Estonia's Thorny Path to Protecting Intellectual Property
by Meelis Kitsing

Piracy is rather supporting development in Estonia, a country still undergoing economic development, says Kitsing, Master of International Political Economy

Video clips about the police destroying pirate CDs, visits of government ministers to the Kadaka Market and news about an enormous fine imposed on another company for using computer software without a licence have become part of Estonia's everyday life over the past few years.

Although lobby groups have achieved significant success in changing the public opinion and that of state officials towards condemning pirate trade, intellectual property rights are still largely overlooked in Estonia. In a study published by the Coalition for Intellectual Property Rights (CIPR) in mid-July, the directors of domestic and international companies in the Baltic states estimate conservatively that their companies sustain a total of 100 million dollars (1.8 billion EEK) of losses per year by reason of intellectual property rights violations.

NO BREAKTHROUGH EXPECTED IN THE NEAR TERM
Improving protection of intellectual property will probably remain difficult over the next few years as well. The reasons are of historical, economic and political nature. In historical perspective the way the protection of intellectual property is currently being carried out is a relatively new phenomenon in both Estonia and elsewhere in the world. Piracy in the modern sense of the word was widespread in England 200 years ago, the world's most developed country back then. Many less developed countries of today point to the fact that the economies of the 19th century Western-European and North American states were undergoing fast economic development side by side with the extensive spread of piracy.

In this respect intellectual property rights are not property rights in the classical sense and their definition leaves room for different interpretations. In principle intellectual property rights can be defined as a combination of ideas, inventions and creative expression, with respect to which the public wishes to exercise property rights. Such rights should advance the so-called generation of knowledge. However, in case of intellectual property it is always important to strike a balance between monopoly and free access to knowledge.

The strict requirements that are currently being implemented via the World Trade Organisation (WTO) to protect intellectual property fail to take into account the above-mentioned historical dynamics and many developing countries are of the opinion that the West supports monopolies by demanding mass harmonisation of policies, which is not the case with other WTO agreements. Less developed countries are required to build up an institutional framework that does not correspond to the current state of their economic development and could become an obstacle to their economic development in the future. Developing countries often label WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) as "technological protectionism".

The World Trade Organisation reached agreement on intellectual property rights during the Uruguay Round in the mid1990s, with the USA and European Union acting as the leading proponents of the agreement. The American pharmaceutical, information technology and film companies had been working for a long time towards including the protection of intellectual property in the WTO agreements. It was only during the Uruguay talks that the USA could win the European Union over to support the same course. As the WTO rules prescribe that members must accept all agreements as a package, the US and EU initiative was successful: many countries agreed about improving the protection of intellectual property, provided they gained more favourable conditions in some other area (e.g. textile industry, agriculture) in return. However, at the time of signing the agreement many developing countries did not grasp the wide scope of the protection to be provided by the agreement on intellectual property and thus, despite the period of transition allowed for many countries, TRIPS has turned out to be a Trojan horse for the developing countries.

REGARDING INTELLECTUAL PROPERTY ESTONIA RESEMBLES DEVELOPING COUNTRIES
Although Estonia became a WTO member in 1999 as a developed country and is on its way to the European Union, which inevitably makes Estonia deal seriously with the protection of intellectual property, the positions of the developing countries are also important for Estonia. As regards intellectual property, Estonia is more of an importer than exporter and therefore rather resembles developing countries.

Economic analysis reveals that in the near term strengthening intellectual property rights in Estonia means that Estonia has to pay high royalties mainly to Western authors. This results in higher consumer prices and limited and more expensive "transfer of technology", which in turn could slow down economic growth.

Expanding protection of intellectual property could mean that productive resources are moving from activities in which Estonia has a higher relative advantage (imitation) to activities in which the relative advantage is lower (innovation). This could lead to decreasing efficiency in resource allocation.

TOO POOR FOR INTELLECTUAL PROPERTY PROTECTION?
In a long-term perspective effective protection of intellectual property is a motivator for a company to engage in local research and development, it also contributes towards spreading of state-of-the-art technologies in the economy and increases foreign investments. However, the state of Estonia also has to invest a lot into building up an efficient system of protecting intellectual property. Neither the local companies nor the state has so many resources as the Western states and companies, to initiate long and complex court cases involving intellectual property.

Thus we can say that the cost of intellectual property reforms is felt immediately whereas the benefits will take longer to materialise. This is why it is difficult to motivate consumers not to buy pirate goods and the government is also facing difficulties in efficiently implementing the legislation.

At the same time, protection of intellectual property has clearly political implications for Estonia as a candidate state of the European Union. Hopefully the economic gain in politics and some other areas would make up for the economic loss arising from implementing intellectual property rights. For example membership in the European Union could help compensate short-term economic losses on account of economic assistance granted for some other area of activity. This is the main difference that could distinguish Estonia from some other current importers of intellectual property.