A Brief History Of Intellectual Property In China And India

from the ups-and-downs dept

This is the second post in a series of posts looking at the question of intellectual property rights in both China and India. We’ll be adding new posts to this series each week for the next few weeks.

To fully understand why increased intellectual property in China and India is unnecessary and objectionable, it helps to understand the relationship intellectual property has with economic development. Historically, intellectual property has generally increased with economic development, but the relationship is not straightforward. Although there is no reliable cross-country index of intellectual property policy, in large part due to the difficulty of quantifying concepts like enforcement quality, some trends are discernable. When a country is poor, IP is unnecessary for a host of reasons, not the least of which is the limited access to productivity enhancing technologies that intellectual property brings and the domestic inability to innovate in a commercially viable manner. But instead of constantly increasing with wealth, IP actually falls with an initial increase in wealth before dramaticaly growing (Maskus 2000). As a country develops, it obtains imitative abilities that make legal prohibition on copying foreign technologies an artificial obstruction to economic growth. However, with further global integration and increased domestic innovative capabilities, patent protection tends to increase. However, China and India have both realized that their relative poverty makes access to technology a more pressing concern, justifying relaxed IP standards.

India’s On-Again, Off-Again Relationship With Intellectual Property

India’ colonial status brought with it patent legislation, so by 1911 India’s IP regime conformed with developed world status (Graff 2007). However, seeking to develop a domestic pharmaceutical industry, in 1970, India abolished patents on pharmaceutical products. This allowed domestic firms to imitate and adapt foreign therapeutic inventions. The policy was a success: the 2,237 licensed drug manufacturers in 1969-1970 grew to 16,000 by 1991-1993, production of drugs grew at an average rate of 14.4% per year from 1980 to 1993, India became a net exporter of pharmaceutical products, and the market share of foreign multinational corporations (MNCs) dropped from 80-90% to 40% (Fink 2005). In 1995, six of the top ten pharmaceutical firms in India were domestic, and employment in the sector had reached half a million people (Lanjouw 1997).

However, to gain access to the global market enabled by the World Trade Organization, India had to ratify the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), the most influential treaty on global intellectual property. Doing so included introducing full product patents on pharmaceutical innovations, extending all patents from 5-14 years to 20 years, and accepting limitations on compulsory licensing (Abramson 2007). Observers noted that this was likely to lead to a loss of consumer surplus (Chaudhuri et al.). However, the government agreed against its wishes to TRIPs for the additional benefits of WTO membership (Lanjouw 1997). Under TRIPs regulations, patenting has accelerated in India (Dahlman 2005).

China As The Late Bloomer

China was a latecomer to intellectual property. Its first patent law came into effect in 1985, followed by a copyright law in 1990 (Graff 2007). However, since then, the pace of progress has been rapid; it has now joined all major international IP treaties (Maskus 2005). Its patenting activity is increasing rapidly, too, with domestic firms nearly doubling the number of patents they received in the past four years (“Chinese firms…”). China’s Patent Office now leads the world, reviewing 800,000 applications in 2008, and in 2009, domestic firms are poised to receive more patents than foreigners for the first time ever (“Battle of Ideas”). Chinese firms are also receiving more patents abroad: in 1999 they only won 90 patents in America, but by last year they had increased that number to 1,225, demonstrating a desire to use their inventions globally (“Battle of Ideas”).

Chinese intellectual property, however, is still frequently critiqued. Enforcement is notoriously weak with the United States citing “rampant counterfeiting and piracy problems.” Strikingly, according to the USTR, China was the origin for 67% of seizures of counterfeit goods at the American border in 2008. In response to these and other concerns, China has recently updated its patent laws, increasing statutory damages and expanding the investigative power of the patent office (Lim 2009).

In the next post, we’ll take an extended look at the case made for stronger intellectual property in China and India. 

Other posts in this series:

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Comments on “A Brief History Of Intellectual Property In China And India”

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Anonymous Coward says:

Kevin, you’re right on.

However, the main problem is that India and China are not “Creative.”

So what do you do with a non-creative, infringement-friendly populous? See “The People’s Republic of Capitalism”, a series by Ted Koppel and you’ll get the drift. WalMart is already doing it.

bikey (profile) says:

Re: not creative?

Half of humanity ‘not creative’? What a ridiculous thing to say. No facts can convince a person who would willingly put such a statement in writing, but hey, China is pouring money into biotech research, and if you don’t think this is creativity, take a gander at Chinese cinema. India not creative? Do you know what Europeans were wearing before they ‘stumbled across’ Indian textiles, prints, colors, etc.? Brown rags (see Braveheart for a taste of early European aesthetics) that’s what. These are just a few of thousands of examples. Please, think before you tap.

Michael L. Slonecker says:

Re: Re: not creative?

No one can seriously argue that countries such as China and India possess potentially significant “intellectual wealth”. At this point in time, however, they have not as yet realized the full advantage of such wealth. In some regards they seem to resemble post-war Japan through the early 60’s, i.e., their R&D capabilities lag far behind the major industrialized nations.

A first step towards parity with such other nations necessarily involves the establishment of basic manufacturing capabilities, with the growth of R&D capabilities to follow after implementation of the former. Thus, “copycapting” and “free riding” on the work of those in other nations is only natural in their growth towards becoming a major force in the international market for new products.

It should be readily apparent that any country embarking on the above course will at first be quite reluctant to embrace IP rights to the full extent expressed in current international treaties. At the same time, however, that reluctance will have to be reassessed as and when such a country desires a “seat” at the “table”.

Simply put, and like it or not, at some time in the future, and likely sooner than later, I expect both India and China to adopt national laws that afford significantly more substantive protection than is now the case. Until this happens they will continue to be viewed askance by the major industrial powers, and will consistently encounter difficulties having their products imported into other nations. Call it “protectionism” if you will, but this is simply a fact of life.

Merely as an aside, I find it somewhat interesting that a pharmaceutical manufacturer of generic drugs in India, despite having built its business based on the manufacture and sale of generics, is just starting to secure patents in India and other industrialized countries in which it seeks to conduct business. The same can be said of businesses situated in China.

Gene Cavanaugh (profile) says:

IP in China and India

This is a well written article, but it TOTALLY misses the whole point!
Have you read Chinese patent law? It is probably the best “black letter” law in existence. I believe Indian “black letter” law is also quite good, though I have not read the Indian statutes.
The problem is that the US IP law (patents, trademarks, copyright) is, as presently administered, absolutely TERRIBLE, and the US, at least, before Obama, has been a world bully forcing its laws on others!
It is unrealistic to talk about IP law on the world scene so long as the “deciders” are all in the US!
It is my understanding (and I know several knowledgeable Chinese) that China (and, I hope India) is beginning to understand and move toward the enforcement of THEIR laws, but it would be ridiculous for them to allow the enforcement of US IP laws.
So long as this is a problem, the whole picture will be murky. The only way to resolve it would be to talk about internal IP in the various countries as one topic, and the “international” (read, US) IP law as another (malodorous) topic.

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