Eckhard Höffner on IP and Technological Innovation and Some Lessons For Canada

21 08 2010

Old Patent Office, Washington DC

Do intellectual property laws promote technological innovation and economic growth?

There is a huge body of literature on this question. Some scholars argue that patents for inventions, which are intended to spur innovation, actually slow it down, at least in some cases. Economic historians have contributed a great deal to this debate. See here and here. Perhaps the best known case of a patent acting as an impediment to technological innovation was the infamous Selden Patent, which would have given its own the exclusive right to manufacture automobiles in the United States. Henry Ford famously persuaded a judge to throw this patent out. The result was a proliferation of competing car companies, each engaging in technological innovations that improved motoring and made it accessible to the masses. Some people have extrapolated from the Selden Patent that all patents for inventions are therefore bad monopolies.  Others say this is throwing the baby out with the bath water.

The debate about whether intellectual property rights for inventors are good or bad is, in turn, connected to the even bigger debate on IP in general. The consumers who believe in freedom to fileshare have contributed both heat and light to this debate in their many websites. Some scholars think that we would be better off in a world with no copyright laws at all. This is the theme of books with titles such as Against Intellectual MonopolyThe Public Domain: Enclosing the Commons of the Mind and The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives.

Needless to say, this scholarly debate has massive implications for public policy: there is a community of scholars who are passionately opposed to what they call “intellectual monopoly” and are always on the lookout for data points to support their case. Most the evidence they have marshalled to date is focused on the patent system.

Economic historian Eckhard Höšner’s research on 19th century Germany suggests that a weak copyright system for books may have spurred economic growth by making technical manuals and other practical books much cheaper than in Britain, the first industrial nation.  For most the 19th century, the German-speaking countries lacked a unified copyright law, which meant that pirate printers were able to shop around for principalities with conveniently lax laws. [It should be noted that the US in this period was also notorious for pirated editions of British authors]. The German-speaking countries lacked such a copyright law because they were politically fragmented, even after 1871.  Höšner has argued that Germany’s rapid catch-up with England was due, in part, to the absence of copyright laws. It was sort of a substitute for technical colleges, although Germany had plenty of those too. See here, here, and here.

It will be interesting to see how Hoener’s research fares at the peer review stage. As a Canadian historian and a citizen of Canada, I think that his research on pre-unification Germany is a very interesting case study. I’m not convinced one way or the other by the arguments for and against IP. This is outside of my area of expertise, although I have looked at the impact of international trademark on the history of the soap industry in the course of my research. I’m inclined to be tentative in pronouncing on the relative merits of any nation’s IP regime. But I do believe that national legal diversity is a good thing since it creates natural experiments or laboratories so that we can evaluate the impact of different patent regimes. Since 1883, countries have been working harmonize their IP laws. Within certain limits, such harmonization might be a good thing. But it would be a tragedy if the whole world adopted a single IP regime. We would be putting all of our eggs in one philosophical basket.

Unfortunately, the United States seems to be intent on forcing encouraging other countries to bring their IP laws in line with their own. I don’t quite agree with those leftists who complain that the United States is acting as a de facto world state, but the American Congress has certainly appropriated the functions of a North American parliament. Congress is sort of like the European Union parliament, but with only one country having  a seat at the table. Anyway, the pressure on Canada’s government to harmonize in this area has been intense and has continued under successive Democratic and Republican administrations.

European Parliament. Note how the flags of multiple countries are visible in this photo.

Through a conjunction of historical circumstances, Canada did not become part of the United States, just as a few of the German-speaking regions avoided incorporation into Germany. Our special constitutional status within North America involves both costs and benefits, but one of the advantages is the right to write our own laws. Why shouldn’t we? The Hong Kong Special Administrative Region has different IP laws than the People’s Republic.

At present, Canadian law is much more lax than American law when it comes to the whole issue of digital property rights. That Canada has maintained its sovereignty and legal distinctiveness in this particular area is largely a function of the fact we have had weak minority governments since the 2004 election. No one political party has a majority of seats, there is chronic instability, and politicians have to be more sensitive than normal to the wishes of voters.  In June 2005, the centre-left Liberal government introduced Bill C-60, a law to amend the old, pre-internet Copyright Act, which had been written on a typewriter, and bring it in line with the infamous Digital Millenium law in the United States. The bill was never passed into law, as this government fell in November 2005 due to a corruption scandal.  In 2008, the centre-right Conservative government, an administration with even fewer nationalist scruples than the Liberals, introduced Bill C-61, which was very similar to the Liberals’ Bill C-60.

This modest building houses US diplomats in Ottawa

Needless to say, this statute would have been music to the ears of the denizens of the massive American Embassy building in Ottawa, which is conveniently located just steps away from the parliament buildings in Ottawa.  This bill was not passed, when the Conservative government dissolved parliament and called an election in September 2008 in a failed bid to get a majority of seats in the House of Commons.

In June of 2010,  the Conservative Industry Minister tabled Bill C-32, another kick at the proverbial can. Government spokesmen loudly protested that this statute was indeed a “Made in Canada” law although a government website also said that this law was required if Canada were to meet its “international obligations” and “bring Canada in line with international standards“.  Made in Canada?  Feel free to quote Shakespeare’s “The lady doth protest too much” here.

For comments about C-32, see here, here, and here.

As someone who believes in having as much diversity as possible when it comes to IP laws, the best case scenario from my point of view is for Canada’s federal government to cede effective control over IP law to the provinces. This could probably be done in a sub-constitutional way and could be justified in the courts as an extension of the provincial power to regulate property and civil rights. Yes there would be costs in the form of possible interprovincial trade barriers, but the benefits of turning this matter over to the provinces is that provincial legislatures are much more insulated from the power of the Washington imperium than the Canadian federal government.  You can’t rely on minority federal parliaments forever to protect our autonomy from all of the thugs and lobbyists in Washington.