Prob­lems in pro­tect­ing in­tel­lec­tual prop­erty rights

It has lagged be­hind other free­doms, but lo­ca­tion-based rules are in­creas­ingly ir­rel­e­vant

The Washington Times Daily - - OPINION - By Richard W. Rahn Richard W. Rahn is chair­man of Im­prob­a­ble Suc­cess Pro­duc­tions and on the board of the Amer­i­can Coun­cil for Cap­i­tal For­ma­tion.

Prague is a glo­ri­ous city with many beau­ti­ful and his­toric build­ings go­ing back nearly a thou­sand years. It man­aged to es­cape al­most all bomb­ing dur­ing WWII, and thus was able to pre­serve the best of its past — to the de­light of both cit­i­zens and tourists. I am here at the Euro­pean Re­source Bank for a dis­cus­sion of the prob­lems in pro­tect­ing in­tel­lec­tual prop­erty (more on that be­low).

Thirty years ago, Cze­choslo­vakia was a poor com­mu­nist coun­try (the Eastern por­tion, Slo­vakia, peace­fully sep­a­rated in 1993, cre­at­ing two in­de­pen­dent coun­tries). Like the other com­mu­nist cities, Prague was drab and de­press­ing un­til af­ter the tran­si­tion.

It is now a rich, demo­cratic, free-mar­ket coun­try where the peo­ple are as pros­per­ous as the Ital­ians, Ja­panese and Span­ish, with a per capita in­come of about $33,000 per year. It is a mem­ber of the Euro­pean Union and NATO. Ac­cord­ing to the 2018 In­dex of Eco­nomic Free­dom, it is more eco­nom­i­cally free than neigh­bor­ing Ger­many, Aus­tria and Poland.

It en­joys a 15 per­cent flat in­di­vid­ual in­come tax, and the size of the gov­ern­ment is about the same rel­a­tive size of the U.S. — good by Euro­pean stan­dards but, like the U.S., too high to max­i­mize the to­tal welfare. Fis­cally, it has been far more re­spon­si­ble than the U.S., with an av­er­age bud­get deficit of less than 1 per­cent and a to­tal debt bur­den of a mod­est 38 per­cent. Con­tract and prop­erty rights are rel­a­tively se­cure, and mar­kets are open with few trade bar­ri­ers. As with all the for­mer com­mu­nist coun­tries, in­tel­lec­tual prop­erty rights have some­what lagged other eco­nomic free­doms. Ac­cord­ing to the in­dex pre­pared by the Prop­erty Rights Alliance, the Czechs rank 30 out of the 127 coun­tries that were mea­sured. Of the for­mer com­mu­nist coun­tries, only Es­to­nia, at 25, had a higher rank­ing.

Prop­erty rights con­sist of a num­ber of sub-cat­e­gories, in­clud­ing patent pro­tec­tion, the rule of law, con­trol of cor­rup­tion, copy­right piracy, and both phys­i­cal and in­tel­lec­tual prop­erty rights pro­tec­tion. As can be seen in the ac­com­pa­ny­ing ta­ble, New Zealand ranks Num­ber 1. Venezuela and Ye­men are at the bot­tom, China is near the mid­dle, and the U.S. is at Num­ber 14.

New Zealand ranks near the top in all of the sub-cat­e­gories, with the ex­cep­tion of patent pro­tec­tion where the U.S. is near the top. As with the econ­omy, prop­erty rights pro­tec­tions have all but col­lapsed in Venezuela, which is a death knell for any new in­vest­ment.

China is under at­tack by the U.S. and other coun­tries by its fail­ure to abide by the in­ter­na­tional trade and in­vest­ment rules. It is as­serted that China is par­tic­u­larly de­fi­cient in the pro­tec­tion of in­tel­lec­tual prop­erty, cou­pled with de­mands that such prop­erty be trans­ferred to Chi­nese-owned or con­trolled en­ti­ties as part of the price for the priv­i­lege of do­ing busi­ness in China. China has a long record of copy­right piracy and coun­ter­feit­ing prod­ucts. Even though China is not the worst of­fender, it is con­sid­ered the big­gest prob­lem be­cause of the sheer size of its econ­omy (Num­ber 2 in the world), which is why the U.S. has aimed its sanc­tions at China.

Pro­tec­tion of in­tel­lec­tual prop­erty, in­clud­ing copy­rights, trade­marks, patents and know-how, as well as trade se­crets, data­bases, plant va­ri­eties, etc., is now of­ten more crit­i­cal to the suc­cess of a busi­ness than phys­i­cal prop­erty. In­tel­lec­tual prop­erty has been rec­og­nized as need­ing pro­tec­tion for sev­eral hun­dred years.

The U.S. Con­sti­tu­tion ex­plic­itly rec­og­nizes the need for and au­tho­rizes the cre­ation of the nec­es­sary agen­cies of gov­ern­ment, such as the patent of­fice, to pro­tect in­tel­lec­tual prop­erty. In­tel­lec­tual prop­erty law was de­vel­oped to en­cour­age the cre­ation of the de­vel­op­ment of new goods and ser­vices. Pro­tec­tion for new in­no­va­tions is nor­mally given for some stip­u­lated pe­riod of time.

In re­cent decades, there has been a move­ment to­ward cre­ation of global stan­dards and rules for in­tel­lec­tual prop­erty. In an eco­nom­i­cally glob­al­ized world where in­for­ma­tion can be in­stantly sent to any­place over the In­ter­net, with­out re­gard for coun­tries’ borders, lo­ca­tion-based rules are in­creas­ingly ir­rel­e­vant and un­en­force­able.

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