By RONALD A. CASS
The European Union's trade commissioner, Peter Mandelson, recently joined the U.S. in protesting Thailand's effective theft of pharmaceutical companies' intellectual property. Despite efforts of health activists to portray the world community as accepting -- even endorsing -- Thailand's conduct, there is growing appreciation that trampling patents to allow a middle-income nation to cut its spending on drugs seriously threatens the world's system of protections for innovation.
The basic issues are relatively simple. Improvements in the way we treat diseases, communicate, store information and do so much else depend on innovation. To encourage innovators, laws give them the right to control the uses of their inventions for a period of time, to decide who makes products using their innovations, and to set the price for access to this "intellectual property."
The World Trade Organization's agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) ties other trade rights to adequate respect for partners' patents, copyrights and trademarks. Compulsory licensing -- forcing patent owners to allow others to manufacture products using their innovations at prices set by the government -- is permitted under extraordinary conditions, such as when a critical patent is not being used to produce essential goods. This has always been understood as limited to a small set of special cases.
While the system of IP protections has worked well to encourage investment in innovations, some groups oppose protection of all property rights. Over the past decade, these groups have worked hard to alter the meaning of the Trips agreement and to encourage governments to use compulsory licensing to break IP protections.
These groups gained a small victory when the WTO said in 2001 that Trips encompassed "flexibilities" -- including compulsory licensing -- that allow governments to deal with health emergencies such as might be posed by epidemics of tuberculosis, malaria or HIV/AIDS in sub-Saharan Africa. WTO ministers agreed as well that there was not a single definition for all nations at all times of what constitutes an appropriate sort of emergency to justify compulsory licensing.
The activists used that declaration to argue that Trips authorizes any nation to impose compulsory licensing on any patent, especially any drug patent, for any reason. The military-backed Thai government's compulsory licensing initiative, pushed by its Public Health Ministry, is the first fruit of the activists' campaign -- a relatively developed nation facing no epidemic, just seeking to shift its spending priorities by taking someone else's property.
The U.S. clearly signaled its view that this works a radical change in the legal system for protecting IP. It put Thailand on the Priority Watch list for nations violating IP rights and formally protested Thailand's action. These moves could lead to trade sanctions on Thailand.
The EU's letter, adding Europe's voice, is especially interesting given the attacks that Neelie Kroes, the EU's competition minister, has launched on IP rights. While Ms. Kroes blithely assumes that her assertion of control over the uses and prices of IP created by firms like Microsoft won't harm innovation, Mr. Mandelson recognizes that any government's assault on the system of IP protections can unravel a thread that supports an increasing proportion of the global economy.
Having set the stage for a potentially disastrous turn in world protection of IP rights, Thailand has a chance to show leadership in a very different way. If its prime minister reins in its Public Health Ministry, Thailand can remind those in Europe and the U.S. who waver on protection for IP rights that the costs of undermining innovation vastly exceed short-term gains from cutting prices on patented drugs. Protecting the benefits from innovation and trade should matter more than pleasing the activists -- no matter how loudly they complain.
Mr. Cass is chairman of the Center for the Rule of Law, dean emeritus of Boston University School of Law and former vice chairman of the U.S. International Trade Commission.