Independent Trade in Intellectual Property Rights as a Building Block for Overcoming Neoliberal Predatory Competition
An Article in the Compendium of Market-Based Social-Ecological Economics
Key issues in view of the neoliberal crisis:
How can we guarantee employment and fair income?
How can we protect the environment effectively?
How should we shape the economic globalization?
What should the economic sciences contribute?
What must be the vital tasks of economic policy?
How can we legitimize economic policy democratically?
Table of Contents
In neoliberal predatory competition, intellectual property has been downgraded to a mere catalyst in promoting market captures in foreign trade in material products and services. As a consequence, the creativity of research and development is predominantly focused on intellectual property that is suitable for mass-producing uniform global goods and services and, at the same time, can be well protected from unauthorized access, or which simply serves as a placeholder to complicate competitors’ own developments. The function as catalyst or placeholder naturally excludes an independent foreign trade in intellectual property, so that progress and the desirable diversity in the world fall by the wayside. Therefore, to make the global economy fit for the future, global trade in intellectual property rights has to be revamped and pushed forward in addition to and in accordance with global trade in goods and services.
2. Clarification of Terms
The term »intellectual property« refers to the rights legally conceded to owners of inventions and other intellectual creations. In the case of intellectual property rights, a distinction is mainly made between personal copyright and industrial intellectual property rights.
The personal copyright covers, for example, the rights to linguistic works (speeches, written works and computer programs), works of music, works of dance art, works of fine and applied arts, buildings, photographs, cinematographic works, and scientific and technical representations. Copyright applies immediately upon the creation of a work. It is inheritable, but not transferable, grants the author rights of use and remuneration and usually ends 70 years after the death of the author.
The industrial intellectual property rights for intellectual creations, which is the important aspect in the context given here, comprises in the technical field the rights to patents, utility models and new plant varieties (variety protection). In the aesthetic field, it comprises industrial designs (designs and models), typographic characters, semiconductor topographies, trademarks, business designations (proprietary names) and geographical indications. Intellectual property rights apply only upon registration of an intellectual creation in a public register and are geographically limited to the scope of the register, and they are limited in time and can be transferred in full or as restricted rights of use (licenses) to other natural or legal persons.
3. Meaning and Purpose of Industrial Intellectual Property Rights
Since intellectual property, unlike material products and services, is easy to copy and can be used at will regardless of location because of its immaterial character, it requires special protection.
For most personal authors, their intellectual property is part of their professional existential basis and can serve an author as production capital or marketable product or both in one and the same form. The latter is the case, for example, when a non-fiction author develops a customized computer program to translate discipline-specific legal texts into several foreign languages and uses the program himself and, at the same time, sells it within the industry for a fee. The author is undoubtedly existentially dependent on his investment in the program being profitable and the program being legally protected against the distribution of pirated copies for a reasonable period of time.
The same applies to industrial intellectual property: a technical invention can improve the production process or the product of a company, but less often both at the same time. Companies will register a technical invention as a patent if secrecy is not possible and if they have to protect their investment and the expected return from imitators and free riders from the industry.
Socially and economically, intellectual property rights are an indispensable prerequisite for personal creativity and private-sector research and development to pay off and contribute to progress. Progress is only future-proof if man’s own quest for creative activity and self-fulfilment is directed towards socially and ecologically profitable paths by a corresponding economic regulatory framework.
The idea, inspired by the new freedoms on the Internet, that intellectual property rights are now obsolete would paralyse professional creativity and be economically and socially counterproductive if incorporated into legislation. It must therefore be up to authors to decide whether they make their texts, images, music or technical inventions freely available and free of charge or not. As far as the Internet is concerned, its main advantage in this respect is that it offers an ideal platform for both free and paid intellectual creations and generates worldwide demand.
Instead of questioning property rights in general, the appropriateness of current protection periods and protection fees must be put under scrutiny. But an even greater obstacle to the profitable use of intellectual property rights is the fact that it is being sacrificed on the altar of predatory competition with goods and services as per the Neoliberal Economic Doctrine. The following sections will focus on this development, which hampers progress:
4. The Restrictive Regime of the World Trade Organization
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) entered into force in 1995 with the establishment of the World Trade Organisation (WTO). As the name suggests, the WTO does not aim at an independent trade in intellectual property licenses with TRIPS – which could serve global progress and replace a large part of the trade in goods and services – but pursues the protection of intellectual property rights for the purpose of intensifying predatory competition in neoliberal free trade with goods and services (see also the article World Trade Organization (WTO)).
Moreover, the WTO does its utmost to protect the intellectual property rights of industrial owners throughout the entire life cycle of production processes and products and, if necessary, to enforce them using the sanction proceedings at its disposal. From the point of view of neoliberal free trade, the determination of the WTO is consistent to the extent that owners of patents, utility models, trademarks and proprietary names naturally have no interest in granting licences on open global markets which expose them to the risk of subsequently being forced out of the market by their licensees who can produce the end products at lower costs. As a rule, licences are therefore only offered when the owners have already skimmed off all the major world markets and the intellectual property is of little value only or has become obsolete.
In addition to hampering independent global trade in intellectual property, the neoliberal practice also has some disadvantages for industrial players: As intellectual property rights are put at the service of global trade in goods and services – almost without exception – their value rises in line with the value of worldwide sales of the products associated with them. This overvaluation exposes the right holders on open global markets to the constant danger of plagiarism and forces them to incur high expenses in preventing the threatening infringements of their intellectual property rights or to pursue infringements by legal means across the globe. Moreover, overvaluation tempts the players to register so-called blocking patents (initially referred to as placeholders), with which they deliberately occupy entire fields of technology – however, not to exploit the patents themselves, but to provide their competitors with the highest possible development costs and to keep them at a competitive distance.
A further social disadvantage of the neoliberal doctrinal expediency of patents and other intellectual property is that entrepreneurial and, increasingly, government research funds flow primarily into projects that promise the prospect of capturing global markets with uniform mass products. Due to this practice, social and ecological aspects are increasingly excluded from research and development objectives – which leads to the neglect of necessary public services of general interest.
5. Current Examples from the Neoliberal Practice
Two current examples demonstrate the different problems arising from the neoliberal practice of the WTO:
The first example: The high hurdles that global free trade in goods and services poses for an independent trade in intellectual property has led some African states to call for a relaxation of patent protection for HIV drugs in WTO negotiations, which would allow them to combat the consequences of the high HIV epidemic level in their countries with low-cost generic drugs. A compromise was then adopted in the WTO, which did not permit countries to bypass patent protection to produce or commission generic medicines themselves, but allowed them to import medicines at low cost and even free of charge.
The legal and humanitarian assessment of this current case directs attention to a central problem caused by neoliberal free trade: On the one hand, the current situation shows that global trade in goods and services, which is based on predatory competition for price advantages in US dollars (partly also in euros), provokes dumping and centralist structures and is not suitable for ensuring autonomous local production and supply. Moreover, it even deliberately aims to create economic dependencies that provide well-protected sinecures for powerful global economic players. Whereas, for an autonomous supply it would be more effective and also more humane to offer local companies licenses as early as possible within the framework of a knowledge and technology transfer separate from trade in goods and services, and to shorten the terms of patents in general significantly. On the other hand, this is a specific case of an emergency call by the developing countries for immediate aid, which under the given circumstances, instead of dealing with it in the WTO from a trading perspective, could have been better resolved by the World Health Organization (WHO) within the framework of internationally financed development aid and with the involvement of the patent owners.
The second example concerns patent protection directly: TRIPS serves transnational biotechnology companies as a binding framework under international law that allows them to patent natural biological resources for the purpose of exclusive private-sector use, thus transforming them from a public good into a protected and tradable private good. In this field, the large corporations are engaged in a race to bring the unexplored biodiversity of tropical rainforests under their economic control. Developing countries and indigenous peoples, on whose territories the genetic codes are stolen and individual natural remedies are copied without them being informed in detail, have so far fought in vain against this practice, which is referred to as biopiracy.
In this case, regardless of the territorial question, the countries and people affected have the clearly better arguments, because it has always been undisputed that forms of life resulting from natural selection are not human inventions and therefore not patentable. Patent applications relating to individual substances of medicinal plants are legally more difficult to assess because it is always to be expected that the curative effect has already been recognized earlier by indigenous peoples and therefore cannot be protected anymore. The former President of the European Patent Office (EPO) in Munich, Alain Pompidou, has announced a promising solution to this problem in an interview with the magazine »Spiegel Online« on 23 February 2006:
“We are building another database for our patent search in which we collect traditional knowledge from all over the world. For example, which medicinal plants the indigenous people of the Amazon use to treat high fever or how tribes in India protected their crops against pests. We collect this knowledge, for example, to be able to reject a patent application for a supposedly new active ingredient from a plant. For example, the US company Thermo Trilogy Corporation and the US Department of Agriculture have jointly filed a patent for a product containing oil from the Indian Neem tree to combat plant pests. But the oil has been used in India for centuries. This led to great excitement among development aid organizations, who feared profiteering with the traditional knowledge of the peoples. We rejected the patent application. In future, we will be able to search this database before we grant a patent and thus prevent fierce criticism. Only the fact that we have this information protects those who preserve this knowledge and have used it for centuries from falsely granted patents. How we deal with biological resources is one of the big questions that will occupy us over the next ten years.”
6. Principles of a Post-Neoliberal Economic Order
Property Rights as a Universal Human Right
The United Nations Declaration of Human Rights of December 1948, in which the legal entitlement to people’s own intellectual creations was granted the status of a universal human right, can be regarded as the starting point for classifying trade in intellectual property. The Declaration was reaffirmed in 1966 and 1993, and the legal entitlement was also enshrined in the Charter of Fundamental Rights of the European Union of December 2000. Both declarations explicitly extend the concept of property to intellectual creations or rather immaterial goods, and thus create incentives for intellectual creativity and conditions for an orderly economic use of intellectual property.
This lays the foundation for an independent global free trade in industrial intellectual property rights, leading the way to a post-neoliberal knowledge and information society that is truly worthy of the name.
Complementarity of Material and Immaterial Trade
As presented in the articles Future-Proof Foreign Trade and Comparative Advantage – Upgraded, a post-neoliberal foreign trade and competition in goods and services under the conditions of a social-ecological market economy requires:
All this in order not to provoke crowding-out effects and to preserve regional diversity in the world.
A post-neoliberal foreign trade and competition with industrial intellectual property rights can be built up complementary to the trade in goods and services as an independent global free trade with licenses of patents, utility models and designs – as well as with copyrighted products. It can be run independently and put entirely at the service of global progress, because, on the one hand, the intellectual property inherent in goods and services can no longer be misused to crowd-out competitors, and, on the other hand, crowding-out effects on a world market for intellectual property rights generate constructive, progress-providing competition in creativity and are by their nature only temporary: This is because suppliers being crowded-out can continue to sell on their demostic market, can reposition themselves or have to give way to more creative suppliers without irrevocably destroying the domestic structures of the real economy.
The independence of trade in industrial intellectual property rights also creates major incentives for companies to specialize in private-sector research and development and to generate profits from the worldwide trade in licences.
On the other hand, sensitization for the preservation of diversity in the world requires countries to be able to restrict imports of copyrighted products by virtue of their economic autonomy in order to protect their cultural identity and development from excessive and harmful foreign influences (see also the bottom section Specifics of the Personal Copyright).
Particularities of the Trade in Industrial Intellectual Property Rights
In contrast to trade in goods and services, this trade can be structured as a global free trade. Participation in free trade in intellectual property rights requires economic areas to preferably trade as part of a multilateral trade agreement based on supranationally agreed intellectual property rights and trade standards, and including an exclusive multilateral exchange rate system with a virtual reserve currency. The parities of this exchange rate system can be based on the bilateral exchange rates of trade in goods and services, but can also deviate from them due to more complex calculation bases. Deviations are irrelevant because this free trade is settled separately anyway – via the virtual reserve currency – due to its pronounced price competition. Prices are formed completely freely according to the international interplay of supply and demand; trade quotas and customs duties are unnecessary because free trade in industrial property rights is deliberately designed to promote unrestricted, constructive price competition in the service of progress.
In contrast to surpluses in goods and services trade, surpluses in the current account of trade in intellectual property are not critical. Therefore, each and every economic area can and should offer far-reaching incentives for the production of economically exploitable intellectual creations under its own responsibility. The most effective incentives are indirect ones confined to creating a favourable environment for creative minds and companies, for example through tax incentives for the participation in regional, national and also international research and development projects.
With regard to the desirable incentives for intellectual creations, it should be noted that, for example, the European patent system does not adequately contribute to sustainable progress and to prosperity and welfare. With years of waiting, fees of at least Euro 32,000 and terms for intellectual property rights of 18 years (TRIPS even requires 20 years), it has a deterrent effect. Reasonable conditions and fees are needed to enable inventors of intellectual creations to acquire intellectual property rights for the world market without delay and at reasonable costs. If inventors are served quickly and inexpensively by patent offices, the terms of intellectual property rights can also be limited to a few years. Short terms further encourage creativity, lower the price level for licenses and enable interested parties to acquire the latest knowledge at reasonable prices at any time. In this way, a dynamic global market for industrial intellectual property rights can evolve that is uniquely suited to contribute to global progress.
In addition, commercial knowledge transfer can be combined with development aid by charging developing countries licence fees that vary according to countries’ level of development, and by compensating price differences from an international development fund. In this way, economic and social development can be promoted and harmonized worldwide, and developing countries are given the sustainable opportunity to grow from pure licensees to active market participants.
The designing of rules for a sustainable free trade in intellectual property rights is the original task of a new-style World Trade Organization: It must harmonize industrial intellectual property rights, involve development aid and set fair price scales, organize arbitration proceedings and launch research and development programs of global interest financed by its members, the results of which can be used by all.
With an independent free trade for industrial intellectual property rights, the neoliberal globalization paradigm of unregulated trade in goods and services and thwarted trade in industrial intellectual property rights would be replaced by the paradigm of regulated trade in goods and services and free trade in industrial intellectual property rights, or in other words: The paradigm of unregulated material trade and thwarted »immaterial« trade would be replaced by the paradigm of regulated material trade and free »immaterial« trade.
In a world marked by cultural and economic differences, this would shift competition for absolute advantages from the physical to the intellectual level. Companies that have been squeezed out of their markets and economic cycles that have been destroyed by neoliberal competition would experience a renaissance and become the source of new ideas for global progress.
Specifics of the Personal Copyright
The boy in the cartoon on the left says: »Granny save your money, I can download the song for you!«
In November 2001, the UNESCO adopted the »Universal Declaration on Cultural Diversity«, with which it intends to work towards an internationally legally binding convention that establishes the special nature of cultural goods: Countries should be granted the right to favor, promote and protect their own cultural goods against exaggerated foreign influences to preserve their own cultural identity and further develop it independently. A future agreement on an independent international free trade in intellectual property rights, here with regard to copyrights in cultural goods, would have to take up UNESCO’s intention, and explicitly grant trade restrictions to be determined autonomously for cultural goods worthy of protection – especially literature, journalism and art, including the fine arts, music art and cinematic art. Holders of copyrights in these categories would have to comply with trade quotas and other conditions for the export of their products, the definition of which would be at the sole discretion of importing countries.
Note on the COVID-19 Pandemic
The pandemic has noticeably revealed the significant weaknesses of the neoliberal economic system for everyone, above all the shortage of medical, but also other products, caused by disruptions in the absurdly networked value and supply chains across the globe.
The analyses of the neoliberal system as well as the principles and practical procedures based on them for building a sustainable system, which are presented in this compendium, thereby obtain an unexpected topicality. Now is the time to seize the opportunity and build up economic policy pressure to enforce the development of an economic order that is sustainably oriented towards social and ecological welfare.
The following article refers to the targeted arguments contained in the Compendium: COVID-19 and Globalization
Click here for the German-language version: Geistiges Eigentum und Neoliberalismus.