Why Should Ukrainians Care About Intellectual Property Rights?

Posted by: Christopher Smith, Economics Officer

Читати українською


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It is impossible to spend time in Ukraine without being struck by the ingenuity of the Ukrainian people.  During my past year in Ukraine, I have met some incredibly inventive, creative people.  Among them, scientists, artists, musicians, and programmers with world class talents and the potential to be engines of growth for this nation.  Just today, I read about Ilya Kovalevskyi, a Ukrainian 8th grade student who became one of 20 winners worldwide of the annual Google “Code-In” programming contest.  He is a brilliant example of Ukraine’s budding talent.

We live in a world where the keys to economic growth lie at the crossroads of information, technology, and innovation.  Then why isn’t Ukraine doing better?  With the kind of talent clearly here, why is Ukraine’s standard of living stagnating?  If Ukraine wants to be the type of nation in which a rising tide of innovation lifts everyone, it must be a nation which protects the intellectual labor of its citizens.  This is the central goal of IPR protection.

Why does the United States care about IPR protection in Ukraine?  Certainly our large software, music, and film companies lose money to piracy in Ukraine.  But there is an even more fundamental reason why we care – we want Ukraine to succeed.  Ukraine’s growth into an economically strong and confident player in Europe is in the national interests of the United States.  And we believe that Ukraine will never be able to fully tap into its own innovation and creative potential if IPR is not protected.  We want to see Ukraine’s great minds create their masterworks here, for the benefit of the Ukrainian people.  But we know that as long as Ukraine’s IPR protection system remains weak, these great minds will seek out opportunities in nations which will protect their works and allow them to be fairly compensated.

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Last week, the International Intellectual Property Alliance (IIPA) requested that the United States Government designate Ukraine as a “Priority Foreign Country” under the “Special 301” statute.  The United States has not yet made a decision on Ukraine’s designation, and will not do so lightly, as Ukraine would be the only country in the world designated as a “Priority Foreign Country.”

I think many Ukrainians remember the photographs of protests outside of the offices of the Interior Ministry in February 2012, following a government action against popular file-sharing and piracy website EX.UA.  Looking at the faces of the protesters, I can understand their anger at being denied a resource to which they had become accustomed.  But looking a bit deeper, I wonder – would those protesters want their own intellectual labor protected?  If they created a mobile phone app, a song, or a film, would they want to be fairly compensated for their time and energy?  And once this process of compensating people for the fruits of their intellectual labor takes root, innovations become commercialized, and living standards begin to rise in Ukraine, wouldn’t they rather live in a place where prices for content no longer seem so high in comparison to local wages?  While the slogans used in this angry protest fought for “freedom of information,” I hope that we could all find common ground in seeking the freedom to make a living from creative works and innovations produced for the benefit of others.

We all want to see Ukraine succeed and prosper.  When Ukraine decides to adequately protect IPR, it will be a vote of confidence in the ingenuity of its own people, and a sign that Ukraine sees value in the works created by its 45 million people and believes that they are the key to its success.  I hope that this day comes soon.

4 thoughts on “Why Should Ukrainians Care About Intellectual Property Rights?

  1. This is inverted economics.

    Ukrainian prosperity is hindered by a lack of consumption. That lack of consumption is caused by a lack of credit. That lack of credit is caused by (a) a judiciary that does not enforce contracts and (b) a state that does not act as insurer of last resort by insuring that each individual is uniquely identifiable and therefore accountable. And, because the judiciary and the state fail at (a) and (b), it is impossible to issue credit to consumers who so that they can create demand. Further if credit were to be issued, and and creditors were to participate in the local economy, the arbitrary seizure of property by government employees increases risk beyond tolerable thresholds that any interest rate outside of usury will permit. The the fact that police are underpaid and resort to bribery and graft, completes the cycle, making it impossible for Ukraine to create the demand by the use of credit. The fact that the government is unstable means that the currency is not valuable either, so the government cannot spend enough to compensate for the lack of consumer credit.

    If intellectual property were a negative impact on an economy, then China would be the world’s laggard. But it isn’t. IP is a drag on the economy. And intellectual property rights, other than trademarks (which are consumer protection insurance) are licences to increase prices on goods that cannot compete on merit in the market alone, without that artificial increase in prices provided by the artificial monopoly that governments grant with intellectual property rights.

    Both logically, and empirically, Intellectual property rights are not a benefit for a developing country, they are an unnecessary burden. Patents are a useful device for private sector financing of investments in the commons, such as pure science, and high risk research into drugs with limited markets. But as they are used in the states, and in the west, IP is just a hunting license granted by the government, to create a limited monopoly, that artificially increases prices to consumers. It is involuntary transfer, no different from the graft and bribery that plagues Ukraine and it’s people.

    They don’t need more corruption. And IP is just another form of corruption.

    They need property rights and credit.

    Curt Doolittle
    The Propertarian Institute
    Kiev

  2. To Curt Doolittle:

    Thank you very much for your comment, and I greatly appreciate your ideas. While I agree with some of your tenets, I must disagree with your conclusions.

    I agree with you that credit is important for economic growth. What is not addressed in your comment is the importance of allowing individuals, under a system which protects intellectual property rights, turning their artistic or scientific intellectual labor into assets. Without IPR protections, there is no way to turn intellectual labor into real property. And without this property, there is no collateral for the credit necessary to create more intellectual property. In this scenario, the world, and the economies of countries such as Ukraine, lose out.

    To say that IPR protection unfairly increases prices is to deny that something of value has been added to a product through the introduction of an innovation, or that the value of the intellectual labor spent creating that innovation is essentially zero. Societies can decide to place the value of intellectual labor at zero, but then they pay the price. A society that doesn’t value innovation is nearly certain not to have it. IPR protection is our way of protecting and valuing innovation because, as a society, we believe that innovation benefits us all.

    I also feel that China, a country I lived in until recently, is an excellent example to draw from. Over past decades, as China has industrialized and created a manufacturing sector based on inexpensive labor, they indeed had little incentive to protect intellectual property rights. But as China now attempts to foster a more high-tech and value added economy, their situation has changed. There are still enormous IPR problems in China, but recent years show China moving towards international IPR norms, not away from them, as the number of Chinese patent holders booms. To get to the next stage, IPR protection is vital, and while it is being implemented imperfectly, many in China realize this. Ukraine, a long-industrialized nation, can learn a great deal more from how China is attempting to position itself now with regards to IPR than it can from its years on the outside of the international IPR system while industrializing. I would assume that, like the Chinese today, most Ukrainians would prefer to aim higher than low-paying, low-skilled manufacturing jobs and to engage for profit its vast potential for innovation and creativity.

    Thank you again for your posting, and I wish you all the best,

    Chris Smith

  3. It was said, “Ukrainian prosperity is hindered by a lack of consumption.” and the discussion related to this thought implies that credit is necessary for the development of consumption belies the truth that in Ukraine there is consumption via black markets, that is markets not under government control.

    However, the real issue was partly correctly stated, “a judiciary that does not enforce contracts.” The complete correct statement should say that the judiciary and Ukrainian state do not respect property rights.

    Ed K

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