A robust free market economy is founded on core legal foundations. The overarching one is the rule of law. But once a system of rule of law and legality is in place, then there must be the legal building blocks of a market economy, which include, among others, company law, competition rules and property rights.
Recently, in this column, I examined two pieces of legislation in Nigeria, namely, the Companies and Allied Matters Act 2020, CAMA 2020, and the Federal Competition and Consumer Protection Act 2018, FCCPA 2018. I argued that the two statutes could, if well implemented, provide strong legal bases for a market economy in Nigeria.
In truth, company laws and competition rules, which relate to economic exchange, are not enough to support a free market economy.
Robust property rights must exist before economic exchanges can take place. Without rules on ownership and transfer of properties, it’s difficult to engage in voluntary commercial exchanges. Which is why, as one scholar put it, property rights provide incentives for investment and wealth-maximising cooperation. And that makes property rights a key legal foundation of a free market economy.
But my focus here is on intellectual property rights, arguably the most controversial and misunderstood of all property rights, such as land and other tangible properties. For many people, intellectual property is obscure and distant, relating to ideas rather than tangible or physical things. Yet, intellectual property, which is about creative effort and knowledge capital, is central to all economic activities. Its scope includes patents, copyright, trademarks, designs and performance rights.
Before we come to the Nigerian context, let’s explore the arguments for a strong protection of intellectual property rights. The first is the moral rights theory, based on the Lockean “fruits of labour” argument. John Locke argued that intellectual property is the fruit of one’s labour and that one should be able to own the fruit of his or her labour. For instance, if created a piece of art, shouldn’t I have the exclusive right to own and commercialise it? Yet, some would see nothing wrong in pirating or making counterfeits of the work, thus denying me the fruit of my labour!
The second argument, which is probably the most potent, is based on the incentive theory, which links intellectual property protection to the future. The incentive theory says that intellectual property protection provides an incentive to make new inventions. If I cannot commercialise my patented work without its unauthorised use by other people, why should I spend time and capital in inventing new drugs, new computer software etc? And, of course, without such incentive to innovate and create new things, society will not have the high productivity and high economic growth that generate prosperity.
Then, thirdly, there is the argument that links strong intellectual property rights to trade flows, foreign direct investment, creation and diffusion of technology and other areas of international commercial activity. The argument is simple. FDI inflows often involve foreign investors transferring technologies to another country.
But if the foreign investors know or suspect that the intellectual property in their technologies could easily be violated in the host country without remedies, they will hesitate to invest in that country. One of the thorny issues in the “trade war” between China and the US is the allegation that China “steal” the intellectual property of US and Western companies that invest in China.
So, intellectual property protection matters. It is a spur for innovation and creativity and the diffusion of technologies. But how robust is Nigeria’s IPR regime?
Well, the first point is that, unlike FCCPA 2018 and CAMA 2020, there are no consolidated IP laws in Nigeria. There are various laws, such as the Patents and Design Act of 1990, the Trademarks Act of 1990 and the Copyright Act 2004. The dates of these laws show that some of them are over 30 years old. The fact that the laws are dated means that they are not compatible with the World Trade Organisation’s Trade-Related Intellectual Property Rights (TRIPS), which introduced new international IP rules and entered into force in 1995.
Surely, the lack of a robust intellectual property protection is a key reason why foreigners are not rushing to register patents and trademarks in Nigeria
Nigeria has traditionally paid little attention to the protection of intellectual property rights. Several years ago, a Nigerian delegation to a meeting of the World Intellectual Property Organisation, WIPO, said: “The repeated assertion that IP could be used for the creation of wealth means nothing to the vast majority of Nigerians, whose preoccupation is not wealth creation but the struggle survival from one day to the next.” That view may have changed, but there is still inadequate appreciation of the benefits of IPR protection in Nigeria.
Of course, Nigeria is not a strong IP-producing country. According to WIPO figures, there were only 200 patents granted to Nigerians in 2018, compared to 451 for South Africa. But patents granted to non-residents, i.e. foreigners, in Nigeria, was 642, compared with 4,295 for South Africa, which suggests more foreign interest in South Africa than Nigeria. In terms of trademark registration, the last available data for Nigeria was for 2013 when there were 4,369 trademark registrations for Nigerians and 1,048 for foreigners. But for South Africa, in 2018, there were 16,745 for residents and 15,247 for non-residents.
Surely, the lack of a robust intellectual property protection is a key reason why foreigners are not rushing to register patents and trademarks in Nigeria. The Nigeria Industrial Revolution Plan (NIRP) states that “Nigeria will respect all its intellectual property commitments”, but while the FCCPA recognises the “validity of a licence granted by the proprietor of a patent” (S.64), it seems to offer special protection against “an infringement of a Nigerian patent” (S.65). It’s not clear why the drafters explicitly mentioned “Nigerian patent” in the act, but it is wrong to give the impression that “Nigerian patents” are given preferential treatment over foreign ones.
What about enforcement? Well, even if Nigeria’s substantive IP laws are strong, the truth is their enforcement is extremely weak. The government stated in the NIRP that “Nigeria has already established the broad framework for adequate protection of IPR”, but added: “However, the enforcements of those rights are currently challenging.”
The enforcements of IPR in Nigeria are extremely challenging. For instance, due to pressure from the US and indigenous lobby groups, Nigeria strengthened its copyright law, including introducing strong anti-piracy measures and the protection of folklore. Yet, piracy and counterfeiting remain widespread in Nigeria.
Indeed, Nigeria is believed to be the largest African market for pirated products, with the US-based International Intellectual Property Alliance (IIPA) once saying that “sound recording piracy is at a level of 85 percent in Nigeria” and that “pirates have completely overrun the book market.”
Neither the regulatory and enforcement agencies nor the courts are able robustly to enforce intellectual property rights or adequately punish their infringements in Nigeria. Surely, foreigners have little confidence in the system. For instance, the US State Department once said: “The use of the courts in Nigeria does not automatically imply fair and impartial judgements.”
But the institutional weaknesses are compounded by the fact that neither government officials nor the public see violations of intellectual rights as a crime. They would probably say: What’s wrong with copying somebody’s book, pirating a music record or producing counterfeits of a product?
Well, a lot is wrong! The writers, the musicians, the film producers, the inventors suffer when they cannot derive adequate commercial benefits from the fruits of their labour, and, of course, the economy suffers because they can’t create jobs and pay taxes. Furthermore, Nigeria loses the opportunity to attract high-technology goods, FDI and inward technology transfer.
No nation has ever succeeded without a robust intellectual property regime, and Nigeria can’t be a strong market economy unless its regime of IPR protection is strong.
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