State of Innovation

Patents and Innovation Economics

Hot Property

Hot Property by Pat Choate

This excellent book by Pat Choate will both frighten and upset you.  For instance, Dr. Choate relates the shocking tale of a woman from Alabama who received a counterfeit antibiotic for a routine infected ingrown toenail and almost died.  Counterfeit medicines kill and injure people every year.  The U.S. is not immune to counterfeit medicines entering our market as the story of the woman from Alabama shows.  Counterfeiting medicines has become a major criminal enterprise.  The reason for this, according to Choate,  is  the risk of getting caught counterfeiting legitimate medicines is significantly less than distributing and selling illegal drugs.  In addition, the margin for counterfeit medicines is often higher than the profits obtained selling illegal drugs (and less dangerous).

The pharmaceutical industry is not unique in dealing with counterfeits.   According to a FAA report,  176 aircraft accidents were the result of counterfeit parts between 1973-1996.  Almost every industry in the U.S. is under attack by pirates making counterfeit products.  The tales of counterfeit music, software, and movies are well known, but there isn’t a personal harm component.  It is past time that we deal with piracy issues effecting our citizens’ security.

A number of these pirates operate with the tacit or even explicit support of their governments.  Dr. Choate documents the long history of state supported industrial espionage.  Often foreign governments target certain technologies that both increase their commercial and military might.  Our government has not prioritized stopping commercial pirates or industrial spies and the United States citizens are all poorer for their negligence.  In some cases, there is even domestic industry that profits from the pirates’ activities at the expense of our long term future.  These domestic industries lobby hard for inaction on the part of our government.  For instance, the retail industry often turns a blind eye to trademark and copyright violations and other forms of counterfeit products.

Perhaps most maddening though,  is our government’s policy of giving away our technology.  For instance, Dr. Choate shows that during the Clinton administration and continued in the Bush II administration,  we failed to protect the technologies of our domestic inventors.  Our government gave away many of the most important safeguards in our patent system to the Japan and  Europe and received almost no concessions from them.  For instance, we now publish our patent applications at 18 months for the whole world to see and providing the opportunity to steal our technology.  We fought hard in the GATT trade negotiations to require other countries to strengthen their intellectual property laws and enforcement.  In return, we significantly reduced our tariffs on textiles and apparel.  This has decimated our textile and apparel industries; but these countries have not come into compliance with the requirements for strengthening their intellectual property systems.  We could bring suit against these countries in the WTO (World Trade Organization) and force compliance, but for some reason we seem uninterested or unwilling to require these nations to uphold their part of the bargain.  I am a strong believer in free trade, but stealing intellectual property is not free trade-  it is just theft, pure and simple.   Theft of real property results  in underinvestment in real property.  It follows that  theft of intellectual property results in underinvestment in technology,  making  us poorer in the US, which in turn makes the whole world poorer.

An interesting point that becomes clear in Hot Property,  is  the Reagan Administration took intellectual property rights, particularly patent rights, more seriously than any subsequent administration.  Reagan understood that our technological innovation has always been the key to our wealth.

March 10, 2010 Posted by dbhalling | Innovation | , , , , , , , , | No Comments Yet