Patent Laws and Intellectual Property Rights

Intellectual property rights are a keystone of the knowledge economy in the twenty-first century and account for an increasing share of international trade, but they have a long history. The grant of exclusive property rights in inventions developed from medieval guild practices. European patents only gradually lost their character as privileges granted through royal favor. In Britain, the Statute of Monopolies (1624) prohibited monopoly grants, excepting patents for inventions. British patents were granted to inventors for fourteen years through a registration system, and it also allowed monopoly rights to importers of inventions from overseas. High monetary and transactions costs restricted access to property rights in invention. The diffusion of information was inhibited, and the market in patent assignments and licenses was limited. British patents were granted "by the grace of the Crown" and were subject to any constraints that the government cared to impose. The Crown could commandeer a patentee's invention without compensation or consent, and reserved the right to revoke or keep secret any patents that were deemed inconvenient or contrary to public policy.

The threat of competition from other countries led to a slow process of revisions that lasted well into the twentieth century. The Patent Law Amendment Act (1852) authorized the first major adjustment of the British system in two centuries, and in 1883 new legislation further rationalized procedures. Compulsory licenses and working requirements were introduced for fear that foreign inventors might injure British industry by refusing to grant other manufacturers the right to use their patents. Britain added a minimal examination for novelty in 1902. Between 1919 and 1949 chemical products were excluded from patent protection to counter competition from the German industry, and until 1977 licenses of right enabled British manufacturers to compel foreign patentees to permit the use of their patents on pharmaceuticals and food products.

Early French policies towards inventions and innovations were based on an extensive array of rewards and incentives. Introducers of inventions could benefit from titles, pensions, loans (some interest-free), lump-sum grants, subsidies for production, tax exemptions, or monopoly grants in the form of exclusive privileges. The modern French patent system was established in 1791 and, after the laws were amended in 1844, remained largely unchanged until the twentieth century. Until 1844 patents were voided if the inventor attempted to obtain a patent overseas on the same invention. Registration without prior examination remained the defining feature of the French system until 1968. The inventor was able to choose the term of the patent for a period of five, ten, or fifteen years. Protection extended to all methods and manufactured articles but excluded theoretical or scientific discoveries without practical application, financial methods, medicines, and items that could be covered by copyright. Patents of importation were granted if the applicant had gained practical knowledge through personal risk and effort. Patentees had to put the invention into practice within two years from the initial grant, or face a tribunal with the power to repeal the patent. The French patent statutes allowed access to patent specifications, but since no provision was made for the publication or diffusion of these descriptions, this statutory clause was ineffective. Patent documents did not have to include claims, and no extract could be copied until the patent had expired.

U.S. PATENT SYSTEM

Since its inception in 1790 the U.S. patent system has departed radically from European models, in ways that favored inventors. U.S. statutes also had a disproportionate effect on the development of international patent laws. In the United States the exclusive rights of inventors were protected by a commitment in the national Constitution "to promote the Progress of Science and useful Arts." U.S. doctrines repudiated the notion that the rights of patentees were subject to the arbitrary dictates of government: the state was not privileged above the patentee, and courts held that the government itself had no higher claim than would a private employer. The patent application process was open to all, and administrative procedures were predictable, uncomplicated, and low-cost. Patent applications were initially examined by a tribunal that included Thomas Jefferson (1743–1826), but this practice was replaced by a registration system in 1793. Reforms in 1836 established the world's first modern patent institution. Its objective was not to grant or limit monopoly privileges, nor to raise revenues for the state, but to promote inventive activity, to ensure the diffusion of information and innovation, to facilitate markets, and to increase social welfare.

U.S. patent rights were awarded to the "first and true inventor," and an examination for novelty was conducted by technically trained professionals to ensure that the invention comprised an original advance that was new to the world. The earliest statutes reserved patent rights to U.S. citizens and alien residents who intended to become citizens, but citizenship restrictions were eliminated after 1861. The original patent term of fourteen years (with a possibility of renewal) was lengthened to seventeen years in 1861, and to twenty years in 1995. Once granted, the patent was not subject to any restraints such as opposition proceedings, compulsory licenses, or working requirements and, indeed, could not be overturned except in instances of fraud. The effective patent administration was reinforced by a flexible and accountable legal system. U.S. judges adhered to the Constitution by protecting the rights of "meritorious patentees." Inventors possessed the legal right to contest the decisions of the Patent Office, with a right of appeal to the U.S. Supreme Court. The legal system further encouraged the evolution of trade in patent rights by protecting buyers and investors against fraudulent patents.

In the nineteenth century many European countries debated the abolition of patents as an inefficient and un-warranted form of protection analogous to tariff legislation, but this "free trade" movement was ultimately defeated in favor of patent systems. Although follower countries such as Germany and Japan were influenced by the U.S. model, they crafted provisions that reflected their own priorities and interests. For instance, key products such as pharmaceuticals were exempted from patent protection (although their processes were patentable). German patent fees were high in order to raise revenues from the large proportion of foreign applicants, but cheaper "petty patents" of shorter duration were also available. German laws included a "work for hire" doctrine that allowed enterprises access to the inventions of employees. Patents could be revoked through opposition procedures, and compulsory licenses or working requirements were permitted. Developing countries of the twentieth century such as India and Brazil incorporated similar measures in their patent laws. They expected that the majority of applications would be foreign, and thus their primary objective was not to encourage inventive activity, but to raise revenues, to promote the transfer of technology from overseas, and to moderate the social costs of exclusion.

After the 1860s U.S. patentees rapidly expanded in international markets, and lobbied to ensure that their inventions were as liberally protected overseas as in the United States. The United States took the lead in promoting the harmonization of international patent laws through bilateral negotiations and multinational conventions, including the congress in Vienna in 1873, the 1883 Paris Convention for the Protection of Industrial Property, and the 1970 Patent Cooperation Treaty. The United States pressed for reciprocity (its patentees would have the same favorable treatment overseas as stipulated in U.S. laws) but other countries voted in support of national treatment (nondiscrimination against foreigners). Although it urges patent law harmonization, the United States has refused to abandon its unique "first to invent" system in favor of the global "first to file" standard, and maintains much stricter antitrust rules towards patents.

The Agreement on Trade-Related Aspects of Intellectual Property Rights of 1994 was a significant step towards legislating minimum provisions in international patent laws, despite protests from many developing countries. Concerns have been voiced about the parameters of patent protection, "patent anticommons" or an overproliferation of private property rights, the strategic use of patents and patent litigation to suppress competition, and patents on traditional knowledge that decrease the public domain. Points of disagreement about the role of patents in development include measures to ensure low-cost access to patented drugs, compulsory licensing, parallel imports, whether the subject-matter of patents should extend to "everything under the sun made by man," trade sanctions for noncompliance with treaties, and the value of uniformity versus diversity in laws. Despite these differences, throughout the past two centuries intellectual property rights have expanded in duration, scope, and enforcement, and political pressures for uniformity have increasingly homogenized patent laws across nations.

SEE ALSO Industrialization.

BIBLIOGRAPHY

Dutton, H. I. The Patent System and Inventive Activity During the Industrial Revolution, 1750–1852. Manchester: Manchester University Press, 1984.

Khan, B. Zorina. The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790–1920. Cambridge, U.K.: National Bureau of Economic Research and Cambridge University Press, 2005.

Khan, B. Zorina, and Sokoloff, Kenneth L. "The Early Development of Intellectual Property Institutions in the United States." Journal of Economic Perspectives 15, no. 3 (Fall 2001): 233–246.

Khan, B. Zorina, and Sokoloff, Kenneth L. "Institutions and Democratic Invention in Nineteenth-Century America." American Economic Review 94, no. 2 (May 2004): 395–401

Ladas, Stephen P., The International Protection of Industrial Property. Cambridge: Harvard University Press, 1930.

Penrose, Edith, The Economics of the International Patent System. Baltimore: Johns Hopkins Press, 1951.

INTERNET RESOURCES

Khan, B. Zorina. "Intellectual Property and Economic Development: Lessons from American and European History." London: Commission on Intellectual Property Rights, 2002. Available from http://www.iprcommission.org/papers/pdfs/study_papers/sp1a_khan_study.pdf.

B. Zorina Khan