Putting COVID IP Waiver and IP Piracy in Context: Consumers and Producers, Pirates and Police Officers

By Alex Montagu
May 20, 2021

“Much like America in the nineteenth century, China today is a larger consumer of IP than it is a producer…. Until China becomes a leading producer of IP, it is unlikely to change its position on the enforcement of these laws.”

IP piracy - https://depositphotos.com/30014897/stock-photo-book-with-pirates-flag.htmlThe Office of the United States Trade Representative’s (USTR’s) 2021 Special 301 Report, published late last month, brought into sharp relief one of the ongoing issues the United States has with China. The country was again listed on its “Priority Watch List” in this annual review of the state of intellectual property (IP) protection and enforcement in the United States’ international trading partners, and the report explained that the United States remains unsatisfied with China’s failure to grant IP protection and enforcement to foreign rights holders.

On the surface, very little is surprising about the USTR’s statement concerning China’s approach to the enforcement of IP rights. By now, China’s failures in the context of IP enforcement are a well-known refrain in the Western media. But dig beneath the surface, and the statement raises a multiplicity of issues that have gone unaddressed. Which IP rights are at issue? Whose IP rights are not being enforced? Should one country enforce the IP rights of the citizens of another country? If so, how and in what way does it do that? Last but not least, has the United States enforced the IP rights of the citizens of other countries?

Pirates of the Past

The enforcement of non-U.S. IP rights in the United States is perhaps the most interesting and least discussed issue and may shed light on the other questions. Placing this matter in proper context begins in January 1842, when Charles Dickens visited the United States to be feted and celebrated by an enamored American public. His novels, especially Oliver Twist, which had been published some years earlier, were a sensation on both sides of the Atlantic. Though initially flattered by the adulation, Dickens was deeply disappointed. He went out of his way to berate American publishers and booksellers, because at that time, the United States did not recognize any foreign copyrights and was therefore not enforcing the copyright of his works.

This meant that anyone could publish Dickens’ novels without paying any compensation to the author. With the public’s appetite for Dickens’ novels running high, American publishers did not hold back and churned out thousands of copies of Dickens’ works. The author rightly complained that he had been robbed of a fortune by American publishers. And this practice wasn’t limited to Dickens or even British writers. English translations of Victor Hugo’s Les Miserables, the most widely read novel in the nineteenth century (said to have been read even by confederate soldiers in the trenches during the Civil War) were published freely in the United States, while the French author received no compensation. Because legal piracy of foreign books was the business model that had made American publishers and booksellers wealthy, they thwarted any attempt to recognize foreign copyrights. After all, why would they ever want to change the system?

It wasn’t until 1989 that the United States finally acceded to the Berne Convention, the multinational treaty that regulates the recognition and enforcement of foreign copyrights. The twists and turns of the United States’ historical approach to foreign copyrights are convoluted, but the critical point that emerges is that in the nineteenth century , the United States was a more significant consumer than producer of IP, and therefore its economic interests did not lie in the enforcement of foreign copyrights.

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From Pirate to Police Officer

Of course, the situation today is vastly different. Now, the United States is the largest exporter of IP in the world. Understandably, the nature of IP rights has also changed. In the nineteenth century, IP value arose primarily in connection with copyrights in novels; today, it lies in trademarks (e.g., clothing and sports brands such as Chanel and Nike), patents and industrial designs (e.g., the iPhone), as well as copyrights (e.g., movies and music), and increasingly in computer code.

Another difference is that majority of valuable IP rights now belong to primarily U.S.-based large multinational corporations, many of which have taken advantage of the cheap labor in China to produce their goods and services. While cheap production in China has dramatically increased the revenues of American corporations in the last three decades, a side-effect has been the rampant piracy of IP in China. Just as American publishers pirated foreign novels with impunity in the nineteenth century, now Chinese manufacturers are making unauthorized versions of American products, from iPhones to Ralph Lauren merchandise.

Once the United States became the prime exporter of IP, its attitude towards the international enforcement of foreign IP laws changed dramatically. In 1994 the United States spearheaded the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)—the most comprehensive worldwide agreement on the recognition and enforcement of foreign IP rights. TRIPS signaled the completion of the United States’ transformation from the IP pirate that Dickens complained about in 1842 to the world’s primary policer of IP rights.

Much like America in the nineteenth century, China today is a larger consumer of IP than it is a producer. Chinese businesses, therefore, do not view the enforcement of foreign IP in their economic interests, just as the enforcement of Dicken’s copyrights had previously not been in the interest of American publishers. Until China becomes a leading producer of IP, it is unlikely to change its position on the enforcement of these laws. It is worth noting that this may happen sooner rather than later if Chinese technological advances, particularly in the domain of artificial intelligence, accelerate.

Another major issue underlying enforcement of foreign IP rights is the current assumption that such enforcement is always beneficial. This assumption invites the question, beneficial for whom? One of the arguments advanced by American publishers in the nineteenth century against the enforcement of foreign copyrights was that such enforcement would drive up the price of British novels and would therefore make them inaccessible to the general public. Novels would then be only for the rich, which was not in keeping with the ideological model of the young American Republic. Of course, as advanced by the publishers who had lined their pockets from the sale of pirated novels, this argument can be viewed as specious and self-serving. But there remained an underlying public policy rationale in making affordable books available to the public and, therefore, contrary to the enforcement of foreign IP rights.

The Pandemic Parallel

This argument finds its parallel today in the recent efforts to seek a waiver of patent rights in connection with the COVID-19 vaccine. Efforts are currently afoot at the World Trade Organization to waive or suspend patent enforcement in connection with the COVID-19 vaccine worldwide. The effort is led by the governments of India and South Africa, which urgently need the vaccine for their populations. The Biden administration in the United States appears to support the waiver of patent rights.

The proponents of the waiver cite the vaccine shortages in developing countries and the need for these vaccines to be made available quickly and on a wide scale in these countries. According to them, patents create blockages to the distribution of the vaccine. The owners of the patents—large pharmaceutical companies such as the drug giant Pfizer—argue against the waiver. These companies contend that waivers would undermine the enormous efforts and expenditures that went into developing the vaccines. They also assert that if patents are not enforced, there is a risk of counterfeit or misused vaccines.

Again, the United States is a mature economy that is a greater producer than consumer of intellectual property. Therefore, its interests lie in the international protection and enforcement of intellectual property rights. But this has not always been the case.

When viewed in this context, it is not surprising that the United States will complain about China’s lax enforcement of foreign intellectual property rights or that U.S. vaccine producers will balk at the prospect of COVID-related IP waivers, just as Great Britain once complained about the United States’ lax enforcement of British copyrights.

Ultimately, history has shown us in no uncertain terms that every country will choose to only enforce laws that serve its interests at the moment. China will eventually reach the point when enforcement of IP rights will be a priority to them. Until then, it may serve well to recall another nineteenth-century literary giant, Mark Twain, who once said, “History doesn’t repeat itself but it often rhymes.”

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The Author

Alex Montagu

Alex Montagu s the author of the business book “Intellectual Property: Money and Power in a New Era” and founding partner Montagu Law dedicated to the practice in intellectual property law, international commercial transactions, and new media commercial and corporate law. Its client roster ranges from startups to Fortune 500 companies encompassing a variety of industries. Alex has been an arbitrator on a number of cases before the International Chamber of Commerce, and also serves as a sought-after speaker at international conferences on a wide variety of intellectual property, business and legal matters. He received his J.D. with honors from Harvard Law School in 1991, a B.A. and M.A. in Law from the University of Cambridge where he received Double First Class Honours in 1989, as well as an undergraduate degree from Princeton University, graduating summa cum laude in 1987.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments.

  1. Anon May 20, 2021 7:22 pm

    The timing of the article is a bit stale, and the connection to the current pandemic is poorly covered.

    While the story of pirate to policeman, consumer to producer rings solidly in history, the telling of that history needs a substantial update.

  2. Ron Hilton May 21, 2021 11:15 am

    Patent rights in a foreign country are still only enforced if the inventor applies for and is granted a patent in that country, with a foreign filing license.

  3. ag May 21, 2021 2:24 pm

    This article frames the current issues in a slightly different narrative that is refreshingly distinct from the many other articles about this topic that seem to echo each other. Thank you for this interesting perspective.

  4. Anon May 21, 2021 5:31 pm

    ah,

    Despite my harsh words above, I do echo that the different perspective is an interesting one.

    There is a point for the historical transformation of a Sovereign as that sovereign matures. I do grant that even as China HAS BEEN progressing along that maturity path — for example, HAS BEEN upgrading the “meat” of its own IP laws — there may well be discontinuities and benefits of “pirate” aspects. It does well to remember though that it was not China that has been plugging for the IP (and critically, IP includes more than just patent) waiver.

  5. michael June 26, 2021 9:06 am

    Most interesting and informative