Attack of the Clones

Recently Pat Choate was walking through Washington, D.C., when he happened upon a potential threat to national security. Within a few miles of the White House, basking in broad daylight, sat a pile of contraband that was tick, tick, ticking. It wasn’t a bomb, but something more insidious: a cluster of counterfeit watches.For years sidewalk vendors throughout the District of Columbia have sold fake Rolexes, phony Louis Vuitton purses, faux Armani sunglasses, and countless other knockoffs. Most passersby, from police officers to senators, pay no mind to the illicit merchandise. But Mr. Choate, an economist and historian who once served as Ross Perot’s vice-presidential running mate, is wary of the invasion.In his new, compelling book “Hot Property: The Stealing of Ideas in an Age of Globalization” (Knopf, 368 pages, $26.95), Mr. Choate argues that rampant counterfeiting by developing nations has undercut American prosperity and threatens the economic future of the country. Mr. Choate compares contemporary piracy to the threat of terrorism before September 11, 2001 – politicians are aware of the problem, yet nobody is taking decisive action to stop it.Perhaps that’s because most of us think of counterfeiting as a victimless crime. If you buy a pirated copy of “Miss Congeniality 2,” who really suffers (other than yourself)? But Mr. Choate is quick to point out that not every counterfeit product is as toothless as a Sandra Bullock performance. In recent years fake airline parts have downed commercial planes, fake baby formulas have poisoned infants, and fake medicines have crippled unsuspecting patients.All of this is frightening enough. But the problem extends far beyond that. According to Mr. Choate, our entire system of protecting innovative ideas is under siege.To underscore the economic importance of intellectual property rights, Mr. Choate retraces the evolution of the “American system of innovation.” The founding fathers inherited a strong faith in patents and copyrights from England. When drafting the Constitution, they included a clause acknowledging the special rights of authors and inventors. Over time, the protection has varied.The country’s first patent laws, championed by George Washington, were rigorous and far-reaching. But soon patent applications overwhelmed the federal government. In 1793, the regulations were softened. “In such a lenient environment,” writes Mr. Choate, “piracy flourished.” Indeed, America entered its golden age of piracy. With the tacit approval of their government, American businessmen set out to steal Europe’s best gadgets.“In this, the United States has dirty hands,” Mr. Choate writes. “Early in its history, a succession of presidents, beginning with George Washington, John Adams, Thomas Jefferson, and James Madison oversaw industrial expansion programs that heavily relied on the theft of foreign-owned technology.”In 1836 the U.S. government passed a much stronger set of patent laws, which laid the foundation for the modern system. Mr. Choate argues that under the new laws, invention, technology, and industry flourished. “By making patents real, the legislation unleashed the innovative capacities of an entire nation on a scale never before attempted,” Mr. Choate writes. “Regardless of social position, education, or economic condition, any citizen who invented something novel and useful could be awarded exclusive rights for its use and commercialization.”Americans, however, eventually got their counterfeiter’s comeuppance. State-sponsored piracy programs prospered during the 20th century, first in Germany and later in Japan. Now it is China that is, as he puts it, a “counterfeiter’s paradise.” “Just like the United States and Japan before it,” Mr. Choate writes, “China is using all the usual means – licensing, theft, piracy, intimidation, spies, and cooperation – to get the technology it needs.”So what is a vulnerable superpower to do? Mr. Choate points out that a protective mechanism is already in place. In the mid-1990s, United States representatives negotiated a multi-national agreement within the World Trade Organization, laying out basic international protection for intellectual property. As part of the agreement, a country targeted by state-sponsored piracy can seek compensation for its losses before an international panel. Mr. Choate calls the WTO settlement procedure a “powerful tool,” but he notes that to date U.S. politicians have all but ignored it.Throughout “Hot Property,” Mr. Choate buttresses his arguments with an impressive array of economic statistics and historical anecdotes. Mr. Choate’s reverence for inventors, disdain for pirates, and anxiety for the future make for an engaging, enjoyable read. His prickly protectionism is endearing, but his book is a call to action. How long will it take U.S. policy makers to confront the runaway piracy? Our fake Rolexes are ticking.Mr. Gillette last wrote in these pages on Confederate history.

Attack of the Clones

Attack of the Clones

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