Here is the gist of some remarks on intellectual property and international development, which were delivered at a CPAC panel at the Capitol Hill Club on February, 28.

Solveig Singleton: Prepared Remarks: Markets and Intellectual Property in International Development

Prepared Remarks for CPAC panel, March 28th, The Capitol Hill Club, Washington, D.C.

How should supporters of free markets weigh in on intellectual property issues in the international context? This issue is tough going. There’s an intellectual divide within free-market circles—on the techno-libertarian side, an array of anti-IP arguments on the one hand and on the other, a handful of IP supporters including Professor Richard Epstein. Obscuring the debate further are people trying to score rhetorical points at a shallow level—talking about IP as “regulation” or arguing about whether we should call it “property.” Then there’s the question of whether IP is for poor countries, or whether it is only for rich ones.

My first point is that intellectual property serves as a foundation for markets; it functions enough like physical property law that free-market supporters would be wrong to dismiss it as regulation or rent-seeking. This helps to answer the second question. Even in developing countries, we begin to see support growing for stronger copyright. Patent law is a harder case; market supporters need to do some hard work here.

So, to start, is intellectual property law or is it regulation? Some pundits and professors use the terms law and regulation almost interchangeably, suggesting that it is inconsistent to support deregulation and IP. Law and regulation are different, though. Law is a sent of ground rules that serve as a foundation for markets and resolve disputes. Regulation involves government far beyond that, in management, in pricing, and so on—in essence treating everything like a dispute. Patents and copyright law involves the government in setting boundaries. But after the initial right is established the terms of trade, use, prices and so on are set by the market (with some exceptions). IP provides a foundation for the market, similar to (but not the same as) the ground rules for physical property and contract law. It is law, not regulation.

There are complications. IP will be law, not regulation, only if government steps back after setting the initial boundaries. First, there must be freedom of contract in licensing. So no interoperability mandates or price regulation or dictating whether or not consumers must be able to make backup copies. Second, traditional enforcement mechanisms don’t work well for copyright in the age of the Internet, so one will see some atypical government activity to compensate, such as the DMCA. Third, the government can be pretty dysfunctional at boundary-setting, with patents in particular, so we can’t ignore the need for patent reform. But if IP is not exactly like physical property it is a none-the-less a system that is strongly analogous to physical property. We can fairly count it as a foundation of markets, one of several mechanisms that helps make markets by excluding free riders.

This helps to answer the question of whether IP is good for poor countries. First, with copyright, the battle lines are beginning to shift. Once, poor countries could with impunity behave as if they were net beneficiaries from free riding, and adopted copyright only under pressure from more advanced economies. But now within those poor countries there is a music industry, there are textiles, there is filmmaking. Chinese filmmakers and Mexican musicians and musicians in Ghana are noticing that piracy hurts them, too. In poor countries, people understand that such economic rights—the right to make a living—are human rights, a familiar free-market message. One will continue to see poor countries resist IP as a bargaining chip for getting rid of agricultural subsidies. But internal support for copyright will grow within developing countries.

The same is true of patents. India is beginning to see new research and development efforts in medicines after strengthening their patent law. Still, market supporters should move carefully here. In Kenya, for example, there are two and three year old children wandering the streets living on garbage, both parents dead of AIDS. Taking a case for market pricing into such countries and pointing out that this is in their long run interest is an incomplete strategy at best. So bring a positive case for free-market medicine, for lowering tariffs on medicine, for lowering costs of approvals for new medicines. Be prepared to teach farmers and tribesmen how to patent traditional crops and medicines. Along with what drug companies and others are doing already to distribute medicines free or at cost in the poorest countries, markets do have a chance. And it is poor countries best, perhaps their only, chance.

Copyrights and patents are more like physical property and contract ground rules than they are monopolies, regulation, or pure manifestations of rent-seeking and lobbying. Over the next ten years intellectual capital will begin to bring new wealth to developing as well as developed nations. The free-market message that the right to make a living by one’s intellectual efforts is a human right will resonate around the world.

posted by Solveig Singleton @ 2:15 PM | International

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