Both French sociologist Michael Crozer and British journalist Patricia Morison make compelling and similar points about efforts to understand organizations around the world. Patterns of organizing clearly differ across borders and cultures, but we run a very real risk of misinterpreting what we see if we push too hard towards sweeping generalizations. Even so, it is sometimes helpful to use broad strokes to paint pictures of what managers can expect to find when they begin to travel.

Consider the East Hope Group of Shanghai, China. Four brothers of the Liu family founded the firm in1982. It was one of the first privately held enterprises (or gong-si – see below) allowed to flourish under China's new government policies supporting the development to large-scale privately held companies. To get the business started, the Liu brothers sold their wristwatches and bicycles to raise the necessary US$120 to open a very small agricultural business. Today, the East Hope Group is the largest animal-feed producer – as well as one of the largest private enterprises – in China, with 10,000 employees working in 120 various business enterprises around the country.

Initiating and building global partnerships can be a perilous enterprise. The stakes are often very high, both for the firms and the negotiators. Indeed, problems often begin as soon as negotiations are opened, with each side trying to gain an advantage at the other's expense (e.g., cheaper prices, royalty distributions, proprietary technology, market access, and so forth). If and when a contract is signed, the problems only multiply. How do we manage the partnership? Who is in charge? How do we build trust between the partners? How do we harmonize our long-term interests? Indeed, what is the meaning of the contract on which the partnership itself is based? And throughout the process, the personalities and private agendas of both the initial negotiators and alliance managers often play a significant role in determining success or failure.

To illustrate this point, consider the case of a failed negotiation.

Many years ago (in the late 1930s, to be precise) telecom CEO Chester Barnard defined an organization as a system of consciously coordinated activities of two or more persons. In the intervening eight decades, no one has come up with a better definition. Barnard went further to point out that the survival of any organization depends on its members' ability and willingness to cooperate, communicate, and work towards a common objective. In particular, he noted that in any theory of organization or management, communication must play a dominant role. While Barnard was thinking about US firms in the 1930s with a fairly narrow business focus, his observations still apply today when considering both large and small firms doing business around the world. What has changed is not the fundamental challenges facing companies, but rather the magnitude of these challenges, as well as the manner in which firms organize and “think” collectively to accomplish their core mission.

Consider Wipro and Intel, two highly successful IT companies doing business globally, yet headquartered in very different regions of the world.

We live in a turbulent and contradictory world, where there are few certainties and change is constant. In addition, over time we increasingly come to realize that much of what we think we see around us can, in reality, be something entirely different. We require greater perceptual accuracy just as the horizons become increasingly cloudy. Business cycles are becoming more dynamic and unpredictable, and companies, institutions, and employees come and go with increasingly regularity. Much of this uncertainty is the result of economic forces that are beyond the control of individuals and major corporations. Much results from recent waves of technological change that resist pressures for stability or predictability. And much results from individual and corporate failures to understand the realities on the ground when they pit themselves against local institutions, competitors, and cultures. Knowledge is definitely power when it comes to global business and, as our knowledge base becomes more uncertain, companies and their managers seek help wherever they can find it. It is the thesis of this book that a major part of this knowledge base for managers rests on developing a fundamental, yet flexible, understanding of how business management works in different regions of the world. More specifically, our aim is to develop information and learning models that global managers can build upon to pursue their careers and corporate missions.

As managers increasingly find themselves working across borders, their list of cultural lessons – do's and don'ts, must's and must not's – continues to grow.

Patent law in the era of decline, rebellion and war

During the nineteenth century and the early part of the twentieth century China became an increasingly decaying imperial power beset by internal rebellion and conflicts with European colonizing powers. One of these rebellions beginning in 1850 and lasting some 20 years was led by Hung Hsiu-ch'uan. A Christian believer, he declared himself the Heavenly King of the Kingdom of Heavenly Peace and led a rebellion estimated to have cost some 30 million lives. Developing a patent law was not an especially high priority in China during this time. There is a suggestion that amidst the slaughter during the time of the Kingdom of Heavenly Peace a patent law of some kind was proposed by one of the leaders of rebellion.

The Taiping rebellion was one of a number of conflicts in China in the nineteenth century, including the two Opium Wars (the first against the British in 1839–42 and the second against the British and French in 1856–60), a war with France in 1884 that saw China lose control over Indo-China and another with Japan in 1895 that saw China lose Korea and Formosa. With 1900 came the Boxer Rebellion that ended in China making many concessions to the Western powers that had captured Peking and put down the Rebellion.

Sovereignty matters

Formally at least, patent administration remains an area of state sovereignty. State sovereignty has been eroded over patent standards, where through multilateral, regional and bilateral trade agreements, many states, most of them developing countries, have moved up to ‘international’ standards that really are the standards of the US and EU. Even though states largely retain discretion over how to administer a patent system, we have seen that the patent offices of many developing countries are becoming integrated into a system of global governance led by the Trilateral Offices.

The integration of developing-country patent offices into this global governance structure is not necessarily consistent with their national interests. It is not immediately obvious, for example, that a developing country which imports medicines should follow the pharmaceutical examination standards of developed-country patent offices that are prepared to accept the gaming behaviour of patent attorneys in the drafting of patent claims. By doing so a developing country is simply importing that gaming behaviour. It is changing the selection pressures that operate in its markets. We have seen that India and Brazil have taken steps to avoid the quality problems that exist in this area at least. In India, the Indian Patents Act allows the examiner to come to a different view of the patentability of a pharmaceutical product (see Chapter 7), and in Brazil the outcome may be different because the Brazilian pharmaceutical regulatory authority has the power to overturn the Brazilian patent examiner's decision in the case of pharmaceutical patents.

Integration

At the beginning of the twenty-first century Brazil, China and India are generally talked about as high-growth economies with China and India in particular set on a path that might potentially see them each chug past the US economy in terms of size. Whatever the future holds these three countries are presently major economic powers using measures such as total GDP. All three countries have a patent law and are investing heavily in the creation of a large modern patent office. Of the three countries China is the most advanced down this path. Its patent office is an International Searching Authority (ISA) for the purposes of the Patent Cooperation Treaty (PCT). The patent offices of India and Brazil, as we saw in Chapter 6, have only just been admitted to ISA status. Both have the potential to increase the size of their offices in the way that China has because both have access to a large pool of low-cost scientific labour.

Before we examine the patent offices of these three countries in more detail we should note that the modernization of their respective offices represents the last step of the integration of these countries into the international patent regime. They are following a historical pattern that we saw inChapter 3 held true for European powers of the late nineteenth century and early twentieth century in which the modernization of patent offices occurred well after the enactment of patent law.

Welcome to the maze

As we saw in our discussion of patent law harmonization, while convergence in patent law is taking place at the level of principles, there is a long way to go at the level of rules. When it comes to the procedural rules relevant to the patent application process there is an enormous diversity of very detailed rules. For example, in the US the Consolidated Patent Rules amount to about 350 pages and a few thousand rules. This does not count the notices, guidelines and amendments that the USPTO issues in any one year relevant to its rules. The USPTO is not alone in administering a system of great rule complexity. In Australia, the Patent Regulations take up more than 490 pages.

The comparative advantage of patent attorneys lies not in their knowledge of patent law, but in their knowledge of many hundreds of rules and guidelines that make up patent procedure and the drafting of the claims that define an invention. A key part of their work is keeping track of the many deadlines that exist for the submission of documentation that accompanies the application process, deadlines which if not kept to will result in extra fees or in some cases the loss of the applicant's rights. The tedium of precise time and document management over what may be many years in relation to a single application, which may end up being withdrawn or rejected, is the price patent attorneys pay for their lucrative practices.

The force of empire

Montesquieu observed that legal institutions and principles of one country rarely serve another well. Laws, he argued, depend on political institutions and before one nation decided to adopt the law of another ‘it would be proper to examine beforehand whether they have both the same institutions and the same political law’. Patent systems have not, however, arrived in most developing countries through a careful process of examination and selection by the inhabitants of those countries. The dominant transplant mechanism has been coercion, the military coercion that accompanied processes of colonization of the late nineteenth and early twentieth centuries and then the economic trade coercion deployed by the EU and US in the last quarter of the twentieth century.

Kiribati provides one illustration of how patent systems have spread to developing countries through colonization and empire. The Gilbert and Ellice Islands (now Kiribati and Tuvalu respectively) saw the process of white settlement begin in the 1830s through contact with whalers and copra traders and then the inevitable missionaries. The Islands became a British Protectorate in 1892 and then a colony of the British Crown in 1916. As we saw in Chapter 4 a single patent system for the British Empire was an idea that had been discussed, but what eventuated was a system that gave the UK patent holder a right to register a UK patent in a colony or protectorate of the British Empire that had adopted a law allowing for re-registration of a UK patent.

Brazil: the nineteenth century

The Portuguese Crown's colonization of Brazil did not produce the kind of colonial administration of patents that the British Crown institutionalized in India. Portugal was itself a comparative latecomer to patent law. Its first patent law appears to be a royal decree of 1837 that set up a registration system for patents in which a description of the invention had to be deposited with the relevant provincial administration of the inventor along with the payment of a fee. In return the inventor received a patent, but without any guarantees as to its validity.

Brazil achieved independence from Portugal in 1822. Prior to independence Brazil had become the centre of the Portuguese Empire as Prince Regent Dom João, fleeing Napoleon, set up court in Brazil in 1808. In 1809 he created the alvará, a law aimed at stimulating industrial activity in an economy dominated by agriculture. Before this law there is some evidence that a European-like privilege system operated in Brazil. This alvará was inspired by the English Statute of Monopolies and followed its basic lines of protection for inventions. Brazil's first constitution of 1824 recognized the right of inventors to a temporary exclusive privilege or remuneration for the use of their invention. This was followed by a law of 1830 that recognized the rights of inventors. Privileges were granted for 5 to 20 years according to the nature of the invention.

Trilateral cooperation

In the last quarter of the twentieth century three patent offices, often referred to as the Trilateral Offices, received the bulk of patent applications and issued most of the world's patents: the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO) and the Japanese Patent Office (JPO). Of the 5.5 million patents in force at the end of 2004, 83% were in force in the US, Japan and the member countries of the European Patent Convention (EPC). Two other offices have because of their large number of filings joined this first tier of patent offices – the Korean Intellectual Property Office (KIPO) and the State Intellectual Property Office (SIPO) of China.

The Trilateral story is one of informal cooperation that becomes grounded in a bilateral memorandum of understanding between the USPTO and the EPO in June 1982 and another between the USPTO and the JPO in 1983, followed by a memorandum amongst all three in 1983. What accounts for this deepening of international cooperation given, as we saw in Chapter 3, that the patent institution has been important to the trade and protectionist policies of states? The explanation hinges on two factors – the role of transnational corporations (TNCs) in the system as demanders of patent office cooperation and the workload problems facing the Trilaterals.

TNCs, the biggest users of the patent system, want a world in which at a moment of their choosing they can obtain high-quality patents at low cost.

The patent ocean: Kiribati

It is a little surprising that one can apply for a patent in Kiribati. More surprising though is that there are twenty or so mainly pharmaceutical patents registered in its patent office. No-one in Kiribati much cares about the few patent files languishing in a filing cabinet since, if the predictions about climate change are right, they are destined for Davey Jones' locker. Almost all of Kiribati is less than two metres above sea level and so its inhabitants are experiencing what happens when an ocean begins to rise up and wash over settled land. The furthest thing from anyone's mind on Kiribati is pharmaceutical patents and yet someone could be bothered to apply for them.

If one had to guess where one could not lodge a patent, Kiribati would have been a plausible choice. Given another guess one might opt for some deeply war-torn country such as Iraq or Afghanistan. In the case of Iraq it is a case of ‘nice try, but no cigar’. Prior to the US invasion of Iraq, there was a patent law in place. After the US invasion, the Administrator of the Coalition Provisional Authority, Paul Bremer, promulgated an order that brought aspects of Iraq's patent law up to international standards. Patenting activity in the Iraq Patent Office (PO) is not great. The cigar is tantalizingly in reach with Afghanistan.

Patent office administration would strike many a person as a dull topic. In fact this is wrong, for it is an excruciatingly dull topic. Yet like many such technical topics it explains why our world is the way that it is. States need tax bureaucracies to collect taxes, otherwise they would not last long as states. Multinationals need patent offices to grant patents, otherwise they could not raise private taxes. They would have to find other ways in which to gain monopolies over medicines, chemicals, seeds and software.

The importance of the topic, along with the realization that patent offices had largely been neglected in the regulatory literature, led me to undertake the study. My focus was not on one office in particular but rather on the interaction amongst patent offices and in particular between developed and developing-country patent offices. The development effects of intellectual property rights have become a major area of study, but we do not know much about how developing-country patent offices administer the standards of patentability that arrive in their countries through various treaty processes.

Administering a patent system is one of the few areas of intellectual property over which developing countries have considerable sovereign discretion. Patent offices might be one place in which one might find developing-country resistance to the hegemony that the US, EU and Japan exercise over patent standard-setting processes.

Europe's national patent offices

In Europe, the early decades of the twentieth century were a period of consolidation and growth of national patent offices. European offices developed their own approaches to the regulation of the patent grant. A proposal put to a UK Parliamentary Committee of 1931 that examiners should more deeply investigate the invention before grant, including its practicability, was rejected by that committee on the basis that it was better to have a scheme that ensured that patents were granted cheaply so as to favour the ‘poor inventor’. The higher standard approach to patent examination in Germany and the Netherlands in which patent examiners had the power to demand evidence of the invention's practicability was rejected. The same UK Committee also considered whether the UK should follow the US and Germany down the path of increasing the scope of the search of the prior art when it came to assessing novelty. Under UK law, the examiner essentially had to search only published British patent specifications. In Germany and the US, foreign specifications and other sources of published technical information formed part of the prior art base that examiners had to search. Investing heavily in extending the searches by examiners was rejected by the UK committee on the basis of its expense. The Committee took the view that the UK patent office should make some return to state revenues rather than reinvesting surpluses for the purpose of improving its service.

Patent statutes

We know much more about the history of patent law than we do about the history of its administration. The emergence of patent law in statutory form is generally said to be 1474 when the Venetian Republic passed a short decree that gave ten years of protection to any person who built ‘any new and ingenious device in this City’. The other early major statutory landmark is the English Statute of Monopolies of 1624. This statute crystallized the pronouncements of the common law courts concerning the use by the English Crown of its prerogative power to grant monopolies in business. Monopolies in general were declared to be void, but an exception was made for patents and grants of privilege for ‘any manner of new manufactures within this realm’.

The spread through Europe of a patent institution based on legislation that gave inventors rights under law as opposed to having to depend on the exercise of prerogative was a slow process. In France public rights of inventorship are linked to laws adopted by the National Assembly in 1790 and enacted in 1791. After this there is something of a take-off in Europe of patent statutes: Austria 1810, Russia 1812, Prussia 1815, Belgium and the Netherlands 1817, Spain 1820, Bavaria 1825, Sweden 1834, Wurtemburg 1836, Portugal 1837, Saxonia, 1843.

Outside of Europe, the First Congress of the United States passed a patent statute in 1790.

A private insider governance network

The twentieth century proved to be the century of innovation in patent bureaucracy and the regulation of markets by patent owners using patenting strategies. Whether this staggering global growth in patent bureaucracy and patent regulation of markets actually caused much important scientific and technological innovation that would otherwise not have occurred, and at a cost that did not outweigh the benefits, is a question to which we will probably never have an answer. More often than not, analysis of the patent system begins with a presumption in its favour: ‘High levels of innovation in the United States would seem to be evidence that the intellectual property system is working well and does not require fundamental changes.’

At the beginning of the nineteenth century few European states had patent law and none had recognizably modern systems of patent administration (see Chapter 3). At the beginning of the twenty-first century it is hard to find an example of a country that does not have a patent law of some kind on the books – Timor Leste is perhaps one example. Even in some of the poorest, smallest states such as some of the Pacific islands, there are patent laws on the books that technically, as we saw in Chapter 10, form part of global patent filing routes. No island seems to be without a patent law.