Lessons from Studying the International Economics of Intellectual Property Rights

Article excerpt

I. INTRODUCTION

When the Uruguay Round negotiations began in 1986, the subject of intellectual property rights ("IPRs") was completely unfamiliar to international trade economists. Presumably the area was ignored because global trade policy concerns had not moved into questions of domestic business regulation. Even today, readers will search in vain for serious treatments of the trade implications of exclusive rights to intellectual property ("IP") in international economics textbooks.

Despite this general inattention, a small but growing literature has emerged in which trade economists have framed specific questions and applied theory and statistical analysis to them. This literature has advanced the understanding of the role of IPRs in the international economy from the realm of speculation to the boundary of hard analysis based on facts and evidence. It has demonstrated that it is possible to use data to assess hypotheses about the economics of global intellectual property protection. Prior to the construction of the evidence that is the subject of this Article, strong claims based on largely unexamined assumptions were made on both sides of the debate. Thus, for example, American trade authorities could push global negotiations on higher standards of protection by claiming that they would result in a long-term flowering of innovation and international technology transfer. Opponents could oppose such standards on the basis of fears that stronger IPRs would destroy channels of inexpensive access to technologies, medicines, and information products. Evidence suggests that there is some truth in both claims, but far more exaggeration.

In this Article, I provide an overview of what international economists have learned from studying IPRs in the global context. While progress has been made, many of the results remain subject to statistical and analytical uncertainty and wide areas of research remain insufficiently explored. There is much about the functioning of IPRs that we do not understand very well, particularly in the context of promoting economic development.

My approach is to list a series of conclusions from the literature. In each case I note whether the conclusions are robust or remain tentative. The critical feature underlying confidence assessment is whether the hypotheses are supported with systematic econometric evidence. Inevitably, the inferences drawn reflect largely my interpretations of this work. Since much of the work reviewed is my own, the discussion herein cannot be considered completely impartial.1

II. QUESTIONS ASKED AND PARTiALLY ANSWERED

Each of the issues covered in this Section could support a series of extensive articles. My intent here is to distill the main lessons and indicate where further research is needed. I state the issues as hypotheses and then provide explanatory discussion.

A. There Are Good Reasons to Study the International Economics of IPRs

A fundamental question is whether international economists can add value to the analysis of IPRs. Economic approaches to patents, copyrights, trademarks, and related devices typically adopt a closed-economy approach without distinguishing among interests of different countries. For example, standard patent analysis seeks to identify optimal patent scope, requiring a complex calculation among the interests of innovators, consumers, and second comers. Actual patent regimes may then be assessed relative to optimal structures, though such comparisons are fraught with conceptual and practical difficulties.

1. One Size Does Not Fit All

In principle, this approach could be extended to the global economy with a simple relabeling of interests. Thus, we may identify four "country types" with divergent interests in global protection. First, IP exporters are net producers and sellers of intellectual property, with a consequent interest in strong international rights. Second, high-income IP importers are net purchasers of intellectual property but their industries require access to sophisticated technological inputs and their consumers prefer high-quality, differentiated products. …