There is one problem with this theory and it is that the US only issues patents that are valid for the US. China issues patents for China, Japan for Japan, etc. Thus, the Chinese are not really beholden to American IP owners in their own country unless they give those American IP owners Chinese patents.
...but then you say this:
I think the US is generally pro-patent and pro-IP because we know that one of the few areas we hold some kind of competitive advantage is in RD, design, arts, etc. We have to keep our hands on these intangible goods because if it comes down to making things we are really, really behind.
...which is cute in that the more you espouse to the outlook implied in the first quote the less the opinion in the second quote makes sense: how would being pro-patent and pro-IP help our competitive advantage with other countries unless there were were some mechanisms by which domestic IP influenced foreign operations?
You've also basically backed your way into the smart version of the theory in question:
- the USA currently has few strong competitive advantages short of producing IP
- the USA is thus pro-IP (domestically + in its international negotiations) as a way of preserving or strengthening its global position vis-a-vis its trading partners
...which makes it unclear what we're arguing about.
As I've heard the argument (and it's been around since the 90s) the argument comes in two versions (the 'lite' and the 'sinister' versions).
The 'lite' version is a balance-of-payments issue: since we're offshoring actually making stuff we will have a substantial trade deficit; having a lot of obligatory patent licenses can mitigate the imbalance. EG:
- (low-patents): original manufacturer builds dvd player with about $20 in parts and labor and sells it to an import/export type for $25 and then best buy gets it @ $45/unit in bulk and it sells for $70 or so; so ~$45/unit is flowing out of the country
- (high-patents): same as before, but now obligatory patent licenses tack on another $5-10 or so per unit; as the people espousing the theory would have it the effect is less net money runs it (they don't get into trying to calculate which parts of the chain have more negotiating ability, and stick with 'less' rather than make more precise estimates)
It's not enough to neutralize a trade deficit but it can knock it down substantially; key to the strategy succeeding is legislative support that helps promote sufficient patent coverage in as many product categories as possible, then letting the market sort out which actually get licensed and for how much.
The issue of patents to foreign holders -- whether USA patents or overseas -- is essentially moot from the balance-of-payments outlook: they mainly impact the internal distribution of money sent to the trading partner but don't have a substantial effect on the total amount sent over.
The 'sinister' version takes the above and throws in some assumption as to how you produce patent-worthy R+D and so forth.
Basically it assumes you can't jump to the forefront of technology immediately (reasonable) and thus even though the USA patent system is equal opportunity in some sense as a practical matter there aren't going to be Chinese-originated patents worth licensing anytime soon; as a large chunk of industrial r+d is funded out of retained earnings the reduced earnings under the high-patent regime (reduced b/c they've been "taxed away" via licensing fees) will retard the technological progress of your trading partners; this lets you keep the upper hand for longer, even if they will close the gap eventually.
There is one problem with this theory and it is that the US only issues patents that are valid for the US. China issues patents for China, Japan for Japan, etc. Thus, the Chinese are not really beholden to American IP owners in their own country unless they give those American IP owners Chinese patents.
...but then you say this:
I think the US is generally pro-patent and pro-IP because we know that one of the few areas we hold some kind of competitive advantage is in RD, design, arts, etc. We have to keep our hands on these intangible goods because if it comes down to making things we are really, really behind.
...which is cute in that the more you espouse to the outlook implied in the first quote the less the opinion in the second quote makes sense: how would being pro-patent and pro-IP help our competitive advantage with other countries unless there were were some mechanisms by which domestic IP influenced foreign operations?
You've also basically backed your way into the smart version of the theory in question:
- the USA currently has few strong competitive advantages short of producing IP
- the USA is thus pro-IP (domestically + in its international negotiations) as a way of preserving or strengthening its global position vis-a-vis its trading partners
...which makes it unclear what we're arguing about.
As I've heard the argument (and it's been around since the 90s) the argument comes in two versions (the 'lite' and the 'sinister' versions).
The 'lite' version is a balance-of-payments issue: since we're offshoring actually making stuff we will have a substantial trade deficit; having a lot of obligatory patent licenses can mitigate the imbalance. EG:
- (low-patents): original manufacturer builds dvd player with about $20 in parts and labor and sells it to an import/export type for $25 and then best buy gets it @ $45/unit in bulk and it sells for $70 or so; so ~$45/unit is flowing out of the country
- (high-patents): same as before, but now obligatory patent licenses tack on another $5-10 or so per unit; as the people espousing the theory would have it the effect is less net money runs it (they don't get into trying to calculate which parts of the chain have more negotiating ability, and stick with 'less' rather than make more precise estimates)
It's not enough to neutralize a trade deficit but it can knock it down substantially; key to the strategy succeeding is legislative support that helps promote sufficient patent coverage in as many product categories as possible, then letting the market sort out which actually get licensed and for how much.
The issue of patents to foreign holders -- whether USA patents or overseas -- is essentially moot from the balance-of-payments outlook: they mainly impact the internal distribution of money sent to the trading partner but don't have a substantial effect on the total amount sent over.
The 'sinister' version takes the above and throws in some assumption as to how you produce patent-worthy R+D and so forth.
Basically it assumes you can't jump to the forefront of technology immediately (reasonable) and thus even though the USA patent system is equal opportunity in some sense as a practical matter there aren't going to be Chinese-originated patents worth licensing anytime soon; as a large chunk of industrial r+d is funded out of retained earnings the reduced earnings under the high-patent regime (reduced b/c they've been "taxed away" via licensing fees) will retard the technological progress of your trading partners; this lets you keep the upper hand for longer, even if they will close the gap eventually.