The Mirage of Intellectual Property

Perhaps few incidents could better define the present phase of global capitalist decay than the lawsuit brought by Apple against Samsung Electronics over alleged infringements of its intellectual property (IP) in respect of its iPhone and iPad handsets and tablets. The case – which has evoked counter-claims by Samsung of comparable IP infringement by Apple – was initiated in April 2011 and has involved litigation in various jurisdictions around the world. By mid-2013 it has resulted in numerous, often contradictory, judgments from different courts but with no decisive victory for either party. Hence any damages or compensatory actions that may result to or from either side seem likely to be largely self-cancelling. Meanwhile the costs of the litigation to both parties, which have not been disclosed, may be conservatively estimated to run to tens of millions of dollars. Arguably growing market recognition of the futility of the whole exercise may have something to do with the 30 per cent decline in Apple’s share price since September 2012 – at a time when the broader stock market has risen by nearly 20 per cent. Thus the only evident gainers from this exercise are lawyers and consultants, while the supposed beneficiaries – shareholders, and ultimately consumers – are the losers.

The Apple vs. Samsung case may in fact prove to have served a wider public purpose if it makes people aware of the absurdity and wastefulness of trying to enforce patents granted in different countries to different companies for what may often appear to be broadly similar technologies, let alone claims (as also complained by Apple) that the shape of one firm’s handset screen may be a copy of another’s. Indeed it should force us to confront the whole question of the role of IP in the modern economy and whether any genuine public interest is served by seeking to enforce proprietary patent rights in an era of rapid technological change, particularly when the claim to such rights often seems questionable in the first place.

The question is all the more pertinent given that intellectual property rights seem only to have become a major issue in international economic relations (or even within national economies) within the last 20-30 years. It is true that the right of individuals to be granted patents on new inventions has been recognised for centuries by national governments in the West. However, it is striking that they never till now seem to have loomed large in the development and spread of technology either before or since the industrial revolution of the early 19th Century. This is probably because the value of patents has not been generally perceived as great enough to justify the cost and effort of obtaining them, given that they do not normally offer protection to inventors / patent holders for more than 20 years and may be hard to enforce.

This naturally begs the question of how and why attitudes have changed in recent years. The key to understanding this is evidently the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which was included in the rules of the World Trade Organisation (WTO) established in 1995 as the governing body regulating international trade. The WTO replaced the General Agreement on Tariffs and Trade (GATT) which had fulfilled the same function since 1948 and had not included any rules governing IP, although the United States in particular had been anxious to remedy this deficiency at least since the 1980s. As a consequence all countries joining the WTO are required to sign up to TRIPS, which commits them in principle to granting and enforcing IP rights to and for all legitimate claimants from whichever country. (It should be noted that this applies to copyright on content and recordings of creative / artistic works as well as technological innovations.)

The most obvious reason for the new-found determination of US and other Western countries to impose IP protection rules internationally is that they are the main source of both technological innovations and mass-market “cultural creations” such as films and musical recordings and that they wished to secure the maximum share of the value generated by these for their corporations and national economies – or even in some cases to limit access to them if that was seen as in their strategic interest. What is less obvious, but arguably a more compelling reason, is that business cycle and competitive pressures combined with market and technological change have been pushing global big business to seek new outlets for investment of their continuing flow of surplus profits. In particular, they have been forced to respond to a) the slower growth and increasing saturation of traditional markets for consumer goods (such as electrical appliances and motor cars) as well as greater competition from low-cost producers such as China, and b) the correspondingly greater importance of services in consumer markets, also associated with a relatively bigger need for investment in intangible assets (such as technological research) rather than plant and buildings. (Another vested interest probably behind this trend may be worthy of mention, namely the voraciously expanding legal services industry, which has rightly viewed IP litigation as a potential bonanza.)

A difficulty posed by this growing dependence on such “software”-intensive markets is that big corporations do not necessarily enjoy the protection from competition that goes with large size, economies of scale and corresponding barriers to new entrants – which have typically protected big players in traditional heavy industries such as engineering and petrochemicals. Hence other ways to protect profits by limiting competition have had to be sought. While Microsoft Corporation demonstrated in the 1990s how to do this by successfully operating a highly profitable monopoly with its Windows software – notwithstanding a US federal anti-trust prosecution – such tactics may well seem difficult for others to replicate, not least because competitors (notably Apple) were ultimately able to eat into Microsoft’s ruthlessly acquired market share. But even as such options for capturing economic rents from IP appear to be dwindling, major players in different technology sectors still seek to use patent law to limit competition.

The trouble with this approach is that the task of designing and enforcing an effective system of patents that meets general acceptance faces as many serious constraints as ever. Of these the central one is that IP restrictions on economic activity are widely perceived as either inherently unfair or unenforceable – even by most countries which have signed up to them under WTO / TRIPS, not least because (as developing countries have argued in WTO negotiations) the already industrialised countries have the competitive advantage of being able to subsidise research and development for their corporate interests. Moreover, to the extent that patent rights are enforceable it is also argued by many that, so far from being an incentive to investment in research and development that may lead to desirable technological progress, they permit and encourage those with control of existing dominant technologies to prevent any advances to them in order to maximise their returns to their past investments. Such a charge could indeed be convincingly levelled at the major pharmaceutical companies, which have often sought to extend the life of patents (typically by making very slight modifications to existing products) rather than undertaking or allowing research by others so as to permit development of new drugs incorporating vital advances in treatment. This constraint has been identified by at least one very respectable body of academic opinion – including two Nobel prize winners – as a reason for recasting the entire global structure of IP law and regulation (

At the same time there is growing recognition that most of the vital innovations that are central to the modern global economy are largely the result of publicly financed research, so that the claim of any private sector companies to any exclusive rights over them seems obviously indefensible. This is the clear implication of a recent study (authored by a leading economist, Prof. Mariana Mazzucato and published by the think-tank Demos – – pointing out that such key technologies as the algorithm central to Google’s search engine and the touch-screen facility used by Apple and other smart-phones were largely developed with the aid of US federal funding, while many important advances in biotechnology made by UK public bodies have been made available at little cost to pharmaceutical companies which have used them to make substantial, patent-protected profits.

Perhaps the most egregious perversions of the concept of IP have been those based on attempts to patent new products derived from naturally existing ones such as the human genome and planting material for crops. The latter case in particular has been the subject of a long campaign (led by the main chemical company concerned, Monsanto Inc.) both to promote the adoption of genetically modified (GM) seeds and to ensure that farmers using them cannot save and replant them – according to traditional agricultural practice – in supposed breach of the manufacturer’s patent. The seemingly endless controversy surrounding this campaign – centring mainly on the issue of the costs and (highly questionable) benefits of GM varieties – has thus far led to no objectively measurable public benefit; rather the contrary. Indeed Monsanto’s recently announced decision to abandon attempts to have its GM seeds authorised for use in the EU would indicate they are starting to see the whole campaign as a futile waste of effort. Yet unquestionably in the absence of restrictive patent laws and TRIPS Monsanto and others would hardly have had the incentive to embark on such a wasteful course and those resources could have been devoted to more constructive purposes.

As suggested earlier, all these largely vain efforts to assert IP rights to an extent that has never been attempted before may come to be seen as worthwhile insofar as they have provoked a strongly hostile reaction against the idea that certain economic actors should seek to claim a right to monopoly control of access to productive assets – and the economic rents that go with them – which are either the common heritage of mankind or have been developed at public expense and thus, notionally, in the public interest. Nowhere has this revulsion been stronger than in the area of pharmaceutical products when the dominant global corporations have sought to deploy their patent rights to deny access to the world’s poorest to affordable life-saving drugs (e.g. to treat HIV) in pursuit of maximum profits. But equally significant is the trend towards developing freely available “open source” software – such as the Linux alternative to Microsoft’s Windows, which has clearly been conceived as an express rejection by its creators of Microsoft’s anti-social values.

There seems every reason to hope that such developments (as well as the inconclusive outcome of the Apple / Samsung litigation) point to a future where such intangible productive assets will be regarded as freely available to individuals or communities to use for whatever legitimate purpose they choose. This is akin to the increasingly popular concept of the “creative commons”.

It needs to be stressed that this does not mean that the concept of intellectual property is wholly without validity. Indeed it is likely to remain the consensus view that inventors, authors and producers of intellectual “products” – whether technological or “cultural” should be entitled to reap a monetary reward from their creations. The question of how this may be achieved, while balancing the interests of individuals and the public at large, in an age when copyright is increasingly hard to protect, needs to be the subject of international public debate. Perhaps the most rational solution would be a structure of rewards for properly authenticated inventors or originators of different types of IP that allows them to be suitably (but not exorbitantly) compensated on a one-off or time-limited basis, preferably according to internationally agreed criteria.

What these developments in relation to IP do signify, however, is that the attempt by the global corporate establishment to seize control of intangible assets on an increasing scale in order to meet their helpless addiction to seeking ever more high-yielding investment outlets is doomed increasingly to fail.


17 September 2013