominant in international copyright concepts, are incompatible with the burgeoning culture of digital information, where physically intangible works are made, copied, transferred, viewed, and modified through copious mediums across the world in seconds for little to no cost.[21] In order to attempt to solve this problem, the WIPO and WTO should model the so-called uniform international intellectual property rights law after taking into consideration the customs of each nation.[22]

The first step to changing the state of affairs in international intellectual property rights lies in the misguided view that intellectual property rights are only for the developed countries to make profit. Some argue that protection of intellectual property rights can be good for poorer countries as well. For example, it has become increasingly difficult for musicians in Mexico to get recording deals with record companies due to the fact that two thirds of all the cassettes and CDs sold in Mexico are counterfeit.[23] India is another example, due to the country’s nearly non-existent intellectual property rights legislation many pharmaceutical companies choose not sell their products there for fear of copycats.[24] Underdeveloped countries need to realize that stringent enforcement of intellectual property rights benefits them domestically just as much as it would internationally. When countries develop more advanced states of intellectual property right protection, they would attract more foreign investment. This foreign investment would lead to a stimulation of the local economy which results in benefits for both the importing country as well as the exporting country.

The problem that exists now is not in establishing uniform intellectual property law across differing continents or establishing an agreed upon law through systems like the WTO or WIPO, but rather less developed nations should re-evaluate their basic beliefs of intellectual property rights. The less developed nations need to move into the economic environment of the present rather than maintaining outdated beliefs and practices. There needs to be a re-education of these countries that currently do not value intellectual property rights as they should. This could occur through sending representatives from the WIPO and WTO to talk with legislators or leaders of these countries so as to explain to them the importance of valuing intellectual property rights. Seen from this point of view, protection of intellectual property rights encourages the domestic industry, secures foreign investment and creates incentives for the creation and use of new technology. Proof of this strategy working is China.

In the past decade, as trade with China increased, more and more pressure was put on China through the sending of government representatives by the United States and Japan to try and change China’s intellectual property rights laws so that they are more compatible on the global scale.[25] The result of this is that patent applications have been increasing consistently despite the global economic crisis. If this result can be repeated with other trading nations and subsequently reflected in multilateral trading agreements, international intellectual property rights would no longer be a barrier to international free trade.

IV. Conclusion

Although the cultures and attitudes regarding intellectual property rights differ between Eastern and Western, Northern and Southern, we must learn to compromise and educate in order to overcome the barriers posed by these differences and achieve a world where international free trade is possible. Currently the ball has been set in motion in that these underdeveloped or beginning industrialized nations have begun changing their ways; however this change is largely motivated by external pressures from highly industrialized trading partners. The barrier that intellectual property rights poses to international free trade will never be fully broken down until these countries realize on their own what benefits can be reaped when they change their ways.


[1]What Is Intellectual Property?, http://www.wipo.int/about-ip/en/ (last visited September 27, 2009).

[2] Id.

[3] EU firms wary of China over IP insecurity, http://www.theregister.co.uk/2009/09/10/eu_china/ (last visited September 26, 2009).

[4] Eliane Engeler, US filed the most international patents in 2008 but latest figures show meltdown’s impact, Sept. 18, 2009,  available at http://www.washingtonexaminer.com/economy/ap/us_filed_the_most_international_patents_in_2008_but_latest_figures_show_meltdowns_impact-59725687.html

[5] Id.

[6] Id.

[7] June Cohan Lazar, “Protecting Ideas and Ideals: Copyright Law in the People’s Republic of China”, Law and Policy in International Business Vol. 27 No. 4 (1996).

[8] Supra at note 1.

[9] Katie Lula, Neither Here Nor There But Fair: Finding an International Copyright Legal System Between East and West, Past and Present, Asian-Pac. L. & Pol’y J. (2006).

[10] Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).

[11] John Boudreau, Fake IPhones are cheap and Popular in China, Mercury News, Sep. 16, 2009,  http://www.mercurynews.com/breaking-news/ci_13350141?nclick_check=1

[12] U.S. Trademark Act, 15 U.S.C.A. § 1128 (2004).

[13] BBC News, Brazil to Break Aids Patent, http://news.bbc.co.uk/hi/english/business/newsid_1505000/1505163.stm (last visited September 25, 2009). 

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Lula, supra note 9.

[20] Id.

[21] Id.

[22] Burns Weston, International Law and World Order (4th Edition, Thomson West 2006).

[23] Stefania Scandizzo, Intellectual Property Rights and International R&D Competition International Monetary Fund Working Paper 4 (2001).

[24] Id at 5.

[25] China Daily.com, Patent Applications Continue Rising in China, http://www.chinadaily.com.cn/bizchina/2009-09/19/content_8711892.htm (last visited September 25, 2009).
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