With free trade and globalization under attack, can IP licensing come to the rescue?

Whatever one’s view about globalization and free trade (dislocation of jobs, social and economic inequality and loss of sovereignty, not to

mention free movement and immigration), one cannot deny that more and more skepticism is being expressed, from the Brexit vote to the US Presidential candidates and so on. If the overarching trend since the 1950’s has been towards institutional integration, the current winds are casting doubt on this tendency. The question arises: how might this affect IP?

The justification for IP focuses on lofty notions such as creating the proper incentives for creation and invention. But let’s not kid ourselves: IP became mainstream while globalization and free trade were taking hold as instruments in fostering economic growth, roughly from the 1980’s. Many IP practitioners are probably too young to remember that this was not always so. In those antediluvian days, IP protection was viewed with skepticism on both sides of the Atlantic; there was wide-spread hostility to patents based on competition law grounds, while trademarks were viewed as a manipulative tool to create otherwise unnecessary consumer desires. For the most part, IP was a backwater legal area, at best a quirky niche practice.

The linkage of IP with the rise of globalization and free trade changed all of that. IP became valuable because it was seen as generating ever-greater commercial value, enhanced by the international reach of IP. There was a wide-spread tendency to view IP and global trade as two sides of a single, inevitable coin, even if the two are not necessarily one and the same. As Professor Matthew Kennedy graphically observed in the context of the TRIPS agreement, negotiating and implementing an IP agreement within the framework of a “multilateral trading system [is] like a cuckoo’s egg laid and hatched in the nest of another species” (p.1). Assuming arguendo declining support for globalization and free trade, this Kat can imagine three different ways to view the future relationship between them, depending upon whether one believes that the relationship between IP and globalization/free grade is coincidental or causal:

1. IP will be unaffected—The rise in the role of IP while globalization and free trade took hold was merely coincidental. The factors that propelled IP forward in the 1980’s were driven more by the transformation from an industrial to a post-industrial world, where intangible assets are increasingly important. Whatever the ebb and flow of globalization and free trade, this transformation will continue. As such, IP will continue to flourish.

2. IP will be disfavored as having been a major contributor—Here, IP is viewed as having a deleterious causal connection. To the extent that IP favors those who take advantage of the knowledge economy and facilitates replacing labor with capital in production, it can be accused as having contributed to the dislocation of workers and increasing income disparity. Accordingly, there is little reason to strengthen IP protection.

3. IP will be swept up as a bi-product of the hostility—Even if IP is not held directly accountable, it will still be affected by the general hostility to internationalism in the form of globalization and free trade. Here, as well, there will be no reason to strengthen IP protection, if all that that such measures do is to enhance the very factors that are under attack.

Even if the optimistic scenario outlined in (1) above comes to pass, one cannot ignore data that indicate a material slowing in world trade. This suggests a decline in the width and breadth of global supply chains and a potentially increasing focus on national, as opposed to trans-national commercial activity, here. If so, as applied to IP, will this mean more, or less, IP activity? The more instinctive response is to argue for less as a natural outcome of less trade. Multi-national patent or trademark protection may be less essential if there are diminished opportunities for trade in protected products across borders.

But perhaps there is a counter scenario. Unlike the situation before 1980, many more countries outside of North America and Europe can claim an increasing middle class. If a decrease in the scope of world trade does not allow satisfying them in the current manner, it does not mean that such needs cannot be met otherwise. One such way might be by import substitution, but another is via increased licensing of IP rights to exploit local potentials and capacities. Should this come to pass, perhaps scenario (1) described above will be the more likely one, after all.