A California jury decision requires Samsung to pay Apple $1 billion for infringement of intellectual property and some of Samsung's products may have to be withdrawn. The decision will strengthen Apple's competitive position not just in America, but in all those countries which recognise American intellectual property rights. This decision is a reminder of how difficult it is to develop universal rules which maximise the benefits of globalisation.
We benefit from the advance of technology and shouldn't begrudge innovators an appropriate return on their intellectual property. But how much should they receive and in what form? The answers will determine how quickly and widely we benefit from past innovation and the incentives for further inventions.
Even within the jurisdiction of a single country, rewarding intellectual property rights presents vexed issues. Patents and copyrights are forms of monopoly. Intellectual property is generally a 'non-rival' good, in the sense that one person's use of an idea does not diminish the capacity of others to use it. When monopolies are created, the benefits from an innovation are reduced.
Moreover, each inventor stands on the shoulders of those who came before: many of Apple's ideas were created elsewhere. Progress is usually a matter of incremental improvement on earlier practice. As Samsung says, tongue-in-cheek: 'it is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners'.
If competition is the spur to invention, this monopoly reduces the pressure to stay ahead through further innovation. Arguing that this will make Samsung work harder to find a different way of doing the same thing is advocating for the re-invention of the wheel.
For how long should a monopoly remain valid? The 'Mickey Mouse Protection Act', which lengthened copyright to 70 years after the death of the author, reflected the lobbying strength of Hollywood rather than economic logic. The incentive provided for innovation by the promise of income so far into the future is worth little to an innovator and its promise would not have produced a better Mickey Mouse. This retrospective protection is just a dead-weight cost on today's users.
Getting the right balance between the owners and the users of intellectual property is hard enough within the domestic jurisdiction. There, at least, a political process is at work to balance interests and competing lobby groups (in the Disney case, Hollywood versus Silicon Valley). The difficulties, however, increase in the global domain.
For countries like Australia, why not just ignore the US ruling and allow Samsung to sell its infringing devices here, competing with Apple to keep prices down? Through the Berne Convention, WTO and our various trade agreements (for example the Australia-US Free Trade Agreement) we agree to enforce foreign property rights. The agreements are often incorporated into wider trade arrangements, the current example being the Trans Pacific Partnership; we sign up to a package of arrangements going well beyond trade.
It's generally in our national interest to sign up to multi-member trade agreements which lower trade barriers. But other topics covered in the TPP, such as intellectual property rights, are not so straightforward. We should not presume that US laws, as interpreted by a California jury in a dispute between an American company and Korean one, will result on a decision that serves Australia's interests.
We do have some bargaining power. If intellectual property is to be enforced in Australia, our administrative apparatus will be needed. When our police and customs are asked to defend the intellectual property rights of foreign designers against unauthorised imitations (thus diminishing the choice of Australians who might value the opportunity to purchase the cheaper copies), this cooperation should be contingent on achieving a sensible balance between the benefits to users and owners of intellectual property.
Mickey Mouse and Amazon's patent over '1-click' purchases may be trivial examples of excessive protection. But these are not trivial issues. We benefit hugely from the availability of generic medicines based on expired patents. It is in our interests to have a continuing flow of pharmaceutical innovation, so such innovation needs to be rewarded. But it is also in our interests that the duration of the monopoly should be short.
Tom Friedman saw the inevitability (and indeed the desirability) of the Golden Straitjacket: uniform universal rules which evolve to govern international economic relations. The detail of these rules is being written day-by-day in negotiations such as the TPP. These negotiations can develop their own political momentum (as happened with the Australia-US FTA). If this occurs, the benefits of globalisation risk being inequitably shared.