The case for non-discrimination in the international protection of intellectual property

We evaluate the case for non-discrimination in the international protection of intellectual property. If trade is not subject to any frictions then requiring national treatment (NT) in patent protection does not have any consequences for innovation (and welfare) since unfavorable discrimination abroad is fully offset by favorable discrimination at home. In the presence of trade frictions, however, such international offsetting in patent protection is incomplete and innovation incentives are actually lower under NT. The formation of a free trade agreement increases the effective global protection available to members without affecting the protection available to the non-member.