South Africa’s IP lesson for America

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The U.S. is not alone in struggling with the right policy for intellectual property. Here, the big questions revolve around the gobbling up of large numbers of patents by aggregators who aren’t innovators.  But in developing nations, the questions are far more basic.

Three months ago, the South African Department of Trade and Industry issued a 44-page draft National Policy on Intellectual Property. It has become the subject of heated discussion. The policy, which could become the basis of legislation, proceeds from the premise that as a developing economy, South Africa should be able to suspend or abrogate the IP rights of patent holders from richer nations so that South Africans can make use of their inventors at low, or no, cost. Special targets are pharmaceutical and software IP.

Such an approach is dangerously short-sighted. The world is a big place, and it’s hard to see why IP-intensive industries would choose to do their R&D, production, and distribution in South Africa in the environment that would be created by the proposal. Home-grown innovators would be wary as well, encouraging a brain drain.

I laid out the argument in more detail yesterday in an op-ed (0) in the South African publication Business Day.

It’s really not very complicated. The rule of law –  including respect for private property – is an asset as important as diamonds or oil in the ground. Arnold Kling and Nick Schulz laid out the argument for the power of intangible assets of this nature in their excellent book of a few years back, Invisible Wealth (1).

My guess is that South Africa will be responsive to the likely adverse reaction of markets if the policy goes into effect – foreign direct investment, absolutely vital at this stage in the nation’s development, will dry up.

But what’s happening in South Africa is a good lesson for developed nations as well. In today’s world, IP policy counts. It can’t be held hostage to short-term political considerations or sloppy economics.




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