Dark side to patent power

by Erica Cervini

  Australian Financial Review, 10 April 2006
The theory goes that patents protect intellectual property, but a historical study of the dye industry shows they can also stifle competition. Johann Peter Murmann has tracked the synthetic dye industry from 1857 to 1914 in Britain, France, Germany, Switzerland and the US. He recently joined the Australian Graduate School of Management in the University of NSW, in Sydney. His study is now in a paperback version of his book, Knowledge and Competitive Advantage: The Co-evolution of Firms, Technology and National Institutions. Murmann's book shows that while Britain and France were early leaders in the dye industry, their patent laws eventually created monopolies that stifled competition. In contrast, Germany did not have patent laws until 1877, but had a strong tradition of chemical research in its universities, which produced technical knowledge, an open market and strong competition. According to Murmann's work, this meant that when British and French patents ran out, the Germans were able to dominate the industry, to the surprise of many. One of the key propositions of this book is that the creation of German dominance in the synthetic dye industry before World War I cannot be understood without coming to terms with successful and unsuccessful patent law, science funding and tariff-lobbying efforts in the three countries.Murmann believes that his study of the synthetic dye industry has important lessons for today's biotechnology and packaged software industries. He has also begun a new project examining the development of the global pulp and paper industry over the last 200 years. Before arriving at the AGSM, Murmann worked at the Kellogg School of Management in the United States.While at Kellogg, Murmann won awards for his research on the dye industry.