Right to pirate and piracy of rights

Protection of Intellectual Property Rights (IPR) has been a matter of acrimonious debate between developed and developing countries. It is widely assumed that firms in developing countries always stand to gain by pirating (making unauthorized commercial use of a patent or copyright, without compensation) from firms in developed country and hence oppose protection of IPR for foreign firms. It is also believed that developing countries oppose IPR protection because the costs to the economy of doing so are thought to exceed the benefits. I question both assumptions.; This thesis shows that even without patent protection, firms in developing countries need not always find pirating from firms in developed countries attractive. Using a Hotelling type duopoly model with differentiated products, I show that it is never in the interest of the pirating firm to fully duplicate the product characteristic of the innovating firm. Piracy tends to result in less product differentiation and more intense price competition. These tend to benefit the consumers. Moreover, I analyze the innovating firms' research and development decision when another firm can pirate the research outcome. I show that while piracy hurts the innovator, positive investment in R&D will always be undertaken.; Also tested is the hypothesis that the level of patent protection in a country depends positively on its innovative ability. Data from more than thirty countries has been examined and the result supports this hypothesis. Innovative ability of a country is sought to be measured by such proxy variables as density of scientific and technical personnel, the share of manufactured in total exports, the number of domestic patents and gross national product.; These empirical results imply that developed countries should nurture the innovative capabilities of developing countries, rather than impose punitive measures on them. Increased innovative ability in a developing country will generate internal pressures on its government to provide protection of IPR. The rapid acquisition of technological capability would align the interests of developing countries with those of developed ones. Such an alignment is likely to be more harmonious and less sanguine than the use of pressure tactics by developed countries.