[Reader-list] US Path to Wealth and Power: Intellectual Piracy and the Making of Industrial America

[Jeebesh Bagchi]

US Path to Wealth and Power: Intellectual Piracy and the Making of 
Industrial America
Doron Ben-Atar, Fordham University

Contested Commons/Tresspassing Public
A Conference on Inequalities, Conflicts, and Intellectual Property
January 6-8, 2005
Indian Habitat Center, New Delhi

[Sarai-CSDS, New Delhi and Alternative Law Forum (ALF), Bangalore]


China has been the economic miracle of our time. Less than two decades 
ago, the country defined poverty and underdevelopment; today, China is 
one of the premier engines of world economic growth, thanks in large 
part to the political repression that keeps the cost of labor there at a 
pittance. Mao’s successors have also realized, however, that in order to 
join the ranks of developed nations China must close the technology 
gap—and that the surest and quickest way to do so is to pilfer Western 
know-how.
And the Chinese have been quite active. My favorite episode centers on a 
Chinese American woman named Gao Zhan. In February 2001 Gao, who 
received her Ph.D. in Sociology from Syracuse University in 1997 and was 
a researcher at American University in Washington DC, was conducting 
research in China when she was arrested, tried and convicted for spying 
for Taiwan. Sentenced to ten years imprisonment, Gao Zhan’s detention 
triggered a wave of protests from human rights organizations all over 
the globe, and in the US both houses passed resolutions granting her 
immediate citizenship. She was let go in July 2001, in apparent good 
will gesture to the upcoming visit by Secretary of State Colin Powel. 
But this would not end up as just another heart warming story of the 
triumph of international outcry over tyranny. Two years later, in 
November 2003, Gao Zhan was back in court – this time in the United 
States where she pleaded guilty to being an industrial spy for the 
Chinese. Using the assumed name Gail Heights and a front company that 
she claimed was affiliated with George Mason University, Gao delivered 
to her Chinese operators $1.5 million worth of high-tech components from 
American companies, including microprocessors with possible military 
uses, before she was caught.
The depth and extent of the Chinese piracy effort, which has gone after 
everything from computer software to music, has alarmed members of 
Congress in both political parties. Republican Senator Richard Shelby of 
Alabama, the chairman of the Senate Select Committee on Intelligence, 
warned that China’s next great leap forward will be made possible 
through illegal appropriation and use of American patented and 
copyrighted materials. During recent Congressional hearings on the 
piracy of intellectual property and their links to organized crime and 
terrorism, Democratic Congressman Howard Berman of California estimated 
that China’s transgressions cost the US economy $1.85 billion dollars a 
year.
With this kind of money at stake, the battle over intellectual property 
has risen to the forefront of contests between developed and developing 
nations. Developed nations are concerned about piracy by consumers and 
producers. On the consumer front, companies and individuals in developed 
nations complain that their creations, whether designer accessories or 
drug patents, are being copied and sold without authorization or 
compensation. Piracy by producers in the developing world causes even 
greater anxiety in the West. The movement of manufacturing to the 
developing world where raw materials are readily available and labor 
costs are low has rendered intellectual capital the most important asset 
of modern corporations. (The American companies whose technology was 
acquired by Gao Zhan stand to lose millions if their technologies can be 
reproduced by Chinese manufacturers with no intent of compensating them.)
China is hardly the only developing nation that engages in intellectual 
piracy. And Western-based companies are asking international agencies to 
police the developing world. Indeed, international organizations have 
adopted western standards and have created an agency, the World 
Intellectual Property Organization, which is “dedicated to helping to 
ensure that the rights of creators and owners of intellectual property 
are protected worldwide and that inventors and authors are, thus, 
recognized and rewarded for their ingenuity.” Some companies are trying 
to safeguard their intellectual property. At a leadership summit for 
chief executives last fall, the CEOs of Medtronic, a medical technology 
company, and Sealed Air, which specializes in packaging, said that their 
companies decline to use top-of-the line technologies in their overseas 
operations because they fear their intellectual property will be stolen.

***

Before Americans rush to condemn those who pirate our know-how they must 
not forget how the United States became the richest and most powerful 
nation on earth. At the end of the third quarter of the 18th century the 
British colonies of North America were mostly under-developed 
agricultural settlements. The foundations for the American empire were 
laid during the next seventy five years, as the United States was 
transformed from an under-developed de-centralized entity on the 
periphery of the Atlantic economy into the dominant center of industry, 
wealth, and power.
Piracy of the intellectual property of others played a crucial role in 
this process. The transfer of protected European technology was a 
prominent feature in the economic, political and diplomatic life of the 
North American confederation from its first moments as an independent 
political entity. With the signing of the 1783 peace accord that 
officially ended the American Revolution, the United States and Great 
Britain became political and economic adversaries. The founders believed 
that American political independence depended on economic 
self-sufficiency, which meant that the young nation needed to reduce its 
vast consumption of imported English manufactured goods. The new defiant 
American mood, heightened by wartime demands for military and industrial 
goods and the post-war desire to prove the compatibility of republican 
government and a high standard of living, viewed technology piracy as 
the premier tool to industrial development.
Perhaps the best way to illustrate the situation is by the following 
vignette. In the second week of November 1787, Phineas Bond, British 
consul in Philadelphia, received a visit from two English nationals. 
Thomas Edemsor, a cotton merchant from Manchester, and Henry Royle, a 
calico printer from Chadkirk in Cheshire County, were greatly 
distressed. They feared lynching at the hands of a mob led by the city's 
leading merchants and they looked to the envoy of His Britannic 
Majesty's government for shelter. Their story went as follows: In 1783, 
concurrent with British recognition of American independence, an 
Englishman named Benjamin H. Phillips set out to establish a cotton 
manufactory in America. In spite of severe restrictions on the 
exportation of textile machinery and the emigration of skilled artisans, 
Phillips purchased a carding machine and three spinning machines in 
England, packed them disassembled into crates declared to British 
customs to contain Wedgwood china, and boarded the U.S. ship Liberty at 
Liverpool bound for Philadelphia. He had earlier sent his son to the 
U.S. capital in anticipation of the machinery's arrival. The elder 
Phillips died before reaching America and his son received the crates, 
but lacking his father's knowledge of the machinery he could not 
reassemble the equipment. He then sold it to another Englishmen, Joseph 
Hague, who managed to assemble it but could not make it work properly. 
Having no capital and despairing of the operating expenses, in the 
spring of 1787, Hague sold the equipment to Royle, who in turn sold it 
to Edemsor. Edemsor once again disassembled the four machines and 
shipped them back to England. According to his testimony, he 
patriotically purchased and repatriated the equipment “to Check the 
Advancement of the Cotton Manufactory in America.”
In the meantime, a group of Philadelphia merchants, concerned with 
advancing the cause of U.S. economic independence form Britain to 
complement the nation's newly found political independence, formed “The 
Pennsylvania Society for the Encouragement of Manufactures and the 
Useful Arts.” The group had instigated a search for Hague's machinery 
and became infuriated upon learning of its repatriation by Royle and 
Edemsor. The merchants' wrath turned on the British culprits, who “in 
great dread of suffering from their Resentment,” went into hiding for 
several weeks. Finally, the fugitives approached Bond for protection, 
and, in Royle's case, for money to secure passage back to England. 
Shocked by the fanatic zeal of “the American Seduction of British 
Machines and Artisans” and convinced of the real danger of violence his 
compatriots faced from the leading men of Philadelphia in their quest to 
acquire “the industrial secrets of the Old World,” Bond paid the fare 
for Royle and his family out of his own pocket. When the Society learned 
of Royle's and Edemsor's escape, its leaders publicly rebuked and 
insulted the British consul.
Not intimidated, Bond set about investigating the incident. His 
inquiries led him to focus on the slippery character of Hague, who had 
left the city and was rumored to be back in England attempting to 
procure more equipment for illegal exportation to America. He notified 
the British foreign office that Hague might be found for arrest in 
Derbyshire, but by the time the authorities arrived there Hague was 
gone. He reappeared in Philadelphia the following spring, having 
successfully smuggled over a new cotton-carding machine. Adding insult 
to injury, the Pennsylvania legislature awarded him a prize of $100.00 
on October 3, 1788 for having succeeded in his piracy. The Manufacturing 
Society trumpeted the achievement in the press and showed little concern 
for the subject of intellectual property, “It is with great pleasure we 
learn” it announced, “that the ingenious Artizan, who counterfeited the 
Carding and Spinning Machine, though not the original inventor (being 
only the introducer) is likely to receive a premium from the 
Manufacturing Society, besides a generous prize for his machines; and 
that it is highly probable our patriotic legislature will not let his 
merit pass unrewarded by them. Such liberality must have the happy 
effect of bringing into Pennsylvania other useful Artizans, Machines, 
and Manufacturing Secrets which will abundantly repay the little advance 
of the present moment.”
The Bond affair is one among many that I chronicle in my book. Those in 
the U.S who whine about the current state of affairs conveniently forget 
that two hundred years ago the shoe was on our foot. American prosperity 
originated in the piracy of industrial technologies from Europe, 
primarily England, to the United States in the first half of the 
nineteenth century. The process took place in spite of a concerted 
effort by the English government to keep their trade secrets at home.
Prohibitions on the emigration of artisans and the exportation of 
machinery from the British Empire had been in effect throughout the 
eighteenth century. In the mid 1770s, as the imperial conflict took 
shape, Parliament ruled that all people leaving for the North American 
colonies from the British Isles and Ireland with intent to settle there 
were required to pay £50 per head. After the United States won its 
independence, growing anxiety in Britain over industrial piracy prompted 
stronger legislation and stricter enforcement. Exporting industrial 
equipment from textile, leather, paper, metals, glass and clock making 
was prohibited in the 1780s. The restrictions were particularly 
comprehensive in all that was connected with the textile industry, 
covering existing as well as future developments. Robert Owen, recalling 
his early days in England's textile industry, reported that in the 1780s 
the “cotton mills were closed against all strangers, and no one was 
admitted. They were kept with great jealousy against all intruders: the 
outer doors being always locked.” A £200 fine, forfeiture of equipment, 
and twelve months' imprisonment (or a £500 fine and forfeiture in the 
case of textile machinery) were laid down for the export or attempted 
export of industrial machinery. The export of steam engines was 
prohibited temporarily in 1785.
The founders knew of these restrictions, but they believed that for the 
US to survive politically and economically it must close the technology 
gap. And fast. Framers of the US Constitution unanimously approved 
Article I, section 8 which instructed the new government “To promote the 
progress of science and useful arts, by securing for limited times to 
authors and inventors the exclusive right to their respective writing 
and discoveries.” The Founding Fathers decided to provide a mechanism by 
which individual inventors and authors were rewarded for enriching 
American society with new devices or writings. Inventors and writers 
were the only occupational groups given special benefits in the United 
States Constitution. It is the only section of the US Constitution that 
specifies not only the responsibility of the future form of government, 
but also the strategy it should use to attain that goal.
A bill to establish a patent system was introduced at that first 
historical session of the United States Congress, but did not reach the 
floor. The initial proposal followed the English system enacted to 
attract superior European craftsmen to the kingdom. Men who introduced 
technological innovations hitherto unknown in England were rewarded with 
production monopolies. Likewise, in the proposed American bill 
introducers received patents of importation and enjoyed all the 
privileges of original inventors. The President, eager to expedite 
matters, addressed the issue in his first annual message in January 
1790. Washington requested the enactment of legislation encouraging 
“skill and genius” at home and “the introduction of new and useful 
invention from abroad.”
The dominant political figure of the Washington administration, Treasury 
Secretary Alexander Hamilton, shared these sentiments. Hamilton deplored 
American dependency on European imports. Only the development of an 
indigenous industrial economy could liberate the nation’s economy from 
the British hold. He ascribed the difficulties of American manufacturing 
to technological deficiencies and wrote that the gap between Europe and 
the United States would diminish “in proportion to the use which can be 
made of machinery.” He called on the Federal government to establish 
some “auxiliary agency” to coordinate the piracy of European technology. 
He proposed to market America’s industrialization in Europe so that 
skilled workers might be induced to circumvent national restrictions on 
artisans’ immigration. He proposed encouraging industrial immigration by 
offering travel subsidies for artisans and exempting from customs for 
their tools, implements of trade, and household goods. The “public purse 
must supply the deficiency of private resources,” he declared, for “as 
soon as foreign artists be made sensible that the state of things here 
affords a moral certainty of employment and encouragement – competent 
numbers of European workmen will transplant themselves, effectively to 
ensure the success of the design.” The industrialization of the United 
States, Hamilton concluded, would “in a great measure trade upon a 
foreign stock.”
Congress set out to write an American patent bill that will conform to 
the sentiments of Washington and Hamilton. The House of Representatives 
produced a version granting introducers of pirated technology the 
monopoly privileges accorded to original inventors. The Senate however, 
amended the bill to grant patent monopolies only to inventors of 
machines “not before known or used” and deleted the location qualifier 
of the house version--“within the United States.” The elimination of 
these four words was revolutionary. The first United States Patent Act 
broke with the European tradition of patents of importation. It 
restricted patents exclusively to original inventors and established the 
principle that prior use anywhere in the world was grounds for 
invalidating a patent. This criterion is particularly puzzling because 
the young nation needed to import technology to develop its industrial 
base. Moreover, the two most important members of the Washington 
administration, the President and Alexander Hamilton, supported granting 
patents of importation.
The sheer volume of applications made the first patent act an 
administrative nightmare. In 1793 Congress relieved members of the 
cabinet from wasting their time examining individual patents and 
assigned the duty to a clerk in the State department. A patent became a 
registration of a claim anyone could make provided he paid the $30.00 
fee, and that no similar claim was previously registered. Acquiring a 
patent depended exclusively on prompt completion of the necessary 
bureaucratic paperwork. The revised system maintained the dual demand 
for novelty and originality by requiring each patentee to take an oath 
that he/she was indeed the first and original inventor. The disputes 
likely to arise from this strictly bureaucratic registration were to be 
resolved by a board of arbitrators and the courts. A revision in 1800 
added the requirement of an oath by all applicants to the effect that 
their “invention, art or discovery hath not … been known or used either 
in this or any foreign country.”
Textual examination of the law might give the impression that the young 
republic rejected technology piracy and established a new intellectual 
property moral code. Before Americans break into their all too familiar 
self-congratulatory verse about the virtuous foreign policy of the 
republic, it is worthwhile to examine the actually operation of the 
American patent law.
First, we should remember that every founding father understood the 
inferiority of American technology, and believed that the key for 
American independence is in asserting economic independence from GB, and 
that the only way of doing this is by weaning the American consumers of 
products manufactured in England. And every founding father supported 
the piracy of European technology by whatever means necessary and most 
even actively engaged in that practice.
Further, in theory the United States pioneered a new standard of 
intellectual property that set the highest possible requirements for 
patent protection—worldwide originality and novelty. But the 
intellectual property laws Congress enacted in the first fifty years of 
national existence were but a smokescreen for a very different reality. 
The statutory requirement of worldwide originality and novelty did not 
hinder widespread and officially sanctioned technology piracy. William 
Thornton, who administered the United States patents for much of the 
life of the 1793 Act, did not insist on the oath of international 
novelty. It is indeed entirely possible that most of the applications 
received at the patent office were for devices already in use. In fact, 
since acquiring a patent involved little more that successful completion 
of paperwork, the Patent Act of 1793 permitted patentees to receive 
patents that infringed on the intellectual property of others. Moreover, 
the Act explicitly prohibited foreigners from obtaining patents in 
America for inventions they have already patented in Europe. This meant 
that while United States citizens could not petition for introducers’ 
patents, European inventors could not protect their intellectual 
property in America. The American patent system, then, sanctioned 
technology piracy as long as imported technology was not restricted 
exclusively to any particular individual introducer. Intellectual 
property in the early republic favored operators, internal developers, 
and entrepreneurs at the expense of investors and inventors.
A new understanding developed about the proper arena for technology 
piracy. A self-respecting government eager to join the international 
community on an equal basis could not flaunt its violation of the laws 
of other countries. Patterns established under the semi-anarchic 
revolutionary and Confederation circumstances were inappropriate 
behavior for a respected member of the international community. This was 
all the more important in the case of nascent Washington administration, 
whose chief task was establishing legitimacy at home and abroad. To be 
sure, clandestine appropriation of English technology not only persisted 
but also intensified. Every major European state engaged in technology 
piracy and industrial espionage in the eighteenth century, and the 
United States could not afford to behave differently. Yet, there was 
etiquette to this piracy. It was undertaken in secret and officials 
would deny any connection to such practices.
The British efforts to keep innovation from leaking across the Atlantic 
proved futile. Inventors and entrepreneurs easily found ways to 
circumvent laws that aimed to keep know-how and production at home. Tens 
of thousands of artisans crossed the Atlantic and brought with them 
their skills, methods and tools. Moreover, piracy became the de facto 
defining feature of American economic policy in the decades following 
independence. The United States emerged as the leading industrial nation 
in the world and Britain revoked its restrictions.
The young republic embraced a Janus-faced approach. In theory it 
pioneered a new standard of intellectual property that set the highest 
possible requirements —worldwide originality and novelty. In practice, 
the country encouraged widespread intellectual piracy and industrial 
espionage. Piracy took place with the full knowledge and sometimes even 
aggressive encouragement of government officials. Congress never 
protected the intellectual property of European authors and inventors, 
and Americans did not pay for the reprinting of literary works and 
unlicensed use of patented inventions.
Lax enforcement of the intellectual property laws was the primary engine 
of the American economic miracle. The early republic made no effort to 
enforce its groundbreaking patent laws. The first decades of national 
existence saw the most intense pursuit of English technology on the 
Federal and state level. These efforts were particularly successful in 
the textile industry as small-scale capacity to build and operate the 
newest mule spinning and Arkwright technologies sprang in a variety of 
spots in the northeastern urban centers.
Indeed, piracy was crucial to the development of the republic. Its book 
stores and libraries were largely composed of unauthorized reprinting of 
British authors—a phenomenon similar to the rampant piracy of music by 
consumers in today’s developing world. On the producer front, the 
violations were even more blatant. A British attorney reported in 1818 
that “European discoveries in art and science generally reach the United 
States within a few months after they first see the light in their own 
country, and soon become amalgamated with those made by Americans 
themselves.” In 1814, a French traveler noted that nearly all the 
machinery used in American manufacturing had “been borrowed from England.”
When the patent law was reformed again in 1836, it was no longer 
necessary for the nation to pretend it would protect the intellectual 
property of non-Americans. Indeed the 1836 act removed the prohibition 
on patents of importation. And whereas the 1836 act no longer restricted 
patents only to U.S citizens, it did set the registration fee for 
foreigners at 10 times the rate for Americans (and two thirds as much 
again if one were a British citizen.) In 1861 the act was reformed to 
give foreigners an almost equal footing. US copyright protection was 
restricted to US citizens even longer and when those were removed other 
regulations such as requiring the use of American typesets, delayed the 
American entrance to the Berne copyright convention till 1989 – more 
than 100 years after GB joined.
To a very large extent, the industrialization of the United States in 
first half of the nineteenth century was founded upon pirated know-how. 
In textile, some followed Robert Lowell’s path and managed to talk their 
way into factories, while others circumvented the restrictions on the 
export of machinery by shipping machine parts to the United States as 
separate components. As late as 1850 immigrants from the British Isles 
comprised more than three-fourth of the weavers and skilled workers of 
the textile industry of Germantown, Pennsylvania. Managers of American 
cotton mills in the first half of the nineteenth century were, for the 
most part, English immigrants because native experienced managers were 
rare. American glass manufacturers recruited European workers 
aggressively in the first two decades of the nineteenth century and by 
the 1820s were world leaders. Paper mills in New England and the 
Mid-Atlantic states relied on a constant stream of skilled European 
immigrants before local industry took off in the 1830s and 40s. Later in 
the 19th century, American steel industry was founded upon imported 
technology. In all these cases European know-how was instrumental in 
getting industries started and turning the United States into a leading 
industrial nation.
As these examples illustrate, the statutory requirement of worldwide 
originality and novelty for American patents did not hinder widespread 
American appropriation of innovations protected under other nations’ 
patent and intellectual property laws. In fact, once a technology was in 
the New World, its introducers could quickly claim it their own, and use 
the courts to discourage infringements. The Boston Manufacturing 
Company, a.k.a Boston Associates, registered nine patents and obtained 
the rights to two others. It hired the country’s most famous lawyer, 
Daniel Webster, and sued competitors for patent infringement. Claiming 
ownership of a pirated innovation was quite easy. Obtaining a patent 
under the 1793 act involved little more than filing the necessary papers 
and paying the $30.00 registration fee. The poorly staffed patent office 
was in no position to examine the merit of the nearly ten thousand 
patents it issued from 1793 to 1836. As one critic charged, most 
American patents registered with the patent office were at best only 
slightly different from known and operating existing machines. The 
mechanics of patent registration not only betrayed the spirit of the 
original legislation by granting patents to innovations of questionable 
originality, but also, in effect, allowed wealthy importers of European 
technology, such as the Boston Associates, to claim exclusive rights to 
imported innovations and use the courts to validate their claims and 
intimidate competitors.
A dual intellectual property regime fueled the 19th century American 
economic miracle. In theory, the nation was committed to protecting the 
intellectual property of authors and inventors, but authorities did 
little to enforce laws. By granting unenforceable monopolies to 
patentees, the U.S. acquired a reputation of being friendly to 
innovation while at the same time, by declining to crack down on 
technology pirates, it allowed for rapid dissemination of innovation 
that made American products better and cheaper.
 From the American Revolution to Crystal Palace exhibition of 1851, the 
United States technology caught up and surpassed its European rivals. 
The industrialization that took place along the northeastern seaboard in 
the first half of the nineteenth century facilitated a dramatic two 
third growth in per capita income. The United States economy grew faster 
and was more productive than any other nation in Europe. Contemporaries 
and historians have come up with a wide range of social, political and 
cultural explanations for this dramatic development. Some celebrate it 
as the ultimate manifestation of the virtue of the American spirit of 
enterprise and others argue that the blood and sweat of slaves provided 
the capital for the spectacular economic growth of the first half of the 
nineteenth century. What is often overlooked is the manner in which 
smuggled technology made for more efficient and more profitable 
industrialization. Tens of thousands of artisans crossed the Atlantic 
and brought with them their skills, methods and tools. American 
industrialists, scientists and intellectuals kept abreast of mechanical 
developments through trips to Europe and growing scientific exchange. 
Federal and states authorities were officially committed to respecting 
the intellectual property of others, yet in fact sanctioned smuggling of 
protected knowledge a huge scale. American investors and mechanics 
modified imported technology to local circumstances. The infant state of 
American know-how and the absence of established classes committed to 
earning their livelihoods from known and tried techniques freed 
innovators from whole sale adoption of imported technologies in favor of 
innovations Europeans often deemed too costly or impractical. Technology 
transfer, then, accounts not only for the rapid economic growth of the 
republic in the first half of the nineteenth century, but also for the 
experimental and innovative reputation of the “American system of 
manufactures.”
Crystal Palace turned out to be the “coming out party” for United States 
technology. In the span of seventy years an agricultural republic with 
some household manufactures that had more in common with the Middle Ages 
than with the industrial world, transformed itself into a world leader 
of cutting edge industrial technology. American machines and the 
“American system of manufacturing,” as the British press called it, 
became the model for worldwide imitation. Similarly to modern developing 
nations, early in its history the United States violated intellectual 
property laws of rivals in order to catch up technologically. 
Integration into the international community required that the 
government of the United States distance itself from such rogue 
operations. In the process the United States had come full circle. The 
fledgling republic, once committed to technology piracy had become the 
primary technology exporter in the world. The years of piracy upon which 
the new status was founded, however, were erased from the national 
memory. The intellectual debt to imported and pirated technology did not 
turn the United States into the champion of free exchange of mechanical 
know-how. As the diffusion of technology began to flow eastward across 
the Atlantic, the United States emerged as the world’s foremost advocate 
of extending intellectual property to the international sphere.

***

The developing world is taking a similar route. Formally, all members of 
the World Trade Organization promise to respect international 
intellectual property rights, but in practice developing nations do 
little to enforce those laws. Some companies plead with international 
agencies such as the WTO and the World Intellectual Property 
Organization to police the matter but with little success. Yet even if 
western political leaders were not reluctant to enter into international 
disputes over the protection of intellectual property, the American 
story should remind contemporary advocates of technology protectionism 
that that all these efforts are destined to fail. If past patterns are 
going to be repeated, within a short time, local entrepreneurs in the 
developing world will acquire, by whatever means, America’s trade 
secrets and produce the desired goods and services on their own.
Politicians anxious to stop the bleeding of American jobs or to protect 
the royalties of Hollywood studios should not erect ineffective 
expensive regulatory bureaucracies and charge them with impossible 
tasks. In the current business atmosphere corporations have little 
choice but take advantage of the lower wages in the developing world. In 
the current wealth discrepancy between North and South, leaders of 
developing nations would be outrageously irresponsible if they devoted 
any of their meager sources to protect the interests of the rich and 
powerful. And surely, as long as the income disparity between rich and 
poor persists, the temptation to pirate would triumph over all 
principled devotions to an abstract notion of intellectual property.
Western leaders should resist the political temptation to enact symbolic 
and futile legislation to prevent the diffusion of knowledge and focus 
instead on ways to encourage innovation at home. Protectionist 
legislation would do little to stop outsourcing at the cost of 
undermining the free flow of information. Staying ahead requires the 
U.S. to remain the center of creativity and innovation. The freedom to 
push the boundaries of our knowledge is the pre-requisite for our 
prosperity. Ultimately, devoting resources to trying to enforce Western 
standards of intellectual property in the developing world is not only 
hypocritical and sometimes cruel, but a futile act. Countries’ most 
valuable asset is not yesterday’s invention, but tomorrow’s innovation.
I don’t draw these historical parallels in order to condone piracy, but 
rather to point out the wrong-headedness of the West’s often 
self-righteous position on intellectual property. The United States 
emerged as the world’s industrial leader by illicitly appropriating 
mechanical and scientific innovations from Europe. The Europeans tried 
but failed to stem the tide, just as current national and international 
agencies pass resolutions condemning piracy, but can do little to stop 
it unless they consider the realities in which those in the developing 
world live.
There are two important lessons lesson here for the developing world. 
What worked for the United States was a seemingly contradictory system 
that protected intellectual property in theory, but did so only 
sparingly in practice. It makes sense for leaders of the developing 
nations to pay lip service to intellectual property agreements and 
occasionally raid a warehouse full of pirated CDs or prosecute a high 
profile pirate. United States history teaches that symbolic acts and 
principle talk, accompanied by lax enforcement, are indeed a winning 
combination.
The second lesson is of greater importance. The key to the American 
economic miracles was the immigration of millions who brought their 
skills and ingenuity to the United States. And they continue to come. 
Thanks to its prosperity, the contemporary United States now easily 
attracts the best and brightest minds from the rest of the world to its 
shores. And even more than two centuries ago, human capital is central 
component of knowledge in the digital age. Immigrants form the rank and 
file of teaching and research at departments of natural sciences in 
American universities. Engineers from all corners of the globe have 
turned Silicon Valley into the center of innovation and creativity of 
our time. And as America prospers, those left behind in the native lands 
wonder how to stop the brain drain and how to persuade their brightest 
not to opt for research and business opportunities in North America. 
Today’s developing nations have few enticements to offer. In the 
competition for the minds that produce intellectual capital, they are at 
a distinct disadvantage.
Few developing nations, most notably India and Brazil, have the capacity 
to use the fruits of piracy to generate innovation at home. Most, 
however, lack the financial and scientific infrastructure required and 
their efforts begin and end with piracy for the purpose of importing 
existing technologies. Developing nations, however, must realize that 
they will not be able to find prosperity through piracy alone. There 
will always be a limit on the usefulness of transferred technology. 
Developing nations will remain importers of skill and its product, 
technology, for as long as their citizens believe that the developed 
world is the only place they will find freedom and its product, opportunity.








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US Path to Wealth and Power
Doron Ben-Atar
Fordham University