Do Patents promote Development? Fr. Seán McDonagh, SSC (June 19th 2009)

The issue of intellectual property rights was one of the areas addressed at the recent Study Week organised by the Pontifical Academy of the Sciences  On Saturday May 16th 2009, Anatole F. Krattiger read a paper entitled “Intellectual Property Rights: Problems and Solutions.” Dr. Krattiger was born in Switzerland and worked as a farmer before embarking on an academic path.  He received his Ph. D from Cambridge University where he studied at the Plant Breeding Institute.

 

In his abstract he states that: “ First and foremost IP (intellectual property rights) is a tool to foster innovations. Whether viewed as a legal concept, a social construct, a business asset, or as an instrument to achieve humanitarian objectives, the value of IP cannot be disputed.”[1] This certainly is the argument which has been promoted assiduously by the neo-economic establishment during the past 30 years.

 

But is there historical evidence to support this view? Ha-Joon Chang to the Cambridge-based Korean economist, challenges this argument in his book Kicking Away the Ladder..[2] Chang traces the modern history of patents. According to him the first recorded patent was taken out in the late Middle Ages by the renowned architect and engineer, Filippo Brunelleschi (1377-1446). In May 2009, I visited Florence and marvelled at the scope and quality of Brunelleschi’s work in Duomo (the Cathedral) and other Churches such as the Church of Santa Croce and San Lorenzo. In 1421 he was given a three year patent on a machine that was designed to lift marble on and off barges.

 

Though patent laws appeared in Britain in 1623, patenting did not come into force in that country until 1852. This was almost one hundred years after the beginning of the industrial revolution. In the United States patents were granted on imported technology without any proof of originality. It is worth reminding Anatole Krattier that in many industrialised countries such as Britain, France, Germany, the United States, Japan, Korea and Switzerland  patenting legislation only appeared after they had developed their industries.  Even then many of these countries which signed up to a patenting regime seldom enforced the patents.[3] The development of the textile industry in the United States in the early nineteenth century was based on patterns and machines which were developed in Lancashire. The Japanese textile industry followed the same route in the early part of the twentieth century, and that country’s much vaunted economic miracle in the post-World War II period was based on innovative copying.

 

Until recent times, patent law differed from country to country, reflecting the way in which different cultures and political systems weighed up the often conflicting claims between compensating the inventor and ensuring that the public benefit from the new product.  Earlier patent agreements began with the Vienna Congress in 1873. This was followed by the Paris Convention of the International Union for the Protection of Industrial Properties which was signed initially by eleven countries. It was revised in 1911, 1925, 1958 and 1967. The Berne Convention on copy-right, signed in 1886, was updated in 1946. This convention recognised that individual countries have particular needs and priorities and that these would be reflected in national legislation.

 

Anatole Krattiger also claims in his abstract that ;“the notion that inventions can become property and can therefore be owned and sold, has encouraged scientists and researches to invent and entrepreneurs and companies to invest in innovation, by allowing them to profit from the resulting technologies.”[4] This seems to be a reasonable enough proposition, but it collapses when subjected to a little historical scrutiny.

 

The historian of economics, Eric Schiff, shows that no country has contributed as many basic inventions as did Switzerland, Krattiger’s own country, during a time when there were no patents.  These inventions include milk chocolate (Daniel Peter, 1875), Chocolate Fondant (Rudolf Lindt, 1879) and powdered soup (Julius Maggi, 1886). [5]Until the middle of the nineteenth century Switzerland was an agricultural country. Because there were no patents, a small company copied the aniline dyeing process which had been developed and patented in Britain. This company which was later called Ciba, developed into a major enterprise with a global reach.  In 1995 it merged with another Swiss company called Sandoz to form Novartis.  Ironically, it was Novartis which led the campaign in Europe to allow companies in Europe to patent genes and life itself. All of this has led Eric Schiff to argue that on economic grounds it is difficult to avoid the impression that the absence of patents “furthered rather than hampered development.[6]

 

In July 2009 the EU Commissioner for competition, Neelie Kroes, revealed that pharmaceutical companies were taking billions of euro from taxpayers and national governments by refusing to allow generic drugs to come quickly onto the  market.   The conclusion of an 18 month study into the activities of pharmaceutical companies found  that “makers of original medicines are actively trying to delay the entry of generic medicines on to their markets. [7] The main tactic used by the corporations was to abuse patenting practices to play for time and wreck the changes of generics manufacturers being able to compete.  One common way of doing this was to file a large number of patent applications across EU states for a single drug in what are known as patent clusters. In some cases as many as 1,300 patents were filed.  Another method was for corporations to sue the manufactures of generic drugs and to then to attempt to stall the cases in the courts for years. [8] The director general of the European Consumers’ Organisaton, Monique Goyens said that “Vicious tactics are used to delay or prevent the entry of more affordable and innovative medicines into the market.” She continued, “ Millions of euros are spent in promotional activities, in legal disputes and settlement agreements instead of the development of new medicines.”[9]

 

The EU Commission reckons that on average generic drugs are 40% cheaper than their branded equivalents within two years of reaching the market. This amounts to a huge sum of money since the present value of retailed drugs is in the regions of €214 billion each year.


[1] Introductory Booklet to the Pontifical Academy of Science’s Study Week, page 10.

[2] Ha-Joon Chang, Kicking Away the Ladder. Anthem Press. P.O. Box 9779,  London, SW19 7QA, 2002, pages 83-85.

[3] Eva Ombaka, “Trade-Related Aspects of Intellectual Property Rights” (TRIPs) and Pharmaceuticals,” in Echoes, 15/1999, World Council of Churches, P.O. Box 2100, 1211, Switzerland.

[4] Ibid page 10.

[5] George Monbiot, “Companies new Demanding Intellectual Property Rights were Built without them.” The Guardian, March 12, 2002, page 15. (Quoting from Schiff, Eric, Industrialization without National Patents, Princeton University Press. 1971)

[6] Ibid.

[7] Ian Jraynor, “ Big pharma ‘delaying ‘ cheaper drugs,” The Guardian, July 9, 2009. page 24.

[8] Ibid.

[9] ibid

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