The Visible Hand: Why India needs to possess

According to latest available estimates the world has 5.6 million patents in force worldwide. This means that 5.6 million ideas are protected by law as belonging to some person or group. If you want to use any of those intellectual properties, you are supposed to pay a fee to the agent who owns it.

The importance of intellectual property has grown sharply over the last few decades. The number of patents granted worldwide each year rose slowly up to the middle of the last century; thereafter the growth has been exponential. The US has been the leader for most of the last hundred years, though the USSR overtook it for a couple of years in the late 1970s and Japan did the same briefly in the late 1990s.

If we deflate the absolute number of patents granted to residents by some measure of the size of the nation, the picture changes only a little. In terms of patents granted per capita, Japan is the world leader, followed by South Korea, with US in the third place. If we look at the patents-to-GDP ratio, the US drops to the fifth rank, with South Korea, Japan, Germany and New Zealand leading.

Where does India figure in all this? Virtually nowhere. Even accounting for the fact that we are a poor nation and so cannot be expected to compete with industrialised nations, our performance on intellectual property has been dismal. China, which till recently had a poor record of creating ideas, has become a major international player. In 2005 it moved up to being the third largest patent granting office in the world. The world’s five largest patent-granting offices — Japan, US, the European patent office, South Korea and China — together account for 74 per cent of all patents in the world.

The reason why I am pounding you with data on a Sunday morning is not because of a perverse desire to ruin your holiday, but to alert you that, while India is surging on many fronts, it does badly when it comes to inventiveness; and this can have severe long-run consequences.

The rise of intellectual property is such a recent phenomenon, that most people have no idea what it means. When we speak of property, we usually think of tangible things — land, house, watch. Especially in India, the ownership of an idea seems strange. But unless we wake up to this global phenomenon and partake in it actively, we will lose out.

One way of understanding this is to look at the colonisation of the Americas. Most of the original inhabitants of the New World lost their land not by war but by not understanding what it was that they were giving up. A recent book by Stuart Banner, How the Indians Lost Their Land, documents how, since the native people did not have the concept of property rights in land and had little experience of buying and selling land, they could not fully comprehend what they were giving up every time they sold land (often for a few bottles of rum) to the settlers from Europe. Banner records how the natives would “sell” land and continue to trespass on the land, simply because they were not used to thinking of land as property and did not understand the rights that came with land ownership. By the time they understood it, their land was gone.

Intellectual property today is at a similar juncture. It is arguable that over the years the income that accrues from intellectual property will outstrip the income from labour and land. That being so, it is important for today’s poor nations to encourage inventive activity and then to establish rights over those. Most universities in industrialised nations have patents offices, encouraging and enabling those who create ideas to patent them. In smart countries across the world — China, South Korea — patent offices are made transparent with minimal bureaucracy and corporations and people in science and engineering are given incentives to invent new ideas.

There is an important contrary question that some may raise. Is it correct to establish rights over ideas and then charge others for using them? This is a big question and the subject of much debate. I personally find it disturbing to see the kind of property rights regime that the world is getting into, compartmentalising our tangible and intangible resources into territories and then passing them down to our progenies and excluding others.

But that debate has little bearing on what I am arguing here. Given that the world is getting into this system, for poor nations to exclude themselves from it is to guarantee nothing but their own poverty.

(Kaushik Basu holds the C. Marks Chair and is Director of the Center for Analystic Economics at Cornell University)