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Ron Layton is creating global mechanisms that provide poor producers in developing countries with a full range of intellectual property tools that allow them to develop sustainable businesses and compete more fairly in overseas markets.
The New Idea
Ron is using intellectual property as an economic strategy to empower the world’s poor. What Ron sees, and many others do not yet, is that intellectual property is not just a legal technicality by which big businesses fight over copyright infringement, or exploit the indigenous assets of the poor. It is a powerful business model that helps producers deal with the fundamental economic problems that threaten their livelihood.
For example, today farmers in Ethiopia sell their high-quality, specialty coffee to a long chain of middlemen to get to the final consumer. Although there are strong consumer markets for their specialty coffees, named after the regions of origin, the farmers earn a smaller proportion of the coffee price than ever. Ron wants to help the farmers secure ownership of the “brand,” that marks their coffee as distinctive to consumers. The identification of the product with the place is their asset, as much as the brand name Coca-Cola is an asset. Ownership opens up a range of commercial options to the farmers: they can progressively reduce the number of middlemen and increase their share of coffee income; they can increase homeland processing by improving the return on investment at higher prices; they can control exclusive rights to supply their product to distributors. They can also ensure that their hard work in maintaining coffee quality over many years is reflected in greater income security. In short, they can benefit from the more sophisticated processes of the global economy.
Ron’s vision has enormous implications. It offers entire countries, especially the poorest countries reliant on commodity export income, the opportunity to reduce the risk of the social and economic disruption that occurs when factories move abroad or markets collapse. It can stimulate investment in citizens’ innate creativity, in education and small business, and propel economic policy that promotes creative designs rather than manufacturing.
To achieve this sea change requires the birth of a new field. By aligning producers’ organizations, intellectual property experts and policymakers nationally and internationally, Ron is shaping this new field and relating it to existing people, professions, and institutions.
Even when poor producers in developing countries—farmers, artisans, some factory workers—supply competitive goods to wealthy overseas markets, they have little access to the ultimate value of what they produce. As small suppliers, their share of the profit is meager. Moreover, they are most vulnerable to economic and business perils: a commodity glut, an economic slump, tough competition from abroad. They suffer disproportionately compared to others in the supply chain.
Globalization adds even more pressure. As the world becomes a single giant labor market, distributors and manufacturers inevitably engage in a “race to the bottom,” seeking to find the lowest-cost supply. Whether the product is coffee or blue jeans or animated cartoons, countries that once had secure export income by supplying these products to the world have lost market share to other countries scrabbling over the same low-return markets. This fluidity is enabled by two realities in the global marketplace. The first is that the retailers have no obligation to the supplier to maintain a long-term relationship. The second is that the suppliers have no access to retail consumers and no ways to influence them.
The “Fair Trade” movement has arisen to mitigate some of these structural problems. Essentially, Fair Trade groups—or “alternative trade organizations” (ATOs)—help small producers circumvent the middlemen and sell directly to consumers, supported by Fair Trade coalitions who help them develop and market their products. In addition to offering market information, fair prices, advances against future production, and skill training, ATOs also sustain their purchasing over time, thereby insuring reliable income in a volatile economy. The benefit of Fair Trade is that producers earn higher income and have a more reliable relationship with the intermediating agency. There are two disadvantages, however. One is that Fair Trade works by helping producers step out of mainstream commerce; Fair Trade is a niche. The other is that the Fair Trade label is not available to most producers because of capital and capacity constraints on the importers’ businesses and because Fair Trade demand is still modest.
Fair Trade products have captured only a tiny share of the handicraft markets, and growth capacity is also limited by capital constraints. Additionally, such products are easily priced out of the market when competitors copy the designs and undercut the price. As soon as a furniture item designed by an artisan, for example, begins selling well through Fair Trade importers, companies in developed country markets will copy the design, have it manufactured cheaply or hand produced in sweatshops, and, unencumbered by the social responsibility of Fair Trade, sell it for a third of the artisan’s price.
There is a vast oversupply of potential Fair Trade products, and demand—although growing rapidly in the U.S. and Britain—is far short of the available supply. Another solution is needed for the host of small producers who can’t sell their entire production under the Fair Trade brand.
Ron sees that the way to make intellectual property work for the poor is to develop understanding of its uses among producers, equip professionals in the intellectual-property field to serve them, and educate policymakers who specialize in export industries, poverty alleviation, and economic development.
Fair Trade organizations have, in fact, been important allies for Ron in that they have verified the fair conditions of Fair Trade certified organizations of producers. Other producers are organized in cooperatives and trading situations that ensure poor producers benefit if the export market conditions can be improved. Ron’s nonprofit company, Light Years IP, is working on several projects in various parts of the world with organizations that ensure that increased trade will alleviate poverty for small producers.
There are two ways producers can take advantage of the role of intellectual property in global trade to seize higher incomes. First, they can capture the IP elements of their physical products—such as licensing or trademarking a product brand. Second, they can develop new designs to export in place of low-value agricultural or manufacturing products.
But taking advantage of these opportunities requires capacity within the market countries—e.g. to register trademarks, identify markets, etc.—that producer organizations rarely have. Therefore, Light Years has built a network of intellectual property professionals and marketing specialists who are pioneers in this new area. At these early stages, each Light Years demonstration project is an opportunity to raise awareness in developing countries of the use of such skills. Where possible, a training component ensures that local knowledge of licensing mechanisms is increased.
Ron is building a Fair Trade component into trade in intellectual property (nonphysical) products. Light Years adopts Fair Trade principles for its agency functions, representing the inventions and the designs from developing country creators for licensing in developed country markets. As this trade grows, Ron expects that the existence of a single Fair Trade IP agency can force conventional IP agencies to change the unreasonable terms offered to designers, such as to music creators in West Africa.
Finally, Ron intervenes at the level of development policy where decisions about the factors affecting production get made and development projects are designed. Most development efforts focus on increasing agricultural production to gain greater share in the commodities export market, but volatile commodity prices mean producers have little income security. They need a way to sustain prices and market share. IP exports can help create this income sustainability. Ron is working directly with trade and development ministries in developing countries to increase their knowledge of the uses of IP and these new policy options. Ron also writes for and engages in debate with organizations such as the World Bank and the World Intellectual Property Organization and various aid programs to shift some of their interventions to this higher value area by becoming trainers who help producers access professional services in IP.
Ron Layton’s father left home at age 12 to join a naval academy, become a sailor, and support his mother. By the late 1930s, he was 25 years old and had everything to look forward to. He had met a charming woman while playing cricket on a trip to New Zealand and was corresponding with her regularly. World War II changed everything. For six years Ron’s father sailed on naval convoys across the Atlantic and Mediterranean. Though he managed to survive as ships sunk beneath him and his friends and comrades died by the dozens, he bore the emotional scars of a long, hard war. When the war ended, he returned to New Zealand, married his sweetheart, and started over. He studied professional engineering at night school and went on to complete a career of public service.
Ron describes his mother as a “spontaneous, vivacious” woman whose optimism and spirit was a constant tonic to his father’s reserved and quiet condition. She was an active citizen—one in a generation of women whose creativity and leadership were unleashed by the wartime need for civil organizing. She managed the Red Cross’s New Zealand chapter. Deeply involved in the Christian Science movement, Ron’s mother was both a faith healer and a social worker. She also introduced Ron to the dignity of Maori elders and to the racial bridge-building initiatives of the time.
Ron was influenced by each of his parent’s very different ideas about public service. His father’s sense of sacrifice and his mother’s dedication to helping others contributed to Ron’s ideas about public service. New Zealand in the 1960s was, in Ron’s words, an almost utopian society. Unemployment was less than half a percent. Crime was low and the social net was very effective. Race relations were growing stronger from a base level much better than in Australia or the U.S. This may be why Ron, at age 15, reacted so strongly to creeping reactionary nationalism and became an activist for political and social issues. Ron was active in New Zealand’s antiapartheid movement in solidarity with black South Africans. In 1972, he and a small group of activists stood for parliament for the first “green” party in New Zealand history, a political initiative that changed the environmental policies of the government.
Ron studied economics, law, and advanced mathematics, and in 1975 joined the foreign service. He took a posting in Niue, the first of several roles working on economic development in Oceania and Polynesia. Ron was quick to realize that none of the economic models that dominated development work were going to apply. How do small island nations, lacking infrastructure, thousands of miles from markets, with populations in the several thousands, and only rudimentary cash economies, fit into development models based on export agriculture and manufacturing? While his governmentwas funding the export of passion fruit as a commodity, Ron began looking into the nation’s intangible assets. A small country’s ability to issue stamps and coins are a source of revenue more significant than to a large country. By issuing unique designs and denominations for the international collector market, Niue could earn export income without restructuring its economy and altering its social structures. Ron studied various forms of what he calls “jurisdictional intellectual property,” the ability of a state to issue licenses and earn income from various nationally owned rights.
Ron sensed that there was an important lesson for the whole world in these experiments, but he also knew that most economies are infinitely more complex than the island nations where he had been working. Ron knew theory, he knew people, and he had some experience with government; what he lacked was a grounding in business. Ron left government service. His first venture, an effort in the mid-1980s to consolidate several computer retailers into a single national brand, expanded rapidly but ultimately failed to acquire enough stores and sank.
Before the 1987 stock market crash, Ron gained some highly valuable experience in his two years of running a large portfolio management company. He then focused his attention on international export business in intellectual property, with a clear long-term plan to put this direct knowledge to work in developing countries at the right time.
Ron set up a company to invest in film production and to distribute licensing rights worldwide, ultimately reaching 100 countries in television distribution. This experience achieved Ron’s goals of tying together elements of value to his ultimate work in development: the business of intellectual property, international markets, and deriving value from creativity. By 1999, Ron was ready to step out of the business and carry out his long-planned public mission. The intellectual-property debate on the IP obligations and developing countries was raging, but the issue was exploitation by foreign interests, not how to use IP to grow export income for poor producers.