Monday, January 10, 2005

Who Should Enforce Intellectual Property Rights?

India has improved patent protection in the pharmaceutical industry. This raises all sorts of interesting issues in development. It is fairly well accepted that patent rights are an important factor in innovation because they stimulate spending on R&D. That said, how much protecting property rights will help spur innovation also has to do with the relative costs of coming up with an invention. In a country like the US, where the capital stock (both human and physical) stock for coming up with new drugs is very large, the cost of innovating is probably lower than in a country like, say, Brazil, where the pharmaceutical industry is not quite as developed.

Brazil might be better off if it does not respect property rights, as its technological capabilities favor copying existing inventions at a relatively low cost rather than coming up with its own inventions at a very high cost. Furthermore, the benefits of extending cheap medication to the population could very well outweigh the potential gains to national income that would come from innovation.

But what about a country like India, where the pharma and biotech industries are not quite nascent, but not quite developed? I don’t have the answer to this question, but it seems like the lack of respect for intellectual property rights has worked pretty well for India thus far, and it also seems like it has worked for China.

This brings to mind the idea that there could be differences in the type of economic model that works for catching up to the developed world versus remaining at the frontier of growth. While strict enforcement of international property rights might be in the interest of the US, it might not be in the interest of India or China... This means that it is up to the countries on the technological frontier to make the appropriate incentives for developing countries to respect intellectual property rights.

These new World Bank papers suggest that the protection of intellectual property rights in poor countries could be an entirely different ballgame from the protection of intellectual property rights in rich countries. In particular, poor countries could need different types of protection than rich countries. “The challenge facing developing countries is to unpackage knowledge from indigenous products and repackage it for commercial markets.” An example of this would be “Congolese artisans who sold distinctive toys in the US market, assisted by an alternative trading organization specializing in marketing developing countries’ IP”

Furthermore, “Countries that sharply strengthen their IPR regime are unlikely to experience sudden boosts in inward FDI. They would be better advised to improve overall investment climate and business infrastructure.”


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