Is Legal Harmonization Always Better? The Counter-Case of Utility Models

Policy makers and international institutions have long maintained that the global business environment is best supported when countries harmonize by adopting substantially uniform legal structures. This is particularly true in the context of intellectual property rights. When such national systems are similar, we believe that investment is undergirded and market participation is facilitated. However, this assumption may be incorrect in some cases. Marginal disharmony in certain intellectual property rights may provide countries space for experimentation while not impeding effective management of global intellectual property portfolios at the firm level. As evidence, we look to the utility model. This long-standing form of invention right is conspicuously and surprisingly unstandardized across the world, yet our analysis, using PATSTAT data, reveals that firms are able to negotiate this disharmony effectively. We employ a novel empirical method that tracks U.S.-priority patents to establish that firms use utility models to optimize their overall appropriability needs by region. Our study finds evidence that a firm may choose standard patent protection in one region and utility model protection in another, even though standard patent protection is available in both settings. We propose that a “zone of appropriability preference” exists when utility models and standard patents overlap, and this zone provides important strategic opportunities to firms with global intellectual property portfolios. Our study thus provides an important counter-case for harmonization of national intellectual property laws. As a result, we suggest that such efforts be undertaken with more caution; in some cases, harmonization may do more harm than good.