IP Rights and Economic Development: A Historical Perspective

• Author: Zorina Khan
• Position: Associate Professor of Economics at Bowdoin College, U.S., is a member of the National Bureau of Economic Research and was a contributor to the U.K.

In the following extracts from a recent interview with WIPO Magazine, Professor Khan shares some of her conclusions and draws analogies with the situation in developing countries today.

Why the design of patent systems matters

"The framers of early American patent policy were convinced that individuals responded to incentives, and so carefully calibrated the system to promote inventive activity. This was evident at the highest levels (e.g. the inclusion of an IP clause in the U.S. Constitution) and the most detailed provisions (e.g. to enable patent applicants in rural areas to mail in their applications without having to pay postage).

Historically, the U.S. took the lead in offering strong protection for patented inventions, and in facilitating widespread markets in patent rights. Patents were regarded as the "dearest and most valuable rights which society acknowledges,¹" and patent holders could appeal to the Supreme Court to plead their causes. Patent holders were never regarded as monopolists, since their contributions to new products and productivity benefited the public.

European countries, on the other hand, tended to regard patent rights as monopolistic. Patent rights were restricted - by the courts and the state - to protect vested interests and existing jobs. Fees were kept high to create revenue for employees and the government. Internationally, the U.S. took the lead in encouraging other countries to strengthen their patent laws in order to benefit globally-competitive American patent holders.

Comparisons between Europe and the U.S. suggest that their differing approach to IP affected the direction, and possibly the rate, of their inventive activity. U.S. inventors were drawn from a wider spectrum of the population than in Europe, and inventiveness was far more broadly distributed across all industries. Markets in patent rights and patented inventions flourished, and this market-orientation was especially beneficial to patent holders who did not have the financial resources to exploit their patents.

These observations are consistent with the patterns of productivity and economic growth. U.S. productivity gains were evident in all sectors, even labor-intensive industries, and growth paths were balanced. In Britain, by contrast, patented inventions tended to...