From pirate to plaintiff: accelerating development through the strategic evolution of intellectual property doctrine.

Author:Strakosch, Richard
Position:Paradigm in Practice: Current Examples from Developed and Developing Nations through Conclusion, with footnotes, p. 61-88

Paradigm in Practice: Current Examples from Developed and Developing Nations

United States

The development of the largest economy in the world (as measured by GDP (216)) is an example that demonstrates the use of IP law as an economic tool, and the clear relationship between the implementation of IP policy, and mechanism of economic development. (217) The basis for the United States (US) intellectual property system is somewhat unique in that it was unambiguously etched into the central founding document; in Article I, Section 8, Clause 8 of the United States Constitution congress is explicitly delegated the power, "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (218) Although congress quickly used that power to draft the patent act of 1790, the United States did not start off with anything that resembles the expansive and far reaching IPR regime it has today. (219)

The US started its economic growth by deliberately and strategically absorbing and imitating technology from Europe without compensation (i.e. pirating). (220) The US made no secret about its preference for domestic inventors, by charging a lower fee at the patent office for citizens than non-citizens. (221) By absorbing and imitating this technology, the US quickly climbed the technological learning curve, and in short order started to emerge as a leader in industrial innovation. (222) Illustrative of the links between IPR regimes and economic development, the US quickly developed a modern patent system, vesting patentees with significant rights that courts had broad power to enforce, (223) while simultaneously neglecting less economically important forms of IP such as copyright. (224) The development of the patent system in this case appeared to be strategic and implemented in lockstep with economic progress. (225) Consistent with the developmental paradigm, the US had relaxed IPR enforcement in its early stages after the revolution, when such a policy was beneficial to the country. (226) However, once the US became an industrial leader the patent regime quickly evolved into one that was liberal in the rights granted to inventors, and open to a much wider range of the population compared to the patent regimes of England and France. (227)

By having lower fees, centralized processing and examination, and making specifications of patents available to the public, the US gave birth to the first modern patent system. (228) The structure succeeded in enabling access to the patent system for a much wider range of individuals then its European counterparts. (229) This helped to speed the diffusion of ideas and inventions, and to decouple the task of innovation from that of commercialization. (230) In Europe, high fees and other practices made it difficult for those without access to wealth or power to utilize the patent system. (231) This not only alienated many inventors, but the same lack of connections and resources that precluded access to the patent system also made it difficult for these inventors to successfully commercialize their inventions. (232) Conversely, the American patent system readily provided these innovators with a mechanism to register their inventions, and then transfer their rights to individuals and entities with the proper skill sets, connections, and resources needed to commercialize the technology by achieving the production of salable products and delivering them to the marketplace. (233) This mechanism promoted more efficient markets by allowing the resources and skills needed for invention and commercialization to be independent of one another. (234) This key innovation helped America quickly gain prominence as a technological leader, and helped to develop and foster an innovation friendly culture. (235) As a counterpart the US simultaneous developed a strong legal doctrine relating to enforcement. (236) This system experienced fairly consistent levels of patent litigation in the early years, with 1-3% (237) of patents being the subject of litigation, a number which is remarkably close to the 1.5% probability of litigation for an issued patent today. (238)

What is interesting about the early leadership position in the field of patent law is that the US simultaneously had, by European standards, very underdeveloped copyright laws. (239) Furthermore, the copyright laws the US did have on the books were applied disproportionally towards protecting domestic works. (240) This state of affairs persisted throughout the 19th and 20th centuries, with the US refusing to participate in the Berne Convention for the Protection of Literary and Artistic Works until 1988. (241) The American reluctance to adopt and enforce copyright, in sharp contrast to patents, can most easily be reconciled by the observation that Europe had a very rich history in literature, arts, music and other forms of expression covered by copyrights; much more advanced than anything the US was producing in its early days. (242) During this period American artists, writers, and thinkers enjoyed relatively free access to materials that were subject to strict copyright laws in Europe. (243) Through the same mechanisms of absorption and imitation, the US eventually developed its own rich arts and entertainment culture, and not surprisingly also began to take copyright law more seriously. (244) This series of events illustrates how the early decision of the US to focus on industrial innovation, as a means of economic development, is directly reflected in its development of corresponding IPR regime. (245)

South Korea

South Korea is a remarkable model for how rapid economic development can be in the right circumstances. (246) The pace of development was so striking that it has earned the nickname "The Miracle on the Han River," referring to the rapid industrialization and revitalization of the capital Seoul. (247) Following the Korean War, South Korea was one of the poorest nations on earth with an annual GDP per capita of just $80. (248) Within the lifespan of a single generation, only 50 years, the GDP per capita has skyrocketed to over $33,200 in 2011, (249) and despite its relatively small size South Korea had the world's 13th largest economy (as measured by GDP). (250) This rapid development is all the more impressive when the plight of its neighbor to the north is considered. (251) Despite having access to much of the same resources, North Korea has pursued a set of policies which have failed to make even moderate economic progress in this same time period. (252) To this day North Korea remains in extreme poverty, with a GDP per capita $1800 in 2011, trailing some of the least developed countries, such as Sudan and Cambodia. (253)

South Korea has benefited from a long term strategic vision to become a developed, knowledge based economy. (254) The country was also small and nimble enough to constantly tweak its IP and economic policy in order to stay on this path. In keeping with the developmental paradigm outlined in this paper, South Korea's initial growth relied heavily on absorbing technology from outside its boarders' and applying it in a targeted industry, the shipbuilding and automobile manufacturing sector. (256) The fruits of this labor drove a strong export economy, and the government used this influx of foreign capital to invest in infrastructure that would position it well for the digital age. (257) South Korea's rapid rise in economic status can be attributed to its early recognition of the importance of telecommunications infrastructure in the economy of the future. (258) This insight lead to early adoption of fiber optics technology, a network South Korea began to build as early as the 1980s. (259) This investment paid off, and South Korea status as one of the world's most wired countries, (260) has facilitated its emergence as a leader in the electronics and technology industries. (261)

South Korea went through the development paradigm so quickly that it is difficult to pinpoint all the discrete steps. (262) In the early 1980s, as South Korean growth accelerated, MNCs from more developed nations started to see South Korean firms as competitive threats. (263) When South Korean competitors emerged, US firms started to take note and complain about insufficient IPR protection and piracy. (264) This trend lead the US in 1985 to formally launch a Section 301 investigation (265) against South Korea, to determine if trade sanctions for insufficient IP laws and enforcement were appropriate. (266) The threat of trade sanctions lead to a series of consultations with the South Korean government, in which South Korean officials quickly agreed to patent and copyright reforms implemented in 1987. (267)

In line with the paradigm, these laws were strong on paper, but the South Korean government initially struggled with enforcement issues that would gradually improve over time. By 1999 knowledge based industries accounted for 45.6% of the South Korea's annual GDP growth. (269) This economic growth from knowledge based industries would set the stage for IP reforms. (270) In 2002 the International Intellectual Property Alliance (IIPA) found that "piracy levels are excessively high across the board, causing an estimated $572 million in (annual) losses to U.S. copyright owners." (271) This would culminate in 2003 with major revisions to copyright law and the formation of a "Standing Inspections Team" that had broad policing power to conduct raids and enforce IPR. (272) The dramatic imagery of an armed unit conducting raids and seizing counterfeit goods was clearly an attempt to signal to the international community that South Korea was ready to take IPR enforcement more seriously. (273) Despite this move South Korea continues to be targeted for a high degree of music piracy (274) and, much like the United States in the early and...

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