The winners and the losers: the Agreement on Trade-Related Aspects of Intellectual Property Rights and its effects on developing countries.

• Author: Su, Evelyn

1. INTRODUCTION

   These are changing times in the global economy. With the opening of the international market and the increased ease with which goods, capital, and ideas flow around the world, new opportunities for industrialization and economic growth have emerged for developing countries.(1) However, these rapid economic changes have not come without problems. The competitiveness of firms in developed countries(2) is largely determined by the ability to develop, commercialize, and, most importantly, to capture the economic benefits from technological innovations.(3) In recent years, these industries have experienced an increase in the number of infringement cases regarding protected corporate technology.(4) These industries have pushed for the strengthening of global protection on intellectual property rights because violations of protected intellectual property rights cost manufacturers and companies billions of dollars in lost revenue each year. For instance, the value of pirated goods in China was $2.3 billion in 1996 and $2.8 billion in 1997.(5) Governments have not only strengthened their own national laws protecting intellectual property rights, but they have also entered into international agreements in an attempt to create an international system of protection for intellectual property rights. In 1994, as part of the Uruguay Round of negotiations and agreements, the Trade-Related Aspects of Intellectual Property Rights ("TRIPs Agreement") was adopted in Marrakesh, Morocco.(6) This comprehensive law governing the global protection of intellectual property rights provides the protection that industries and developed countries have been seeking. However, the TRIPs Agreement simultaneously narrows the developing countries' access to technology, discouraging the rapid diffusion of new technology needed for economic growth.

   The goal of this comment is to explore the effects of the TRIPs Agreement on the industrialization and economic growth of developing countries. Part II of this comment provides an overview on the development of intellectual property rights in the world. In addition, this section will discuss international agreements on the protection of intellectual property rights, including past conventions and the TRIPs Agreement. In Part III, this comment studies the current economic situation in developing countries and explores policy tools for economic growth. This section, moreover, outlines the conflicting arguments surrounding the effects of the TRIPs Agreement on developing countries. Part IV analyzes the empirical evidence surrounding the effects of the TRIPs Agreement on foreign direct investment and international trade in developing countries.

2. OVERVIEW OF INTELLECTUAL PROPERTY RIGHTS AND THE TRIPS AGREEMENT

   1. Overview of Intellectual Property Rights

      1. Definition of Intellectual Property Rights

         Intellectual property rights are defined as governmental protection of private innovations and creativity.(7) Intellectual property law protects "original ideas, creative forms of expression, new discoveries, inventions, and trade secrets."(8) The basic forms of intellectual property rights generally include patents, copyrights, trademarks, and trade secrets.(9) Each form of intellectual property has its own standards and procedures, which establish the subject matters protected, the application process involved in achieving protection, the duration of protection, and the remedies for infringement.(10) However, the fundamental feature of these various forms of intellectual property rights is the exclusive right to exclude others from certain activities.(11)

         Traditionally, laws governing the protection of intellectual property rights extend only to the national boundaries of the nation where the inventor has fried for protection.(12) Recently, nations have attempted to expand the protection of intellectual property rights for their own nationals beyond the boundaries of the nation and into the international markets on a global scale.(13) Two main reasons have prompted governments to enter these international agreements on the protection of intellectual property rights.(14) First, as developing countries gradually increase their exports of industrial goods into markets originally dominated by industrialized countries, the industrialized countries must rely more heavily on their comparative advantage in the production of intellectual property.(15) Second, the high cost of research and development combined with the vulnerability of high-tech knowledge to free-riders has forced companies to seek international protection of intellectual property rights.(16)

      2. The Origins of Intellectual Property Rights

         The public willingness to bestow private property rights to creative expressions, designs, and innovations can be traced back to ancient times.(17) Copyright protection was first observed in the fifteenth century after the invention of the printing press.(18) During the sixteenth and seventeenth centuries, it was common in most countries for the sovereign to grant exclusive publishing rights for a fee.(19) Unauthorized publications were prohibited because they reduced the sovereign's revenues.(20) In 1710, the first statute recognizing the author as the primary recipient of copyright protection was passed in England.(21) Subsequent court decisions in England confirmed the rights of authors to exclude others from publishing their works without permission as a common law right, rather than a statutory right.(22) Many civil law countries during the eighteenth and nineteenth centuries began enacting statutes, such as the 1793 French statute protecting the rights of authors.(23) In the United States, the Constitution contains a provision calling for federal copyright protection.(24)

         Trademarks evolved from the early practices of marking property to indicate ownership.(25) The practice of marking property appeared during the fifth and sixth centuries B.C. where Greek vases bore the marking of the potter.(26) Modern trademark protection started in the trade guilds where craftsmen were required to place production marks on their goods.(27) While an individual's mark on the goods served for identification purposes, the concept of trademark and unfair competition evolved from the premise that it was unfair to present one's goods as the goods of another.(28) Systematic legal protection of trademarks began to evolve in the early nineteenth century.(29) Courts in both the United States and England created the tort action of "passing off," where "the defendant had used plaintiff's mark to deceive consumers into thinking that plaintiff was the source of defendant's goods."(30) Eventually, courts began categorizing the stealing of another's mark as trademark infringement, rather than "passing off" or unfair competition cases.(31) Today, the mark not only can be placed on goods, but also can serve to identify services, associations, and certifications.(32)

         Very little is known about the development of trade secrets because of the secrecy of the facts surrounding them.(33) The legal protection of trade secrets can be traced back to early Roman times.(34) For instance, a master could bring a legal action and obtain a monetary remedy against a third party who enticed the master's slave to reveal the master's secrets.(35) During the Middle Ages in Europe, the craft guilds successfully provided protection for craft secrets by keeping the secrets of the method of production within the guilds.(36) In nineteenth century Britain, protection of trade secrets was provided through the apprenticeship system, where tricks of the trade were passed from the principal to the apprentice.(37) In Asia, family businesses and the sense of lifetime employment with a particular employer minimized the loss of secrets via employee turnover.(38) Today, international competition and the high cost of technological development have intensified the importance of trade secret protection.(39)

         During the Renaissance, the Italian states were among the first Western governments to grant patents.(40) For example, during the fifteenth century, the Venetians codified a general patent statute in order to spur the introduction of new technologies.(41) The practice of granting patent rights eventually spread throughout Europe in the centuries that followed, where often royalty had the power to grant patents.(42) In the seventeenth century, the English government adopted the Venetian model, whereby the English government, not the royalty, granted inventors limited monopolies on their inventions and ideas.(43) This English model became known as the Statute of Monopolies.(44) In the late eighteenth century, both France and the United States enacted comprehensive patent laws with the understanding that patent rights were individual rights, rather than a royal prerogative.(45) By the late nineteenth century, many countries around the world, including Japan, had adopted comprehensive patent statutes.(46) However, many former colonies, such as those of the British Empire, adopted less comprehensive patent systems.(47)

   2. International Agreement on Protection of Intellectual Property Rights

      1. Past International Agreements on the Protection of Intellectual Property Rights

         With the globalization of the economic market and the increase in international trade, industries in developed countries have experienced an increased number of infringements on intellectual property rights.(48) National intellectual property laws have been ineffective in combating problems associated with intellectual property rights infringement.(49) With the increase in trade, industries have begun to lobby for an international system of protection for intellectual property rights. During the past century, nations attempting to harmonize intellectual property rights have entered into a number of international agreements.(50) Even though each of these international agreements have...