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The political economy of implementation: intellectual property rights protection across the world

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Content ii

THE POLITICAL ECONOMY OF IMPLEMENTA TION:
INTELLECTUAL PROPERTY RIGHTS PROTECTION ACROSS THE WORLD

by

Hong Pang

A Dissertation Presented to the
FACULTY OF THE USC GRADUA TE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLITICS AND INTERNA TIONAL RELA TIONS)

December 2011

Copyright 2011 Hong Pang

ii

Dedication
This dissertation is dedicated to my parents, Jie Pang and Shurong Duan, as a
modest appreciation for their unconditional love.

iii

Acknowledgements
I could not have finished this dissertation without my advisors, colleagues, friends
and family. I owe a great deal of gratitude to all of them for their supports,
encouragements and love. Ultimately, I alone am responsible for the final product and
any error contained herein.
First and foremost, I would like to thank my advisor and mentor, Dr. John Odell.
During the past eight years since we first talked over the phone and discussed my
research interests in the forthcoming graduate studies in 2003 when I was still in Beijing
working as a journalist, he has shown me how a hard-working and respectful scholar and
mentor should look like. He is always accessible, patient, and ready to provide trenchant
but always useful comments and suggestions. At the same time, he always sets rigorous
research standards, no matter whether it is a term paper, a research proposal, or the
dissertation, and reminds me of possible pitfalls and caveats in my studies. Most
importantly, he always believes in me, gives me encouragements as well as disciplines
when I was down, opens all kinds of possibilities to me, and supports me with all means.
I could have not finished this dissertation without the rigorousness and disciplines which
he required through the whole process.
My other committee members and mentors also gave me constant supports and
suggestions through the process. It is Dr. Jeffrey Nugent who guides me through every
stage in the journey of rigorous statistical analyses. Personally, I benefit a lot from the
weekly graduate student meetings, which he initiated at the Department of Economics
and holds in his spare time besides office hours and even during the summer session and
where I can present my works and get suggestions from him and colleagues on how to
iv

improve my studies for the next week. He also encourages me to open my eyes to other
topics and fields which might be helpful to my studies and academic career. Dr. Saori
Katada helped me polish my ideas from the proposal stage, read all of my earlier drafts,
and provided suggestions and encouragements on how to improve the manuscript. She is
considerate and eager to think of all kinds of institutional supports which she knows can
help me to finish my degree. Personally I also appreciate the role model which she sets
for me as well as those personal experiences and lessons which she shares with me on
how to balance academic life and personal life as a female scholar.
Several other faculty members outside my committee, either at USC or at other
institutions, also offered substantial supports and encouragements to this dissertation. Dr.
Stanley Rosen kindly allows me to dive into his collection of books and yearbooks on
film industries in China. Dr. Daniel Lynch suggested me to go to the Chinese University
of Hong Kong to read internal journals on IPR policy making and to talk with his
graduate classmate and friend Dr. Andrew Mertha, the expert on Chinese IPR protection.
Dr. Clayton Dube at the U.S.-China Institute boosted my spirits when I was really
anxious about the forthcoming fieldwork trip in 2008. Dr. Andrew Mertha kindly agreed
to talk with me over the phone when he was extremely busy in moving from Washington
University to Cornell University and it was the discussion with him which ensured me to
focus on the variations in IPR protection at the industrial level. I was also very fortunate
to talk with Dr. Scott Kennedy from Indiana University, an expert on Chinese industry
lobbying, in Peking University in 2008 when he was a visiting scholar there.
Special thanks go to all the interviewees who kindly agreed to talk with me and
shared their opinions and experiences with me. I appreciate every conversation with
v

them as well as the inspirations and leads they offered to me. I feel really regretful that
the names of my interviewees are replaced by codes in the footnotes to protect their
identities and I could not even list their names here. I am looking forward to talking
with you again and, please, one more question!
At USC, I was beneficiary of comments and helps from numerous colleagues. A
few stands out: Xiaowen Zhang, Cintia Quiliconi, Weixia Chen, Yesim Ince, Matthew
Shapiro, Shuyang Sheng, Rahul Nilakantan, Hongchun Zhao, Malgorzata Switek, and
Nathaniel Arnold. I thank them for their collegiality and am grateful for their continued
friendship.
Financial supports for the training of panel data analysis at the University of
Michigan, the fieldwork research, and writing of this dissertation came from the USC
School of International Relations (SIR), USC Center for International Studies (CIS), USC
Center for International Business Education and Research (USC-CIBER), and U.S.-China
Institute. Without their generous supports, I cannot imagine that I could have
accomplished this project smoothly.
My greatest debt is to my father, Jie Pang, and my mother, Shurong Duan, who
love me in all the ways parents do. Although they might not understand a single word in
this thesis, they encourage me to pursue my dreams which they do not have the chance to
pursue, teach me to always do my best and never give up, and are always proud of what I
am doing and what I have accomplished. I wish I could understand how much sacrifice
they have made when they sent their only child to another country. They have been my
role models of integrity, tenacity and courage. I dedicate this dissertation to them as a
modest appreciation of their unconditional love.
vi

My own family has also been constant sources of support. It is my husband, Yue
Zhang, who encourages me to pursue this degree, always accompanies by my side, and
supports me both intellectually and spiritually. I cannot forget the countless moments
when he had to put his own research aside to answer my questions on statistics, discuss
with me on various statistical methods, and give me encouragements by all means when I
was down. While writing this dissertation, our daughter Sophia was born. She has been
so considerate not to bring any worry to me that I can concentrate on my work. Every
slight growth-up which I have seen on her and every sunshine smile on her face fill my
heart with joy. I hope this little piece could be a small compensation for her for the every
moment which I had to spend away from her and on this dissertation.

vii

Table of Contents
Dedication ii
Acknowledgements iii
List of Tables x
List of Figures xii
Abbreviations xiii
Abstract xvi
Chapter 1 Introduction: The Puzzle of Intellectual Property Rights Protection 1
1.1. Defining and Measuring the Level of IPR Protection 8
1.2. Alternative Explanations for the Levels of IPR Protection 20
IPR Literature in Economics 20
IPR Literature in Political Science (Comparative Politics and
International Relations) 25
IPR Literature in Law and Business 32
1.3. Missing Explanations at the National Level and in the International
Context 35
Characteristics of Legal Institutions Overlooked 36
Characteristics of Political Institutions Under-Explored 40
The Effects of International Institutions and Regional Institutions
Undetermined 42
The Conditions of Successful Lobbying Behavior by Interest Groups
Unknown 45
1.4. V ariations at the Industry Level not Explained 47
1.5. The Research Design 49
1.6. Implications of This Study 54
1.7. Chapter Outline 56

Chapter 2 The International Political Economy of IPR Statutory Protection:
The Case of Patent Protection 57

2.1. What Have We Learned about IPR Protection and What is Left to be
Learned 60
Domestic Economic Characteristics and Political Institutions 60
Domestic Legal Institution: Legal Origin 62
International Influences: Multilateral and Bilateral Dispute
Settlement Mechanisms 68
viii

Relative Importance of Domestic Characteristics and International
Influences in Determining the Level of IPR Protection 79
2.2. Data, Data Sources and Models 81
V ariable Operationalization, Data Sources and Data Management 81
Models 85
2.3. Results 90
Baseline Model: Domestic Economic and Political Characteristics and
their Effects on Patent Protection 90
Legal Origin and Patent Protection 93
Bilateral and Multilateral Dispute Settlement Mechanisms and Patent
Protection 97
Change of Patent Protection 103
2.4. Conclusion, Contribution and Directions of Future Studies 120

Chapter 3 The International Political Economy of IPR Enforcement:
The Case of Copyright Protection for Business Software 126

3.1. Domestic Economic and Political Characteristics and IPR Protection:
How about Legal Institutions? 128
3.2. Bilateral Incentives and Pressures versus Multilateral International
Institutions: How about Regional Trade Agreements? 137
3.3. Copyright Protection for Business Software: Data, Model and
Evidence 149
V ariable Operationalization, and Data Source 149
Model 162
Evidences: Legal Origin and Piracy Rate of Business Software 164
Evidences: International Influences and Piracy Rate of Business
Software 174
3.4. Conclusion, Contribution and Directions of Future Studies 186

Chapter 4 Why to Steal Certain Books is Not an Elegant Offense:
The Political Economy of Selective Copyright Enforcement in China 191

4.1. What is Missing in the Existing Literature on IPR Protection in China
and My Research Initiatives 194
4.2. The Economics of Copyright Industries, Government-Business
Interactions and Industry-Specific IPR Regime for Software in China 205
4.2.1. The Economics of Copyright Industries in China 206
Economic Prominence 206
Ownership: Structure, Competition and Cooperation among
Enterprises with Different Ownership 210
4.2.2. Theoretical Hypotheses: How might the Economics of
Copyright Industries in China Influence Inter-Firm

ix

Cooperation, Government-Business Linkages and
National Copyright Regime? 226
4.2.3. Why Industry-Specific Copyright Regime Can Be
Established for Software But Not for Film and Recorded
Music in China? 236
Industrial Cooperation in Lobbying 236
Government Preferential Policies 244
Industry-Specific Copyright Regime for Software 248
4.3. Conclusions and Implications 254

Chapter 5 Conclusions and Implications 258
5.1. Contributions to the Literature of IPR Protection 258
5.2. Policy Implications 262
5.3. Implications for Other Scholarships 266
Implications to the Literature of Legal Origins 266
Implications to the Literature of International Compliance and
Implementation 268
Implications to the Literature of Chinese Politics 271
5.4. Directions of Future Studies 271
More Characteristics of Domestic Legal Institutions to Be Examined 272
Influences of Regional Trade Agreements to Be Reexamined 272
Beyond State: Industry and Other levels of Analysis? 273
Technology Development and IPR Protection: A Continuously
Updated Story 275
IPR Protection as a Game between Pro-IPR Groups and Anti-IPR
Groups 276

Bibliography 279
Appendix: Components and Scoring Method of PR Index 292

x

List of Tables

Table 1.1 Examples of the Existing Indices Measuring IPR Statutory Protection 11

Table 1.2 Examples of the Existing Indices Measuring IPR Enforcement 16

Table 2.1 Cases Related with Patent Protection, the WTO DSB (1995-2010) 71

Table 2.2 Independent V ariables and Data Sources for the Analysis of Patent
Statutory Protection 83

Table 2.3 Sample Statistics (1960-2005) 86

Table 2.4 Baseline Models and PR Index, All Countries (POLS, RE, and FE
Models) 91

Table 2.5 Legal Origin and PR Index, All Countries (POLS and RE Models) 94

Table 2.6 Dispute Settlement Mechanisms and PR Index, All Countries (POLS
Models) 98

Table 2.7 Dispute Settlement Mechanisms and PR Index, All Countries
(RE Models) 99

Table 2.8 Dispute Settlement Mechanisms and PR Index, All Countries
(FE Models) 100

Table 2.9 Change of PR Index, All Countries (RE Models, Controlling for
Domestic Characteristics and their Interactions with Legal Origin) 104

Table 2.10 Change of PR Index, All Countries (RE Models, Controlling for
International Influences and their Interactions with Legal Origin) 106

Table 2.11 The Effects of Domestic Characteristics and International Influences
for Different Legal Origins 109

Table 2.12 Change of PR Index, All Countries (FE Models, without Interaction
Terms) 110

Table 2.13 Change of PR Index, All Countries (FE Models, Controlled for
Interaction between the Initial Level of PR Index and Domestic
Characteristics) 112

Table 2.14 Change of PR Index, All Countries (FE Models, Controlled for
Interaction between the Initial Level of PR Index and Domestic
Characteristics as well as V arious Dispute Settlement Mechanisms) 113
xi

Table 2.15 Change of PR Index, All Countries (FE Models, Controlled for
Interaction between Political Rights and International Influences) 118

Table 3.1 Independent V ariables and Data Sources 151

Table 3.2 Cases Related with Copyright Protection and Enforcement, the WTO
DSB (1995-2010) 156

Table 3.3 The Effects of Legal Origin and Other National Characteristics on
Piracy Rate of Business Software, All Countries (Ordinary Least Square) 165

Table 3.4 The Effects of Legal Origin and International Influences and Pressures
on Piracy Rate of Business Software, All Countries (Ordinary Least
Square) 168

Table 3.5 The Effects of National Characteristics on Piracy Rate of Business
Software, All Countries (Analysis of Panel Data, Baseline Model) 172

Table 3.6 The Effects of Legal Origin and Other National Characteristics on
Piracy Rate of Business Software, All Countries (Analysis of Panel
Data) 173

Table 3.7 The Effects of International Influences on Piracy Rate of Business
Software, All Countries (Analysis of Panel Data, Pooled OLS Models) 175

Table 3.8 The Effects of International Influences on Piracy Rate of Business
Software, All Countries (Analysis of Panel Data, Random Effect
Models) 177

Table 3.9 The Effects of International Influences on Piracy Rate of Business
Software, All Countries (Analysis of Panel Data, Fixed Effect Models) 179

Table 3.10 The Effects of International Influences on Piracy Rate of Business
Software, All Countries (Analysis of Panel Data, Random Effect
Models vs. Fixed Effect Models, Summary) 185

Table 4.1 Estimated Trade Losses Due to Copyright Piracy (in Millions of U.S.
Dollars) and Levels of Piracy in the People’s Republic of China,
by IIPA, 1995-2009 201

Table 4.2 Comparison among Three Copyright Industries: Independent V ariables,
Theoretical Predications, and Case-Study Findings 227

xii

List of Figures

Figure 4.1 Annual Revenue of China’s Software Industry, Film Industry,
Recording Industry and Audiovisual Industry (2000-2007) 207

Figure 4.2 Employees’ Education Level in China’s Software Industry (2004-2007) 208

Figure 4.3 Annual Revenue of China’s Software Industry (in 100 Million RMB),
Compared with China’s Electronic Information Industry in Total
(2000-2007) 209

Figure 4.4 Share of Software Enterprises with Different Ownership in Revenue
(2003-2007) 211

Figure 4.5 Share of Software Enterprises with Different Ownership in Number
(2003-2007) 212

Figure 4.6 Domestic Box Office Revenue of Domestic Produced Films vs.
Imported Films (in 100 Million RMB) (2004-2008) 215

Figure 4.7 Number of Domestic Produced Feature Films (2001-2008) 216

Figure 4.8 Share of Domestic Produced Feature Films in Number by Different
Ownership (2000-2005) 218

Figure 4.9 Structure of China’s Audiovisual Industry 223

Figure 4.10 Market Share of Physical Music Sale Revenue, 2006-2007 224

Figure 4.11 Share of Recorded Music Sale Revenue by Different Repertoire
Origins, 2007 224
xiii

Abbreviations

AAP Association of American Publishers

BIT bilateral investment treaty

BRIC Brazil, Russia, India and China

BSA Business Software Alliance

CAVA China Audio & Video Association

CAVCA China Audio-Video Copyright Association

CFCA China Film Copyright Association

CFCPA China Film Copyright Protection Association

CMIC China Music Industry Committee

CSA China Software Alliance

DSB Dispute Settlement Body

DSP Dispute Settlement Procedure

ESA Entertainment Software Association

EU European Union

FDI foreign direct investment

FE fixed effect

GAPP General Administration of Press and Publication

GATT The General Agreement on Tariffs and Trade

GDP gross domestic product

GNP gross national product

GSP Generalized System of Preferences

GI geographical indication

xiv

ICRG International Country Risk Guide

ICT information and communication technology

IDC International Data Corporation

IFTA Independent Film & Television Alliance

IIPA International Intellectual Property Alliance

IP intellectual property

IPR intellectual property rights

IPRC International Planning and Research Corporation

JI judicial interpretation

LDC least developed country

MCSC Music Copyright Society of China

MII Ministry of Information Industry

MIIT Ministry of Industry and Information Technology

MOC Ministry of Culture

MPAA Motion Picture Association of America

MRFT Ministry of Radio, Film and Television

NCA National Copyright Administration

NMPA National Music Publishers’ Association

NPC National People’s Congress

OCR Out-of-Cycle Review

OLS Ordinary Least Squares

PhRMA Pharmaceutical Research and Manufacturers of America

PR Index Patent Rights Index

xv

R&D research and development

RE random effect

RIAA Recording Industry Association of America

RTA regional trade agreement

SAIC State Administration for Industry and Commerce

SARFT State Administration of Radio, Film and Television

SOE state-owned enterprise

SPC Supreme People’s Court

TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights

UPOV International Union for the Protection of New V arieties of Plants

USTR United States Trade Representative

VAT value-added tax

WEF World Economic Forum

WGIs Worldwide Governance Indicators

WIPO World Intellectual Property Organization

WTO World Trade Organization

xvi

Abstract
This dissertation studies the reasons and mechanisms of domestic compliance and
implementation of international commitments in one of the trade-related issue areas,
intellectual property rights (IPR) protection, by examining both international influences
and domestic characteristics, analyzing variations at both national and industrial level,
comparing the reasons for both IPR statutory protection and enforcement, and using both
statistical analysis and comparative case study.
First, this dissertation breaks new ground by establishing the importance of
domestic legal institutions for differences in IPR protection, especially in terms of
enforcement on the ground. Countries depend on the currently existing legal institutions
to enact provisions and develop new rules for IPR protection according to the new needs
of technology advancement, economic development and industrial restructuring as well
as to provide the primary enforcement apparatus and deference to potential infringements.
Especially considering that the current international IPR regime does not create any
obligation to establish a special judicial system for IPR enforcement, the characteristics
and capabilities of the existing legal institutions highly restrict the level to which IPR as
an intangible type of property right could be protected and enforced. I find that countries
of Common Law, which are characterized with legal infrastructure friendlier to property
rights, more independent judicial power and stronger capability to adapt to the changing
social circumstances, provide higher level of IPR enforcement than countries of German
Civil Law, Scandinavian Civil law and French Civil Law, although the differences among
countries of different legal families in statutory protection are not so obvious in the best
available longitudinal data.
xvii

Second, this dissertation examines the effects of domestic political regime on both
IPR statutory protection and enforcement. It finds that the interests of intellectual
property generators and owners are more likely to be protected on the books in
democratic regimes than in authoritarian regimes, although in practice there is no obvious
difference in IPR enforcement results between the two country groups. More importantly,
this dissertation discovers that authoritarian regimes are more likely to yield to
international pressures propelling them to enact higher level of IPR protection than their
democratic counterparts, given that they do not need to get international commitments
approved by costly and prolonged domestic political debates and there is no domestic
democratic procedure as a leverage against international pressures for legislation and
policy change.
Third, on the international side of the story, this dissertation takes initiative to
systematically examine the effects of the TRIPS Agreement embedded in the world trade
regime with strengthened dispute settlement mechanism on both IPR statutory protection
and enforcement. A survey of patent-related cases brought in front of the WTO Dispute
Settlement Body (DSB) reveals that they have effectively propelled defendants to enact
patent protection on the book, unless the defendants are the United States or the European
Community. A similar pattern was also found in statutory protection for copyright.
However, given that the TRIPS Agreement does not specify any standard for enforcement
results, the WTO dispute settlement mechanism has been feeble to depress software
piracy rate across the globe in a short term.
Furthermore, this dissertation makes the first effort to examine the effects of
regional trade agreements (RTAs) on IPR enforcement. I take initiative to survey the
xviii

original texts of all the currently existing RTAs and their IPR provisions, identify several
important distinguishing characteristics, categorize these agreements accordingly, and
develop a dataset of countries’ membership in RTAs of different kinds over time. This
newly developed dataset helps us to extend our examination of international institutions
and their effects on IPR protection to regional ones. It finds that, with other factors equal,
countries involving into RTAs with provisions on copyright protection generally have
lower software piracy rate and better copyright protection on the ground than those
enjoying liberty without extra institutional constraints coming from RTAs.
Fourth, this dissertation illustrates the significance of making comparison at the
industry level with a comparative case study of copyright protection in three industries in
China. It challenges our entrenched assumption that certain type of IPR would be
protected and enforced to the same extent for different sectors and their products once the
basic principles and standards for the protection for this type of IPR have been enacted.
It also challenges the overwhelming use of nations as the basic unit of analysis in the past.
By virtue of this carefully designed comparative case study, I show how the domestic
incentives for IPR protection are constructed both by government and by industries and
emphasize the role of economic characteristics of industries in influencing the pattern of
enterprise lobbying efforts and their effectiveness, inviting government support to certain
industries, and contributing to variations in IPR protection across different industries. I
find that IPR-intensive industries with international competitiveness tend to obtain
stronger IPR protection than other IPR-intensive industries without even in a single
country. Furthermore, IPR-intensive industries with more active, inclusive and
autonomous lobbying efforts for IPR protection are more effective in obtaining higher
xix

level of IPR protection. The scale and effectiveness of industrial lobbying further depend
on the level and pattern of cooperation and competition between enterprises in their
business relationship, the stake of enterprises of various ownerships in the industry and
their initiatives in cooperation in lobbying. IPR-intensive industries with higher level of
economic prominence, with more significant contribution to the economy and higher
extent of technology intensiveness, should have better chance to exert their influence on
government IPR statutory protection, policy-making and enforcement, and will invite
more support from the government with stronger IPR protection.
Finally, by putting together three empirical studies, this dissertation illustrates the
different reasons and mechanisms behind IPR statutory protection and IPR enforcement.
Although bilateral and multilateral pressures and stimuli embedded in international trade
and investment relationship and institutionalized in multilateral regimes explained a
substantial portion of variations in IPR statutory protection and explained their changes
over time, domestic incentive constructed by the individual calculations of costs and
benefits by users, producers, policy makers and enforcers and the process of government-
industry interaction as well as domestic institutional strength are the most important
factors in determining the results of IPR enforcement.

1

Chapter 1 Introduction: The Puzzle of Intellectual Property Rights
Protection
The past three decades witnessed a wave of improving protection for intellectual
property rights (IPR), in terms of both statutory protection and enforcement, across the
globe. These changes have happened and are continuously evolving against an intricate
backdrop consisting of economic development, technological revolution, domestic
industrial restructuring and international (re)distribution of labor, domestic and
international power bouts, bilateral and multilateral negotiations, as well as strengthened
institutionalization of regional and multilateral regimes. Given the fact that international
transactions of goods and services as well as international proliferation of investment
have increasingly depended on patents, copyrights, trademarks and other forms of
intellectual property (IP)
1
This is also a legitimate and important question to ask especially for developing
countries. Given that knowledge and intangible intellectual property is not generated
with uniform distribution across countries, with developed economies and their citizens
and corporations taking the lead in investing in research and development (R&D) and
, IPR protection and promotion have become an increasingly
controversial issue of international business and economic negotiations and domestic
strategic policy making. What factors explain the level of IPR protection, as well as its
improvement and/or stagnation from further improvement in a certain country at a certain
time is always a legitimate question to ask as the intricate backdrop evolves over time.

1
Other forms of IP, which are under the jurisdiction of the Agreement on Trade-Related Aspects of Intellectual
Property Rights (the TRIPS Agreement), include geographical indications (GIs), industrial designs, layout-designs
(topographies) of integrated circuits, database, and undisclosed information. Beyond the TRIPS Agreement, IP also
includes plant breeders’ rights.

2

developing innovative products and processes of production with commercial values
while developing countries mainly consisting of followers, imitators and consumers, IPR
protection always tops the list of issues on which developed economies apply various
means of pressure asking for changes and improvements. At first glance, providing IPR
protection in developing countries would be no other than implementing bilateral and
multilateral commitments which they made earlier. However, the reality is much more
complicated than that. In general, the details of bilateral, regional and multilateral
commitments and how they affect the level of IPR protection have not been examined.
Even less have we learned the reasons and mechanisms behind the two distinct aspects of
IPR protection, that is, statutory protection and enforcement. Neither have we paid
enough attention to some important domestic characteristics, such as domestic political
and legal institutions, domestic incentives, industrial characteristics and industries’
lobbying behaviors, which are all expected to determine the level of IPR protection.
Our understanding about the reasons for IPR protection could also be deepened if
we could extend our study to the industrial level, a level which has been neglected by
existing research that has focused primarily on the national level. In the past, students
and practitioners of IPR protection generally assumed that once a law of certain type of
IPR is in place, this type of IPR would be protected to the same extent for the various
products in which the IP is embedded. However, the reality is, even if several different
industries involve the same type of IP as the essential factors of production and the
essential components of their products and therefore are subject to the protection for the
same type of IPR, the actual level of IPR protection for these different industries and their
products might still be different. There is still room for states to maneuver strategically
3

for the sake of economic development, technology advancement and industrial prosperity,
especially in terms of IPR enforcement, although international forces have pushed for
establishing some worldwide threshold requirements. This is exactly where industrial
characteristics and the lobbying behavior of different industries step into the story.
This dissertation aims at improving our understanding of the reasons and
mechanisms of IPR protection by examining both various international interactions and
institutions and domestic economic, political and legal characteristics, analyzing
variations in IPR protection both at the national level and at the industrial level, and
comparing the reasons and mechanisms behind IPR statutory protection on the book and
IPR enforcement on the ground. In this dissertation, I make the following four arguments.
First, various forums of international negotiations, international commitments and
international dispute settlement mechanisms have influences on IPR statutory protection
and enforcement to different degrees. I confirm that bilateral pressures exerted by
developed countries on their developing counterparts, pioneered by the Special 301
processes and other review processes by the United States Trade Representative (the
USTR), have succeeded in propelling the target countries, especially those authoritarian
ones, to enact higher standards of IPR protection but have failed entirely to elicit effective
enforcement of those IPR laws and regulations in the target countries. The new
international IPR agreement embedded in the strengthened world trade regime, the
Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS
Agreement thereafter)
2

2
For a full text of the TRIPS Agreement, please see
, is regulating states’ behavior in IPR protection in both statutory
http://www.wto.org/english/docs_e/legal_e/27-trips.pdf, accessed
on Apr.13, 2011.

4

protection and enforcement (procedures and means). By establishing threshold
requirements for IPR statutory protection and enforcement (procedures and means), the
TRIPS Agreement accordingly screens the members who signed or were admitted into
the Agreement (as well as the World Trade Organization (WTO)) and prevents its
members from reneging on what was stipulated in the TRIPS Agreement. But
empirically, the constraining effect of the strengthened dispute settlement mechanism
available for any dispute arising regarding the implementation of the TRIPS agreement is
rather limited on IPR enforcement in the member states, as the actual data reveal.
Regional trade agreements (RTAs) with IPR provisions have further screened the states
which entered into such arrangements, but how the screening process works deserves
further study.
Second, the level of IPR protection which a country can offer beyond the
threshold requirements for IPR statutory protection and enforcement (procedures and
means) stipulated in the TRIPS Agreement and the extent to which a country can enforce
its IPR laws and regulations depend on its incentives. Beyond roughly operationalizing
domestic incentives by the scale of innovative and original activities, measuring it by the
volume of R&D expenditure and confirming its significance, I show how the domestic
incentives for IPR protection are constructed both by government and by industries and
emphasize the role of economic characteristics of industries in influencing the pattern of
enterprise lobbying efforts and their effectiveness, inviting government support to certain
industries, and contributing to variations in IPR protection across different industries.
While we have known that countries with domestic IPR-intensive industries that are
internationally competitive tend to provide stronger IPR protection than countries without
5

such industries, I find that IPR-intensive industries with international competitiveness
tend to obtain stronger IPR protection than other IPR-intensive industries without even in
a single country. Furthermore, IPR-intensive industries with more active, inclusive and
autonomous lobbying efforts for IPR protection, for instance those with domestic
enterprises and foreign enterprises cooperating with each other and with state-owned
enterprises’ (SOEs’) active involvement, are more effective in obtaining higher level of
IPR protection. The scale and effectiveness of industrial lobbying further depend on the
level and pattern of cooperation and competition between enterprises in their business
relationship, the stake of enterprises of various ownerships in the industry and their
initiatives in cooperation in lobbying. IPR-intensive industries with higher level of
economic prominence, with more significant contribution to the economy and higher
extent of technology intensiveness, should have better chance to exert their influence on
government IPR statutory protection, policy-making and enforcement, and will invite
more support from the government with stronger IPR protection.
Third, the level of IPR protection which a country can afford and the extent to
which a country can enforce its IPR laws and regulations also depend heavily on its
capability. Beyond roughly operationalizing domestic capability by the scale of gross
domestic product (GDP) per capita and confirming its significance and admitting the
importance of bureaucratic effectiveness in IPR protection in certain countries, I
emphasize the importance of domestic legal institutions in IPR protection. The domestic
legal institutions either facilitate or impede the provision of IPR protection. Countries
from different legal families, characterized with different legal infrastructures, different
degrees of judicial independence, and different capabilities to adapt to the changing social
6

circumstances, provide different levels of IPR protection, with the Common Law
countries providing the highest level of IPR protection, the French Civil Law countries
the lowest, and the German Civil Law countries and the Scandinavian Civil Law
countries somewhere in between. These identified differences among countries of
different legal families are remarkably more relevant in IPR enforcement than in IPR
statutory protection.
Last but not the least, the gap between the two distinct aspects of IPR protection,
statutory protection and enforcement, could be explained by the mismatch between
international expectations and domestic incentives and capability. On the one hand,
international pressures and stimuli embedded in international trade and international
investment relationships, and the strengthened international institutions pushed the
different national IPR statutory protection policies to converge to each other. On the
other hand, however, the variations in domestic incentives and capabilities still keep the
IPR enforcement results diverging from each other. Domestic incentives could result
from the interests of relevant IPR-intensive industries to protect their intellectual property,
the incentives of the users (either individuals or enterprises) of IPR products, and the
preference of government given to public interest versus private interest and to IPR-users
versus IPR-owners. Domestic capability is determined not only by economic
development and national income but also institutional infrastructure, especially national
legal institutions, in the case of IPR protection.
I reach these conclusions by conducting three empirical studies. In order to
compare the reasons and mechanisms behind IPR statutory protection and IPR
enforcement, I examine the reasons for the variations in patent statutory protection and
7

their changes over four decades (from 1960 to 2005) in 122 countries and economies and
the reasons for the variations in software piracy rates over fifteen years (from 1994 to
2008) in 110 countries and economies respectively. These two statistical analyses focus
on studying the effects of domestic legal institutions and various international influences
and showing their distinct importance in IPR statutory protection and IPR enforcement.
In order to explore how domestic incentives are constructed instead of treating them as
given and how they are constructed not only independently but also interdependently, in
another comparative case study, I zoom into the level of industries in one single country
(software, film and recorded music industries as copyright industries in China) and
theorize how the industrial characteristics (such as economic prominence, ideological
prominence, ownership structure, and cooperation and competition among various
ownerships) affect the linkage between industry and state and the impact of industry on
industrial policy making and institutional building, make foreign negotiation and framing
strategies more effective in certain industry, and thus contribute to establishment of an
industry-specific copyright regime for software in China.
The remainder of this chapter discusses the processes which lead to this
dissertation’s research questions and strategies. I will begin with a review of means of
defining and measuring the level of IPR protection as well as the existing literature of
various disciplines explaining the level of IPR protection. By discussing their success of
explaining and identifying their failure of not-explaining of IPR protection across
countries, over time, and across different types of IPR and IP-intensive products, I
present my research questions to be solved in this dissertation in details as well as my

8

research design in order to answer these research questions. Implications of this
dissertation to the larger context will be discussed briefly.

1.1. Defining and Measuring the Level of IPR Protection
Before I move forward to explore the reasons for IPR protection, it is essential to
define what I am going to measure and evaluate. Intellectual property rights are the
rights of their owners to exclude others from exploiting the economic value of his or her
original inventions with industrial utility (patents and utility models), original designs
embedded in certain products (industrial designs) or chips (integrated circuits), original
expressions of authorship (copyright and neighboring rights), identifiable signs and
symbols conveying information to consumers about the product or service (trademarks
and service marks), geographical indications, database, and breeding new, stable and
distinct plant varieties (plant breeders’ rights).
Therefore, “IPR protection” could refer to the standards a country enacts to
establish a creator’s rights to exclude others from activities that damage or infringe his or
her intellectual property. These standards should define the scope of various IPRs and the
duration of protection. They could include limitations and restrictions imposed on those
rights for the sake of domestic economic and social objectives, such as terms of
compulsory licensing and fair use of copyrighted materials for scientific research and
educational purpose. They should also specify enforcement procedures, measures and
standards, such as availability of administrative, civil and criminal enforcement
procedures, level of administrative, civil and criminal remedies and liabilities, availability
of border measures, and availability of such provisional measures as preliminary
9

injunctions. As a result, any improvement in IPR protection could come from expanding
the scope of protection, prolonging the term of protection, removing limitations and
restrictions imposed on those rights, making the penalties of commercial piracy more
stringent and setting the remedies of infringement more costly. Therefore, this definition
of “IPR protection” focuses on the IPR laws in place in countries, which I term as “IPR
statutory protection” or “IPR protection on paper” and which Maskus (2000) treated as
“input measure” of “IPR protection”.
3
Besides, “IPR protection” could also refer to the actions of enforcing those
standards and their results, which I term as “IPR enforcement” or “IPR protection on the
ground” and which Maskus (2000) treated as “output measure” of “IPR protection”.

4

3
My differentiation of “IPR statutory protection” and “IPR enforcement” is not identical with Maskus’s (2000)
differentiation of “input measure” and “output measure” of IPR protection. For one thing, the “input measures” of IPR
protection which Maskus reviewed could cover enforcement beyond IPR laws (for example, enforcement actions),
which I treat as “IPR enforcement”. For another, I disagree with his categorization of various means of measurement
under the two concepts, which I will deliberate in the following text.
It
is hard to imagine that the identical laws could result in the identical enforcement
activities and enforcement outcomes in countries with different preferences,
infrastructures and capabilities. Therefore, “IPR enforcement” is distinct from those
enforcement procedures, measures and standards stipulated in countries’ legal texts and
documents. It refers to enforcement actions by public authorities, either administrative or
judicial, to safeguard the rights endowed. Furthermore and more importantly, it refers to
enforcement outcomes, that is, how effective the administrative and judicial decisions
have been enforced, how effective these actions and decisions could deter potential
infringements, and, finally, to what extent the IPRs could be protected or be violated in a
country.

4
Ibid.

10

For the sake of making general and reliable inferences on the reasons for IPR
protection, it is fundamental to measure the strength of IPR protection, in terms of both
statutory protection and enforcement, on a consistent and comparative basis. Although
qualitative descriptions derived from government announcements, media reports, and
lawyers’ anecdotes and intelligence could be useful for a single country case study or
comparative case study for a limited number of countries, quantitative measurements
with a consistent standard are important for international comparisons among large
numbers of countries, or temporal comparisons for trends, or comparisons among
industries.
It is relatively more straightforward to measure “IPR statutory protection”. Table
1.1 lists several examples of the existing indexes measuring IPR statutory protection.
Some scholars (Burke 1996, Papadopoulos 2003, Van Kranenburg and Hogenbirk 2005)
treated membership to international IPR conventions and membership duration as a proxy
for IPR protection in domestic laws, given that membership to these conventions requires
the signatory country to update domestic IPR laws to incorporate a set of minimum
standards. Such an index is rather simple to establish since membership to these
conventions can be easily ascertained by inspecting the register of each convention
administrated by the World Intellectual Property Organization (WIPO).
5

5
These international IPR conventions mainly refer to the twenty-four international IPR conventions/treaties
administrated by the WIPO and the International Union for the Protection of New Varieties of Plants (UPOV). For a
full list of these treaties and their membership status, please see the WIPO webpage at
However, such
a measurement based on membership is at best only a crude (if not problematic) indicator
of IPR protection for several reasons: (1) it cannot capture variations in IPR protection
http://www.wipo.int/treaties/en/.
Among these twenty-four international IPR treaties, the most important ones are the Berne Convention (for copyrights),
the Paris Convention (for patents, industrial designs, trademarks, GIs, and trade secrets), the Madrid Agreement
(trademarks), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Budapest Treaty
(the biotechnological patents).

11
Table 1.1 Examples of the Existing Indices Measuring IPR Statutory Protection
Compiler(s)
of the Index
Type(s) of
IPR
Measured
Dimension Coverage
Country
Coverage
a
Year
Coverage
Public
or
Not
Rapp and
Rozek (1990)
Patents
• Availability of working requirements
• Availability of compulsory licenses
• Availability of product patents for pharmaceuticals
• Constructed based upon conformity of each nation’s
patent laws to the minimum standards proposed by
the US Chamber of Commerce (1987).
87 Not sure Yes

Kondo
(1995)
Patents
• Duration of protection
• Coverage of protection (electrical method claims,
microbiological processes, microbiologically
processed products, chemicals, pharmaceuticals,
food, computer programs)
• Scope of protection
b

33
1976-
1990,
yearly
No

Burke (1996) Copyrights
• Membership in international copyright treaties
c

• Duration of membership in international copyright
treaties
c

49
As of
1990
Yes

Ginarte and
Park (1997)
and Park
(2008)
Patents
• Coverage of protection (pharmaceuticals, chemicals,
food, surgical products, microorganisms, utility
models, software, and plant and animal varieties)
• Duration of protection
• Membership in international treaties
d

• Enforcement mechanisms (preliminary injunctions,
contributory infringement, burden-of-proof reversal)
• Restrictions on patent rights (working requirements,
compulsory licensing, revocation of patents)
122
1960-
2005,
quin-
quennially
Yes

12
Table 1.1 Continued
Compiler(s)
of the Index
Type(s) of
IPR
Measured
Dimension Coverage
Country
Coverage
a

Year
Coverage
Public
or
Not
Papadopoulos
(2003)
Copyrights
• Membership in international copyright treaties
c

• Duration of membership in international copyright
treaties
c

84
As of
1998
No

Van
Kranenburg
and
Hogenbirk
2005
Patents,
Industrial
Designs,
Trademarks,
GIs, Trade
Secrets and
Copyrights
• Membership in international treaties
e

• Availability of patent protection in the national
law
• Availability of copyright protection in the national
law
44 1998 Yes

Rodriguez
(2006a)
Copyrights
• Membership in international copyright treaties
f

• Availability of enforcement provisions (ex-parte
civil search orders, border measures, and
remedies)
23
European
countries
1994,
1997 and
2000
No

Notes:
a. This column shows the largest number of countries available in the index over years.
b. It includes provisions on cancellation for non-use, compulsory licensing due to non-use, compulsory licensing due to insufficient use, early publication of the patent
application, first-to-file system, no loss of novelty if early disclosure of invention occurred in an official exhibition, no loss of novelty if early disclosure of
invention occurred while carrying out research with scientific objectives, no loss of novelty if early disclosure of invention occurred while carrying out public
experimentation, patent infringement being a crime, possible cancellation on public interest or national security grounds, protection of application against infringers
before grant of patent, regulation restricting licensing, requirement of licensing-dependent patents, requirement of cross-licensing, and validity non-judicially
arbitrated.
c. These treaties include the Berne Convention, the Rome Convention, and the Phonograms Convention.
d. These treaties include the Berne Convention, the Universal Copyright Convention, the Paris Convention, the European Patent Convention, and the Patent
Cooperation Treaty.
e. These treaties include the Paris Convention, the Patent Cooperation Treaty, The Protection of New V arieties, the Budapest Treaty, and the TRIPS Agreement.
f. These treaties include the Berne Convention, the WIPO Copyright Treaty, and the TRIPS Agreement.

13

beyond the minimal standards established in these conventions; (2) entering into certain
IPR convention does not necessarily mean effective implementation (even in terms of
legislation), which could be impeded by incentive obstacles or capability obstacles; and
(3) given the role of international conventions in promoting IPR protection across the
world, it works better as a measurement for independent variable of international
conventions rather than for dependent variable of IPR protection. Other scholars (such
as Maskus 2000) made inferences about the stringency of countries’ IPR protection by
analyzing the nature, frequency and severity of the complaints by the United States
reflected in the annual National Trade Estimate Reports of the USTR, since countries’
being mentioned in the reports as well as movement from one category to any another
signals the degree of IPR deficiency and its change. However, again, such a rough
descriptor is subject to sharp criticisms, given that it fails to differentiate IPR statutory
protection from IPR enforcement, it implicitly uses the U.S. standards to measure IPR
protection across the globe, and it could bring about the problem of simultaneity if we
intend to analyze or control the effects of the pressures exerted by the United States.
Ideally, numeric indices of IPR strength could be developed by undertaking close
analyses of the components of IPR legal texts of each country, although it would be a
challenging task to determine which dimensions of IPR laws should be gauged, how
much weight should be given to each dimension, and to gain enough knowledge and
understanding of legal jargons for a significantly large number of countries over a
significantly long coverage of history.
6

6
Some scholars (for example, El Said 2006) regarded the TRIPS provisions as standards and categorized countries into
subgroups such as TRIPS-minus, TRIPS-consistent and TRIPS-plus ones based on their individual knowledge about
countries’ IPR legal systems, providing that although the TRIPS Agreement lays down minimum standards of
Rapp and Rozek (1990), Kondo (1995), Ginarte

14

and Park (1997) (which was updated by Park (2008)), and Rodriguez (2006a) are a few
examples which respectively developed indices measuring IPR protection on paper. (See
Table 1.1) Among them, Ginarte and Park’s index stands out providing its larger
coverage of countries (122 countries), longer and continuously updated coverage of
history (from 1960 to 2005, every five years), and more comprehensive coverage of
multifaceted dimensions, which all permit analyses of the index across countries over
time. (For the detailed information on this index, please refer to Appendix). This index is
what I will rely on to analyze the reasons for IPR statutory protection.
In comparison, it is even more daunting to measure “IPR enforcement” on a
consistent and comparative basis. Some (comparative) country studies (for example,
Mertha 2005 and 2006 on China, Dimitrov 2009 on China, the United States, Russia,
France, Taiwan, and the Czech Republic) cited government official data to measure the
efforts made by governments or judicial systems to enforce IPR laws and regulations,
such as number of IPR cases handled by customs, number of administrative copyright
enforcement cases and administrative trademark enforcement cases, number of first- and
second-instance civil IPR cases, number of police enforcement, number of criminal IPR
cases, and number of criminal sentences and incarcerations. But those data are actually
measuring the scale of IPR enforcement activities instead of the strength of IPR

protection, it also provides members with the discretion of incorporating their own standards and procedures regarding
how to implement the TRIPS Agreement within their jurisdiction and the right to apply and incorporate higher and
more extensive levels of protection if they opt to do so willingly. In this regard, I should call attention to Deere 2009,
in which she tried to capture the variations in TRIPS implementation in developing countries by specifying several
dimensions: (1) timing of TRIPS legislative reforms; (2) choice of exhaustion regime for industrial property; (3) use of
exclusions and exceptions to patent rights; (4) grounds for granting compulsory licenses; (5) provisions on data
protection for new chemical entities; (6) approaches to plant variety protection; and (7) copyright term. Deere further
developed a typology of overall variations in IPR standards and categorized 78 developing countries and least
developed countries (LDCs) into three groups: countries with TRIPS-plus standards, those with a mixed approach to
TRIPS flexibilities, and those with TRIPS-minus standards. Although she did not develop any index based on these
dimensions, her accounts provide a consistent and comparative basis on which a more nuanced index of IPR statutory
protection could be developed.

15

protection as a result of enforcement activities. Larger quantity of these enforcement
activities does not necessarily mean better quality of enforcement, since the former could
result from a bigger size of national territory and national population
7
Considering that even the identical provisions of IPR laws and the identical level
of IPR enforcement efforts could have quite distinct effects in countries with different
development level, political and legal infrastructure, and capabilities, it is essential to
directly measure the outcomes of IPR statutory protection and IPR enforcement efforts
for the purpose of theoretical development and public policy. There are generally two
approaches to measure IPR enforcement outcomes. (See Table 1.2) The first one relies
on surveying executives in multinational corporations, who are likely aware of systematic
differences in IPR strength in countries. These surveys typically ask for the respondents’
views on the adequacy of local IPR protection, with less focus on the technical details in
IPR laws and regulations but more focus on the perceived effectiveness of IPR
protection.
, more rampancy of
IPR infringement and piracy, and even more ineffective enforcement procedures and
means.
8
One example of this approach is the survey conducted by the World
Economic Forum (WEF) in its annual World Competitiveness Report.
9

7
That is why Schwabach (2008) proposed to use enforcement activities per capita as a better measurement.
These indices are
at best crude measurements for several reasons: (1) how the surveys were designed and
conducted is not easily penetrable by the public; (2) they only provide aggregate indices

8
Different from Maskus 2000, I treat this approach as measuring the “output” (i.e.: results) of IPR protection instead of
“input” of IPR protection.

9
There are also some surveys among executives of multinational corporations conducted by American business
associations for a single country, such as the ones by the American Chamber of Commerce in Shanghai (2004-2009,
yearly) and the US-China Business Council (2003-2009, yearly) on China.

16
Table 1.2 Examples of the Existing Indices Measuring IPR Enforcement

Compiler(s)
of the Index
Type(s) of
IPR Measured
Methods
a
Country
Coverage
b
Year
Coverage
Public
or
Not
WEF
IPR in
Aggregate
• Survey for perceived effectiveness of IPR protection
• Respondents are asked to provide a subjective
answer to the question of whether IPR in each
country are adequate to meet their needs for security
and exploitation of proprietary technical information
• The answers are complied into a numerical index,
with higher numbers indicating stronger faith in IPR
protection.
139
1989-up
to date,
yearly
Yes

BSA and
IPRC

Copyrights
(Piracy Rate
for Business
Software)
• The piracy rate is defined as the volume of software
pirated as a percent of total software installed in
each country.
• The volume of software pirated is estimated by the
difference between software applications installed
(demand) and software applications legally shipped
(supply).
85
1994-
2002,
yearly
Yes
c

BSA and
IDC
Copyrights
(Piracy Rate
for Business
Software)
• The piracy rate is determined as the percentage of
total software installed that was not legally acquired.
• The volume of software pirated is estimated by the
difference between packaged software which was
put into use during the year and packaged software
which was paid during the year.
d

110
2003-up
to date,
yearly
Yes
c

17
Table 1.2 Continued

Compiler
of the
Index
Type(s) of
IPR Measured
Methods
a
Country
Coverage
b
Year
Coverage
Public
or
Not
RIAA
Copyrights
(Piracy Rate
for Recorded
Music)
• In most cases, estimate the level of pirate sales of
U.S. repertoire based on local surveys of the market
conditions in each territory
• Review estimates against other sources
e

• Not sure how the RIAA gets the piracy rate data
54
f
1995-
2010,
yearly
Yes
g

MPAA
Copyrights
(Piracy Rate
for Motion
Picture)
• For 2005 data, the piracy levels are based on the
percentage of potential market lost to piracy.
Calculations involve revenue losses, legitimate
market sizes and potential legitimate markets without
piracy. Loss calculations were based on demand, that
is, a direct measurement of consumer
purchasing/pirating behavior, including hard goods
and Internet piracy.
• For 2004 and prior years’ data, loss calculations
involved supply. And the methodologies are
different for developed markets, partially developed
markets and fully pirate markets.
47
f
1995-
2005,
yearly
Yes
g

ESA
Copyrights
(Piracy Rate
for
Entertainment
Software)
• The piracy rate is defined as the relative percentages
of pirate sales to legitimate sales.
• Not sure how the ESA gets the percentage
32
f
1995-
2007,
yearly
Yes
g

18

Table 1.2 Continued

Compiler
of the
Index
Type(s) of
IPR Measured
Methods
a
Country
Coverage
b
Year
Coverage
Public
or
Not
PhRMA
Data
Exclusivity
and Patent
Protection
Estimate the damages incurred every year attributable
to trade barriers related to IPR protection as a percent
of the total market share
22
f
2005 Yes
h

Notes: WEF: World Economic Forum; BSA: Business Software Alliance; IPRC: International Planning and Research Corporation; IDC: International Data Corporation;
RIAA: Recording Industry Association of America; MPAA: Motion Picture Association of America; ESA: Entertainment Software Association; PhRMA:
Pharmaceutical Research and Manufacturers of America; IIPA: International Intellectual Property Alliance.
a. A rough description of method used to generate each index is provided here. For more detailed information, please refer to each study.
b. This column shows the largest number of countries available in the index over years.
c. The data are ready to download at the BSA website at http://www.bsa.org/country/Research%20and%20Statistics.aspx, assessed on Apr.1, 2008.
d. The basic methods used for generating business software piracy rate in a country by the BSA and the IPRC and those used by the BSA and the IDC are the same. One
of the major differences between the two lies in the software categories measured. In the BSA and IPRC studies, only business applications software (such as general
productivity or office software, professional applications and utilities) was examined. But the BSA and IDC studies also examined operating systems and consumer
applications such as PC gaming, personal finance and reference. As a result, the BSA and IDC studies looked at a significantly larger market. However, as concluded
by the BSA and IDC studies, this difference has minimal impact on the piracy rates. According to the author’s computation, the correlation between the BSA and
IPRC piracy rates in 2002 and the BSA and IDC piracy rates in 2003 is as high as 0.94, significant at 0.0001 level.
e. These sources include market surveys by anti-piracy personnel and/or third parties; optical disc industry and CD-R burning data provided by third-party consultants;
legitimate sales; enforcement data and anti-piracy developments; historical piracy estimates where possible; economic indicators, professional surveys and academic
studies of piracy or counterfeit goods; and legitimate revenue from online and mobile networks where possible.
f. These studies only report data for countries and economies which these industrial associations recommend to receive designations from the USTR under the “Special
301” provisions.
g. These industrial associations do not publish the data separately by themselves. Instead, they publish the data together in the annual Special 301 reports submitted by
the IIPA, their parent association. These reports can be downloaded at the IIPA website at http://www.iipa.com/countryreports.html, asses on May.2, 2011. The
compiled data are on the author’s file.
h. The data are available in the PhRMA Special 301 report in 2006, which is on the author’s file.

19

of IPR protection instead of disaggregated ones for different types of IP, let alone for
different industries and even for different regions inside a country; and (3) temporal
consistency is still in question given that the respondents sampled into the survey could
be sensitive to IPR protection to different degree over time. The other approach directly
estimates the extent to which IPRs are violated in different countries. Industrial
associations headquartered in the United States are the most active force monitoring
piracy behaviors threatening their profits, conducting research and estimating the severity
of piracy problem in relevant countries for the purpose of advocacy.
10
(For a list of
dataset provided by these industrial associations, please see Table 1.2) Among them, the
dataset provided by the BSA
11
beat the others given its largest coverage of countries (110
countries), longest coverage of history (1994-up to date), most balanced panel data, as
well as its most straightforward and consistent methodology
12
.
13

10
These industrial associations include Business Software Alliance (BSA), Recording Industry Association of America
(RIAA), Motion Picture Association of America (MPAA), Entertainment Software Association (ESA), and PhRMA
(Pharmaceutical Research and Manufacturers of America).
This dataset is what I
will rely on to analyze the reasons for IPR enforcement outcomes. Furthermore, since

11
As an effort to counteract the condemnations by the BSA on their ineffective copyright protection for business
software, some countries might publish their own data of piracy rate. One example is the yearly reports of software
piracy rate in China by ChinaLabs (2006-2010) from 2005 to 2009.

12
The methodologies of other datasets in Table 1.2 are more problematic. They either did not specify their
methodologies used to get the estimates (such as the dataset by the RIAA and the ESA), or used different
methodologies to estimate piracy rate of physical products and level of internet piracy and failed to aggregate the two
into a single one (such as piracy rate of sound recording), or recently revised and updated their methodologies and/or
reviewed their methodologies and therefore stopped publishing piracy rate data due to increasing complication of
piracy problem resulting from Internet piracy.

13
This dataset might be subject to some criticism: (1) the BSA might overestimate piracy rate for the sake of lobbying;
(2) it may not be appropriate to put the BSA and IPRC dataset (1994-2002) and the BSA and IDC dataset together for
analyses given that the latter updates the methodology of the former (for details, please see the notes of Table 1.2); and
(3) there might be selection and endogeneity issues in the potential analyses. As for the first criticism, my interviewee
confirmed with me that, although a single data point may not accurately represent the actual piracy level in a certain
country at certain time, this dataset is good for comparison across countries and over time. (Interview 11042009BJ) As
for the second criticism, the BSA and IDC studies argue that updating methodology only has minimal impact on the
piracy rates. And according to the author’s computation, the correlation between the BSA and IPRC piracy rates in
2002 and the BSA and IDC piracy rates in 2003 is as high as 0.94, significant at 0.0001 level.

20

these datasets provided by industrial associations focus on the severity of IPR
infringement at the industrial level, they provide us with a starting point for comparative
studies at the industrial level, which will be one of the focuses of this dissertation.
14

1.2. Alternative Explanations for the Levels of IPR Protection
After measuring and evaluating IPR protection in a comparative and consistent
way, it is a legitimate endeavor to speculate what factors explain the level of IPR
protection provided in a certain country, in a certain sector of IPR-intensive products and
in a certain year, as well as its improvement or stickiness at a certain level, although
economics studies could at best draw mixed conclusions on the effects of stringent IPR
protection on economic activities, social welfare and economic development
15

. Studies
in economics, political science, international relations, law and business have provided
different answers.
IPR Literature in Economics
Economics literature (for example, Besen and Raskind 1991 on IP laws in general,
Landes and Posner 1987 on trademark law, Landes and Posner 1989 on copyright law,

14
Some people may argue that the methodologies used by each industrial association to calculate piracy rates are not
consistent with each other and therefore they may doubt about the appropriateness of putting these piracy rates of
different industries together to compare with each other. That is why I only treat these datasets as “a starting point” and
suggest confirming their validity using other sources, such as interviewing practitioners in certain country.

15
A thorough discussion on these studies is well beyond the scope of this dissertation. But it warrants a brief mention
here. These theoretical and empirical studies have examined international effects as well as domestic effects of IPR
protection. The international effects examined include international trade activities (for example, Maskus 2000,
Maskus and Y ang 2011), FDI and international technology transfer (for example, Kondo 1995, Primo Braga and Fink
1998, Maskus 1998, Maskus 2000, Naghavi 2007). The domestic effects examined include innovation behaviors and
technology development (for example, Helpman 1993, Maskus 2000, Cosovanu 2003 in software sector in Eastern
Europe and other emerging markets, Qian 2007 in pharmaceutical sector), social welfare defined by terms of trade (for
example, Helpman 1993), market structure and pricing (for example, Helpman 1993, Maskus 2000), and economic
development (for example, Maskus 2000, Maskus et al 2005 in China, Falvey et al 2006 on growth rate, Maskus 2007).

21

Ginarte and Park 1997 on patent statutory protection, Mazzoleni and Nelson 1998 on
patent protection) emphasized the characteristics of IPR as “public goods”
16

16
That is, while the cost of creating an IP product subject to IPR protection is often high, the cost of reproducing the
product, whether by the creator or by those to whom he has made it available, is often low. If the copies made by the
creator of the work are priced at or close to marginal cost, others may be discouraged from making legal copies and the
creator’s total revenues may not be sufficient to cover the cost of creating the IP products and the creator may be
discouraged from creating IP products in the first place.
and the role
of IPR laws as a means of promoting efficient allocation of resources and maximizing the
benefits from creating IP products and stimulating innovation minus both the losses from
limiting access to IP products (which will lead to higher prices for consumers and goods
producers using the innovations as inputs, slower and more limited dissemination of
knowledge and future innovations) and the costs of administrating, adjudicating and
enforcing IPR protection. Most of these studies used a traditional law and economics
framework to analyze decisions of individuals (including creators, reproducers and/or
consumers), firms, and/or societies on the extent to which certain IPR should be protected
based on the costs and benefits facing them. However, they mainly focused explaining
the principal doctrines of IPR laws, such as the nature of IPR protection (that is, the
necessary degree of similarity between two works before infringement can be found,
which could be, for example, inactionability of accidental duplication in copyright and
requirement of distinctiveness in trademark), the scope of protection (for example,
whether to protect ideas versus expression, production of derivative works, and fair use
terms) and the optimal term. These principal doctrines have already been widely adopted
by countries in their IPR laws. Neither did these studies discuss how these doctrines of
IPR laws are applied and enforced on the ground. Moreover, although these formal
models identified several immeasurable determinants of these principal statutory

22

features
17
Ginarte and Park (1997) provided an exception. Using a model of cost-benefit
analysis for decisions by a benevolent policy maker or a society, they explored how the
optimal level of patent protection
, they generally failed to take extra steps to figure out and test which
measurable factors could determine the optimal level of protection.
18
varies in response to changes in some (measurable)
exogenous variables. They theorized that (1) countries with higher level of development
should have higher level of patent protection since they are more able to afford the
infrastructural costs associated with strengthened patent protection; (2) factors which
stimulate long-run production, such as investment in R&D capital and human capital,
should lead to strengthening of patent protection; and (3) factors which reduce long-run
price, such as openness, political freedom and market freedom, should lead to
strengthening of patent protection. Given that their model is not based on any
characteristic specific to patent vis-à-vis other types of IPR, their hypotheses provide a
starting point and a baseline for the future studies to test and control.
19
Although Ginarte and Park’s empirical study confirmed a significantly positive
correlation between national income and the stringency of IPR protection so that national
income level has been generally controlled in later studies (Marron and Steel 2000,

17
These immeasurable determinants of principal statutory feature include such as the value of an IPR work, the
marginal cost of making copies, and the cost of expression, although some hypotheses could be further developed based
on these formal models.

18
Ginarte and Park developed an index to measure the level of patent protection at the national level. For detailed
information on how the index is constructed, see Appendix.

19
For example, Marron and Steel 2000 examined the effects of the scale of R&D activities (measured by R&D
expenditure as a percentage of GDP) and the stock of education (measured the average number of years of schooling
among people who are 25 or older in 1990); Shadlen et al 2005 examined the effects of scientific infrastructure
(measured by the number of scientists and technicians in R&D per 1000 inhabitants) and human capital (measured by
combined primary, secondary, and tertiary gross enrollment ratio for 1997); Yang et al 2009 examined the effect of
technology development (measured by expenditure of information and communications technology (ICT) as a
percentage of gross national income).

23

Depken and Simmons 2004, Fischer and Rodriguez 2005, Rodriguez 2006a and 2006b,
and Shadlen et al 2005 on software piracy, to name a few)
20

20
Maskus 2000 detected a quadratic relationship between national income (measured by GDP per capita) and patent
protection (measured by the patent protection index developed by Ginarte and Park (1997)). But for the purpose of
controlling the effect of national income, it is fair enough to only include the first order of national income in the
regression.
, there could be diverse causal
mechanisms at play between the two. Firstly, as a country becomes wealthier, its
decision makers, researchers, technicians and entrepreneurs would have more and more
resources available to dedicate to original activities, which would further prompt the
economy to transform its structure of economic activities from a labor-intensive one to a
technology-intensive one and thus demand even more resources. As an economy’s
technological sophistication increases, inventors and creators become strong
constituencies for stronger IPR protection for the sake of preventing their tremendous
amount of financial and intellectual investment in developing innovative products from
being undercut. Secondly, as a country becomes wealthier, more populations could gain
access to higher education. This, on the one hand, could help enlarge the body of
populations who engage in R&D activities, while on the other hand, could help
strengthen the ethical base against committing infringement behaviors and/or consuming
IPR-infringing products. Thirdly, as a country becomes wealthier and engages in more
innovative activities, technology-intensive and IP-intensive products become more
affordable to a greater number of ordinary people. The demand for higher quality and
differentiated products rises while the demand for sloppy pirated goods decreases. Lower
price of authentic and licensed goods and enlarged market size (Ki et al 2006) strengthen
the preferences for IPR protection, humiliate behaviors of consuming infringed products,
and weaken the consumer base of piracy and infringement. Fourthly, countries with

24

higher national income are generally those integrating into the world economy more
actively. Given the “trade-related” characteristics of IPR protection (Maskus and
Penubarti 1995, Maskus 2000), strong IPR protection could be one way to “develop
better trade relations with other economies” (Ginarte and Park 1997, p293). Last but not
the least, IPR protection is a luxury of economic development because as countries
become wealthier, they could afford more effective administrative and judicial
institutions (Ginarte and Park 1997) by staffing and training police, prosecutors and
judges (Shadlen et al 2005), assign higher priority to IPR protection and devote more
resources to IPR enforcement activities vis-à-vis other issues competing for enforcement
infrastructure and resources.
Besides national income and underlying confounding factors, some economic
empirical studies emphasized the effect of other socio-economic characteristics, such as
income inequality, on IPR protection, although studies so far appear to be inconclusive.
Some studies (Fischer and Rodriguez 2005
21
and Rodriguez 2006b on software piracy
rate) detected negative correlation between income inequality and piracy rate while
others (Ki et al 2006 on music piracy rate) detected exactly the opposite. Moreover, they
failed to develop formal models to illustrate why income inequality is relevant, and the
mechanisms they identified through which income inequality may impact piracy rate are
not sound and sometimes even self-contradicting.
22

21
For example, Fischer and Rodriguez (2005) found that software piracy appears to be a middle class crime in the full
sample and in all regional subsamples except the West European and North American geographic regions.

22
Fischer and Rodriguez (2005) identified three mechanisms through which income inequality may impact (software)
piracy rate: (1) in societies with high income inequality, the gap between societal mean income and individual income
may be large, making those at the lower end of income distribution more prone to commit crime; (2) in countries whose
citizens embrace the principles of redistribution (implying lower income inequality), the population is more prone to
find pirating for redistributive purposes morally acceptable; and (3) in more equal societies, we might expect higher

25

In order to check the validity of the above-mentioned considerations, it is helpful
(and generally standard in economics literature) to put one or more of them together with
national income to see whether each of them has independent influence and whether the
coefficients’ size, sign and/or significance level change after adding others into the
regression.
23

But soon enough some scholars found it hard to be satisfied with simply
including these considerations in the regression models without elaborating the
mechanisms and processes through which IPR protection is provided, as discussed below.
IPR Literature in Political Science (Comparative Politics and International Relations)
In contrast to the IPR literature in economics which emphasized the level of IPR
statutory protection and enforcement simply as a result of maximization calculation by a
hypothetical decision maker, the IPR literature in political science emphasized the
characteristics of IPR protection as a battle field of various domestic and international
powers as well as the characteristics of IPR enforcement as a task of domestic institutions.
They analyzed the actual behaviors and capacities of these actors and institutions and
their influences on IPR protection. Distinct from the economics literature which applied
traditional law and economic framework and economic cost-benefit analysis to deduce

levels of trust which make both supply side and demand side feel safe to copy and share software without license.
Based on the first argument, we can only observe a positive relationship between income inequality and piracy, exactly
the opposite to Fischer and Rodriguez’s hypothesis. Ki et al 2006 also made quite self-contradicting explanations to the
effect of income inequality and middle class (p.409).

23
For example, Ginarte and Park (1997) showed that the coefficient of national income is no longer consistently
significant and positive once controlling other underlying factors which might simultaneously influence the level of
patent statutory protection and national income, such as investment in R&D activities, the degree of freedom in its
market environment, and the degree of international integration measured by trade openness and therefore concluded
that national income is only a proxy for these omitted variables.

26

potential determinants of IPR protection, literature of political science applied statist
analysis, interest group analysis, institutional analysis, or structural analysis.
First, different from the IPR literature in economics relying on economic cost-
benefit analysis, the literature in political science have undertaken political cost-benefit
analysis and explored the political conditions for and constraints against stronger IPR
protection. Some studies have treated IPR legislation and regulations largely as a part of
state-building efforts for the purpose of promoting rapid industrialization and economic
development, promoting progress in science and technology, promoting prosperity of
cultural and artistic undertakings, or sometimes preserving national ideology
communicated in those undertakings (Alford 1995 and Groombridge 2000 on China,
Banerji 2000 on India). Although these studies described backgrounds for this state-
building effort, such as monopoly and exploitative behaviors of multinational
corporations, shattered national economy, and reformative mindset of policy-makers
24

24
For example, Banerji 2000 identified structuralist and Keynesian economic view in favor of state intervention rather
than one advocating the free play of market forces as an ideological background of weakening patent protection for
drugs and food, easing license granting, putting a ceiling on the amount of royalties patentees could demand, and
reducing the term of protection in India in 1970s. Alford 1995 emphasized Mao’s ideology of Marxism and
collectivism over individualism to explain the collapse of IPR regime in China especially during 1960s and 1970s.
,
their descriptions on the decision-making of IPR protection in certain country were
extremely rough. These studies still treated nation state as a billiard ball and therefore
failed to discuss the process through which these state-building strategies were negotiated
and formulated domestically. At the same time, given that the research interests of IPR
protection have been focalized on developing countries since 1990s, whose IPR decision
making and implementation became no longer domestic and independent, this approach
emphasizing state-building efforts is far from sufficient on the international edge.

27

Second, some IPR studies in political science focused on how domestic
constituencies promoted their viewpoints to government administrations and legislatures
and influenced the formation of so-called national interests in IPR protection. These
studies moved beyond those treating IPR protection as state-building efforts and those
roughly measuring the power of domestic constituency for more stringent IPR protection
by certain indicators (such as R&D expenditures as a percentage of GDP or expenditure
of information and communication technology (ICT) as a percentage of gross national
income in Yang et al 2009). Implicitly assuming that the feasibility of IPR enacting
reforms depends on politicians’ assessment of political costs and benefits of providing
enhanced IPR protection, these studies examined whether a country has substantial
industrial constituencies who might gain or lose from stronger IPR protection and showed
how they intervened into the legislative debates, lobbied the executive branches and
parliamentarians, and passively or actively resisted government measures to protect IPR.
(Banerji 2000 on India, Buscaglia 2000 on Latin American countries, Fischer 2005 on
Australia and Chile, Lengyel 2005 on Argentina, Eren-Vural 2007 on India and Turkey, to
name a few) These constituencies include private-interest-oriented industrial groups,
such as researchers, technicians and industrial producers standing at the frontier of
innovations, producing IPR-intensive products and owning IPRs as well as those
industries imitating as followers, relying on licensing and IPR-intensive products as their
inputs, aspiring to reduce their production costs and tending to infringe others’ IPR. They
could also be public-interest-oriented ones such as church (such as Roman Catholic
Church against patenting living organisms created by biotechnology in Brazil in
Buscaglia 2000) and NGOs (Sell and Prakash 2002, Odell and Sell 2006, Deere 2009).

28

Third, different from the IPR literature in economics which focused on national
socio-economic characteristics to explain the level of IPR protection, some IPR literature
in political science (as well as economics) focused on the characteristics of domestic
political institutions and their effects on IPR legislation, administration and enforcement.
Given that the cost of administrating and enforcing IPR system is an important
determinant for optimal IPR protection (as theorized by Landes and Posner 1989 in the
case of copyright), one group of scholars emphasized the capacity and effectiveness of
bureaucratic and legal institutions. Marron and Steel (2000) argued that countries with
strong economic institutions protecting traditional property and contracts
25
should also
provide strong protection for intellectual property while, in contrast, Shadlen et al (2005)
showed that state capacity
26
appears to be unrelated with IPR protection once other
controlling variables (such as human capital and scientific infrastructure) were added into
the regression. The effectiveness of institutions in Marron and Steel (2000) refers to that
of both bureaucratic institutions and legal institutions
27

25
In Marron and Steel (2000), countries’ economic institutions were measured by the index of International Country
Risk Guide (ICRG) by the Political Risk Services Group (Knack and Keefer, 1995). This index provides country risk
assessments for international investors by focusing institutions protecting property and contracts. Knack and Keefer
(1995) identified five ICRG variables related to security of property and contracts: tradition of law and order,
government’s propensity to repudiate contracts, the quality of the bureaucracy, the extent of corruption, and the risk of
expropriation. The composite of these five variables was used to measure the strength of economic institutions, ranging
from 0 to 10 and with higher values representing greater protection for property and contracts. For the homepage of the
Political Risk Services Group, please go to
, while in Shadlen et al (2005)
http://www.prsgroup.com/Default.aspx. For the methodology of the ICRG
index, please see http://www.prsgroup.com/ICRG_Methodology.aspx, accessed on Apr.21, 2011.

26
In Shadlen et al 2005, state capacities were measured by “government effectiveness”, one of the dimensions of the
Worldwide Governance Indicators (WGIs) by Kaufmann et al (2002). According to Kaufmann et al (2010), the
dimension of “government effectiveness” of the WGIs captures “perception of the quality of public services, the quality
of the civil service and the degree of its independence from political pressures, the quality of policy formulation and
implementation, and the credibility of the government's commitment to such policies.” (Kaufmann et al 2010, p4) This
definition is almost the same with that in Kaufmann et al 2002 (p5), on which Shadlen et al 2005 relied for their
analysis. Shadlen et al 2005 used this measurement of “government effectiveness” rather than the ICRG index as in
Marron and Steel (2000) because (1) the former covers more countries than the latter; and (2) the former does not
incorporate a measure of property rights protection into the definition and therefore avoids the problem of endogeneity.

27
See note 25.

29

exclusively refers to that of public administration
28
. Holm (2003) and Rodriguez (2006b)
detected a strong negative relationship between judicial efficiency
29
and software piracy
rate given that efficient law enforcement may raise the probability or severity of
punishment and lead to a decline in the expected economic gains from any illegal activity.
Similarly, Robertson et al (2008) found that corruption
30

28
See note 26. Also, for a full list of variables which are used to produce the composite indicator of “government
effectiveness” in the WGIs, please see
worsens the software piracy
rates. Beyond these general examinations of institutional effectiveness, some scholars of
political science paid special attention to those institutions in charge of IPR legislation,
administration and enforcement and attributed poor IPR protection to these institutions’
entrenched organizational interests and bureaucratic culture (Mertha 2005 on China and
Deere 2009), lack of financial resources, human resources and enforcement capacities
(Clark 2000, Groombridge 2000, Mertha 2005 and Dimitrov 2009 on China, El Said 2006
on Jordan, Buscaglia 2000 on Latin American countries such as Peru, Lengyel 2005 on
Argentina, Deere 2009), their partiality, incompetence and corruption (for example,
Buscaglia 2000 on Peru, Groombridge 2000 and McCombs 2004 on China’s judiciary
system), and lack of penalties with deterrent effect (Groombridge 2000 and Dimitrov
2009 on China’s criminal enforcement).
http://info.worldbank.org/governance/wgi/pdf/ge.pdf, accessed on Apr.18, 2011.
Also see tables at the end of Kaufmann et al 2002.

29
In both Holm (2003) and Rodriguez (2006b), judicial efficiency was measured by “rule of law”, one of the
dimensions of the WGIs by Kaufmann et al (2002, 2010). According to Kaufmann et al (2010), the dimension of “rule
of law” captures “perceptions of the extent to which agents have confidence in and abide by the rules of society, and in
particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of
crime and violence.” (Kaufmann et al 2010, p4) For a full list of variables which are used to produce the composite
indicator of “rule of law” in the WGI, please see http://info.worldbank.org/governance/wgi/pdf/rl.pdf, accessed on
Apr.18, 2011.

30
In Robertson et al (2008), corruption is measured by the Corruption Perceptions Index developed by Transparency
International, an index of perceived corruption based on thirteen surveys or expert analyses. For the detailed
information of the Corruption Perceptions Index, please see
http://www.transparency.org/policy_research/surveys_indices/cpi/2010/in_detail#4, accessed on May.20, 2011.

30

Another group of scholars further emphasized in country case studies the
structural characteristics of these IPR bureaucracies and other institutions as the reasons
for institutional ineffectiveness, such as bureaucratic rankings and inter-bureaucracy
tensions and competitions (Groombridge 2000 and Mertha 2005 on China, Lengyel 2005
on Argentina), bureaucratic redundancy (Groombridge 2000, Mertha 2005 and 2006,
Dimitrov 2009), and local protectionism and lack of incentives in local IPR enforcement
institutions (Groombridge 2000, Trainer and Simone 2002, Massey 2006 and Dimitrov
2009 on China). For example, Mertha (2005) showed that although China enacted and
revised its IPR laws and regulations under the constant pressure from the United States
and with the strong incentive to enter into the world trade regime, institutionalization of
the tensions between IPR bureaucracies with lower rankings and other functional
bureaucracies representing discrete IPR subfields made effective coordinated
enforcement impossible. Also on IPR protection in China, Mertha (2005, 2006) found
that higher level of local bureaucratic redundancy led to inter-bureaucracy competition
over overlapping jurisdictions and explained more active trademark enforcement
compared to copyright enforcement while Dimitrov (2009) argued that bureaucratic
redundancy without laws clearly delineating the responsibilities of different enforcement
agencies induced the bureaucrats staffing those bodies to engage in personalistic
enforcement and corruption and thereby compromised the enforcement results.
Fourth, different from IPR literature in economics which assumed welfare
maximization in closed economy and generally regarded countries’ choices in IPR
protection as independent ones, IPR literature in international relations emphasized the
processes of decision-making and the results of implementation and enforcement on IPR

31

protection as largely interdependent ones under the influence of international power
dynamics. These studies noticed that, given the “trade-related” characteristics of IPR
protection (Maskus and Penubarti 1995, Maskus 2000), frequent international
interactions expose countries to bilateral and multilateral pressures, incentives and
influences to improve the standard and practice of IPR protection. Some of them (Drahos
2002 and 2003b, La Croix and Konan 2002 on China, Buscaglia 2000 on Latin America)
emphasized the unbalanced power distribution in international system and the coercive
effects of pressures and incentives applied by international trading partners, investors and
donors who were led by the United States, followed by the European Union and free-
ridden by other wealthiest developed countries, upon which developing countries rely for
market access, investment, intellectual developments and transfers, foreign aids, and
sometimes even political security. Bilateral pressures through aggressive unilateralism
represented by the USTR’s Special 301 processes, Section 306 monitoring and potential
associated trade retaliations (Bhagwati and Patrick 1990, Bayard and Elliott 1994, Sell
1995, 1998 and 2003, Zeng 2002a and 2002b, Shadlen et al 2005, Mertha 2005 and Xue
2005 on China), potential suspension of benefits under the Generalized System of
Preferences (GSP) (Buscaglia 2000 on Latin America), negotiations of bilateral IP
treaties (Drahos 2001), bilateral investment treaties (BITs) (Drahos 2001, Shadlen et al
2005, El Said 2006 on Jordan), RTAs (Drahos 2003a, El Said 2005 on the Arabian
countries and 2006 on Jordan), negotiations establishing the world trade regime tying IPR
protection with further trade liberalization (Ryan 1998, Shadlen et al 2005, Barton et al
2006), and negotiations for WTO membership (Mertha 2005 and Mertha and Pahre 2005
on China, El Said 2006 on Jordan, Deere 2009) were analyzed. Some scholars (Sell 2003,

32

Sell and Prakash 2004, Anderson 2006) further traced the source of bilateral pressures to
the efforts made by multinational corporations in monitoring countries’ IPR protection,
lobbying home governments to take actions and penalize the unauthorized use of their IP
in less developed countries, either through trade sanctions or through threats to withdraw
broader trade benefits. In contrast to the studies focusing coercive effects of international
pressures, some studies also paid attention to learning effects and socialization effects of
international interactions, such as through capacity building (Deere 2009) on developing
countries’ decision making on IPR protection.
Among them, negotiation literature deserves a special mention. They discussed
whether and under what conditions various negotiation strategies, such as trade sanctions
or threats of trade sanctions and their credibility (Jayakar 1997, Zeng 2002a and 2002b,
Hulse and Sebenius 2003), framing (Sell and Prakash 2004, Odell and Sell 2006),
sequencing, acoustic separation and persuasion (Hulse and Sebenius 2003) are effective
in making certain countries commit to undertaking IPR enacting reform. Given that these
studies focused on negotiation process, most of them were normally silent on whether
these bilateral or multilateral commitments will be implemented domestically by
legislation and enforcement, except that Mertha and Pahre (2005) illustrated how partial
implementation of negotiated agreements was expected at the negotiation stage using
formal model and case study of the U.S.-China IPR negotiation.

IPR Literature in Law and Business
Generally speaking, legal scholars closely monitored any change of IPR statutory
protection in a certain economy (such as Trainer and Simone 2002 on trademark

33

protection in China, Liu 2005 and 2006 on patent protection in China, Chen 1994 on
copyright protection for computer software in Taiwan, Harris 2002 on IP laws in Japan)
or a country group (such as Bird and Cahoy 2007 in Brazil, Russia, India and China
(BRIC))
31
, elaborated how these statutory changes might influence the practices of IPR
protection and management, made normative comments and criticisms on any deficiency
of these statutory provisions against certain standards
32
A lot of business studies (as well as sporadic comments and studies by legal
scholars and economics scholars)
, and thus provided first-hand
intelligence to business persons, decision makers and scholars in other disciplines. Some
exceptional works explored institutional challenges to sufficient and efficient
enforcement of IPR, such as the lack of judiciary independence (Nie 2006 on China),
partiality and incompetence of judges (McCombs 2004 on patent enforcement in China,
Nie 2006 on China, El Said 2006 on Jordan), corruption (McCombs 2004 on patent
enforcement in China), and regional adjudication mechanism (Helfer et al 2009 on IP rule
of law in the Andean Community). However, given that these works are by and large
based on experiences of a single country, they failed to theorize and generalize the
reasons for IPR protection.
33

31
The changes of IPR statutory protection might include those specific on IPR protection, such as IPR protection scope
and term, injunctions and provisional measures, civil liabilities, administrative remedies and criminal remedies, as well
as those which are generally applied beyond IPR protection, such as judicial review, civil and criminal procedures.
emphasized the variations in national culture,

32
The standards could be either some threshold requirements made under the TRIPS Agreement or higher standards
similar with the practices in the United States or the European Union countries or embedded in other international IPR
treaties beyond the TRIPS Agreement.

33
There are also some business literatures conducting survey research at the individual level, searching for
demographic factors (Kwong et al 2003), ethical factors (Kwong et al 2003, Limayem et al 2004) and situational
factors (Glass and Wood 1995, Limayem et al 2004) on individuals’ participation in (consumer) copyright piracy.
These surveys were conducted either for certain ethnic groups (for example, Kwong et al 2003 among Chinese), for
certain economies (for example, Kwong et al 2003 in Hong Kong), for groups of certain professions (for example,

34

overarching social norms and customs, which cannot be simply captured by neo-classical
economics. Some of them (Marron and Steel 2000, Husted 2000, Moores 2003 and 2008,
Depken and Simmons 2004, Yang et al 2009) introduced one or more of the five
dimensions of Hofstede’s national culture Index (Hofstede 2001, Hofstede and Hofstede
2004)
34
into the left-hand side of the regression equation and found strong correlations
between national culture and the level as well as the change of (software) piracy rate.
35

Glass and Wood 1995 among undergraduate business students enrolled in a sophomore level computer literacy class,
Limayem et al 2004 among students but with large variations in their ages, majors, levels of education and computer
knowledge and nationalities), or for different type of IPR piracy (Kwong et al 2003 on CD piracy vs. Limayem et al
2004 on software piracy).

Others (most of whom are legal scholars) in country case studies attributed certain
countries’ failure of developing IPR laws spontaneously by themselves or their difficulty
in enforcing IPR laws transplanted from the western countries to certain characteristics of
national culture. For example, it has been argued that the hesitant attitude and sluggish
practices in IPR protection in contemporary China is a direct outgrowth of the history of
her culture, which combines socialism, Confucianism and Legalism, favors collectivism
over individualism, and highly appreciates quoting the classics and obeying the

34
The five dimensions are power distance (measuring the extent to which the less powerful members of organizations
and institutions accept and expect that power is distributed unequally), uncertainty avoidance (measuring a society’s
tolerance for uncertainty and ambiguity), individualism (opposite to collectivism, measuring the degree to which
individuals are integrated into groups), masculinity (opposite to femininity, measuring the distribution of emotional
roles between genders), and long-term orientation (measuring the degree to which the societies foster pragmatic virtues
oriented towards future rewards, such as saving, persistence, and adapting to changing circumstances). Later a sixth
dimension, indulgency versus restraint (measuring the degree to which the societies allow relatively free gratification of
basic and natural human drives related to enjoying life and having fun), was added. The data of five-dimension
national cultural index are available at http://www.geert-hofstede.com/hofstede_dimensions.php and the data of six-
dimension index are available at http://www.geerthofstede.nl/research--vsm/dimension-data-matrix.aspx, accessed on
May.10, 2011. The data for the first four dimensions are available for seventy countries and the data for the last two
dimensions are available for ninety-three countries. All data are cross-sectional without variations along the time
dimension.

35
Among them, most (Marron and Steel 2000, Husted 2000, Moores 2003, Depken and Simmons 2004, Yang et al
2009) found strong and negative correlations between individualism and (software) piracy rate and a few others found
positive correlation between power distance and piracy rate (Depken and Simmons 2004) and negative correlation
between masculinity and piracy rate (Moores 2008). Moores (2008) even found that the rate of decline in software
piracy is a cultural phenomenon, with two factors, power distance and uncertainty avoidance, working in opposition.

35

intellectual and political authority. (Alford 1995, McCombs 2004, Liu 2005 and 2006,
Lehman 2006, Nie 2006) This national culture was regarded at the best as a country-
specific balancing point on which, for the benefit of the whole society, China
accommodates the public interest favoring the users of intellectual works rather than the
owners as the modern IPR landscape is characterized (Shao 2006), while at the worst as
power manipulation by a very small group of people to control the flow of ideas to the
populace and an deeply rooted obstacle the country finds hard to get over with (Alford
1995, Liu 2005). The Chinese culture was also regarded as dramatically influencing the
culture and utilitarian ethic toward IPR protection among most Asian nations. (Swinyard
et al 1990 illustrating their point with the case of Singapore) The studies on the effect of
national culture suggest that policies which do not take these cultural differences into
account but attempt to transfer Western legal concepts without the underlying social
constructs are responsible for much of the failure in IPR protection, especially in terms of
enforcement.

1.3. Missing Explanations at the National Level and in the International Context
Although the existing IPR studies of various disciplines have successfully
identified several social-economic, political, institutional, cultural and international
factors at work to explain the choice in the level of IPR protection, we can still improve
our understandings on the puzzle of IPR protection in the following aspects.

36

Characteristics of Legal Institutions Overlooked
In the existing studies examining the effectiveness and/or structures of domestic
institutions on IPR protection, the characteristics of domestic legal institutions have
received less attention than they deserve and the way domestic legal institutions have
been measured was problematic. Some important statistical analyses of IPR protection
have completely overlooked the importance of legal institutions in enacting IPR
protection, developing new IPR rules, enforcing those laws and regulations, and deterring
potential IPR infringements and pirating behaviors. For example, although Shadlen et al
2005 hypothesized a negative relationship between state capacities and software piracy
rate, a careful examination of the authors’ operationalization and measurement for “state
capacity”, the “government effectiveness” index provided by Kaufmann et al (2002) as a
part of the Worldwide Governance Indicators (WGIs), shows that this measurement only
captures the quality of public administration.
36
All of the individual variables which are
used to produce the composite indicator of “government effectiveness” are about
bureaucratic quality, such as the quality of infrastructure, public education and budget
management, the capacity of political authorities to implement reforms and mobilize
revenue, the stability of government, the degree of red tape, and policy consistency.
37

36
According to Kaufmann et al 2010, the dimensions of “government effectiveness” of their WGI index captures
“perception of the quality of public services, the quality of the civil service and the degree of its independence from
political pressures, the quality of policy formulation and implementation, and the credibility of the government's
commitment to such policies.” (Kaufmann et al 2010, p4) This definition is almost the same with that in Kaufmann et
al 2002 (p5), on which Shadlen et al 2005 relied for their analysis.

This could be a reason why they failed to find an independent and significant effect of

37
For a full list of variables which are used to produce the composite indicator of “government effectiveness” in the
WGI, please see http://info.worldbank.org/governance/wgi/pdf/ge.pdf, accessed on Apr.18, 2011. Also see tables at the
end of Kaufmann et al 2002.

37

government effectiveness on software piracy.
38
Most of the existing IPR literature simply overlooked the fact that IPR protection
and enforcement is mainly the task of domestic legal system rather than domestic
bureaucratic institutions. Firstly and on the surface, IPR protection and enforcement
depend on statutory provisions as its backbone providing standards on protection scope,
protection term, provisional measures, liabilities and remedies, judicial review,
limitations and restrictions, and civil and criminal procedures. More deeply, how these
IPR statutory provisions are enacted and evolve over time should be consistent with the
way laws of other specialties are enacted and evolve over time.
In some other studies (such as Marron
and Steel 2000 on institutions in general, Buscaglia 2000 and Robertson et al 2008 on
corruption), scholars failed to differentiate the effect of bureaucratic institutions versus
that of legal institutions and failed to highlight the effect of legal variables on IPR
protection.
Second, with respect to enforcement measures, civil and criminal enforcements
are at least as essential as administrative enforcements as measures against IPR
infringement and piracy. According to the TRIPS Agreement, both civil procedure and
criminal procedure must be available for the effective enforcement of IPR.
39

38
The effect of government effectiveness is insignificant, especially when other variables correlated with government
effectiveness, such as the levels of human capital and scientific infrastructure, were added into the model.

Administrative procedures are acceptable only to the extent that “such procedures shall
conform to principles equivalent in substance to those set forth in this Section [Section 2

39
See Article 41-Paragraph 1, Article 42, and Article 61 of the TRIPS Agreement,
http://www.wto.org/english/docs_e/legal_e/27-trips.pdf, accessed on Apr.13, 2011.

38

of Part III: Civil and Administrative Procedures and Remedies].”
40
In practice, although
the national records of employing administrative procedures versus civil and criminal
procedures vary across countries, most of the countries depend on civil and criminal
procedures for IPR enforcement at least equally as administrative procedures, even with
some countries (such as the United States) almost entirely relying on civil and criminal
procedures for IPR enforcement.
41
Third and most importantly, national legal system actually supplies the very
environment in which IPR laws are enforced and IPR enforcement procedures are applied,
given the fact that states depend on their courts and judges to make decisions on the
merits of the cases at hand and enforce these decisions consistently, transparently and
fairly. A lot of characteristics of national legal system have substantial influences on the
level of IPR protection. For example, the professionalism and expertise of judges, the
quality of their decisions and argumentations, how they make decisions and how these
decisions might influence future statutory provisions or future decisions of cases, the
extent to which their decisions can be made and enforced independently from
bureaucratic interventions or other external influences, and the extent to which court
decisions and the public’s expectations on court decisions can provide deterence to
potential IPR infringers all determine the results of IPR enforcement.

40
See Article 49 of the TRIPS Agreement, http://www.wto.org/english/docs_e/legal_e/27-trips.pdf, accessed on Apr.13,
2011.

41
Dimitrov (2009) showed that in most countries there is relative parity between administrative enforcement and
enforcement provided by the courts, the police and the customs, taking Russia, T aiwan, Czech and France as examples.
He also showed that administrative enforcement is disproportionately widely used in China to provide IPR enforcement,
with as many as twelve different bureaucracies with IPR enforcement responsibility and with administrative cases
outnumbering non-administrative ones by a hundredfold in 2004, while, in the United States, administrative
enforcement is virtually never used.

39

Some scholars have already noticed the deficiency of overlooking legal
institutions in the existing IPR literature. Some of them proposed that IPR statutory
protection on paper should have direct effects on IPR enforcement on the ground. For
example, Rodriguez (2006a) examined copyright laws on software piracy rate in twenty-
three European countries in 1994, 1997 and 2000.
42
There are some exceptional studies which paid attention to the performance of
legal institutions, such as judicial efficiency and rule of law (Holm 2003, Rodriguez
2006b). Again, a careful examination of the ways measuring the performance of legal
institutions by these studies reveals that their examinations might be problematic. Holm
(2003) and Rodriguez (2006b) used the index of “rule of law”, one of the dimensions of
Kaufmann et al’s aggregated governance indicators, to measure the efficiency of judicial
system in a country. Part of this “rule of law” index captures the degree of protection of
Given that it is a daunting task to
measure statutory protection and enforcement for the same type of IPR, this study is a
great endeavor. However, given that the level of IPR statutory protection and IPR
enforcement could be determined by the similar series of factors, we can imagine that
other variables which are expected to have influence on IPR statutory protection would
enter into the regression without independent and significant effects (this is exactly what
happened in Rodriguez 2006a except for the level and the square term of GDP).
Furthermore, as discussed above, the influence of domestic legal institutions on IPR
protection is way beyond what IPR statutory protection could simply offer.

42
Other examples include Groombridge 2000 on the way in which IPR laws were written in China.

40

property rights, of which IPR is a type.
43
Therefore, in order to address the deficiency of the existing IPR literature in
overlooking the effect of legal institutions or treating it inappropriately in statistical
analysis, in this dissertation I will explore the effects of certain characteristics of legal
institutions by categorizing countries by their legal origins or legal families. By
borrowing the idea of legal origins from the literature of law and economics, I will
examine whether countries of different legal origins exhibit differences in their IPR
statutory protection and enforcement results, along with differences in other aspects such
as investor protection, government regulation and judicial independence as shown in the
literature of law and economics, and provide several potential explanations. Furthermore,
legal traditions were largely introduced into countries through conquest and colonization
and therefore largely exogenous. “Legal origins” are coded completely independently
from protection of IPR or property rights in general (La Porta et al 2008). Thereby, the
perplexing problem of endogeneity associated with using “rule of law” index can be
avoided.
Using “rule of law” as one of the independent
variables might bring endogeneity into the regression.

Characteristics of Political Institutions Under-Explored
The existing IPR studies have paid too little attention to the characteristics of
political institutions, such as the type of political regime. Although the IPR literature in

43
According to Kaufmann et al (2010), the dimension of “rule of law” captures “perceptions of the extent to which
agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement,
property rights, the police, and the courts, as well as the likelihood of crime and violence.” (Kaufmann et al 2010, p4)
For a full list of variables which are used to produce the composite indicator of “rule of law” in the WGI, please see
http://info.worldbank.org/governance/wgi/pdf/rl.pdf, accessed on Apr.18, 2011.

41

economics identified the importance of several socio-economic factors at the national
level, the IPR literature in political economy identified the incentives and actions of
domestic constituencies to lobby their governments either to cater to or to boycott the
international requirements for improving IPR protection standards and enforcement
efforts, and the IPR literature in international relations identified the influences of
international pressures and incentives, all these factors must have influenced IPR
statutory protection and enforcement through the channel of domestic political
institutions.
The domestic political regime is a potential factor influencing countries’ IPR laws
and policies because, first, it provides a broader political environment in which
governments make national policies. It determines the degree of engagement by national
legislatures in IP reforms and the responsiveness of countries’ executive and legislative
branches to interest groups, a factor which have been regarded as important in IPR
protection (Deere 2009 for developing countries). More specifically, domestic political
regime determines whether and to what extent the appeals of certain interest groups can
be represented in the legislation and decision-making process, and to what extent the
diversified and normally competitive interests of various interest groups can compete
with each other and be aggregated in the final decision-making and enactment. For
instance, it is hard to imagine that the processes and results of enacting for IPR protection
in India, where both the lower house and the upper house have veto powers on any bill
and ordinance (as shown by Banerji 2000), would be the same as those in China, where
legislation at the worst reflects volatile preference of party leaders and cabinet members
and at the best is a bargaining among relevant bureaucracies at the central level (as shown

42

by Mertha 2005). The importance of domestic political regime is especially relevant in
IPR enacting reform in developing countries, which to a great extent means
implementing commitments made internationally through domestic political process.
Given that countries with different political regimes would expect different degrees of
difficulties to get international commitments approved domestically (Putnam 1988), they
would show different tendency to bend to international pressures.
Furthermore, the domestic political regime could potentially influence IPR
statutory protection and enforcement results because different domestic political regimes
have demonstrated different commitments to the protection of property rights (Olson
1993, Clague et al 1996, Leblang 1996) and the rule of law (Przeworski and Maravall
2003, Helmke and Rosenbluth 2009). If the principle of property rights protection can be
generally esteemed in a society, it can be easily extended to other properties as intangible
as intellectual property. Rule of law can guarantee that judges can make their decisions
on the merits of cases and logic reasoning and enforce those decisions without political
interference from certain persons and executives. Given that directly introducing
measures of property rights protection and/or rule of law into regressions to check their
influences on IPR protection would result in endogeneity problem, democracy might
work as a good proxy for these political characteristics without introducing endogeneity.

The Effects of International Institutions and Regional Institutions Undetermined
Concluding an international IPR agreement with strengthened dispute settlement
and enforcement mechanism was declared as one of the victories won by developed
countries and industrial interests in the Uruguay Round. However, scholars have been

43

astoundingly silent about the effects of WTO’s dispute settlement mechanism on IPR
protection. This silence is especially annoying considering the vibrant discussions about
legalization of international institutions in general (Goldstein et al 2000, Koremenos et al
2001) and the strengthened dispute settlement mechanism of the WTO in particular
(Busch and Reinhardt 2002 and 2003, Pekkanen 2003, Davey 2005) and their effects on
countries’ behaviors. There are a few exceptions, but all are subject to certain
deficiencies. Some legal scholars (Reichman 1998 on India, Czub 2001 and Bentolila
2002/2003 on Argentina) observed some countries’ legislation efforts after being sued in
front of the WTO Dispute Settlement Body (DSB) in country case studies but failed to
examine the effects of WTO dispute settlement mechanism on countries’ IPR protection
generally. Deere (2009) examined the WTO dispute settlement process as one of
international pressures faced by developing countries in implementing their TRIPS
commitments by surveying allegations, settlements and resolutions of all seven WTO
TRIPS disputes against developing countries from 1995 up to 2009. Her survey
exclusively focused on those cases with developing countries as defendants but again
failed to examine the effects of WTO dispute settlement mechanism on countries’ IPR
protection generally, especially on IPR enforcement results. Shadlen, Schrank and Kurtz
(2005) for the first time systematically examined the effects of WTO dispute settlement
mechanism on copyright enforcement measured by software piracy rate. However, they
falsely examined all WTO DSB cases involving IPRs, which included cases involving
patents, trademarks or GIs or cases with allegations unrelated with copyright protection
for business software (such as measures concerning sound recordings).

44

Although developed countries successfully embedded the principle of IPR
protection into the world trade regime, established uniform standards of IPR protection at
the global level with a strengthened enforcement mechanism, and therefore offered better
guarantees for international dispute settlement in IPR issues, they have been dissatisfied
with the minimal standards of IPR stipulated in the TRIPS Agreement in particular and
the current multilateral trade regime in general which was stuck in impasse. (Drahos
2003a) They have utilized means other than multilateral ones to create linkage between
IPR with trade and institutionalize other countries, especially developing ones. Bilateral
and regional free trade agreements have been exploited to encourage developing
countries to abandon the flexibilities and exceptions permitted in the TRIPs Agreement
and adopt higher standards of IPR protection beyond the TRIPS Agreement.
Up to date, case studies on the effects of RTAs are very limited. A few studies
examined bilateral free trade agreements signed between the United States with another
country, such as Australia (Fischer 2005), Jordan (Drahos 2001 and El Said 2006), and
Thailand (Arnold 2006) and IPR statutory changes in these countries. Helfer et al (2009)
examined the effects of RTAs with built-in judicial or quasi-judicial institutions (Andean
Community and Andean Tribunal of Justice) on member states’ IPR legislation,
administration, enforcement, and adjudication and even rebuffing pressures from the
United States. However, few studies have conducted systematic studies on RTAs and
IPR protection besides these fragmentary descriptions of country or country group, let
alone systematic studies on the effects of RTAs with different characteristics, such as
whether they have TRIPS-plus provisions in the agreement, whether the agreements were
concluded between countries with diverging levels of IPR protection, whether they have

45

their own dispute settlement mechanisms, and whether they established some cooperation
regime helping members to build their enforcement capacity. Even fewer studies
examined the effects of RTAs on the actual IPR enforcement and protection beyond
simply making international commitments and implementing those commitments by
enacting reforms.

The Conditions of Successful Lobbying Behavior by Interest Groups Unknown
We are still short of theoretical developments on the conditions under which
lobbying efforts by interest groups are successful in advancing their interests either in
strengthening IPR statutory protection and making policies efficient in their enforcement
results or in boycotting those changes. To what extent interest groups can influence the
result of IPR decision-making and legislation process? What factors determine the power
of certain interest groups in influencing government policy-making and legislation? Is it
the pattern in which policy makers and industries interact with each other in a certain
country, or the way, the scale and the degree of effectiveness in which enterprises can
cooperate with each other in lobbying, or the economic characteristics of industries?
Although these questions are interesting in both theoretical sense and empirical sense, the
energy we have spent on these questions and the answers we have provided to these
questions are far from sufficiently satisfying.
One reason for this deficiency lies in our exclusive focus on those successful
stories of lobbying and lack of comparative context. A few studies which are
exceptionally successful in identifying the conditions of successful lobbying in IPR
protection help to illustrate this point. Sell and Prakash (2002) and Odell and Sell (2006)

46

emphasized the skillful framing strategies maneuvered by interests groups by comparing
the business victory in concluding the TRIPS Agreement in the WTO in 1994 with the
subsequent NGO campaign against enforcing the TRIPS Agreement to ensure access to
essential HIV/AIDS medicines in 2001. Eren-Vural (2007) analyzed the different
historical dynamics of inter-class struggles resulting in divergent patterns of state
intervention and dependency on foreign technology by comparing different outcomes in
enacting reform for pharmaceutical patent in India and Turkey. Jayakar (2003) identified
the pattern of state-industry linkages and the level of innovative activity of certain
industry by comparing IPR protection in four industries in two countries
44

. Although the
two studies by Sell and Prakash (2002) and Odell and Sell (2006) did not deal with
domestic implementation besides negotiation processes and results of international
agreement, Eren-Vural (2007) did not touch upon the issue of enforcement, and
comparability between protection for different types of IPR in Jayakar’s study (2003,
patent and copyright) is rather questionable given that the economics of different types of
IPR are different (Landes and Posner 1989 and Park 2010 on copyright, Ginarte and Park
1997 and Maskus 2000 on patent, Landes and Posner 1987 on trademark), these studies
manifest how important it is to analyze the conditions of successful lobbying in a
comparative context beyond simply describing the presence of interest group lobbying in
case studies.

44
They are information technology industry in Taiwan, computer software industry in India, film industry in India, and
cable television programming industry in T aiwan.

47

1.4. Variations at the Industry Level not Explained
The overwhelming majority of the existing studies on IPR protection have
examined the variations of IPR protection at the national level, but surprisingly
overlooked the variations across industries. These studies at worst generally talked about
IPR protection in certain countries without even differentiating various types of IPR
(such as patent, copyright and/or trademark), or at best touched upon protection for
certain types of IPR for certain sectors (for example, pharmaceutical patent in India by
Banerji 2000 and Eren-Vural 2007, in Turkey by Eren-Vural 2007, in Argentina by
Lengyel 2005, biotechnological patent in Australia by Fischer 2005) without comparing
patent (or copyright or trademark) protection for different sectors (with Jayakar 2003 as
an exception). This deficiency goes hand in hand with an overwhelming reliance on
nation as the unit of analysis. To a large extent, this limitation results from the
problematic assumption that the economics and politics of IPR protection for certain
sector are universally relevant for all sectors covered by this type of IPR and different
sectors could benefit similarly and simultaneously from a certain level of legal protection,
simply because their products consist of the same type of IPR
45
We should begin to open our eyes to see whether there is any variation in terms of
IPR protection among different sectors and industries. A closer review of economics
theories of IPR reveals that the optimal level of IPR protection derived by these theories
is product-oriented. For example, the optimal level of copyright protection tends to rise
and are supposed to be
protected under the same set of laws and regulations.

45
According to Sections 1 to 7 of Part II of the TRIPS Agreement, intellectual property includes copyright and related
rights, trademarks, geographical indications, industrial designs, layout designs (topographies) of integrated circuits, and
protection of undisclosed information. Sometimes, intellectual property also covers protection of new varieties of
plants, domain names of the Internet, and encrypted program-carrying satellite signals.

48

with the value of a work and the value of a work will be greater the greater the demand
for the work and the lower the marginal cost of making copies according to Landes and
Posner (1989). According to these economics theories, it would be desirable to design
product-specific IPR laws for the sake of maximizing social welfare although it is hard to
imagine that such product-specific IPR laws are feasible in reality. However, in reality,
sector-specific IPR laws, policies and enforcement regimes, efforts and results are not so
uncommon even in a certain country. For example, in India, computer software industry
experienced expanded enforcement efforts and declining piracy level recently while film
industry experienced minimal enforcement and very high piracy level (Jayakar 2003).
According to the annual reports by copyright industry associations in the United States
46
,
in China more obvious improvement in copyright protection has been experienced by
software industry than by motion pictures and sound recordings industry in the past
fifteen years
47
It would be also theoretically important to search for the reasons for these cross-
industry variations. Because industries develop at different paces and with different
characteristics and not all industrial sectors can simultaneously benefit from strong IPR
protection, a country is unlikely to have a coherent IPR protection level. It makes good
economic sense and political sense for policy makers to provide a certain level of IPR
protection in line with the level of development of certain industry in their country. (Yu
, while in Brazil motion picture industry has experienced lower piracy rates
than other copyright industries during the same period. These cross-industry variations
are empirically interesting to explore.

46
For sources and citations, please refer to T able 1.2.

47
Chapter 4 of this dissertation will explore the reasons for this cross-industry disparity.

49

2007) Therefore, if we want to fully understand the relationship between IPR protection
and economic development, we need to pay attention to IPR protection for different
sectors and their divergent protection scope and terms. It would be misleading to explore
IPR protection as if various forms of IPR were based on identical models, with protection
of similar scope and characteristics and with similar social costs.

1.5. The Research Design
As well aware of both the strength and the weakness of quantitative and
qualitative research methods in academic inquiries respectively and strongly believing
that various research methods are the means of rigorous research rather than the ends, in
the following empirical studies I will take advantage of both kinds of research methods to
explore the gaps and deficiencies in the existing studies on the reasons for IPR protection
I identified in the last two sections. This dichotomy in methodology completely results
from the different needs of different research questions at hands.
In order to systematically examine the effects of legal institutions, political regime,
international institutions with strengthened dispute settlement mechanism and regional
institutions, I will rely on quantitative research methods. The biggest obstacle to conduct
quantitative research methods lies in the difficulty to quantify the level of IPR protection,
both in terms of legislation and enforcement, across countries and over time with a
consistent and comparative standard. This obstacle can be overcome given that I have
identified the best available datasets measuring statutory protection for patent (Ginarte
and Park’s index, first published in 1997 and updated by Park in 2008, every five years
for 122 countries from 1960 to 2005) and copyright enforcement for software (BSA

50

various years, every year for 110 countries since 1994) respectively in the first section.
With these two panel data sets, I am allowed to conduct longitudinal analysis, which is
regarded as possessing several advantages over conventional cross-sectional or time-
series data sets (Hsiao 2003)
48
. Statistical analysis allows me to differentiate the effects
of various factors confounding with each other and find out whether they have
independent effects on IPR protection, for example, whether there are significant
differences among countries of different legal families and whether these differences
coincide with those among countries with different degrees of government effectiveness.
For another example, single case study might have a hard time to differentiate the effect
of RTAs negotiation from WTO accession negotiation given that both negotiations might
happen at the same time (as shown in the case of Jordan, El Said 2006)
49
However, statistical analysis is far from perfect and sufficient. For one thing,
sometimes quantitative measurements for explanatory variables and explained variables
across countries and over time with a consistent and comparative standard are not readily
. In that case,
we cannot conclude for sure whether the enacting reform in the country was due to the
negotiation pressures from and fever for multilateral trade regime or bilateral (regional)
trade agreement. It would be necessary to resort to statistical analysis to test the
generality of claims with necessary controls.

48
These advantages might include (1) giving researcher a large number of data points, increasing the degrees of
freedom and reducing the collinearity among explanatory variables, and hence improving the efficiency of econometric
estimates; (2) potentially allowing researchers to analyze a number of important economic questions that cannot be
addressed using cross-sectional or time-series data sets; and (3) providing means of resolving or reducing the
magnitude of a key econometric problem that often arises in empirical studies, namely, the often heard assertion that
the real reason one finds (or does not find) certain effects is the presence of omitted (mismeasured or unobserved)
variables that are correlated with explanatory variables.

49
Jordan made statutory changes in its IPR laws in 1999 so that it could get access to the WTO in 2000 and sign a FT A
with the United States in 2001.

51

available or, even though some data are available, the number of observations is simply
way lower than the benchmark number which is necessary for large-N studies. This is
exactly the case if we want to explore the reasons for cross-industry variations of IPR
protection inside a certain country and the conditions and determinants for successful
lobbying behaviors by industries, given that (1) it is hard to measure the degree of IPR
protection at the industrial level in a consistent and comparative way, (2) sometime it is
hard to exactly measure the explanatory variables at the industrial level beyond ordinal
comparison, such as the degree of competition and cooperation among enterprises in their
business relationship and the degree of cooperation in their lobbying efforts as discussed
in the following case study in Chapter 4, and (3) we might only have two or three
industries for comparison, while the number of our explanatory variables could be way
larger than three.
For another thing, statistical analysis is relatively feeble to show the mechanisms
through which explanatory factors influence the results beyond simply demonstrating
correlations. For example, industries’ lobbying efforts and strategies, the process in
which these efforts are made, and their influences on the decision making and
enforcement results, either success or failure, are hard to capture in equations, although
statistical models could establish correlations between IPR protection and R&D
expenditure as a rough measure of domestic incentives for IPR protection. In order to
answer the questions about cross-industry variations of IPR protection inside a certain
country and the conditions and determinants for successful lobbying behavior by
industries, it becomes necessary to supplement quantitative models with case studies that

52

examine the micro mechanisms. Furthermore, it would be difficult to learn which
country specific causes might be relevant without studying any country in depth.
It is more desirable to carefully design or choose cases in qualitative study in
certain ways instead of randomly. Given that qualitative study is small-N study which
might be questioned about the generality of its claims and challenged with alternative
explanations, comparative case study with certain variables constant and with limited
number of interesting explanatory variables variant across cases or carefully chosen
single case study would help us to get more reliable inference. For this purpose of
research rigor while exploring cross-industry variations of IPR protection and the
conditions of successful lobbying by industries, I will examine the evolving disparities in
copyright protection and enforcement for three industries, namely business software,
motion pictures, and recorded music, in China since 1995 up to date. This comparative
case study helps me to hold certain explanatory variables constant across industries,
which have been regarded as important determinants on IPR protection by the existing
literature, such as pressures from developed countries (especially the United States)
(Zeng 2002, Mertha 2005) and domestic bureaucratic structure (Mertha 2005) so that I
can keep my eyes on those which have been overlooked or underemphasized in the past,
such as the economic characteristics and development status of copyright industries,
state-industry linkages, national industrial policies and resulting IPR regime.
Furthermore, examining IPR protection at the industry level actually enlarges the number
of my observations and provides me with extra leverage of theoretical development
comparing with previous studies examining Chinese IPR protection aggregately.

53

There are several factors which make me choose China in this comparative case
study. The most substantial reason is that it makes an original contribution to the existing
studies on IPR protection in China, most of which were conducted at the national level
and therefore lacked a comparative context (see my critiques in Chapter 4 in details). By
zooming into the level of industry, this dissertation shows that even in a country with a
generally bad record in IPR protection, there are variations in IPR protection across
industries and the different patterns of government-industry interaction and the different
characteristics of industries explain those variations. Second, given that China is
traditionally categorized as having an authoritarian regime and industries are generally
regarded as lacking incentives and institutional capabilities to influence legislation and
policy-making, an analysis of conditions for successful industry lobbying constitutes a
least likely case study (Odell 2001). Third, China entered into the radar of my research
because of the importance of this research question of IPR protection to China, to its
trade partners and to the world. Similar to other middle-income developing countries,
China is experiencing rampant piracy of others’ IPRs while at the same time beginning to
create her own IPRs. She was torn between the competing interests of entrenched “pirate”
industries and her indigenous inventors and artists, who would benefit from a stronger
IPR regime. Whether and how these indigenous IP owners stand up to protect their
interests and win the battle against pirating enemies is an interesting as well as important
research question. Considering that China is the most frequent target of sticks of
aggressive unilateralism wielded by the United States, which have encountered constant
failure and frustration in the past two decades, a new examination from the perspective of
industries would help decision makers and business practitioners to reflect and redraft the

54

strategies to address the problem of IPR protection, a problem perplexing the bilateral
trade and investment relationship for a long time. Given China’s sheer size in world trade
and investment as well as her unprecedented resurgence and restructuring, any
development in IPR protection would provide impetus or pullback on improvement of
IPR protection in other countries. Finally, I choose China in the case study because my
personal background in China, including language, knowledge and connections, as well
as research tools are well adapted to this case.

1.6. Implications of This Study
This dissertation speaks to the audience in both the theoretical world and the
practical world on domestic compliance and implementation of international
commitments. It examines the reasons and mechanisms of international compliance in
one of the trade-related issue areas, IPR protection. It shows that at least in the area of
IPR protection, the process of international compliance could be divided into two stages,
firstly legislation or policy making on the book and secondly enforcing those laws and
policies on the ground, and the reasons and mechanisms for these two stages might be
different. Comparing with other issue areas (such as tariff reduction and quotas removal)
where enforcement on the ground itself could follow so closely with legislation and
policy making that it is hard to differentiate the two, it takes much longer to observe
enforcement results presenting themselves in IPR protection. Tariff reduction and quotas
removal happen at the border and need minimal institutions to implement while IPR
protection happens behind the border and need a huge amount of institutional
infrastructure, capacity and good will. Comparing with other issue areas (such as arms

55

control and international territory, maritime areas and cross-border rivers) where
international commitments themselves are those which need to be enforced and thus there
is no need to comply with international commitments with extra policy making, there
could be a huge gap between legislation or policy making and enforcement in IPR
protection and statutory compliance could become an excuse for lack of meaningful
enforcement on the ground. This dissertation implies that different issue areas of
international compliance have different characteristics and processes, emphasize different
aspects of domestic characteristics and international influences to explain the timing,
variations and mechanisms of international compliance, and ask for different strategies in
practice. Any effort to develop an integrative theory of international compliance should
take into consideration the variations across issue areas in the process and the agents
involved in complying with international commitments.
By comparing the reasons and mechanisms of statutory or policy compliance and
enforcement compliance, this dissertation emphasizes the importance of international
influences in statutory or policy compliance and the importance of domestic legal
institutions and indigenous incentives in enforcement compliance in IPR protection.
Other issue areas similar to IPR protection include, but are not limited to, labor rights
protection and environmental protection, where it is relatively easier to make
international promise and change policies and laws accordingly than to enforce those
laws and implement those policies behind the border. Authentic enforcement and
compliance in those areas involve a lot of institutions, agents and sectors and could only
emerge when these actors have enough incentives and enough capabilities. More

56

attention should be paid to domestic legal institutions in these issue areas where legal
institutions are at least as essential as administrative institutions in enforcement.

1.7. Chapter Outline
This dissertation is organized as follows. The next chapter (Chapter 2) presents a
statistical analysis of IPR protection “on the book” in 122 countries from 1960 to 2005,
with patent statutory protection as an example. In this chapter, I examine the effect of
domestic legal institutions and their characteristics, domestic political regime, and
multilateral trade regime with strengthened dispute settlement mechanism. Chapter 3
presents a statistical analysis of IPR protection “on the ground” in 110 countries from
1994 to 2008, with copyright protection for business software as an example. In this
chapter, I further examine the effect of RTAs on copyright enforcement results besides
others effects covered in Chapter 2. By comparing the results in Chapter 2 and 3, I
discuss how the effects of various factors are different from IPR statutory protection to
IPR enforcement. Chapter 4 presents a comparative case study of copyright protection at
the industrial levels in China, with special focus on the effect of industry development,
industry characteristics, industry lobbying efforts and government preferential policy on
IPR statutory protection and enforcement. Chapter 5 concludes by discussing the policy
implications, the contributions of this research to the wider research program, and the
directions of studies in the future.

57

Chapter 2 The International Political Economy of IPR Statutory
Protection: The Case of Patent Protection
In the past three decades, enacting reforms to provide stronger protection for
patent rights, by either legislating new laws or revising the existing laws, have swept
countries across the globe. This chapter explores the conditions under which countries
provided IPR protection by examining the variations in patent statutory protection across
countries and over time for the past fifty years. Why did many countries, especially those
developing ones, not begin to adopt laws and regulations for patent protection compatible
with the United States’ and European minimum standards until the 1980s, even though
some international treaties of patent protection
50
These questions would not be needed if there existed a generally accepted
understanding of the economic, legal and international conditions under which some of
these countries changed their policies and moved toward stronger patent statutory
protection while others failed to do so over almost fifty years. Since there is not, this
chapter aims to find answers to these questions.
had already existed for a long time?
Why did they begin to legislate to protect patent rights in the 1980s even though some
empirical studies have shown that international IPR regimes would not benefit these
countries for the purpose of their development? Why do countries still show differences
in the level of patent statutory protection in their legal codes, even though international
standards of IPR protection have been greatly strengthened since 1995?

50
These international treaties include the Paris Convention in 1883 and its revisions, the Patent Cooperation Treaty in
1970 and its revisions, and the Protection of New V arieties (UPOV) in 1961 and its revisions.

58

This chapter aims to contribute to our understanding of IPR protection in two
ways. First, I take advantage of the cutting-edge statistical tools to provide a systematic
analysis of cross-country variations in the level of patent protection in their legal codes.
Statistical analysis was seldom used as the main methodology in the existing literature on
IPR protection in political science and international relations, which are almost
monopolized by (comparative) case studies. This reliance on case studies can partially
be attributed to difficulties in measuring the level of IPR protection across countries as
well as over time as discussed in Chapter 1. Because of the limitation in data availability
and data quality, the few studies which use statistical analysis have depended on Ordinary
Least Squares (OLS) models and Random Effects (RE) models to analyze panel data. In
view of omitted variables and other problems, those methods may have led to misleading
conclusions.
Second, in this study, I complement the existing literature focusing on economic
factors with an analysis of domestic legal institutions measured by “legal origins”, a
differentiation borrowed from the literature of law and finance, as well as an analysis of
foreign influences from the literature of international relations, and thus provide a more
comprehensive examination of potential determinants of patent statutory protection than
what has been done so far. In the literature of law and finance, countries of different legal
origins have been shown to provide different levels of property rights (broadly defined)
protection, with Common Law countries providing the highest level of property rights
protection and French Civil Law countries providing the lowest level of property rights
protection. Countries with German Civil Law and Scandinavian Civil Law traditions
have been shown to lie in the middle. Do the variations in patent statutory protection

59

across countries follow a similar pattern as for property rights protection in general? This
chapter will provide some preliminary evidence.
Furthermore, in the limited number of studies which have systematically
examined the cross-country and over-time variations in patent protection, international
influences have been generally overlooked. International influences could result from (1)
bilateral trading relationships with countries which provide high level of IPR protection
and have unilateral coercion tools available to use, (2) strengthened multilateral trade
regime “equipped with arms”, (3) RTAs implanted with higher standard of IPR protection
than the existing international standards, and (4) spread of international norms through
foreign direct investment (FDI) from the home countries to the host countries and
competition for FDI with technology transfer among countries. These international
influences are all expected to propel and/or encourage countries to provide higher level of
patent protection, especially in the recent two decades. This chapter will differentiate two
international dispute settlement mechanisms, a bilateral mechanism represented by the
United States’ trade coercion instruments and a multilateral mechanism represented by
the strengthened WTO Dispute Settlement Procedure (DSP).
This chapter is organized as follows. In Section 1, I will briefly review the
existing literature on IPR protection, identify national as well as international, economic
as well as political and legal influences on the level of patent protection, and identify how
this chapter can contribute to the literature. In Section 2, I will discuss the data, their
sources and the models I use. The results obtained are presented in Section 3 showing
the magnitudes of the different influences across countries and over time. Conclusions as
well as suggestions for future research will be discussed in Section 4.

60

2.1.What Have We Learned about IPR Protection and What is Left to be Learned?
Domestic Economic Characteristics and Political Institutions
Econometric studies have established the existence of a strong and positive
correlation between national income and IPR protection, although the causal mechanism
at play between the two is not quite clear. For example, Ginarte and Park (1997)
developed a model based on economic cost-benefit analysis to derive what factors would
affect a country’s choice of level of patent protection and examine how the optimal level
of protection varies in response to changes in exogenous variables. In this model, a
policymaker’s choice of level of patent protection depends on weighing the benefits (such
as stimulating innovation and developing better trade relations with other economies) and
costs (such as limiting access to IPR products which will lead to higher prices for
consumers and good producers using the innovations as inputs, slower and more limited
dissemination of knowledge and future innovations, and the costs of administrating,
adjudicating and enforcing IPR protection). Based on their model, Ginarte and Park
argued that factors which reduce long-run price or stimulate long-run production should
lead to strengthening of patent protection and the richer countries are more able to afford
the infrastructural costs associated with strengthened patent protection. Their empirical
study did indicate that the more developed economies tend to provide stronger protection.
But once the other underlying factors, which may influence patent protection levels and
which are correlated with national income, are controlled in statistical analyses, the effect
of national income is not consistently important or not even consistently positive.
Ginarte and Park showed that it is not the level of development per se that influences the

61

provision of patent protection, but rather the determinants of economic development,
such as investment in R&D activities, investment in human capital, the degree of freedom
in its market environment, the degree of political freedom, and the degree of international
integration measured by trade openness. In other words, national income probably works
as a proxy for these omitted relevant variables.
The study by Ginarte and Park (1997) provides us with a baseline model of patent
protection across countries. The economic factors at the national level must influence the
choice of level of IPR protection through the channel of domestic political institutions.
These domestic political institutions determine whether and how the appeal of certain
interest groups can be represented in the legislation process, the extent and the results of
competition among different constituencies, and the capacities of legal infrastructure. It
is expected that the higher degree of political freedom a country has, the more likely the
interests of various domestic constituencies can be represented and pursued in legislation
and national policy making. However, the net effect of political freedom on the choice of
level of IPR protection is not as clear cut as it might suggest since the interests of both
IPR-supporting groups and IPR-opposing groups can be influential in shaping the legal
code and/or national policy of IPR protection.
Different from traditional international trade instruments (such as tariffs and non-
tariff trade barriers), policies of IPR protection operate behind the border while are
associated with domestic policy objectives. (Barton et al 2006) Higher levels of IPR
protection could provide further incentives for indigenous innovations while at the same
time could also restrict the capabilities of the public to get access to and benefit from
innovations and information products with a reasonable price. Therefore, compared with

62

other international trade instruments, policies of IPR protection are expected to have
more complicated and longer-term implications for social welfare distribution, not only
among different domestic constituencies but also between developing and developed
countries, and may bring more repercussions in domestic politics. Countries might
develop a strong domestic constituency for higher IPR protection, as they become
wealthier and complete a transformation in the structure of their economic activities (such
as increasing percentage of technology-intensive production). In other words, as
domestic researchers, technicians and producers begin to dedicate more resources to
innovative activities, they are more likely to pressure their governments to provide higher
level of IPR protection for their investment in R&D and human capital, their intellectual
achievements and their profit margin. R&D expenditures as a percentage of GDP can be
treated as one proxy for the domestic constituency supporting higher patent protection.
(Ginarte and Park 1997) At the same time, when countries become wealthier and devote
more resources to innovative activities, technology-intensive products become more
affordable to people. This transition further lowers the demand for access to those low
priced goods and further shrinks the size and power of IPR-opposing constituency.

Domestic Legal Institution: Legal Origin
A country’s legal institutions are also important in determining its level of
protection for IPR as a relatively new type of property rights. Economic development
might result in strengthening the capacity of government and/or the legal system so as to
supply enough IPR protection, in terms of not only legislation but also legal enforcement.
It is expected that the richer a country is, the more able it is to afford the infrastructural

63

costs associated with higher IPR protection. Furthermore, the more developed a
country’s legislative and enforcement infrastructure is, the fewer additional resources
would be needed to afford higher levels of IPR protection.
The distinction among different legal origins is not so familiar in the field of
international studies and comparatives politics as it is in the field of law and economics,
especially law and finance. According to the literature of legal origin, countries
belonging to different legal families with different origins of their commercial laws
(English Common Law, and French, German and Scandinavian Civil Law
51

51
Although some may argue that there is another legal origin, the Socialist one, besides the four, I do not include it in
the current study since few countries have Socialist legal origin nowadays.
) generally
exhibit differences in investor protection, government ownership and regulation (or
government involvement in economic life), and the degree of formalism and
independence of judicial system with respect to statutory law (La Porta et al 2008).
Compared to French Civil Law, Common Law is associated with (a) better investor
protection, which in turn is associated with improved financial development, better
access to finance, and higher ownership dispersion (La Porta et al 1997, 1998); (b) lighter
government ownership and regulation, which are in turn associated with less corruption,
better functioning labor markets, and smaller unofficial economies (government
ownership of banks in La Porta et al 2002b, government ownership of media in Djankov
et al 2003b, regulation of entry in Djankov et al 2002, regulation of labor markets in
Botero et al 2004); and (c) less formalized and more independent judicial systems, which
are in turn associated with more secure property rights and better contract enforcement
(formalism of judicial procedures in Djankov et al 2003a, judicial independence in La

64

Porta et al 2004). Countries of German Civil Law and Scandinavian Civil Law tradition
lie in the middle. Some of these studies on legal origin examine the formal legal statutes
(the legal rules on the books) and their quality, while others discuss what happens “on the
ground”.
Although the literature of legal origin has covered several fields of law,
regulations and economy, variations among legal origins have not been examined in the
studies of IPR protection across countries as an issue of both statutory rules and law
enforcement. How could legal origin help us understand the cross-country variation in
IPR protection legislation? From the legal origins literature, three explanations with
respect to efficiency, judicial independence, and adaptability to the evolving
circumstances respectively might be relevant.
First, legal origin theory may predict that IPR protection should follow a similar
pattern of property rights protection among countries using a similar legal system since it
is more efficient to either to adapt what has previously been established (in “mother”
countries) or to transplant it from a similar country with a similar legal system than to
establish from scratch a set of new legal institutions and enforcement. The legal
infrastructure includes not only basic law and strategy for dealing with new problems, but
also the institutions for enforcing the laws and human capital of the participants in the
legal system. As shown in the literature of legal origin (such as La Porta et al 1999),
Common Law countries exhibit more generally higher scores on a variety of measures of
security of property rights. If the efficiency consideration works in reality, Common Law
countries would provide more protection for IPR than French Civil and Socialist Law
countries.

65

Second, the literature on legal origins has found a strong correlation between the
Common Law tradition and judicial independence
52
A third important difference between Common Law and French Civil Law, which
was touched upon in legal origin literature (such as formalism of judicial procedures, by
Djankov et al 2003), well explored by Beck et al (2003) and further modeled by
. The literature also found that
judicial independence is a strong predictor of some measures of economic freedoms, such
as protection of property rights. La Porta et al’s empirical study (2004) shows that legal
origins influence economic freedom partially through judicial independence and further
argues that judicial independence may provide us with a micro-foundation for the effects
of legal origin on economic freedom. Judicial independence is obviously valuable for
enforcing IPR protection when the government itself is a litigant, as well as when the
government itself is infringing others’ intellectual property rights. Judicial independence
is also valuable in purely private disputes when one of the litigants is politically
connected to the executives who want to make the court favor its clients. However, the
effect of judicial independence on IPR protection legislation is not clear cut. Although
judges in the countries with higher judicial independence (especially those countries of
Common Law tradition) could enact laws mainly based on legal logic and independent of
the legislation and politics to some extent, whether judges could enact laws favorable to
the IPR holders still depends on their preferences as for how to balance the two opposite
objectives of encouraging indigenous innovations and ensuring the general public to have
sufficient access to innovative products but at reasonable prices.

52
Glaeser and Shleifer 2002 even regarded judicial independence as the defining characteristic of Common Law
tradition.

66

Gennaioli and Shleifer (2007) and Ponzetto and Fernandez (2008), is their different
adaptability to the evolving circumstances. Comparative law literature and legal origin
literature noticed that the theory underlying French legal doctrine is different from that of
Common Law. French Civil Law tends to hold that the laws drafted by legislature were
so clear, complete and coherent that it should not be necessary for judges to choose
among competing statutes, to give practical meaning to ambiguous statutes, and to
deliberate how laws and past experiences could be applied to new situations. Judges only
play a mechanical role. In contrast, judges in Common Law countries are granted
substantial discretion to challenge and replace inefficient laws with new efficient ones
through their case-by-case litigation decisions. Judges in French Civil Law are obligated
to adhere to the logical principles of codified law while those in common law are
obsessed with facts and deciding concrete disputes. In consequence, when handling the
myriad of changing problems that arise in a dynamic situation, Civil Law countries,
depend heavily on changes in statutory law (upon which courts’ judgments are almost
purely based), while Common Law countries, embracing judicial discretion and judge-
made law as an important source of law, can simply depend on the accumulation of
judges’ case-by-case decisions. Considering that changes in statutory laws are an
outcome of political process involving a multiplicity of divergent agents and therefore are
costly and prolonged, French Civil Law countries tend to be less flexible, less responsive
and less efficient to adapt to evolving economic circumstances and changing needs of
society conditions than Common Law countries. Rigid French Civil Law doctrine would
have larger gaps between social needs and the legal system’s capability to satisfy those
needs than dynamic Common Law doctrine would. Adaptability to the evolving

67

circumstance is especially relevant in the case of IPR protection, given that new
technology and innovations (both those whose patent should be protected as well those
communication technologies and innovations which help new ideas and IPR-intensive
products spread out without space limit and within a blink) erupt so quickly.
There are two points worth making clear. For one, although scholars of
comparative law found that the French have found ways to circumvent much inefficiency
in their rigid doctrine with antagonism toward jurisprudence and judicial discretion by
using case law to alter its legal system afterwards (Merryman 1985, 1996), yet, they also
found that French Civil Law colonies, which inherited the French legal doctrine, are not
as lucky. (Beck et al 2003) These countries simply inherited the French Civil Code and
its legal principle imposed upon them no matter how seriously it conflicted with their
local laws and how seriously these conflicts impeded the application and further
development of the law. They inherited the French legal culture of prohibiting open
discussion by judges on competing and ambiguous statutes and open challenges of past
court judgments when deciding new cases. Even worse, they failed to learn from the
French how to circumvent the inefficiency and rigidity of the French doctrine. Besides,
the lower prestige and inferiority of the judges makes the judicial profession a less
preferred choice and prevents more responsive legal system from developing because of a
dearth of intelligent people in law. All of these prevented these countries from
developing efficient legal system and make them more likely to be less adaptive to the
evolving circumstance than the Common Law countries. For another, German Civil Law
has been regarded by many comparative legal scholars as closer to Common Law and
different from French Civil Law in terms of its adaptability since it embraces

68

jurisprudence and judicial discretion in creating a responsive and flexible legal system.
(La Porta 1997 and Beck et al 2003 to name a few) Therefore, if the hypothesis of
adaptability to the evolving circumstance was right, German law countries would have
similar levels of IPR protection with Common Law countries, with other conditions the
same.

International Influences: Multilateral and Bilateral Dispute Settlement Mechanisms
Besides domestic economic circumstances and political and legal institutions,
there are strong reasons to expect international factors to play an important role in
improving IPR protection across the world and over time. Countries, especially those
developing ones, have faced intense bilateral, regional and multilateral demands and even
pressures to change their domestic laws, policies, and behaviors of IPR protection.
When the WTO was established in 1995, the TRIPS Agreement also went into
effect. According to this agreement, all the members of the WTO as well as countries
who expect to be members of the WTO must accept the TRIPS Agreement at the same
time they accept provisions of other agreements under the WTO. For countries who had
been WTO members prior to 1995, the obligations for full implementation of the TRIPS
Agreement vary by their level of development. Developed countries were granted a one-
year transition period, while developing countries were granted a five-year transition
period. For countries which were not founding members in 1995, the application of
TRIPS obligations were negotiated when they applied for accession. In these cases, full
implementation of the TRIPS Agreement was expected immediately upon entry, although
the obligations might be different from case to case. It is expected that WTO

69

membership, the greater obligations to implement TRIPS Agreement, as well as
negotiation with respect to WTO membership could have positive effects on the level of
IPR protection.
Does an international organization or international agreement really matter in
changing countries’ behavior? Different theories of international relations have given
different answers. Realists and Neorealists in international relations do not think
international organizations can make any difference, since countries will only act
according to the principle of maximizing their own absolute power or relative power. In
contrast, functionalist institutionalists believe that international institutions are useful to
promote international cooperation and implementation according to international
agreements, because they can set up legal behavior expectations, provide information to
countries about each other’s implementation behavior and reduce transaction costs.
(Keohane 1984, Maggi 1999) This informative role is especially important to the
working of reciprocity and non-discrimination principle in the General Agreement on
Tariffs and Trade (GATT) and the WTO. (Bagwell et al 1999) However, the empirical
evidence is mixed. For negative evidence, if we review the history of international IPR
protection, memberships in international treaties and organizations (e.g. the Berne
Convention, the Paris Convention, and the WIPO) are found to have only a minimal role
in changing states’ behavior. (Ginarte and Park 1997; Sell 1998) For some positive
evidence, developing countries, even those least developed ones, began to establish
“TRIPS-plus” protection of IPR after 1995. (Deere 2006)
Some may argue that the failure of previous international treaties and institutions
to elicit national legal and behavioral changes in IPR protection results from the fact that

70

these international institutions do not have strong enough “teeth”. According to
functionalist institutionalism, the expertise requirements to accurately verify agreement
violations promote the legalization of international institutions. Higher level of
legalization (Goldstein 2000)
53
is expected to elicit higher level of compliance with
international agreements by rational choice theorists. (Koremenos et al 2001) In the case
of IPR protection, since the TRIPS Agreement is a part of the agreements establishing the
WTO, the realm of IPR is now subject to the disciplines of an international organization
with a binding dispute resolution process, of which the previous international institutions
lacks. Under the TRIPS Agreement, IPR-violating countries can be sued in front of the
WTO DSB and can be penalized with retaliatory trade sanctions. Since the WTO was
established and the TRIPS Agreement entered into force in 1995, there have been sixteen
cases related with patent protection and enforcement raised in front of the WTO DSB up
to date. (See Table 2.1) We have good reason to expect that the effect of the TRIPS
Agreement under the strengthened the WTO DSB
54

53
Legalization is defined and measured by the degree to which rules are obligatory, the precision of those rules and the
delegation of some function of interpretation, monitoring and implementation to a third party.
would be different from the effect of
previous agreements. (Drahos 2002; Ryan 1998, and Sell 2003) Under the strengthened
enforcement mechanism of the WTO compared with that of the GATT, countries are
expected to comply more with international agreements and legislate for higher IPR
protection according to the standard established by the TRIPS Agreement after 1995.

54
Some theorists argue that the strengthened enforcement mechanism is still not as perfect as enforcement in domestic
court, since both the GATT and the WTO have relied on decentralized sanctions for decades, in which a dispute panel
finds violations of international trade rule, while it is up to the injured party to retaliate within specified limits. Both the
GATT and the WTO have no centralized power to punish or reward, but only to authorize individual members to do so.
The WTO just moves one step further than the GATT in terms of its centralized and strengthened DSP arrangement for
judging trade disputes, which are characterized with its time-bound and negative consensus properties. (Pekkanen 2003
and Petersmann 1997) Some researchers even argue that Appellate Body (AB) in the WTO has its own power of
interpretation and even rule-making of international law. (Garret et al 2000, Barton et al 2006)

71
Table 2.1 Cases Related with Patent Protection, the WTO DSB (1995-2010)

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS 36 Pakistan US
Patent Protection for
Pharmaceutical and
Agricultural Chemical
Products
27, 65,
70
President issued Ordinance to
establish a system for the filing of
patent applications and to grant
patents for pharmaceutical and
agricultural chemical products.
(02/04/1997)
04/30/1996 03/07/1997
c

DS 37 Portugal US
Patent Protection
under the Industrial
Property Act

33, 65,
70
Issued Decree Law confirming the
length of patent protection. (1996)
04/30/1996 10/08/1996
c

DS 50 India US
Patent Protection for
Pharmaceutical and
Agricultural Chemical
Products
27, 65,
70
Promulgated the Patents Ordinance
(01/08/1999), which was replaced by
the Patents (Amendment) Act 1999.
(03/26/1999)
07/02/1996 04/16/1999
d

DS 79 India EC
Patent Protection for
Pharmaceutical and
Agricultural Chemical
Products
27, 65,
70, 70.8,
70.9
(See DS 50) 04/28/1997 04/16/1999
d

DS 83 Denmark US
Measures Affecting
the Enforcement of
IPR
50, 63,
65
The Parliament passed amendments to
the Administration of Justice Act
granting the relevant judicial
authorities the authority to order
provisional measures in the context of
civil proceedings involving IPR
enforcement. (03/20/2001)
05/14/1997 06/13/2001
c

72
Table 2.1 Continued

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS 86 Sweden US
Measures Affecting
the Enforcement of
IPR
50, 63,
65
The Parliament passed legislation
granting judicial authorities the
authority to order provisional
measures in the context of civil
proceedings involving IPR.
(11/25/1998)
05/28/1997 12/02/1998
c

DS
114
Canada EC
Patent Protection of
Pharmaceutical
Products
27, 27.1,
28, 33
Proposed to make regulatory change
to revoke Subsection 55.2(2) of the
Patent Act so that no one who has
availed themselves of the “regulatory
review exception” could be entitled to
further manufactured or further
stockpile products prior to the
expiration of the term of the relevant
patent. (2000)
e
12/19/1997 10/07/2000
f

DS
153
EC Canada
Patent Protection for
Pharmaceutical and
Agricultural Chemical
Products
27.1 N.A. 12/02/1998 N.A.
g

DS
170
Canada US
Term of Patent
Protection
33, 65,
70
Bill S-17 came into force on Jul.12,
2001.
h

05/06/1999 08/12/2001
i

73
Table 2.1 Continued

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS
171
Argentina US
Patent Protection for
Pharmaceuticals and
Test Data Protection
for Agricultural
Chemicals
27, 65,
70
Agreed to submit to the National
Congress within one year an
amendment to Argentinean law on
product by process patent protection,
shifting the burden of proof in process
patent infringement cases, and
preliminary injunctions; to fulfill its
WTO obligations on Art.70.7 through
its legal system and practices.
h

05/06/1999 06/20/2002
c

DS
186
US EC
Section 337 of the
Tariff Act of 1930 and
Amendments thereto
3, 2, 9,
27, 41,
42, 49,
50, 51
N.A. 01/12/2000 N.A.
g

DS
196
Argentina US
Certain Measures on
the Protection of
Patents and Test Data
27, 28,
31, 34,
39, 50,
62, 65,
70
(See DS 171) 05/30/2000 06/20/2002
c

DS
199
Brazil US
Measures Affecting
Patent Protection
27, 27.1,
28, 28.1
No amendment of legislation made.
Brazil agreed that in the event it
deems necessary to apply Art.68 of
Brazil’s Industrial Property Law to
grant compulsory license on patents
held by the U.S. companies, the
Brazilian Government will hold prior
talks on the matter with the U.S.
Government within the scope of the
U.S.-Brazil Consultative Mechanism.
05/30/2000 07/19/2001
j

74
Table 2.1 Continued

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS
224
US Brazil US Patents Code 27, 28 N.A. 01/31/2001 N.A.
g

DS
408
EU and
Nether
-lands
India
Seizure of Generic
Drugs in Transit
7, 8, 2,
28, 31,
41, 42
N.A. 05/11/2010 In progress

DS
409
EU and
Nether
-lands
Brazil
Seizure of Generic
Drugs in Transit
1.1, 2,
28, 31,
41.1,
41.2, 42,
49, 50.3,
50.7,
50.8, 51,
52, 53.1,
53.2, 54,
55, 58,
59.
N.A. 05/12/2010 In progress

Notes: US: the United States; EC: the European Community; EU: the European Union; AB: the Appellate Body of the WTO DSB; N.A.: not available.
a. The Starting Date is the date when the request for consultations was made.
b. The Ending Date is the date when a mutually agreed solution was notified, or when the period of implementation for the panel/AB report agreed by the parties or
determined by Arbitrator was going to expire, or when no further action was taken either by the parties or the WTO DSB, whenever is latest.
c. The case ended when a mutually agreed solution was notified without establishing a panel.
d. The case ended when the period of implementation for the AB report agreed by the parties was going to expire.
e. On Oct.23, 2000, Canada notified the WTO DSB that it had implemented the DSB recommendations effective from Oct.7, 2000. But the implementation status report
is not available on the WTO website.
f. The case ended when the period of implementation for the panel report determined by Arbitrator was going to expire.
g. The case ended without further actions taken either by the parties to the dispute or by the WTO DSB.
h. Detailed information about legislation, such as status report on implementation by the defendant, is not available on the WTO website.
i. The case ended when the period of implementation for the AB report determined by Arbitrator was going to expire.
j. The case ended when a mutually agreed solution was notified, although a panel had been established but not made any decision.
Sources: The WTO DSB. For the disputes which cited the TRIPS Agreement, please see the WTO webpage at
http://www.wto.org/english/tratop_e/dispu_e/dispu_agreements_index_e.htm?id=A26#selected_agreement, accessed on Apr.25, 2011.

75

Studies in regard to the effect of strengthened enforcement mechanism from the
GATT to the WTO on compliance and implementation (of various issues) are quite
limited, with studies by Busch and Reinhardt as exception. They detected a selection
effect in the GATT disputes that the defendant tends to concede more prior to a ruling
than after a ruling against it (Busch and Reinhardt 2002). This selection effect implied
that increasing audience cost associated with increasing transparency at the consultation
and ruling stage in the WTO may be counterproductive to comply (Busch 2000,
Reinhardt 2001). But their studies focus on the cases in the GATT, and did not directly
deal with the effect of the strengthened WTO on IPR protection.
55
In addition to the multilateral pressures derived from membership in the WTO
and potentially being subject to trade sanctions authorized by the WTO dispute settlement
mechanism, countries also faced unilateral pressures from the U.S. to improve their IPR
protection. The “Special 301” provisions of the 1988 Omnibus Trade and
Competitiveness Act gave the U.S. President authority to retaliate against foreign
countries that violate IPR of the U.S.’s citizens and companies. Special 301 requires the
USTR to identify, within 30 days of issuing the National Trade Estimates Report, “those
countries that deny adequate and effective protection of intellectual property rights, or
deny fair and equitable market access to the United States persons that rely on intellectual
property rights.” At the end of every April, the USTR publicizes an annual Special 301
Report, listing countries where the treatment of IPR fails to meet the U.S. standards,

55
Furthermore, their definition of “compliance” is problematic. Following Hudec (1993), they equalized “compliance
with rulings” with the dispute outcome or the ultimate policy result of a dispute, which is defined as the extent to which
the defendant liberalized the disputed trade policy practices according to the complainant’s demands (Busch and
Reinhardt 2002, p473), although these two things are not the same literally.

76

based on the nominations by several industry associations.
56
(Sell 1998) Countries are
listed in one of the three categories, with increasing severity of their IPR infringement:
Watch List, Priority Watch List, and Priority Foreign Countries. Especially, if a country
is identified as “Priority Foreign Countries”, the USTR has 30 days to decide whether or
not to conduct a formal investigation that could lead to trade sanction. Besides the three
categories of priority monitoring, the USTR also announces which countries are under
Section 306 monitoring for their compliance with bilateral intellectual property
agreements signed with the U.S. and which countries are under the OCRs
57
Is unilateral pressure, represented by the U.S. Special 301 practice, effective in
eliciting national policy change in the case of IPR protection? Structural neorealist
theories of international relation derive nations’ interest to conduct certain policy from
the structure of the anarchic international system, based on the distribution of power
throughout the system. These theories predict that the more powerful states will prevail
over the weaker ones, and that the powerful ones make the rules and the less powerful
ones can only follow those rules. From this perspective, the structure of the system
by the USTR
in the annual USTR Special 301 Report. Even after the Uruguay Round was completed
and a new IPR regime was integrated with a strengthened DSP under the WTO, the U.S.
made it clear that it will never give up in using unilateral instruments to protect IPR if
necessary and has continuously publicized its annual Special 301 placement until today.

56
International Intellectual Property Alliance (IIPA) is the most important and active one. It is an association of several
IPR-related industry associations, including Association of American Publishers (AAP), Business Software Alliance
(BSA), Entertainment Software Association (ESA), Independent Film & Television Alliance (IFTA), Motion Picture
Association of America (MPAA), National Music Publishers’ Association (NMPA), and Recording Industry
Association of America (RIAA).

57
Out-of-Cycle Reviews are conducted to monitor progress in addressing concerns regarding the lack of adequate
protection and enforcement of IPR and may result in change of placement a certain country has on Special 301 report
from year to year, although the change is not guaranteed.

77

imposes constraints on states’ freedom of action, and the states’ policy interest is defined
exogenously. Reflecting a combination of realist and structuralist perspectives on
international relations, researchers on IPR protection argue that developing countries’
adoption of stronger IPR protection is determined largely by the degree of pressures
applied by international donors, investors, and trading partners upon whom they rely for
market access, foreign aid, and sometimes even national security. In particular, the
wealthiest developed countries, the U.S. and the European Union (EU), are considered as
a crucial factor that determines how developing countries address the issue of IPR
protection domestically. (Sell 1995, 1998, 2003; Drahos 2002, 2003) For example,
Bayard and Elliott (1994, pp83-85) argued that the success of the U.S.’s aggressive
unilateralism depends on the target country’s vulnerability to the U.S. retaliation,
measured by the share of the target’s gross national product (GNP) which is accounted
for by the exports to the U.S. Sell found that the USTR pressure in the late 1980s and
early 1990s was effective in getting countries to change their laws and policies in IPR
protection, although not the actual enforcement of IPR protection. Mertha and Pahre, in
their case study of IPR protection in China (Mertha 2005, Mertha and Pahre 2005), also
showed that the unilateral pressure from the U.S. has the essential effect in improving
legislation on patent, copyrights and trademark protection, although the gap between
legislation and enforcement cannot be reduced by unilateral pressure. Some legal studies
treated domestic legislation as a result of spreading of American laws to other
jurisdictions through economic liberalization and political fragmentation. (Kelemen et al

78

2004) Steinberg (2005) even specified international trade regime as the means through
which the U.S. spread its American legal style and state mold to developing countries.
58
On the other hand, unilateral pressure may not be as effective as expected.
Because of its characteristic of “unilateral aggressiveness”, Special 301 placement may
lead to domestic backlash in the target countries, thus increasing the domestic political
cost of conceding. Furthermore, Special 301 can be effective as a threat only if this threat
is credible. (Schelling 1960) For example, Special 301 placement may not be effective in
eliciting interested legislation and enforcement in those countries which are hardly
dependent on the U.S. market, or in those countries on whose market the U.S. is highly
dependent. Zeng (2002) paid attention to the possible influence of the structure of trade
between the U.S. and target countries and identified the degree of trade competitiveness
(measured by the number of overlaps between the top twenty commodities the U.S.
exports and the top twenty commodities it imports from a particular country) to explain
the success of aggressive unilateralism.

Besides the unilateral pressure derived from structural power imbalances and
USTR’s use of bilateral dispute settlement mechanisms, we also need to consider the
incentive provided by the U.S. BITs. These treaties address the IPR issue by treating it as
an aspect of investment and making high levels of IPR protection a prerequisite for all
prospective BITs partners. Actually, under these BITs arrangements, countries have
obligated themselves for “TRIPS-plus” obligations on IPR protection. Considering the
potential benefits of signing BITs with the U.S., such as potential increases of foreign

58
Steinberg thought that the U.S. tries to spread its American legal style and state mold to developing countries by
using accession to international regimes, rule deepening in international regimes, and enforcement of the rules with
both unilateralism and multilateralism to elicit reduced role of state-led and central planning institutions, elements of
new state capacity, shifts of authority, changes in national policy-making processes, and national legal system changes.

79

investment from the U.S. and tighter trade and investment relationships with U.S., such
treaties provide incentives as well as compensation for the cost of providing higher levels
of IPR protection.

Relative Importance of Domestic Characteristics and International Influences in
Determining the Level of IPR Protection
After examining econometric studies on domestic economic and political
determinants, as well as possible effects of legal institutions and international influences,
no matter whether they result from strengthened international institutions or various
means of unilateral coercion and incentives, we need to take into consideration all of
these factors in order to systematically analyze cross-country variations in IPR protection
over the past fifty years. One of such outstanding studies is conducted by Deere (2006)
in her study of the variations among developing countries in three core aspects of the
TRIPS implementation (the timing of implementation, the pace and strength of legislative
reforms, and the degree of enforcement offered
59

59
In particular, the author examined the varying degree to which developing countries took advantage of TRIPS
“flexibilities”.
), which can be explained by the
interplay between global power pressures and national political dynamics. Her case
study showed that the reasons why francophone African countries surprisingly provide
“TRIPS-plus” protection of IPR are the weak national political dynamics plus the strong
international power pressures, and especially the strong international efforts to build
capability in these countries. But this study relied on case studies instead of statistical
analysis. Her focus on francophone African countries can also be challenged, because of

80

the limited importance of these countries to TRIPS implementation
60
Finally, with few exceptions (Ginarte and Park 1997; Shadlen et al 2005), most of
the literature on implementation of IPR protection use cases studies as their exclusive
research methods. This monopoly of case studies results from the well-known difficulty
in quantifying the degree of IPR protection across countries and over time with a
consistent and reliable standard. Because of the limitation in data availability and data
quality, the few studies using statistical tools mainly relied on OLS models and RE
models (Ginarte and Park 1997, Shadlen et al 2005) to analyze panel data. In view of
omitted variables and other problems, those methods may have led to misleading
conclusions.
, and that national
political dynamics cannot be fully represented in settings in which national political
dynamics are totally overwhelmed by the international pressures. Another outstanding
study combining both the national and international determinants is conducted by
Shadlen, Schrank, and Kurtz (2005). This study examined the effect of both national and
transnational determinants on the levels of software piracy in 80 countries from 1994 to
2002 and showed that membership in the WTO and bilateral pressures from the U.S.
(particularly pressures that offer reciprocal concessions) led to substantial increases in
levels of protection in both rich and poor countries.

60
There may be some political importance (for instance, pushing other countries to emulate), but I am afraid that the
economic importance of the TRIPS implementation in these countries is very limited.

81

2.2. Data, Data Sources and Models
V ariable Operationalization, Data Sources and Data Management
Before I move on to explore the conditions under which countries provide higher
level of patent protection through legislation and why certain countries made more
improvement on patent protection than others over time, let me discuss how I
operationalize and measure dependent variable and independent variables. As identified
in Chapter 1, I will use Patent Rights (PR) Index first developed by Ginarte and Park
(1997) and recently updated by Park (2008) to measure the level of statutory protection
for patent rights. This PR Index measures the legal protection of patent rights every five
years from 1960 to 2005 for 122 countries and economies.
61
As for domestic economic and political factors, I follow Ginarte and Park (1997)
to include real GDP per capita, trade openness, political and market freedom and
investments in human capital and R&D in my analysis and follow their sources of data
collection (except for trade openness). As for legal origin, I use the data in La Porta et al
(For how the index was
constructed, please refer to Appendix) Given that this index was recently updated by
Park (2008), I could take advantage of this PR Index with longer time coverage and wider
country coverage in my statistical analysis, compared with the one used by Ginarte and
Park (1997). I will examine both the level of the PR Index as well as its changes as the
dependent variables in my analysis.

61
The original index (Ginarte and Park 1997) was constructed for 110 countries and economies, quinquennially from
1960 to 1990. This PR Index is not perfect either, especially considering that (1) it includes membership in
international treaties as one of its dimensions, which might overlap with other dimensions; (2) its inclusion of
membership in international treaties as one of its dimensions limit my capability to analyze the effect of membership in
international treaties (especially the TRIPS) on patent protection; and (3) it only measures the legal protection for
patent but cannot tell us anything about how these legal protections are enforced.

82

2008. Please note that this measurement of legal origin does not have annual variation.
This property limits our model selections as discussed below.
As for bilateral dispute settlement with the U.S., I use dummy variables to
indicate whether a certain country was placed on the three different categories of Special
301 list, Section 306 monitoring list, and OCR list by the USTR, and whether a country
has signed a BIT with the U.S. for more than half the year. I refer to the USTR annual
Special 301 reports for various monitoring categories and the website of U.S. Department
of State for information of BITs respectively. As for the multilateral dispute settlement
under the WTO DSP, I use another dummy variable to indicate whether a certain country
was a defendant before the WTO DSB against another country or country group as
complaint(s) for its insufficient protection of patents. I refer to the online documents
available at the WTO DSP gateway. Please see Table 2.2 for variable operationalization
and data sources.
There are four points which should be noted here about the data used later for
analysis. First, the data of GDP per capita are log-transformed to remove the exponential
growth of GDP per capita over time for a certain country. Second, considering that the
dependent variable, the PR Index, is measured every five years, the original
measurements for all independent variables, which are measured every year, cannot be
used directly. To solve this problem, I compute the average value for several continuous
independent variables (including logged GDP per capita, R&D, secondary enrollment
rate, political rights, trade openness) in the five years before the observation of the PR
Index, and the average values of several dummy independent variables (including
placement of Priority Foreign Country, Priority Watch list, Watch List, 306 List, OCR,

83
Table 2.2 Independent Variables and Data Sources for the Analysis of Patent Statutory Protection

Independent Variables Available Y ears Source
Logged GDP pc. Logged real GDP per capita, constant 2000
US dollar.
1960-2004 World Development
Indicator (WDI), World
Bank
R&D. Expenditure on R&D as a percentage of GDP 1965-2004 UNESCO
Secondary Enrollment Rate. Gross rate of secondary school
enrollment.
1971-2004 WDI, World Bank
Trade Openness. Total trade (export plus import) as a
percentage of GDP .
1960-2004 WDI, World Bank
Economic Freedom. An index measuring on a zero-to-
hundred scale, with higher number representing higher degree
of economic freedom.
1995-2004 Heritage Foundation
Political Rights. An index measured on a one-to-seven scale,
with one representing the highest degree of freedom and
seven the lowest.
1972-2005 Freedom House

Common Law. 1 if a certain country belongs to Common
Legal Origin, 0 otherwise.
(no annual variation) La Porta et al 2008
French Civil Law. 1 if a certain country belongs to French
Legal Origin, 0 otherwise.
(no annual variation) La Porta et al 2008
German Civil Law. 1 if a certain country belongs to German
Legal Origin, 0 otherwise.
(no annual variation) La Porta et al 2008
Scandinavian Civil Law. 1 if a certain country belongs to
Scandinavian Legal Origin, 0 otherwise.
(no annual variation) La Porta et al 2008

Priority Foreign Country. 1 if a certain country was
designated as a Priority Foreign Country by the USTR
Special 301 Report in a certain year, 0 otherwise.
1989-2004 USTR Special 301 reports
as described in text, Federal
Register

84

Table 2.2 Continued

Priority Watch List Country. 1 when a country was
included in Priority Watch List by the USTR Special 301
Report in a certain year, 0 otherwise.
1989-2004 USTR Special 301 reports
as described in text, Federal
Register
Watch List Country. 1 when a country was included in
Watch List by the USTR Special 301 Report in a certain year,
0 otherwise.
1989-2004 USTR Special 301 reports
as described in text, Federal
Register
306 List Country. 1 when a country was under Section 306
monitoring according to a bilateral IPR agreement with the
U.S., 0 otherwise.
1989-2004 USTR Special 301 reports
as described in text, Federal
Register
OCR. 1 when a country was under Out-of-Cycle Reviews by
the U.S., 0 otherwise.
1989-2004 USTR Special 301 reports
as described in text, Federal
Register
BITs. 1 when a country has a bilateral investment treaty with
the U.S. which has been signed for at least half the year, 0
otherwise.
1983-2004 U.S. Department of State

Defendant in the WTO. 1 when a country is defendant in a
patent-related case in the WTO DSP , 0 otherwise.
1995-2004 WTO

Notes:
(1) All of the independent variables, except Economic Freedom and those of legal origins, are the average of the data for the preceding five years before
the PR Index measurement respectively.
(2) The data of Economic Freedom are the average of ten years, from 1995 to 2004. Therefore the data of Economic Freedom is time-invariant.
(3) Data availability varies across countries. Therefore the panel data are unbalanced.

85

BITs with the U.S., defendant in the WTO DSP), again in the five years before the PR
Index measurement. Therefore, the independent variables can be viewed as being lagged
five years behind the PR Index. The latter group of 5-year average of dummy
independent variables from the original dataset can be viewed as measurements for the
extent of bilateral and multilateral pressure and incentives that a certain country faces in
that five-year range. Lagging independent variables helps us to avoid the potential
problem of simultaneity, especially between the PR Index and economic development,
R&D expenditure, Special 301 placements and other subordinate placements, and being a
defendant under WTO DSP. These lagged 5-year average values of independent
variables will be used in the final statistical analysis. Third, the original data of economic
freedom are averaged for 1995-2004, instead of being averaged for every five years,
which might shrink the sample size too much because of the short coverage of the data.
Therefore, measurement of economic freedom is treated as a time-invariant variable in
this study. Fourth, in this chapter, I cannot include both TRIPS membership and WTO
membership as independent variables and examine their effects on the protection of
patent rights, since TRIPS membership is highly correlated with WTO membership, and
also is one of the components of the PR Index (see Appendix). Inclusion of TRIPS
membership and/or WTO membership in the model would lead to collinearity and also
built-in bias by tautology. (See Table 2.3 for descriptive statistics.)

Models
When exploring the reasons for certain levels of patent protection as well as its
over-time change, I will focus on examining the three groups of variables of interest in

86

Table 2.3 Sample Statistics (1960-2005)

PRI GDP RD SER PR TO EF PFC
N 1080 973 497 799 819 965 1200 1210
Mean 2.28 7.46 0.95 51.43 3.79 64.23 59.20 0.0026
Std. dev. 1.00 1.59 0.87 33.87 2.18 40.98 11.62 0.0372
Min 0.20 4.42 0.01 1.06 1.00 0.67 17.01 0
Max 4.88 10.80 4.77 154.69 7.00 389.30 89.29 0.80
GDP 0.51*** 1.00
RD 0.53
***
0.67
***
1.00
SER 0.63
***
0.82
***
0.61
***
1.00
PR -0.49
***
-0.71
***
-0.45
***
-0.70
***
1.00
TO 0.19
***
0.26
***
0.08
*
0.29
***
-0.22
***
1.00
EF 0.31
***
0.76
***
0.41
***
0.59
***
-0.67
***
0.23
***
1.00
PFC 0.02 -0.03 0.00 0.02 0.03 -0.01 -0.02 1.00
PWL 0.20
***
0.10
***
-0.01 0.19
***
-0.09
***
-0.06
*
0.03 0.28
***
WL 0.37
***
0.23
***
-0.02 0.33
***
-0.24
***
0.05 0.15
***
0.10
***
306 0.06
*
-0.01 -0.02 0.02 0.05 0.02 -0.01 0.35
***
OCR 0.16
***
0.09
***
-0.01 0.12
***
-0.08
**
0.08
**
0.06
**
-0.01
BITs 0.17
***
-0.02 -0.18
***
0.13
***
-0.06
*
0.13
***
-0.05 0.02
WTO 0.16
***
0.13
***
0.10
**
0.16
***
-0.13
***
0.00 0.08
***
-0.01
CL 0.04 -0.09
***
-0.02 -0.06
*
-0.08
**
0.14
***
0.14
***
-0.01
FCL -0.22
***
-0.16
***
-0.39
***
-0.23
***
0.22
***
-0.15
***
-0.31
***
-0.03
GCL 0.20
***
0.21
***
0.38
***
0.30
***
-0.11
***
0.02 0.18
***
0.07
***
SCL 0.16
***
0.32
***
0.27
***
0.30
***
-0.27
***
0.09
***
0.22
***
-0.02

Notes:
(1) PRI, PR Index; GDP, logged GDP pc; SER, Secondary Enrollment Rate; PR, Political Rights; TO, Trade Openness;
EF, Economic Freedom; PFC, Priority Foreign Country; PWL, Priority Watch List; WL, Watch List; 306, 306 list.;
WTO, Defendant in the WTO; CL, Common Law; FCL, French Civil Law; GCL, German Civil Law; SCL,
Scandinavian Civil Law.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.

87

Table 2.3 Continued

PWL WL 306 OCR BITs WTO CL FCL GCL SCL
1210 1210 1210 1210 1210 1220 38 65 12 5
0.0241 0.0599 0.0023 0.0029 0.0650 0.0054
0.1169 0.1972 0.0445 0.0261 0.2396 0.0532
0 0 0 0 0 0
1.00 1.00 1.00 0.40 1.00 0.80

1.00

0.47
***
1.00
0.05 0.06
**
1.00
0.29
***
0.26
***
0.12
***
1.00
0.15
***
0.21
***
-0.02 -0.00 1.00
0.12
***
-0.01
***
-0.01 0.03 0.03 1.00
-0.05
*
-0.05
*
-0.04 0.00 -0.07
**
0.04 1.00
0.01 0.02 -0.00 -0.04 0.07
**
-0.05
*
-0.73
***
1.00
0.11
***
0.08
***
0.08
***
0.08
***
0.03 -0.04 -0.22
***
-0.36
***
1.00
-0.05
*
-0.04 -0.01 -0.02 -0.05
**
0.09
***
-0.14
***
-0.22
***
-0.07
**
1.00

Notes:
(1) PRI, PR Index; GDP, logged GDP pc; SER, Secondary Enrollment Rate; PR, Political Rights; TO, Trade Openness;
EF, Economic Freedom; PFC, Priority Foreign Country; PWL, Priority Watch List; WL, Watch List; 306, 306 list.;
WTO, Defendant in the WTO; CL, Common Law; FCL, French Civil Law; GCL, German Civil Law; SCL,
Scandinavian Civil Law.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.

88

order: (1) baseline analyses similar to that in Ginarte and Park (1997), which includes
only domestic economic and political characteristics; (2) analyses examining the
influence of legal origin; and (3) analyses examining the effect of international influences
represented by various bilateral and international dispute settlement mechanisms. The
results will be presented in the next section. The first three subsections of Section 3 will
show the results explaining the level of patent protection across countries over time. In
each section, three different models, Pooled Ordinary Least Squares (POLS), RE and
Fixed Effects (FE), when feasible, will be used respectively. The basic model structure is:
t i i t i t i
Z X PRI
, , ,
ξ γ β α + + + =

t i i t i
v
, ,
ε ξ + =
in which
t i
X
,
are those time-variant independent variables,
i
Z are those time-invariant
independent variables (such as Legal Origin),
i
v is an unobserved, time-invariant,
country-level effect, and
t i,
ε is an idiosyncratic shock varying over countries and time.
Problems with POLS models for panel data are that it requires
t i,
ξ to be uncorrelated with
the regressors
t i
X
,
and
i
Z and with all functions of the regressors for all t, and that its
estimates of the coefficients are not efficient. A problem with RE models for panel data
is that it requires
t i,
ξ (both
i
v and
t i,
ε ) to be strictly exogenous to the regressors
i
X (note:
not
t i
X
,
) and
i
Z for all t. Since sometimes panel data violate the standard assumption that
unobserved time-invariant panel-level effects are uncorrelated with the time-variant
independent variables, which is necessary for RE models to be consistent and efficient in

89

panel data analysis, I also use FE models (within transformation
62
In the fourth subsection of Section 3, I will focus on explaining the change in the
level of Patent Rights Index over time. Besides examining the three groups of variables
of interest (domestic economic and political characteristics, legal origin, bilateral dispute
settlement mechanism
) as a comparison.
Please note that FE models cannot be used to identify the effect of legal origin on patent
protection, since legal origin, as a time-invariant variable, would be dropped in FE
models. The RE and FE models will be paid more attention and compared with each
other for superiority if both are available.
63
t i i t i i t i
Z X PRI PRI
, , 0 , ,
ξ γ β α + + + + = ∆
and international dispute settlement mechanisms) as before, I
also control for the initial level of Patent Rights Index, given that patent protection
measured by PR Index tends to increase for each country over time, suggesting that how
much a country can improve its patent protection level depends heavily on its initial level.
This time, I only use RE models and mainly FE models to analyze. The basic model
structure is:

t i i t i
v
, ,
ε ξ + =
in which
0 , i
PRI is the initial level of Patent Right Index for each country,

t i
X
,
are those
time-variant independent variables,
i
Z are those time-invariant independent variables
(such as Legal Origin),
i
v is an unobserved, time-invariant, country-level effect, and
t i,
ε
is an idiosyncratic shock varying over countries and time. Again, please note that FE

62
Within-transformation estimates, instead of first-difference estimates, are used, since the panel is an unbalanced one
with gaps. It is not worth the efforts to produce first-difference estimates.

63
Variable of being placed on OCR monitoring will be dropped in the following analyses on the change of patent
protection over time, since its effect on the change of the PR Index is not clear-cut.

90

models cannot be used to identify the effect of legal origin as well as the effect of initial
level of patent protection on change of patent protection, since both of them are time-
invariant for any single country. As for the effect of legal origin as well the interaction
between legal origin and other controlling variables, I will only rely on RE model. As for
the initial level of patent protection as an important determinant of how much a country
can further improve its patent level, I add the interaction terms between the initial level of
patent protection with other independent variables of domestic economic and political
characteristics as well as international influences so that the effect of the initial level of
patent protection can be captured in the FE models. When using FE models, I also
include country dummies in the models to control for any country-level heterogeneity.
Finally, I include interaction terms between political rights and international influences in
the analyses of change in patent protection over time. Hopefully, these analyses can
contribute to our understanding of the conditions under which international influences are
more influential in changing countries’ behavior.

2.3. Results
Baseline Model: Domestic Economic and Political Characteristics and their Effects on
Patent Protection
Table 2.4 shows the results examining the effects of domestic economic and
political characteristics on patent protection, which are generally consistent with those in
Ginarte and Park (1997), in some cases with even stronger results. The first regression in
Table 2.4 is a simple regression of PR Index on GDP per capita. The result confirms that
more developed economies provide stronger patent protection. However, when other

91

Table 2.4 Baseline Models and PR Index, All Countries
(POLS, RE, and FE Models)

Dependent V ariable: PR Index
POLS
(1)
POLS
(2)
RE
(1)
Logged GDP pc 0.37***
(0.03)
-0.12
(0.08)
0.52***
(0.04)
R&D 0.31***
(0.09)

Secondary Enrollment Rate 0.02***
(0.00)

Trade Openness 0.0002
(0.00)

Economic Freedom -0.0022
(0.01)

Political Rights -0.08
(0.05)

Constant -0.42*
(0. 23)
2.29***
(0.73)
-1.54***
(0.31)

No. of Observations 929 418 929
No. of Clusters 119 100 119
F Value 139.68 64.76
Prob.>F 0.0000 0.0000
Wald chi
2
179.06
Prob.>chi
2
0.0000
R
2
0.3275 0.6066
R
2
within 0.2995
R
2
between 0.4181
R
2
overall 0.3275

Notes:
(1) Robust standard errors are reported in parentheses.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.
(3) Hausman test comparing RE (1) and FE (1) supports the superiority of FE model over RE model (with
chi
2
=121.12, Prob.>chi
2
=0.0000), so does the Hausman test comparing RE (2) and FE (2) (with chi
2
=98.65,
Prob.>chi
2
=0.0000).

92

Table 2.4 Continued

Dependent V ariable: PR Index
RE
(2)
FE
(1)
FE
(2)
Logged GDP pc -0.11
(0.09)
1.18***
(0.13)
0.84***
(0.23)
R&D 0.22**
(0.11)
0.03
(0.10)
Secondary Enrollment Rate 0.03***
(0.00)
0.02***
(0.00)
Trade Openness 0.0034**
(0.00)
0.01***
(0.00)
Economic Freedom -0.02*
(0.01)
(dropped)
Political Rights -0.13***
(0.05)
-0.16***
(0.04)
Constant 3.10***
(0.64)
-6.50***
(0.99)
-5.82***
(1.65)

No. of Observations 418 929 418
No. of Clusters 100 119 100
F Value 80.64 68.45
Prob.>F 0.0000 0.0000
Wald chi
2
427.52
Prob.>chi
2
0.0000
R
2

R
2
within 0.5910 0.2995 0.6537
R
2
between 0.5873 0.4181 0.5354
R
2
overall 0.5850 0.3275 0.4894

Notes:
(1) Robust standard errors are reported in parentheses.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.
(3) Hausman test comparing RE (1) and FE (1) supports the superiority of FE model over RE model (with
chi
2
=121.12, Prob.>chi
2
=0.0000), so does the Hausman test comparing RE (2) and FE (2) (with chi
2
=98.65,
Prob.>chi
2
=0.0000).

93

domestic economic and political characteristics are added into the regression as in the
second column, the coefficient of GDP per capita becomes negative and insignificant.
This result suggests that it may not be the level of development per se that influences the
patent protection, but rather the determinants of economic development, such as R&D,
human capital, and political rights. GDP per capita is likely to have proxied for the
effects of these omitted variables. This pattern reappears in the results of both RE and FE
models. The tradeoff between the significance of GDP per capita and R&D in explaining
patent rights protection is interesting when comparing the results of RE (2) model and FE
(2) model. Human capital, measured by the gross Secondary Enrollment Rate, has
positive and significant influences on patent protection no matter which model is selected.
Trade openness and political freedom
64

also have positive and significant influences on
patent protections. Indeed, as more complicated models are used, their effects on patent
protection are strengthened in terms of both magnitude and significance. The level of
economic development measured by GDP per capita explains about 30 percent of the
overall variance in the PR Index, while other economic and political characteristics
explain about another 30% of the within-country variance and about 15% of the between-
group variance in the PR Index.
Legal Origin and Patent Protection
In the analysis of legal origin and its effect on patent protection (results shown in
Table 2.5), I mainly focused on four major legal origins, Common Legal Origin, French

64
Please be noted that Freedom House Index measures the degree of political rights, on a one-to-seven scale, with one
representing the highest degree of freedom and seven the lowest. Therefore negative coefficients on political rights
represent positive correlations between political rights and PR Index.

94

Table 2.5 Legal Origin and PR Index, All Countries
(POLS and RE Models)

Dependent V ariable: PR Index
POLS
(1)
POLS
(2)
POLS
(3)
POLS
(4)
Logged GDP pc 0.37***
(0.03)
-0.12
(0.08)
0.35***
(0.04)
-0.08
(0.08)
R&D 0.31***
(0.09)
0.33***
(0.09)
Secondary Enrollment Rate 0.02***
(0.00)
0.02***
(0.00)
Trade Openness 0.0002
(0.00)
0.0001
(0.00)
Economic Freedom -0.0022
(0.01)
-0.0055
(0.01)
Political Rights -0.08
(0.05)
-0.08
(0.05)
Common Law 0.21*
(0.11)
0.05
(0.14)
German Civil Law 0.63***
(0.13)
-0.02
(0.11)
Scandinavian Civil Law 0.10
(0.26)
-0.52**
(0.21)
Constant -0.42*
(0. 23)
2.29***
(0.73)
-0.36
(0.26)
2.16***
(0.71)

No. of Observations 929 418 929 418
No. of Clusters 119 100 119 100
F Value 139.68 64.76 71.93 48.06
Prob.>F 0.0000 0.0000 0.0000 0.0000
Wald chi
2

Prob.>chi
2

R
2
0.3275 0.6066 0.3553 0.6202
R
2
within
R
2
between
R
2
overall

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.
(3) The results of POLS (1) and (2) and RE (1) and (2) are the same with those in Table 2.4.

95

Table 2.5 Continued

Dependent V ariable: PR Index
RE
(1)
RE
(2)
RE
(3)
RE
(4)
Logged GDP pc 0.52***
(0.04)
-0.11
(0.09)
0.51***
(0.04)
-0.06
(0.09)
R&D 0.22**
(0.11)
0.23**
(0.11)
Secondary Enrollment Rate 0.03***
(0.00)
0.03***
(0.00)
Trade Openness 0.0034**
(0.00)
0.0031*
(0.00)
Economic Freedom -0.02*
(0.01)
-0.02**
(0.01)
Political Rights -0.13***
(0.05)
-0.13***
(0.05)
Common Law 0.16
(0.13)
0.08
(0.17)
German Civil Law 0.42***
(0.16)
-0.05
(0.14)
Scandinavian Civil Law -0.38
(0.26)
-0.61***
(0.22)
Constant -1.54***
(0.31)
3.10***
(0.64)
-1.50***
(0.32)
2.96***
(0.64)

No. of Observations 929 418 929 418
No. of Clusters 119 100 119 100
F Value
Prob.>F
Wald chi
2
179.06 427.52 212.02 446.54
Prob.>chi
2
0.0000 0.0000 0.0000 0.0000
R
2

R
2
within 0.2995 0.5910 0.2995 0.5937
R
2
between 0.4181 0.5873 0.4549 0.5913
R
2
overall 0.3275 0.5850 0.3454 0.5987

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. **significant at 5%. ***significant at 1%. All are two tailed tests.
(3) The results of POLS (1) and (2) and RE (1) and (2) are the same with those in Table 2.4.

96

Legal Origin, German Legal Origin, and Scandinavian Legal Origin. Countries of French
Legal Origin are treated as the reference group, since they have the largest number of
observations (65 out of 121 countries in the sample
65
These results suggest that legal origin does not directly influence patent protection, but
probably indirectly through its effect on R&D and trade openness. It is also interesting to
note that according to the results of analyses of legal origin, Scandinavian countries,
given their relatively high level of R&D, education level, political freedom, economic
freedom and trade openness, provide lower patent protection than they should.
). The models with the three
categorical variables of legal origin added are compared with the baseline models from
the previous subsection. When only controlling for log-transformed real GDP per capita,
Common Law countries and German Law countries tend to provide higher protection for
patent rights than French Civil Law countries. But once other domestic economic and
political characteristics are controlled in the models, the level of patent protection
provided by both country groups is not significantly different from that by French Civil
Law countries. If we compare Pooled OLS (2) with Pooled OLS (4) and RE (2) with RE
(4) respectively, we can find that the effects of human capital, economic freedom and
political freedom on PR Index are not affected by the addition of legal origin to the model.
There are two more comments on the effect of legal origin on patent protection.
Firstly, please be reminded that legal origin is a time-invariant variable in this analysis,
and apparently not good at explaining variations in panel data. Legal origin cannot
contribute to explaining any variation within panels (countries), but it does contribute to

65
Besides, among 121 countries covered in the PR Index dataset, 38 countries belong to Common Legal Origin, 12
countries belong to German Civil Legal Origin, 5 countries belong to Scandinavian Civil Legal Origin, and 1 country
belongs to Socialist Legal Origin.

97

explaining some variations (1-2%) between panels. Secondly, considering that bilateral
and multilateral pressures and incentives were placed on countries especially after 1980s
(which will be examined in the next section), the differences of patent protection
legislation among various legal origins might shrink a lot in the past 25 years, for which
period the data of this analysis are largely covered.

Bilateral and Multilateral Dispute Settlement Mechanisms and Patent Protection
The picture for the effects of bilateral and multilateral dispute settlement
mechanisms is mixed. (Results are shown in Table 2.6, 2.7 and 2.8 for POLS models, RE
models and FE models respectively.) As expected, the effects of two categories of
Special 301 placement (Priority Watch List and Watch List) and Section 306 monitoring
on patent protection are positive and significant no matter whether we control for other
domestic economic and political characteristics besides the level of economic
development and no matter which estimation technique is used. This suggests that once a
certain country was placed on these monitoring lists, it was induced to provide higher
levels of patent protection through legislation. This may explain why the U.S. did not
give up the use of such “unilateral aggressiveness” after the strengthened international
regime for IPR protection had been established in 1995. Similarly, the effect of BITs
with the U.S. on patent protection is consistently positive and significant across different
models regardless of the control variables and model specifications used. But the results
show that designating a certain country as Priority Foreign County by the USTR did not
help to propel this country to provide higher level of patent protection. Its effect on PR
Index is surprisingly insignificant and even has a negative sign (although still

98

Table 2.6 Dispute Settlement Mechanisms and PR Index, All Countries
(POLS Models)

Dependent V ariable: PR Index
POLS
(1)
POLS
(2)
POLS
(5)
POLS
(6)
Logged GDP pc 0.37***
(0.03)
-0.12
(0.08)
0.33***
(0.04)
-0.02
(0.08)
R&D 0.31***
(0.09)
0.37***
(0.09)
Secondary Enrollment Rate 0.02***
(0.00)
0.02***
(0.00)
Trade Openness 0.0002
(0.00)
0.0015
(0.00)
Economic Freedom -0.0022
(0.01)
-0.0037
(0.01)
Political Rights -0.08
(0.05)
-0.07
(0.05)
Priority Foreign County 0.16
(0.62)
-0.43
(0.48)
Priority Watch List Country 0.58**
(0.23)
0.47**
(0.23)
Watch List Country 0.94***
(0.16)
0.76***
(0.14)
306 List Country 1.23***
(0.30)
1.16***
(0.38)
OCR 2.31***
(0.73)
0.55
(0.80)
BITs 0.48***
(0.12)
0.39***
(0.14)
Defendant in the WTO 1.25***
(0.46)
0.31
(0.37)
Constant -0.42*
(0. 23)
2.29***
(0.73)
-0.26
(0.26)
1.68**
(0.69)

No. of Observations 929 418 920 411
No. of Clusters 119 100 118 99
F value 139.68 64.76 44.29 32.08
Prob.>F 0.0000 0.0000 0.0000 0.0000
R
2
0.3275 0.6066 0.4252 0.6614

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(3) POLS (1) and (2) are the same with those in T able 2.4.

99

Table 2.7 Dispute Settlement Mechanisms and PR Index, All Countries
(RE Models)

Dependent V ariable: PR Index
RE
(1)
RE
(2)
RE
(5)
RE
(6)
Logged GDP pc 0.52***
(0.04)
-0.11
(0.09)
0.42***
(0.04)
-0.0051
(0.08)
R&D 0.22**
(0.11)
0.26***
(0.10)
Secondary Enrollment Rate 0.03***
(0.00)
0.02***
(0.00)
Trade Openness 0.0034**
(0.00)
0.0036**
(0.00)
Economic Freedom -0.02*
(0.01)
-0.01
(0.01)
Political Rights -0.13***
(0.05)
-0.10**
(0.04)
Priority Foreign County 0.03
(0.37)
-0.13
(0.48)
Priority Watch List Country 1.05***
(0.21)
0.96***
(0.23)
Watch List Country 1.30***
(0.14)
0.77***
(0.13)
306 List Country 1.78***
(0.15)
1.30***
(0.50)
OCR 1.39*
(0.74)
0.21
(0.62)
BITs 0.69**
(0.12)
0.45**
(0.19)
Defendant in the WTO 0.96**
(0.44)
0.42
(0.40)
Constant -1.54***
(0.31)
3.10***
(0.64)
-0.98***
(0.33)
2.17***
(0.64)
No. of Observations 929 418 920 411
No. of Clusters 119 100 118 99
Wald chi
2
179.06 427.52 666.71 544.05
Prob.>chi
2
0.0000 0.0000 0.0000 0.0000
R
2
within 0.2995 0.5910 0.5191 0.7017
R
2
between 0.4181 0.5873 0.3939 0.5987
R
2
overall 0.3275 0.5850 0.4226 0.6421

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(3) RE (1) and (2) are the same with those in T able 2.4.

100

Table 2.8 Dispute Settlement Mechanisms and PR Index, All Countries
(FE Models)

Dependent V ariable: PR Index
FE
(1)
FE
(2)
FE
(5)
FE
(6)
Logged GDP pc 1.18***
(0.13)
0.84***
(0.23)
0.76***
(0.11)
0.53**
(0.22)
R&D 0.03
(0.10)
0.13
(0.10)
Secondary Enrollment Rate 0.02***
(0.00)
0.02***
(0.00)
Trade Openness 0.01***
(0.00)
0.0085***
(0.00)
Political Rights -0.16***
(0.04)
-0.13***
(0.04)
Priority Foreign County -0.24
(0.35)
-0.09
(0.50)
Priority Watch List Country 1.02***
(0.23)
0.93***
(0.23)
Watch List Country 1.25***
(0.17)
0.60***
(0.16)
306 List Country 1.62***
(0.11)
0.90*
(0.54)
OCR 0.84
(0.73)
-0.41
(0.52)
BITs 0.69***
(0.14)
0.47*
(0.27)
Defendant in the WTO 0.77*
(0.41)
0.17
(0.30)
Constant -6.50***
(0.99)
-5.82***
(1.65)
-3.53***
(0.85)
-3.21*
(1.65)
No. of Observations 929 418 920 411
No. of Clusters 119 100 118 99
F value 80.64 68.45 4159.41 44.91
Prob.>F 0.0000 0.0000 0.0000 0.0000
R
2
within 0.2995 0.6537 0.5362 0.7274
R
2
between 0.4181 0.5354 0.4158 0.5632
R
2
overall 0.3275 0.4894 0.4052 0.5618

Notes:
(1) Robust standard errors are in parentheses. FE (1) and (2) are the same with those in T able 2.4.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(3) Hausman test comparing RE (5) in Table 2.7 and FE (5) supports the superiority of FE model over RE model (with
chi
2
=76.26, Prob.>chi
2
=0.0000), so does the Hausman test comparing RE (6) in Table 2.7 and FE (6) (with
chi
2
=71.62, Prob.>chi
2
=0.0000).
(4) Economic Freedom is dropped from the FE models because of its time-invariant quality.

101

insignificant). This result is very consistent across different models with different
controls. In the history of Special 301 placement, the USTR used this most severe
warning instrument of “unilateral aggressiveness” extremely cautiously, perhaps only in
the most hopeless cases. From 1989 when the USTR was authorized to utilize
Special301 investigation till 2009, only 7 countries or economies were designated as a
Priority Foreign Country for a total of 17 times (Brazil once, India three times, Paraguay
once, the People’s Republic of China three times, Taiwan once, Thailand three times,
Ukraine five times). Of these 17 uses, 11 placements are used continuously for three
countries (India, Thailand, and Ukraine). Besides these continuous uses of Priority
Foreign County designation, these designations might be followed sometimes by Section
306 monitoring if the target country (such as China and Paraguay) signed a bilateral
Memorandum of Understanding on IPR with the U.S. and mostly by Priority Watch List
designations. The limited uses of Priority Foreign Country may not give us enough
power to explain its effect on patent protection.
The evidence for whether being a defendant under the WTO DSP for its
insufficient protection of patent rights in the previous five years changes a country’s
protection level is mixed, according to the results. The effect of being sued under the
WTO DSP on patent protection is significantly positive when only controlling for the
level of economic development, but becomes insignificant, although still positive, when
other controls of domestic economic and political characteristics are added into the model.
Please note that the coefficients of being a WTO defendant is generally smaller in
magnitude compared with the effect of the U.S.’s unilateral aggressiveness, especially
Special 301 placements and Section 306 monitoring.

102

A careful examination of the cases brought under the WTO dispute settlement
mechanism (see Table 2.1) reveals that in fact being exposed to the serious pressure of
litigation and rigorous surveillance and examination under the WTO DSB is relatively
effective in eliciting legislation and regulation for patent protection. In ten out of the
fourteen cases related with patent protection which started before 2005 (the latest date
when the Ginarte-Park Index is available), the defendant responded to the consultation (in
six cases, DS 36, DS 37, DS 83, DS 86, DS 171 and DS 196) or implemented the panel
decision (in two cases, DS 79 and DS 114) or the Appellate Body (AB) decision (in two
cases, DS 50 and DS 170) before the period of implementation was going to expire by
promulgating certain ordinances, amendment to law, and regulatory change in order to
comply with their obligations made under the TRIPS Agreement.
66
However, it is
astounding to observe that in three of the other four cases related with patent protection
from 1995 to 2005, which failed to bring about any legislation or regulatory changes, the
defendant is either the U.S. (in DS 186 and DS 224) or the EC (in DS 153).
67
But why in the statistical analysis we failed to detect any effect of the WTO dispute
settlement on Patent Right Index? The main reason is that the specific deficiency and
The cases
even ended at the consultation stage without mutually agreed solution or any further
action taken either by the parties to the dispute or by the WTO DSB. Whether these three
cases failed to elicit legislation or regulatory change in the defendant due to the nature of
the cases or due to power politics deserves further study.

66
Please note that DS 50 and DS 79 actually targeted on the same issue in India and DS 171 and DS 196 targeted on
the same issue in Argentina.

67
The other case is DS 199 with Brazil as defendant and the U.S. as complainant on the granting of compulsory license.
In this case, although Brazil made no amendment to its law, it agreed to consult with the U.S. on the bilateral basis if it
is about to grant compulsory license on patents held by the U.S. companies. See T able 3.1.

103

inconsistency in defendant country’s legislation and regulations with the TRIPS
Agreement which these WTO dispute cases targeted are not the dimensions covered by
the Patent Right Index. To my knowledge and understanding, there are at least six of the
fourteen patent cases targeting issues which are not captured by the Patent Right Index.
They are unavailability of provisional measures in the context of civil proceedings
involving IPR enforcement in Denmark and Sweden (in DS 83 and DS 86), lack of
restrictions on “regulation review exception” for patent protection (in DS 114), patent
protection term for patent filed before Oct.1, 1989 in Canada (in DS 170), patent term
extension only available to certain patents (for pharmaceutical and agricultural chemicals)
in the EC (in DS 153), and patent rights in inventions made with federal assistance in the
U.S. (in DS 224).

Change of Patent Protection
Tables 2.9-2.15 show the results analyzing factors which might influence the
change in the level of patent protection. Table 2.9 and 2.10 show the results of RE
models controlling for the initial level of patent protection as well as interactions between
legal origin and domestic characteristics and international influences respectively. Table
2.11 shows the effects of domestic characteristics and international influences after
considering the interactions between these factors and legal origins and whether these
effects are different across legal origins. Table 2.12 shows the results of FE models with
additional domestic characteristics. Tables 2.13 and 2.14 show the results of FE models
with controlling for interaction between the initial level of patent protection and domestic
characteristics as well as international influences respectively. Table 2.15 explores the

104
Table 2.9 Change of PR Index, All Countries
(RE Models, Controlling for Domestic Characteristics and their Interactions with Legal Origin)

Dependent Variable: First Difference of Logged PR Index
RE (7) RE (8) RE (9) RE (10) RE (11) RE (12) RE (13)
Log (PR Index
0
) -0.08***
(0.03)
-0.14***
(0.01)
-0.13***
(0.01)
-0.15***
(0.01)
-0.13***
(0.01)
-0.13***
(0.01)
-0.13***
(0.01)
Logged GDP pc -0.03**
(0.01)
-0.02***
(0.01)
-0.02***
(0.01)
-0.03***
(0.01)
-0.03***
(0.01)
-0.02***
(0.01)
-0.02***
(0.01)
R&D -0.01
(0.01)

Secondary Enrollment Rate 0.0011**
(0.00)
0.0013***
(0.0004)
0.0013***
(0.0003)
0.0013***
(0.0003)
0.0012***
(0.0003)
0.0014***
(0.0004)
0.0013***
(0.0003)
Trade Openness -0.00
(0.00)

Economic Freedom -0.00
(0.00)

Political Rights -0.02**
(0.01)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.02***
(0.00)
-0.01***
(0.00)
-0.02***
(0.00)
Common Legal Origin -0.04***
(0.01)
-0.06***
(0.02)
-0.13***
(0.04)
-0.03*
(0.02)
-0.04***
(0.02)
German Legal Origin 0.02
(0.02)
0.16***
(0.06)
0.36***
(0.09)
0.22***
(0.05)
-0.00
(0.03)
Scandinavian Legal Origin -0.03***
(0.01)
-0.05**
(0.02)
0.45
(0.50)
0.12
(0.13)
-0.08***
(0.02)
Log (PR Index
0
)*Common Legal
Origin
0.06**
(0.02)

Log (PR Index
0
)*German Legal
Origin
-0.17**
(0.07)

Log (PR Index
0
)*
Scandinavian Legal Origin
0.03
(0.03)

Logged GDP pc*Common Legal
Origin
0.01***
(0.00)

105
Table 2.9 Continued

Logged GDP pc*German Legal
Origin
-0.04***
(0.01)

Logged GDP pc*Scandinavian
Legal Origin
-0.05
(0.05)

Secondary Enrollment Rate
*Common Legal Origin
-0.0001
(0.0003)

Secondary Enrollment Rate
*German Legal Origin
-0.0024***
(0.0006)

Secondary Enrollment Rate
*Scandinavian Legal Origin
-0.0016
(0.0013)

Political Rights *Common Legal
Origin
0.0024
(0.0038)
Political Rights *German Legal
Origin
0.01
(0.01)
Political Rights *Scandinavian
Legal Origin
0.04**
(0.02)
Constant 0.40***
(0.10)
0.29***
(0.05)
0.34***
(0.05)
0.36***
(0.05)
0.37***
(0.05)
0.34***
(0.05)
0.34***
(0.05)
No. of Observations 414 701 701 701 701 701 701
No. of Clusters 100 116 116 116 116 116 116
Wald chi2 30.92 166.62 239.39 345.10 275.08 247.60 252.49
Prob.>chi2 0.0001 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
R2 within 0.0232 0.0480 0.0477 0.0472 0.0509 0.0531 0.0486
R2 between 0.1639 0.2957 0.3602 0.3911 0.4027 0.3612 0.3660
R2 overall 0.0578 0.0929 0.1037 0.1104 0.1120 0.1080 0.1050

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.

106
Table 2.10 Change of PR Index, All Countries
(RE Models, Controlling for International Influences and their Interactions with Legal Origin)

Dependent Variable: First Difference of Logged PR Index
RE
(9)
RE
(14)
RE
(15)
RE
(16)
RE
(17)
RE
(18)
RE
(19)
RE
(20)
Log (PR Index
0
) -0.13***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
-0.11***
(0.01)
Logged GDP pc -0.02***
(0.01)
-0.01*
(0.006)
-0.01**
(0.006)
-0.01**
(0.006)
-0.01
(0.007)
-0.01*
(0.006)
-0.01*
(0.006)
-0.01**
(0.006)
Secondary Enrollment Rate 0.0013***
(0.0003)
0.0003
(0.0003)
0.0004
(0.0003)
0.0004
(0.0003)
0.0003
(0.0003)
0.0003
(0.0003)
0.0004
(0.0003)
0.0004
(0.0003)
Political Rights -0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
-0.01***
(0.00)
Common Legal Origin -0.04***
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.03***
(0.01)
-0.01
(0.01)
-0.02**
(0.01)
-0.02*
(0.01)
-0.03**
(0.01)
German Legal Origin 0.02
(0.02)
0.02
(0.01)
0.01
(0.01)
0.01
(0.02)
0.05**
(0.02)
0.01
(0.01)
0.01
(0.01)
0.01
(0.01)
Scandinavian Legal Origin -0.03***
(0.01)
0.01
(0.01)
0.01
(0.01)
0.01
(0.01)
0.03**
(0.01)
0.01
(0.01)
0.01
(0.01)
0.02
(0.01)
Priority Foreign County 0.24
(0.22)
-0.08
(0.10)
0.20
(0.21)
0.26
(0.23)
0.24
(0.22)
0.24
(0.23)
0.23
(0.22)
Priority Watch List Country 0.13**
(0.06)
0.12**
(0.06)
0.07**
(0.05)
0.12**
(0.05)
0.13**
(0.06)
0.12**
(0.06)
0.14**
(0.06)
Watch List Country 0.13***
(0.04)
0.12***
(0.04)
0.13***
(0.04)
0.19***
(0.05)
0.13***
(0.04)
0.12***
(0.04)
0.12***
(0.04)
306 List Country 0.18***
(0.05)
0.16***
(0.03)
0.18***
(0.05)
0.17***
(0.04)
0.10***
(0.01)
0.18***
(0.05)
0.18***
(0.05)
BITs 0.07***
(0.02)
0.07***
(0.02)
0.07***
(0.02)
0.07***
(0.02)
0.07***
(0.02)
0.08***
(0.03)
0.07***
(0.02)
Defendant in the WTO -0.08
(0.12)
-0.08
(0.13)
-0.11
(0.10)
0.03
(0.14)
-0.08
(0.13)
-0.08
(0.13)
-0.49***
(0.13)
Priority Foreign County
*Common Legal Origin
0.50
(0.34)

107
Table 2.10 Continued

Priority Foreign County
*German Legal Origin
0.87***
(0.10)

Priority Foreign County
*Scandinavian Legal Origin
(dropped)
Priority Watch List Country
*Common Legal Origin
0.24**
(0.10)

Priority Watch List Country
*German Legal Origin
0.05
(0.19)

Priority Watch List Country
*Scandinavian Legal Origin
(dropped)
Watch List Country *Common
Legal Origin
-0.16**
(0.07)

Watch List Country *German
Legal Origin
-0.20*
(0.11)

Watch List Country
*Scandinavian Legal Origin
-0.36***
(0.13)

306 List Country*Common
Legal Origin
(dropped)
306 List Country *German
Legal Origin
0.14***
(0.02)

306 List Country
*Scandinavian Legal Origin
(dropped)
BITs *Common Legal Origin -0.07
(0.05)

BITs *German Legal Origin 0.02
(0.03)

BITs *Scandinavian Legal
Origin
(dropped)
Defendant in the WTO
*Common Legal Origin
0.59***
(0.20)
Defendant in the WTO
*German Legal Origin
(dropped)

108
Table 2.10 Continued

Defendant in the WTO
*Scandinavian Legal Origin
0.20
(0.13)
Constant 0.34***
(0.05)
0.25***
(0.05)
0.26***
(0.05)
0.26***
(0.05)
0.23***
(0.05)
0.25***
(0.05)
0.25***
(0.05)
0.25***
(0.05)
No. of Observations 701 694 694 694 694 694 694 694
No. of Clusters 116 115 115 115 115 115 115 115
Wald chi2 239.39 450.95 20310.2 510.88 534.71 . 916.45 506.40
Prob.>chi2 0.0000 0.0000 0.0000 0.0000 0.0000 . 0.0000 0.0000
R2 within 0.0477 0.1029 0.1057 0.1116 0.1202 0.1031 0.1041 0.1140
R2 between 0.3602 0.4374 0.4774 0.4360 0.4321 0.4397 0.4503 0.4344
R2 overall 0.1037 0.1636 0.1701 0.1695 0.1757 0.1641 0.1659 0.1718

Notes:
(1) Robust standard errors are in parentheses.
(2) significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.

109
Table 2.11 The Effects of Domestic Characteristics and International Influences for Different Legal Origins

Common Law German Civil Law
Scandinavian Civil
Law
French Civil Law
Log (PR Index
0
)

-0.09 -0.32 -0.15 -0.15
Logged GDP pc

-0.02 -0.07 -0.03 -0.03
Secondary Enrollment Rate

0.0014 -0.0010 0.0014 0.0014
Political Rights

-0.02 -0.02 0.02 -0.02
Priority Foreign County

. 0.87 . .
Priority Watch List Country

0.31 0.07 0.07 0.07
Watch List Country

0.03 -0.01 -0.17 0.19
306 List Country

0.10 0.24 0.10 0.10
BITs

0.08 0.08 0.08 0.08
Defendant in the WTO 0.10 -0.49 -0.49 -0.49

110
Table 2.12 Change of PR Index, All Countries
(FE Models, without Interaction Terms)

Dependent V ariable: First Difference of Logged PR Index
FE
(7)
FE
(8)
FE
(9)
FE
(10)
FE
(11)
FE
(12)
FE
(13)
FE
(14)
Logged GDP pc 0.07***
(0.02)
-0.02
(0.04)
-0.01
(0.04)
-0.05
(0.04)
R&D -0.0042
(0.02)

Secondary Enrollment
Rate
0.0023***
(0.00)
0.0020**
(0.00)
0.0020***
(0.00)
0.0009
(0.00)
Trade Openness 0.0013***
(0.0004)
0.00
(0.00)

Political Rights -0.03***
(0.01)
-0.02***
(0.01)
-0.02***
(0.01)
-0.02**
(0.01)
Priority Foreign
County
0.40
(0.26)
Priority Watch List
Country
0.20**
(0.10)
Watch List Country 0.13*
(0.07)
306 List Country 0.16**
(0.07)
BITs 0.08**
(0.03)

111
Table 2.12 Continued

Defendant in the WTO -0.11
(0.17)
Constant -0.47***
(0.13)
0.11***
(0.02)
-0.02
(0.03)
0.01
(0.02)
0.22***
(0.02)
0.20
(0.27)
0.18
(0.27)
0.43
(0.29)

No. of Observations 893 498 729 874 758 694 701 694
No. of Clusters 119 107 117 118 119 115 116 115
F Value 18.46 0.05 18.45 12.52 32.50 7.42 10.19 7.96
Prob.>F 0.0000 0.8233 0.0000 0.0006 0.0000 0.0000 0.0000 0.0000
R
2
0.1308 0.1864 0.1595 0.1362 0.1488 0.1775 0.1774 0.2267
Adjusted R
2
-0.0030 -0.0368 -0.0015 0.0013 -0.0099 0.0087 0.0107 0.0598

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(3) The log-transformed initial value of PR Index (Log (PR Index
0
)) and Economic Freedom are omitted in this table, since it is time-invariant and therefore dropped
from the FE analyses.
(4) Country dummies are used in each of these models but omitted in the table.

112

Table 2.13 Change of PR Index, All Countries
(FE Models, Controlled for Interaction between the Initial Level of PR Index and
Domestic Characteristics)

Dependent V ariable: First Difference of Logged PR Index
FE
(13)
FE
(15)
FE
(16)
FE
(17)
Log (PR Index
0
) (dropped)

(dropped) (dropped) (dropped)
Logged GDP pc -0.01
(0.04)
0.05
(0.09)
-0.01
(0.03)
-0.01
(0.04)
Secondary Enrollment Rate 0.0020***
(0.0007)
0.0021***
(0.0007)
0.0048***
(0.0012)
0.0020***
(0.0007)
Political Rights -0.02***
(0.007)
-0.02***
(0.007)
-0.02**
(0.007)
-0.02
(0.017)
Log (PR Index
0
)* Logged
GDP pc
-0.14
(0.13)

Log (PR Index
0
)* 2nd
Enrollment Rate
-0.0052***
(0.0017)

Log (PR Index
0
)* Political
Rights
0.0070
(0.0312)
Country Dummies (absorbed)

(absorbed) (absorbed) (absorbed)
Constant 0.18
(0.27)
0.24
(0.23)
0.18
(0.23)
0.17
(0.27)

No. of Observations 701 701 701 701
No. of Clusters 116 116 116 116
F Value 10.19 7.54 8.04 10.07
Prob.>F 0.0000 0.0000 0.0000 0.0000
R
2
0.1774 0.1806 0.1982 0.1776
Adjusted R
2
0.0107 0.0128 0.0340 0.0092

Notes:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(3) FE (13) is the same with that in T able 2.12.

113
Table 2.14 Change of PR Index, All Countries
(FE Models, Controlled for Interaction between the Initial Level of PR Index and Domestic Characteristics as
well as Various Dispute Settlement Mechanisms)

Dependent V ariable: First Difference of Logged PR Index
FE (14) FE (18) FE (19) FE (20) FE (21) FE (22) FE (23) FE (24) FE (25)
Logged GDP
pc
-0.05
(0.04)
-0.04
(0.04)
-0.05
(0.04)
-0.04
(0.04)
-0.04
(0.04)
-0.05
(0.04)
-0.04
(0.04)
-0.04
(0.04)
-0.04
(0.04)
SER 0.0009
(0.0008)
0.0030**
(0.0014)
0.0009
(0.0008)
0.0008
(0.0007)
0.0007
(0.0007)
0.0009
(0.0008)
0.0008
(0.0008)
0.0009
(0.0007)
0.0028**
(0.0014)
Political
Rights
-0.02**
(0.007)
-0.01**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.01**
(0.007)
PFC 0.40
(0.26)
0.39
(0.27)
0.54*
(0.29)
0.31
(0.22)
0.41
(0.29)
0.41
(0.27)
0.40
(0.26)
0.43*
(0.26)
0.59**
(0.28)
PWL 0.20**
(0.10)
0.18*
(0.10)
0.20*
(0.10)
0.43***
(0.15)
0.20*
(0.10)
0.21**
(0.10)
0.19*
(0.10)
0.17*
(0.09)
0.14
(0.09)
WL 0.13*
(0.07)
0.11*
(0.07)
0.13*
(0.07)
0.14**
(0.06)
0.24**
(0.09)
0.13*
(0.07)
0.13*
(0.07)
0.15**
(0.07)
0.13*
(0.07)
306 0.16**
(0.07)
0.10
(0.09)
0.16**
(0.07)
0.16**
(0.07)
0.17**
(0.07)
-0.01
(0.06)
0.16**
(0.07)
0.16**
(0.07)
-0.09
(0.07)
BITs 0.08**
(0.03)
0.07**
(0.03)
0.08**
(0.03)
0.06*
(0.03)
0.08**
(0.03)
0.08**
(0.03)
0.14***
(0.07)
0.08**
(0.03)
0.07**
(0.03)
WTO -0.11
(0.17)
-0.09
(0.17)
-0.10
(0.17)
-0.17
(0.15)
-0.04
(0.16)
-0.11
(0.17)
-0.11
(0.17)
0.25
(0.26)
0.24
(0.28)
Log (PR
Index
0
)*SER
-0.0037**
(0.0017)
-0.0034**
(0.0017)
Log (PR
Index
0
)*PFC
-0.41*
(0.22)
-0.44**
(0.21)
Log (PR
Index
0
)*PWL
-0.55**
(0.26)

114
Table 2.14 Continued

Log (PR
Index
0
)*WL
-0.27**
(0.12)

Log (PR
Index
0
)*306
0.89**
(0.39)
1.02***
(0.35)
Log (PR
Index
0
)*BITs
-0.17**
(0.07)

Log (PR
Index
0
)*WTO
-0.72**
(0.34)
-0.66*
(0.37)
Constant 0.43
(0.29)
0.40
(0.26)
0.44
(0.29)
0.40
(0.28)
0.39
(0.28)
0.45
(0.29)
0.42
(0.28)
0.41
(0.29)
0.41
(0.28)
No. of
Observations
694 694 694 694 694 694 694 694 694
No. of
Clusters
115 115 115 115 115 115 115 115 115
F Value 7.96 8.37 8.46 9.46 8.58 . 8.654 7.77 .
Prob.>F 0.0000 0.0000 0.0000 0.0000 0.0000 . 0.0000 0.0000 .
R
2
0.2267 0.2362 0.2299 0.2381 0.2459 0.2270 0.2295 0.2336 0.2458
Adjusted R
2
0.0598 0.0698 0.0620 0.0721 0.0815 0.0586 0.0615 0.0666 0.0766

Notes:
(1) SER, Secondary Enrollment Rate; PFC, Priority Foreign Country; PWL, Priority Watch List; WL, Watch List; 306, 306 list.; WTO, Defendant in the WTO.
(2) Compared with T able 2.13, this table controls for international influences and the interaction terms between the initial level of PR Index and domestic characteristics
as well as international influences.
(3) Robust standard errors are in parentheses.
(4) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(5) The log-transformed initial value of PR Index (Log (PR Index
0
)) is omitted in this table, since it is time-invariant and therefore dropped from the FE analyses.
(6) Country dummies are used in each of these models but omitted in the table.
(7) FE (14) is the same with that in T able 2.12.
(8) Before running for FE (25), each interaction term of international influences were controlled together with the interaction term of secondary enrollment rate
respectively to see whether any combination of two interaction terms are significant. The results of these analyses are omitted from this table but available upon
request. FE (25) only keeps those significant interaction terms in these analyses.

115

political conditions under which international influences are effective in eliciting
improvement in patent protection in a certain country.
As expected (see Table 2.9), a country with a relatively higher initial level of
patent protection will improve less in patent protection afterwards. Given the same level
of economic development (measured by log-transformed GDP per capita) (see FE (15) in
Table 2.13), human capital (measured by secondary enrollment rate) (see FE (16) in Table
2.13, FE (18) and (25) in Table 2.14), or protection for political rights (see FE (17) in
Table 2.14), the higher the initial level of patent protection is, the less the country would
improve its protection level afterwards. Similarly, given the same level of pressures
resulting from bilateral dispute settlement measured by designation as Priority Foreign
Country (see FE (19) and (25) in Table 2.14), as Priority Watch List Country (see FE (20)
in Table 2.14), as Watch List Country (see FE (21) in Table 2.14), and signing BITs with
the U.S. (see FE (23) in Table 2.14), and the same level of pressures resulting from
multilateral dispute settlement measured by being challenged by other countries in front
of the WTO DSB for its insufficient patent protection (see FE (24) and (25) in Table 2.14),
the higher the initial level of patent protection is, the less the country would improve its
protection level afterwards.
Countries with different legal origins do show significant variations in terms of
improving patent protection through legislation over time. Table 2.9 and 2.10 suggest
that countries of Common Law improved their patent protection less than countries of
French Civil Law. This result cannot directly support the hypothesis that Common Law
system is more adaptable to the changing circumstance than French Civil Law system,
given that the PR Index might not be able to capture the nuanced changes in patent

116

protection through case-by-case litigation decisions and judge-made law beyond statute
laws. But Table 2.9 and 2.10 suggest that the divergences in their patent protection
between countries of Common Law and countries of French Civil Law have shrunk,
probably because of a series of international influences.
As for domestic economic, political and legal characteristics, countries with
higher economic development level tend to improve less in patent protection (although
the effect is not significant in most of the FE models in Table 2.12 through Table 2.15),
because these countries might already have relatively higher levels of patent protection in
general. But across different legal origins, countries of German Legal Origin improve the
least while countries of Common Legal Origin improve the most. (See RE(11) in Table
2.9 and the second row of Table 2.11) In contrast, countries with higher education level
and protection for political rights tend to improve more in patent protection afterwards
(and the effects of both are more consistently significant in most of the models in Table
2.9 through Table 2.15), because constituencies in these countries have stronger
incentives to improve their patent protection level and also have more supportive political
infrastructures to pursue their interests through legislation and policy making. This
pattern persists across countries of different legal origins, except countries of German
Civil Law in the case of education and countries of Scandinavian Civil Law in the case of
political rights, where the opposite pattern exists. (see RE(12) and RE(13) in Table 2.9
and the third and forth rows of Table 2.11)
Table 2.10 through Table 2.14 also show that international influences, especially
the bilateral trade dispute settlement mechanisms and bilateral incentives provided by
BITs, are at least as important as domestic economic and political characteristics in

117

eliciting the improvement in patent protection. Countries that were more frequently
placed by the USTR on its annual list of Priority Foreign Country, Priority Watch List,
Watch List, and 306 monitoring list tend to improve their level of patent protection more
than those which were not on those lists ever or less frequently. Countries which signed a
BIT with the U.S. also tend to improve their level of patent protection more than those
countries without BITs with the U.S. Surprisingly, being a defendant under the WTO
DSP for insufficient patent protection failed to make a certain country improve its level of
patent protection. Again, countries of different legal origins seem to respond to different
dispute settlement mechanisms differently as shown in the fifth through tenth row in
Table 2.11.
Table 2.15 focuses on exploring the political conditions under which international
influences are effective in eliciting increases in patent protection by adding interaction
terms between political rights and each variable of international influences respectively.
For example, the positive and significant coefficient of the interaction term between
political rights and being designated as Priority Foreign Country by the USTR (see FE
(26) in Table 2.15) indicates that among the countries which were designated as Priority
Foreign Country by the USTR for the same frequency in a given five year period,
countries with higher Political Rights Index by Freedom House (reflecting lower levels of
protection for political rights) tend to make more improvement in their patent protection
under the influence of this bilateral pressure. Similarly, among the countries which were
monitored under Priority Watch List and 306 List by the USTR for the same frequency in
a five year period, countries with higher Political Rights Indexes by Freedom House,
namely, with lower level of protection for political rights, tend to make more

118
Table 2.15 Change of PR Index, All Countries
(FE Models, Controlled for Interaction between Political Rights and International Influences)

Dependent Variable: First Difference of Logged PR Index
FE
(25)
FE
(26)
FE
(27)
FE
(28)
FE
(29)
FE
(30)
FE
(31)
Logged GDP pc -0.04
(0.04)
-0.05
(0.04)
-0.04
(0.04)
-0.04
(0.04)
-0.04
(0.04)
-0.04
(0.04)
-0.04
(0.04)
SER 0.0028**
(0.0014)
0.0029**
(0.0014)
0.0026*
(0.0014)
0.0027*
(0.0015)
0.0028**
(0.0014)
0.0028**
(0.0014)
0.0029**
(0.0014)
Political Rights -0.01**
(0.007)
-0.01**
(0.007)
-0.02**
(0.007)
-0.02**
(0.007)
-0.01**
(0.007)
-0.01**
(0.007)
-0.01**
(0.007)
PFC 0.59**
(0.28)
-0.35
(0.53)
0.56**
(0.28)
0.58**
(0.28)
0.56*
(0.29)
0.59**
(0.28)
0.59**
(0.28)
PWL 0.14
(0.09)
0.15
(0.09)
-0.01
(0.12)
0.14
(0.09)
0.14
(0.09)
0.14
(0.09)
0.15
(0.09)
WL 0.13*
(0.07)
0.12*
(0.07)
0.13*
(0.07)
0.09
(0.14)
0.13*
(0.07)
0.13**
(0.07)
0.12*
(0.07)
306 -0.09
(0.07)
-0.19**
(0.08)
-0.13*
(0.07)
-0.09
(0.07)
-2.75***
(0.65)
-0.09
(0.07)
-0.09
(0.07)
BITs 0.07**
(0.03)
0.07**
(0.03)
0.06*
(0.03)
0.07**
(0.03)
0.07**
(0.03)
0.04
(0.10)
0.07**
(0.03)
WTO 0.24
(0.28)
0.22
(0.28)
0.25
(0.27)
0.23
(0.28)
0.24
(0.28)
0.25
(0.28)
-0.29
(0.51)
Political Rights * PFC 0.26**
(0.10)

Political Rights * PWL 0.06*
(0.03)

Political Rights * WL 0.02
(0.06)

119
Table 2.15 Continued

Political Rights * 306 2.14***
(0.55)

Political Rights * BITs 0.01
(0.02)

Political Rights * WTO 0.20
(0.15)
Log (PR Index
0
)* SER -0.0034**
(0.0017)
-0.0034**
(0.0017)
-0.0032*
(0.0017)
-0.0031
(0.0019)
-0.0034*
(0.0017)
-0.0034*
(0.0017)
-0.0035**
(0.0017)
Log (PR Index
0
)* PFC -0.44**
(0.21)
-0.55***
(0.20)
-0.43**
(0.21)
-0.44**
(0.21)
-0.43*
(0.22)
-0.45**
(0.21)
-0.44**
(0.21)
Log (PR Index
0
)* 306 1.02***
(0.35)
1.85***
(0.42)
1.36***
(0.42)
1.10**
(0.45)
-41.73***
(11.34)
1.02***
(0.35)
1.02***
(0.35)
Log (PR Index
0
)* WTO -0.66*
(0.37)
-0.62*
(0.37)
-0.69*
(0.36)
-0.61
(0.38)
-0.66*
(0.37)
-0.66*
(0.36)
-0.25
(0.52)
Constant 0.41
(0.28)
0.42
(0.28)
0.43
(0.28)
0.42
(0.28)
0.41
(0.28)
0.41
(0.28)
0.40
(0.28)
No. of Observations 694 694 694 694 694 694 694
No. of Clusters 115 115 115 115 115 115 115
F Value . . . . . . .
Prob.>F . . . . . . .
R
2
0.2458 0.2490 0.2495 0.2467 0.2469 0.2460 0.2470
Adjusted R
2
0.0766 0.0788 0.0794 0.0760 0.0762 0.0752 0.0764
Notes: SER, Secondary Enrollment Rate; PFC, Priority Foreign Country; PWL, Priority Watch List; WL, Watch List; 306, 306 list.; WTO, Defendant in the WTO.
(1) This table keeps controlling for the interactions between the initial level of PR Index and domestic characteristics as well as international influences.
(2) Robust standard errors are in parentheses.
(3) * significant at 10%. ** significant at 5%. *** significant at 1%. All are two tailed tests.
(4) The log-transformed initial value of PR Index (Log (PR Index
0
)) is omitted in this table, since it is time-invariant and therefore dropped from the FE analyses.
(5) Country dummies are used in each of these models but omitted in the table.
(6) FE (25) is the same with that in T able 2.14.

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improvement in their patent protection under the influence of those bilateral pressures.
These results show that, at least in the case of patents, countries with autocratic political
regime are more vulnerable to bilateral pressures exerted by a much stronger country,
since these countries do not need to go through the costly and prolonged political hassles
among constituencies with conflicting preferences to legislate for higher level of patent
protection.

2.4. Conclusion, Contribution and Directions of Future Studies
This chapter tries to examine the variations in both the level of patent protection
and changes therein across countries and over time. The main finding is that both
domestic economic, political and legal characteristics and bilateral and multilateral
dispute settlement mechanisms are important in raising countries’ patent rights protection
since 1980s.
But there are other more specific findings. First, my statistical analyses echo with
the study by Ginarte and Park (1997) that domestic economic development, associated
with R&D investment, is a major reason for countries to improve their patent protection,
with human capital, political freedom and trade openness serving as contributing factors.
Second, Common Law countries and German Civil Law countries tend to provide higher
protection for patent rights than French Civil Law countries, although its effect on patent
protection might not be direct but probably indirect through its effect on R&D and trade
openness. Legal origin does a fair job in explaining cross-country variations, especially
considering the time-invariant character of the data on legal origin and the fact that
countries of various legal origins have converged to each other in their legislative

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protection for patent since the 1980s. The differences among countries of different legal
families in statutory protection have been worn down by several years’ international
convergence of IPR laws through coercion, institutionalization, socialization and
emulation.
Third, bilateral dispute settlement mechanisms, represented by the U.S.’s Special
301 placements and Section 306 monitoring, have significantly and consistently positive
effects on propelling the target countries to provide higher legislative protection for
patent, as BITs with the U.S. do. Designating Priority Foreign County, which is the most
severe instrument of “unilateral aggressiveness” but seldom used, did not contribute to
the improvement of patent protection according to the results, but it works with other
bilateral coercive means. The strengthened WTO DSP mechanism only plays a marginal
effect on countries’ patent protection over time. The bilateral dispute settlement
mechanisms represented by the USTR’s Special 301 placements and other monitoring
procedures and bilateral incentives resulting from the BITs between the U.S. and other
countries are at least as important as domestic economic, political and legal
characteristics in explaining the improvement of patent protection over time. I also show
that autocratic regimes are more vulnerable to bilateral pressures asking for improving
patent protection.
68

68
Please note that there is an important selection issue associated with both bilateral dispute settlement mechanisms,
represented by the various monitoring lists employed by the USTR, and multilateral dispute settlement mechanisms.
This means that the independent variables of these bilateral and multilateral dispute settlement mechanisms are not
completely exogenous to the dependent variable of PR Index. T o solve this problem, I use the lagged five-year average
values of these independent variables in the statistical analyses conducted above to avoid the potential problem of
simultaneity. On the other hand, future study could investigate what kinds of countries are much easier to be subject to
various dispute settlement mechanisms and screen out some characteristics as good instruments for further 2-stage
analysis.

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This chapter contributes to our understanding of patent protection in particular
and IPR protection in general. By using various statistical tools, it systematically
examines the effects of domestic economic, political and legal characteristics as well as
bilateral and multilateral dispute settlement mechanisms, differentiates the relative
importance of various influences, and suggests the possible mechanisms of certain
influences.
There are several areas which I have not been able to fully address in this chapter
and thus deserve further studies. First, the effects of domestic economic, political and
legal characteristics as well as bilateral and multilateral dispute settlement mechanisms
on patent protection should be checked and compared among country groups with
different levels of economic development so as to investigate any non-linearities in these
relationships. The reason why cross-country-group comparison is important needs to be
noted here. It is generally argued that countries adopt different IPR regimes because they
aim to reach what they judge to be the right balance between encouraging the creation of
intellectual property and promoting its diffusion. So there is a continuum of national
policy that generally reflects a country’s level of economic development and comparative
advantage in innovative and artistic products. The more advanced industrial countries,
with substantial capacity to produce intellectual property, tend to favor stronger IPR. The
poorest countries are busy dealing with the problem of poverty and survival and do not
care much about IPR protection, since they do not have many innovative activities and no
need to consume innovative products. They might respond easily to the external
pressures, bilaterally and multilaterally, and provide higher level of IPR protection
legislation.

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But, somewhere in between are the middle-income developing countries, which
produce products using pirated IPR but also are beginning to create their own. These
middle-income developing counties are torn between the competing interests of
entrenched “pirate” industries and their emerging inventors and artists, who would
benefit from a stronger IPR regime. Hence, it might be desirable to investigate these
countries separately. Would the economic, political and legal characteristics influence
IPR protection differently in middle-income developing counties than in the other
countries? Do they respond differently to bilateral and multilateral dispute settlement
mechanisms? That is why this subgroup of countries carries different, if not more,
research importance than the other two subgroups of countries.
Second, the effectiveness of the U.S. unilateral aggressiveness on IPR protection
might be conditional on its credibility in the eyes of the target countries. The more a
country is dependent on the U.S. for export market access, the more likely it might be
designated on the USTR Special 301 placements or other monitoring lists, while the more
the U.S. is dependent on the target country for export market access, the less credible the
threat of trade sanction by the U.S. is. Interaction between bilateral dispute settlement
mechanisms and their credibility have not been checked in this study, but this could be a
useful extension of the study.
Third, the effect of BITs on patent protection suggests that FDI might also
influence IPR protection level through two mechanisms. On the one hand, domestic
beneficiaries from incoming FDI may become new constituents supporting higher level
of IPR protection, since they know that only by securing IPR can they attract more FDI.
On the other hand, transnational corporations, which are relatively innovative, would

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only invest where their IPR can be protected and would lobby their home country to
execute unilateral pressures on the host countries for higher IPR protection at the national
level. At the firm level or industry level, multinational corporations could externalize the
norms of IPR protection from home country of higher protection to host country of lower
protection through backward and forward linkages. There have been some studies in the
areas of externalizing standardization, workers' rights and environmental protection.
(Darnall et al 2010) Please note that what really matters in spreading of certain
international norms may not be the overall volume of FDI net inflow, but FDI inflow
from a certain country or sources, such as the U.S. and member countries of the European
Community.
Fourth, this chapter has not addressed the influence of RTAs on patent protection.
There have been more than 200 RTAs signed within region as well across regions, with
members of balanced economic development as well as members of unbalanced
economic development. Most of these RTAs have their own dispute settlement
mechanisms, besides bilateral ones represented by the U.S. Special 301 placements and
other monitoring and multilateral one under the WTO DSP. Among these RTAs,
variations exist in terms of whether international standards represented by the TRIPS
Agreement or other standards higher than international standards (like the general
protection level provided in the European Union) are accepted as benchmark inside the
RTAs, and time limit within which a certain standard is expected to meet. IPR-related
provisions in establishing RTAs and availability of regional enforcement mechanisms are
expected to have a significant influence on countries’ IPR protection, considering that
those countries, especially those less developed ones in the unbalanced RTAs, have great

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incentives to keep the close trade and/or investment relationship with other members
under the RTAs. Application for RTAs membership is expected to have influence on
countries’ IPR protection, considering that membership of RTAs works as a
compensation for potential loss from higher level of IPR protection, an incentive
provided to countries to accede, and bargaining chips available for pro-IPR groups to
play in domestic politics. Furthermore, future research could use international
negotiation analysis to investigate the international causes more deeply, such as bilateral
negations with both coercive and incentive means as well as multilateral negotiations in
the institutional context of WTO, WIPO and RTAs, given that sometimes skillful
negotiation strategies could help weaker parties to make less concession than what
statistical correlations would predict or hard to catch.
Last but not least, this chapter only examines enacting legislation as one essential
part of delivering higher protection for patent to industries and firms, and it was not
designed to examine how these legislations were enforced. A study of enforcement and
the extent to which patent infringers would be penalized would be needed for a full
understanding of the patent protection on the ground and how that varies by country.

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Chapter 3 The International Political Economy of IPR Enforcement:
The Case of Copyright Protection for Business Software
In Chapter 2, I have explored how the enacting reforms for IPR protection, such
as patent, copyright and trademark, have swept the world by taking the statutory
protection for patent rights as an example. How have these laws of IPR protection been
enforced in different countries? Why countries still reveal huge divergence in their IPR
enforcement results, although national standards of IPR protection have converged to
each other in the legal codes after the TRIPS Agreement was signed in 1994? Why have
some countries improved their IPR protection a lot
69
The existing literature of empirical studies on IPR protection focused on the effect
of either domestic economic conditions or certain aspects of international pressures,
some on bilateral pressure and influence, some on multilateral international institution
and some on regional international institutions although did not check their influence
in the past two decades not only in
legal codes, but also in terms of enforcement of those legal statutes, while others are still
criticized for their insufficient and inefficient enforcement of IPR protection? This
chapter will explore the domestic and international conditions under which countries
provided IPR protection on the ground by examining the cross-country variations in
terms of their enforcement in copyrights protection for business software in the past
fifteen years (1994-2008).

69
Please be noted that I do not make any normative judgment when using such phrases as “improvement in IPR
protection” or “higher level of IPR protection”. Whether they mean “better off” or “higher welfare” depends on which
groups of people we are talking about. For example, stronger IPR protection is obviously better for the IP owners
while might be worse for the IP users who need to pay more out of their purses for the goods and with less options.
Although the IP owners argue that higher IPR protection is also better for the IP users because stronger IPR protection
encourages innovation and creative products, the essence of IPR protection is to equip IP owners with monopoly power
and there exist possibilities for IP owners to abuse this monopoly power and make use of IPR protection as a means to
limit market competition as some critics maintain.

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systematically in large-N study. Based on these existing studies, this chapter will first
indentify another important domestic institution—legal institutions—which will help us
understand the cross-country difference in the extent of IPR enforcement and compliance
with international standards. In the literature of law and finance, countries of different
legal origins are shown to provide different level of property rights (PR) protection, with
countries of Common Law system providing the highest level of PR protection, countries
of French Civil Law system providing the lowest level of PR protection and countries of
German Civil Law system and Scandinavian Civil Law system lying in the middle. This
chapter will provide evidence that this pattern in the area of general property rights
protection also appear in protection for such intangible property rights as copyright of
business software.
Second, instead of focusing on certain aspect of international influence on IPR
protection, this chapter will systematically examine the relative effects of three types of
international influences from bilateral consultation and interaction, regional and
multilateral institutions at the same time. As in the previous studies, bilateral influence
mainly refers to pressure executed by the United States on its trade partners through
anticipated trade sanction as well as bilateral investment treaties between the United
States and other countries through investment incentives. I also examine net FDI as one
of the controlling variables as a measurement of bilateral influence of multilateral
corporations (MNCs) exporting Western values and standards while investing abroad.
Besides, I particularly check the influences of RTAs as well as multilateral institutions
and their built-in dispute settlement mechanisms, like that in the WTO, on the level of
enforcement. These influences have not been examined systematically in previous

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statistical studies. This chapter shows that countries entering into RTAs and multilateral
trade agreement like WTO generally have higher level of protection for software
copyright, but the consultations and disputes under the built-in dispute settlement
mechanisms in WTO per se do not necessarily improve the protection level for software
copyright among countries, at least so far.
This chapter is organized as follows. In Section 1, I will briefly review the
existing literature examining the effects of domestic economic and political
characteristics on IPR protection, and discuss how further examination on domestic legal
institutions would improve our understanding on copyright protection in the case of
business software, especially its enforcement. In Section 2, I will discuss what
international factors are expected to influence the extent of copyright protection, and
identify the necessity to examine the effects of RTAs as well as the relative importance of
bilateral, regional and multilateral mechanisms on improving IPR protection. In Section
3, I will discuss the data and their resources, the models I use, and the evidences I get.
Conclusions as well as the directions of future research will be discussed in Section 4.

3.1.Domestic Economic and Political Characteristics and IPR Protection:
How about Legal Institutions?
Econometric studies have established the existence of strong and positive
correlation between national income and the protection of IPRs, although the causal
mechanism at play between the two is still not quite clear cut. On the one hand, as
reviewed in Chapter 2, an empirical study conducted by Ginarte and Park (1997)
indicates that the more developed economies tend to provide stronger protection in

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legislation for patent. As for enforcement of IPR protection, Shadlen, Schrank and Kurtz
(2005) also show that the more developed the economy is, the lower the software piracy
is in that economy.
On the other hand, there have been a lot of disagreements on what it is about
economic development and national income that matter in intellectual property protection.
First, countries might develop new domestic constituencies for higher IPR protection as
they become wealthier and complete a transformation in their structure of economic
activities (such as with increasing percentage of technology-intensive production). As
domestic researchers, technicians and producers begin to dedicate more resources to
inventive activities, they are more likely to persuade their governments to provide higher
level of IPR protection for their investment in R&D and human capital, their intellectual
achievements and their profit margin. Therefore, R&D expenditures as a percentage of
GDP can be treated as one proxy for the domestic constituency supporting higher IPR
protection. (Ginarte and Park 1997) At the same time, when countries become wealthier
and devote more resources to innovative activities, IPR-intensive products become more
affordable to more people. This transition further increases the demand of those IPR-
intensive goods with a reasonable price and further shrinks the size and power of IPR-
opposing constituency. Considering that the level of IPR protection reflects a balance
between promoting incentives for innovations and insuring public access to innovations
with a reasonable price, domestic government will have more incentives and bigger
leverages to provide higher level of IPR protection as countries become wealthier and
power balance between domestic IPR-supporting constituency and IPR-opposing
constituency tilt against the latter.

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Second, as countries and their people become wealthier, they will devote more
expenditure and resources into education and development of human capitals. For one
thing, more national and personal spending on education will promote the development
of innovation activities, drive the increase in expenditure in research and development,
and thus strengthen the power of domestic constituency supporting higher IPR protection.
For another, at the personal level, consumers with higher education level generally have
more sympathy for innovators and producers who rely on their intellectual efforts, higher
income level and thus more extra incomes to spend on purchasing genuine IPR-intensive
products besides daily necessities.
It should be noted that domestic political institutions is important to determine
whether and how the economic factors at the national level can influence the choice of
IPR protection level at the local and national level. In different sets of domestic political
institutions, the appeal of various interest groups can be aggregated and represented in the
legislation process to different extent, and thus the power balance among different
constituency groups could be influenced differently. It is expected that the higher degree
of political freedom a country has, the more likely the interests of various domestic
constituencies can be represented and pursued in legislation and policy making as well as
law enforcement and policy implementation. However, the net effect of political freedom
on the level of IPR protection is not clear cut as it suggests, since both the interest of IPR-
supporting groups and IPR-opposing groups can be influential in shaping the legal code
and/or national policy of IPR protection and their enforcement.
Third, economic development would provide more resources to government to
put into legal enforcement and policy implementation and thus result in strengthening the

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capacity of government and/or legal system to supply enough IPR protection, in terms of
not only legislation but also, more importantly, legal enforcement. Enforcing protection
for IPR imposes infrastructural and implementation costs on national and local
governments, not only including purchasing genuine IPR-intensive products, like
licensed software, in the public sectors, but also including providing special training to
administrative staffs, police, prosecutors, and judges as well as financing prosecution and
enforcement activities. Therefore, as countries get richer, they are more able to afford the
infrastructural and implementation costs associated with higher IPR protection.
Furthermore, as countries become wealthier, governments might have more resources to
improve its government effectiveness, regulatory quality, legal enforcement in general
and control of corruption level, thus provide a general benign environment for the owners
of property rights in general and intellectual property rights in particular. Additionally,
the more developed a country’s legislative and enforcement infrastructure is, the less
marginal resources are needed to provide higher level of IPR protection.
The empirical studies provide mixed evidence for these different mechanisms
through which national income and economic development might promote protection for
intellectual property rights. In Ginarte and Park 1997, once controlling for other
underlying factors, which may influence patent protection levels and are correlated with
national income, in their empirical study, the effect of national income is not consistently
important or even not consistently positive. Ginarte and Park thus argued that it is not the
level of development per se that influences the provision of patent protection, but rather
the determinants of economic development, such as investment in R&D activities,
investment in human capital, the degree of freedom in its market environment, the degree

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of political freedom, and the degree of international integration measured by openness.
In another words, national income probably works as a proxy for these omitted relevant
variables.
The empirical studies in enforcement for IPR protection provide some different
evidence. Shadlen, Schrank and Kurtz (2005) examined similar domestic economic
characteristics, such as human capital measured by combined primary, secondary and
tertiary gross enrollment ratio, R&D measured by the number of scientists and
technicians in R&D per 1,000 inhabitants, and political institutions operationalized by
government effectiveness and measures by an index developed by Kaufmann, Kraay and
Mastruzzi (2002) on the enforcement of copyright for business software measured by
piracy rate. On the one hand, their empirical study shows that no matter which domestic
economic characteristics are controlled, national income always has a negative and
significant effect on the level of piracy rate in business software. On the other hand, they
show that human capital always has a negative and significant effect on piracy rate, while
scientific infrastructure surprisingly has a positive effect on piracy rate (which is
significant in most of the models). The effect of government effectiveness was detected
negative and significant in some model but positive and insignificant in other. It should
be noted that because of unavailability of data covering sufficiently long period, all
independent variables of domestic economic and political characteristics, except national
income, use either the data for one single year (for human capital and political institutions)
or the average of data in a short period (for R&D) in this empirical statistical analysis.
This makes it hard to better detect any with-in panel cross-period variations using the
dataset. This empirical study also relies exclusively on the population-averaged

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generalized linear models, which assume that there is no correlation between unobserved,
time-invariant heterogeneity among groups and observed time-variant and time-invariant
heterogeneity among groups. The following analysis will try to deal with these two
problems with panel data covering longer time period as well as fixed-effect models and
post-estimation examination for comparing validity of different models.
Focusing on the domestic economic characteristics and political institutions, the
existing literature on IPR protection, especially legal enforcement for IPR protection,
generally overlook one domestic institutions—legal institutions. After all, the
enforcement of IPR protection mainly and directly depends on domestic legal
infrastructure of a country, instead of being imposed from outside by any international
influence, especially bilateral pressures as discussed in the next session. Even those
domestic economic and political factors mentioned above work through domestic legal
infrastructure to influence IPR enforcement.
The variations across different legal origins and their effects are not so familiar to
the field of international studies and comparatives politics as it is in the field of law and
economics, especially law and finance. According to the literature of legal origin
reviewed in the previous chapter, countries belonging to different legal families with
different origins of their commercial laws (English Common Law, and French, German
and Scandinavian Civil Law
70

70
Although somebody may argue that there is another socialist legal origin besides the four, I do not include it in the
current study since few countries have socialist legal origin nowadays.
) generally exhibit difference in investor protection,
government ownership and regulation (or government involvement in economic life), and
formalism and independence of judicial system in their statutory law. Compared to

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countries of French Civil Law, countries of Common Law generally have (a) better
investor protection, which in turn is associated with improved financial development,
better access to finance, and higher ownership dispersion (La Porta et al 1997, 1998); (b)
lighter government ownership and regulation, which are in turn associated with less
corruption, better functioning labor markets, and smaller unofficial economies (La Porta
et al 2002b, Djankov et al 2003b, Djankov et al 2002, Botero et al 2004); and (c) less
formalized and more independent judicial systems, which are in turn associated with
more secure property rights and better contract enforcement (Djankov et al 2003a, La
Porta et al 2004). Countries of German Civil Law system and Scandinavian Civil Law
system lie in the middle. Some of these studies on legal origin examine the formal legal
statutes (the legal rules on the books) and their quality, while others discuss what happens
“on the ground”.
The difference between various legal origins has not been examined in the studies
of cross-country IPR protection as argued in the Chapter 2. Following the analysis of
Chapter 2, which focuses on the effects of legal origins on legislation and cross-country
over-time variations in statutory rules, this chapter will examine the effects of legal
origins on how these IPR laws are enforced domestically. The three explanations
provided by the previous chapter, efficiency consideration, judicial independence and
adaptability to the evolving circumstances, are still relevant in the case of IPR
enforcement. Furthermore, the three explanations should be more relevant in the case of
IPR enforcement than in the case of IPR legislation for the following reasons.
First, enforcement of IPR protection relies on legal infrastructure and enforcement
capacities similar with that of general property rights protection in each legal system,

135

since it is more efficient to adapt to the previously established (for mother countries) or
transplanted (for transplanting countries) legal infrastructure than establishing a set of
new legal institutions and enforcement capability from scratches in the new legal sphere.
Even for those countries which entered international IPR agreements or regional trade
agreements recently, those regional or multilateral agreements generally do not require
them to establish a completely new set of enforcement structure especially and
exclusively for IPR. The legal infrastructure includes basic law and strategy for dealing
with new problems, the institutions for enforcing the laws and its effectiveness and
accountability, and human capital of the participants in the legal system, among which
the latter two are especially relevant in terms of enforcement. La Porta et al 1999) shows
that countries of Common Law exhibit more generally higher scores on a variety of
measures of security of property rights. If the efficiency consideration works in reality,
Common Law countries would have higher level of enforcement for IPR than French
Civil Law countries.
Second, countries of Common Law generally have higher degree of judicial
independence
71

71
Glaeser and Shleifer 2002 even regarded judicial independence as the defining characteristic of common law.
, which is found to contribute to economic freedoms, such as protection of
property rights by the literature of legal origin. Giving that countries have already
provided legislative protection for IPR protection to certain extent, judges in the countries
with higher judicial independence could make court decisions based on legal logics and
immune themselves from the influences of executive branches and interest groups.
Different from the unclear-cut net effect of judicial independence on legislation for IPR
protection, judicial independence is obviously valuable for enforcing IPR protection

136

when the government itself is a litigant, as well as when the government itself is
infringing others’ IPR. Judicial independence is also valuable in purely private disputes
when one of the litigants is politically connected to the executives who want to make the
court favor its clients.
Thirdly, according to comparative law literature and legal origin literature,
Common Law doctrine and French Civil Law doctrine have different underlying theories
on the completeness and coherence of laws and the role of judges and thus different
degree of adaptability to the evolving circumstances. (Djankov et al 2003, Beck et al
2003, Gennaioli and Shleifer 2007, Ponzetto and Fernandez 2008). French Civil Law
tends to hold that the laws drafted by legislature were so clear, complete and coherent
that it would be not necessary for judges to choose among competing statutes, to give
practical meaning to ambiguous statutes, and to deliberate how laws and past experiences
could be applied to new situations, while Common Law holds the opposite. Therefore,
judges in the French Civil Law are obligated to adhere to the logical principles of
codified law, while those in Common Law are obsessed with facts and deciding concrete
disputes and granted with substantial discretion to challenge and replace inefficient laws
with efficient ones through their case-by-case litigation decisions. In consequence, when
dealing with new problems that arise in a dynamic situation, countries of Civil Law
system depends heavily on changes in statutory law, while countries of Common Law
system can simply depend on the accumulation of judges’ case-by-case decisions.
Considering that legislation is time-consuming and costly political process involving a
multiplicity of divergent agents, French Civil Law system tends to be less flexible, less
responsive and less efficiently rapidly to adapt to evolving economic circumstances and

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changing needs of society conditions than Common Law system. Larger gaps between
social needs and the legal system’s capability to support those needs are expected to be
observed in relatively more rigid French Civil Law system. Considering the nuanced
piecemeal changes in legislative protection for IPR might not be well captured by the
existing index such as Patent Protection Index used in Chapter 2, they might be more
manifest in the over-time changes in measurement of IPR enforcement result.
Adaptability to the evolving circumstance is also relevant in the case of copyright
protection, which will be examined in the empirical section, given that new
communication technologies which help new ideas and copyright-intensive products
spread out without space limit and within a blink erupt so quickly.

3.2.Bilateral Incentives and Pressures versus Multilateral International
Institutions: How about Regional Trade Agreements?
Besides domestic economic characteristics and political and legal institutions,
there are strong reasons to expect international factors to play an important role of
promoting IPR protection across the world and over time. Countries, especially those
developing ones, have faced intense bilateral, regional and multilateral demands and even
pressures to change their domestic laws, policies and enforcement behaviors in IPR
protection. These bilateral, regional and multilateral commitments made by countries are
expected to be complementary to the domestic characteristics to determine the level of
IPR enforcement.
When the WTO was established in 1995, the TRIPS Agreement also went into
effect as an integrated part of the single undertaking. According to this agreement, all the

138

members of the WTO as well as countries who expect to be members of the WTO must
accept the TRIPS Agreement at the same time when they accepted provisions of other
agreements under the WTO. But the obligations to fully implement the TRIPS
Agreement vary by the level of economic development for countries who had been WTO
members by 1995, and countries are granted with different length of transition period.
Developed countries were granted a one-year transition period until January 1, 1996,
while the developing countries and transition economies were allowed a five-year
transition period until January 1, 2000. Least-developed countries are granted a longer
transition period of a total of eleven years until January 1, 2006, which has been further
extended to July 1, 2013 with the possibility of further extension.
72
Does an international institution or international agreement matter in change
countries’ behavior? Different theories in international relations have given different
answers. Realism and Neorealism do not think international organization can make any
For countries which
are not the founding members in 1995, application of the TRIPS obligations were
negotiated when they applied for accession. In these cases, full implementation was
expected immediately upon entry, although the obligations may be different from case to
case. If international institutions could produce influence on countries’ behaviors and
countries could seriously enforce their international commitments, there should be
difference in the level of IPR enforcement between WTO members and non-members, as
well as between countries with different length of transition period to implement the
TRIPS Agreement.

72
For a full list of developing countries and least-developed countries with various transition period, please refer to the
webpage of the WTO at http://www.wto.org/english/tratop_e/trips_e/tripfq_e.htm#Transition, accessed on Jun14, 2010.

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difference, since countries will only act according to the principle of maximizing its own
absolute power or relative power. In contrast, functionalist institutionalism believes that
international institutions are useful to promote international cooperation and
implementation according to international agreements, because they can set up legal
behavior expectations, provide information to countries about each other’s
implementation behaviors and reduce transaction cost. (Keohane 1984, Maggi 1999)
This informative role is especially important to the working of reciprocity and non-
discrimination principle in GATT and WTO. (Bagwell et al 1999) However, the
empirical evidences on IPR protection are mixed. On the one hand of negative evidence,
although international IPR agreements and institutions (such as the Berne Convention,
the Paris Convention, and the WIPO) have existed for more than a century, they only
have a minimal role in changing states’ behavior, since countries began to significantly
improve their IPR protection only since 1980s. (Ginarte and Park 1997; Sell 1998) On
the other hand of positive evidence, even those least developed ones, began to establish
“TRIPS-plus” protection of IPR at the legislative level after 1995. (Deere 2006)
A comparison between WTO and WIPO, the TRIPS Agreement and other
international IPR agreements implies that whether international treaties and institutions to
elicit national behavioral changes in IPR protection might result from whether these
international institutions have strong enough “teeth” or not. International institutions
vary in the extent of legislation
73

73
Legalization is defined and measured by the degree to which rules are obligatory, the precision of those rules and the
delegation of some function of interpretation, monitoring and implementation to a third party. (Goldstein 2000)
. Higher level of legalization (Goldstein 2000) is
expected to elicit higher level of compliance with international agreements by rational

140

choice theorists. (Koremenos et al 2001) In the case of IPR protection, since the TRIPS
Agreement is an integrative part of the agreements establishing the WTO and any country
must accept the single undertaking before entering the organization, IPR protection is
now subject to the disciplines of an international organization with a strengthened dispute
resolution process, of which the previous international institutions lack. Under the WTO
and relevant TRIPS obligations, IPR-violating behaviors by any country can be
complained in front of the WTO DSB and can be panelized with authorized retaliatory
trade sanctions. The fact that IPR commitments under the TRIPS Agreement are “trade-
related” also makes the stake of non-compliance much higher than that in the other
international institutions and agreements. Therefore, we have good reason to expect that
the WTO membership and the TRIPS obligations under the strengthened WTO DSP
74
Studies on the effect of the WTO and its embedded agreements with strengthened
dispute settlement and enforcement mechanism compared with the GATT on countries’
compliance and implementation are limited. Busch and Reinhardt generally implied that
with strengthened dispute settlement mechanisms under the WTO, transparency at both
the consultation stage and the ruling stage increases in WTO. This change would
increase audience costs for the defendant, and thus would be counterproductive to elicit

would make countries provide higher level of IPR protection than before. (Drahos 2002;
Ryan 1998, and Sell 2003)

74
Some theorists argue that the strengthened enforcement mechanism is still not perfect as enforcement in domestic
court, since both GATT and WTO have relied on decentralized sanctions for decades, in which a dispute panel found
violations of international trade rule, while it is up to the injured party to retaliate within specified limits. Both GATT
and WTO have no centralized power to punish or reward, only to authorize individual members to do so. But WTO
moves one step further than GATT in terms of its centralized and strengthened DSP arrangement for judging trade
disputes, which are characterized with its time-bound and negative consensus properties. See Pekkanen 2003 and
Petersmann 1997. Some researchers even argue that Appellate Body (AB) in WTO has its own power of interpretation
and even rule-making of international law. See Garret et al 2000, Barton et al 2006.

141

desirable behavioral changes from the defendant. Shadlen, Schrank, and Kurtz (2005)’s
empirical study showed that countries which have been the defendant in a WTO case
involving IPR have significantly lower piracy rate of business software after controlling
for national income, human capital and obligation to fully comply with WTO’s TRIPS
standards (but not others). One problem with their empirical study is that they examine
the effects of all WTO cases involving IPR instead of WTO cases involving copyright
and its implementation on the piracy rate of software, which is mainly protected under
national copyright law and international copyright agreements. I will make adjustment
on this in the following empirical study.
In addition to the multilateral pressures derived from implementing obligations
under the WTO and the TRIPS Agreement and potential exposure to the WTO dispute
settlement mechanism and authorized trade retaliation, countries also faced bilateral
pressures from the United States to enforce for higher level of IPR protection. The
“Special 301” provisions of the 1988 Omnibus Trade and Competitiveness Act gave the
U.S. President authority to retaliate against foreign countries that violate IPR of the U.S.
citizens and companies. Special 301 requires the USTR to identify, within 30 days of
issuing the National Trade Estimates Report, “those countries that deny adequate and
effective protection of intellectual property rights, or deny fair and equitable market
access to the United States persons that rely on intellectual property rights.” Every year,
the USTR needs to publicize an annual Special 301 Reports, listing countries where the
treatment of IPR fails to meet U.S. standards, based on the nominations by several

142

industry associations. (Sell 1998)
75
Although all kinds of unilateral trade instruments and bilateral pressures by
developed countries, represented by the U.S. Special 301 practice, might be thought to be
effective to elicit desirable behavior changes by structural realist theorists of international
relations in general (Bayard and Elliott 1994, pp83-85) and to press developing countries
to adopt stronger laws for IPR protection in particular as demonstrated in Chapter 2 (as
well as in Sell 1995, 1998, 2003; Drahos 2002, 2003), they might not be as well effective
in terms of eliciting higher level of enforcement for IPR protection. Sell found that
USTR pressure in the late 1980s and early 1990s was effective in getting countries to
Countries are listed in one of the three categories,
with increasing severity of their IPR infringement: Watch List, Priority Watch List, and
Priority Foreign Countries. Especially, if a country is identified as “Priority Foreign
Countries”, the USTR has 30 days to decide whether or not to conduct a formal
investigation that could lead to trade sanction. Besides the three categories of priority
monitoring, the USTR also announces which countries are under Section 306 monitoring
under a bilateral agreement or Memorandum of Understanding with the U.S. and which
countries are under Out-of-Cycle Reviews (OCR) by the U.S. along with the annual
USTR Special 301 Report. Even after the Uruguay Round was completed and a new IPR
regime was integrated with a strengthened DSP under the WTO, the U.S. made it clear
that it will never give up in using unilateral instruments to protect IPR if necessary and
continuously publicize its annual Special 301 placement annually until today.

75
International Intellectual Property Alliance (IIPA) is the most important and active one. It is an association of several
IPR-related industry associations, including Association of American Publishes (AAP), Business Software Alliance
(BSA), Entertainment Software Association (ESA), Independent Film & Television Alliance (IFTA), Motion Picture
Association of America (MPAA), National Music Publishers’ Association (NMPA), and Recording Industry
Association of America (RIAA).

143

change their laws and policies in IPR protection, although not the actual enforcement of
IPR protection. Mertha and Pahre, in their case study of IPR protection in China (Mertha
2005, Mertha and Pahre 2005) , also showed that the unilateral pressure from the U.S. has
an essential effect to improve legislation in protection for patent, copyrights and
trademark, although the gap between legislation and enforcement cannot be reduced by
unilateral pressure. There are several explanations for the failure. First, the Special 301
placements as well as other unilateral trade instruments and bilateral pressures may lead
to domestic backlash in the target countries and thus increase the domestic political cost
of conceding due to its blunt characteristic of “unilateral aggressiveness”. National
governments of the target countries have to rush to legislate for higher level of IPR
protection either by passing a new IP-related law or making amendments on the previous
ones on the one hand while postponing genuine enforcement of those laws on the other in
order to avoid any further trade retaliation imposed by the U.S. under the Special 301
process and avoid harsh criticism on being soft to the foreign pressures by domestic
opposing parties at the same time. Second, Special 301 and other means of unilateral
threat can be effective as a threat only if this threat is credible. (Shelling 1960) For
example, Special 301 placement may not be effective to elicit desirable enforcement in
those countries which are hardly dependent on the U.S. market, or in those countries on
whose market the U.S. is highly dependent. (Zeng 2002) Finally, and most importantly,
genuine enforcement for IPR protection domestically cannot be imposed from the outside
but highly depends on domestic economic, political and legal infrastructure, no matter
how strong and credible the U.S. threat is. Given that the legislation protection for IPR
has reached a certain level, it takes time for countries to enforce those laws and gradually

144

decrease the rate of piracy and infringement over time, since countries need to
accumulate enough material resources and human capitals, the enforcement activities
need to become institutionalized instead of simply an expedient bandwagon show as a
response to the U.S. threat, the public needs to develop strong capabilities, incentives and
willingness to shed away from buying pirated and infringed products, and the
enforcement efforts need to time to have deterrent effects on future infringement
activities.
Bilateral influences do not only include pressure derived from structural power
imbalance and the USTR’s use of bilateral dispute settlement mechanism, but also
bilateral incentives. As a response to the U.S. failure to obtain an agreement on trade in
counterfeit goods at the end of the Tokyo Round in 1979 and the resistance of developing
countries in early 1980s to include IPR as a negotiation agenda in the Uruguay Ground,
the U.S. not only reformed its Trade Act of 1974 by creating “Special 301” as a new
enforcement tool in 1980s, it also began to link its BITs Program
76
with adequate and
effective protection for IPR. As argued by Drahos (2001), generally speaking, BITs do
not set specific standards of intellectual property (with US-Poland BIT (entering into
force in 1994) as an exception
77

76
For all BITs in currently in force, please visit the website
) but protect the rights of investors who depends on
intellectual property as a mode of investment by including intellectual property in treaties’
definition of investment. The role of BITs per se in promoting IPR protection is mainly
http://tcc.export.gov/Trade_Agreements/Bilateral_Investment_Treaties/index.asp (accessed on Jun.14, 2010).

77
US-Poland treaty contains extensive protections for IPR that are not ordinarily addressed in BITs. Poland obligated
to extend copyright protection to computer programs, to provide product as well as process patent protection for
pharmaceuticals and chemicals, and to protect integrated circuit layout designs. In a side letter to the treaty, Poland
also obligated to enact national legislation implementing these obligations during 1991 and 1992, and adhere to the
Paris Act of the Berne Convention for the Protection of Literary and Artistic Works in 1990.

145

to propel BITs partners
78
to make commitments to implement the TRIPS obligations
within a reasonable time, although most of these BITs partners are either developing
countries or least-developing countries with long transition period under the TRIPS
Agreement, or non-member in the WTO and the TRIPS Agreement by the time when the
BITs were signed.
79
Comparing with the institutionalized bilateral investment treaties, some
researchers argue that FDI is also expected to be helpful to trade liberalization in general
and spread and institutionalize western liberal ideas indigenously in particular. FDI
might influence IPR protection through several mechanisms. First, transnational
corporations, which originate from those developed countries and are relatively
innovative, would only invest where their IPR can be protected and propel potential host
countries to compete for higher level of IPR protection. They would also lobby in their
Furthermore, the U.S. is using BITs as a carrot to get developing
countries to sign bilateral intellectual property agreements, in which these partners have
obligated themselves for “TRIPS-plus” obligations on IPR protection. Considering the
potential benefits of signing BITs with the U.S., such as increased foreign investment
from the U.S. and tighter trade and investment relationship with the U.S., such treaties
provides incentives as well as compensation for the cost (at least in theory) to provide
higher level of IPR protection.

78
Among the 40 BITs partners up to now, there are 17 developing countries with transitions period of 5 years under
TRIPs (Argentina, Bahrain, Bolivia, Cameroon, Republic of Congo, Egypt, Estonia, Grenada, Honduras, Jamaica,
Morocco, Poland, Sri Lanka, Trinidad and Tobago, Tunisia, Turkey, Uruguay), 4 least developing countries with longer
transition period until Jul.1, 2013 under TRIPs (Bangladesh, Democratic Republic of Congo, Mozambique, Senegal),
14 countries entering into WTO later than Jan.1, 1995 and with obligation of full implementation of TRIPS upon entry
(Albania, Armenia, Bulgaria, Croatia, Ecuador, Georgia, Jordan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia,
Panama, Ukraine), 2 non-WTO member until now (Azerbaijan, Kazakhstan) . The other 3 countries, Czech, Romania,
Slovak, are the signing parties of WTO with standard one-year transition period as the U.S.

79
BITs were also expected to undermine the potential use of compulsory licensing and limit the capacity of
governments to impose performance requirements on investment activities. But these have well exceeded the scope of
discussion of this chapter.

146

home country to execute unilateral pressure in the host countries for higher IPR
protection at the national level. Second, at the firm level or industry level, multinational
corporations could externalize the norms of IPR protection from home country of higher
protection to host country of lower protection through backward linkages. There have
been some studies in the areas of externalizing standardization, workers' rights and
environmental protection. (Darnall et al 2010). Third, domestic beneficiaries may
become constituents supporting higher level of IPR protection, since they know that only
by securing IPR can they attract more FDI from those developed countries with
technology-intensive production.
There is another group of international institutions, regional trade agreements
(RTAs), which have proliferated in the past two decades given the staggering trade
negotiation process in the new round under the WTO and the deepening integration of
regional trade transaction and investment, while whose effects on promoting IPR
protection were generally overlooked in the empirical studies of IPR protection. RTAs
are expected to improve the level of IPR protection in their members, especially those
with lower level of IPR protection, for several reasons. First, for the similar reason of
signing BITs and bilateral intellectual property treaties, countries with higher level of IPR
protection are not satisfied with the TRIPS Agreement, which in their eyes only set
minimum obligations, and resort to RTAs to propel other countries to make TRIPS-plus
commitments. These TRIPS-plus commitments include acceding into and ratifying
certain international IPR treaties before certain deadlines, requiring members to
implement a more extensive standard than the TRIPS Agreement (such as standards in
line with those in the U.S. or European Union), and eliminating an option for members

147

under the TRIPS standards. Second, some RTAs might cover clauses on cooperation in
IPR, ranging from disseminating information, sharing experiences, exchanging of experts,
organizing symposiums, seminars and workshops, undertaking training on enforcement,
to providing technical assistance for efficient administration and enforcement of IP
protection system. These cooperation clauses, if implemented accordingly, are expected
to improve the human capital and technical capability in IPR administration and
enforcement. Third, a lot of RTAs have members with highly imbalanced level of IPR
protection when the RTAs were signed. These members generally have unbalanced level
of economic development and/or unbalanced trade dependence on others’ export market
among each other, and/or one party (mostly a country) has strong incentives to integrate
into another party (mostly another RTA). Potential benefits entering such RTAs can
compensate for the cost to provide higher level of IPR protection. TRIPS-plus
commitments and cooperation clauses are generally more likely to be included in these
RTAs, since the parties with higher level of IPR protection also have strong incentives to
obligate the parties with lower level of IPR protection in their behaviors.
It is important to take into consideration of both domestic economic and political
as well as international influences to systematically analyze cross-country variations in
IPR protection over the past decades, since influences and/or pressures from abroad, no
matter whether they are bilateral, regional and multilateral, are not self-enforcing and
must work through the domestic institutions. There have been some studies checking
domestic characteristics and international influences at the same time. For example,
Deere (2006) studies variations among developing countries in their approach in three
core aspects of TRIPS implementation (the timing of implementation, the pace and

148

strength of legislative reforms, and the degree of enforcement offered
80
), which can be
explained by the interplay between global power pressures and national political
dynamics. Her case study shows that the reasons why francophone African countries
surprisingly provide “TRIPS-plus” protection of IPR is the weak national political
dynamics and the strong international power pressures, and especially the strong
international efforts to build capability in these countries. But this study failed to use
statistical analysis. And her focus on francophone African countries should be challenged,
for firstly the importance of these countries to implement the TRIPS Agreement is little
81

,
and secondly national political dynamics cannot be fully shown since in this setting
national political dynamics is totally overwhelmed by the international pressures.
Shadlen, Schrank, and Kurtz (2005) also checked both the national and international
determinants on levels of software piracy in 80 countries from 1994 to 2002, but using
statistical research method. They showed that both the bilateral influences (incentives
resulting from BITs with the U.S. and trade dependence on the U.S. but not the pressures
resulting from the U.S. special 301 placements) and multilateral influences (resulting
from the TRIPS obligations) are significantly associated with lower level of piracy rate in
both rich and poor countries. But the relative importance of RTAs is completely
overlooked in their analysis. My following study will fill up this gap.

80
In particular, the author examines the varying degree to which developing countries took advantage of TRIPS
“flexibilities”.

81
There may be some political importance (such as pushing other countries to emulate), but I am afraid that the
economic importance of implementation in these countries is very limited.

149

3.3. Copyright Protection for Business Software: Data, Model and Evidence
In this section, I will build upon both economic literature and international
relations literature and develop a strengthened synthesis of existing scholarship on IPR
enforcement. First, I will extend both economic literature and international relations
literature respectively by examining two effects which have been overlooked by the
contemporary scholarship, legal institution focusing on legal origin and regional trade
agreements. Second, by synthesizing domestic economic, political and legal
characteristics with bilateral, regional and multilateral influences together, I could
examine the relative importance of various influences at the same time. Third, by
examining data covering longer period and more countries and taking advantage of the
cutting-edged econometric techniques, I could further refine the statistical analysis.

V ariable Operationalization, and Data Source
It has been notoriously difficult to measure the level of IPR protection, especially
enforcement, across countries and over time. Ideally, a good measurement of IPR
enforcement should differentiate itself from the measurement of legislation and reflect the
performance of IPR laws filtered through the domestic enforcement institutions. The
biggest obstacle to measure IPR enforcement by using percentage of genuine goods to all
goods being consumed is to get the information on usage of infringed and pirated goods
and justify how many genuine goods could be purchased and consumed if all
infringement would be repressed.
There is such a measurement which at least solves the problem associated with
the first obstacle as identified in Chapter 1. Business Software Alliance (BSA), an

150

industry association headquartered in the U.S. campaigning for copyright protection for
business software, annually published a world piracy report on software piracy rate for
over a hundred countries every year since 1993 till 2009.
82
As for domestic economic determinants, I follow Shadlen et al 2005 on including
GDP per capita, investments in R&D and human capital (please refer to Table 3.1 for
definitions and sources of the independent variables and their available years). I made
several adjustments compared with Shadlen et al 2005 on these variables: (1) by using
log-transformed GDP per capita instead of the level of GDP per capita since the level
could follow a pattern of exponential growth; (2) using R&D expenditure instead of R&D
personnel as a measurement of investment stock in R&D since the former one covers
more countries for more years in my data collection; (3) using gross rate of secondary
school enrollment by World Development Indicator by World Bank online instead of
combining primacy, secondary and tertiary gross enrollment ratio by the United Nations
Development Program (UNDP), since there are no time-series data covering the desired
years at the UNDP website; (4) using yearly data for R&D expenditure and education for
I will take advantage of this
dataset with longer time coverage and wider country coverage in my statistical analysis,
compared with Shadlen, Schrank, and Kurtz (2005). Besides, since the level of piracy
rate is not normally distributed but highly screwed, I use the logit-transformed piracy rate
as dependent variable.

82
Although since 2004 (for reporting piracy rate of business software for the year of 2003), BSA commissioned its
cross-the-world piracy rate to IDC, an information technology industry’s leading global market research and
forecasting firm, instead of International Planning and Research Corporation (IPRC) as in the previous years, the piracy
rate in 2003 reported by IDC and that in 2002 reported by IPRC are highly correlated with each other (with Pearson
Correlation Coefficient equal to 0.94, significant at 0.01 level). As claimed by the 2004 BSA (and IDC) piracy report,
the major differences between IDC reports from 2003 and thereafter and IPRC reports before are (1) the IDC reports
used its proprietary statistics for software and hardware shipments while IPRC reports rely on BSA members’ data; (2)
IDC reports began to cover categories not covered in previous studies, such as operating systems, consumer-oriented
software and local-language software.

151
Table 3.1 Independent Variables and Data Sources

Independent Variables Available Years Source
Logged GDP pc. Logged real GDP per capita, constant 2000 US
dollar.
1994-2008 World Development Indicator
(WDI), World Bank
R&D. Expenditure on R&D as a percentage of GDP. 1994-2007 UNESCO
Secondary Enrollment Rate. Gross rate of secondary school
enrollment.
1994-2008 WDI, World Bank
Trade Openness. Total trade (export plus import) as a percentage of
GDP
1994-2008 WDI, World Bank
FDI. Foreign Direct Investment, net inflow as a percentage of GDP. 1994-2008 WDI, World Bank

Government Effectiveness. An index ranging from about -2.5 to 2.5,
with higher values representing better government effectiveness.
1996, 1998, 2000,
2002-2008
Kaufmann, Kraay and
Mastruzzi 2009
Regulatory Quality. An index ranging from about -2.5 to 2.5, with
higher values representing better regulatory quality.
1996, 1998, 2000,
2002-2008
Kaufmann, Kraay and
Mastruzzi 2009
Rule of Law. An index ranging from about -2.5 to 2.5, with higher
values representing better rule of law.
1996, 1998, 2000,
2002-2008
Kaufmann, Kraay and
Mastruzzi 2009
Control of Corruption. An index ranging from about -2.5 to 2.5, with
higher values representing better control of corruption.
1996, 1998, 2000,
2002-2008
Kaufmann, Kraay and
Mastruzzi 2009
Democracy. An index ranging from 10 to -10, with the higher number
representing higher degree of democracy.
1994-2008 Polity IV

Common Law. 1 if a certain country belongs to Common Legal
Origin, 0 otherwise.
(no annual
variation)
La Porta et al 2008
French Civil Law. 1 if a certain country belongs to French Legal
Origin, 0 otherwise.
(no annual
variation)
La Porta et al 2008
German Civil Law. 1 if a certain country belongs to German Legal
Origin, 0 otherwise.
(no annual
variation)
La Porta et al 2008
Scandinavian Civil Law. 1 if a certain country belongs to
Scandinavian Legal Origin, 0 otherwise.
(no annual
variation)
La Porta et al 2008

152
Table 3.1 Continued

Priority Foreign Country. 1 if a certain country was designated as a
Priority Foreign Country by USTR Special 301 Report in a certain
year, 0 otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
Priority Watch List Country. 1 when a country was included in
Priority Watch List by USTR Special 301 Report in a certain year, 0
otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
Watch List Country. 1 when a country was included in Watch List by
USTR Special 301 Report in a certain year, 0 otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
US Special 301. 3 if a certain country was designated as a Priority
Foreign Country by USTR Special 301 Report in a certain year, 2 if
included in Priority Watch List, 1 if included in Watch List, 0
otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
306 List Country. 1 when a country was under Section 306
monitoring according to a bilateral Memorandum of Understanding
with the U.S., 0 otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
OCR. 1 when a country was under Out-of-Cycle Reviews by the U.S.,
0 otherwise.
1994-2008 USTR Special 301 reports as
described in text, Federal
Register
BITs. 1 when a country has a bilateral investment treaty with the U.S.
which has been in force for at least half the year, 0 otherwise.
1994-2008 U.S. Department of State

WTO Membership. 1 when a country is a member of WTO for at
least half the year, 0 otherwise.
1995-2008 WTO
TRIPS obligation. 1 when a country is obligated to fully implement
the TRIPS commitment for at least half the year, 0 otherwise.
1995-2008 WTO
Defendant in WTO DSP. 1 when a country is a defendant under the
WTO dispute settlement procedure for copyright-related issue, 0
otherwise.
1995-2008 WTO

153
Table 3.1 Continued

Membership in RTA in Force. 1 when a country is a member in a
RTA in force with clauses on IPR protection for at least half the year, 0
otherwise.
1994-2008 WTO
Membership in TRIPS-plus RTA in Force. 1 when a country is a
member in a RTA in force with clauses on IPR protection requiring for
TRIPS-plus commitments for at least half the year.
1994-2008 WTO

Note: Data availability varies across countries. Therefore the panel data are unbalanced.

154

over-time variations instead of their level only for certain year or average for several
years. Furthermore, following Ginarte and Park (1997), I also include trade openness
measured by total export and import volume as a percentage of GDP, since trade
openness is expected to reduce long-run price and bring higher level of IPR protection, as
well as net inflow of FDI as a percentage of GDP as my major controlling variables of
domestic economic characteristics.
As for domestic political characteristics, I follow Shadlen et al 2005 to use the
index of government effectiveness, one of the dimensions of World Governance Indicator
(WGI) developed by Kaufmann, Kraay and Mastruzzi in the past decade, measuring
perceptions of the quality of public services, the quality of the civil service and the degree
of its independence from political pressures, the quality of policy formulation and
implementation, and the credibility of the government's commitment to such policies.
Although there are several other dimensions of governance measured by WGI (such as
voice and accountability, political stability and absence of violence, regulatory quality,
rule of law, control of corruption), they are not used as controlling variables in my
analysis, since they are either correlated with my other independent variables (such as
democracy and legal origin), or incorporate a measurement of property rights in their
definition and will be subject to the problem of endogeneity if included in the models. In
addition, I use Polity IV for measurement of degree of democracy and autocracy.
As for domestic legal institution, I follow the comparative law literature and
literature of law and finance to use La Porta, Lopez-de-Silanes and Shleifer (2008)’s
dataset of legal origin. Please be noted that this measurement of legal origin does not
have annual variations. This property limits our model selections as discussed below.

155

I also include three groups of potential foreign influences. As for bilateral
pressures and incentives from the United States, I use dummy variables to indicate
whether a certain country was designated as the Priority Foreign Country, or placed on
the Priority Watch List, the Watch List, OCR list and Section 306 reviewing list by the
USTR and whether a country has a BIT with the U.S. I refer to USTR annual reports of
the Special Section 301. Considering that the three different categories of the Special 301
placement indicate the distinct degree of IPR infringement in the target countries and the
corresponding degree of U.S. pressures, I also use an ordinal index ranging from 0 to 3 to
get a measurement for the U.S. overall pressures on a certain country in a certain year.
Another set of dummy variable is used to indicate whether a certain country has a BIT in
force with the U.S. for at least half the year.
83
As for the influences of multilateral trade institutions and its built-in DSP, I refer
to the WTO website as well as their online documents of dispute settlement and use
dummy variables to indicate respectively: (1) whether a country is WTO member for at
least half the year; (2) whether a country is obligated to fully implement the TRIPS
commitments for at least half the year; (3) whether a country is a defendant under the
WTO DSP for software-copyright-related issues in certain year. (Please see Table 3.2 for
a list of these cases and their information.) Please be noted that my measurement of the
third variable is different from Shadlen et al (2005), which assumes all WTO cases
involving IPRs in the relevant year might have an effect on copyright enforcement for
business software.

83
Considering that BIT s might go into force in a year different from the year when they were signed, I also examine the
effects of BITs according to their signature date as a robustness test.

156
Table 3.2 Cases Related with Copyright Protection and Enforcement, the WTO DSB (1995-2010)

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS 28 Japan US
Measures
concerning Sound
Recordings
3, 4, 14,
61, 65,
70
Promulgated amendments to Copyright
Law to provide protection to past
performances and existing sound
recordings. (12/26/1996)
02/09/1996 02/05/1997
c

DS 42 Japan EC
Measures
concerning Sound
Recordings
14.6,
70.2
(See DS 28) 05/28/1996 11/07/1997
c

DS 82 Ireland US
Measures
Affecting the
Grant of
Copyright and
Neighboring
Rights
9-14,
41-48,
61, 63,
65, 70
Promulgated the Intellectual Property
Act 1998 and the Copyright and
Related Rights Act 2000 (on protection
and enforcement for copyright and
neighboring rights), with the later
implemented by the end of Dec.2000.
05/14/1997 11/06/2000
c

DS 83 Denmark US
Measures
Affecting the
Enforcement of
IPR
50, 63,
65
The Parliament passed amendments to
the Administration of Justice Act
granting the relevant judicial
authorities the authority to order
provisional measures in the context of
civil proceedings involving IPR
enforcement. (03/20/2001)
05/14/1997 06/13/2001
c

DS 86 Sweden US
Measures
Affecting the
Enforcement of
IPR
50, 63,
65
The Parliament passed legislation
granting judicial authorities the
authority to order provisional measures
in the context of civil proceedings
involving IPR. (11/25/1998)
05/28/1997 12/02/1998
c

157
Table 3.2 Continued

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS
115
EC US
Measures
Affecting the
Grant of
Copyright and
Neighboring
Rights

9-14,
41-48,
61, 63,
65, 70
(See DS 82) 01/06/1998 11/06/2000
c

DS
124
EC US
Enforcement of
IPRs for Motion
Pictures and
Television
Programs
41, 46
Greece passed legislation, Art.17 of which
provides an additional enforcement
remedy for copyright holders whose
works were infringed by television states
operating in Greece. (10/13/1998)
04/30/1998 03/26/2001
c

DS
125
Greece US
Enforcement of
IPR for Motion
Pictures and
Television
Programs

41, 61 (see DS 124) 05/04/1998 03/26/2001
c

DS
160
US EC
Section 110(5) of
US Copyright Act

9.1
No amendment of legislation made yet
until 2011. The US made a lump-sum
payment to a fund to be set up by
performing rights societies in the EC for
3-year period commencing Dec.21, 2001.
(06/26/2003)
01/26/1999 06/23/2003
d

DS
186
US EC
Section 337 of
the T ariff Act of
1930 and
Amendments
thereto
3, 2, 9,
27, 41,
42, 49,
50, 51
N.A. 01/12/2000 N.A.
e

158
Table 3.2 Continued

Case
No.
Defendant Plaintiff Subject
Articles
Cited
Changes Made by the Defendant
Starting
Date
a
Ending Date
b
DS
362
China US
Measures
Affecting the
Protection and
Enforcement of
IPRs
3.1, 9.1,
14,
41.1,
46, 59,
61
Amendments of the Chinese Copyright
Law were approved on Feb.26, 2010;
the State Council adopted the decision
to revise the regulations for Customs
Protection of IPRs on Mar.17, 2010.
04/10/2007 03/20/2010
f

Notes: US: the United States; EC: the European Community; AB: the Appellate Body of the WTO DSB; N.A.: not available. Only those cases in upper case are the
cases which might influence copyright enforcement for business software.
a. The Starting Date is the date when the request for consultations was made.
b. The Ending Date is the date when a mutually agreed solution was notified, or when the period of implementation for the panel/AB report agreed by the parties or
determined by Arbitrator was going to expire, or when no further action was taken either by the parties or the WTO DSB, whenever is latest.
c. The case ended when a mutually agreed solution was notified without establishing a panel.
d. The case ended when a mutually satisfactory temporary arrangement was notified, when the period of implementation for the panel report determined by Arbitrator
had expired.
e. The case ended without further actions taken either by the parties to the dispute or by the WTO DSB.
f. The case ended when the period of implementation for the panel report agreed by the parties was going to expire.
Sources: The WTO DSB. For the disputes which cited the TRIPS Agreement, please see the WTO webpage at
http://www.wto.org/english/tratop_e/dispu_e/dispu_agreements_index_e.htm?id=A26#selected_agreement, accessed on Apr.25, 2011.

159

As for the effects of regional trade agreements, I refer to the RTA database on the
WTO website for the most up-to-date information on RTAs notified to the GATT/WTO
and use dummy variables to indicate respectively: (1) whether a country is a member in a
RTA in force with clauses on IPR protection for at least half the year; (2) whether a
country is a member in a RTA in force with clauses on IPR protection requiring for
TRIPS-plus commitments for at least half the year
84
Second, normally RTAs with IPR protection clauses will automatically cover
copyright as one aspect of intellectual property, with some specifying detailed obligations
for copyright protection and some not. But the IPR clauses of some RTAs (such as those
between Canada and Costa Rica, Chile and El Salvador, Chile and Cost Rica,
MERCOSUR, to name a few) only specify obligations on geographical indications (GIs)
and/or trademark issues but nothing else. I do not treat those RTAs as relevant in the
following analysis of copyright protection for business software. Additionally, there are
some RTAs which mention IPR protection: (1) only in the exception clause (i.e., the RTA
. Considering that there are
substantial variations among RTAs making the coding process really complicated and
time-consuming, I should make several notes about my coding practices. First, normally
WTO RTA database provides the linkages to the text of the agreements, their annexes and
any other related documents. For some RTAs, extra comments and information on main
topics covered by the RTA are provided by the WTO. I mainly rely on the former set of
information when coding, while using the latter set of information as confirmation and
cross-reference.

84
Considering that RTAs might go into force in a year different from the year when they were signed, I also examine
the effects of RT As according to their signature date as a robustness test.

160

shall not prevent any of the parties from taking measures of state control related with
protection of industrial and intellectual property in the foreign economic areas, generally
accepted in the international practice, that are considered necessary for compliance with
international agreements) (such as RTAs between Armenia and Moldova, Australia and
New Zealand, Ukraine and Azerbaijan, Commonwealth of Independent States, to name a
few); (2) only in the definition of investment in the chapter on investment (such as
Common Market for Eastern and Southern Africa, and RTA between Chile and
Colombia); (3) only as one area of cooperation in sharing information and experiences on
laws, regulations and programs but without separate article or chapter on IPR protection
(such as RTA between Chile and Colombia). Considering that these RTAs do not have
separate article or chapter specifying obligations on IPR protection, I do not treat those
RTAs as relevant in the following analysis of copyright protection for business software
either.
Third, a single country might be involved in more than one RTA with IPR
protection obligation in a certain year. Considering that the marginal cost of committing
to another RTA with IPR protection obligation is shrinking and becoming negligible, I do
not differentiate whether in a certain year a country is a member of one single RTA with
(TRIPS-consistent or TRIPS-plus) IPR protection obligations or a member of two or
more such RTAs.
Fourth, a careful survey of RTAs which have been signed and entered into force
so far shows that there are huge variations among them in terms of their obligations on
IPR protection. Some RTAs use extremely brief language to state their obligation on IPR
(such as RTA between Canada and Israel), while some RTAs declare their IPR obligations

161

in extremely great details by specifying obligations in each aspect of intellectual property,
in each type of enforcement means, including Custom, administrative, civil and criminal
enforcement, and/or in both the main text of the agreements and the annexes (such as
RTAs with the U.S. or EC as one party). Some RTAs briefly obligate their members to
“develop regulations and procedures ensuring IPR protection” (such as the Gulf
Cooperation Council), some affirm parties’ rights and obligations under the TRIPS
Agreement (such as RTAs between Chile and China, Jordan and Singapore, and Southern
African Development Community), while some others not only obligate their members to
accede to and comply with certain international treaties (such as RTA between Japan and
Brunei), but also specify the deadlines to fully implement these commitments (such as
Central European Free Trade Agreement) or obligate their members to meet the level of
protection similar with certain country or country group’s standard within certain years
(such as the RTAs with the EC as one party). As for obligation on enforcement, most of
RTAs do not differentiate the obligations on legislation and enforcement, while some
specify the standard of enforcement, either in accordance with the TRIPS Agreement and
WTO (such as RTA between the Republic of Korea and Singapore and some RTAs with
EFTA as one party), or in accordance with “highest international standards” or the
standard of certain country group, such as the EC) (such as some RTAs with the EC as
one party). For now, in order to control the complexity of coding to a reasonable extent, I
differentiate the degree of obligations for copyright protection only by developing a
dummy variable indicating whether a certain country is a member in a RTA with TRIPS-
plus commitments on IPR protection or not, instead of a more detailed and nuanced index
differentiating the variations furthermore. But considering that RTAs’ documents are

162

generally complex and lengthy legal texts, defining “TRIPS-plus” RTA accurately and
consistently is still a challenging task. Drahos (2001) defines TRIPS-plus bilateral
agreement as one requiring a member to implement a more extensive standard or
eliminating an option for a member under a TRIPS standard. In the analysis below, I
follow a similar definition and treat a RTA as TRIPS-plus one if it (1) obligates its
member(s) to accede to or ratify certain international IPR treaties before certain year
(earlier than what the TRIPS Agreement permits); or (2) obligates its member(s) to
provide “highest international standard” in line with certain countries or certain country
groups (such as the U.S., the EC, or the European Free Trade Agreement (EFTA)).

Model
In the following analysis, I will focus on examining two sets of variable of
interest, countries’ legal origin and international influences, including bilateral, regional
and multilateral ones, respectively and comprehensively. In order to analyze the effect of
legal origin on software piracy rate, I will use (1) ordinary least square (OLS) model for
cross-sectional data by averaging dependent variable and all independent variables for
each country over the available years. Considering that my key variable of interest, legal
origin, is a time-invariant one while the other independent variables are longitudinal,
legal origin might not be good at explaining variances over the time period. The basic
model structure is:
i i i i
X n legalorigi piracyrate ε γ β α + + + =
; (1)

in which
i
piracyrate is the vector of observations on piracy rate,
i
n legalorigi is the

163

vector of observations on legal origin,
i
X is the matrix of averages of other independent
variables, and
i
ε is an idiosyncratic shock varying at the country level; (2) Pooled
ordinary least square (POLS) model for panel data; (3) random effect (RE) model for
panel data. The basic structure for these two sets of model is:
t i i it i t i
v X n legalorigi piracyrate ε γ β α + + + + =
; (2)

in which
t i
piracyrate is the vector of observations on piracy rate,
i
n legalorigi is the
vector of observations on legal origin,
t i
X is the matrix of other independent variables,
i
v
is other unobserved, time-invariant panel-level effects, and
t i
ε is an idiosyncratic shock
varying at the country level and over time. Again, since legal origin is a time-invariant
variable, fixed effect (FE) model with more flexible assumption about the data structure
(that the unobserved time-invariant panel-level effects are not related with
t i
X and
observed time-invariant panel-level effects, such as legal origin in this case) cannot be
used to identify its effect. For each set of model, domestic controlling characteristics
(including economic and political ones) and international influences will be added
respectively and comprehensively. In these analyses of legal origin, I mainly focus on
four major legal origins, Common Legal Origin, French Legal Origin, German Legal
Origin, and Scandinavian Legal Origin. Countries of French Legal Origin are treated as
the reference group, since they have the biggest number of observations (60 countries out
of 110 countries in the sample
85

).

85
Besides, among 110 countries covered in the BSA dataset, 25 countries belong to Common Legal Origin, 18
countries belong to German Civil Legal Origin, 5 countries belong to Scandinavian Civil Legal Origin, no country
belongs to Socialist Legal Origin, and 2 countries (Brunei and Reunion) do not have data on their legal origin.

164

In order to analyze the effects of various international influences on software
piracy rate, since the data for independent variables except legal origin (which enter into
the analysis as a controlling variable of domestic legal characteristic this time) are variant
over time as well as across individual countries, I will use (1) pooled ordinary least
square (POLS) model; (2) RE model; and (3) FE model in sequence. The basic structure
for these three sets of model is:
t i i i it t i
v Z X piracyrate ε γ β α + + + + =
; (3)

in which
t i
piracyrate is the vector of observations on piracy rate,
t i
X

is the matrix of
independent variables of international influences as well as other controlling variables,

i
Z is the matrix of observations on independent or controlling variables which are time-
invariant, such as legal origin,
i
v is other unobserved, time-invariant panel-level effects,
and
t i
ε is an idiosyncratic shock varying at the country level and over time. The RE and
FE models will be paid more attention and compared with each other for superiority.

Evidences: Legal Origin and Piracy Rate of Business Software
A simple OLS regression (OLS (1) in Table 3.3) confirms that over the time
period with available data, countries of Common Law tend to have lower piracy rate of
business software and thus provide higher enforcement for copyrights of business
software than countries of French Civil Law. Countries of German Civil Law as well as
Scandinavian Civil law have even lower piracy rate than those of Common Law. But
once national economic development level is controlled, Common Law countries still
present significantly lower piracy rate than French Civil Law countries while German

165
Table 3.3 The Effects of Legal Origin and Other National Characteristics on Piracy Rate of Business Software
All Countries (Ordinary Least Square)

Dependent Variable: Piracy Rate of Business Software (Logit Transformed)
OLS
(1)
OLS
(2)
OLS
(3)
OLS
(4)
OLS
(5)
OLS
(6)
OLS
(7)
OLS
(8)
OLS
(9)
OLS
(10)
OLS
(11)
Common Law -0.54**
(0.21)
-0.33**
(0.14)
-0.23
(0.15)
-0.38***
(0.14)
-0.30**
(0.14)
-0.36***
(0.14)
-0.12
(0.13)
-0.22*
(0.13)
-0.17
(0.14)
-0.14
(0.13)
-0.41***
(0.13)
German Civil Law -0.70***
(0.24)
-0.31*
(0.16)
-0.21
(0.17)
-0.41**
(0.16)
-0.27*
(0.16)
-0.42
(0.16)
-0.12
(0.15)
-0.17
(0.16)
-0.19
(0.16)
-0.20
(0.15)
-0.21
(0.15)
Scandinavian Civil
Law
-1.61***
(0.41)
-0.39
(0.28)
-0.08
(0.31)
-0.35
(0.28)
-0.31
(0.28)
-0.41
(0.28)
0.04
(0.28)
-0.22
(0.27)
-0.08
(0.28)
0.06
(0.29)
-0.45
(0.28)
Logged GDP pc -0.53***
(0.04)
-0.56***
(0.06)
-0.52***
(0.07)
-0.54***
(0.05)
-0.51***
(0.05)
-0.27***
(0.08)
-0.35***
(0.07)
-0.33***
(0.08)
-0.29***
(0.08)
-0.48***
(0.04)
R&D -0.08
(0.10)

Secondary
Enrollment Rate
-0.001
(0.004)

Trade Openness -0.0007
(0.001)

FDI -0.002
(0.002)

Government
Effectiveness
-0.51***
(0.12)

Regulatory Quality -0.43***
(0.12)

Rule of Law -0.40***
(0.12)

Control of
Corruption
-0.45***
(0.12)

Democracy -0.04***
(0.01)

166
Table 3.3 Continued

Constant 1.08***
(0.11)
5.33***
(0.36)
5.56***
(0.49)
5.29***
(0.38)
5.34***
(0.36)
5.22***
(0.37)
3.20***
(0.64)
3.88***
(0.56)
3.63***
(0.67)
3.25***
(0.67)
5.15***
(0.34)
N 108 106 88 98 104 102 106 106 106 106 100
p-value <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001
F value 7.83 49.93 40.96 41.88 39.06 42.64 55.95 52.80 51.42 54.11 50.78
R2 0.1843 0.6641 0.7141 0.6948 0.6659 0.6895 0.7367 0.7253 0.7200 0.7301 0.7298
Adjusted R2 0.1607 0.6508 0.6966 0.6782 0.6488 0.6733 0.7235 0.7115 0.7060 0.7166 0.7154

Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.

167

Civil Law countries and Scandinavian Civil law countries behave in between (with the
former having marginally significantly lower piracy rate than French Civil Law countries
and the latter having insignificantly lower piracy rate than French Civil Law countries)
(OLS (2) in Table 3.3). This result also confirms again that the more developed a country
is, the higher level of IPR enforcement it would provide. The pattern of significant
excellence in copyright enforcement in Common Law countries relative to French Civil
Law countries is also consistent across models with different domestic economic
characteristics (including R&D, secondary enrollment rate, trade openness, and FDI)
controlled, although none of these economic characteristics are significantly influential
on the piracy rate over the time period covered (OLS (3-6) in Table 3.3). Most of the
controlling variables of domestic political characteristics (including government
effectiveness, regulatory quality, rule of law, control of corruption, and democracy),
except democracy, influence the significance of Common Legal Origin in explaining the
across-country difference in piracy rate, and if we also take into consideration their
negative effects on piracy rate with very high significance level, this loss of significance
of legal origin is probably due to the fact that these indicators of government are highly
correlated with the categories of legal origin, especially when we examine the average
level of government indicators over the time period covered (OLS (7-11) in Table 3.3).
The pattern of significantly lower piracy rate in Common Law countries than in
French Civil Law countries and with German Civil Law Countries and Scandinavian
countries in between is generally consistent when variables of bilateral influences,
regional influences and multilateral influences are controlled (Table 3.4). Please be
noted that all these variables of international influence are dummy variables for each

168
Table 3.4 The Effects of Legal Origin and International Influences and Pressures on Piracy Rate of
Business Software, All Countries (Ordinary Least Square)

Dependent Variable: Piracy Rate of Business Software (Logit Transformed)
OLS
(2)
OLS
(12)
OLS
(13)
OLS
(14)
OLS
(15)
OLS
(16)
OLS
(17)
OLS
(18)
OLS
(19)
OLS
(20)
Common Law -0.33**
(0.14)
-0.31**
(0.15)
-0.28**
(0.14)
-0.25*
(0.13)
-0.33**
(0.13)
-0.33**
(0.14)
-0.33**
(0.14)
-0.40***
(0.13)
-0.26*
(0.13)
-0.40***
(0.13)
German Civil Law -0.31*
(0.16)
-0.35**
(0.17)
-0.34**
(0.16)
-0.28*
(0.15)
-0.25
(0.16)
-0.31*
(0.16)
-0.32**
(0.16)
-0.31**
(0.15)
-0.30*
(0.15)
-0.28*
(0.15)
Scandinavian Civil Law -0.39
(0.28)
-0.42
(0.29)
-0.40
(0.28)
-0.33
(0.27)
-0.33
(0.28)
-0.43
(0.31)
-0.31
(0.28)
-0.16
(0.27)
-0.25
(0.27)
-0.16
(0.27)
Logged GDP pc -0.53***
(0.04)
-0.51***
(0.05)
-0.50***
(0.05)
-0.51***
(0.04)
-0.49***
(0.05)
-0.53***
(0.04)
-0.49***
(0.05)
-0.42***
(0.05)
-0.46***
(0.05)
-0.40***
(0.05)
Priority Foreign
Country
1.23
(1.75)

Priority Watch List 0.01
(0.30)

Watch List -0.08
(0.21)

306 List 0.65
(0.70)

OCR 0.75
(1.37)

BITs 0.16
(0.15)

WTO Membership -0.59***
(0.18)
-0.60***
(0.18)

TRIPS Obligation -0.51**
(0.20)
-0.31
(0.19)
Defendant in WTO
DSP
0.48
(1.39)

Membership in RTA in
Force
-0.32*
(0.17)
-0.35**
(0.16)

169
Table 3.4 Continued

Membership in TRIPS-
plus RTA
-0.70***
(0.16)
-0.64***
(0.17)
Constant 5.33***
(0.36)
5.16***
(0.38)
5.08***
(0.40)
5.59***
(0.36)
5.31***
(0.35)
5.34***
(0.36)
5.19***
(0.36)
4.65***
(0.37)
5.43***
(0.36)
4.67***
(0.37)
N 106 105 105 105 105 106 106 106 105 105
p-value <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001 <.0001
F value 49.93 20.96 38.29 45.33 42.97 39.62 41.65 50.38 39.95 42.90
R-square 0.6641 0.6651 0.6591 0.6960 0.6846 0.6645 0.6756 0.7158 0.7098 0.7243
Adjusted R-square 0.6508 0.6333 0.6419 0.6806 0.6686 0.6478 0.6594 0.7016 0.6920 0.7074

Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) The effects of Priority Foreign Country, Priority Watch List and Watch List are not significant as a whole or respectively. The effects of 306 List and OCR are not
significant respectively either.
(4) The effect of BIT s signed is similar with that of BIT s in force shown above in OLS (13).
(5) The effect of membership in RT A signed is similar with that of membership in RT A in force shown above in OLS (17).
(6) The effect of membership in TRIPS-plus RTA signed is similar with that of membership in TRIPS-plus RTA in force shown above in OLS (18), except that its
(absolute) effect is smaller (-0.66 with the same significance level).
(7) The result of OLS (2) is the same with that in T able 3.3.

170

country each year, and their averages over the time period covered representing for how
many years out of the years covered certain international influence was present are only
very rough indicators for the extent of international influences. I will mainly rely on the
panel data study in the following sub-section to check their relevance on piracy rate. But
for now, bilateral pressures (represented by USTR Special 301 process and other
reviewing processes and bilateral incentives (represented by BITs) are not significant in
influencing copyright enforcement in business software respectively and as a group (OLS
(12-13) in Table 3.4). Countries with longer history of being a WTO member or
obligations to fully implement the TRIPS commitments generally have significantly
lower piracy rate of business software, while countries with history of being a defendant
under the WTO DSP are not significantly different from other countries without that
history in piracy rate (OLS (14-16) in Table 3.4). Countries with longer history of being
a RTA member with commitment on copyright protection and being a RTA member with
TRIPS-plus commitment on copyright protection generally have significantly lower level
of piracy rate of business software, and the (absolute) effect of being a RTA member with
TRIPS-plus commitment on copyright protection is bigger and more significant than that
of being a RTA member with commitment on copyright protection (OLS (17-18) in Table
3.4). The effects of being a WTO member and RTA member with commitment on
copyright protection, if checked at the same time, are both negative and significant on the
piracy rate, with the (absolute) effect of WTO membership higher than RTA membership.
But if we use more accurate measurements for the effects of membership in multilateral
institutions and regional institutions, that is, the history of obligations to fully implement
TRIPS commitments and being a RTA member with TRIPS-plus commitment on

171

copyright protection, and examine them at the same time, the effect of regional
institutions overwhelms the effect of multilateral institutions (OLS (19-20) in Table 3.4).
Now I turn to the analyses of legal origin based on the panel data. Before I
examine the effect of legal origin, firstly I check the effects of national economic and
political characteristics respectively and screen out those variables that might
significantly influence the piracy rate based on panel data. The results of POLS (1)-(7) in
Table 3.5 show that national development level measured by log-transformed GDP per
capita, education level measured by secondary enrollment rate as well as government
effectiveness and democracy are significantly negatively correlated with piracy rate of
business software. So I keep these four variables in my baseline models of domestic
economic and political characteristics (POLS (8), RE (2) and FE (2) in Table 3.5). In
these three models, three out of these four variables (with secondary enrollment rate as an
exception) are negatively correlated with piracy rate, although some of them (secondary
enrollment rate and democracy) are not always significant when controlling for the other
three. Even controlling for the domestic economic and political characteristics which
might significantly influence the level of piracy rate, countries of Common Law still have
significantly lower piracy rate than countries of French Civil Law and with countries of
German Civil Law and Scandinavian Civil Law in between (POLS (9) and (10), RE (3)
and (4) in Table 3.6). If we compare POLS (8) with (10) as well as RE (2) with (4) in
Table 3.6, variables of legal origin contribute to explain 1.1-1.7% more variance across
countries. It should be noted here that this pattern of significant excellence of Common
Law countries relative to French Civil Law countries in terms of copyright enforcement

172
Table 3.5 The Effects of National Characteristics on Piracy Rate of Business Software, All Countries
(Analysis of Panel Data, Baseline Model)
Dependent V ariable: Piracy Rate of Business Software (Logit Transformed)
POLS
(1)
POLS
(2)
POLS
(3)
POLS
(4)
POLS
(5)
POLS
(6)
POLS
(7)
POLS
(8)
RE
(1)
RE
(2)
FE
(1)
FE
(2)
Logged GDP
pc
-0.58***
(0.05)
-0.56***
(0.09)
-0.49***
(0.07)
-0.58***
(0.05)
-0.58***
(0.05)
-0.29***
(0.08)
-0.54***
(0.04)
-0.28***
(0.07)
-0.90***
(0.07)
-0.44***
(0.09)
-2.26***
(0.20)
-0.78***
(0.22)
R&D -0.14
(0.09)

Secondary
Enrollment
Rate
-0.0055*
(0.0030)
0.0040
(0.0026)
0.0019
(0.0028)
0.0008
(0.0036)
Trade
Openness
0.0008
(0.0008)

FDI -0.0024
(0.00)

Government
Effectiveness
-0.49***
(0.10)
-0.56***
(0.09)
-0.37***
(0.12)
-0.35*
(0.20)
Democracy -0.04***
(0.01)
-0.02**
(0.01)
-0.01
(0.01)
0.0048
(0.0146)
Constant 5.58***
(0.40)
5.48***
(0.74)
5.20***
(0.45)
5.49***
(0.41)
5.61***
(0.43)
3.21***
(0.66)
5.41***
(0.38)
2.90***
(0.55)
8.34***
(0.61)
4.34***
(0.67)
19.83***
(1.66)
7.15***
(2.06)
N 1294 766 809 1238 1161 895 1230 576 1294 576 1294 576
No. of
clusters
107 88 99 105 102 107 100 93 107 93 107 93
F value 158.38 113.12 74.50 76.55 80.17 190.90 94.48 115.25
Prob>F 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Wald chi
2
170.20 219.88 132.84 5.73
Prob>chi
2
0.0000 0.0000 0.0000 0.0004
Adjusted R
2
0.5385 0.6088 0.5616 0.5246 0.5387 0.6719 0.5932 0.7493
R
2
within 0.3587 0.1014 0.3587 0.1194
R
2
between 0.6222 0.7580 0.6222 0.7185
R
2
overall 0.5385 0.7318 0.5385 0.6928
Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) Hausman test comparing RE (1) and FE (1) supports the superiority of FE model over RE model (with chi
2
=242.84, Prob>chi
2
=0.0000), so does the Hausman test
comparing RE (2) and FE (2) (with chi
2
=17.64, Prob>chi
2
=0.0015).

173
Table 3.6 The Effects of Legal Origin and Other National Characteristics on Piracy Rate of
Business Software, All Countries (Analysis of Panel Data)
Dependent Variable: Piracy Rate of Business Software (Logit Transformed)
POLS (1) POLS (8) POLS (9) POLS (10) RE (1) RE (2) RE (3) RE (4)
Logged GDP pc -0.58***
(0.05)
-0.28***
(0.07)
-0.53***
(0.05)
-0.31***
(0.07)
-0.90***
(0.07)
-0.44***
(0.09)
-0.91***
(0.08)
-0.44***
(0.09)
Secondary Enrollment Rate 0.0040
(0.0026)
0.0025
(0.0025)
0.0019
(0.0028)
0.0015
(0.0028)
Government Effectiveness -0.56***
(0.09)
-0.44***
(0.10)
-0.37***
(0.12)
-0.33**
(0.13)
Democracy -0.02**
(0.01)
-0.02**
(0.01)
-0.01
(0.01)
-0.01
(0.01)
Common Law -0.40***
(0.14)
-0.28**
(0.13)
-0.21
(0.23)
-0.30**
(0.15)
German Civil Law -0.34**
(0.16)
-0.19*
(0.11)
-0.07
(0.17)
-0.22
(-0.15)
Scandinavian Civil Law -0.53***
(0.17)
-0.18
(0.13)
0.39
(0.27)
-0.19
(0.21)
Constant 5.58***
(0.40)
2.90***
(0.55)
5.35***
(0.39)
3.36***
(0.54)
8.34***
(0.61)
4.34***
(0.67)
8.40***
(0.61)
4.46***
(0.65)
N 1294 576 1293 576 1294 576 1293 576
No. of clusters 107 93 106 93 107 93 106 93
F value 158.38 115.25 83.08 88.69
Prob>F 0.0000 0.0000 0.0000 0.0000
Wald chi
2
170.20 219.88 248.19 438.48
Prob>chi
2
0.0000 0.0000 0.0000 0.0000
Adjusted R
2
0.5385 0.7493 0.5711 0.7606
R
2
within 0.3587 0.1014 0.3587 0.1031
R
2
between 0.6222 0.7580 0.6306 0.7747
R
2
overall 0.5385 0.7318 0.5414 0.7493
Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) The results of POLS (1) and (8) and RE (1) and (2) are the same with those in Table 3.5.

174

is consistent, even though variables of international influences are also controlled as in
the following subsection (see Table 3.7 and Table 3.8).

Evidences: International Influences and Piracy Rate of Business Software
As shown in the OLS models for cross-sectional data earlier in Table 3.4, bilateral
pressures and influences from the U.S. did not significantly decrease the level of piracy
rate of business software in other countries across the globe, while the length of history of
being a member in a strengthened multilateral trade regime and obligating for copyright
enforcement under it as well as the length of history of being a member in RTA with
(TRIPS-consistent or TRIPS-plus) commitments on copyright protection does decrease
piracy rate in countries. The OLS models for cross-sectional data also detect larger and
more significant effects of membership in TRIPS-plus RTAs relative to membership in
TRIPS-consistent RTAs, bigger effects of WTO membership relative to TRIPS-consistent
RTA membership, and bigger and more significant effects of TRIPS-plus RTA
membership relative to the TRIPS obligation.
Would these patterns be persistent when taking into consideration of across-time
variations as well as cross-country variations in the analyses of panel data? The answer is
mixed. U.S. bilateral pressures represented by USTR Special 301 processes and other
reviewing processes are confirmed again to be ineffective to decrease the level of piracy
rate of business software in their target countries (see POLS (11-13) in Table 3.7, RE (5-7)
in Table 3.8, and FE (3-5) in Table 3.9). This indicates that the U.S. pressures, although
they might be effective to impel a certain country to legislate for IPR protection of higher
level, have failed to influence countries’ behavior within their national boundaries so far.

175
Table 3.7 The Effects of International Influences on Piracy Rate of Business Software, All Countries
(Analysis of Panel Data, Pooled OLS Models)

Dependent V ariable: Piracy Rate of Business Software (Logit Transformed)
POLS
(10)
POLS
(11)
POLS
(12)
POLS
(13)
POLS
(14)
POLS
(15)
POLS
(16)
POLS
(17)
POLS
(18)
POLS
(19)
POLS
(20)
POLS
(21)
POLS
(22)
Logged GDP
pc
-
0.31***
(0.07)
-
0.31***
(0.07)
-
0.30***
(0.07)
-
0.30***
(0.07)
-
0.31***
(0.07)
-
0.30***
(0.07)
-
0.29***
(0.07)
-
0.31***
(0.07)
-
0.31***
(0.07)
-
0.31***
(0.07)
-
0.31***
(0.07)
-
0.30***
(0.07)
-
0.28***
(0.07)
Secondary
Enrollment
Rate
0.0025
(0.0025)
0.0020
(0.0025)
0.0022
(0.0025)
0.0022
(0.0025)
0.0024
(0.0026)
0.0000
(0.0025)
0.0021
(0.0023)
0.0025
(0.0025)
0.0025
(0.0025)
0.0025
(0.0025)
0.0022
(0.0024)
-0.0001
(0.0025)
0.0017
(0.0023)
Government
Effectiveness
-
0.44***
(0.10)
-
0.42***
(0.10)
-
0.43***
(0.10)
-
0.44***
(0.10)
-
0.44***
(0.10)
-
0.39***
(0.10)
-
0.43***
(0.09)
-
0.44***
(0.10)
-
0.44***
(0.10)
-
0.43***
(0.09)
-
0.39***
(0.09)
-
0.38***
(0.09)
-
0.39***
(0.09)
Democracy -0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02*
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02**
(0.01)
-0.02*
(0.01)
-0.02*
(0.01)
Common Law -0.28**
(0.13)
-0.26**
(0.13)
-0.26**
(0.13)
-0.27**
(0.13)
-0.27**
(0.13)
-0.27**
(0.13)
-0.27**
(0.12)
-0.28**
(0.13)
-0.28**
(0.13)
-0.28**
(0.13)
-0.31**
(0.12)
-0.28**
(0.13)
-0.29**
(0.12)
German Civil
Law
-0.19*
(0.11)
-0.19*
(0.11)
-0.21**
(0.10)
-0.19*
(0.11)
-0.18
(0.12)
-0.19*
(0.11)
-0.18
(0.11)
-0.19*
(0.11)
-0.19*
(0.11)
-0.19*
(0.11)
-0.21*
(0.11)
-0.20*
(0.11)
-0.20*
(0.11)
Scandinavian
Civil Law
-0.18
(0.13)
-0.19
(0.13)
-0.21
(0.13)
-0.19
(0.13)
-0.20
(0.13)
-0.20
(0.13)
-0.20
(0.13)
-0.20
(0.13)
-0.20
(0.13)
-0.19
(0.13)
-0.19
(0.13)
-0.22*
(0.13)
-0.21
(0.13)
U.S. Special
301
0.04
(0.05)

306 List 0.41
(0.41)

OCR 0.06
(0.09)

BITs -0.04
(0.11)

WTO
Membership
-
0.51***
(0.15)
-
0.51***
(0.14)

TRIPS
Obligation
-
0.39***
(0.10)
-
0.38***
(0.09)

176
Table 3.7 Continued

Defendant in
WTO DSP
0.43*
(0.22)
0.46**
(0.20)
0.46**
(0.22)
Defendant in
WTO DSP
t-1
0.27
(0.33)

Membership
in RTA in
Force
-0.01
(0.08)
-0.03
(0.08)

Membership
in TRIPS-
plus RT A
-0.15
(0.09)
-0.13
(0.09)

Constant 3.36***
(0.54)
3.32***
(0.55)
3.25***
(0.53)
3.30***
(0.55)
3.36***
(0.57)
3.85***
(0.53)
3.48***
(0.53)
3.36***
(0.53)
3.37***
(0.54)
3.37***
(0.53)
3.39***
(0.53)
3.87***
(0.51)
3.49***
(0.51)
N 576 568 568 568 568 576 576 576 576 576 576 576 576
No. of
Clusters
93 92 92 92 92 93 93 93 93 93 93 93 93
F value 88.69 77.79 75.70 77.41 77.18 99.58 98.09 80.39 76.73 79.35 77.74 80.78 79.98
Prob>F 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
R
2
0.7606 0.7523 0.7543 0.7518 0.7518 0.7741 0.7749 0.7620 0.7611 0.7606 0.7642 0.7758 0.7789

Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) The result of POLS (10) is the same with that in T able 3.6.
(4) The effect of BIT s signed is similar with that of BIT s in force shown above in POLS (14).
(5) The effect of RT A signed is similar with that of RT A in force shown above in POLS (19).
(6) The effect of Membership in TRIPS-plus RTA signed is similar with that of Membership in TRIPS-plus RTA in force shown above in POLS (20), except that its
(absolute) effect is smaller (-0.14 with the similar significance level).
(7) The effect of one-period-lagged Membership in TRIPS-plus RT A in force is similar with that of Membership in TRIPS-plus RT A in force shown above in POLS (20),
with similar magnitude and significance level.

177
Table 3.8 The Effects of International Influences on Piracy Rate of Business Software, All Countries
(Analysis of Panel Data, Random Effect Models)
Dependent Variable: Piracy Rate of Business Software (Logit Transformed)
RE
(4)
RE
(5)
RE
(6)
RE
(7)
RE
(8)
RE
(9)
RE
(10)
RE
(11)
RE
(12)
RE
(13)
RE
(14)
RE
(15)
Logged GDP
pc
-
0.44***
(0.09)
-
0.43***
(0.09)
-
0.43***
(0.08)
-
0.43***
(0.09)
-
0.45***
(0.09)
-
0.43***
(0.08)
-
0.42***
(0.08)
-
0.44***
(0.09)
-
0.41***
(0.09)
-
0.43***
(0.09)
-
0.40***
(0.08)
-
0.43***
(0.09)
Secondary
Enrollment
Rate
0.0015
(0.0028)
0.0014
(0.0027)
0.0014
(0.0028)
0.0013
(0.0028)
0.0017
(0.0028)
0.0012
(0.0025)
0.0041*
(0.0022)
0.0015
(0.0028)
0.0019
(0.0028)
0.0015
(0.0027)
0.0015
(0.0026)
0.0041*
(0.0022)
Government
Effectiveness
-0.33**
(0.13)
-0.33**
(0.13)
-0.33**
(0.13)
-0.33**
(0.13)
-
0.34***
(0.13)
-
0.26***
(0.10)
-
0.34***
(0.13)
-0.33**
(0.13)
-0.32**
(0.13)
-0.33**
(0.13)
-
0.27***
(0.10)
-
0.35***
(0.13)
Democracy -0.01
(0.01)
-0.01
(0.01)
-0.01
(0.01)
-0.01
(0.01)
-0.01
(0.01)
-0.00
(0.01)
-0.00
(0.01)
-0.01
(0.01)
-0.01
(0.01)
-0.01
(0.01)
-0.00
(0.01)
-0.01
(0.01)
Common
Law
-0.30**
(0.15)
-0.28*
(0.15)
-0.29*
(0.15)
-0.29*
(0.15)
-0.34**
(0.15)
-0.23
(0.15)
-0.27*
(0.14)
-0.30**
(0.14)
-0.30**
(0.14)
-0.30**
(0.14)
-0.22
(0.16)
-0.28*
(0.15)
German Civil
Law
-0.22
(0.15)
-0.22
(0.15)
-0.23
(0.14)
-0.22
(0.15)
-0.18
(0.15)
-0.22
(0.14)
-0.22
(0.15)
-0.22
(0.15)
-0.25*
(0.15)
-0.22
(0.15)
-0.24
(0.15)
-0.19
(0.15)
Scandinavian
Civil Law
-0.19
(0.21)
-0.19
(0.20)
-0.21
(0.21)
-0.20
(0.21)
-0.23
(0.21)
-0.26
(0.17)
-0.26
(0.19)
-0.19
(0.21)
-0.23
(0.21)
-0.19
(0.21)
-0.31*
(0.18)
-0.28
(0.19)
U.S. Special
301
0.02
(0.05)

306 List 0.14
(0.35)

OCR -0.05
(0.04)

BITs -
0.22***
(0.08)
-0.03
(0.11)
-0.13
(0.08)
WTO
Membership
-
0.80***
(0.27)
-
0.76***
(0.30)

TRIPS
Obligation
-
0.40***
(0.11)
-
0.39***
(0.11)

178
Table 3.8 Continued

Defendant
in WTO
DSP
0.04
(0.21)

Membership
in RTA in
Force
-
0.13***
(0.05)
-0.09*
(0.05)

Membership
in TRIPS-
plus RTA
-0.02
(0.07)
0.02
(0.07)
Constant 4.46***
(0.65)
4.39***
(0.67)
4.38***
(0.64)
4.40***
(0.66)
4.62***
(0.66)
5.05***
(0.55)
4.39***
(0.65)
4.45***
(0.65)
4.25***
(0.65)
4.41***
(0.66)
4.82***
(0.58)
4.48***
(0.68)

N 576 568 568 568 568 576 576 576 576 576 568 568
No. of
Clusters
93 92 92 92 92 93 93 93 93 93 92 92
Wald chi
2
438.48 436.86 430.76 432.04 447.10 507.90 492.99 440.11 439.42 444.95 525.78 519.81
Prob>chi
2
0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
R
2
within 0.1031 0.1043 0.1019 0.1047 0.1224 0.2123 0.1812 0.1028 0.1236 0.1008 0.2221 0.1890
R
2
between 0.7747 0.7664 0.7686 0.7664 0.7581 0.7795 0.7855 0.7750 0.7735 0.7765 0.7730 0.7734
R
2
overall 0.7493 0.7406 0.7420 0.7396 0.7341 0.7554 0.7607 0.7497 0.7490 0.7511 0.7490 0.7493

Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) The result of RE (4) is the same with that in T able 3.6.
(4) Different from the effect of BIT in force shown above in RE (8), the effect of BIT signed is negative but not significant.
(5) The one-period-lagged effect of being a defendant in WTO DSP is similar with the effect of being a defendant in WTO DSP shown above in RE (11).
(6) The effect of Membership in RT A signed is similar with that of Membership in RT A in force shown above in RE (12), with the same magnitude at the 0.05
significance level.
(7) The effect of Membership in TRIPS-plus RTA signed is similar with that of Membership in TRIPS-plus RTA in force shown above in RE (13), except that its
(absolute) effect is smaller (-0.0008, insignificant).
(8) The one-period-lagged effect of Membership in TRIPS-plus RT A in force is similar with that of Membership in TRIPS-plus RT A in force shown above in RE (13),
with similar magnitude and significance level.

179
Table 3.9 The Effects of International Influences on Piracy Rate of Business Software, All Countries
(Analysis of Panel Data, Fixed Effect Models)

Dependent V ariable: Piracy Rate of Business Software (Logit Transformed)
FE
(2)
FE
(3)
FE
(4)
FE
(5)
FE
(6)
FE
(7)
FE
(8)
FE
(9)
FE
(10)
FE
(11)
FE
(12)
FE
(13)
Logged GDP pc -
0.78***
(0.22)
-
0.77***
(0.23)
-
0.78***
(0.22)
-
0.76***
(0.22)
-
0.69***
(0.23)
-
0.60***
(0.20)
-
0.64***
(0.21)
-
0.78***
(0.22)
-0.58**
(0.29)
-
0.86***
(0.25)
-0.44
(0.27)
-
0.69***
(0.25)
Secondary
Enrollment Rate
0.0008
(0.0036)
0.0007
(0.0036)
0.0008
(0.0036)
0.0006
(0.0036)
0.0007
(0.0037)
0.0024
(0.0029)
0.0046
(0.0030)
0.0008
(0.0036)
0.0013
(0.0038)
0.0008
(0.0036)
0.0026
(0.0030)
0.0043
(0.0029)
Government
Effectiveness
-0.35*
(0.20)
-0.36*
(0.21)
-0.35*
(0.21)
-0.36*
(0.21)
-0.37*
(0.20)
-0.24*
(0.13)
-0.33*
(0.19)
-0.35*
(0.20)
-0.33
(0.22)
-0.35*
(0.20)
-0.24*
(0.13)
-0.35*
(0.19)
Democracy 0.0048
(0.01)
0.0054
(0.01)
0.0049
(0.01)
0.0053
(0.01)
0.0090
(0.01)
0.0152
(0.01)
0.0126
(0.01)
0.0049
(0.01)
0.0043
(0.01)
0.0041
(0.01)
0.0152
(0.01)
0.0139
(0.01)
U.S. Special 301 0.03
(0.06)

306 List -0.04
(0.29)

OCR -0.05
(0.04)

BITs -
0.35***
(0.09)
-0.09
(0.18)
-0.24**
(0.12)
WTO
Membership
-
0.91***
(0.32)
-0.85**
(0.37)

TRIPS
Obligation
-
0.40***
(0.10)
-
0.37***
(0.10)
Defendant in
WTO DSP
0.01
(0.17)

Membership in
RT A in Force
-0.12
(0.08)
-0.09
(0.07)

180
Table 3.9 Continued

Membership in
TRIPS-plus
RTA
0.07
(0.08)
0.09
(0.08)
Constant 7.15***
(2.06)
7.04***
(2.12)
7.12***
(2.07)
7.04***
(2.06)
6.51***
(2.09)
6.24***
(1.77)
5.96***
(1.93)
7.15***
(2.07)
5.51**
(2.71)
7.78***
(2.33)
4.85**
(2.43)
6.42***
(2.24)

N 576 568 568 568 568 576 576 576 576 576 568 568
No. of Clusters 93 92 92 92 92 93 93 93 93 93 92 92
Wald chi
2
5.73 4.73 4.69 4.79 7.42 6.92 9.98 4.60 6.51 4.64 6.34 7.69
Prob>chi
2
0.0004 0.0007 0.0007 0.0006 0.0000 0.0000 0.0000 0.0009 0.0000 0.0000 0.0000 0.0000
R
2
within 0.1194 0.1203 0.1190 0.1207 0.1390 0.2217 0.1940 0.1194 0.1327 0.1225 0.2306 0.2068
R
2
between 0.7185 0.7113 0.7104 0.7105 0.6877 0.7326 0.7284 0.7185 0.7225 0.7132 0.7140 0.6983
R
2
overall 0.6928 0.6853 0.6830 0.6834 0.6667 0.7013 0.7023 0.6928 0.6986 0.6869 0.6872 0.6744

Note:
(1) Robust standard errors are in parentheses.
(2) * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed tests.
(3) Be noted that the variables of legal origins are dropped in Fixed Effects Models, since they are time-invariant.
(4) The result of FE (2) is the same with that in T able 3.5.
(5) Different from the effect of BIT in force shown above in FE (6), the effect of BIT signed is negative but not significant.
(6) The one-period-lagged effect of being a defendant in WTO DSP is similar with the effect of being a defendant in WTO DSP shown above in FE (9).
(7) The effect of Membership in RT A signed is similar with that of Membership in RT A in force shown above in FE (10), except that its (absolute) effect is smaller (-
0.10, insignificant).
(8) The effect of Membership in TRIPS-plus RTA signed is similar with that of Membership in TRIPS-plus RTA in force shown above in FE (11), except that its
(absolute) effect is bigger (0.09, insignificant).
(9) The one-period-lagged effect of Membership in TRIPS-plus RT A in force is similar with that of Membership in TRIPS-plus RT A in force shown above in FE (11),
with similar magnitude and significance level.

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After all, genuine enforcement depends more on countries’ own incentives and
capabilities. Different from the OLS results, incidental pressures and incentives resulting
from the BITs with the U.S. are detected to have a significantly repressing effect on the
piracy rate by themselves (see RE (8) in Table 3.8, and FE (6) in Table 3.9), but not
always have a significantly repressing effect if other regional and multilateral influences
are also controlled (see RE (14-15) in Table 3.8, and FE (12-13) in Table 3.9, with the
result of FE (13) as an exception).
As for the effects of a strengthened multilateral trade regime, countries being a
member of WTO and committing to fully implement the TRIPS obligations have
significantly lower piracy rate than others, no matter whether we examine their effects by
themselves (see POLS (15-16) in Table 3.7, RE (9-10) in Table 3.8, and FE (7-8) in Table
3.9) or with controlling for other potential international influences (see POLS (21-22) in
Table 3.7, RE (14-15) in Table 3.8, and FE (12-13) in Table 3.9). Being a defendant
under the WTO DSP does not have significantly repressing effects on countries’ piracy
rate, with all of its coefficients being positive (see POLS (17) (21) in Table 3.7 with 0.05
significance level, RE (11) in Table 3.8, and FE (9) in Table 3.9 with both insignificant at
all). As robustness checks, I also examine the one-period-lag effect of being a defendant
under the WTO DSP (shown in POLS (18) in Table 3.7; not shown in Table 3.8 and 3.9
but comment on that in the notes of both tables) and the similar patterns persist.
A careful examination of the cases brought under the WTO DSB (see Table 3.2)
reveals that there might be some reasons why we failed to detect in the statistical analysis
any effect of the WTO dispute settlement mechanism on depressing software piracy rates
and improving copyright enforcement for business software. First, the number of cases

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targeting software piracy is limited. Among all the eleven cases, which are related with
copyright protection and enforcement from 1995 to 2010, only six of them targeted on
certain legislation, regulation and enforcement procedures which might influence the
piracy rate of business software, let alone the fact that two of them (DS 82 and DS 115)
are actually a single case and another of them (DS 186) ended up with no action taken
either by the parties to the dispute or the WTO DSB beyond the complaint’s request for
consultation. (See cases in upper case in Table 4.2) All the six cases targeted on the
deficiency and inconsistency in legislation and regulations with the TRIPS Agreement in
the defendant countries, such as lack of provisional measures in the context of civil
proceedings involving IPR (in DS 83 and DS 86), lack of criminal procedures and
penalties for commercial scale piracy (in DS 362), and even lack of more general
requirements consistent with the TRIPS provisions (in DS 82, DS 115, and DS186).
None of them dealt with enforcement results directly. As a result, the WTO dispute
settlement mechanism is impressively effective in eliciting legislation and regulation
making necessary for copyright protection. In five of the six cases (except DS186 with
the U.S. as the defendant), the defendant responded to the WTO dispute settlement
mechanism by passing new laws and regulations or revising the existing ones even before
a panel was established (DS 82, DS 83, DS 86, and DS 115) or according to the decision
of the WTO DSB (DS 362 with China as the defendant). Nevertheless, it might take
years for these legislations and regulations to have effect on the piracy level of copyright
products, such as business software, considering that the enforcement of these
legislations and regulations on the ground takes time and how quickly the effects on
piracy level can show themselves depends on domestic enthusiasm, infrastructure and

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capability. We cannot expect that defending oneself in front of the WTO DSB this year
would immediately depress a country’s piracy rate to a lower level compared over time or
internationally in the next year. Second, countries and cases are not randomly picked up
in front of the WTO DSB. Among the five defendant countries in the six cases, four
(Ireland, Denmark, Sweden, the U.S.) are developed economies, which means that they
would have better chance to enforce their laws and regulations once they were adjusted to
be consistent with the international standards. However, even before the WTO dispute
settlement cases were brought against them, the piracy level in three countries (Denmark,
Sweden and the U.S.) had already been rather low if compared internationally, which
implies that there might not be much room for them to improve either.
The effects of being a RTA member with TRIPS-consistent commitments on
copyright protection and being a RTA member with TRIPS-plus commitments on
copyright protection on countries’ software piracy rate are not as strong as shown in the
OLS results. Although the countries being a member of TRIPS-consistent RTA generally
have lower piracy rate of business software than others without that kind of membership,
most of these differences are not significant (shown in POLS (19) (21) in Table 3.7, and
FE (10) (12) in Table 3.9), with the RE significant results as exceptions (see RE (12) (14)
in Table 3.8). The effect of being TRIPS-plus RTA is not consistent across POLS, RE
and FE models, except their insignificance (shown in POLS (20) (22) in Table 3.7, RE
(13) (15) in Table 3.8, and FE (11) (13) in Table 3.9).
Considering that there are variations in the effects of BITs and RTAs detected
across different sets of models, especially between RE and FE models shown in Table 3.8
and Table 3.9, we should compare the two sets of models and determine which one is

184

more appropriate. In order to achieve this goal as well as to compare the relative
importance of bilateral, regional and multilateral influences, the results of RE and FE
analyses are reproduced in Table 3.10 and compared with each other. The Hausman test
comparing RE (16) and FE (12) supports the superiority of the former over the latter
(with chi
2
=12.89, Prob>chi
2
=0.07), while the Hausman test comparing RE (17) and FE
(13) supports the superiority of the latter over the former (with chi
2
=19.45,
Prob>chi
2
=0.0069).
If we examine the effects of being a BIT member, WTO member, and TRIP-
consistent RTA member at the same time (see RE (16) in Table 3.10), being a WTO
member and being a TRIPS-consistent RTA member are both negative and significant on
the piracy rate, with the (absolute) effect of WTO membership larger than that of RTA
membership, while the effect of BIT membership, although negative, is not significantly
influencing piracy rate. These are similar with the results of OLS analysis. However, if
we use more accurate measurements for the effects of membership in multilateral
institution and regional institution and examine the effects of BIT membership,
obligations to fully implement the TRIPS commitments, and TRIP-plus RTA membership
at the same time (see FE (13) in Table 3.10), the effects of multilateral institutions and
BIT membership completely overwhelm the effect of regional institutions. These results
are completely opposite to the results of OLS analysis. This unexpected result is
probably due to the fact that when some of the RTAs were established, the members with
lower level of IPR protection are targeted by these RTAs to improve their IPR protection
over a period of time, therefore both countries of higher IPR protection and countries of
lower IPR protection are correlated with the TRIPS-plus RTA membership so that the

185

Table 3.10 The Effects of International Influences on Piracy Rate of Business
Software, All Countries
(Analysis of Panel Data, Random Effect Models vs. Fixed Effect Models, Summary)

Dependent V ariable: Piracy Rate of Business Software (Logit Transformed)
RE
(16)
FE
(12)
RE
(17)
FE
(13)
Logged GDP pc -0.41***
(0.09)
-0.44
(0.27)
-0.43***
(0.09)
-0.69***
(0.25)
Secondary Enrollment Rate 0.0017
(0.0026)
0.0026
(0.0030)
0.0044*
(0.0023)
0.0043
(0.0029)
Government Effectiveness -0.31***
(0.09)
-0.24*
(0.13)
-0.39***
(0.12)
-0.35*
(0.19)
Democracy -0.0022
(0.01)
0.0152
(0.01)
-0.0052
(0.01)
0.0139
(0.01)
BITs -0.02
(0.11)
-0.09
(0.18)
-0.11
(0.08)
-0.24**
(0.12)
WTO Membership -0.77***
(0.29)
-0.85**
(0.37)

TRIPS Obligation -0.39***
(0.10)
-0.37***
(0.10)
Membership in RTA in Force -0.09*
(0.05)
-0.09
(0.07)

Membership in TRIPS-plus
RTA
0.03
(0.07)
0.09
(0.08)
Constant 4.76***
(0.60)
4.85**
(2.43)
4.37***
(0.71)
6.42***
(2.24)

N 568 568 568 568
No. of Clusters 92 92 92 92
Wald chi
2
283.42 6.34 278.66 7.69
Prob>chi
2
0.0000 0.0000 0.0000 0.0000
R
2
within 0.2214 0.2306 0.1889 0.2068
R
2
between 0.7619 0.7140 0.7587 0.6983
R
2
overall 0.7340 0.6872 0.7339 0.6744
Hausman Test
chi
2
12.89 19.45
Prob> chi
2
0.0749 0.0069
Note:
1. Robust standard errors are in parentheses. But following the standards, the Hausman tests are based on
models with standard errors.
2. * significant at 10%, two tailed tests. **significant at 5%, two tailed tests. ***significant at 1%, two tailed
tests.
3. Be noted that the variables of legal origin are dropped in Fixed Effects Models, since they are time-invariant.
In order to compare the results of Random Effect Models with Fixed Effect Models, I report the Random
Effect Models without the variables of legal origin in RE (16) and (17) in this table, with other controlling
variables unchanged compared with RE (14) and (15) in T able 3.8.
4. The results of FE (12) and (13) are the same with those in T able 3.9.

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repressing effect of TRIPS-plus RTA membership on piracy rate (especially of those
countries with lower level of protection) is balanced out. Furthermore, the IPR protection
level of the countries with lower IPR protection level upon entry might keep low after
several years of RTAs’ signature and entering into force, while most of the countries,
especially those founding developed members in 1995 and those non-founding members
in 1995 which however must immediately implement TRIPS obligations upon entry,
entered into WTO or committed to the TRIPS obligations when they had already reached
relatively higher level of IPR protection. Even examining the one-period lagged effect of
membership in TRIPS-plus RTA is not enough to solve this problem (as noted in Table
3.7, 3.8 and 3.9). This probably could explain the different results between OLS model
(OLS (20) in Table 3.4) and FE model (FE (13) in Table 3.10) on the relative importance
of multilateral institutions and regional institutions.

3.4.Conclusion, Contribution and Directions of Future Studies
This chapter tries to examine the variations in copyright protection on business
software across countries as well as over time. Different from Chapter 2, which focuses
on legislation for IPR protection, this chapter focuses on the enforcement result, that is
“what happens on the ground” instead of “what is on the legal book”. There are two
main findings by the analyses of this chapter. First, countries of different legal origins,
with different legal infrastructures, different degree of judicial independence, and
different capability to adapt to the changing social circumstances, have significantly
different level of copyright protection in terms of enforcement. Common Law countries
provide higher level of copyright protection in software with lower level of piracy rate
than French Civil Law countries, with German Civil Law countries and Scandinavian

187

Civil Law countries somewhere in between. This significant difference among countries
of different legal origins is consistent even when controlling for other domestic economic
and political characteristics and various types of international influences. This supports
the argument that genuine domestic enforcement of international commitments highly
depends on domestic incentives and capacities to implement. If we compare the analyses
of enforcement in this chapter with the analyses of legislation in Chapter 2, we can
further notice that the differences among various legal origins in terms of infrastructure,
degree of judicial independence and adaptability to changing social circumstances are
more relevant in explaining the variations in enforcement results for copyright protection
than those in legislation for patent protection. This contributes to our understanding of
domestic legal institutions on copyright protection in specific and IPR protection in
general, especially in the area of enforcement. This finding also suggests the scholars of
international compliance to consider the effects of the legal systems in the countries they
study, especially in the issue areas where international compliances happen behind the
national border and where legal institutions are involved at least as essentially as
administrative institutions in enforcement. Environmental protection and labor rights
protection could be such issue areas.
Second, this chapter examines the effects of various international influences by
themselves and as groups. This chapter shows that bilateral pressures from the U.S.
represented by the USTR Special 301 processes and other review processes are not as
effective as expected to improve the domestic enforcement of those existing laws in the
target countries, although they significantly pushed the target countries to legislate for
higher level of IPR protection as shown in Chapter 2. This chapter discovers that a

188

strengthened multilateral trade regime is conducive to the improvement of copyright
protection across the globe over time, an effect hard to detect directly in Chapter 2, and
confirms the ineffectiveness of being a defendant under the WTO DSP on copyright
enforcement, similar with its ineffectiveness on patent legislation detected in Chapter 2.
Another step forward made by this chapter compared with the existing studies and
Chapter 2 is to examine the effects of RTAs on IPR protection in general and copyright
enforcement in specific. Countries being a member of RTAs with TRIPS-consistent
commitments on copyright protection generally have lower piracy rate of business
software and thus higher level of copyright protection than others. However, the effect of
being a member of TRIPS-plus RTAs needs to be examined further in the future.
There are several areas which I have not been able to fully address in this chapter
and thus deserve further studies. First, this chapter mainly focused on explaining the
variations in the level of IPR enforcement by treating the level of piracy rate in business
software as the dependent variable. Future studies could treat the change of piracy rate in
business software as the dependent variable and examine what domestic factors and
international factors contribute to the improvement of copyright enforcement.
Second, this chapter examines the effect of legal institutions on IPR enforcement,
but fails to examine the effect of different aspects of legal institutions on IPR
enforcement. In the theoretical section of this chapter, three different aspects of legal
institutions have already been identified, including legal infrastructure, degree of judicial
independence and adaptability to changing social circumstances. If appropriate
measurements for these aspects of legal institutions are available, the effects of various

189

aspects of legal institutions could be checked respectively so that we can tell which
aspects are more relevant in IPR enforcement.
Third, it is worth the efforts to further examine the effect of RTAs in general and
in different country groups. For one thing, as argued earlier, it takes time for the effect of
RTAs to present itself. This requires our models to take into consideration of long-term
effect of RTAs instead of focusing on their short-term effect. For another thing, and more
importantly, both TRIPS-consistent RTAs and TRIPS-plus RTAs might have distinct
effects on different country groups. A careful survey of RTAs and the piracy rate of
business software of their members shows that there are a lot of RTAs with medium to
extremely unbalanced IPR protection level among their members (with their members
having 15% or more of difference in their piracy rate). As argued earlier, these RTAs are
promoted to establish by the members with higher IPR protection and expected to target
those members with lower IPR protection to improve their protection level. Therefore,
the relationship between RTA membership and countries’ behaviors on IPR protection is
apparently different in these two different groups of countries. For the first group of
countries, RTA membership with IPR clauses is endogenous to their higher level of IPR
protection. In contrast, for the second group of countries, RTA membership with IPR
clauses is expected to influence their IPR protection level after entry and/or taking into
effect. The following potential hypotheses are developed and deserve further test in the
future studies: (1) countries with lower IPR protection level in a RTA with IPR protection
clause would improve their protection level more than other countries, if this RTA’s IPR
protection clause includes obligations on cooperation; (2) countries with lower IPR
protection level in a RTA with IPR protection clause and with unbalanced IPR protection

190

level among its members would improve their protection level more than others after they
enters into this RTA; (3) countries with lower IPR protection level in a RTA with IPR
protection clause and with unbalanced IPR protection level among its members would
improve their protection level more than other countries, if this RTA’s IPR protection
clause includes obligations on cooperation; and (4) countries with lower IPR protection
level in a RTA with TRIPS-plus obligations would improve their protection level more
than other countries.

191

Chapter 4 Why to Steal Certain Books is Not an Elegant Offense: The
Political Economy of Selective Copyright Protection in China
The last two chapters of statistical analysis theorize the reasons for IPR statutory
protection in patent and IPR enforcement in copyright protection for business software
respectively. However, the explorations for the reasons and mechanisms of IPR
protection have been made exclusively at the national level. Large-N statistical analysis
is infeasible if we would like to zoom our research focus into the lower level, such as
industry inside a certain country, since it is much harder to measure the degree of IPR
protection as well as certain explanatory variables at the industrial level in a consistent
and comparative way and the number of explanatory variables could be larger than the
number of industries for comparison. Large-N statistical analysis is also not useful if we
would like to show the mechanisms through which explanatory factors influence the
results beyond establishing correlation relationships. Comparative case study is needed if
we intend to explain the variation in IPR protection across industries in a certain country,
which is both theoretically and empirically interesting.
As an extension of the last two chapters, this chapter provides a comparative
political economic analysis of copyright protection in three industries in a single country,
China. In the past more than two decades, China has been heavily criticized for its
inadequate IPR protection. The negative impression of Chinese continuing poor IPR
protection and ignorance of international agreements on IPR protection has been forged
and further strengthened in many’s minds by endless anecdotal evidence from media,
lawyers, entrepreneurs and scholars as well as continuing condemnations from the
foreign governments, especially that of the United States. In the case of copyright

192

protection, the persistently high level of piracy rate in China despite the continuous
pressures from the United States under a series of unilateral monitoring mechanisms and
bilateral consultations and negotiations is consistent with the general picture drawn in the
last two chapters that international pressures could at best elicit stronger IPR protection
on the paper and campaign-like enforcement efforts while entirely failed to improve
enforcement results on the ground. China’s legal system following the model of German
Civil Law does not help it to provide stronger IPR protection either. However, a closer
examination of existing academic research shows that we know less about
implementation of IPR protection in China than we think. We failed to answer the
question on whether China ever improved its protection for IPR through these years
besides simply enacting new laws or revising the existing ones and why if there is any
improvement. We failed to carefully examine whether there is any variation in terms of
IPR protection among different industries, but mistakenly assumed that different
industries could benefit similarly and simultaneously from a certain level of legal
protection, simply because their products consist of the same type of IPR and are
supposed to be protected under the same set of laws and regulations. In order to explain
variations in IPR protection across different industries, it is not helpful at all to look at
legal origins, unilateral pressures, and pressures from being a defendant in front of the
WTO DSB, which have kept constant across different industries in a single year.
This chapter aims to fill these intellectual and empirical gaps by examining the
evolving disparities in copyright enforcement among three industries, including business
software, motion pictures, and recorded music, in China since 1995 up to now. Reports
by industry associations in the U.S. show that there has been more obvious improvement

193

in copyright protection in software than in motion pictures and sound recordings in China
in the past fifteen years. In this chapter, I will provide a comparative political economic
analysis of copyright protection in China, ruling out several alternative explanations for
these evolving disparities in copyright enforcement among the three industries, given that
the enforcement institutions are not significantly different across the three industries, the
diplomatic pressures from the U.S. as well as the international assistances on capacity
building from the U.S. industries are not significantly different across the three industries,
and market access and censorship in different industries do not contribute to the industrial
variations in copyright protection. Instead, I show that China has established an industry-
specific IPR protection regime for software but not for motion pictures and recorded
music. The main reason for this variation is that software industry has made more active,
inclusive and autonomous lobbying efforts for IPR protection with domestic private and
state-owned enterprises and foreign enterprises cooperating with each other, and therefore
is more effective in obtaining higher level of IPR protection. This pattern of lobbying in
software industry results from the higher level of cooperation between enterprises in their
business relationship and huge stake of enterprises of various ownerships in lobbying
cooperation. Furthermore, software industry has higher level of economic prominence,
more significant contribution to the economy and higher extent of technology
intensiveness, which make it have better chance to exert their influence on government
IPR statutory protection, policy-making and enforcement and invite more support from
the government with stronger IPR protection.
This chapter is organized as follows. In Section 1, I will briefly survey the
existing literature examining IPR protection in China and their limitations, which

194

motivated my cross-industry study, and discuss how my study can improve our
understanding on copyright protection in particular and IPR protection in general in
China. In Section 2, I will examine the economic characteristics of the three copyright
industries respectively, predict how these economic characteristics contribute to the
different pattern and level of state-industry linkage in the three industries, and discuss
why special copyright regime could be established for software but not for motion
pictures and recorded music. Conclusions as well as the implications of this study will be
discussed in Section 3.

4.1. What is Missing in the Existing Literature on IPR Protection in China and My
Research Initiatives
Although the existing literature on Chinese IPR protection has shown a
considerable progress in theoretical development and empirical studies, it is still limited
in three aspects in which I aim to improve in this chapter. Firstly, the lack of consistent
and comparable measurement for IPR enforcement level still impedes the research
program. Most of the studies on Chinese IPR enforcement (Kshetri 2009, Liu 2005, Liu
2006, Massey 2006, McCombs 2004, to name a few) rely on anecdotal evidence from the
media and lawyers instead of using hard evidence measuring the level of protection and
enforcement. There have been several surveys among foreign executives working in
China on the level of IPR protection there (WEF, 1997-2010
86

86
This dataset measures average responses in each economy to questions included in WEF’s Executive Opinion Survey,
conducted early months of each year.
; AmCham Shanghai,
2004-2009; USCBC, 2003-2009), but these survey results were seldom cited simply

195

because how the surveys were designed and conducted is not easily penetrable to the
public and they merely described a general picture of Chinese IPR protection instead of
disaggregating their data into different types of intellectual property, let alone into
different industries and different regions inside China. There have been a few studies
(Mertha 2005 and 2006, Dimitrov 2009) cited Chinese official data on IPR enforcement,
such as number of administrative copyright enforcement cases and administrative
trademark enforcement cases, number of first- and second-instance civil IPR cases
accepted by Chinese courts, and number of criminal IPR cases handled by Chinese courts.
But those measurements are actually measuring the scale of enforcement activities but
not the extent of IPR protection as a result of enforcement activities.
Secondly, as in the literature accessing general rule of law in China (Peerenboom
2008), excessive reliance on anecdotal evidence from the media and lawyers led to the
biggest problem in accessing IPR protection in China, that is, the lack of a comparative
context and therefore treating “deficient IPR enforcement in China” as an irrefutable
proposition. Both the popular media and legal scholars are much more likely to focus on
areas where there are problems, rather than spending time investigating whether or not
the system functions as it is supposed to, and therefore always exaggerate the problematic
part of the story. We are often presented with stories showing problems with IPR
protections in China or shortcomings in the enforcement structure, but seldom in a
comparative context. This comparative context could be a cross-country or cross-
economy one, as Alford (1995) did when he compared mainland China and Taiwan,
which two enjoyed the similar historical and culture background but different stage of
economic and political development. It would be even greater, as well as even more

196

difficult, to find another country with comparable population, geographic and economy
size and extent of complexity relative to China and show how it behaves in IP protection
in order to give China a pertinent evaluation on IP protection. One such outstanding
effort was made by Dimitrov (2009), who evaluated Chinese IPR protection in a
comparative framework against Russia, Taiwan, Czech Republic, France and the U.S.,
using consistence, transparency and procedural fairness as consistent standards to
evaluate the degree of rationalization in enforcement, although his focus is on
institutional obstacles against effective enforcement and he failed to explain why, given
the same set of institutional obstacles, the IPR protection level could be improved in
certain industry but not in the others. Another way to solve this problem would be to
compare inside China, over time, across different types of IPR, or across different sectors
Mertha (2005, 2006) compared the Chinese enforcement actions in copyright and
trademark and argued that the competition between various bureaucracies in trademark
resulted in more active trademark enforcement than copyright enforcement. There have
been some scattered studies of IPR protection in certain industry (for example, Li 2002
on copyright protection in software industry, Wang 2003 and Wang and Zhu 2003 on
copyright protection in film industry, Chen and Watanabe 2007 on patent protection in
pharmaceutical industry, Liu 2005 on patent protection in biotechnology industry; some
empirical observations including Gelb 1997), but these studies have not been integrated
in a cross-industry comparison framework, as Jayakar (2003) did in comparing IPR
protection in the Taiwanese information technology industry, the Indian computer
software industry, the Indian film industry, and the Taiwanese cable television
programming industry (although the comparability between protection for different types

197

of IPR in his study (that is, patent and copyright) is rather questionable given that the
economics of different types of IPR are different).
Thirdly, the literature of China’s IPR protection is far from integrated, with
several blocks drifting away from each other. On the one hand, the explanations of IPR
legislation and explanations of enforcing and implementing those IPR laws are separated
from each other. Neorealist scholars held absolute domination when explaining the
reasons for China’s adoption of stronger IPR laws, which they argued were largely
determined by the degree of pressure applied by international donors, investors and
hegemonic trading partners upon which China relies for market access. They mainly
focused on the effect of the pressure from the U.S. (Sell 1995 and 1998, Massey 2006),
examining whether the U.S. pressure worked or not (Goldberg and Feder 1991) and
under what conditions it worked (Zeng 2002a and 2002b). A related strand of literature
focused on the negotiation strategies of both China as developing countries (Dahros 2003,
Sell and Prakash 2004, Mertha and Pahre 2005, Odell and Sell 2006) and the U.S. (Hulse
and Sebenius 2003) against the background of structural power imbalance and
interdependence between the two. Apparently, neorealist approach cannot explain
general “deficient enforcement” or any variation in the timing and extent of
implementation across different regions and industries in China. It overlooks the
importance of interaction between domestic political and economic logics and
international inducement or pressure in IPR implementation.
On the other hand, in terms of domestic enforcement and implementation of IPR
laws in China, the structuralist explanations and culturalist explanations opposed to each
other. Most of the structuralist explanations focused on the characteristics of the formal

198

institutions of government in China, especially as a transitional economy. For example,
Mertha (2005, 2006) found that higher level of local bureaucratic redundancy led to more
active trademark enforcement compared to copyright enforcement, while Dimitrov (2009)
argued that with bureaucratic redundancy in the absence of laws clearly delineating the
responsibilities of different enforcement agencies, the bureaucrats staffing those bodies
engage in personalistic enforcement and corruption. Other structural characteristics, such
as bureaucratic structure in a certain “xitong” (i.e. functional bureaucratic system, such as
bureaucracy in charge of patent, copyright and counterfeiting) (Mertha 2005), lack of
financial resources, enforcement capacities and/or incentives for central and local
administrative IP enforcement bodies (Clark 2000, Mertha 2005), and decentralization,
local protectionism and resulting potential collusion between local officials and
counterfeiters (Trainer and Simone 2002, Dimitrov 2009, Massey 2006) were also
analyzed. Besides, lack of criminal penalties or penalties with any deterrent effect is also
a target attracting criticism (Trainer and Simone 2002, Dimitrov 2009). In contrast,
culturalist explanations (represented by Alford 1995, also see Liu 2006 and Shao 2006)
hold that contemporary Chinese attitude to law in general and to IPR in particular is a
direct outgrowth of the history of her culture so that what the U.S. and western countries
have been doing to transplant IPR laws to China is not only ineffective but perhaps
deleterious as well. At the consumer level, there have been some surveys examining the
effect of attitude toward social cost of piracy, social benefit of dissemination, ethical

199

belief and anti-big business attitude on personal intention to buy pirated CDs, such as the
survey study conducted in Hong Kong by Kwong et al (2003).
87
However, both structuralist explanations and culturalist explanations concentrated
on macro variables (such as the structure of IPR enforcement bureaucracies and inter-
bureaucratic competition by Mertha 2005, the degree of decentralization and delegation
relationship between the central enforcement agencies and the local ones by Dimitrov
2009, political culture and history by Alford 1995), while generally overlooked
institutional actors (except those key enforcement agencies) and their perceptions and
behaviors in the implementation stage, as Deere (2009) did in her analysis of developing
countries’ implementation of the TRIPS Agreement. First of all, we should give explicit
attention to IPR industries as “implementation constituency”, whose economic interests
would be influenced by implementation. After all, the depth and sustainability of IPR
enforcement depend on the emergence of politically influential indigenous interests
committing to that goal and China will not be ready for IPR protection until she desires it
out of her own volition. Furthermore, we should pay more attention to certain
government bureaucracies and their roles as industrial regulators besides enforcers. For
example, in the case of copyright protection, Ministry of Culture is in charge of cultural
market regulations, which not only include supervision of the wholesale, retail and rental
trade in audiovisual products (leading to its major role in enforcing copyright as shown in
Mertha 2005 and Dimitrov 2009), but also include making industrial policies, control of
market access of cultural products (especially those through Internet distribution), and
supervision of venues of cultural commercial activities, such as Internet Cafés and KTVs,

87
But apparently cross-culture examination like Kwong et al 2003 would be extremely difficult to conduct.

200

which depend on copyright contents for their business. As shown in the following
sections, Ministry of Industry and Information Technology (MIIT, with Ministry of
Information Industry (MII) as its predecessor) played an important role in making
policies supporting the development of software industry, which contributed to the
establishment of a specific IPR enforcement regime for software in the early 2000s. Last
but not the least, as suggested by Kshetri (2009), only by analyzing institutional actors,
their perceptions on IPR protection, and their power and influences represented by their
access to economic, political and social resources, we can show the complex process of
interaction and negotiation among these institutional actors, which results to the current
societal adoption as well as future evolution of enforcement results.
This chapter aims to contribute to our understanding of China’s IPR enforcement
by filling up those three deficiencies mentioned above. In the past decade and a half,
there has been more obvious improvement in copyright protection in software than in
motion pictures and sound recordings in China. The annual Special 301 Reports
submitted by IIPA (IIPA 2001-2010) to the USTR Office show that the piracy rate of
software in China has decreased from higher than 95% in 1995 to 79% in 2009 (see Table
4.1), while that of motion pictures and sound music did not drop a lot or at all during the
same period. Some may argue that American industry associations may overestimate the
piracy rate for the sake of lobbying, but here I explain the data in a different way—even
with the possibilities of overestimation, software piracy rate in China has still dropped by
almost 16% in 13 years! Others may also doubt about the consistency of calculating
piracy rates in each industry by each American industry association respectively and
reliability of putting them together to compare. But during my fieldwork, academic

201

Table 4.1 Estimated Trade Losses Due to Copyright Piracy (in Millions of U.S.
Dollars) and Levels of Piracy in the People’s Republic of China, by IIPA, 1995-2009
Year Motion Pictures Records & Music Business Software
Loss Level Loss Level Loss Level
1995 124.0 100.0% 300.0 54.0% 488.0 96.0%
1996 120.0 85.0% 176.8 53.0% 507.5 95.0%
1997 120.0 75.0% 150.0 56.0% 987.9 96.0%
1998 120.0 90.0% 80.0 56.0% 808.4 95.0%
1999 120.0 90.0% 70.0 90.0% 437.2 91.0%
2000 120.0 90.0% 70.0 93.0% 765.1 94.0%
2001 160.0 88.0% 47.0 90.0% 1140.2 92.0%
2002 168.0 91.0% 48.0 90.0% 1637.3 92.0%
2003 178.0 95.0% 286.0 90.0% 1787.0 92.0%
2004 280.0 95.0% 202.9 85.0% 1488.0 90.0%
2005 244.0 93.0% 204.0 85.0% 1554.0 86.0%
2006 . . 206.0 85.0% 2172.0 82.0%
2007 . . 451.2 90.0% 2999.0 80.0%
2008 . . 564.0 90.0% 3005.0 80.0%
2009 . . 466.3 90.0% 3412.4 79.0%
Notes:
(1) Data for 2008 and 2009 are compiled from “2010 ‘Special 301’ USTR Decisions: 2008 and 2009 Estimated
Trade Losses due to Copyright Piracy (in Millions of U.S. Dollars) and 2008-2009 Estimated Levels of
Copyright Piracy” published on International Intellectual Property Alliance (IIPA)’s website, at
http://www.iipa.com/pdf/IIPA2010USTRDecisionsSpecial301TableofEstimatedTradeLossesandPiracyLevels
061110.pdf (accessed on July 1, 2010)
(2) Data for 1995 to 2008 are compiled from IIPA Special 301 Reports, People’s Republic of China, 2001-2009,
various years. These reports are available at the section for China on the webpage at
http://www.iipa.com/countryreports.html (accessed on July 1, 2010)
(3) If there is any inconsistency between these reports, data on the latest report are reported in this table.
(4) For methods used to calculate estimated piracy levels for business software and records and music, please see
“Appendix B: Methodology IIPA 2010 Special 301 Report on Copyright Protection and Enforcement”, at
http://www.iipa.com/rbc/2010/2010SPEC301METHODOLOGY.pdf.

observers
88
, lawyers focusing on IPR protection in China
89
, and principals of indigenous
and transnational industry associations
90

88
Interview 09092008BJ.
generally confirmed the reliability of the data
and the general trend of evolving industrial disparities in copyright enforcement results
shown in the data. Piracy rate not only is a better measurement for the level of IPR

89
Phone Interview 08062008LA, with interviewee located in Shanghai. Interview 07302009BJ.

90
Interview 09162008BJ. Interview 09232008BJ. Interview 09272009BJ.

202

protection than the number of enforcement activities, but also presents us a picture of
obvious variations across different copyright industries, which have not been accounted
for yet. It could be inferred from the piracy rate that software enjoys the highest level of
copyright protection, recorded music the lowest level of copyright protection, and motion
pictures somewhere in between.
91
This comparative study among copyright industries is significant and interesting
for the sake of better understanding IPR protection in China, one of the hottest topics in
the U.S.-China relations, and her development strategies. Because industries develop at
different paces and not all industrial sectors can simultaneously benefit from strong IPR
protection, a country is unlikely to have a coherent IPR protection level. It makes good
economic sense and political sense for policy makers to provide a certain level of IPR
protection in line with the country’s industrial development. (Yu 2007) Therefore, if we
want to fully understand the relationship between IPR protection and economic
development, we need to pay attention to the different forms of intellectual property and
the varying protection scope for each. It would be misleading to explore IPR protection
as if various forms of IPR were based on identical models, with protection of similar
scope and characteristics and with similar social costs.

This comparative study among copyright industries is also significant and
interesting for the sake of rigor in research design. It will be a nice practice of
comparative study techniques keeping certain important explanatory variables under
control while examining others (George and Bennett, 2005). Firstly, all the copyright

91
It must be acknowledged that piracy rate is still high even for software in China and therefore the differences across
industries to be explained is rather limited. But we could still benefit from making industrial comparison, such as
gaining extra theorizing leverage, comparing with studying only one industry.

203

industries I will examine are the ones under severe debates during the U.S.-China IPR
dialogues as well as under rigorous monitoring by the U.S. government, enterprises and
industrial associations. Furthermore, since I will exclusively focus on copyright issue,
industries to be examined are under the jurisdiction of the same xitong (bureaucratic
system), which is in charge of copyright enforcement in China and was emphasized by
Mertha (2005) to understand IPR protection level in a particular area. Since cross-
industry comparative study can help me hold these important explanatory variables
emphasized by the existing literature controlled across industries, I can keep my eyes on
those which have been overlooked or underemphasized in the past, such as the economic
characteristics and development status of copyright industries, state-industry linkages,
national industrial policies and resulting IPR regime.
Given that the existing studies on copyright protection in economics, political
science and international relations fail to define what types of copyright they discuss, let
me briefly define the rights subject to infringement and needs to be protected in each
industry before discussing variations of copyright protection at the industrial level in
China. In a narrower sense, copyright is “the legal protection extended to the owner of
the rights in an original work that he has created. It comprises two main sets of rights:
the economic rights and the moral rights,” according to the WIPO.
92
The economic rights
include “the rights of reproduction, broadcasting, public performance, adaptation,
translation, public recitation, public display, and so on.”
93

92
WIPO, “Collective Management of Copyright and Related Right”, see
Copyright Law of China
revised in 2010 further specifies that economic rights include the rights of reproduction,
http://www.wipo.int/about-
ip/en/about_collective_mngt.html, accessed on Feb. 25, 2011.

93
Ibid.

204

distribution, lease, public display, public performance, projection, broadcasting,
dissemination on information networks
94
, film shooting, adaptation, translation,
compilation, and so on.
95
The moral rights include “the author’s rights to object to any
distortion, mutilation or other modification of his work that might be prejudicial to his
honor or reputation.”
96
In a broader sense, “copyright” should also include “copyright-
related rights”, also known as “neighboring rights”, which are “the rights that belong to
the performers, the producers of phonograms and broadcasting organizations in relation
to their performances, phonograms and broadcasts respectively.”
97

The piracy of
business software and motion picture reported by IIPA mainly refers to the infringement
against software and film producers’ rights of reproduction, distribution, and
dissemination on information networks while, in contrast, the piracy of records and music
reported by IIPA mainly refers to the infringement against the phonogram producers’
neighboring rights of reproduction, distribution, and dissemination on information
networks.

94
This is the literal translation of the legal term used in the Copyright Law of the People’s Republic of China. IIPA
uses “Copyrights on the Information Networks” in their report. See IIPA 2007.

95
For a full text of “Copyright Law of the People’s Republic of China” (“zhonghua renmin gongheguo zhuzuoquan fa”)
in Chinese, see http://www.chinanews.com/gn/news/2010/02-26/2141928.shtml, accessed on Feb.26, 2011.

96
WIPO, “Collective Management of Copyright and Related Right”, see http://www.wipo.int/about-
ip/en/about_collective_mngt.html, accessed on Feb. 25, 2011.

97
Ibid. Also see Liu 2007, p36.

205

4.2.The Economics of Copyright Industries, Government-Business Interactions and
Industry-Specific IPR Regime for Software in China
Studies on government-business relationship have found that the economic
characteristics of firms and sectors have influences on the extent to which firms are
interested and able to cooperate with each other, the manners in which firms and their
associations interact with the governments (either bottom-up or top-down), whether they
have relatively more or less influence on government policy making and implementation,
and whether the governments establish more or less preferential policies for certain
sectors. This section begins with analysis of economics of the three copyright industries
in China, focusing on those characteristics such as their economic prominence (measured
by their contribution to the economy in terms of revenue, the extent of technology
intensiveness, and sectors’ linkage with other sectors and significance) and ownership
(measured by ownership structure, competition and cooperation among enterprises with
different ownership, and competitiveness of China’s indigenous copyright industry).
These economic characteristics of the three copyright industries are then shown to make
software industry more motivated to organize together and more capable to influence
legislation and government policy making in copyright protection, than film industry and
recording industry, to make the government more penetrable to the appeals of software
industry than those of the other two industries, and finally to contribute to the
establishment of industry-specific copyright protection regime for software in China.

206

4.2.1. The Economics of Copyright Industries in China
Economic Prominence
Software industry is more prominent than film industry and recording industry in
China in terms of its economic contribution, technological significance and connection
with other sectors. Firstly, China’s software industry contributes disproportionally more
revenue in absolute value every year to China’s economy in general than the other two
industries. (See Figure 4.1) This sharp contrast leaves us a deep impression on how
important China’s software industry is to the Chinese economy compared with the other
two, although a note should be followed. On one hand, the revenue of software industry
includes not only that from software products but also that from system integration and
software services. Furthermore, among software products, only certain software products
(such as operation system software and some application software) are much more
vulnerable to piracy. Considering these two reasons, therefore, the data of software
industry as a whole might overestimate the portion of the industry which has incentive to
protect its copyright. On the other hand, since the revenue of film industry only includes
those from domestic box office, oversea sales and oversea box office, and advertisement
at the movie channel, but not those from audio-visual products and other authorizations,
the data of film industry might underestimate the size of the industry. Although it is hard
to directly compare the size of the portion of software industry and film industry which is
affected by copyright infringement because of constraints on data availability, the
possibility of exaggerating the sharp contrast between the revenue of software industry
and that of film industry could not change the overall picture of higher economic
prominence of software industry in general and the subsector of software products in

207

Figure 4.1 Annual Revenue of China’s Software Industry, Film Industry, Recording
Industry and Audiovisual Industry (2000-2007)

Sources: Data for software industry are from Statistical Yearbook of China's Electronic Information Industry (Software
Section) (zhongguo dianzi xinxi chanye tongji nianjian (ruanjian pian)), 2007. Data for film industry are
from Yin 2009. Data for recording industry are from IFPI 2007 and 2008. Data for audiovisual industry are
from Annual Report on China's Audiovisual Industry (zhongguo yinxiang hangye baogao), in Annual Report
on Development of China's Cultural Industry, 2008 (2008nian zhongguo wenhua chanye fazhan baogao).
Notes:
1. The revenue of software industry includes the revenue from software products (which include system
software, embedded software, application software and supporting software or middleware), systems
integration and software services.
2. The revenue of film industry includes the revenue from domestic box office (of both domestic produced films
and imported films), oversea sales and oversea box office, and advertisement at movie channel. This total
revenue does not include those from audio-visual products and other authorizations.
3. The revenue of recording industry comes from recorded music sale, including physical music sale (in the
format of CDs, cassettes, VCDs, DVDs) and digital music sale (including online, mobile and subscription).
The data for 2005 and thereafter are estimated by IFPI on the basis of the sale data reported by IFPI member
companies while considering their market share. The data for 2004 and before are based on reports of
Chinese government. Therefore, the data for 2004 and for 2005 are not comparable.
4. The revenue of audiovisual industry includes the revenue from sound recording products and video products.
The majority of sound recording products are on the contents of culture and education, and the rest are on the
content of entertainment, among which recorded music is the majority. The majority of video products (66%)
are on the contents of entertainment, among which video products of films and dramas are the majority (53%).

particular, after considering that software products contribute about 50-60 percentage of
revenue of software industry in total during 2002-2007 and that system software and
application software contribute about 50-60% percentage of revenue of software products
in total during 2003-2004 and even higher afterwards
98

98
This estimation is based on author’s computation of data published in Statistical Yearbook of China's Electronic
Information Industry (Software Section) (zhongguo dianzi xinxi chanye tongji nianjian (ruanjian pian)), 2007
, and even after adding the total

0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
2000 2001 2002 2003 2004 2005 2006 2007
Software Industry 560.0 750.6 1100.0 1633.0 2404.9 3906.4 4801.0 5834.3
Film Industry 22.0 36.0 48.0 57.3 67.3
Recording Music Industry 10.5 12.2 7.3 4.7 5.9 5.3
Audiovisual Industry 14.2 18.0 24.7 27.6 25.1 36.2 35.2
in 100 Million RMB

208

revenue of audiovisual industry (again, see Figure 4.1) to the revenue of film industry. In
addition, recording industry has entered into striking recession not only in China but also
across the globe in the past decade, although software industry and film industry have
developed continuously and rapidly during the same time period.
Secondly, although technology is important to all three industries in this study,
software industry is the most technology-intensive one, and recording industry the least
one, while film industry in the middle and much closer to the lower end. The technology
in software industry is also more volatile than that in the other two industries. This
follows the general pattern throughout the world. As in a technology-intensive industry,
China’s software enterprises have a far better educated and trained workforce on average
than their film and recording counterparts. Most employees are graduates with bachelor
degrees, often in computer science, and around 10% employees even hold master degrees
or higher. (See Figure 4.2) It is no doubt that most of China’s software enterprises are
located in adjacency to universities and scientific and technological research institutes.
Figure 4.2 Employees’ Education Level in China’s Software Industry (2004-2007)

Source: Statistical Yearbook of China's Electronic Information Industry (Software Section) (zhongguo dianzi xinxi
chanye tongji nianjian (ruanjian pian)), 2007.
0%
20%
40%
60%
80%
100%
2004 2005 2006 2007
34%
27%
49%
37%
55%
59%
42%
53%
11%
14%
9% 10%
Specialized College Degree and Lower
Bachelor Degree
Master Degree and Higher

209

Thirdly, an industry’s economic prominence is also illustrated by its position in
the whole industry chain with certain pattern of backward and forward linkage with other
sectors. China’s software industry contributes an important share of revenue (about 6%-
11%, increasing during the period from 2000 to 2007, See Figure 4.3) every year to
China’s electronic information industry, to which it is a subsector, and provide software
to hardware manufactured by the rest of the industry, not to mention the fact that software
has become an indispensible tool for urban life, business transaction and government
operation. In contrast, film industry and recording industry only have forward linkage
with very limited numbers of sectors, such as artists brokage, publication and distribution

Figure 4.3 Annual Revenue of China’s Software Industry (in 100 Million RMB),
Compared with China’s Electronic Information Industry in Total (2000-2007)

Source: Statistical Yearbook of China's Electronic Information Industry (Software Section), 2007.
Notes:
1. The revenue of electronic information industry includes that from software industry and hardware
manufacturing industry.
2. Horizontally, electronic information industry in China can be further categorized into the following
subsectors: communications equipments, radars, broadcasting and TV equipments, computers, household
audiovisual equipments, electronic devices, electronic components, electronic measuring instruments, and
special equipments for electronic industry.

0.0
10000.0
20000.0
30000.0
40000.0
50000.0
60000.0
2000 2001 2002 2003 2004 2005 2006 2007
9889.3
11876.3
14000.0
18800.0
26531.7
38417.0
47500.0
56001.0
560.0 750.6 1100.0
1633.0
2404.9
3906.4
4801.0
5834.3
Electronic Information Industry Software Industry

210

of audio-visual products, public performance and commercial performance, management
and trade of copyrights and trademarks, development and manufacture of post-film
products, celebrity endorsements and advertising, which are generally less developed in
China. In other words, the spillover effect from film industry and recording industry is
more limited compared with their software counterpart in China. The prominence of film
industry and recording industry mainly lies in their characteristics of providing contents
to a variety of media, such as radio and TV programs, physical audio-visual products, and
digital audio-visual products spread through internet and mobile devices. Especially in
China, the prominence of film industry and recording industry is rather cultural,
ideological and political than economic, with the film industry with greater prominence,
and therefore might be more easily to invite government’s direct top-down intervention.

Ownership: Structure, Competition and Cooperation among Enterprises with Different
Ownership
A majority of software enterprises in China are privately run, either domestic or
foreign. During 2003 to 2007, only less than 10% of the total revenue of China’s
software industry is contributed by state-owned enterprises (SOEs) (only 2-3% of all
software enterprises in number), while privately owned domestic software firms (about
53-64% of all software enterprises in number) and privately owned foreign software
firms (12-14% of all software enterprises in number) contribute about 50-60% and 25%-
33% to the total revenue respectively.
99

99
This pattern generally persists if we look at the share of enterprises with different ownership in number and in
renenue of software products (instead of software industry as a whole). The data of share of enterprises with different
ownership in revenue of software products are omitted here because of limited space, but available upon request.
(See Figure 4.4 and 4.5)

211

Although domestic private software enterprises outnumber foreign software
enterprises and the former’s revenue contribution almost doubles that of the latter, it has
to be admitted that the real market leader is foreign firms, especially those from the U.S.
After all, the hub of software sector is in the U.S. and China’s software industry is a
follower across the globe in terms of programming concepts, language and techniques.

Figure 4.4 Share of Software Enterprises with Different Ownership in Revenue
(2003-2007)

Source: The original data of revenue of software enterprises with different ownership come from Statistical Yearbook
of China's Electronic Information Industry (Software Section), 2005-2007, and Statistical Yearbook of China's
Electronic Information Industry, 2003 and 2004. The share of revenue is calculated by the author.
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
2003 2004 2005 2006 2007
8.69%
7.62%
4.45%
5.75%
6.96%
24.90%
33.50%
24.93%
30.24%
32.83%
3.10%
1.94%
1.77%
1.79%
1.41%
0.77%
1.48%
0.75%
0.36%
0.48%
49.44%
47.84%
61.62%
54.04% 46.95%
13.11%
7.62%
6.48%
7.81%
11.37%
SOEs
Foreign and Hong Kong/Macau/Taiwan Invested
Collective
Shareholding Cooperative
Shareholding
Others

212

Figure 4.5 Share of Software Enterprises with Different Ownership in Number
(2003-2007)

Source: The original data of number of software enterprises with different ownership come from Statistical Yearbook
of China's Electronic Information Industry (Software Section), 2005 and 2007, and Statistical Yearbook of
China's Electronic Information Industry, 2003 and 2004. The share in number is calculated by the author.

In China’s software market, foreign enterprises are generally in larger size if we look at
Figure 4.4 and 4.5 at the same time. Especially when we look at the subsector of
personal computer operation system (PC OS) and application software, which are much
more vulnerable to copyright infringement, U.S. enterprises are giant leaders in several
important product areas, for instance, Microsoft in PC OS (since 1985) and its office
software (since 1990) and Autodesk in computer-aided design (CAD) software (since
1982). In contrast, Chinese software enterprises in these products are very young, much
smaller in size, relatively inferior in quality and less competitive, for instance, Red Flag
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
2003 2004 2005 2006 2007
3.00% 3.12% 1.96% 2.17%
12.91% 13.19%
11.29%
14.16%
0.89% 0.69%
0.40%
0.35%
1.62% 1.40%
1.01%
0.72%
55.58% 55.51% 63.98%
52.64%
26.00% 26.09%
21.36%
29.95%
SOEs
Foreign and Hong Kong/Macau/Taiwan Invested
Collective
Shareholding Cooperative
Shareholding

213

(zhongke hongqi) in operation system
100
(since 2000), Kingsoft (jinshan) (since 1988)
and Yozosoft (yongzhong) (since 2000) in word processing and office software, ZWsoft
(zhongwang) (since 1998), Gstarsoft (haochen) (since 1992), and CAXA (shuma dafang)
in CAD software. A lot of China’s genuine application software use interfaces similar
with those of foreign software. Some of them were developed domestically based on the
(incomplete) source codes licensed by foreign software enterprises or alliances, from
sinificating (hanhua) for foreign products, and/or customerization for certain industries
based on foreign platform software.
101
It should be noted that some domestic enterprises
are prominent as market leader in certain segments, such as UFSoft (yongyou) and
Kingdee (jindie) in financial management, and Peking University’s Founder Group
(beida fangzheng) in laser typesetting software and Chinese font software.
102
But most of
the users of these softwares as well as other above-mentioned Chinese software are
commercial ones. These softwares are less vulnerable to piracy, since they are more
difficult to be simply duplicated and their commercial users prefer to purchase licenses
for more reliable products and comprehensive post-sale services.
103

100
This operation system is based on Linux, a family of Unix-like computer operation systems using the Linux kernel.
Linux is predominately known for its use in servers instead of personal computers, a market sector which is almost
completely dominated by Microsoft Windows or Mac OS. Furthermore, there have been a lot of debates and legal
cases about copyright ownership of Linux products. The copyright ownership of Linux products is extremely murky
and complicated given that they are based on the concepts of “open-source software” with GNU General Public
License (GPL), requiring that anyone who distributes Linux must make the source code and any modifications
available to the recipients under the same terms, only the initial issuer(s) of the license of a Linux product is the
copyright holder, and any following developers based on the source code initially publicized are only licensees and
issuers of the license for the next round. Therefore, different from business software, open-source software (like those
of Linux products) rely on providing services instead of selling licenses for profits.

101
Interview 08212009BJ.

102
Ibid.

103
Ibid.

214

Hand in hand with severe competition between domestic and foreign software
enterprises, cooperation between the two groups of software producers is also of high
scale. Foreign software enterprises cooperate with Chinese counterparts in almost
everything from basic research, to sinificating products and product development, to
marketing, public liaison, product sales and post-sale services. They rely heavily on
Chinese local talents to adapt their products to Chinese customers, to develop new
products with lower cost, and to manage their business operation. Horizontal cooperation
between domestic and foreign software enterprises dwarfs that in the film and recording
industry in China shown blow.

As for China’s film industry, ownership structures are a little bit different across
its three subsectors, namely production, distribution and projection, although in general
domestic state-owned and private enterprises occupy the majority of the market thanks to
a series of industrial policies. In the subsector of film production, products of domestic
film studios and those of foreign film studios almost equally share the market in terms of
domestic box office revenue, with the former enjoying more than half the slice of the pie
and increasing market share over the recent years (from about 50% in 2004 to 60% in
2008) (see Figure 4.6).
However, this market structure measured by box office revenue formed and
persisted not because domestic film studios are more competitive in their production than
their foreign counterparts, but because of a series of policies supporting indigenous
industry and constraining foreign enterprises’ market access. For example, according to
China’s WTO commitment, China agreed to allow 20 revenue-sharing foreign films for

215

Figure 4.6 Domestic Box Office Revenue of Domestic Produced Films vs. Imported
Films (in 100 Million RMB) (2004-2008)

Source: Yin 2009.

theatrical release (10 of which are from the U.S.) and another 30 foreign films whose
projection rights are sold for a lump-sum price to enter into the Chinese market every
year.
104

104
Before China’s entry into WTO in 2001, only 10 revenue-sharing foreign films were allowed to import.
Besides, the State Administration of Radio, Film and Television (SARFT, the
central government bureau in charge of film industry) issued regulations requiring that
foreign films should occupy less than one third of the total screen time in cinemas and
occasionally decreed “black-out periods”, during which no new revenue-sharing
blockbuster foreign films may be released in order to restrict competition with Chinese
films being released in the same period. (IIPA 2009) In contrast, domestic film studios
produced hundreds of feature films every year for the market, with the number
skyrocketing from 88 in 2001 to 406 in 2008 (see Figure 4.7). However, according to the
estimation by Yin (2009), only about 150 films out of the 406 feature films produced in
2008 could be screened considering that there were only 1545 movie theatres and 4097

0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2004 2005 2006 2007 2008
8.30
11.00
14.40
18.01
26.89
6.70
9.00
11.80
15.26
16.52
Domestic Produced Film Imported Films

216

screens in total in the cities of mainland China then, and only at most about one fifth of
these 406 feature films could be popular in the market.
105

The rest (and the majority) of
domestic produced feature films, especially those produced by state-owned film studios,
are of poor quality, relying on out-of-date state of art, and meager in innovation and
imagination. A lot of films produced by state-owned film studios are “main melody”
films (zhuxuanlü dianying), which are leitmotif films made with the financial support
from central and local governments and the party to convey and promote state and party
policies and eulogize patriotism, collectivism, and socialism. These films are even less
marketable and popular in theatres and thus less vulnerable to the problem of piracy.
Figure 4.7 Number of Domestic Produced Feature Films (2001-2008)

Source: Yin 2009 and 2008.

As for investment in domestic film production, for one thing, foreign enterprises
had not been formally allowed to enter into production sector until 2004 and have been
limited to 49% ownership in any film produced domestically since then. (Chu 2010) Up

105
According to Yin (2008), in 2007 only 140 out of 402 domestic produced feature films were screened in nation-wide
scale, along with 48 imported films. According to Yin (2007), in 2006 only 50 independently produced domestic
feature films and 20 jointly produced domestic feature films out of 330 domestic produced featured films can
individually produce box office revenue of 5 million RMB and above.

88
100
140
212
260
330
402
406
0
50
100
150
200
250
300
350
400
450
2001 2002 2003 2004 2005 2006 2007 2008

217

to 2006, only Columbia Picture Inc.
106
among the major studios in Hollywood was active
in film co-production in China, but with very limited amount of investment.
107

This
implies that state-owned and private film studios in the mainland China as well as
investors from Hong Kong, Macau and Taiwan dominated investment in domestic
production. For another thing, the ban on the entry of private capital into production was
lifted much earlier than that on the entry of foreign capital. Private capital was firstly
invited into the production of main-melody films in 1995. In 1996, Chinese government
further encouraged enterprises, public institutions and other social organizations as well
as individuals to participate in films production in the form of financial aid and
investment and therefore legitimate the privatization of the industry. Private capital has
increasingly become the major force in film production in the past decade. As a result, as
of November 30, 2008, there are 38 state-owned film studios in mainland China, 18 of
which are state-owned but privately run enterprises and 20 of which are “semi-state-
owned” public institutions (shiye danwei). Among these 38 (semi-) state-owned film
studios, only China Film Group (zhongguo dianying jituan) and Shanghai Film Group
(shanghai dianying jituan) have relatively strong production capability. (Yin 2006) In
contrast, there are nearly 300 private film studios and production houses across the
country. (Zhu, 2008) Although there are no detailed data on the share of investment by
different ownership, Figure 4.8 gives us a general picture of deceasing share of state-
owned film studios in domestic production of feature films after 2002.

106
Now Columbia Picture Inc. has been merged under Sony Pictures Entertainment, Inc.

107
Up to 2006, Columbia Picture Inc. had invested in co-producing 9 films in China, 5 of them with investment less
than 1 million USD for each, and others with investment less than 4 million USD for each. (Yin and Zhan 2006)

218

Figure 4.8 Share of Domestic Produced Feature Films in Number by Different
Ownership (2000-2005)

Source: China’s Film Y earbook, 2007, p252.

In the subsector of film distribution, foreign enterprises have been completely
prohibited from entering. Two SOEs (China Film and Huaxia Distribution Co. Ltd) have
held a state-enforced monopoly over the import of foreign films and their distribution so
far.
108
As for distribution of domestic films, private distributors had been allowed to
enter into distribution sector since 2002
109

108
Although Huaxia Distribution Co. Ltd. was established in 2003 to break the monopoly of China Film monopoly over
distribution of foreign films, this change did not bring about much competition between the two since both companies
are state-owned and with overlapping shareholders. In order to further comply with WTO requirements in eliminating
monopoly, China has recently indicated to the WTO that distributors other than China Film Group and Huaxia may
apply to distribute foreign films, including through joint ventures with foreign producers.
and developed very quickly, although China
Film is still the No.1 distributor up to date. For instance, in 2007, China Film and Huaxia
distributed 115 domestic produced films for 800 million RMB box office revenue and 50
domestic produced films for 130 million RMB box office revenue respectively, while

109
In June 2002, Polybona Film Distribution Co, Ltd. became the first private enterprise who was awarded the business
license for film distribution by Film Bureau of SARFT .

0%
20%
40%
60%
80%
100%
120%
2000 2001 2002 2003 2004 2005
75%
78%
66% 65%
53%
34%
25%
22%
34% 35%
47%
66%
Produced by State-Owned Film Studios
Independently or Jointly Produced by Other Ownership

219

Polybona, the leading domestic private distributor, distributed only 17 domestic produced
films but for 340 million RMB box office revenue, considering that the total box office
revenue in 2007 is 1801 million RMB of 402 domestic produced feature films. (China’s
Film Yearbook, 2008, p252)
In the subsector of film projection, foreign companies had not been allowed to
own a theater until the end of 2003, and have been limited to 49% ownership.
110
As of
November 30, 2008, there are 34 theater chains allowed to distribute (through theater
release) and project foreign and domestic films (Zhu 2008)
111
. Although there are no
detailed data as for the ownership structure of these theater chains, a survey on them
gives us a general picture with three points worth to mention. Firstly, state-owned
enterprises still control the lion share of the projection sector. Most of the theater chains,
especially those biggest ten with 87.2% of nation-wide box office revenue in 2008
112

110
In some cities, like Beijing, Shanghai, Guangzhou, Chengdu, Xi’an, Wuhan, and Nanjing, foreign capital is allowed
to own up to 75% of a theater. (Chu 2010)
,
were established upon pre-exiting national and provincial state-owned film companies
and their theaters. Secondly, private capitals have been really active in investing in
establishing theater chains and theaters. For example, among the five biggest theater

111
The theater chains have developed rather rapidly, considering that they had not been mandatorily required to set up
until June 1, 2002. Before that, film distribution and projection were characterized by state monopoly of purchasing
and marketing for the films produced. Under this regime, China Film monopolized distribution, purchased films
produced by state-owned film studios with the same price regardless of the production cost of each film, and then gave
films to state-owned film companies at the provincial level to project in theaters with certain pre-determined share of
revenue. Although China Film’s monopoly was broken in 1993 in distribution and film studios were allowed to
cooperate directly with film companies at the provincial level, film companies at the provincial level still held
monopoly of projection locally and film studios’ profits were still independent from the box office revenue of the films
they produced. The old regime of distribution and projection (as well as piracy) led to recession of China’s film
industry. After 2002, theater chains were established based on cooperation of a film distributor and several theaters,
using unified brand, unified projection schedule, unified management and administration. By Oct.1, 2002, theaters in
Beijing, Shanghai, Jiangsu, Zhejiang, Hubei, Hunan, Guangdong, and Sichuan had to build up two theater chains,
otherwise they would not be allowed to import films. (Sheng, 2005, p222) This reform broke the local monopoly of
distribution and projection held by provincial film companies so that film studios can directly negotiate with theater
chains for revenue sharing.

112
http://collywood.blog.163.com/blog/static/12851383201071773114989/

220

chains in terms of box office revenue in the past four years
113
Therefore in summary, competition is the main theme between domestic and
foreign enterprises, in every subsector of China’s film industry, although horizontal
cooperation in production and projection in the forms of capital investment became
increasingly popular recently. Generally speaking, foreign film studios, especially those
from the U.S., are more competitive in production, finance, technology, and marketing
both domestically and internationally. In contrast, Chinese indigenous film enterprises
are much smaller in scale
, the only completely
privately-run theater chain, Wanda International Cinemas, climbed up from No.5 to No.1
on the ranking in only 4 years. Thirdly, state-owned film companies have cooperated
with private capitals in development of theater chains, with China Film Stellar Film
Chain Co., Ltd., also one of the five biggest theater chains, as an example.
114

113
These five biggest theater chains include China Film Stellar Film Chain Co., Ltd. (zhongying xingmei), Shanghai
United Circuit (shanghai lianhe), New Film Association (xinyinglian), China Film South China Circuit Co, Ltd.
(zhongying nanfang dianying xinganxian), and Wanda International Cinemas.
, and inferior in the extent of specialization,
professionalization, and industrialization. Upon this context, a series of industry policies
constraining participations of foreign film enterprises in each subsector (especially in
distribution) make the relationship between domestic enterprises and foreign enterprises
further tense. Also there has been competition between state-owned enterprises and
domestic private enterprises, since the latter gradually squeezed into every subsector and
broke the former’s monopoly. But the competition between the two is moderated to some
extent, since domestic private enterprises rely on state-owned ones for government

114
In 2005, no film company in mainland China has more than 2 billion of assets, except China Film. In 2008, almost
300 entities were involved in producing 406 domestic films in China. In contrast, only six major motion picture studios,
including Walt Disney Studios, Paramount Pictures Corporation, Sony Pictures Entertainment, Inc., 20
th
Century Fox
Film Corporation, Universal City Studios LLP, Warner Bros. Entertainment Inc., dominate film industry in the U.S. In
2008, the big six only produced 102 motion pictures, but earned box office revenue 20 times that of China. (Yin 2009)

221

financial support, more specialized human capital, stronger distribution capacity and
further market liberalization while SOEs rely on the private ones for investment,
production and marketing capacity.
Furthermore, horizontal cooperation is less emphasized than vertical integration in
film industry in general and in China in particular because of importance of distribution
subsector in the film industry. Distribution is generally regarded as the hub connecting
production and projection subsectors and integrating the whole industry chain vertically.
With strong distribution capability, film studios could have a better idea about the market
demands, make production and distribution plans accordingly, sell their products directly
to the market with better prices to increase their profits, and ultimately finance production
of more and better movies. Therefore, vertical integration between production,
distribution and projection by strengthening distribution subsector is more emphasized
than horizontal cooperation in the film industry globally. In particular, given that the
distribution subsector in China is rather weak compared with foreign film studios
115

,
stronger campaign for vertical integration by domestic policy-makers and indigenous
entrepreneurs exists in China. This further compromises the level of horizontal
cooperation between enterprises of different ownerships, especially domestic and foreign
enterprises.
Again, there are four major subsectors in the recording industry in China, namely
production, publication, distribution, and sale, with different ownership structures. (For

115
In contrast to the U.S. film distribution powerhouses, Chinese film distributors are still focusing in theater release
and domestic release instead of post-theater, cross-media, and oversea distribution and marketing, are limited in
investing and financing capability, and short of controlling power on the whole industry.

222

the structure of China’s recording industry, which is similar with that of China’s
audiovisual industry
116

116
In China, recording industry is categorized as a part of audiovisual industry, with video industry as another part.
Since most of the publication, reproduction, and distribution enterprises in China normally engage in both recording
products and video products at the same time, and recording products and video products share the same means of
production and are governed by similar laws and regulations, recording industry and video industry are normally
examined together in China. As a result, most of the industry reports in Chinese are on audiovisual industry, covering
music products, post-film products, post-TV-serial products, post-performance products, education videos and etc.,
while very few reports are exclusively on recording industry. According to 2006 Annual Report of China’ s Audiovisual
Industry, there were more than 300 audiovisual publishers, more than 300 audiovisual reproducers, more than 2000
audiovisual producers and distributers, and more than 100 thousand audiovisual retailers. It is difficult to find statistics
exclusively on China’s recording industry.
, please see Figure 4.9.) The production (content provision)
subsector of recorded music is almost monopolized by the major four international
recording companies, including Sony-BMG, Universal Music, EMI Music, and Warner
Music (ordered with decreasing market share in China), which altogether occupied 69%
and 66% of the Chinese market in 2006 and 2007 respectively in terms of physical
recorded music sale. (See Figure 4.10) The other one-third physical recorded music sale
was contributed by other independent labels, such as indigenous recording companies
like China Record Corp. (zhongguo changpian zonggongsi), China Record Shanghai
Corp. (zhongguo changpian shanghai gongsi), Pacific Audio & Video Co. (taipingyang
yingyin), Taihe Rye Music Co. (taihe maitian), and New Run Entertainment (niaoren
yishu). Comparing with the major four international recording companies, Chinese
indigenous recording companies are of great numbers, but of rather smaller scale and
weaker competitiveness to produce original works and make profits. In 2007, repertoire
of international and regional origins contributed to 78% of recorded music sale revenue

223
Figure 4.9 Structure of China’s Audiovisual Industry

Source: Reproduced from 2006 Annual Report of China’ s Audiovisual Industry.

Publication
(SOEs, with
Publication
Rights and
ISBN)
CD-ROM
Reproduction
Production
(Copyright
Owners, Open to
All Kinds of
Ownership)

Authorization
to Reproduce
CD-ROM
Products
Distribution
(Mainly
SOEs, Some
Private)
Sale
(Open to All
Kinds of
Ownership)
CD-ROM Products
Authorization
to Reproduce
with ISBN
Purchasing ISBN
Consumers
Authorization to
Publish
(with a Lump-Sum
Price or
Commission)

224

Figure 4.10 Market Share of Physical Music Sale Revenue, 2006-2007

Source: IFPI, 2008.

in China, while that of domestic origins only contributed to 13%. (See Figure 4.11)
117

Similarly, the sale subsector, at the lowest end of the industry chain, is open to enterprises
of all kinds of ownership, but again is characterized with a great numbers of enterprises
of smaller scale, lack of chain store operation, and thus higher operation cost and risk.
Figure 4.11 Share of Recorded Music Sale Revenue by Different Repertoire Origins,
2007

Source: IFPI, 2007.

117
According to another news report, 80% of the top 500 songs downloaded through Baidu.com, Chinese biggest
search engine, are produced in Hong Kong and Taiwan, and almost all the copyrights of these songs belong to the
major four international recording companies. See http://money.163.com/08/0725/08/4HMDJSHC00251RJ2.html (in
Chinese, accessed on Oct.23, 2010)

0%
20%
40%
60%
80%
100%
2006 2007
21%
19%
20%
20%
21% 25%
6% 2%
31% 34%
EMI Universal Sony BMG Warner Other Independent Labels
13%
78%
9%
Domestic International/Regional Classical

225

In contrast, the publication and distribution subsectors have been almost
completely controlled by the state-owned enterprises (SOEs) since the industry began to
develop in early 1980s.
118
Different from the situation in other countries where recording
companies always have rights to publish and distribute their own works, recording
companies can only publish and distribute their works in mainland China through certain
qualified Chinese publishers, which are severely regulated and authorized with
publication rights and ISBNs by the Chinese government and are normally state-owned
enterprises and “semi-state-owned” public institutions (shiye danwei).
119

According to Ju
Wang (2008), the Executive Vice President and Secretary-General of China Audio &
Video Association (CAVA, zhongguo yinxiang xiehui), back in 1980, these publishers
were established by and directly affiliated to the cultural or radio and television
bureaucracies at the central and local level with limited investment from these
bureaucracies in charge and with full responsibility for their own profits and losses.
Although at the beginning, these publishers tried to develop their own original works
while publishing others’ works, they began to abandon this strategy in late 1990s and to
rely on publishing rehash and/or works of international recording companies either
through commission or by selling ISBNs, because of limited investment from the
bureaucracies in charge, their excessively spread-out operation over all subsectors of the
industry (including new product development, production, publication, reproduction,
distribution, logistics and sale), and impassable barriers for investment of other

118
Interview 09262008BJ.

119
In reality, some Chinese state-owned publishers do not have capabilities to publish and distribute. Normally
recording companies would purchase ISBNs from certain state-owned publishers and distribute their products.

226

ownerships to enter into publication subsector. As a result, these publishers failed to
develop their own innovative capacity in production.
In summary, China’s indigenous recording industry takes a shape of football, with
rather weak upstream subsector (production) and downstream subsector (sale), but strong
state control and emphasis on the midstream subsector (publication and distribution).
Especially in production (content provision), China’s indigenous state-owned and private
recording companies could not get an upper hand in the severe competition with the four
international recording companies because of their weak innovation capacity. Horizontal
cooperation among producers is totally overwhelmed by horizontal competition and
efforts for further market concentration through merger and acquisition.

4.2.2. Theoretical Hypotheses: How might the Economics of Copyright
Industries in China Influence Inter-Firm Cooperation, Government-Business
Linkages and National Copyright Regime?
The economic characteristics of enterprises and industries are expected to have
influences on enterprises’ interests and capabilities to cooperate with each other in
influencing government policies, the pattern of government-business linkages in policy-
making (either bottom-up or top-down), the degree of their impacts on government policy
making and implementation, and finally policy result as summarized in Table 4.2.

227
Table 4.2 Comparison among Three Copyright Industries:
Independent Variables, Theoretical Predications, and Case-Study Findings
Independent Variables Software industry Film Industry Recording Industry
Economic
Prominence
Revenue Contribution to
China’s Economy
High;
Increasing
Medium;
Increasing
Low
Decreasing and in
recession
Technology
Intensiveness and
Human Capital
High;
Highly trained and
educated
Medium;
Medium trained and
educated
Low;
Lowly trained and
educated
Connection with Other
Sectors
(Spillover Effect)
Strong forward linkages Limited forward linkages

Limited forward linkages
Sector’s General
Significance
Necessary for
informatization and
important for information
security
Greater ideological and
political significance
Lower ideological and
political significance
Ownership
(SOEs vs.
domestic
private
enterprises
vs. foreign
enterprises)
Ownership Structure
Mostly private enterprises,
either domestic or foreign
Mostly SOEs and
domestic private
enterprises; various
restrictions on foreign
films in all subsectors
Mostly foreign enterprises
in production; Mostly
SOEs in publication and
distribution
Extent of Competition
and Competitiveness
High;
Competition in favor of
foreign firms
High; tense relationship
between domestic and
foreign enterprises;
Competition in favor of
foreign firms
High;
Competition in favor of
foreign and private firms
Extent of (Horizontal)
Cooperation
High, between domestic
and foreign enterprises
Increase to medium,
between SOEs and
domestic private
enterprises;
Low, between domestic
and foreign enterprises
Low

228

Table 4.2 Continued

Dependent Variable
Prediction of
Theory
Pattern of Cooperation
in Lobbying
Active industry-wide
cooperation
Cooperation along the line
of nationality, with
domestic enterprises
cooperating with each
other and foreign ones
cooperating with each
other
Cooperation among
foreign enterprises, with
little participation of SOEs
Pattern of Government-
Industry Linkage
Two-way interaction
between government and
industry, both top-down
and bottom-up
Top-down interaction
between government and
industry
Fewer interactions
between government and
industry
Industry’s Influence on
Government Policy-
Making
High Low to medium Low
Policy Result
Strongest copyright
protection
Weaker copyright
protection
Weakest copyright
protection

229
Table 4.2 Continued

Case-Study
Finding
Pattern of Cooperation
in Lobbying
CSA (1995): most
inclusive; autonomous;
and active in lobbying;

CFCPA (2005):
representing domestic
copyright holders; less
autonomous; and mainly
active in copyright
collective management;

CA VCA (2008):
representing domestic
copyright holders; less
autonomous; and mainly
active in copyright
collective management;
CMIC (2008):
representing domestic and
foreign copyright holders;
less autonomous; with
limited lobbying activities;
BSA: representing foreign
copyright holders, but
cooperating with CSA in
lobbying
MPA: representing foreign
copyright holders; no
cooperation with CFCPA
in lobbying
IFPI: mainly representing
foreign copyright holders;
no cooperation with
CA VCA and CMIC in
lobbying

SOEs active in lobbying SOEs inactive in lobbying SOEs inactive in lobbying
Pattern of Government-
Industry Linkage
Two-way interaction: with
top-down preferential
policies, one of which is
IPR protection
Top-down interaction:
policies on industrial
reforms and market
access , not related with
IPR protection
Fewer interactions
Policy Result industry-specific
protection regime:
(commercial) end-users’
obligation
Weaker copyright
protection, but improving
slowly
Weakest copyright
protection under the
regime of “neighboring
rights” without protection
for the rights of
broadcasting and public
performance

230

Normally, governments are more willing to make and implement policies which
can bring more benefits to domestic enterprises than to foreign enterprises. For instance,
in the case of IPR protection, international competitiveness in favor of domestic IPR-
intensive enterprises
120
In contrast, countries with less competitive indigenous IPR-intensive enterprises
have weaker incentives to provide strong IPR protection. For one thing, in these
countries, the interests of the general public to get access to IPR-intensive products at
lower price are given more weight than the interests of indigenous IPR-intensive
enterprises, which are generally weak, to protect their IPR. For another thing, higher
level of protection for IPR would benefit foreign IPR-intensive enterprises more than
domestic ones, which are followers in production, facing budget constraints and therefore
would invite stronger national protection for IPR in terms of both
legislation and enforcement (Buscaglia 2000), since competitive domestic enterprises
have self-confidence in winning the competition against foreign counterparts with strong
IPR protection and would thus demand their governments to provide more protection
within national territory and, at the same time, their governments have similar confidence
that stronger IPR protection would boost rather than undermine the competitive
advantage of their own industries and would thus like to supply the policy. These IPR-
intensive enterprises with international competitiveness and their associations will also
work hard to lobby their governments for stronger protection for their IPR in other
countries, especially those importing their products and technologies in large amount.

120
Domestic competitiveness (i.e. competitiveness inside the national territory) in favor of domestic IPR-intensive
enterprises is not a good predicator for policy, since domestic competitiveness could be a result of protectionist industry
policy instead of natural endowment.

231

spending less on R&D, and are generally striving for larger share of domestic market
against foreign ones by imitating their foreign counterparts.
Besides the variations in the level of general IPR protection at the country level,
the level of IPR protection might also be different across various industries in a certain
country. There might be several explanations for the variations at the industry level.
First of all, industries with higher level of economic prominence should have better
chance to exert their influence on government policy making and pursue policies of their
interests. Over time and in a more dynamic process, industries which benefit from
certain government policy would become more vital in their activities, contribute more
revenue and tax to the economy, and gain even more influence on government policy
making and implementation, while industries, especially those sunset industries, might
fall into stagnation without support of government preferential policies and their
influence on government policy making would further decline. On the one hand, industry
with more yearly revenue, higher extent of technology intensiveness, and closer and more
intensive connection with other sectors would invite governments to pay more attention
to the development of the industry and make governments more willing to make
preferential policies beneficial to the development of the industry. This is especially true
for the industry of high technology in middle-income developing economies, which strive
to update their industrial structure by investing research and developing new technology,
especially when this technology can be used in a number of industries and have greater
spillover effect. On the other hand, the appeals of these industries are more likely to be
taken into consideration and accepted by governments when making policies. For the
industry with higher extent of technology intensiveness, governments generally lack the

232

expertise in making decisions that affect the industry and therefore tend to resort to
enterprises and their associations for policy suggestions. Opinions and suggestions given
by personnel in these enterprises and industries, who generally have higher education
level and expertise and are familiar with the industry and its policy preferences, are much
easier to be taken on by government. Greater dependence of governments on certain
industry for revenue and tax contribution and for technical and professional supports in
policy making gives this industry better chance to get access into government policy
making and result in policies benefiting it more.
Furthermore, industries with stronger industry-wide efforts among various
ownerships to lobby for certain policy change should have better chance to exert their
influence on government policy making and pursue policies of their interests. Several
factors contribute to the scale and effectiveness of industry-wide lobbying cooperation.
Firstly, enterprises with higher degree of cooperation and lower degree of competition in
their business relationship should have stronger incentive to cooperate with each other in
lobbying. Higher level of cooperation in business relationship between firms will align
their policy interest, create incentives and enthusiasm for joint actions to pursue common
policy objectives, and strengthen their cooperation in lobbying government for certain
policy making. In contrast, tense relationship among enterprises resulting from severe
competition and/or public policies favoring certain enterprise groups will make
cooperation pursuing for certain policy change less possible, especially when these
conflicts of interests are lying between domestic firms and foreign firms.
Secondly, certain pattern of lobbying cooperation among different ownerships is
expected to be more effective than others. For example, lobbying efforts by foreign firms

233

and their associations cooperating with domestic ones are more effective than those with
foreign firms and domestic firms lobbying separately, since cooperation between
domestic firms and foreign firms in lobbying is a strong signal sent to governments that
certain policy can benefit their domestic interests and therefore makes certain policy
much easier to pursue. For another, lobbying efforts with the active participation of state-
owned enterprises (SOEs) are more effective than those without, since SOEs generally
have better access to the government policy makers and therefore enjoy the upper hand in
influencing government policy making.
Besides the level of cooperation and competition among different ownerships on
the business side, ownership structure which an industry has also determines the pattern
of lobbying cooperation to some extent. Considering that lobbying efforts are always
time-consuming and resource-consuming, only those enterprises with large market share
and therefore essential interests at stake would have incentives to invest in those activities.
For example, in an industry with SOEs enjoying negligible market share, it is hard to
involve SOEs into the industry-wide lobbying efforts because their interests at stake are
very marginal. In an industry with private enterprises together enjoying the majority of
market share but each in small size, they need to unite together with each other or unite
with big SOEs to influence government policies, since these small private enterprises
may not have voices loud enough to be heard by the government on their own and do not
have natural allies in the government to support them.
Considering these general hypotheses and the economic characteristics of three
copyright industries in China discussed in the previous subsection together, we would
expect the following. Firstly, given that international competitiveness is in favor of

234

foreign enterprises instead of domestic enterprises for all three copyright industries,
protection for copyright of business software, motion pictures and recorded music are all
relatively poor in China comparing with other countries where these products are
internationally competitive.
Secondly, industrial cooperation in lobbying for IPR protection should be of
different scale and along different lines of ownership in the three industries. There
should be active industry-wide cooperation in lobbying for copyright protection in
software industry, given that software enterprises in China, most of which are privately
run with each domestic private enterprises rather small, should have strong incentives to
cooperate with each other in lobbying. The intensive cooperation between various
ownerships, especially between domestic enterprises and foreign enterprises on the
business side in software industry mitigate conflicts of interest between the two and
therefore facilitate industry-wide concerted efforts in promoting stronger copyright
protection. In contrast, lobbying cooperation in film industry should lie along the line of
nationality, since for one thing domestic private enterprises in film industry, which are
developing rather rapidly but still weak, should have incentives to cooperate with SOEs
giant counterparts for better access to policy making process, and at the same time tense
relationship between domestic enterprises and foreign ones resulting from severe
competition and market access control prevents them from cooperating with each other.
Similarly, lobbying cooperation in recording industry is expected to be among foreign
enterprises with little participation of SOEs because of foreign enterprises’ monopoly in
the recording industry and high stake in policy making and implementation and, in
contrast, SOEs’ lack of originality and negligible activities in the production subsector.

235

Thirdly, the pattern of interaction between government and enterprises is different
across three copyright industries in China. In software industry, we would expect
intensive interaction between government and enterprises in two directions, both the
bottom-up one represented by above-mentioned industrial active lobbying efforts and the
top-down one represented by government preferential policies, given that software
industry has higher economic prominence which invites more government intervention.
In contrast, we would expect top-down interaction in film industry given its high political
and ideological importance and fewer top-down interactions in recording industry given
its low economic and political prominence.
Fourthly, copyright industries in China should be different in their influence on
government policy-making. Software industry is expected to have the highest influence
on the Chinese government among the three to make policies preferential to its
development in general and copyright protection in particular, considering that it
contributes the most revenue and tax to the economy and provides software products as
an essential tool for urban life, business transaction and government operation, and
therefore the development of indigenous software is significant for national information
security while based on adequate protection of copyright. The highest level of
technology intensiveness in software industry should give it extra leverage in influencing
government policy-making. Industry-wide cooperative lobbying efforts involving both
domestic enterprises and foreign ones with SOEs’ participation should further contribute
to legislation and implementation for higher level of copyright protection. In contrast,
film industry and recording industry are expected to have lower influence on government
policy-making and implementation in copyright protection, since both are still

236

underdeveloped in China as a developing country and development of these
entertainment industries is not given the priority in developing countries like China.
Lack of cooperation between domestic enterprises and foreign ones in both film industry
and recording industry and lack of participation of SOEs in lobbying in recording
industry further weaken the effectiveness of lobbying efforts in these two industries
respectively.
Finally, given the wider and more active lobbying cooperation between domestic
enterprises and foreign enterprises with SOEs’ participation, more two-way interaction
between government and industry, and greater industrial influence on government policy-
making in software industry than in film industry and recording industry, we would
expect higher level of copyright protection for software than for motion pictures and
recorded music in China. I will examine these expectations respectively in the following
subsector.

4.2.3.Why Industry-Specific Copyright Regime Can Be Established for Software
But Not for Film and Recorded Music in China?
Industrial Cooperation in Lobbying
Chinese software industry, with more active horizontal cooperation in business
relationship between domestic enterprises and foreign enterprises, has more inclusive and
more active cooperation in fighting for copyright protection than film industry and
recording industry. The indigenous industry association for copyright protection in
software industry was founded earlier and has more inclusive membership than that in
film industry and recording industry. Early in the March 1995, with the development of

237

Chinese software industry and as a response to the severe problem of software piracy in
pre-installation
121
, domestic software enterprises in China came together and founded the
China Software Alliance (CSA, zhongguo ruanjian lianmeng), with the Business
Software Alliance (BSA), the antipiracy association based in the United States, as a
model. The founding enterprises include Peking University’s Founder Group (beida
fangzheng), Lenovo Group (“Legend” before 2004, lianxiang), Stone (sitong), UFSoft
(yongyou) and other eight companies, most of which are private.
122
Only four years later,
CSA quickly involved Microsoft as one of its foreign members.
123
Up to now, CSA has
included SOEs (such as Founder Group and China National Software & Service Co. Ltd.
(CS&S)), domestic private enterprises (such as Kingsoft, Jiangmin, CAXA, and
Gstarsoft ) as well as foreign enterprises (such as Autodesk, Microsoft and Adobe) as its
members. In contrast, China Film Copyright Protection Association (CFCPA, zhongguo
dianying banquan baohu xiehui, the predecessor of China Film Copyright Association
(CFCA, zhongguo dianying zhuzuoquan xiehui) from 2009) was not established until
August, 2005. It only represents Chinese film copyright holders, both state-owned and
private ones, throughout the country as its members.
124
As for recording industry, there
are mainly two indigenous industry associations acting on copyright protection
125

121
Interview 09162008BJ.
, China

122
Interview 09162008BJ.

123
Xingdong Fang and Junxiu Wang, “Surrender to Microsoft” (“xiang weiruan touxiang”), in Chinese, in July 2002.
See http://fxd.bokee.com/2073063.html, accessed on Feb.21, 2011.

124
Interview 08052009BJ. Also, for a full list of members of CFCA, please see http://www.cfca-
c.org/vip_ml.php?page=1, accessed on Feb.24, 2011.

125
In music industry, there is another industry association, Music Copyright Society of China (MCSC). MCSC is a
copyright collective management organization representing composers and lyricists as copyright holders established in
1992.

238

Audio-Video Copyright Association (CAVCA, zhongguo yinxiang zhuzuoquan jiti guanli
xiehui) and China Music Industry Committee (of China Audio-Video Association (CAVA,
zhongguo yinxiang xiehui)) (CMIC, zhongguo yinxiang xiehui changpian gongzuo
weiyuanhui), both of which were not established until 2008. As expected, CAVCA only
represents Chinese copyright holders
126
The copyright-defending and lobbying efforts by software industry association are
more autonomous on behalf of their members than those by industry associations in film
industry and recording industry in China. CSA was founded with initiation completely
from Chinese software enterprises, with financial contribution exclusively from their
founding members and without budgetary transfer from the government.
. Although CMIC has more inclusive
membership with both Chinese and Chinese-foreign cooperative enterprises recording
companies, its activities in lobbying are very limited as discussed below.
127
Therefore,
CSA enjoys autonomy in its own financial management and personnel management. In
contrast, although according to the official report CFCPA was founded under the
initiative of five industry associations of film industry
128

, CFCPA was actually initiated
by government officials at the State Administration of Radio, Film and Television

126
Interview 09232009BJ. As discussed below, CAVCA is mainly functioning as a copyright collective management
organization. When it manages and exercises the copyright of foreign repertoires and collects royalties for them in
China, it needs to conclude reciprocal representation agreements with foreign collective management societies.

127
Interview 09162008BJ.

128
These industry associations include China Film Producers’ Association (zhongguo dianying zhipianren xiehui),
China Film Distribution and Projection Association (zhongguo dianying faxing fangying xiehui), China City Theater
Development Association (zhongguo chengshi yingyuan fazhan xiehui), and China Audio & Video Association
(zhongguo yinxiang xiehui). See Xinhua News Agency, “China Film Copyright Protection Association was Founded
Today” (“zhongguo dianying banquan baohu xiehui chengli”) in Chinese, on Aug.29, 2005. See
http://news.xinhuanet.com/ent/2005-08/29/content_3418024.htm, accessed on Feb.8, 2011.

239

(SARFT), the administrative bureaucracy in charge of film industry.
129
Similarly,
CAVCA and CMIC were both initiated by CA VA, an industry association established and
administered by the General Administration of Press and Publication (GAPP) as a “bridge
and link” between administrative bureaucracy and enterprises or a way for administrative
bureaucracy to manage enterprises. Although CAVCA was separated from CAVA when it
was established in 2008, CMIC has been one of the subcommittees of CAVA until now.
Additionally, both CFCA (the successor of CFCPA) and CAVCA are a part of copyright
collective management
130
system in China, which the National Copyright Administration
(NCA) took the initiatives and made great efforts to establish. NCA also controlled the
two’s personnel management.
131
Most importantly, the activities of Chinese software industry association have
focused more on lobbying Chinese government bureaus for higher protection of
copyright than those of film industry association and recording industry association.
CSA and its members have regularly hosted or attended meetings with various
government bureaucracies responsible for legislation, policy making, and policy
implementation, reported the status quo of the industry, the spoken out their concerns
about severe piracy problem and how the problem hurts the industry’s ability to make

129
See “Report on Preparation for the Establishment of China Film Copyright Association” (“guanyu zhongguo
dianying zhuzuoquan xiehui choubei gongzuo de baogao”), in Chinese, on Jun.23, 2010. See http://www.cfca-
c.org/news_view.php?newsty=105&news=27, accessed on Feb.25, 2011.

130
Copyright collective management organizations are important in copyright protection. Sometimes individual
management of copyrights is impossible with regard to certain types of use both for the owner of the rights and for the
user. For example, a composer is not materially capable of monitoring all uses of his works and contacting every single
radio and television station to negotiate licenses and remuneration for the use of his works. At the same time, it is not
practical for a broadcasting organization to seek authorization from every author for the use of his copyrighted work.
This difficulty and impracticability of individual management of copyright and related rights creates a need for
collective management organization to exercise copyright and related rights on behalf of the owners of rights.

131
See “The First General Assembly of China Film Copyright Association was Held in Beijing” (“zhongguo dianying
zhuzuoquan xiehui diyici huiyuan dahui zai jing zhaokai”), in Chinese, on Jun.29, 2010. See http://www.cfca-
c.org/news_view.php?newsty=104&news=48, accessed on Feb.28, 2011.

240

profits and further grow, and pushed for revisions to the Copyright Law and other
relevant regulations and stronger and more effective enforcement.
132
These government
bureaucracies include as widely as the legislation body (such as the National People’s
Congress (NPC)), the bureaucracy of administrative enforcement (such as NCA and the
State Administration for Industry and Commerce (SAIC)), as well as bureaucracies
making industry policies (such as the Ministry of Information Industry (MII) before 2008,
the Ministry of Industry and Information Technology (MIIT) after 2008, and the State
Council). Given that enforcement of software copyright protection involves some
technical issues, CSA is active to provide technical support to enforcement agencies.
133

Besides development of government relationship, on the side of business users, CSA also
organizes training sessions for them on use of software, protection for copyright and
intellectual property in general, and software asset management.
134
In contrast, lobbying activities by domestic film industry and recording industry
are quite limited. CFCA and CAVCA mainly function as copyright collective
management organizations, if their activities ever involve lobbying for better legislative
protection and enforcement.
On the side of
personal users, CSA has also further involved into a lot of activities to promote public
awareness of copyright protection by publishing articles in newspapers and organizing
public events on copyright issues.
135

132
Interview 09162008BJ. Also see Kennedy 2005, p152.
Although, according the official announcement made by
its President Rongde Zhu, CFCPA was founded “to provide consulting services and

133
Interview 09162008BJ.

134
Ibid.

135
See note 42.

241

supports to its members in their activities of rights protection under their authorization, to
provide suggestions to the Chinese government on making plans on copyright protection
in film industry, to represent its members in international communication on copyright
protection, and to pursue protection for copyrights of post-film products”
136
, actually its
activities since its foundation have been rather limited to pursuing protection for the
rights of broadcasting and public performance in television stations, internet cafés, public
transportations (including long-distance buses, trains, and airplanes), and VOD (video-
on-demand) at hotels instead of rights of reproduction, distribution, and dissemination on
information networks, which are the major rights facing the threat of piracy referred in
IIPA’s annual country piracy reports. These activities are mainly targeting commercial
users instead of illegal duplicators and producers of optical disk.
137
This situation did not
change much even after CFCPA changed itself from an industrial association for rights
protection to a copyright collective management organization in July 2009 and rename
itself as CFCA.
138

136
Xinhua News Agency, “China Film Copyright Protection Association was Founded Today” (“zhongguo dianying
banquan baohu xiehui chengli”) in Chinese, on Aug.29, 2005. See
Similarly, although according to its charter CAVCA was founded to
protect the rights of reproduction, distribution, public performance, projection,
broadcasting, rental, and dissemination on information networks of audio and video
products, its activities have been extremely limited to collectively managing public
performance right of certain video products (MTVs) by collecting royalties for MTVs
http://news.xinhuanet.com/ent/2005-
08/29/content_3418024.htm, accessed on Feb.8, 2011.

137
Interview 08052009BJ. Also see Y ue Xiao, “China Film Copyright Association was Founded Recently” (“zhongguo
dianying zhuzuoquan xiehui chengli”), China Intellectual Property Rights News, in Chinese, on Apr.21, 2010. See
http://www.cipnews.com.cn/showArticle.asp?Articleid=15633, accessed on Feb.8, 2011.

138
Interview 08052009BJ.

242

played in KTVs.
139
Although this right could be a type of copyright belonging to
recording enterprises, it is not the major rights of phonogram producers referred by IIPA
annual reports. As for CMIC, although it was established to lobby for stronger copyright
protection through legislation, policy making and more effective enforcement as one of
its agenda
140
, its lobbying activities have been rather limited if not scarce since its
foundation. Its few lobbying until recently targeted NCA and focused on legislation of
protection for phonogram producers’ rights of broadcasting and public performance.
141

As a result, Ke Song, the CEO of Taihe Rye Music Co., commented that lack of lobbying
with the government is an important reason why recording industry suffers from more
severe piracy than other copyright-related industries.
142
Besides impressively including foreign enterprises as its members and
enthusiastically lobbying and taking actions for the sake of members’ copyrights by itself,
Chinese indigenous software industrial association also cooperates more with foreign
counterparts than those in film and recording industry. The most active foreign industrial
lobbying groups presenting foreign copyright holders and campaigning for their member
enterprises are Business Software Alliance (BSA) in software copyright protection,
Motion Picture Association (MPA) in film copyright protection, and International
Federation of the Phonographic Industry (IFPI) in recorded music copyright

139
Interview 09232009BJ.

140
For the proposed agenda of CMIC, please see “CMIC was Founded Recently” (“zhongguo yinxiang xiehui
changpian gongzuo weiyuanhui chengli”), in Chinese, Jul.18, 2008. See http://ent.sina.com.cn/y/2008-07-
18/18382106489.shtml, accessed on Feb. 28, 2011.

141
Yanbin Zang, “Summary of CMIC’s Activities in 2010 and Working Plan for 2011” (“changpian gongzuo
weiyuanhui 2010 nian gongzuo xiaojie ji 2011 nian gongzuo yaodian”), in Chinese. See
http://www.chinaav.org/Web/Articles.aspx?artid=0000008772, accessed on Feb.28, 2011.

142
Ke Song, speak at the China International Digital Music Festival at the 2
nd
China International Copyright Expo, held
in Beijing on Oct.25, 2009.

243

protection.
143
Since 1995 when CSA was established, CSA and BSA have cooperated
closely on enforcement of software copyright. For example, they have jointly run a
national hotline for people to report piracy since 1995
144
Big SOEs have also played more important role in lobbying for stronger copyright
protection in software industry than in film industry and recording industry. For instance,
Peking University’s Founder Group was entrusted by Chinese government to conduct
investigation and research and making suggestions for the drafting of “Outline of the
National Intellectual Property Strategy”
and jointly provided financial
rewards for people who report piracy by commercial users since 2006. They also have
jointly provided training sessions on using authentic software and copyright protection as
well as software asset management to commercial end-users. In contrast, the cooperation
between CFCPA and MPA and between CAVCA and IFPI are only limited in representing
each other in copyright collective management.
145
as an enterprise representative in 2008.
146
The
leaders of state-owned software enterprises also acted together with their private
counterparts and pushed for stronger copyright protection. One example is that Xuan
Wang from Founder
147

143
Among the three, IFPI is the only foreign industry association with Chinese enterprise, China Record Corp., as its
member. But China Record Corp. is very marginal in IFPI’ activities. Interview 09232008BJ. Interview 11042009BJ.
and Chuanzhi Liu from Legend issued a resolution together with
Wenjing Wang from UFSoft at the 2
nd
plenum of the Ninth National People’s Congress in
March 1999, calling for increased protection against piracy. In contrast, SOEs in film

144
Kennedy 2005, p152.

145
For the English version of this outline, please see http://www.gov.cn/english/2008-06/21/content_1023471.htm,
accessed Mar.3, 2011.

146
Interview 08042009BJ.

147
Both Founder Group and Legend Group are state-holding enterprises.

244

industry and recording industry are extremely indifferent and laggard in lobbying for
protecting their copyright. In the film industry, SOEs have not begun to transform
themselves into modern enterprises until very recently. For a long time, they have been
operating under the scheme of planning economy with state bureaucracy making
production plans, determining the number and the content of films to be produced by
each studio every year, purchasing all of their products at a certain price, and being
responsible for film distribution and as a result, these film studios have been indifferent
in how much profit their products can make. Lack of initiatives among employees, on
the one hand, makes them less enthusiastic to protect their intellectual property and, on
the other hand, make their products less popular in the market and less vulnerable to
piracy and infringement. In the recording industry, SOEs are clustered in publication and
distribution subsector and quite marginal in original production as shown above.

Government Preferential Policies
Besides more inclusive and active lobbying from the industry and enterprises to the
relevant government bureaucracies for stronger copyright protection, higher economic
prominence of software industry has also invited Chinese government to pay more
attention to it. Chinese government gets more eager to make conscious efforts to support
the further development of software industry with all kinds of preferential policies than to
film industry and recording industry, and most importantly, treat strong IPR protection as
one of the conditions in which the industry can develop and thrive. Since the late 1990s,
information technology has become an indispensible part of everyday vocabulary and an
essential tool for the operation of business and government. Chinese government

245

gradually realizes the importance of software industry in the development of information
technology industry, the informatization of national economy, the upgrading of industrial
structure, and the information security of economic transactions and government
operation. Upon this background, early in 2000, the State Council issued “Several
Policies to Encourage the Development of Software Industry and Integrated Circuit
Industry” (“guli ruanjian chanye he jicheng dianlu chanye fazhan de ruogan zhengce”),
also known at Document No.18.
148
In this document, IPR protection, along with other
preferential policies in investment and financing, tax, support for R&D, export,
distribution, personnel education and training, and procurement, was listed as one of the
policies to encourage the development of software industry in Article 10. Article 10
further specifies three aspects of policies, including (1) encouraging the registration of
software copyright and providing strengthened protection for the registered software, (2)
prohibiting any entity from using software products without authorization in its computer
system, and (3) strengthening anti-piracy activities against production, manufacture, sale
and smuggling of pirated software

by relevant government bureaucracies
149
.
150

148
For a full text of “Several Policies to Encourage the Development of Software Industry and Integrated Circuit
Industry”, see
Although
the first policy of copyright registration is more about copyright management than
copyright enforcement and the third policy of copyright enforcement campaign is
generally used against piracy of CDs (recorded music) and DVDs (motion picture) and
regarded as ineffective (Dimitrov 2009), the second policy of end-user obligation is
http://www.miit.gov.cn/n11293472/n11293832/n11294372/n11302994/11648322.html, in Chinese,
accessed on Mar.5, 2011.

149
These government bureaucracies include the Ministry of Public Security, the Ministry of Information Industry, the
State Administration for Industry & Commerce, the State Intellectual Property Office, the National Copyright
Administration, and the State Administration of T axation.

150
Ibid.

246

substantial in reducing piracy rate in software as discussed below.
151
Higher level of political and ideological prominence of film industry has
prevented personnel, enterprises and their associations from exerting great influence on
policy making as discussed above while at the same time invited Chinese government to
make special policies. Since the early 1990s, relevant bureaucracies of Chinese
government have issued a series of policies for the purpose of reforming Chinese film
industry and strengthening its competitiveness so that film enterprises can survive in the
context of economic liberalization and competition from the international titans. These
policies including those of breaking up state monopoly in film production, distribution
and projection

152
, establishing the system of theater chain
153
, market access for foreign
films
154
, as well as government-initiated and government-directed conglomeration of
enterprises. However, none of them ever touch upon the issue of copyright protection.
Furthermore, most of the policies and regulations were promulgated at the ministerial
level, for example, by the Ministry of Radio, Film and Television (MRFT, the
predecessor of SARFT), SARFT, and the Ministry of Culture (MOC). This situation did
not change until 2009 when the State Council publicized “Plan to Reinvigorate Culture
Industry” (“wenhua chanye zhenxing guihua”)
155

151
Interview 09092008BJ. Interview 04062009LA.
, which for the first time mentions IPR

152
Such as “Some Opinions on Deepening the Current Chinese Film Industry’s Institutional Reform” (“guanyu
dangqian shenhua dianying hangye jizhi gaige de ruogan yijian”, also known as Document No.3) by the MRFT in
1993, “Regulations of Management on Productions of Reforming Feature Films” by the MRFT in 1995, and “Interim
Provisions on Operation Qualification Access for Movie Enterprises” by the SARFT IN 2004. See Chu 2010.

153
Such as “About the Implementation of Reform on Distribution and Exhibition Systems” in 2001. See Chu. 2010.

154
Such as “About Completing the W ork of Key Movies: Releasing and Screening Notice” by the MRFT and the MOC
in 1995 and “Temporary Regulation on Foreign Companies Investing in Theaters” by the SARFT in 2003. See Chu
2010.

155
For a full text of “Plan to Reinvigorate Culture Industry”, see http://news.xinhuanet.com/politics/2009-

247

protection as one of the supporting conditions to reinvigorate culture industry (to which
film industry belong). But this important policy did not attach enough significance to the
role of strengthening IPR protection in reinvigorating the film industry. For one thing,
IPR protection is listed as only a part of the very last supporting condition to reinvigorate
culture industry, which emphasizes on legislation. For another, given that all the
supporting conditions sound very soft, vague and general, this plan failed to bring any
meaningful and constructive measures to combat against piracy in motion picture besides
hollow slogans. “Guide Opinions on Promoting Prosperous Development of Film
Industry” (“guanyu cujin dianying chanye fanrong fazhan de zhidao yijian”)
156
The situation in recoding industry is even worse, given its low economic
prominence as well as low political and ideological significance. Recording industry is
never treated as a separate industry by the Chinese government and there is even no
government bureau specialized in the management and regulation of recording
industry
, which
was issued by the State Council more recently in 2010 as an announcement of
preferential industrial policies exclusively for film industry, did not improve much in
these two aspects.
157

09/26/content_12114302.htm
, while in contrast Department of Software under MII and MIIT and Bureau of
Film under MRFT and SARFT are in charge of regulation and making industrial policies
for software industry and film industry respectively. As a result, recording industry
seldom gets policy support from the Chinese government. An example would be that the
, in Chinese, accessed on Mar.5, 2011.

156
For a full text of “Guide Opinions on Promoting Prosperous Development of Film Industry”, see
http://www.gov.cn/zwgk/2010-01/25/content_1518665.htm, in Chinese, accessed on Mar.5, 2011.

157
Interview 09232008BJ.

248

audio and video products of recording industry have been subject to higher value-added
tax (VAT) (17%) than other kinds of publications (13%) for a long time until 2007.
Although recording industry is also implicitly covered as one part of culture industry in
the above-mentioned “Plan to Reinvigorate Culture Industry” in 2009
158

, copyright
protection for recorded music is not emphasized given the similar reasons above.
Industry-Specific Copyright Regime for Software
The legal regime of copyright protection in China consists of one law (Copyright
Law enacted in 1990, revised in 2001 and 2010), five regulations (Implementation
Regulations of the Copyright Law issued in 1991 and revised in 2002, Regulation on
Protection for Computer Software issued in 1991 and revised in 2001, Regulation on
Implementation of International Copyright Treaties issued in 1992, Regulation on
Copyright Collective Management issued in 2004, and Regulation on the Protection for
the Right of Dissemination on Information Network issued in 2006), and two judicial
interpretations of the Supreme People’s Court (SPC) (JIs on Several Issues Regarding the
Application of Relevant Laws to Hearing Copyright Cases Related with Computer
Network promulgated in 2000 and revised in 2003 and 2006, JIs on Several Issues
Regarding the Application of Relevant Laws to Hearing Cases of Civil Copyright
Disputes promulgated in 2002). Although copyrights of software, motion picture and
recorded music are all subject to the jurisdiction of these series of laws, regulations and
JIs, there are industry-specific rules and stipulations for copyright protection for products

158
In this plan, recording industry is only mentioned once while film industry is mentioned at five different places with
related policies.

249

in three industries, with software products enjoying the highest protection and recording
products the lowest.
At the first sight, it seems that the industry-specific copyright regime for software
lies in the separate regulation on copyright protection of software (Regulation on
Protection for Computer Software issued in 1991 and revised in 2001
159
In fact, the industry-specific copyright regime for software leading to higher level
). However, a
careful examination of this regulation (both its original version and revised version) and
comparison between this regulation and other laws, regulations or JIs, this regulation
does not provide extra protection for software beyond the protection scope and level for
motion picture. The law and regulations treat computer software as “literary works”, one
type of “works” under the protection of “copyright”, similarly with motion picture
protected as “art works”. The Regulation on Protection for Computer Software revised in
2001 provides copyright protection for software for fifty years, from the date of its first
issue to Dec.31 of the fiftieth year, similarly with the copyright for motion picture and
recorded music. This Reregulation also provides software copyright holders the same
range of rights with copyright holders of motion pictures, as long as the rights are
relevant to the case of software. These rights include the rights of issue, authorship,
modification, reproduction, distribution, lease, dissemination on information networks,
and translation. This Reregulation also specifies the jurisdiction of administrative
enforcement, civil enforcement and criminal enforcement of copyright protection for
software, similarly with copyright protection for motion picture and recorded music.

159
For a full text of “Regulation on Protection for Computer Software” (“jisuanji ruanjian baohu tiaoli”) in 2001 in
Chinese, see http://www.ncac.gov.cn/cms/html/205/1872/201004/698032.html, accessed on Mar.11, 2011.

250

of software copyright protection lies well beyond the separate regulation for computer
software as we see at the first sight. The stipulations which really make a difference in
copyright protection and enforcement between software and motion picture are the ones
which place liability on the commercial end-users of computer software.
160
Placing
liability on the end-users of computer software results from the pressure from the United
States. In early 1990s, the liability of end-users was included as one of the items in the
negotiation between China and the United States. In the US-China Agreement Regarding
Intellectual Property Rights in February 1995, Chinese government committed to the idea
that no pirated software would be used in public institutions.
161
As a result, the National
Copyright Administration prepared “Circular on the Prohibition of Use of Illegally
Reproduced Computer Software” (“guojia banquanju guanyu bude shiyong feifa fuzhi de
jisuanji ruanjian de tongzhi”) in August 1995, prohibiting any government entity from
using unauthorized software in their computers.
162
But this circular had not been
approved and forwarded to local governments and central government bureaucracies until
early 1999.
163
Although the pressure from the United States and Chinese fever to enter into
Given that this document is only a circular without legal effect and was
issued by a government bureau which was not even of ministry-level rank (until 2001,
Mertha 2005), this circular was almost never put into practice.

160
Interview 09082008BJ.

Interview 04062009LA.

161
Xue 2005. And Bu Shou, “Review of Legislation Process for Software Copyright Protection in China” (“zhongguo
ruanjian zhuzuoquan boahu lifa jincheng huigu”), Jul.17, 2010, in Chinese,
http://www.wlbq.net/HTML/ruanjianbaohu/2010/0717/444.html, accessed on Mar.12, 2011.

162
For a full text of the circular, see http://www.cesoftware.com.cn/index.php?mod=policy&act=detail&id=22, in
Chinese, accessed on Mar.12, 2011.

163
Ibid.

251

international trade regime were the initial impetus for placing liability on the end-users of
computer software, lobbying of Chinese software enterprises and their association,
lobbying cooperation between Chinese and foreign association of software protection,
and the Chinese government’s aspiration to promote the development of software
industry have played an important role in defining the scope of “end-users”. In 1999,
there was a debate on which terrace China should provide protection for software
copyright. On the one extreme, the United States expected China to provide protection
for software copyright on the highest terrace by placing liability on all end-users,
including public institutions, commercial entities, families and individual persons. If this
requirement was put into practice, any unauthorized use of software is infringement
regardless of the purpose of the use. On the other extreme, a group of people including
journalists, legal and economic scholars argued that China, as a developing country,
should provide IPR protection at the “appropriate” level, which matches the level of
development in economy, technology, culture and society.
164

164
For a full list of appealers, see “Calling for Appropriately Protecting for Software Intellectual Property Rights”
(“guanyu heli baohu ruanjian zhishi chanquan de huyushu”), Dec.25, 2001, in Chinese, at
Therefore, China should
follow the TRIPS Agreement and not make any end-user hold liability for using
unauthorized software. Upon this background, the State Council issued the above-
mentioned Document No.18 to support the development of software industry and include
“prohibiting any entity from using software products without authorization in its
computer system” as one of the policies. The need for encouraging the development of
software industry as well as lobbying efforts by domestic software enterprises and foreign
software enterprises and their associations finally succeeded in placing liability on the
http://www.china-
review.com/laf.asp?id=13266, accessed on Mar.12, 2011.

252

commercial end-users of software, a middle ground between the two extremes. This was
finally formalized in the JIs on Several Issues Regarding the Application of Relevant
Laws to Hearing Cases of Civil Copyright Disputes promulgated in 2002, which makes it
a civil liability to use unauthorized software in a commercial environment.
This higher level of copyright protection for software with commercial end-user
liability has led to continuous efforts of using legal software in computers. These efforts
began from 2001, when the National Copyright Administration, the Ministry of Finance,
the Ministry of Information Industry (MII) and State Development and Planning
Committee issued “Notice on Governmental Organizations as Role Models by Using
Legal Software” ordering government bureaus at all levels to only use legal software and
providing budget for software purchases. In 2006, these efforts further extended to
enterprises, from larger ones to smaller ones. Given that the liability of the commercial
end-users of software has been enacted, software copyright holders can bring commercial
user of pirated or under-licensed software under administrative enforcement and civil
enforcement. There have been some cases in which Chinese software enterprise
complain commercial users’ illegal use of their products, for example, Peking
University’s Founder Group against Blizzard on use of Chinese Font Software. But most
of Chinese software producers benefit from placing liability on commercial end-users by
providing their products as alternatives for commercial end-users much cheaper than the
foreign products.
165

At the other end of the spectrum, the rights of phonogram producers are treated

165
Interview 08212009BJ. Interview 09272009JS(BJ).

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and protected as “neighboring rights”, which is also known as “copyright-related rights”,
in China. This practice of differentiating “neighboring rights” from copyrights follows
the traditions of German civil law, although in countries of German civil law this
differentiation is only rather conceptual than essential in defining intellectual property
rights of phonogram producers and protecting their rights.
166
However, the situation is
different in China. Copyright Law of China defines smaller scope of protection for
phonogram producers than for other copyright holders. In contrast with the rights of
copyright holders, who enjoyed sixteen types of rights including the rights of
reproduction, distribution, lease, public display, public performance, projection,
broadcasting, dissemination on information networks
167
, film shooting, adaptation,
translation, and compilation , neighboring rights only cover four types of rights, including
the rights of reproduction, distribution, lease, and dissemination on information networks
according to Article 42 in Copyright Law, the single article stipulating the rights of
phonogram producers.
168

166
Interview 09262008BJ.
For example, China has been criticized for lack of protection
for rights of broadcasting and public performance of recording companies for several
years. Under the current Copyright Law, television stations, radio stations, and public
venues (such as airports, restaurants, shopping centers, and cafes) could use recorded
music without paying loyalty. Although lack of protecting rights of broadcasting and
public performance for phonogram producers does not seem to directly affect protecting
rights of reproduction and dissemination on information network for recording

167
This is the literal translation of the legal term used in the Copyright Law of the People’s Republic of China. IIPA
uses “Copyrights on the Information Networks” in their report. See IIPA 2007.

168
There are other two articles, Article 40 and Article 41, related with phonogram producers in the Copyright Law of
China. But these two stipulate the obligations of phonogram producers to copyright holders and performers.

254

enterprises in legal cases according to some lawyers, disrespecting intellectual products
of phonogram producers even by government-run institutions (such as televisions stations
and radio stations) apparently discourages enforcement of other rights.
169

4.3.Conclusions and Implications
This chapter discusses the variations in copyright protection for software, motion
picture and recorded music in China. It focuses on the role of enterprises’ bottom-up
lobbying and government’s top-down preferential supports for certain industry in
establishing industry-specific copyright regime for software but not for the other two
industries. Beyond that, it further explores how economic characteristics at the industry
level contribute to the pattern of enterprises’ lobbying efforts and cooperation, the level
of government support to certain industry, and the degree of industry’s influence on
policy-making. Given the higher level of cooperation in business relationship, more
significant stake of SOEs and stronger initiatives from domestic private enterprises, there
have been more active, inclusive and autonomous lobbying efforts in software industry.
The higher economic prominence further makes software industry more influential in
government policy-making than the other two industries. Given the higher level of
economic prominence, there have been greater initiatives from the government to
promote the development of software industry with all means. This is why China
provides highest level of protection for software.

Although the role of Chinese software industry associations and firms in

169
Phone interview 02282011BJ(LA).

255

improving copyright protection should not be overlooked, it should not be exaggerated
either, especially in terms of enforcement. For one thing, generally speaking, China is
still a country with hesitation to the establishment and development of all kinds of
associations (including business associations) and their involvement in policy-making,
although non-government organizations have developed in the past decade. One
interviewee illustrated this point with an anecdote about the establishment of CSA in
1995: when CSA tried to get registered at the Ministry of Civil Affairs (MCA) using the
name “China Software Alliance”, it was at first rejected just because in Chinese, “alliance”
(lianmeng) has some implicit association with political party.
170
For another, the Chinese software enterprises’ interests at stake are still rather
limited. Chinese software producers, as a follower across the globe, specialize in
software products where foreign enterprises are relatively less competitive in Chinese
market because of institutional barrier (such as financial management software) and
linguistic barriers (such as Chinese font software, Chinese word processing software, and
translation software), which either target on commercial users or have to be marketed
with hardware and therefore are hard and/or unattractive to be pirated by the general
public. Severe problem of piracy further biased the structure of Chinese software
industry toward one focusing on system integration and software services. The Chinese
software industry has been developing under the insufficient protection FOR copyright.
The autonomy of
industry associations is much lower than their counterparts in the U.S., since it is
compromised by Chinese government’s close and intensive supervision.

170
This name was finally accepted by MCA, given that another word for organization, “association” (xiehui), has been
used for another organization of software enterprises, China Software Industry Association (CSIA, zhongguo ruanjian
hangye xiehui). MCA also suggested CSA to register as a subcommittee of CSIA exclusively for copyright protection.
Interview 09162008BJ.

256

They have learned how to co-opt with the environment they live in. As a result, only a
very small portion of Chinese software industry is dedicated to producing software that is
vulnerable to piracy and therefore has strong incentive to improve copyright protection.
Their strategies in public relations are rather less sophisticated than those of western
industrial associations, such as Business Software Alliance in the U.S. In the long run,
there will be a dynamic interaction between industry development and institutional
setting, with insufficient copyright protection constructing the biased structure of Chinese
software industry and with the biased structure of Chinese software industry further
compromising the industry’s incentives and capabilities to pursue stronger intellectual
property protection. An example would be that Kingsoft, as an indigenous software
enterprise and with its founder Bojun Qiu as the most active pioneer fighting against
piracy, had to steer its business from word processing software, anti-virus software, and
translation software, towards other products such as online video games since 2003 for
the sake of survival and development in the market.
171
Therefore, this chapter does not argue that lobbying efforts by indigenous industry
is the main force behind the establishment of industry-specific regime for software.
Instead, the main impetus for stronger copyright protection always comes from the
United States and the international trend

172

171
Interview 10242009BJ.
. Scholars of Chinese IPR protection might
emphasize the pressures exerted by the United States by humiliating China with bilateral
consultations and unilateral aggressiveness and argue that variations of copyright
protection at the industrial level result from the different degrees of unilateral pressures

172
Interview 04062009LA.

257

by the United States. However, a careful examination of annual Special 301 Reports
submitted by the IIPA to the USTR as a blueprint to the final versions of USTR’s official
Special 301 Reports does not find out obvious difference in different industries’ efforts to
defend their rights overseas. Although foreign pressures provide an impetus for stronger
copyright protection, it is unlikely that China’s copyright regime could be validated
domestically without benefiting China’s social welfare and knowledge-based economy.
Active participation of indigenous enterprises and their cooperation with foreign
counterparts in lobbying as well as government preferential initiatives provide
justification for implementing stronger copyright protection for software.

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Chapter 5 Conclusions and Implications
This dissertation studies the reasons and mechanisms of domestic compliance and
implementation of international commitments in one of the trade-related issue areas, IPR
protection, by examining both international influences and domestic characteristics,
analyzing variations at both national and industrial level, comparing the reasons for both
IPR statutory protection and enforcement, and using both statistical analysis and
comparative case study. It makes the first effort to show the importance of legalized
world trade regime and regional trade agreements in narrowing differences in countries’
IPR statutory protection. Meanwhile, it identifies the importance of domestic legal
institutions for divergence in IPR enforcement results across countries and finds that
countries of Common Law provide higher level of IPR protection, especially in terms of
IPR enforcement, than countries of French Civil Law, German Civil Law and
Scandinavian Civil Law. It also identifies the importance of domestic incentives
constructed by government-industry interaction for strong IPR protection and argues that
industries’ economic characteristics influence the patterns and effectiveness of enterprise
lobbying efforts, invite government support to different degree, and contribute to
variations in IPR protection across industries.

5.1. Contributions to the Literature of IPR Protection
Taking advantage of both cutting-edge statistical tools and carefully designed
comparative methods, focusing on different units of analysis, and analyzing both the
reasons for IPR statutory protection and IPR enforcement, this dissertation deepens our
understanding about the reasons for IPR protection as well as its improvement over time

259

in several aspects. First, this dissertation breaks new ground by establishing the
importance of domestic legal institutions for differences in IPR protection, especially in
terms of enforcement on the ground. Countries depend on the currently existing legal
institutions to enact provisions and develop new rules for IPR protection according to the
needs of technology advancement, economic development and industrial restructuring as
well as to provide the primary enforcement apparatus and deference to potential
infringements. Especially considering that the current international IPR regime does not
create any obligation to establish a special judicial system for IPR enforcement, the
characteristics and capabilities of the existing legal institutions highly restrict the level to
which IPR as an intangible type of property right could be protected and enforced. I
confirmed that countries of Common Law, which are characterized with legal
infrastructure friendlier to property rights, more independent judicial power and stronger
capability to adapt to the changing social circumstances, provide higher level of IPR
enforcement than countries of German Civil Law, Scandinavian Civil law and French
Civil Law, although the differences among countries of different legal families in
statutory protection are not so obvious in the best available longitudinal data .
Second, following the lead of Ginarte and Park (1997), this dissertation examines
the effects of domestic political regime on both IPR statutory protection and enforcement.
It is found that the interests of IP (represented by patent) generators and owners are more
likely to be protected on the books in democratic regimes than in authoritarian regimes,
although in practice there is no obvious difference in IPR enforcement results
(represented by copyright protection for business software) between the two country
groups. More importantly, this dissertation discovers that authoritarian regimes are more

260

likely to yield to international pressures propelling them to enact higher level of IPR
protection than their democratic counterparts, given that they do not need to get
international commitments approved by costly and prolonged domestic political debates
and there is no domestic democratic procedure as a leverage against international
pressures for legislation and policy change.
Third, on the international side of the story, this dissertation takes initiative to
systematically examine the effects of the TRIPS Agreement embedded in the world trade
regime with strengthened dispute settlement mechanism on both IPR statutory protection
and enforcement. Although the best available data do not readily allow us to directly
examine the effects of the TRIPS Agreement on statutory protection for patent (because
of potential multicollearity problem) and do not readily capture the effects of the WTO
dispute settlement mechanism, a survey of patent-related cases brought in front of the
WTO DSB reveals that being exposed to the formal litigation process consisting of
rigorous surveillance by the trade partners and the TRIPS Council, bilateral consultations
between defendants and complainant(s), formal examination, adjudication and arbitration
on the merit of cases by the WTO DSB, and potential authorized retaliation has
effectively propelled defendants to enact patent protection on the book, unless the
defendants are the United States or the European Community. A similar pattern was also
found in statutory protection for copyright. However, given that the TRIPS Agreement
does not specify any standard for enforcement results, the WTO dispute settlement
mechanism has been feeble to depress software piracy rate across the globe in a short
term.

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Furthermore, this dissertation makes the first effort to examine the effects of
RTAs on IPR enforcement. I take initiative to survey the original texts of all the currently
existing RTAs and their IPR provisions, identify several important distinguishing
characteristics, categorize these agreements accordingly, and develop a dataset of
countries’ membership in RTAs of different kinds over time. This newly developed
dataset helps us to extend our examination of international institutions and their effects
on IPR protection to regional ones, which have been established at least partially to
propel countries, especially developing ones, to make further commitments on IPR
protection by providing incentives on trade openness and investment opportunities
beyond what the world trade regime has promised. It is found that, with other factors
equal, countries involving into RTAs with provisions on copyright protection generally
have lower software piracy rate and better copyright protection on the ground than those
enjoying liberty without extra institutional constraints coming from RTAs.
Fourth, this dissertation illustrates the significance of making comparison at the
industry level with a comparative case study of copyright protection in three industries in
China. By comparing IPR protection in different sectors in a single country and therefore
holding constant a series of important domestic socio-economic and institutional
characteristics as well as international influences, I gain extra leverage of theoretical
development beyond what a single case study without within-case comparison, on which
most of the existing IPR literature on a single country are based, could offer. It
challenges our entrenched assumption that certain type of IPR would be protected and
enforced to the same extent for different sectors and their products once the basic
principles and standards for the protection for this type of IPR have been enacted. At the

262

same time, it also challenges the overwhelming use of nations as the basic unit of analysis
in the past. By virtue of this carefully designed comparative case study, I could keep my
eyes on industries’ economic characteristics and lobbying efforts, detect conditions under
which these efforts could possibly succeed, and elaborate how domestic incentives and
preferences for IPR protection are constructed as a result of industry-specific patterns of
government-industry interactions.
Finally, by putting together three empirical studies, this dissertation illustrates the
different reasons and mechanisms behind IPR statutory protection and IPR enforcement.
Although bilateral and multilateral pressures and stimuli embedded in international trade
and investment relationship and institutionalized in multilateral regimes explained a
substantial portion of variations in IPR statutory protection and explained their changes
over time, domestic incentive constructed by the individual calculations of costs and
benefits by users, producers, policy makers and enforcers and the process of government-
industry interaction as well as domestic institutional strength are the most important
factors in determining the results of IPR enforcement.

5.2. Policy Implications
Developed countries, as the leaders in R&D investment and the main innovators
in the world economy, should reflect on their strategies of protecting IPRs of their
citizens and corporations overseas. Given that aggressive unilateralism, represented by
the Special 301 procedures under the jurisdiction of the USTR, has existed as an
institutionalized channel through which corporate interests and demands in oversea IPR
protection could be heard by their home countries, it will continue to fulfill its duty of

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conducting self-help surveillance and providing intelligence for foreign IPR policy-
making in the United States and the European Union. Given that the multilateral trade
regime with strengthened dispute settlement mechanisms have been established to make
countries commit to a series of threshold requirements for IPR protection and monitor the
behaviors of member states, it will continue to accomplish its tasks in preventing
reneging from these threshold requirements for IPR statutory provisions and enforcement
procedures and means which countries have already committed. Given that regional
trade agreements have been established to provide further incentives with more promises
in trade and investment liberalization, they will continue to take up the missions of
making countries, especially developing ones, commit to providing IPR protection of
higher level and with more extensive scope and more limited restrictions.
However, these strategies are far from enough if judged by their performances on
IPR enforcement results. Considering that the moral base of unauthorized unilateralism
has been weakened after the WTO was established in 1995, the credibility of
unauthorized unilateral sanctions becomes severely questionable and it could at best
induce non-institutionalized campaign-like enforcement activities, such as those in China.
Considering that the TRIPS Agreement is short of clear-cut standards for IPR
enforcement, its implementation beyond legislation and regulation making really depends
on countries’ good faith and institutional capabilities.
Given that developing countries have made enough international commitments
while have not fully transferred words into actions and results, developed countries
should invest more resources and energy on establishing indigenous incentives to support
IPR enforcement. They could strategically target indigenous IPR-intensive industries and

264

persuade policy makers and industrial leaders that stronger enforcement would provide
foremost benefits to the indigenous interests. They could also work closely with central
and local governments in the target countries to establish organizational interests of
bureaucracies and courts taking charge of IPR enforcement. In addition, more resources
and energy should also be invested in improving institutional capabilities in developing
countries. Capacity building efforts should be targeted on institutions administrating IPR
applications, registration and conferral, task forces and their personnel in charge of IPR
enforcement, and judges who might adjudicate IPR cases and participate into IPR
legislation or legal development.
Furthermore, from the perspectives of IPR-intensive enterprises as IPR developers
and owners, they could help themselves to protect their very interests overseas beyond
keeping monitoring overseas protection and infringements of their IPRs and resorting to
their home governments for formal bilateral and multilateral actions. Formal government
actions, such as Special 301 procedures and dispute settlement procedures under the
WTO DSB, normally chase after systematic inadequate IPR protection and enforcement
instead of a single breach of bilateral or TRIPS obligations for a certain person or
enterprise. In order to take more targeted actions, IPR-intensive enterprises should
increase the stakes of indigenous interests in protecting IPR in host countries by
strengthening cooperation and sense of symbiosis through daily business relationship
with indigenous IPR-intensive industries which are engaged in research and development,
have motivations to protect their own IPRs, and could potentially become indigenous
implementation constituencies. Given that the indigenous enterprises are still weak in
their influences on policy-making and unsophisticated in their lobbying behaviors, IPR-

265

intensive enterprises and their associations should make alliances with them, share
experiences and strategies in lobbying, and take advantage of the existing lobbying
channels and resources. Industrial associations of these IPR-intensive enterprises could
provide trainings to administrators and judges in the target countries and lawyers and
personnel of legal affairs in indigenous enterprises both producing IPs themselves and
using others’ IPs as inputs. They could also provide technological supports in
enforcement and propose schemes of technological solutions to combat against IPR
infringement. Constructive supports and helps are more effective than simple
condemnations.
Developing countries, as the followers in research and development, imitators of
innovative processes and products, and consumers of IPR products, should reflect
whether and how they can benefit from stronger IPR protection. Although it is well
beyond the scope of this study to make a comprehensive evaluation and a normative
judgment on whether developing countries could benefit from stronger level of IPR
protection, providing higher standards of IPR protection could cost foreign reserve which
is already limited in order to money for licensing and add extra burdens to national
exchequer, limit domestic enterprises’ capacities of developing products and processes by
imitating, and divert resources from other more substantial social, economic and political
problems and further compromise bureaucracies and courts’ capabilities of dealing with
these problems. Developing countries should develop a balanced and clear national IPR
agenda to encourage and enhance creativity domestically and to promote knowledge
distribution at the same time and apply this agenda whenever possible. There is still
room for such a balanced and clear national IPR agenda to play a role, although

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developing countries have committed to threshold requirements under the umbrella of the
TRIPS Agreement. Democratic developing countries could take advantage of their
domestic democratic legislation and decision making processes to resist unilateral
pressures to enact for stronger IPR protection and even put off meaningful legal changes
when the multilateral trade regime and its legalized dispute settlement body rule against
them, as India did in the late 1990s and Argentina did in the early 2000s (see Table 2.1).
Middle-income developing countries could ask for more concessions on market access,
investment opportunities and technology transfers when making extra commitments on
IPR protection beyond those of the TRIPS Agreement while taking their own market
access and investment access as leverages. Given that the current international IPR
regime did not specify a clear-cut and operational standard of IPR enforcement, genuine
IPR enforcements still depend on countries’ incentives and capabilities and final
enforcement mechanisms and results could be very industry-specific.

5.3. Implications for Other Scholarships
Implications to the Literature of Legal Origins
My empirical studies of legal origins and IPR protection in terms of both patent
statutory protection and copyright enforcement results for business software contribute to
the literature of legal origins in several aspects. This dissertation expands the application
of the thesis of legal origins to a new category of rights protection, intellectual property
rights protection, beyond what have been covered by the literature of law and economics,
such as rights protection for shareholders, creditors and workers. It also examines and
confirms the thesis of legal origins with a direct measurement of enforcement results of

267

legal rules beyond legal rules of rights protection themselves on which most of the
literature of legal origins has focused.
Furthermore, this dissertation takes the initiative to examine the thesis of legal
origins in a longitudinal setting. The literature of legal origins has largely been based
upon cross-sectional studies of the quality of corporate, insolvency or labor law at a
particular historical point in the late 1990s (Armour et al 2009 as an exception), while my
empirical studies are based on indices which track changes of legal stipulations as well as
changes of enforcement results over time in the area of IPR protection. These
longitudinal studies find that the differences in legal rules between countries of different
legal origins (especially those of Common Law versus those of French Civil Law) could
become smaller over time and therefore cast doubt on the legal origin hypothesis that
those differences might persist over a long period of time. If we run a series of linear
regressions between Ginarte and Park’s Patent Protection Index and categorical dummy
variables of legal origins year by year with GDP per capita controlled, we can find that
the differences between countries of Common Law and countries of French Civil Law
had been significantly large until 1995, when the TRIPS Agreement was born,
173

173
I did not show the results of these linear regressions in this dissertation. But the results are available upon request.
while
after 1995 these differences became insignificant. Compared with the literature of legal
origins which appears pessimistic in narrowing the differences across countries of
different legal origins and thus more useful to foster understanding across legal traditions
than suggesting a blueprint for legal reform, this dissertation suggests the feasibility of
improving rights protection by domestic legal reform, especially with the pressure of
implementing international commitments in an institutionalized environment, although

268

the entrenched characteristics of different legal families still prevent countries’
enforcement results from converging with each other especially in a short period of time.
Overall, this dissertation suggests that the scholars of comparative law should examine
the thesis of legal origins in other longitudinal settings, both on legal rules and
enforcement of those legal rules over a long temporal coverage, when data allow.

Implications to the Literature of International Compliance and Implementation
This dissertation contributes to the literature of international compliance and
implementation of international commitments which has been focused on the issues of
high politics, such as arms control (Chayes and Chayes 1995), human rights (Avdeyeva
2007) and international territory, maritime areas and cross-border rivers (Mitchell and
Hensel 2007), as well as social economic issues, such as environmental protection
(Chayes and Chayes 1995, Dai 2005) and international monetary affairs (Simmons 2000,
Von Stein 2005, Simmons and Hopkins 2005), with empirical studies on IPR protection.
First, a part of this dissertation examines the “second-order compliance”, namely
compliance with the rulings by the third-party dispute settlement procedures (Simmons
1998), on IPR protection under the world trade regime. Although the WTO’s dispute
mechanism was strengthened if compared with its counterpart under the GATT, its
enforcement is still characterized with lack of deterrent or punishing but merely a
compensatory effect identified by Tallberg (2002), meaning that the non-compliant party
is in fact at liberty to choose between complying with the WTO rulings and accepting the
cancellation of proportionate concessions. Even with this limitation, this dissertation
shows that most of the defendants not only accepted the validity of the WTO DSB and/or

269

AB decisions but also moved forward or at least demonstrated good faith to remove its
unlawful ordinances, although I did not analyze the potential sources of selection bias
(Simmons 1998, Von Stein 2005, Simmons and Hopkins 2005) on who would be subject
to the surveillance of the WTO DSB.
Furthermore, the existing studies of international compliance and implementation
of international commitments have done rigorous work to address compliance and
enforcement in an international game, such as international coercion (Tallberg 2002),
international competition (Simmons 2000), concern over international reputation
(Simmons 2000), international learning (Avdeyeva 2007), and management activities by
international institutions (Tallberg 2002), less analytical attention has been paid to
domestic enforcement mechanism and reasons (with an exception of Dai 2005
174

174
In this paper, Dai emphasized informational status of domestic constituencies on their influence in domestic decision
making and the informative role played by international institutions on domestic constituency.
). For
one thing, I show that domestic legal institutions and their characteristics, along with
domestic bureaucratic structures (Mertha 2005) and political regime, could exist as a
constraint on countries’ capabilities of complying with and implementing international
commitments in both statutory enactment in the book and enforcement on the ground.
They could be more relevant in certain issue areas, such as those which require
behavioral changes behind the national border and rely on legal procedures and
enforcements (for example, competition policies, labor rights protection and
environmental protection), than others which simply require behavioral changes at the
national border (for example, tariffs, territory, arms control, restriction on current
account). The relative importance of domestic factors versus international factors in

270

determining the degree of international compliance and implementation of international
commitments depends on to what extent compliance and implementation reply upon local
enforcement beyond national enforcement. The constraints of capacity limitations on
compliance and implementation remind us to explore the managerial role of international
institutions (Chayes and Chayes 1995, Tallberg 2002), such as capacity building efforts,
in the future. For another thing, I show that even with international institutions equipped
with legally binding forms of third-party dispute settlement, there is still room for states’
incentives to play in determining the degree to which they intend to comply with and
implement their commitments. I elaborate how states’ incentives to comply and
implement were constituted in the process of government-industry interaction. In the
future, scholars of international compliance should pay more attention to domestic
incentives, domestic institutions and their capabilities, and how international factors exert
their influences on these incentives and institutional capabilities when theorizing the
reasons for international compliance.
Finally, this dissertation suggests that the process of international compliance and
the relative importance of domestic factors and international factors to explain the
process and results could be different across different issue areas. For example, IPR
enforcement warrants larger amount of institutional infrastructures, capabilities and good
will than enforcement of tariff and quota schedules. There would be a larger temporal
gap between formalization of compliance by legislation and/or policy making and the
genuine enforcement of those laws and policies in IPR protection than in tariff reduction
and quotas removal. Any effort to develop an integrative theory of international

271

compliance should take into consideration the variations across issue areas in the process
and the agents involved in complying with international commitments.

Implications to the Literature of Chinese Politics
This dissertation contributes to the literature of Chinese politics in two aspects.
First, it contributes to the literature of IPR protection in China, which generally lacks of a
comparative context, by examining variations in copyright protection across three
copyright-intensive industries, software, motion pictures and recorded music. It shows
that even with the same overarching copyright law and the same set of legal and
administrative institutions, there are still variations in the implementation policies and
procedures across industries, which result from a series of political economic
characteristics at the industry level and result in variations in copyright protection
enforcement results. Second, this dissertation makes a statement to the scholars on rule
of law in China (Peerenboom 2002, Potter 2007) that legal enforcement is not only
determined by Chinese institutional settings but also by indigenous incentives to enforce
certain laws and regulations, whose construction should be examined more carefully.

5.4. Directions of Future Studies
Our understanding about the reasons for IPR protection as well as its
improvement over time could be further deepened beyond the existing literature and this
dissertation. Let me discuss some directions which are worth exploring in the future.

272

More Characteristics of Domestic Legal Institutions to Be Examined
Categorizing countries into different legal origins or legal families are interesting
and meaningful while too simple though. Given that most of legal rules for IPR
protection were developed in the legislature system and the enforcement of IPR legal
rules are mainly the task of legal institutions in most countries, we should examine more
specific characteristics of domestic legal institutions beyond simply categorizing
countries into different legal origins or legal families. I have not been able to examine
the accuracy or the relative relevance of the three explanations about why Common Law
countries provide higher level of IPR protection than French Civil Law countries, namely,
efficiency consideration, degree of judicial independence, and the capability of adapting
to the evolving circumstances. Besides that, recent scholarships of comparative law also
identify other characteristics of legal institutions as determinants of effective legal
institutions, such as the degree to which laws were developed internally or transplanted
with local adaptation (Berkowitz et al 2003), the degree of representation in legislative
bodies afforded to the indigenous population (Daniels et al 2011), and the degree of
centralization of the law-making and enforcement processes (Milhaupt and Pistor 2008,
Milhaupt 2009).

Influences of Regional Trade Agreements to Be Reexamined
Although a part of this dissertation attempts to examine the effects of RTAs on
IPR enforcement results, the analyses could be strengthened and refined. The
examination of RTAs could be extended from one exclusively focusing on the existence
of RTAs to one including both the existence and the negotiation of RTAs given that a lot

273

of countries have already changed their behaviors in the process of getting access to the
organizations. Countries with lower level of IPR protection at the beginning of the RTAs
or even the negotiation stage of the RTAs should be given more attention considering that
they are the targets of the constraining IPR stipulations of the RTAs. Besides whether a
certain RTA has TRIPS-plus stipulations on IPR protection or not, other characteristics of
RTAs, such as membership with unbalanced levels of IPR protection, RTAs with
cooperation and capacity building obligations, and RTAs with built-in third-party dispute
settlement mechanism, should be examined further.

Beyond State: Industry and Other levels of Analysis?
Although a part of this dissertation attempts to move beyond the existing studies
of IPR protection which have overwhelmingly concentrated on explaining the variations
of IPR protection at the national level and illustrates the importance of comparison at the
industry level with a comparative case study of copyright protection in three industries in
China, such an endeavor is just the beginning rather than the end. The necessity for
comparison at the industry level results from the distinct economics and politics of IPR
enacting and enforcement for different sectors and products which could potentially
emerge in a country or across countries. Countries do not just have one (international)
political economy of IPR protection, but multiple (international) political economies for
even one type of IPR protection. For example, it is hard to imagine the economics and
politics of patent protection for pharmaceutical products would be the same with those of
patent protection for software for a country which is plagued with certain endemic
diseases, such as HIV AIDS. It is also surprising to observe that copyright enforcement

274

results reveal diverging levels and trends in different copyright industries, as shown in
India (Jayakar 2003)
175
and Brazil
176
Furthermore, other levels and units of analysis beyond state and industry are also
important, interesting and feasible. For example, even with a country’s general legal
framework of IPR protection already in place, the application and enforcement of these
laws and regulations could be divergent locally. Gruner (2008) argued that there are at
least four distinct regional situations within China that are developing as the country
emerges with increasingly more active commercial activities
, given that domestic institutional establishments and
capabilities are the same for different sectors. Well-controlled comparative examinations
for the reasons of IPR protection at the industry level should be extended to and across
other countries and economies.
177

175
In India, with expanded enforcement efforts, computer software industry experienced a declining piracy rate.
and these four distinct
regional situations provide the very distinct environments in which IPRs are protected
and enforced. Even the associations of copyright industries, such as IIPA, began to
monitor and report the status of IPR protection in major provinces of China. The local
divergences could result from the different combinations of dominant businesses in local
areas, variations in local economic and political strengths of businesses that produce and
own IP versus those that infringe others’ IPRs, and disparities of local governments and
courts in their institutional procedures, infrastructures and capabilities to provide strong

176
As shown in the annual Special 301 reports submitted by the IIPA to the USTR, in Brazil, motion picture industry
experiences lower piracy rates than other copyright industries during the same period. These reports can be
downloaded at the IIPA website at http://www.iipa.com/countryreports.html, asses on May.2, 2011. The compiled data
are on the author’s file.

177
These four regions include: (1) the municipalities of Beijing, Shanghai, Hong Kong and the surrounding areas under
the direct control of these metropolises; (2) coastal China encompassing the areas near China’s coastline other than the
major urban centers in the first category; (3) Inner China containing the regions immediately inland from the coastal
sections of China; and (4) Outer China including western provinces of China that are primarily mountainous and desert
areas.

275

IPR enforcement
178

. Such local divergences in application and enforcement of IPR laws
and regulations could be more prominent in countries with federalism political regime
and divergent economic development levels, socio-economic conditions and dynamics of
government-industry interactions.
Technology Development and IPR Protection: A Continuously Updated Story
The interplay between technology development and IPR protection is more subtle
than we normally assume. IPR protection has been supposed to work as an important
public policy and national strategy to encourage investment in research and development
of innovative products, procedures, and ways to express and present ideas. Technology
progresses have been applauded as a positive development to strengthen the constituency
base and provide further incentives for IPR protection. However, technology
development is not always a blessing for IPR protection. For example, in the realm of
copyright protection, we have observed how in 1990s introducing the technology of CDs
and VCDs into the market has made piracy much easier and cheaper than in the era of
cassettes and VHSes (Wang and Zhu 2004) and boosted piracy rates of recorded music
and films worldwide.
Nowadays, the story of technology development as a challenge to IPR protection
needs to be updated, given that development of information and communications
technology (ICT) could constitute another hit to the copyright industries which are
already down in the gulf of severe hard-copy piracy rather than an indicator for domestic
incentives supporting more stringent copyright protection as some studies expect (Yang

178
Interview 10222009BJ, and 11052009BJ.

276

et al 2009). Unlike ten years earlier, nowadays people can download music within a
blink and carry it with any portable device without paying a penny, download even high-
definition films to their home computers with high-speed internet access, watch films
online without even downloading them, or reading books without even bothering to
borrow them from libraries. The ease of obtaining free contents on the Internet has made
manufacturing and vending pirated CDs and DVDs less profitable and even made
venders of pirated CDs and DVDs vanish from the alleys in some cities.
179

Researches
on technology advancements such as the development of ICT could strengthen our
understanding on the sudden worldwide changes of IPR protection in the history.
Furthermore, given that different copyright industries may be vulnerable to Internet
piracy to different degrees because of the different characteristics of their products,
researches on the interplay of technology advancement and copyright protection (and IPR
protection in general) could improve our understanding on the variations of IPR
protection and enforcement at the industry level.
IPR Protection as a Game between Pro-IPR Groups and Anti-IPR Groups
Although a part of this dissertation examines the characteristics and lobbying
activities of pro-IPR industry constituencies and identifies conditions under which their
efforts are more effective in establishing industry-specific IPR protection regime, it is just
one side of the story. Determining the level of IPR protection is always a process of
balancing the benefits from encouraging originalities and those from guaranteeing public
access to innovative products with reasonable prices and a process of competition in

179
Fieldwork observation in Beijing, Tianjin, Guangzhou and Shenzhen in China from June to November in 2009.

277

powers and arguments between pro-IPR constituencies and anti-IPR constituencies.
Some studies on patent protection have analyzed domestic constituencies against
stringent patent protection for certain type of products and how their strategies influenced
the enacting results by legislatures or the policy-making results by governments (for
example, pharmaceutical industry in India by Banerji 2000 and Eren-Vural 2007, in
Turkey by Eren-Vural 2007, in Argentina by Buscaglia 2000). However, studies on
copyright protection are generally silent about the influence of important constituencies
who might lose from stronger copyright protection and how they intervened into the
enactment process and passively or actively resisted to government efforts to protect IPR,
except for some descriptions of concerns and objections raised by certain government
bureaucracies (Mertha 2005 on China). IPR studies are also generally silent about how
the characteristics and activities of anti-IPR constituencies influence the results of
enforcement beyond enactment. In the case of copyright protection, this neglect partially
results from the fact that consumers of copyright-intensive products, as an important
interest group against higher prices which more stringent copyright protection might
bring about, are seldom active in lobbying for their interests since it is generally hard for
them to overcome barriers of collective actions. This neglect also results from the fact
that, most of the piracy behaviors are clandestine and therefore it is hard to detect their
size and their connections with the national and local economy and politics, let alone to
measure the full economic impact of counterfeiting and piracy.
However, this neglect surprisingly continues in the era of Internet piracy when
Internet piracy emerged and quickly spread out, although its rampancy could be analyzed
industrially and institutionally. In the era of information technology and internet as a new

278

communication tool which becomes increasingly essential in our daily life, internet
content providers (ICPs) have become an important group of infringers against
copyrights while internet service providers (ISPs) have become an important medium for
pirated contents to spread and have connived to the rampancy of piracy in the virtual
environment. In the ecosystem of the virtual world, ICPs and ISPs depend on copyright
industries to provide contents. They lack incentives to provide or support sufficient
copyright protection and at the same time might have stronger capabilities to influence
enactment and policy-making in copyright protection compared to their counterparts of
copyright content providers. At the same time, Internet piracy could pose an extra
challenge to the enforcement infrastructures and routines which have been tailored to the
need of combating against hard-copy piracy and existed for a long time and further
compromise institutional capabilities of enforcement which have already been feeble in
developing countries. This re-drawn picture of power structure between copyright
owners, copyright users and potential infringers, and copyright enforcers is worth further
exploring.

279

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Appendix: Components and Scoring Method of PR Index
180

The PR Index includes the following categories:
(1) Coverage Available Not available
Patentability of pharmaceuticals 1/8 0
Patentability of chemicals 1/8 0
Patentability of food 1/8 0
Patentability of surgical products 1/8 0
Patentability of microorganisms 1/8 0
Patentability of utility models 1/8 0
Patentability of software 1/8 0
Patentability of plant and animal varieties 1/8 0

(2) Membership in international treaties Signatory Not signatory
Paris Convention and revisions 1/5 0
Patent Cooperation Treaty 1/5 0
Protection of New V arieties (UPOV) 1/5 0
Budapest Treaty (microorganism deposits) 1/5 0
Trade-Related Intellectual Property Rights
(TRIPS)
1/5 0

(3) Duration of protection Full Partial
1 0 < f < 1

(4) Enforcement mechanisms Available Not available
Preliminary (pre-trial) injunctions 1/3 0
Contributory infringement 1/3 0
Burden-of-proof reversal 1/3 0

(5) Restrictions on patent rights Does not exist Exists
Working requirements 1/3 0
Compulsory licensing 1/3 0
Revocation of patents 1/3 0

where f is the duration of protection as a fraction of 20 years from the date of application
(for application-based system) or 17 years from the date of grant (for grant-based patent
systems). The overall score for Patent Rights Index is equal to the sum of points under
(1)-(5).
181

180
This PR Index is updated by Park (2008) from the PR Index developed by Ginarte and Park (1997). The difference
between the two PR Indexes is that the coverage of the index is extended by adding the patentability of software to the
first category and membership in two more international treaties (Budapest Treaty and TRIPS) are added to the second
category.

181
Ginarte and Park (1997) demonstrated that the ranking of countries by patent protection levels is not sensitive to the
application of equal weighting (or unweighting) of categories.

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Creator Pang, Hong (author)

Core Title The political economy of implementation: intellectual property rights protection across the world

School College of Letters, Arts and Sciences

Degree Doctor of Philosophy

Degree Program Politics and International Relations

Publication Date 11/22/2011

Defense Date 07/17/2011

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag China,civil law,common law,Compliance,copyright,dispute settlement,enforcement,government-industry relationship.,implementation,intellectual property rights,legal institution,legal origin,legislation,Motion pictures,OAI-PMH Harvest,patent,political regime,recorded music,regional trade agreement,software,TRIPS Agreement,World Trade Organization

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Advisor Odell, John (committee chair), Katada, Saori N. (committee member), Nugent, Jeffrey B. (committee member)

Creator Email coral_pang@hotmail.com,hongpang.us@gmail.com

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