Over the recent decades, increasing attention has been paid to the role of intellectual property rights protection in affecting economic growth and encouraging innovation and invention, international trade, and even foreign investment by governments, businesses or academia. The prevailing condition results in a series of international patent discussions and reforms.
In 1994 the General Agreement on Tariffs and Trade (GATT) Uruguay Round, several member nations, in particular United States and other developed countries, agreed that state intellectual property protections were essential to a country’s international transactions including trade and foreign investment. (Bellmann et al. , 2003) In other words, intellectual property rights have a strong link with international trade and even economic growth.
After negotiations, one year later, the agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPs) was introduced and became a minimum standard of intellectual property protection of WTO member. After TRIPs were imposed on all WTO members, global standards of intellectual property protection have been strengthened and harmonized in 1990s. The GATT and WTO claim that this agreement advances the technology and economic growth all over the world, no matter what type of economy a nation has: developed or developing economy.
However, a fierce debate on the performance and outcome of IPR development in developing countries is going on. Current public opinion is that developed countries have a gross advantage in TRIPs but it sacrifices the benefit of developing countries. (Bellmann et al. , 2003) That is to say, most large corporations from developed countries possess exclusive but limited rights to exercise their invention, thus other competitors cannot benefit by them without paying additional cost.
In practice, it is speculates that developed countries have vested interests in patent reform, however, developing countries encounter a serious and difficult choice of intellectual property development. With regard of patent reforms, developed countries could reduce the costs of the patented products such as anti-imitative costs. Nevertheless, without the disregard for intellectual property protections, developing countries would find it difficult to attract foreign investment and international trade but provide adequate nurturance to local industries for developing countries.
Conversely, if developing countries pay too much attention on intellectual property protection, local industries might lose their competitive abilities owing to stricter intellectual property protection resulting to enhance the market power for the rights holders. It is understandable this issue raise a disturbance because most of the world’s patents are controlled by developed countries. According to National Science Foundation survey (2006), the world’s gross expenditure on research and development is highly concentrated on a few developed countries such as the United States, United Kingdom, France, Japan and Germany.
For further analysis, over 50% of global research and development (R&D) expenditure was contributed by the top two countries – United States and Japan. The R&D performance, as imagined, is mainly controlled by these countries as well. Consequently, the R&D results and patents are mainly possessed by large corporations in these developed countries. Based on the above discussion, it is undoubted that strength of patent rights protection is a matter of concern for international trade regardless of developed or developing countries.
Furthermore, in theory, five basic components make up intellectual property, including trade secret, patent, copyright, trademark and mask work (Sherwood, 1990). In this article, we only focus on the patent protection in importing countries and then attempt to answer the following questions: Do the patent rights matter to international transactions? How deep the relationship between the strength of patent rights and international trade is? This paper attempts to illustrate the relationship between patent rights protection and international trade: evidence from the Untied States.
The rest of this study proceeds as follows. Section 2 will summarize a review of relevant research literatures in the field of the patent-trade relationship. In section 3, the theoretical framework used in this empirical study will be underlined. There are three hypotheses. Section 4 briefly describes the specification of gravity model, collection method and data resources. Section 5 presents a discussion of empirical results. In the final part, a short summary and evaluation concludes this paper.