By Barry MacTaggart

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July 9, 1982, Friday Late City Final Edition
Section A Page 23 Column 1 Desk: Editorial Desk Length: 862 words
Type: Op-ed

In recent days many people have been shocked that Japanese businessmen might have stolen computer secrets from I.B.M. The allegations are the latest twist in the tense worldwide struggle for technological supremacy, but few businessmen, especially those involved in high-technology, research-based industries, can be very surprised.

Their inventions have been "legally" taken in country after country by governments' violation of intellectual-property rights, especially patents. It has been going on for some time, and it is getting worse. Through political and legal dealings, many governments, including Brazil, Canada, Mexico, India, Taiwan, South Korea, Italy and Spain, to name a few, have provided their domestic companies with ways to make and sell products that under proper enforcement and honorable treatment of patents would be considered the property of the inventors. And now, the United Nations, through its World Intellectual Property Organization, is trying to grab high technology inventions for underdeveloped countries.

As more and more countries yearn for industrialization, it is ironic that less and less respect is given those laws and principles that have attended industrialization in the last hundred years. This is nowhere more true than in the area of patent protection for high technology, where learning how to manufacture a product requires enormous resources but actually manufacturing it sometimes turns out to be quite simple. It is in acquiring the knowledge to make new products - computers, pharmaceuticals, telecommunications equipment, chemicals and others - that American companies have been so good. And it is this knowledge that is being stolen by the denial of patent rights.

For example, India has denied Pfizer the right to exercise its own patent covering doxycycline, an antibiotic used widely around the world. It reserves to Indian companies the right to manufacture and sell that drug, even though the result has been that far less of it is available in India than is needed. Another illustration is Canada's compulsory licensing law, which has obliged Smith, Kline & French to grant patent rights on its antiulcer drug, Tagamet, to a local company that invested nothing in its research and development. The royalty in such a transaction is a meager 4 percent.

Patents are a vital stimulus to technological innovation and a vital part of doing business. In 1883, Western nations met in Paris to write a treaty that firmly conferred international legitimacy on intellectual-property rights - patents and trademarks -and asserted their critical relation to technological innovation. The thought then, which is still valid, was that the enormous human and financial costs attending technological innovation are worth the risks only if the invention is protected from duplication for a period of years in which the inventor can reasonably hope to recoup his costs. Under this arrangement, the inventor is then free to disseminate the technology.

Many developing countries, and some that are clearly developed, do not respect this arrangement. In many cases, however, their laws give the impression that they do, thereby encouraging inventors to place their products on the market. Once a product is on the market, the information issued with a patent makes it easy to steal the technology unless its protection is enforced.

The irony is that by eroding patent protection, governments are likely to accomplish the opposite of their professed intentions. They may appear to benefit from the inventions they take, but these gains are made at the expense of the system that nourishes industrial creativity.

What's more, the revisions to the Paris treaty being considered by delegates to the United Nations organization would confer international legitimacy on the abrogation of patents. The principle the World Intellectual Property Organization seeks to introduce would enable a nation to deny the inventor the protection of a patent or, worse still, prevent him from exercising his own invention if the product is not made from scratch in that nation.

So far, the United States has opposed such a theft of American technology. Unfortunately, European nations have failed to insist on the respect of these principles of international law and of the international economic system. Canada, Australia and New Zealand have gone even further and argue that for these purposes their nations should be considered developing countries! The competition for world markets and international business is becoming ever more tense, and that is the very reason the United States should insist more than ever that the principle underlying the international economic system be respected and upheld.

Barry MacTaggart is chairman and president of Pfizer International Inc.

Copyright 1982 The New York Times Company