Intellectual Propertyand the Economy

Excellencies, Distinguished Speakers, Distinguished Participants, Ladies and Gentlemen,

I am pleased and honoured to be invited to give the keynote address before the distinguished gathering today at the first international seminar organized by the Central Intellectual Property and International Trade Court. I propose to look at intellectual property from the trade and industry perspective and focus on the different kinds of use of intellectual property and their effects on the economy and the desirable development and direction of intellectual property in the 21st century.

Intellectual property is increasingly important in the world economy. It is estimated that intellectual property rights now protect one trillion US dollars worth of products. Intellectual property has a firm foothold in the trade liberalization process through the Agreement on Trade-Related Aspects of Intellectual Property or the TRIPS Agreement under the World Trade Organization. It is contained in various international agreements under the World Intellectual Property Organization. Whether we like it or not, whether we are ready for it or not, intellectual property is here to stay as a very important tool in the economic, political, social, cultural, and educational fields. It affects the whole facade of the economy. It could be used as either aggressive or defensive strategy. It could be used to further or slow down the trade liberalization process either wittingly or unwittingly. It has always been the subject of conflicting desires of the right holders on one part and the public at large on the other part. It is an excellent tool to promote innovation and creativity but could create an enormous or even unbridgeable technological gap between the developed and developing countries if enforced in an imbalanced way. So the present and future development and direction of the various regimes of intellectual property rights will have profound impacts on the global, regional, and national economies.

Thailand had adopted modern protection of intellectual property rights since 1892 in the form of the Royal Proclamation of Vachirayan Library for the Protection of Literary Work. This is not surprising since literary and artistic works have always been prominent in Thailand throughout the ages. The first Copyright Act was passed in 1901, the latest version was that of 1994. The first trademark law was passed in 1914. The patent law seemed to have a more arduous journey since it was first drafted in 1913, but the first patent law was enacted in 1979. The economic, political, and social environment then was certainly different from the present environment. Thailand at the turn of the 19th century and for the most part of the 20th century was for all intents and purposes an agricultural society. Now Thailand at the turn of the 20th century has been on the verge of becoming an industrial country. The export of industrial goods during the period of January to September in 1997 amounting to approximately 770 billion Bahts. This represented a 14.2% increase over the same period in 1996 regardless of the present financial turmoil. Such export of industrial goods also represented about 68% of the total Thai export during that period while the agricultural goods export amounted to about 169 billion Bahts representing only 14% of the total export. But one big question remains, namely, in our relentless industrialization: Have we made proper use of intellectual property as a strategic tool? Have we just blindly made products and services without the marginal benefits of even the most rudimentary rights provided for intellectual property in the form of patent, trademark, and copyright?

I am afraid the figures and statistics provide the needed, though unpalatable answer. The registered trademarks and granted patents give the right holders almost monopoly over a fixed duration of time against unfair exploitation of their works. The number of applications filed each year in Europe, USA, and Japan for patent and trademark protection correspond to the status of these three as the undoubted leaders in the leading edge technology. For example, in Japan alone, the year 1996 presented about 376,000 patent applications and about 188,000 trademark applications. By contrast, in Thailand from the year 1979 to 1996 there had been about 35,000 patent applications, of which only about 5,000 were domestic applications. And if we looked even closer, we could see that out of the 5,000 Thai domestic applications, only 1,315 were for patent on invention. This is the total contrast to the situations in Europe, USA, and Japan. The answer is clear. Thailand for one reason or another has looked at patent with some suspicion. It would be understandable for people to think that way when the country was and is happily dependent on imported technology. According to the figures of the Bank of Thailand BOT, the money Thailand spent on the import of technology was about 25 billion Bahts in 1996. In contrast, the value of technology exported from Thailand in the same period was about 700 million Bahts. Such a technology trade deficit was enormous. This imbalance is also a stark contrast to the trend among the leading industrial countries such as Japan, the US, the UK, and France where there has been a stark upward and active trend in the technology trade. So the import of technology were not a bad thing in itself if the economy which had have imported it could increase its own export of technology. Japan itself in the decade between 1986 to 1995 had about 4 trillion Yen in terms of technology trade. At this time of borderless business operations, it would be unthinkable that any economy could compete effectively without making use of the modern patent protection.

In the light of what I have said so far, I believe that the Thai private and the public sectors have to learn to look at patent in a completely new perspective at least in the Thai economy. First of all, it is important to realize that the patent protection is not just protection for protection’s sake or something merely to please some trading partners. It does serve some specific strategic purposes. It could be used to protect one’s products against those of competitors. In the US, the award for damages on the ground of patent infringement is reputedly the highest. This may be an explanation for the popularity of patent application in the US. The classic case of Polaroid vs Kodak over the infringement of instant camera patent resulted in the huge damages award of 347 million US dollars. The Japanese are the most prolific patent applicants as their big 100 companies filed averagely 200,000 applications a year in the 1990s, but the damages awarded in Japan have been generally much lower than those in the US. However, there has been a steady increase in the number of IPRs related lawsuits during this decade and there were two cases which resulted in the award of over two hundred million Yen each. In Europe also, the use of patent as a form of self-defense in the US style is gaining more popularity. Other purposes are the use of patent to increase the market share, to earn royalties, to do cross-licensing, or even to obstruct the activities of competitors by preempting their development or launching of new products through shrewd applications in whatever country which is likely to be a business battle ground. The right holders have to be vigilant and quick to take effective actions to protect the fruits of their research and development (R&D).

The vast discrepancy between the developed and developing countries seems to stem from the availability or inadequacy of the resources spent on R&D. For example, Japan spent 124 trillion Yen during 1986 to 1995 on R&D. In the 1990s, the R&D costs in Japan had increased annually at about 3.4%. So it is not surprising that Japan is the biggest filer of patent applications. I am not saying that Thailand could emulate the Japanese model in terms of the money spent. I merely wish to point out that there is a very strong correlation between the IPRs protection and the existence of adequate R&D in the country. It is clear that developing countries are in a vicious cycle as far as patent is concerned, minimal spending on R&D, thus inadequate innovation, and a small number of domestic applications for patent. What could we do to break the vicious cycle?

Intellectual property by itself cannot be a magic wand to cure whatever deficiencies in the economy where there has not been enough innovation and creativity to cope with the fast-paced globalization and the rapid development of technology particularly the information technology. There must be innovative and creative works susceptible of the protection afforded by intellectual property in the first place. But in any case, the absence of sufficient indigenous works is not an excuse for infringement of the intellectual property rights of others. Intellectual property has to be tackled in a committed and comprehensive manner, not superficially.

What I mean by the term “in a committed and comprehensive manner” is that we should look beyond the scope of intellectual property and beyond our national boundary. Intellectual property is borderless and will be even more so in the future given the pace of technological development.

Utmost importance should be attached to human resource development. We need to have the workforce whose members are innovative and creative. We can no longer afford to benefit from cheap labour especially in the future when competitiveness will be determined by technological capabilities. In this light, education and promotion of the public awareness on intellectual property are indispensable. Our workforce must be well-informed on the exploitation of intellectual property rights and the protection provided by the intellectual property laws. The protection provided for the right holders must be effective to ensure them that their intellectual property rights will be adequately enforced and protected. This needs to be done with firm commitment of the authorities concerned. The measures used must be effective to prevent against and deter infringement. For this, the broad blueprint is the enforcement provisions of the TRIPS Agreement. There must be appropriate mechanisms to ensure the effective enforcement. In the case of Thailand, the latest mechanism is the Central Intellectual Property and International Trade Court initiated by the administration of Prime Minister Chuan Leekpai in 1993 although Thailand was not bound by the TRIPS Agreement to do so. This should help strengthen protection and enforcement of intellectual property rights in the Thai economy.

The creation of intellectual property works alone is not sufficient to guarantee their successful exploitation. The owners or holders of the intellectual property rights, especially the corporate bodies must be fully aware of the value of these rights as economic assets, some of which, for example, patents are difficult to acquire and expensive to maintain. Nowadays Thai trademarks have been infringed abroad and the Thai right holders have a lot of difficulties in asserting their rights, simply because of failures to file for registration of their marks in the client countries beforehand, or some by misappropriation of their marks. So counterfeiting seems to be an unwelcome accompaniment and acknowledgement of the popularity or success of the marks. Domestic registration is not enough when goods and services move across national boundaries. It is commonly said that a popular trademark is more important than the factory itself. It lasts forever if it is renewed on time, whereas fire or an earthquake could destroy the factory any time. So intellectual property rights are equally, if not more, significant than any other kind of economic assets.

Efforts in the creation of intellectual property works have to be properly supported. First of all, there must be sufficient information on technology and intellectual property. The move by the Department of Intellectual Property to set up a comprehensive IP Library is a very positive step conducive to the overall R&D. Secondly, there must be a channel for the support and exploitation of intellectual property works. Universities and research institutes must have close links with the business and industry so that efforts could be concentrated on the needed areas. Thirdly, the authorities must ensure that the IPR system is conducive to R&D activities by promoting intellectual property at every level of the public and at every educational level. So the efforts of the Department of Intellectual Property in providing information for the primary and secondary school students are a step in the right direction.

Whatever we do domestically will not be enough to make intellectual property a meaningful strategic tool of trade in the time of global competition. We have to be able to protect the Thai intellectual property works wherever they are in the world. Several international agreements attempt to harmonize the standards of protection. However, on patent and trademark, registration has to be obtained on an individual country basis except in the cases of European Patent and the European Community Trademark. I had first hand experience during the first administration of Prime Minister Chuan Leekpai in trying to give ASEAN-wide protection to trademarks and patents of ASEAN member countries. The rationale is to make it most convenient to the right holders in the ASEAN countries. The regional patent and trademark systems will give much boost to the trade liberalization among the ASEAN countries. Strong regional cooperation as presently exemplified by the ASEAN Working Group on Intellectual Property Cooperation will contribute greatly to broader international cooperation such as APEC and to other international cooperation. It is true that because of the TRIPS Agreement, there have been greater efforts in harmonization of intellectual property law to comply with TRIPS obligations. But we should be careful not to create so many individual pockets of protection that they stifle the flow of trade, investment, and technology. This sentiment is embodied in the objectives of the TRIPS Agreement itself, namely, the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a conducive manner to social and economic welfare, and to a balance of rights and obligations.

I do believe that intellectual property should promote the movement of goods and services and not the other way round. We have to always bear in mind the balance between the strong IPRs protection on the one hand and the need to prevent unfair competition on the other. Intellectual property rights are not to be abused as monopolistic tools. That is the reason why the trademark, patent, and copyright laws have to contain some provisions to prohibit certain unfair business practices especially in the licensing of rights.

In any case, intellectual property has to be developed in a balanced way taking into account the interests of the right holders and the public. This principle of the balance of interests is evident in all major international agreements on intellectual property. It means that developing countries do have a role to play in the formulation of standards and practices. We could in particular help forge the standards and practices that promote free and fair trade. In this light, the issues of exhaustion of rights and parallel import are still as important and contentious as ever.

The issue of exhaustion of rights and parallel import both involve the legitimate copies made by the right holders or through their consent. The crux is how far the right holders should be allowed to retain the exclusive right of distribution of the goods in the case of the principle of exhaustion involving patent and trademark. There are 3 kinds of practices. First, it is the national exhaustion of rights which means that the right holders in any particular country have the exclusive rights of distribution which will be exhausted after the first sale of such goods in that country. Second is the regional exhaustion of rights which means that the right holders in any regional economic community such as the European Community have the exclusive right of distribution which will be exhausted after the first sale in any member economy of such economic community. The European Community has this well-established practice of intra-Community exhaustion and extra-Community non-exhaustion. The third kind is the international exhaustion which holds that the right holders will be deemed to have exhausted the exclusive right of distribution after the first sale of their goods anywhere in the world. The last alternative does back up the idea of global sourcing and global marketing as well as global pricing.

The principle of parallel import means that anyone can freely import the legitimate copies of intellectual property products into a country without seeking permission from the right holders beforehand. The right holders argue that they should have the exclusive right of importation to guarantee the quality and service on the goods as well as reasonable pricing for each individual market. They have been demanding for the ban on parallel import. On the other hand, attention must be paid to the public interest in terms of choice of products. Is there any strong public interest to compel the consumers to buy legitimate goods only from the right holders or their agents?

The issues of exhaustion of rights and parallel import have to be determined not only from the perspective of intellectual property but also from that of the public policy on how far free competition should be allowed or encouraged in the distribution of goods.

In addition, we have to make new initiatives to protect and promote the fruits of intellect although they may not fit into the presently accepted forms of intellectual property works. In this regard, I believe that the convening of the World Forum for the Legal Protection of Folklore in Phuket last year has signified that the developing countries have come of age and could be united in pushing for the new form of protection for folklore which is the work handed down from generation to generation not by individual creators as such. If we could be united enough to push through one initiative, then other positive and meaningful initiatives could follow. We could be proactive, and not merely defensive.

In the long run, intellectual property rights may have to be managed on a global, not regional or national basis. The information technology especially the increasing use of the Internet has presented a very severe challenge to copyright in particular. New international agreements under WIPO have been made. But they could not catch up with the technology. Perhaps the help to the copyright holders may come from technology itself not the change to international standards of copyright protection. I believe that in many circumstances, the business practice has to be changed to adapt to the technological changes which in the case of copyright means the ability of households to have access to incredibly large amount of information and ability to make perfect copies easily.

The future presents both challenges and opportunities for the rich and poor economies alike to exploit intellectual property in a dynamic and balanced way. International consultation will be the key for such exploitation. But such international consultation will have to be built on strong regional cooperation. The close cooperation among countries of the region will provide a great momentum to the efforts of individual countries to use intellectual property most efficiently and effectively for the economic, social, and cultural development.

To upgrade Thailand’s economic structure to a higher product cycle we need to enhance our total factors productivity, meaning the ability to produce more and more efficiently by using the same amount of factors of production. To achieve this, human resources must become more educated, skillful, productive and inventive. Machinery must embody the latest technology so that quality products in the higher value added could be manufactured in larger number. Research and Development is one of the keys to all these achievements. One of the crucial driving forces behind R & D is the right to protect one’s invention and creative endeavor. Intellectual property is becoming rapidly an expanding assets in both domestic and international trade and would gain in value on trade and production itself in the direction of know-ledge and technology-based processes.

I am very pleased that the Ministry of Commerce and the Central Intellectual Property and International Trade Court organize this seminar. I hope this seminar would increase our understanding of the process of intellectual property right protection and redefine the role of the Central Court as efficiently as possible. I wish you all success in your deliberation.