Eager to safeguard the dwindling number of economic fields in which it retains world dominance, the United States is pressing hard in foreign capitals for better protection of "intellectual property" -- things like computer software, movies and recorded music, books, pharmaceutical formulas, consumer brand names and microchip designs.
Since 1985, U.S. negotiators have brought this message to some 30 foreign governments, sometimes threatening sanctions to make them crack down on unlicensed copying. Now it is pushing the General Agreement on Tariffs and Trade (GATT), the Geneva-based organization that polices trade, to enact international standards and find ways to enforce them.
Many governments have tightened controls in response. But in parts of the developing world, the campaign is running up against well-entrenched industries founded on copying and armed with political connections at the highest levels. It is also clashing with deeply held beliefs that what Washington calls piracy is a legitimate means by which a bit of the wealth and learning of the industrialized world is passed to the poorer countries and raises living standards there.
In industrialized countries, the United States runs up against profit-motivated obstruction, but also good-faith differences in philosophies of the details and mechanisms of protection. And as technology advances in fields such as genetic engineering and million-bit microchips, courts are finding it harder and harder to answer a basic question of litigation in this field: How much must you change an object to make it a new, unprotected innovation rather than an unauthorized copy?
U.S. Trade Representative Clayton K. Yeutter recalls that when he left government service at the end of the Ford administration, hardly anyone in Washington had ever heard of the notion of intellectual property. He returned to government two years ago to find it one of the hottest buzzwords in town. "Intellectual property issues have become central to congressional debate on trade policy," says Sen. Patrick Leahy (D-Vt.).
The main reason is money. In this era of record trade deficits -- the United States recorded $170 billion in red ink in 1986 -- products in the intellectual property category are among the charmed few that consistently run a surplus.
The world has little appetite these days for American automobiles, steel or television sets. But it can't get enough of its movies and television programs, buying $2.5 billion to $3 billion worth in 1986, according to the Motion Picture Association of America. It uses U.S. medicines and pharmaceuticals as well, with $3.1 billion worth sold abroad in 1986.
The United States continues to lead the world in the development of technology -- the writing of computer software, the designing of computer microchips and the development of life forms through genetic engineering. Fields such as these bring in billions of dollars more in direct sales and licensed production overseas.
In days past, Washington tended to look on piracy abroad as a nuisance. Now it is seen as a threat to U.S. economic vitality and one of the most serious of trade barriers facing U.S. manufacturers, on the assumption that piracy in a foreign country means that legitimate U.S. products will be shut out.
"We get down to technology as the principle determinant of our competitiveness," Yeutter said at a recent Washington conference on intellectual property organized by the American Council for Capital Formation and the Center for Policy Research.
Timothy J. Richards, an international trade specialist at the law firm of Dewey, Ballentine, Bushby, Palmer & Wood, estimated in a presentation to the conference that U.S. companies lost about $25 billion in foreign sales in 1986 due to piracy. Figures of this sort are highly speculative, however, since no one knows the true scope of piracy and how many people would have bought nonpirated originals, which are typically many times more expensive than copies.
The issue began taking form in the late 1970s. In 1982, federal legislation for the Caribbean Basin Initiative, the United States' effort at building a cooperative sphere with that region, picked up the issue, largely in response to pirating of satellite-broadcast entertainment by resort hotels there. In 1984, a trade bill was passed by Congress that included provisions making the safeguarding of intellectual property a consideration in granting developing countries preferential tariff treatment.
Also that year, Congress passed a law extending proprietary protection specifically to the design of computer chips. The law gives protection to foreign designs if authorities here judge that the country of origin is making good-faith efforts to protect foreign chips in its own market.
With measures such as these as leverage, U.S. trade negotiators have been pressing foreign governments to tighten laws and enforcement. They report generally good responses in many Pacific Rim countries.
There are rarely simple solutions, however. Singapore is an example. "The pirates are pretty much out of business in Singapore," says Emery Simon, an intellectual property specialist at the Office of the U.S. Trade Representative. "What they've done is move across into Malaysia and Indonesia."
Historically, patents and copyrights have been a point of friction between rich and poor countries. In the 19th century, when Britain was the world leader in technology and popular culture, it complained that the U.S. gave insufficient protection. Its complaints had little effect, however; American companies wanted freedom to capitalize quickly on British innovations and bring them to market.
Today, pharmaceuticals offer an extreme example of the issues at hand. An American company may spend 10 or 12 years and millions of dollars developing and testing a new drug. It therefore feels it has a right to recoup part of this investment by going abroad and selling, at a "reasonable price," the drug itself or the rights to make it.
But in the Third World, where standards of public health are decades behind those of the United States, policy-makers see things in a different light. Why should the local people be denied the better health that the drug could bring because they can't afford the price the American company would want to charge? In Brazil, Chile and Argentina, patent laws protect only processes for manufacturing a drug, not the final product. Anyone who can arrive at the same drug by a different process than the U.S. inventor is free to do so.
It is not only the Third World that makes these arguments. In recent negotiations with Canada, the U.S. objected to provisions in its laws that provide for compulsory licensing of new drugs to Canadian companies, which pay a 4 percent royalty to the American company. The United States argued that that figure was way too low; Canada said the idea was to keep drug prices low. It has now agreed to change the system as part of a larger trade agreement.
Arguments of national welfare are applied to computer software and virtually every other technology. By having access to low-cost software -- that is, copied software -- local companies can function more efficiently, speed national development and have a fighting chance in the world economic race.
Similar thinking applies to foreign-developed pesticides and foreign-authored textbooks. In South Korea, illicit copies of American textbooks are common in university classrooms. South Korean officials have argued that students couldn't afford books at all if they had to buy the original versions.
"We consider that all countries must have rights to access to technology in order to improve the living standards of their people," says Mauricio Cortes Costa, economic counselor at the Brazilian Embassy here. "A patent is not given with the sole object of protecting the innovator."
Rather, he contends, reflecting a common view in the Third World, it serves to create a relationship between innovator and society, with both sides having responsibilities. As for using patents or copyrights to stop the international flow of technology, he said, "the ultimate effect would be to interfere with many countries' economic development -- and this must not be allowed to happen."
P.S. Sahai, minister of commerce at the Indian Embassy, voices a similar concern: "Any protection to the patentee should not be at the cost of the public."
Enhancing public health and industrial development are typically cited by Third World governments in excusing piracy. But piracy also occurs in industries devoted to simply making quick and easy money by replicating imported music, TV programming and brand-name products.
In many Third World countries, granting protection is seen as eradicating local jobs and caving in to bullying from the United States, whose trade deficits garner little sympathy. No government wants to take that political heat.
In Thailand, a center of film and music piracy, analysts say that opponents of Prime Minister Prem Tinsulanond recently used Prem's alleged excessive flexibility with the Americans on this issue to try to force the calling of new elections.
The intellectual property issue has also added tension to the already deeply troubled U.S.-Japan trade relationship. U.S. officials feel that the snail-paced consideration that Japan's patent office gives applications results in foreign companies getting no real protection. They have also pushed for greater protection of U.S. computer software and a crackdown against pirated video movies, which the Motion Picture Association of America estimates cheat U.S. companies out of about $160 million in sales a year. This type of piracy is declining, the association says.
These days the United States is increasingly less willing to listen to arguments that the quest for development and a dignified standard of living legitimizes such behavior. "That's really an indefensible way to run a society," declared Yeutter. "I don't see how any nation in the world can defend piracy as a means of keeping consumer costs down."
Typically, the United States makes the argument that it is in a country's own interest to protect foreign products. Doing so will make foreign companies willing to introduce their newest developments there. It will also result in reciprocal protection to innovations that the country's own companies eventually devise and allow them to make money from exports. Some countries embrace this logic; others bow only under the threat of sanctions.
In November, President Reagan took the unusual step of actually applying sanctions, slapping steep tariffs on a range of products from Brazil to protest the country's software import rules.
Brazil has refused to protect foreign software. It has also banned sale of a common product line of the U.S. company Microsoft Corp., saying that local software could do the job just as well. The United States contends that Brazil's software is just a copy of Microsoft's and that the U.S. company is losing sales.
U.S. manufacturers have also moved to take legal action against unauthorized reproduction through the Commerce Department and the International Trade Commission. Earlier this year, Texas Instruments won rulings against a number of South Korean and Japanese companies that it alleged had improperly appropriated the design of chips. It lost cases filed against other companies, however.
The United States's own clout in the battle is diminished by the fact that it has never joined the largest international agreement on copyright, the century-old Bern Convention, which has 76 countries as members. Three bills are before Congress to make the changes that would bring the United States into line with Bern -- one conflict, for instance, is that the United States does not protect architectural works, while Bern does.
Joining the convention, said Rep. Robert Kastenmeier (D-Wis.), sponsor of one of the bills, would bring "enhanced political credibility in our global effort to strengthen copyright norms, to suppress piracy and to secure in all the countries of the world a realistic minimum standard of protection for creative works.