State of Innovation

Patents and Innovation Economics

How Should the US Respond if China Creates a Successful Patent System?

Here is another confused and confusing academic paper, The US, China and the G-77 in the era of responsive patentability  Queen Mary Journal of Intellectual Property, Vol. 2 No. 4, pp. 315–328.  The paper seems to suggest that it will be bad news for the US and the West if China and other BRIC nations create successful patent systems that result in their technological leadership.  The solution according to the paper appears to be aggressive use of anti-trust law.  However, the paper is far too incoherent to be sure exactly what the author’s point is.

The paper starts with some telling lines.

It appear that “‘anything made under the sun by man’” is patentable, but it is also clear that the sun never sets on the patent system.

Responsive patentability means that anything is patentable anywhere. Restrictions on patentable subject matter are read down or circumvented through clever claims drafting.

Most citizens in poor states cannot afford to pay patent prices for access to needed medical and food technologies.

Responsive patentability is unresponsive to the preferences of poor people.

The author, Mr. Drahos, is a professor of law and heads the Chair in Intellectual Property at Queen Mary University of London.  Interestingly, Mr. Drahos is not a patent attorney and in fact does not have the technical background necessary to be a patent attorney or to sit for the patent bar.  How universities think that it makes sense to have a professor who is incompetent to be a patent attorney teach patent law is beyond me.

The paper is full of broad unsupported statements such as those above.  Why should the sun set on the patent system?  Should the sun set on the criminal system, on the property rights system?  Mr. Drahos offers no explanation.  Why should there be a restriction on patentable subject matter?  If so what should those restrictions be?  Again Mr. Drahos offers no explanation.

What is the point of stating that poor people cannot afford patented foods or medicines?  Poor people cannot afford many things.  That is the definition of being poor.  So what is Mr. Drahos point?

Finally, the statement that responsive patentability is unresponsive to the preference of the poor is totally unsupported.  Should the criminal law system be responsive to the preferences of the poor?  Why should the poor’s input be more important than anyone else?  Is physics, algebra, chemistry, calculus responsive to the preferences of the poor?  Should they be?

Patent law should be based on logic and reason.  It should be firmly grounded in property rights and it should not deviate from this logic for the poor, the rich, or socialists like Mr. Drahos.

Ignoring the obvious bias of the paper it appears to be making a point about China becoming a technological leader and how the US and West should respond to this challenge.  The paper explains:

China’s market socialism may yet evolve into a close variant of US knowledge monopoly capitalism. This ending to China’s development story would not surprise readers of Animal Farm.

For a patent wealth maximization strategy to succeed a country’s innovation system must generate core technologies.

Under this criterion the system can be said to work if one country is able to use it to extract monopoly rents from other countries, thereby making it an overwhelming net winner from the system.

From these statements it appears that Mr. Drahos is concerned that China might become a creator of technologies, particularly core technologies, instead of just a consumer.  The paper appears to imply this would be bad.  I cannot see how the world will be worse off if more people are inventing important technologies that make everyone’s life better.  Again the paper fails to explain this assumption, but there are clues to why Mr. Drahos is so concerned with this outcome, for instance, the ominous reference to Animal Farm.

After setting out this dire situation, Mr. Drahos proposes at least a partial solution.

Let us assume for the sake of argument that a succession of five-year plans turn China into a patent superpower with control over many core technologies. How might the US respond to such a situation? One possibility is that it would simply issue compulsory licences over those foreign technologies it believed were vital to its national interests. Over the course of the twentieth century, antitrust law has been intellectual property’s constant regulatory shadow. For significant periods of the twentieth century it was a shadow that loomed over intellectual property owners to check the exclusionary uses of their monopoly powers. There is a resilience to antitrust principles in the US that should never be underestimated.

Mr. Drahos solution to an inventive China is to ignore property rights either with compulsory licensces or antitrust law.  Modern antitrust law is anti-property rights and turned the law against monopolies on it head.  The Statute of Monopolies of 1623 limited the power of the Crown (government) to interfere with private property rights.  The Statute of Monopolies excluded patents for inventions because they result from the creative effort of the inventor and therefore are property rights.  On the other hand modern antitrust law increases the power of government to interfere with private property rights.  The underlying theory of antitrust law is the efficient market hypothesis.  This hypothesis postulates that wealth is created by falling prices for existing goods and services and this is the result of competition to sell existing goods and services.  However, this is incorrect and inconsistent with modern economic research.  Increases in per capita income are the result of increases in technology – inventions.  Antitrust law undermines the incentive to create and invest in new technologies and therefore hurts our economic health.

When the US was facing an economic and technological challenge from Japan in the 1970s, the answer was to strengthen US patent law.  It worked spectacularly.  The US regained both its economic and technological leadership in the 1980s and 1990s.  Then the US started weakening its patent laws around 2000 and has continued to do so.  Once again the US is stagnant technologically and economically.  The clear answer to a technological challenge by China is for the US to strengthen its patent rights and all property rights not to resort to antitrust law, which is what the US did in the 1970s.

 

 

Let’s deconstruct Mr. Drahos paper.  He hates patents and does not think they should exist.  His citation of Michele Boldrin and David K Levine, who have written a book suggesting the elimination of patents, demonstrates this point.  Mr. Drahos has argued elsewhere that patents are not “property”, which is consistent with his ‘monopoly’ analysis.  But Mr. Drahos isn’t just against patents, he is against property rights generally.  For example he quotes Fidel Castro with approval.

Fidel Castro in a speech at a G-77 Summit in Havana in 2000 claimed that developed countries ‘control 97% of the patents the world over and receive over 90% of the international licenses’ rights’. He went on to observe that the ‘new medications, the best seeds and, in general, the best technologies have become commodities whose prices only the rich countries can afford’.  Castro finished with a strong appeal for unity and cooperation amongst the G-77.

Castro as a communist is against all property rights.  Mr. Drahos concern in this paper is not that the US might fall behind technologically, it is that other countries might adopt a strong property rights legal system that including patents.  The patent discussion in this paper is just a crutch from Mr. Drahos to push a radical Marxist ideology.  It is an embarrassment that this paper is considered academic or scholarly research and that Mr. Drahos has a job as a professor of law and chair in intellectual property.

 

The US, China and the G-77 in the era of responsive patentability  Queen Mary Journal of Intellectual Property, Vol. 2 No. 4, pp. 315–328.

 

 

 

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August 23, 2013 - Posted by | -Law, -Philosophy, Patents | , ,

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