The Competitiveness of Nations in a Global Knowledge-Based Economy
Paul A. David *
The Evolution of Intellectual Property Institutions and the Panda’s
Thumb
This paper has been
prepared for presentation at the
Meetings of the
International Economic Association in
24-28 August
1992.
Content
1. The Contemporary Re-Emergence of Intellectual Property Issues History
2. The Historical Evolution of Property Law and the Limitations of
Economic Analysis
3. Intellectual Property Law and Some Legacies
of History
*William Robertson Coe Professor of American
Economic History
Department
of Economics,
“That ideas should freely spread from one to another over the globe,
for the moral and mutual instruction of man, and improvement of his condition,
seems to have been peculiarly and benevolently designed by nature, when she
made them, like fire, expansible over all space, without lessening their
density in any point, and like the air in which we breathe, move, and have our
physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a
subject of property. Society may give an
exclusive right to the profits arising from them, as an encouragement to men to
pursue ideas which may produce utility, but this may or may not be done,
according to the will and convenience of the society, without claim or
complaint from anybody...”
Thomas
Jefferson, 1813
1. The Contemporary
Re-Emergence of Intellectual Property Issues History
The array of modern laws and administrative procedures concerned with
intellectual property (sometimes referred to herein as IP) once again have
emerged as the topic of widespread and intense discussions in the
In addition to the forces being generated within the sphere of
scientific and engineering research itself, the amplifying effects of national
economic policy has been a contributory factor.
The 1960s and 1970s had seen the developing countries successfully
resist conforming to a regime of strong international protection for
intellectual property (see, e.g. Mody 1990, Siebeck 1990). But,
during the 1980’s the
Thus, a profound reconsideration of the merits and drawbacks for the
diverse parties involved of achieving global “harmonization “ of protections for
intellectual property has been brought about as a result of the widening
international markets for R&D-intensive goods and services, the pressures
generated by the official U.S. campaign, and also by attempts to link the
availability of private direct foreign investment to the willingness of receipient countries to accord patents, copyrights and
trade secrets much the same measure of protection that they presently receive
in the investors’ “home” territories.
The debate over the merits of global harmonization is, in large measure
about the desirability of achieving such uniformity at a strong, rather than a
weak standard of property rights enforcement.
2. The Historical Evolution of Property Law and the Limitations of
Economic Analysis
Unlike the debates
over intellectual property institutions in earlier eras, which had captured the
attentions of great political and social philosophers such as Thomas Jefferson -
from whose correspondence with a Baltimore inventor (see Koch and Peden, eds. 1972, p.630) has been drawn the epigraph of
this paper - our present day discussions evince relatively slight interest in
philosophical questions. We are less
occupied with questions regarding the “natural
rights” of inventors and authors to the fruits of their creative efforts,
or the justice of claims advanced on
behalf of all humanity to benefit from the collective, social processes through
which new scientific and technological ideas arise (for exceptions see, e.g., Dworkin 1981, Davis 1989, Berg 1991). Rather, in keeping with the more pervasively
utilitarian spirit of the times, the statutes, legal rulings, administrative
regulations and other institutional arrangements affecting patents, copyrights,
and trade secrets are widely regarded as public policy instruments that,
properly, should be designed to enhance economic welfare by stimulating
technological progress.
Accordingly, even if
the rhetoric of argument may on occasion appeal to notions of justice and
equity, it is modern economic analysis and the latter’s characteristic preoccupation
with questions of efficiency that now sets the terms of policy
discussions about the protection of intellectual property. On the one hand, it has come to provide the
most widely accepted over-arching interpretation and supporting rationale for
public interventions aimed at channelling economic resources into invention and
innovation; but, on the other hand, in continuation of a long tradition,
economic analysis yields some fundamental criticisms of the systems that have been
erected to achieve that purpose by securing rights in intellectual
property. Therefore, as proves to be the
case in many other instances, it is inescapable as well as instructive to take
the economist’s approach in discussing domestic intellectual property
legislation, and national policies to enforce rights in such property
internationally. At very least this
provides a framework that identifies the major problems of allocative
efficiency, and the distributional issues that are at stake - from the viewpoint
of society as a whole rather than the perspective of the various private
and narrowly national interests involved (see, e.g., Machlup
1958, Wright 1983, Kaufer 1989, Siebeck
1990, Besen and Raskin
1991, David 1992a).
Having said that
much, it is also necessary to acknowledge that economists as a body have been
notably unable to agree in formulating much in the way of straightforward,
practical advice for the guidance of lawyers, jurists and public policy makers
in these matters (see Priest 1986). The
fundamental source of this inconclusiveness is not so much the inordinate, and
oft-disparaged tendency of economists to engage in theoretical speculations, as
it is the persisting absence of established consensus on the answers to two classes of difficult
empirical questions. First, will a
faster pace of growth in the stock of scientific technological knowledge always
be an unambiguously “good thing” for a particular industrial sector or national
economy, and, therefore, warrant the sacrifice other, lesser societal
goals? Second, how responsive is the
supply of socially useful discoveries and inventions to the creation of bigger
private economic incentives? One must
concede that for policy analysts not to know the policy goal with any precision
must be a considerable handicap, just as it is for them to remain unsure about
the incentives and constraints that would be required to achieve any particular
goal, were one to be agreed upon.
Unfortunately, however, these two questions are not ones that can be
answered any better by lawyers on the basis of their having delved more deeply
into the details of existing or proposed intellectual property regimes.
A further caveat
on this score is warranted, in view of the unfortunate tendency on the part of
both economic theorists and legal theorists to slip into modes of analysis that
are essentially ahistorical. Those of us who, from practise, are most at
ease with the logic of microeconomic reasoning applied to intellectual property
rights issues need to take our cue from the skepticism
voiced by legal practitioners in this field.
We should take more pains not to allow familiar, simplifying
abstractions to obscure a central fact about the nature of the world for which
we would prescribe institutional reforms: the complex body of law, judicial
interpretation, and administrative practice that one has to grapple with in the
area of intellectual property rights has not been created by any rational,
consistent, social welfare-maximizing public agency. What we are faced with, instead, is a mixture
of the intended and unintended consequences of an undirected historical
process, upon which the varied interests of many parties, acting at different
points, some widely separated in time and space, have left an enduring impress. So, it would be really quite remarkable were
the historical evolution of legal institutions concerning patents, copyrights
and trade secrets, somehow, to have bequeathed to us a set of instruments
optimally designed to serve either the public policy purposes,
or the private economic interests of individuals and firms who currently seek
such protections.
To agree with this
one does not really have to take a firm stand against the general notion of an
evolutionary drift towards social optimality in the effects of the law on
resource allocation. Clever, modern Panglossians have come up with the proposition that the
likelihood that laws resulting in inefficient resource use will be exposed more
frequently to economically motivated litigation creates “selective pressure”
which must operate exorably and continuously to remold intellectual property law so as to render it moreefficient; that this can work even if the outcome of
the litigation is random; that some beneficent “invisible hand “, thus, guides the evolution
of legal institutions affecting economic performance. These ingenious but nonetheless dubious
arguments are confined, even by their most ardent proponents, to the supposed
workings of the common law system of judge-made law (see, e.g., Rubin 1977,
Priest 1977, Goodman 1978; and also Cooter and Kornhauser 1980, Cooter and Ulen 1988, and David (1992b) on deficiencies in the
selective litigation thesis). When we
speak of the modern “law “ of
intellectual property, however, we must be considering statutory and
administrative laws pertaining to patents and copyrights, even though a
complicating exception may be recognized concerning the law of trade secrets’
roots in the common law.
Thus, in the case of
the legal protections afforded to intellectual property it is difficult to find
even a speculative, theoretical justification for conceptualizing the pertinent
statutes, and the administrative procedures they authorize, as institutional
tools that have been passed along to us in shapes forged perfectly to “promote
the Progress of Science and useful Arts “.
The latter, of course, is the specific purpose identified by the framers
of the U.S. Constitution (Article I, sect. 8, cl. 8)
when they granted the Congress the power of “securing for limited Times to
Authors and Inventors the exclusive Right to their respective Writings and
Discoveries.” Nor should the prevailing
statutes enacted under that authority be read as policy instruments contrived
to attain a social optimum defined more broadly in terms of economic welfare.
Indeed, the first
step towards an understanding of many of the policy dilemmas that arise today
in regard to the introduction or alteration of intellectual property
institutions would seem to be an acknowledgement of just this elementary
point. If these arrangements are to be
viewed as utilitarian appendages of the body politic, it would be far more
illuminating to recognize their essential nature as most closely akin to the “thumb
“ of the Giant Panda - to which a metaphorical allusion appears in the title of
this paper. The Panda’s thumb has been
justly celebrated by Stephen Jay Gould (1980: Ch.1) as a striking example of
evolutionary improvisation yielding an appendage that is inelegant yet
serviceable. Although its owner is
enabled to grasp and strip the leaves from the stalks of the bamboo plant, on which she feeds
exclusively, this thumb is not anatomically a finger at all, much less an
opposable, manipulating digit. In
actuality, it is a complex structure formed by the marked enlargement of a bone
that otherwise would be a component of the animal’s wrist - but for the effect
of some genetic mutation - and the related extensive rearrangement of
supporting musculature. It is, as Gould
says, “a contraption, not a lovely contrivance”, and one whose
obvious mechanical limitations stem from its remote accidental origins.
Evolutionary
processes in biology work largely with the materials that are close to
hand. So does institutional evolution, and
especially the processes of incremental change and adaptation in legal and
other rule-systems that accord great weight to precedent (see, e.g., North
1991). Accordingly, even though the
array of legal provision and administrative rules that we refer to today as
comprising the “patent system” and “copyright system” have undergone
considerable adaptations in specific form and function over the course of their
long history, they appear remarkably resistant to rapid and radical reform.
As the nature of new
technologies changes, however, it has become evident that the familiar legal
contraptions of “patents” and “copyrights”
are rather ill-suited to the realities of some of the situations in which they
are being put to work (see, e.g., OTA 1986, WIPO 1989). They continue to be looked to as stimuli for
the generation of useful innovations, but, while enabling the private
appropriation of economic benefits from new scientific and engineering
knowledge, the familiar devices for protection intellectual property are known
to have a variety of untoward side-effects that may be distorting and even
impeding the progress of technology.
Moreover, the problems are not confined to those which might be solved
by readjusting old and still serviceable legal tools, or forging novel statutes
to fit special (sui generis)
technical circumstances. The process of
more finely articulating and more vigorously enforcing private rights in
intellectual property is certainly worth pursuing in some of these situations,
but, just as clearly, it cannot be looked to for optimal solutions to all of
society’s problems of institutional mechanism design affecting the production,
distribution and utilization of knowledge.
When one has conducted an extended review of the economic analysis of
the provisions for protecting intellectual property, as economists have done on
repeated occasions over the course of the past half century (including the
present author, in David 1992a), there is an understandable desire to arrive at
some overall evaluation of whether it is, from a resource allocation viewpoint,
“a good thing”. But, in this case, the
greater part of wisdom has been found to lie in resisting this temptation. Because, as is all too evident from the
adumbration of the incentive effects of allowing the private capture of
otherwise unappropriable positive externalities from
the quest for knowledge, on the one hand, and the myriade
untoward allocative distortions and inefficiences due to the creation of monopolies that
restrict access to knowledge, on the other, there is a great array of economic
benefits and costs to which actual magnitudes cannot readily be attached. It is difficult to do better in such
circumstances than to assert the appropriateness of “the inconclusive
conclusion”. Indeed, as Fritz Machlup (1958) observed long ago, in summing up his review
of the economics of the patent system:
If one does not know whether a system ‘as a whole’
(in contrast to certain features of it) is good or bad, the safest ‘policy
conclusion’ is to ‘muddle through’ - either with it, if one has long lived with
it, or without it, if one has lived without it.
If we did not have a patent system, it would be irresponsible, on the
basis of our present knowledge of its economic consequences, to recommend
instituting one. But since we have had a
patent system for a long time, it would be irresponsible, on the basis of our
present knowledge, to recommend abolishing it.
In short, with regard to the major structural features of the
institutions of intellectual property protection, one might as well accept that
modern economic analysis offers little basis for resisting the conclusion that
the industrial societies of the West remain “prisoners” of our particular
history. It is all too easy to miss that
main message by allowing oneself to be carried away with the style of intricate
economic analysis characteristic of the modern literature devoted to the
problem of the optimum length and scope of patent protection, or the optimum
degree to which copyright should be enforced; and especially with the efforts to
be more conclusive, and construct “positive”
theories exposing the economic rationales of this or that particular aspect of
present-day legal institutions. By
focussing selectively upon specific and arresting features of the structure of
protections afforded to intellectual property, and pointing to their putatively
favorable consequences for social efficiency in
resource allocation, a misleading impression can be conveyed that the law in
this area is susceptible to easy and rapid reshaping for the purposes of
enhancing economic welfare.
One cannot doubt that to inquire whether any cogent rationale based on
efficiency grounds can be found certainly is illuminating, and quite germane to
normative discussions of existing institutional arrangements. Nor can it be seriously disputed that the
evolution of the law in the societies of the West over time has manifested a
great adaptive capacity. One should
notice, however, that whereas the considerations of economic efficiency - so
much at the center of concern throughout the
foregoing survey - would seem to call for great subtlety and differentiation in
the nature and degree of IP protection provided, according to differences among
industries in technological and market circumstances, this evidently is not a
direction in which adaptation of the law has proceeded very far. One might well wonder, in view of such
analytical findings, why it is that patent and copyright terms are almost
invariably made uniform across industrial sectors and product markets (some special
exceptions being allowed under
Even more obtrusive is the fact that today much uncertainty and
controversy surrounds the persistent difficulties of adapting intellectual
property law to new technologies.
Central to these difficulties of adaptation are problems involving the
consistency with which legal principles are to be applied, and the concerns for
preserving the force of precedent, circumscribing ambiguities and uncertainties
in the enforcement of rights, and reducing the costs of legal transactions and
litigation. Unfortunately, the economist’s
conventional approach of evaluating specific institutional arrangements and
policies in isolation does not naturally accommodate that legitimate and
important class of systemic concerns, with which traditional legal scholars so
often are occupied. As a consequence,
the literature on the economics of patents, copyrights, and trade secrets
rarely notices the problems that arise at the interfaces,
or in the interstices between those regions of the law. Neither has it paid much
concern to the interrelationships and connections between intellectual
property and the larger matrix of the law of property, tort, and contract
(however, see Cheung 1982, as an exception).
Nevertheless, it is in large measure for reasons precisely of the sort
that conventional economic analysis has tended to overlook that legal
institutions typically evolve incrementally in politically and culturally
stable societies; that they preserve many aspects of outward continuity even
when it becomes apparent that there has been a change in the circumstances of
many of the economic actors affected by the institution, and that a radical transformation
has occurred in the inner rationale and motivation for its maintenance. Explicit recognition of some of the ways in
which historical legacies of surprising antiquity continue to shape the nature
of the legal protections afforded intellectual property, and thereby affect the
allocation of innovative activities, is perhaps the most expedient and
effective route to increasing the relevance and realism of the policy
recommendations that economics can offer in this area.
3. Intellectual
Property Law and Some Legacies of History
Although the history of intellectual property rights in the West is
replete with instances of redefinition and reinterpretation in response to
pressures to better accommodate or advance the economic interests of members of
the society upon whom those laws most directly impinged, many of the structure’s
gross features continue to reflect the remote historical circumstances in which
they originated. The existence of these
legacies from the past ought not be ignored, nor should
the problematic aspects of such continuities with contexts very far removed
from those of the present day be minimized.
In persisting, they necessarily impinge upon and influence both the
search for new technologies and the organization of economic activities based
on the exploitation of the resulting additions to the stock of knowledge.
Patents began as instruments used by noble or republican governments in
later medieval and early Renaissance Europe primarily to induce the transfer
and disclosure of foreign technologies. Even
the most cursory attention to this bit of history should give pause to one
casual supposition which the basic economic analysis of the patent system has
fostered - viz., that the protection of intellectual property has been
instituted where governments recognized there was more to be gained by
stimulating indigenous inventive activity, than by applying knowledge of
techniques and products that could be “borrowed” freely from the rest of the
world.
Patent, the English adjective, means “open”, and the noun form
abbreviates the term “letters patent” (a literal translation of the Latin litterae patentes) -
which refers simply to open letters.
These were the official documents by which certain privileges, rights,
ranks or titles were conferred and publicly announced; hence they carried the
seal of the sovereign grantor on the inside, rather than being closed by a seal
on the exterior (see Hill 1924: p. 406).
The “openness” involved, thus, was in no sense connected with any
disclosure of an invention - notwithstanding which, misapprehensions about this
bit of etymology persist to the present day (see, e.g., Bugos
and Kevles 1991).
Only much later did the granting of letters patent evolve into social
contrivances for the encouragement of original
invention.
In the fourteenth century, such grants were employed to encourage the
introduction of foreign technologies through the emigration of skilled artisans
from abroad, as in the case of the letters patent given to the Flemish weaver,
John Kempe, by Edward II in 1331, or the protection
granted to two Brabant weavers to settle at York in 1336, or the similar grant
conferred in 1368 upon three clock-makers from Delft (see Federico 1929: p.p 293-95).
Many of the basic features of the patent are better suited to its
initial purposes and historical contexts than to the subsequent use to which
the contrivance has been put. The
disclosure provisions of modern patent systems, for example, were an essential
and natural aspect of the effort to induce foreign artisans to reveal a “mystery”,
and train domestic craftsmen in its pursuit.
Making the conduct of the trade or craft - and the consequent training
of apprentices and journeymen - a condition for the privilege conveyed by the
patent was quite straightforward, since that was the whole object of the
exercise. Protecting the instructors
from the competition of their students, by giving them a monopoly of the trade
directly addressed the spillover problem - since
there was no way those they trained were likely to
benefit except by setting up in competition as soon as they learned the “mysterie”. Even the
duration of these early English patents -- 14 years, with 7 year extensions
possible - was not fixed arbitrarily: 7 years was the term of service of an
apprentice, and so the protection afforded was to last at least for two
generations of trainees. Inasmuch as
this was the conventional term of apprenticeship irrespective of the trade or
craft, there was some considerable logic to fixing the term of the patent award
uniformly across all branches of industry - even though, as has been pointed
out, modern economic analysis finds this aspect of the contemporary patent
system difficult to rationalize.
Granting monopolies also made sense fiscally for sovereigns whose powers
of taxation and borrowing were very circumscribed. It shifted the market risks to the foreign
artisan, and transferred to him also the bother of collecting the excise tax in
the form of the markup over his production
costs. Finally, there was no need to
ascertain that the grantee had originated anything, only that
at the time of the grant the practice was not being carried on - and hence
could be presumed to be unknown - within the sovereign’s domains. The criteria of “originality, novelty, and
non-obviousness” that have emerged as definitions of what does and doesn’t
qualify as an invention at the U.S. Patent Office, and elsewhere, might well be
seen as the make-shift results of a two hundred year long struggle to utilize
the grant of patent privileges to accomplish a restricted purpose for which,
originally, it had not been designed (see Lubar
1990).
Most historical accounts place the origins of systematic state
protection for intellectual property firmly in Renaissance Italy, whence it
spread elsewhere, first on the continent of
In this era the practice of granting such privileggi,
which was hardly confined to
he refuses to make such machine
available to the public in order that the fruit of his genius and skill many
not be reaped by another without his will and consent, and that, if he enjoyed
some prerogative concerning this, he would open up what he is hiding and would
disclose it to all.
From about this time forward, the issue of patent privileges for various
devices became increasingly frequent, and, by 1460, the Venetian Senate in its
administrative practice was differentiating between grants of exclusive
monopoly to sell products incorporating an “invention”, and awards that forebade use of the device without permission while
obligating the holder to grant licenses to others when “reasonable royalties”
were offered (see Kaufer 1989: p. 4). Technology importation continued to figure as
a primary objective: in 1469 a German, one Johann von Speyer,
received an exclusive monopoly of the trade of printing in the Venetian domain
in exchange for introducing the craft.
It has become conventional in modern historical accounts of the
development of intellectual property protection in the West to assign great
significance to the Venetian Senate’s passage, on
We have among us men of great
genius, apt to invent and discover ingenious devices... Now, if provisions were
made for the works and devices discovered by such persons, so that others who
may see them could not build them and take the inventor’s honor
[sic] away, more men would then apply their genius, would discover, and would
build devices of great utility to our commonwealth.
Yet, most authorities view this statute merely as having codified prior
practice, rather than enunciating any “novel” principle (see Frumkin 1945, Prager 1948,
Phillips 1982, Long 1991). The law required
the registration of any “new and ingenious” device not having been made
hitherto within the Venetian domain, and prohibited all private parties save
the inventor from making it for a period of ten years, on pain of penalties for
violation of the code. Furthermore, it appears
that between 1474 and 1490 very few patents actually were issued under the
Venetian code; this despite the fact that the period right through to the
middle of the sixteenth century saw the continued granting of many patent privileggi conferring exclusive production rights
for terms varying between 5 and 80 years, as well as monopolistic trade
privileges (see Kaufer 1989: p. 6).
Despite the rising interest in invention, and the spread on the
continent of Europe of the use of patent grants to encourage the development of
new industrial practices as an instrument of mercantilist policy in France during
the mid-sixteenth century, in England the first clear provision for “patents of
invention” - as distinct from the technology transfer franchises sometimes
referred to as “import patents” - did not emerge before the seventeenth
century. It did so then rather as an
afterthought, in the course of a movement to free the economy and polity from
the abuses of royal grants of monopoly privileges.
With the advent of the Tudor dynasty (1485), the former use of open
letters as a means of encouraging national industry had given way to the
negotiation by the Crown of secret agreements designed to attract skilled
foreign artisans into its own service.
German armorers, Italian shipwrights and
glass-makers, French ironworkers were enticed to cross the Channel in this
fashion. With Elizabeth I’s accession to the throne (1558), however, the previous
policy of general encouragement for technology transfers was reconstructed: in
1561-1571 many patents were issued by the Crown under this policy, starting
with a grant to two foreigners to introduce the manufacture of hard white
Spanish soap, and another for the manufacture of saltpetre - an item previously
imported from Antwerp (see Federico 1929: 293-97). So extensively was the royal perogative of awarding monopolies of all sorts exercised on
behalf of Court favorites and the Crown’s fiscal
needs, that by 1601 Elizabeth was compelled to promise reforms in order to
deflect a Parliamentary challenge to her authority in this regard. Nevertheless, this only deferred the
conflict; the abuses and retaliatory efforts to curtail the royal perogative escalated under James I, until in 1623
Parliament passed the Statute of
Monopolies, declaring all crown monopolies, charters and patents thereafter
contrary to law. An exception was
allowed, however, in the case of royal patents conferring a monopoly for 14
years or less “to the first and true inventor” of a new manufacture (see
Federico 1929: p.299).
It is upon this exemption that the British patent system and its
derivatives elsewhere have been erected.
Even so, the modern reading of the Statute
of Monopolies as “the Magna Carta of the rights
of inventors” (Machlup 1958: pp. 2-3), is somewhat
anachronistic. The verb “to invent”
carried far more extensive connotations at that time than it does today. For example, in a famous patent for a pump,
granted by James I to Robert Crumpe in 1618, the
sense of “invent” included “bringing into use, find, establish or institute manufacture”
(Hill 1924: p. 416). In short, only
originality in
The
giving
effectual encouragement, as well to the introduction of new and useful
inventions from abroad, as to the exertions of skill and genius in producing
them at home,...
The Constitutional era ushered in a decisive shift towards preoccupation
with protecting national inventive and literary activities, swept away the
disparities of treatment that had arisen among the former colonies, and
cemented into the structure of federal law the distinctions between patent and copyright
protection that today are taken to be fundamental. Despite the considerable attention to patent
policy issues in the American colonies during the latter seventeenth and the
eighteenth centuries, up to the hiatus created during the period of the
Revolution itself, the first systematized patent provision in America emerged
only in 1784, and then as a footnote to the copyright provisions in the South
Carolina “Act for the Encouragement of Arts and Sciences.” This statute’s purpose was to establish
literary property protection for a renewable fourteen year term. However, the following interesting rider was
included (Bugbee 1967: p. 93):
The Inventors of useful machines
shall have a like exclusive privilege of making or vending their machines for
the like term of 14 years, under the same privileges and restrictions hereby
granted to, and imposed on, the authors of books.
What renders this provision rather intriguing today is that it so
closely coupled patent protection with copyright protection, assigning the
former as most appropriate to “machines “, and the latter to “books “, but
otherwise barely distinguishing the treatment of the one from the other. The language adopted by the Constitutional
Convention in 1787 was influenced strongly by the previous state laws, and so
spoke also of securing exclusive rights for “Authors and Inventors” in order to
“promote the Progress of Science and useful Arts”. Copyright and patents for invention were not
mentioned explicitly - nor were import franchise explicitly rejected - as the
means whereby this purpose might be accomplished.
The formal creation of a patent system during the early days of the U.S.’s
nationhood was thus shaped most strongly by the experience of the former
British colonies, and hence (except in
rhetoric) was little influenced by
actions of their revolutionary French contemporaries. The law of 1791, which formally established a
patent system in
The U.S. Senate complied with
In its late medieval origins, the copyright privilege had nothing to do
with the encouragement of intellectual creativity or originality of
expression. Indeed, the very notion of
claiming originality of authorship was a Renaissance departure from the
scholastic tradition of seeking to cloak one’s own ideas with the authority of
Aristotle and the other “ancients” (see e.g. Long (1991). Rights of literary property involving published
works remained legally unprotected in
Like the earliest patents of invention, the first known copyrights
appeared in Renaissance Italy. By the
end of the 1460s the craft of printing had been introduced in
However, towards the end of the century some privileges were awarded for
the protection of authors which did have the character of modern copyright: in
1486 the historiographer of the Republic was granted exclusive control over the
publication of his work; and in 1493 the Cabinet made an exclusive ten-year
grant of proprietary rights, to one Daniele Barbaro, in the publication of a book authored by his
deceased brother (Bugbee 1967:p.45). More typical were the copyrights issued to
editors and publishers for individual works written by others; these were petty
monopolies, prohibiting publication of the work without permission of the
grantee. Publishers were soon flocking
to the government to reserve well-known titles for themselves, in the hope of
either publishing themselves or selling the right to another printer at some
future date; in 1517 the resulting shortage of available titles caused the
Senate to revoke all such copyright privileggii
henceforth to “new and previously unprinted works”.
What was probably the first general copyright law in the world came in
the form of a decree issued by the Council of Ten in Venice in 1544-45,
prohibiting the printing of any work unless written permission from the author
or his immediate heirs had been submitted to the Commissioners of the
University of Padua, but no provision was made to maintain a register of
protected works (Bugbee 1967: p.46). This step was prompted by the continued
unauthorized printing of works for which copyrights had been granted. A further measure directed toward more
complete regulation of the printing business came in 1548-49, with a Council
decree establishing a gild into which all Venice’s printers and booksellers
were to be organized. An added
motivation was to assist the Church in the suppression of heretical
literature. The same concern with
censorship of a potentially dangerous new medium of communication, rather than
securing the rights of authorship, animated the royal officials of sixteenth
century
In the
As far as the
foreign authors were concerned, the Elzevirs appear
to have followed simply the dictates of their own convenience and advantage.
They took what material they thought they could use, without troubling
themselves to make either requests or acknowledgments. They were, in fact, the most extensive
piratical publishers that the world had as yet seen, and may be said to have
reduced piracy to a business system.
The Venetian printers’ guild was closely resembled by the Stationers’
Company which was chartered in
Thus, in
The modern statutory protection of authors’ copyrights in the
From the foregoing brief account of the origins of copyright it is
evident that the signal distinction between the protection of ideas under
patent law and the protection of expression under the law of copyright owes a great
deal to the fact that copyright arose in response to both internal and external
interests in regulating the nature of competition in the printing and
publication business, an industry in which decreasing costs were at an early
date felt to be a source of instability.
Copyrights, therefore, were inherently concerned with the security of
property rights in the expression of ideas - whether old ideas or new ones. Only much later have they come to be enlisted
in the cause of stimulating the production of new knowledge. Is it so surprising, then, that in this new
role they sometimes are found to perform rather awkwardly? Consider, as a simple case in point, the
recent assignment of copyright law to the task of protecting intellectual
property rights in computer software.
There it has been observed that the protection afforded to unique
expression offers no security for originators of novel algorithms and concepts
for applications programs (such as spreadsheets, and relational
databases). Yet, at the same time the opportunities
that the law creates to protect original expression has had the effect of
encouraging an excessive degree of variety in the “look-and-feel” of software,
whereas some greater degree of standardization of the machine-user interface is
widely felt to be desirable from the standpoint of economic efficiency (see,
e.g., Farrell 1989; David and Greenstein 1990).
Historical studies reveal that although patents, copyrights and legal
protection of trade secrets are recognizable institutions familiar in western
societies for centuries, policies bearing upon the protection accorded to
intellectual property, and the juridical-institutional arrangements used to
implement them, have been a mutable thing, adapting over time and across
societies to the perceived needs and advantages of interested parties. The adaptations that may be seen in each form
of protection, moreover, have occurred within the historical context of other,
related institutional arrangements affecting the costs and benefits of
maintaining specific IP rights.
An implication of this observation is that the effort to institute a
uniform international regime of IPR protection is almost bound to occasion
conflict and controversy. Even where it
is possible to argue that a new IP regime could be found that would be
Pareto-improving, the need to align domestic and international laws adds
additional constraints that tend to render such solutions impractical. As a result, discussions of the “correct”
international system of protection for IP are more likely than not to
degenerate into rhetorical efforts to impose institutional arrangements that
may be well adapted to the national purposes and the domestic legal contexts of
one country (or several similar countries), upon societies that are quite
different in those respects.
The supposed trade-off between promoting technological progress and technology
diffusion, or transfer, has led to the view that strong protection of IP rights
must serve the former goal, at the expense of the latter. This has served as a rationale for the
conflicts between the technologically advanced and the developing nations over
IP issues: an interest in weak or minimal protection for IP is imputed to the
developing countries’ limited capacity to innovate technologically, and their
comparative advantage in imitating the products and processes originated
elsewhere. But, this is not necessarily
the case. Indeed, just the opposite
point may be made both on modern theoretical grounds, and by reference to
historical experience: legal protection of intellectual property rights in the
form of state-sanctioned monopoly franchises can have seriously detrimental
consequences for the processes of discovery and invention, and may be
instrumental in bringing about the successful transfer and commercial
application of new scientific and technological knowledge. The arguments supporting this can be
summarized as follows:
(1) Because invention often is a cumulative process, as scientific
inquiry more generally is recognized to be, the enforcement of patent rights
can interfere with further discovery. It
deflects resources into “racing” for the priority prize, and into inventing
around the basic patent. It discourages
complementary inventions, because the returns may be extracted by the first
patentee, whose work has been built upon.
Note the distinction made here between inhibiting progress, rather than
discouraging investment in R&D.
(2) Weak and narrow patents, as in the modern Japanese system, encourage
firms to cross-license and thus disseminate findings rapidly, encouraging the
collective invention process - in the direction of elaboration and adaptation
to particular markets, although it may discourage efforts to achieve radical,
fundamental inventions (see Ordover 1991, and
references therein). This is consistent
with one aspect of Kitch’s (1980) “prospect” argument
for broad, strong patents, as encouraging fundamental innovations and their
orderly development. But, it contests
the premise in the latter that a monopolist can identify and efficiently
contract for the performance of the cumulative, elaborative research.
(3) While it is arguable that weak patent protection regimes encourage
exchanges of patent licences among firms that are symmetrical in regard to
their technological capabilities, the opposite is more likely to be the case in
regard to transfers of technical know-how from more to less capable
organizations. Much of a firm’s
capability for absorbing and implementing patented innovations depends upon its
access to tacit knowledge that is complementary to the patent. If it does not possess such knowledge
already, because it has no experience base in the area and cannot readily hire
skilled personnel from firms that do, it must contract for the required
information. But, tacit information is
notoriously difficult to contract for, due to the problems of informational
asymmetry and monitoring costs. This
problem bedevils North-South technology transfers that do not involve the
intermediation of multinational organizations.
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codified knowledge in the receiving country provides a basis - as Arora (1991) recently has demonstrated - for structuring
contracts that would accomplish the transfer of the uncodified,
tacit knowledge which is necessary for the profitable operation of industrial
processes, but which has not been publicly disclosed by the patent- or
copyright-licensor. Further, contractual
arrangements to transfer tacit knowledge as part of the terms for the licensing
of the use of codified and published information (e.g., in a patent), generally
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interests of both the licensor and the licensee.
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