ABSTRACT

Differences in national intellectual property rules may cause economic activity to shift from one jurisdiction to another, so that a higher-protection rule will be undermined by lower-protection rules of other jurisdictions. This chapter illustrates this phenomenon with four examples: different rules on the enforceability of anti-reverse engineering clauses of software licenses, on the protectability of bio-engineered research tools, on peer-to-peer file sharing, and on exceptions to anti-circumvention rules. It considers several options nations may have to respond to such intellectual property arbitrage, none of which is likely to be very effective.

Differences in national rules enable IP arbitrage

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), concluded in 1994, has narrowed the range of issues on which nations can adopt differing IP rules. All World Trade Organization (WTO) Members, for example, must now protect computer programs by copyright law. Yet, TRIPS plainly contemplates continued differences in national laws by signaling that nations are free to adopt higher-protection rules than the required minima (which presumably means they need not do so). Members are also “free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.” TRIPS restricts national autonomy by forbidding nations from treating foreigners less well than their own nationals, but this implicitly “accepts the proposition that states may differ in their substantive laws.”