World must respect patent rights
David G. Tuerck
Nowadays, everyone accepts
the idea of "global interdependence." Economic and cultural
barriers fall as countries form economic unions, abandon socialism
and liberalize their foreign trade laws. The electronic media link
capital markets and cultural centers. High technology, which moves
quickly across national borders, accounts for a growing share of
There is, however, one
respect in which the global economy remains stuck in an isolationist
time warp. This is the unwillingness on the part of many countries,
including a number of important US trading partners, to respect
intellectual property rights.
The absence or weakness
of patent, copyright and trademark law in other countries has created
a profitable business in stealing new ideas and then marketing products
based on those ideas in competition with the companies that developed
them. Hong Kong has become notorious as a source of illegally copied
computer software. Companies filing for patent protection in Japan
take the chance of having their secrets made public without any
guarantee that the sought-for protection will in fact be granted.
Other countries wink at the practice of illegally copying US brand
names and trademarks. Estimates of the cost of this piracy to US
companies range from $40 billion to $60 billion a year.
As a result, the United
States is losing its competitive advantage in world markets. US
companies find themselves unwilling to develop new products out
of fear of having to enter into time-consuming, costly legal battles
that may reach a successful conclusion only after the copyright
or patent has expired. It took Texas Instruments 25 years to get
patent protection for its work in integrated circuitry. Honeywell
is only now reaching the end of a long, costly patent-infringement
suit against Minolta Camera for using the autofocus technology that
Honeywell invented and patented.
"The General Agreement on Tariffs and Trade provides
a framework for solving the problem. Under GATT, member countries
reduce trade barriers on a multilateral basis, permitting a
country that makes reductions in its trade barriers to get,
in return, equivalent reductions from other countries."
Both foreign and domestic
consumers lose in this process, as companies divert their energies
and resources from innovation to litigation and as the incentive
to introduce new products disappears. The absence of adequate, uniform
protection of all intellectual property rights means the globalization,
not of commerce and culture, but of technological backwardness and
The General Agreement
on Tariffs and Trade provides a framework for solving the problem.
Under GATT, member countries reduce trade barriers on a multilateral
basis, permitting a country that makes reductions in its trade barriers
to get, in return, equivalent reductions from other countries.
Last year, however, GATT
suspended its negotiations as a result of differences between member
countries over the subject of farm subsidies. The need for a legal
code protecting intellectual property rights offers one of the most
important reasons for an early resumption of these negotiations
One subject for discussion
will be a 1988 law, under which the United States excludes products
embodying stolen technology when there has been a "substantial
investment" in their development by a US company. GATT objects
to this law because it applies differently to foreign-produced than
to American-produced goods.
Our trade negotiators
should not be intimidated by these objections. They should demand
a uniform code for the protection of intellectual property rights
and an enforcement mechanism that will take the profits out of product
First, however, it is
necessary for GATT negotiations to resume. Countries that want to
reduce their trade barriers can do so unilaterally without GATT
and as economics proved long ago, gain in the process. Where GATT
is needed is in areas like intellectual property rights where effective
enforcement is impossible without multilateral cooperation.
David G. Tuerck is
executive director of the Beacon Hill Institute and chairman and
professor of economics at Suffolk University. This article first
appeared in The Boston Globe on February 5, 1991.
Format revised on 18