Historical Overview of Patents
Historical Overview of Patents
The model of intellectual property law that took shape during the nineteenth century not only plays an important role in influencing the way we think of intellectual property law, it also restricts the questions we ask about it. One of the consequences of a narrative which teaches us that, within a historical context, intellectual property law is timeless, natural and inevitable, and that it is driven by principle, is that it leads us away from the changes that occurred over the course of the nineteenth century.1
As pointed out in the above excerpt, intellectual property has often been misconstrued as being ‘timeless, natural and inevitable’. For instance, patents, the main subject of this book, are considered a natural right to property in ideas or the only way a society can encourage invention and innovation. Looking at the history of patents may help us not only to avoid such static approaches to patents, but also to understand current issues around patent systems. This chapter attempts to provide a brief overview of the history of patents by reference to a historical division into three periods put forward by Peter Drahos.2 It should be noted that the early history of patents confines itself to a description of the development of patents in European countries as not all societies relied on a notion of intellectual property as a means of encouraging invention and innovation. For instance, imperial China is known as ‘a society that achieved spectacular outcomes in science and innovation without relying on intellectual property rights or a customary equivalent’.3
The territorial period is marked by the principle of territoriality; ‘the principle that intellectual property rights do not extend beyond the territory of the sovereign which has granted the rights in the first place’.4 The section looking at this period traces back to the origin of the patent system which saw the Crowns giving monopoly privilege in most of medieval Europe. It moves on to later patent systems and considers whether or not the laws in the French Revolution engendered the notion of a natural property right in ideas by looking at the relevant discussions during the Revolution. In addition, the patent controversy in mid-nineteenth-century Britain, Switzerland and the Netherlands is briefly dealt with. This is followed by reflection on a variation among patent systems seen in nineteenth-century Europe and North America.
The international period is triggered by the growing demand for international regulation of intellectual property in the context of enormous technological developments and the expansion of international trade. The adoption of the Paris Convention for the Protection of Industrial Property (Paris Convention) in 1883 was a landmark event. National treatment of foreign applicants of a patent was established as an international principle. Nevertheless, increasing international cooperation in regulating patents by no means culminated with a harmonisation of national patent rules in this international era. In the US, there existed scepticism over patents in relation to free trade and anti-monopoly policy until the late twentieth century. Developing countries adopted a patent system which would serve their development goals and social policy. This section therefore looks in turn at the adoption of the Paris Convention, the discussion on patents and its relationship with anti-monopoly policy within the US, and patent systems in developing countries.
The global period sees increasing attempts to harmonise patent rules. This section discusses the context within which the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was adopted in 1994, alongside the increasing competition between world economies and the shift in ideas which places more emphasis on knowledge as property and regards the protection of patents to be favourable to free trade. This section also examines what TRIPS requires World Trade Organization (WTO) Member countries to do and what the issues have been after the adoption of TRIPS. It also considers key features of intellectual property provisions in bilateral or regional free trade agreements, so-called ‘TRIPS-Plus’ standards, as well as the debates over issues of intellectual property and access to medicines in a number of international and national forums.
The Territorial Period
Patent as the Prerogative-based Monopoly
Patents have their beginning in the prerogative-based monopoly system of medieval Europe.5 Based on the prerogative power of grant, the Crown could grant individuals exclusive monopolies over particular trades. Examination of the English patent system at this time shows that patents were a device ‘to encourage the transfer of valuable trades and technologies to England’.6 Therefore, monopolies would be granted not only to those who had invented something but also to those who had brought technologies from abroad. With some kind of innovation or technology, ‘[p]atentees were required to implement their invention without delay and ensure its continuance by communicating the necessary skills to native workmen’.7
However, the practice of the Crown giving monopolies was not consistent with the designed purpose. Patents were often granted to the wrong persons who were neither inventors nor specialists but were rather favourites of the Crown. Moreover, patentees were given the same power as the Crown ‘to supervise, search, and seize the goods of infringers as well as the ability to levy fines and penalties for infringement’.8 The abusive exercise of the Crown grant monopolies led to a proclamation from the Queen in 1601 which introduced judicial review so that the courts could give their view on the validity of a grant of monopolies.9
The response of the English common law courts to the grant of monopolies can be seen in Darcy v. Allein10 which is regarded as an early landmark case on monopolies. The case established that ‘monopolies are a profound interference in the liberty of subjects to trade’ and ‘are void at common law’.11 The court found that monopolies which prevented others from working and trading contravened the common law, which gave freedom of trade a primary status. Another concern raised by the court was that monopolies were used for the private gain of the monopolist. Furthermore, the ability of the monopolist to decide the price would affect everyone and could therefore undermine public welfare.
In 1623 the English Parliament passed the Statute of Monopolies12 which reflected the prevailing view of the common law court. The statute criticised that many grants, based on ‘misinformation and untrue pretences of public good’, had been ‘unduly obtained and unlawfully put in execution’, and it declared all monopolies to be contrary to the laws of the realm and therefore to be void.13 As an exception, section 6 of the statute allowed patents to be granted only to those who made new manufactures within the territory for limited periods (14 years – the duration of two training periods for craft apprentices). Even such grants were given only with the proviso that they were not ‘mischievous to the state’, for instance through raising prices. Although the Statute of Monopolies was commonly accepted to lay down the legal foundations for patents,14 patents remained to be seen as a creature of prerogative-based privilege until the late eighteenth century.15
The Emergence of Modern Patent Systems and Patent Controversy
Most European countries, with the notable exception of Switzerland, established modern patent systems in the first half of the nineteenth century.
The French Revolution and a natural right to property in ideas
The French Revolution abolished the privileges granted by the Old Regime and established a modern intellectual property system.16 The laws during the Revolution were often stated as laying a foundation for the idea of the natural rights of inventors or authors. Section 1 of the French law of 1791 stated: ‘All new discoveries are the property of the author; to assure the inventor the property and temporary enjoyment of his discovery, there shall be delivered to him a patent for five, ten or fifteen years.’ Here, the right of authors or inventors was seemingly perceived to be one that was recognised rather than created by legal instrument. However, the debates during the French Revolution reveal that there existed a tension between private interests in ideas and public enlightenment.17 One argument about ideas was that ‘ideas were social rather than individual in origin’; ‘the progress of enlightenment depended upon public access, rather than private claims to ideas’.18 The contrasting argument was that the sanctity of individual creativity should be protected as a natural right. Although these debates are primarily concerned with authorship, they may also provide insights in the field of patents.
The 1791 law itself appeared not to be coherent with the natural rights argument. While it recognised an author’s right as a natural property right, it limited the term of protection after which the works of authors would become part of the public domain. Classical natural rights would have no expiry dates. Furthermore, the decree adopted later in 1793 put more emphasis on the notion of the public domain. The grant of a limited property right to authors was presented as ‘a mechanism for promoting and ensuring public enlightenment by encouraging and recompensing intellectual activity’.19 Therefore, it may not be fair to say that the legacy of the French Revolution on intellectual property is confined only to the notion of a natural property right in ideas.20 The recognition of the public domain during the French Revolution deserves adequate attention.
Patent controversy in the nineteenth-century United Kingdom
During the period of industrial revolution between 1750 and 1850 in the United Kingdom, patents were considered to be an important element of technological change.21 According to Harold Irvin Dutton, ‘very few important inventions bypassed the system’.22 Arguments that supported patents at this time did not much rely on the natural rights thesis which assumes that inventors have a natural right of property in ideas. Support for patents was more advanced by the argument that patents encouraged inventive activity by monopoly-reward and that this eventually benefited the public.23 However, such arguments about the public benefit of patents were not sustained without critique. For instance, James Watt’s patents on his steam engine24 and Richard Arkwright’s patents on methods of spinning cotton25 encountered massive criticisms. Nevertheless, the opposition to a number of individual patents was not directed to the patent system per se until the 1850s.26
The 1852 Patent Law Amendment Act changed the content of the anti-patent debate. ‘The Crown’s abuse of Royal prerogative and its use of patents as a source of patronage and revenue were no longer the issues of contention.’27 As the 1852 Patent Amendment Act established a more effective system of registration that simplified the obtaining of patent protection, patents were perceived as a creature of legal instrument rather than as a product of Royal Grant.28 Now the patent-abolitionist argument was mainly directed to the impact of patents on free trade.29 The abolitionists argued that patents restricted free trade in goods, including technology. R.A. Macfie, Liverpool sugar-refiner and leading abolitionist, highlighted ‘their [patents’] incompatibility with Free Trade’.30 Abolitionists also criticised patents for not being effective incentives to invention, and argued that unnecessarily expensive licence fees which were allowed by patents imposed hardships on domestic manufacturers. Nevertheless, few denied the necessity of rewarding invention. How to devise alternative forms of rewarding inventors was one of the primary concerns of the abolitionists.31 With the emergence of protectionism, the abolitionist movement faded away in the United Kingdom and the patent controversy ended up with another reform, the 1883 Act, which reduced further the initial cost of a patent and thus led to greater access to the patent system.32
The Netherlands and Switzerland
In the late nineteenth century, patent controversies raged in other European countries too. Switzerland and the Netherlands are examples that showed ‘industrialisation without national patents’.33 Switzerland had no patent law between 1850 and 1888. The Netherlands abolished its patent system in 1869 as a result of successful lobbying by domestic enterprises. Small and medium-sized domestic enterprises saw patents as an obstacle to their growth, making them vulnerable to disruption of litigation brought by foreign patent holders. Both Switzerland and the Netherlands observed rapid technological advancement and economic growth during this period.34 The absence of national patent law enabled domestic enterprises to introduce foreign innovations, without having to pay expensive license fees, and to produce good-quality goods for reduced costs.35 However, both domestic and foreign pressures led to the enactment of patent legislation respectively in Switzerland in 1888 and in the Netherlands in 1912.36 Still, the 1888 Patent Law of Switzerland excluded chemical substances and processes from patentability in effect. This exclusion lasted until 1907.
A wide variation among patent systems
Patent laws in Europe and North America in the late nineteenth century presented wide variations in many respects. Graham identified some key areas of variation among national patent systems. These included ‘interpretations of novelty, the length of protection terms, the issue of whether or not patents needed to be ‘worked’ domestically, and exceptions to patentability’, which are considered in the following.37
In some countries, such as France, Turkey and Italy, prior knowledge, use, or publication destroyed novelty, regardless of the origin.38 However, in most other countries, foreign use or knowledge, if not published, could still be patented.39 The UK was exceptional in that only public manufacture, use or sale in its territory constituted a lack of novelty. Protection terms also varied from 14 years in the UK to 17 years in the US. Local working requirements were another area of variation. In many countries, if patentees did not locally manufacture or use patented products or processes, this could lead to issuing a compulsory licence to other manufacturers or even revocation of the patent. In some countries, for example the US, there was no such requirement. What might be unpatentable depended on statute or the policy of courts and patent offices in each country. Nevertheless, there appeared to be a widely shared view in European countries such as France and Germany that medicines and foods should not be patented. The underlying reasoning was that allowing private monopoly for essentials, such as medicines and foods, would endanger the public interest. Diverse national approaches to patents make it clear that patent systems were adopted as a matter of public policy, the objective of which involved encouraging as well as facilitating maximum access to technological progress. The scope and the level of patent protection generally depended on the extent of industrial development of countries and the perspectives of interest groups.40
A number of things can be learned from the brief description of patent laws in the territorial period. Firstly, industrial revolution, technological development and the expansion of international trade motivated most countries in Europe and North America to design public policies for migrating foreign technology and encouraging technological advancement. Patent laws were adopted to fulfil such policies. Secondly, this period saw a variation of national patent systems which reflected different industrial conditions, the perspectives of interest groups, and prevalent ideas on knowledge of countries. Such diversities in national patent systems provided room for manoeuvre for countries, in particular technological followers. Thirdly, the way of perceiving patents had shifted from the Crown giving privileges to a product of legal instrument. Nevertheless, controversy over patents did not disappear. One of the main concerns was the implications patents had for free trade. In addition, fears of monopoly led to the exclusion of foods and medicines from patentability in many European countries.
The International Period
The Paris Convention
Growing interests in international cooperation in intellectual property law in the late nineteenth century were situated within the context of an explosion of international trade as well as increasing intensive competition between countries, based on technological development. States, in particular net exporters, began to seek international cooperation on intellectual property which would provide adequate protection for their companies in foreign markets.41 Anti-patent mood weakened along with a retreat from free trade and a resurgence of protectionism in economic policies of governments. Demand for an international framework for the regulation of intellectual property manifested itself in the form of two multilateral agreements, the Paris Convention for the Protection of Industrial Property (1883) (Paris Convention) and the Berne Convention for the Protection of Literary and Artistic Works (1886) (Berne Convention). Here, the Paris Convention only is to be dealt with as it concerns the protection of patents.
The 1873 World Exposition of Vienna served as momentum for the adoption of an international industrial property convention. As US and German inventors expressed concern that their inventions would not be adequately protected at the Exposition, the Austro-Hungarian government adopted a temporary measure providing protection for foreign intellectual property in order to attract foreign inventors to the Exposition. In addition, the government sponsored an international patent congress, the 1873 Vienna Congress, during the conference. While anti-patent views were expressed during the Congress, the majority view was in favour of patent protection.42 The first public call for an international industrial property convention was made during the Congress, and preparatory meetings for the convention were held in 1878 and 1880, culminating in the adoption of the Paris Convention in 1883.
The Convention addressed important issues, such as ‘national treatment, the right of priority, and rules relating to local manufacture’.43 National treatment is a principle that foreign patent applicants should be treated the same as nationals with respect to legal rights and remedies. In negotiating the content of the Convention, there was little controversy over the principle of national treatment.44 The first filing of an application for a patent (the priority date) in one Member country gave a priority right to the applicant. During a six-month period from its filing date, the applicant was allowed to file for patents in other countries and to prevent third parties from applying a patent on the same invention. While the Convention required Member States not to revoke patents only on the grounds of importation, Members were able to grant compulsory licensing in the case of non-working, i.e. using a patent process or manufacturing a patented product, within the patent-granting country. Nonetheless, the Convention left many areas of variation among national patent laws untouched.45 The three most important ones were whether or not prior examination of patent applications was required, the term of a patent, and exceptions from patentability. The Convention established an international organisation to administer the issues arising from the Convention, the Paris Union for the Protection of Industrial Property, whose present form is the World Intellectual Property Organization (hereinafter, WIPO), which covers not only industrial property, but also other forms of intellectual property. This international period was characterised by Drahos as being one where States sought international frames for regulations of intellectual property, yet ‘retained enormous sovereign discretion over intellectual property standard setting’.46
Patents and the Antitrust Policy in the US
The US, which currently champions the strict protection of intellectual property, was not always supportive of the patent system in the twentieth century. This section discusses anti-patent sentiments that permeated US policy until the mid-1970s.
Scepticism about the patent system and monopoly power heightened with the emergence of patent-based cartels in the late nineteenth century.47 Corporate consolidation escalated in the 1890s and 1900s and patents were effectively used by big businesses to control competition in the market. Edwin J. Prindle, a highly influential patent attorney at the time, observed that patents were ‘the best and most effective means of controlling competition. They occasionally give absolute command of the market, enabling their owner to name the price without regard to cost of production’.48 Based on patent licensing, big companies were able to divide markets, set prices and reap vast financial rewards. The patent system became subject to critical scrutiny by all three branches of the US government.49
Congress passed antitrust legislation: the Interstate Commerce Act in 1887, the Sherman Antitrust Act in 189050 and the Clayton Antitrust Act in 1914.51 However, the antitrust acts were not actively used until Franklin D. Roosevelt took power in 1933. More resource allocation allowed the Justice Department’s Antitrust Division to initiate numerous antitrust actions between 1938 and 1942. Congressional hearings during the same period were also marked by ‘condemnations of patents and calls for the rights to be rolled back such as through compulsory licensing’.52 However, the antitrust movement weakened with the US entry into World War II in 1941 as politicians saw the merits of big business in winning the war.53
Nonetheless, the US court’s distrust towards the patent system, which began with the Supreme Court overruling the A.B. Dick case in 1917,54 continued until the 1980s. In the case of A.B. Dick (1912),55 the Supreme Court condoned the tie-in practice56 of the A.B. Dick Company, which sold its patented mimeograph machine on the condition of restricting its use to ink purchased from the patentee.57 However, in 1917 the Supreme Court struck down tie-ins as hampering free competition under the 1914 Clayton Act.58 The Court held that ‘tie-ins allowed patent owners to obtain de facto “monopolies” over non-patented claims by extending their patents to cover non-claimable items’.59 Throughout most of the twentieth century, since the concept of misuse first emerged in 1917, ‘patents were considered to be monopolies rather than necessary incentives for innovation’60 in the eyes of the US judiciary. Patents were subordinate to the antitrust policy and the courts often presumed patents to be invalid. The concept of patent misuse ‘reached its zenith in a series of cases in the 1940s’.61 In general, the concept of misuse can be applied when the patentee has either been involved in a violation of the antitrust laws or attempted to expand the scope of the patent to unpatented material.62
This antitrust, anti-patent view that permeated the judiciary began to change in the 1980s. Patents became no longer construed as a bar to free competition in US public policy. This will be dealt with in later sections.
Patents and Developing Countries: Search for More Access to Technology
As of 1986, the majority of the Members of the Paris Convention63 were from developing countries. Out of 97 Member countries of the Paris Convention, about 64 countries were developing countries.64 While there was an apparent belief among developing countries that patents could be a medium that would assist the transfer of technology, there also existed considerable pressure from developed countries and transnational corporations on developing countries to have a patent system and to join the Paris Union by adopting the Paris Convention. The provisions of the Paris Convention (1883) were revised several times, the latest in Stockholm in 1967 which was before developing countries joined in large numbers. The Paris Convention set the international minimum standard for patent protection, the core of which was the elimination of discrimination against foreign inventors and the protection of their rights through the priority provisions.65
However, developing countries found such provisions did not take account of the vast inequities in technological development and wealth. Patents of developing countries were predominantly owned by foreigners. Edith Penrose’s research in 1973 demonstrated that in developing countries ‘foreigners typically take from three-fourths to well over 90% of the patents granted, and these may be highly concentrated in the hands of a very few companies’.66 Moreover, the patents owned by foreign companies facilitated market dominance by those companies. This was particularly true of the pharmaceutical industry. More than three-quarters of 160 pharmaceutical laboratories in Venezuela were owned by foreign companies, which also controlled more than 90 per cent of the pharmaceutical market.67 The level of market dominance by foreign companies was similar in the Brazilian pharmaceutical industry. In Colombia 32 foreign companies controlled more than 74 per cent of the pharmaceutical market.68
In developing countries, the effects of patents on domestic inventive activity per se were minimal, and patents were largely owned by foreign companies or foreign nationals, as described above.69 The question was rather over whether or not patents facilitated the transfer of technology.70 In this respect, it was argued that patents were of little importance for the transfer of technology since the patented processes were not used and the patented products were not manufactured in the patent-granting developing countries. This view is in stark contrast to one of the classical justifications of patents as ‘a means or vehicle for technology transfers’.71 Even worse, foreign-owned patents were mostly used to protect markets from other potential producers and thus prevented developing countries from seeking the goods from alternative sources at cheaper prices.72 For instance, in a situation where no antibiotics were locally produced, the Andean countries sought to import available technology from various resources, but the patent holders blocked the imports.73 While distrust of the patent system per se increasingly grew among developing countries, compulsory licensing was considered as a means for addressing ‘abuses’ of patents, including restricting imports from alternative sources or blocking other potential manufacturers.
An important attempt to address the perspective of developing countries in this regard was the ‘Model Law for Developing Countries on Inventions’ prepared in 1965 by BIRPI (the Secretariat for the International Bureaux of Intellectual Property, the predecessor of WIPO).74 The Model Law for Developing Countries on Inventions (hereafter, the Model Law) provided three grounds for granting compulsory licences: ‘the importance of the patented invention for the defence or the economy of the country or for public health, the need to exploit an invention patented earlier in order to use a later invention, and inadequate working’.75 Although the Model Law also restricted the extensive use of compulsory licensing without specifying the relevant categories in which such licensing may be justified, it was believed that a rigorous enforcement of compulsory licensing could adequately address most abuses that patents may cause.76
At the time, a different way of conceiving intellectual property was entrenched in the gulf between developed countries and developing countries. Developing countries viewed intellectual property as a part of the ‘common heritage’ belonging to all human beings, whereas developed countries conceived it as private property.77 As a prominent example of the former, India considered that the notion of common heritage, when applied to patents, involved the free flow of information and technology, something considered essential for their economic and social development.78 The common heritage principle guided ‘a measure that required limitations on the extent of patentability, and emphasized the need to exclude certain fields from patent protection’.79 The Indian Patent Law of 1970 was a reflection of this principle: it granted patents only for processes and not for the production of food, pharmaceuticals and chemicals; it restricted both the extent of patentability and the term of patents (pharmaceuticals for only seven years); and it included a detailed measure to ensure an adequate local working of patents.80 As a result, India managed to lower drug prices which had reached their highest prices under the old patent laws formulated during colonial times.81 In addition, it succeeded in preventing foreign companies from enjoying market dominance in India. India was not the only country that redesigned its patent law to serve public interests. Other countries, like Brazil, Argentina, Mexico and the Andean Pact countries, also limited the scope of patentability in the pharmaceutical industry.82
Developing countries’ search for a free flow of technological information led to serious attempts to revise the international patent protection system provided in the Paris Convention. This was meant to address the disparity existing between developing countries and developed countries. Conferences for the revision of the Paris Convention83 were held between 1980 and 1984. Among developing countries, Latin American States (Brazil, Mexico and the Andean Pact countries) and India were particularly active in the conferences.84 The developing countries put forward the idea of intellectual property as a common heritage and sought ‘provision that would give developing countries more and more access to technology that had been locked up by means of patents’.85 Specifically, the developing countries tried to incorporate exclusive compulsory licensing86