Patent systems are designed with the main objectives of incentivizing innovation; incentivizing development and commercialization of inventions, inducing disclosure of an invention, and enabling orderly development of broad prospects. Initially, the concern was restricted to the domain of national territories so as to encourage local inventive and innovative activities. Later on, in parallel with the expansion of industrialization and international trade, the concern began to go beyond national territories. At this stage, the urgent need of protecting patent rights as well as the rapid increase of international movement of goods became more imperative than ever before. The conclusion of the 1883 Paris Convention on Industrial Property Protection was the reflection of earlier days’ concerns. The dramatic turning point in various phases of international patents development was the Trade Related International Property Agreements (TRIPS) that laid down substantive principles that all members of the WTO should respect. It substantially impacted international society as the TRIPS signaled the inevitability of a more harmonized and strong global patent system.

Nowadays, it is apparent that most countries and companies consider patents as very important tool for economic development, as we can see that international patent application has increased by 75% for last 10 years. Conflicts and competitions over international patent reform are becoming intense as international transaction or trade becomes more affluent. On one hand, the dissatisfaction about ineffective and inefficient protection by the fragmented patent system had called for the discussion for international patent harmonization. Accordingly, developed countries have initiated international discussion to harmonize several issues of domestic discretion such as the technical character of inventions, definition of prior art and exclusions from patentability. Many developing countries, however, are strongly against this idea, claiming that the harmonization would only benefit a few developed countries at the expense of the developing countries. For these reasons, in the 1950s, a great number of newly independent developing countries fought to free themselves from the Paris conventions to which their colonial masters had committed them. Although membership in the conventions may have served the economic interests of the colonialists, the newly independent nations did not believe that it served their own. Moreover, they even argued that that the United States was the major beneficiary of TRIPS agreement, whereas developing countries are major contributors.

To confront this conflicts and competitions, it is necessary to analyze the economic aspect of patent harmonization from both countries’ point of view. The industrialized countries argued that only if the developing countries adopted strong intellectual property protection could they hope to attract the foreign direct investment essential to their economic development. However, it is still arguable whether the strong intellectual property regime can contribute foreign direct investment.