RaQuell Yarbrough BC607: Assignment 6.

2 September 17, 2011

Why Protecting Intellectual Property Rights are Important for Creating Wealth What is intellectual property? The World Intellectual Property Organization defines intellectual property as the creations of the mind: inventions, literary and artistic works, and symbols, names, images and designs used in commerce (WIPO). If a country, such as China, would like to increase or create wealth it must offer opportunities for its citizens to safeguard their discoveries and inventions from theft; contrarily there is no incentive for individuals to be innovative, artistic or to yield new ideas, products or services and offer them to be marketed. Without newly created goods and services the market for exchange would soon desiccate and the opportunities for creating more wealth would follow. Without the protection afforded to intellectual property rights inventors and creators would be subject to their valuable ideas and creations being stolen and replicated, sure enough for profit by others. Even with these defenses many individuals and establishments are constantly combating imitating and brand borrowing. The Organisation for Economic Co-Operation and Development (OCED) estimates counterfeiting and piracy cost the world economy 200 billion dollars annually. The OCED states counterfeiters and pirates target products where profits margins are high, taking into account the risk of detection, the potential penalties, the size of the markets that could be exploited and the technological and logistical challenges in producing and distributing products (OCED). This sounds like the actions of any well ran competitive firm, nevertheless, these actions result in counterfeiters and those who pirate products having an unfair advantage in the marketplace. These firms dont pay anything for the research and development costs tangled in producing the new product; they have no advertising expenses, no costs for packaging design or development and they are not responsible for warranties or service claims. Thus they are able to sell the product significantly cheaper than the original creator. Many industries produced nothing less than counterfeit goods in China and were keenly encouraged and financed by the Chinese government. With Chinas entry into the WTO organization this situation has now allegedly stopped. The WTO has opened an office in China to monitor the situation. It will be thought-provoking to see if a practice that was the norm for so long can be wholly curtailed. The World Intellectual Property Organization (WIPO) is an agency of the United Nations established in 1967 charged with developing a balanced and accessible international intellectual property (IP) system, which rewards creativity, stimulates innovation and contributes to economic development while safeguarding the public interest (WIPO). Since its beginning the WIPO has been instrumental in promoting IP rights among the 184 member countries it refers to as Member States.

The World Trade Organization (WTO) has been very active in trying to protect intellectual property rights around the world with its Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO through the TRIPS agreement attempts to protect Intellectual Property Rights (IPR) internationally among its members. The WTO states, Society benefits in the long term when intellectual property protection encourages creation and invention, especially when the period of protection expires and the creations and inventions enter the public domain (WTO). The TRIPS agreement cover five issues: (1) application of IP agreements and principles of trading among members; (2) protection of IP rights; (3) enforcement in the members own countries; (4) settlement of disputes between members; (5) special agreements to members during the introduction phrase. The TRIPS agreement also covers actions against selling goods in another country at a price that is unfairly low. Antidumping disallows a country to export goods to another country and sell them at a price that is lower than charged in the manufacturing country causing harm and killing competitive similar products in that market. The TRIPS agreement allows the offender if he harms the industry in the competing country to be removed from exporting to the harmed country for a period of five years or requires the seller to rise its price to the proper level. TRIPS also contain safeguards against tariff and non-tariff barriers that are important to free trade. While there are many people and organizations that back intellectual property rights, there are also those who contend that IP restricts the development of new products and are not a reward to inventors and creators but a form of monopolistic privilege and censorship. Markus Krummenacker in his paper Are Intellectual Property Rights Justified? traces the historical origins of IPR back to the English Crown. He states the English Crown granted patents in order to raise funds and to secure control over industries that were considered to be of political importanceand was a measure for ensuring government control over the printing press, in a time of great religious and political dissent (Krummenacker, M.). The system became so political it incorporated not only production items but also things such as salt and leather. This became so frowned upon that it was ultimately restricted and replaced in 1620 by the Statute of Monopolies. The English Crown still retained control over the production of some items including gunpowder, munitions and the printing press claiming national security interest. Later, the rights of publishers and authors were emphasized in 1710 with the passing of the Statue of Anne. Krummenacker insists that IPRs are artificial constructs, erected by powerful governments for very particular political purposestries to enforce artificial barriers upon the free flow and use of information, thus creating scarcity where it is most damaging to all humanity and where a rich bounty of wealth could exist instead (Krummenacker, M.) The government claims to promote IPRs to encourage creativity. One field in which this idea appears to have faults is the software industry. Until the early 1980s there were no software patents and the industry grew rapidly on its own in the preceding twenty years. Since the introduction of software patents new technology has been stalled in lawsuits restricting the release of the newest technologies to consumers. It is Krummenackers stand that the only people benefiting from the IPRs game is the IP lawyers by using scare tactic, painting dark pictures of other companies plastering the landscape with patents, disabling technology access for the client company, unless the client launches a pre-emptive strike first. Rather than issuing patents and copyrights Kummenacker suggest rapid product development to get to the market first, creating a really well-done and superior product, and using well-thought out market strategies to satisfy the needs of a larger potential customer base. This he argues is better than

filing large numbers of patents and copyrights and then incurring the expense of discovering and suing all those who infringe. This system only benefits large corporations who hold hundreds of patents and IP lawyers who are interested in obtaining fees. According to Krummenacker eliminating the current patent system would open the whole economy to fresh ideas and a world of new creativity without the fears of legal action. The existing system of protecting IPRs is well established and is endorsed with promoting democracy and constructing wealth after the economy and personal incomes have reached a higher point of economic development. Despite the fact that the system may not be perfect, there is no such thing, no system ever is, it does have the support of the major developed countries of the world. It has operated well when everyone plays legitimately collectively. I dont have confidence in the fact that changing things and eliminating the current system would result in anything other than pandemonium. If the market deems it essential to give away its inventions it will be for the purposes of selling complementary items of perceived higher value. Conclusively, I think we have a system that is efficient, builds wealth, and protects the maker by permitting the recapture of research and development costs and stimulates the desire to invent again. Changing the system now even though it may have its faults would severely obstruct the market as we know it and would certainly discourage creativity and as a result abolish the aspiration to build wealth as well.

References

1. http://beijing.usembassy-china.org.cn/protecting_ipr.html 2. http://www.stopfakes.gov/sf_why.asp 3. World Intellectual Property Organization. What is Intellectual Property? Retrieved from: http://www.wipo.int/about-ip/en/index.html. 4. Berne Convention for the Protection of Literary and Artistic Works. (n.d.) Retrieved September 17, 2011. from Wikipedia: http://en.wikipedia.org/wiki/Berne_Convention_for-the-Protection_of-Literary_andArtistic_Works 5. Organisation for Economic Co-Operation and Development. (2007) The Economic Impact of Counterfeiting and Piracy: Executive Summary. Retrieved September 17, 2011 from http://www.org/dataoecd/13/12/38707619.pdf. 6. Piracy (1979). Blacks Law Dictionary with Pronunciations 5th Edition. By Henry Campbell Black, M.A. 7. CyberCollege InternetCollege. (n.d.) Puritans to Pirating. Retrieved September 17, 2011 from http://www.cybercollege.com/frtv/book2.htm

8. World Trade Organization. Intellectual property: protection and enforcement. Retrieved September 17, 2011 from http://www.wto.org/english/thewto_e/ehatis_c/tif_e/agrm7_e.htm. 9. Krummenacker, M (1995). Are IntellectualProperty Rights Justified? Retrieved from http://www.n-a-n-o.com/ipr/ectro2/extro2mk.html/