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IPRs costly for Third World, don’t help reduce poverty

An independent panel established by the British government has found that the intellectual property rights system can adversely affect developing countries by increasing the costs of access to products and technologies vital for development. Stressing that higher intellectual property standards are not necessarily beneficial to industrializing economies, the expert group underlines the need for intellectual property regimes to be crafted according to a country’s state of development and its particular socioeconomic conditions.


GENEVA: International regimes of intellectual property rights (IPRs) impose costs, such as higher-priced medicines or seeds, for most developing countries, making more difficult the reduction of poverty, a target set in the Millennium Development Goals by the UN General Assembly, the  independent Commission on Intellectual Property Rights has said.

The final report of the Commission, which was set up by Clare Short, the UK Secretary of State for International Development, and chaired by John Barton, Professor of Law at Stanford University, was published on 12 September. (The full report and supporting papers are available at www.iprcommission.org.)

According to the chairman, the Commission was given absolute freedom to choose its own agenda and programme of work and reach conclusions and recommendations.

In a preface, Prof Barton says that the Commissioners decided early on not just to attempt to suggest compromises among different interest groups, but to be as evidence-based as possible, which made their task challenging, since the evidence is often limited or inconclusive. However, “when there is so much uncertainty and controversy about global impact of IPRs, we believe it is incumbent on policymakers to consider the available evidence, imperfect as it may be, before further extending property rights in scope or territorial extent.”

The other members of the Commission were: Mr Daniel Alexander (Barrister specializing in intellectual property (IP) law in the UK), Prof Carlos Correa (an IPR expert and Director of the Masters Programme on Science and Technology Policy and Management, University of Buenos Aires, Argentina), Dr Ramesh Mashelkar (Director-General of the Indian Council of Scientific and Industrial Research and Secretary to the Department of Scientific and Industrial Research, India), Dr Gill Samuels (Senior Director of Science Policy and Scientific Affairs (Europe) at the pharmaceutical TNC, Pfizer Ltd), and Dr Sandy Thomas (Director of Nuffield Council on Bioethics, UK).

In a foreword to the report, Sir Hugh Laddie, the UK High Court Patents Judge, has said that the Commissioners had consulted widely, and the resulting report is “most impressive”.

He adds: “There are few concerned with IP who will find this report makes comfortable reading... Perhaps there is something about the era we live in that has encouraged blind adherence to dogma. This has affected many walks of life. It has certainly affected the whole of intellectual property rights.”

On the one side, in the developed countries, there is a powerful lobby of those who believe that all IPRs are good for business, benefit the public at large and act as catalysts for technical progress. And if IPRs are good, more IPRs must be better, is their view. On the other side, in the developing world, there is a vociferous lobby of those who believe IPRs will cripple development of local industry and technology, and harm local populations and benefit none but the developed world. So firmly and sincerely are these views held that at times it has appeared that neither side has been prepared to listen to the other. “Persuasion is out, compulsion is in.”

Whether IPRs are good or bad, the developed world has come to an accommodation with it, and by and large has the national economic strength and established legal mechanisms to overcome problems caused (by the IPRs). Insofar as their benefits outweigh the disadvantages, the developed world has the wealth and infrastructure to take advantage of the opportunities provided.

“It is likely that neither of these holds true for developing and least developed countries,” Luddie adds.

The Commission’s establishment must be viewed against this background of how national IPRs could best be designed to benefit developing countries. Inherent in that remit was the acknowledgement that IPRs could be a tool which could help or hinder more fragile economies. The resulting report was most impressive.

“Stronger protection is not necessarily better”

In the 180-page report containing some 50 recommendations, the Commission has called on developed nations, the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO) to take the circumstances of poor countries and their development needs properly into account when seeking to develop international IP systems.

“Developed countries,” Barton says, “often proceed on the assumption that what is good for them is likely to be good for developing countries. But, in the case of developing countries, more and stronger protection is not necessarily better. Developing countries should not be encouraged or coerced into adopting stronger IP rights without regard to the impact this has on their development and poor people. They should be allowed to adopt appropriate rights regimes, not necessarily the most protective ones.”

The Commission concludes that the intellectual property rights system as a whole is less advantageous for developing than for developed countries in many areas of importance to development, such as health, agriculture, education and information technologies. The system increases the costs of access to many products and technologies that developing countries need.

The Commission concludes that the extension of IP rights globally will diminish the degree of competition worldwide for many products and services. For example, the degree of competition in developing-country markets for patented pharmaceutical products will diminish in 2005 when major suppliers of generic versions of such medicines will have to apply patent protection under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

“This is particularly important for those countries where competition is already weak,” said Barton. “Developing countries participate in global intellectual property systems as ‘second comers’ in a world that has been shaped by ‘first comers’,” he said.

“They are now being urged to adopt a complex set of rules more suited to advanced economies. When their economies were at comparable stages of maturity, most developed countries did not follow the stringent intellectual property standards they now advocate for developing countries.”

The Commission has called on developed nations to take the economic needs of developing countries fully into account when seeking to craft international IPRs systems. Developed countries should pay more attention to reconciling their commercial self-interest with the need to reduce poverty in developing countries, which is in everyone’s interest, says the report.

Higher IP standards should not be pressed on developing countries without a serious and objective assessment of their impact. The impact of IP rights on poor people will vary according to socioeconomic circumstance, and IP systems should be tailored to a country’s state of development and its particular circumstances, according to the report.

The Commission has called on the international institutions principally responsible for the development of global IP policy, the WTO and WIPO, to take into account the needs and interests of those adversely affected by IP rights, not just the interests of potential beneficiaries of those rights.

According to the report, “The voice of developing countries and, in particular, consumers needs to be better heard and the decisions taken better informed by evidence of the impact of IP rights in those countries. WIPO must give explicit recognition to both the benefits and the costs of IP protection for developing nations.”

“Equally, this applies to the evolution of policy with respect to the digital media and the Internet,” said Barton. “The temptation to impose very strict protection because of the ease with which software and other digital media can be copied may diminish the very real benefits they could bring to developing countries, particularly in accessing educational and scientific documents at low cost.”

Access to medicines

On the issue of access to medicines, the Commission has concluded that without the incentive of patents, it is doubtful the private sector would have invested so much in the discovery and development of medicines, many of which benefit both developed and developing countries.

However, the report finds that the IP system “hardly plays any role in stimulating research on diseases particularly prevalent in developing countries” unless there is also a substantial market in the developed world.

In fact, says the report, as IP rights are strengthened globally, the overall cost of medicines in developing countries is likely to increase unless steps are taken to counteract this trend.

The report suggests that developed and developing countries adopt a range of policies to improve access to medicines. One means of obtaining medicines at lower prices, amongst others discussed in the report, is for countries to use the mechanism of “compulsory licensing.”

Compulsory licensing allows a country to contract a third party to manufacture a patented product if there are good reasons to do so (for instance, if the government considers the price of a medicine unjustifiably high). In fact, the United States government envisaged its use when negotiating the price of Cipro following the anthrax attacks last year.

The report also recommends use of differential pricing, which would allow prices of drugs to be lower in developing countries while higher prices are maintained in developed countries. If this is to work, says the report, “then it is necessary to stop low-priced drugs leaking back to developed countries.”

Developing countries should also aim to facilitate in their legal systems the ability to import patented medicines if they can get them cheaper elsewhere in the world.

Such a policy, the so-called parallel importing and exhaustion of rights, is not covered by the TRIPS Agreement, which explicitly says that it is left to each country and its policies. However, using other instruments, major industrialized nations, in particular the US, threaten action in the WTO; and whether or not they will really succeed in such disputes, this has a chilling effect on policymakers in the developing world.

The report comes on the eve of crucial meetings of the WTO negotiators trying to put flesh and blood into the Doha Ministerial Declaration on the TRIPS Agreement and Public Health. The US, by offering a so-called moratorium on raising disputes against the least-developed and sub-Saharan African countries and offering aid, is trying to head off African nations from backing a developing-country initiative at the WTO. Under this initiative, those countries which do not have the capacity to manufacture and supply their own markets with essential drugs can issue a compulsory licence to a producer in another country (already allowed under TRIPS). However, the licensee in that country may not be able to produce and export. The simplest solution for this appears to be to exercise the option of interpretation to enable countries to utilize the general exceptions under Article 30 of the TRIPS Agreement.

But the US, and the transnational pharmaceutical industry, are trying to prevent this by invoking some misleading arguments to Africans and persuading them to go the way of amending Article 31 for compulsory licensing, which can be held up by the need for consensus in adoption and then ratification and acceptance.

The Commission’s report says that developing countries should also make provisions in their law that will facilitate the entry of generic competitors as soon as the patent has expired on a particular drug. “In developed countries, generic competition causes prices to fall quite sharply,” said Barton. “In the absence of patents in developing countries, more people would be able to afford treatments they need.”

The Commission recognizes that the IP system is one factor among several that affect poor people’s access to healthcare. Other important constraints to access to medicines in developing countries are the lack of resources and the absence of a suitable health infrastructure (including hospitals, clinics, health workers, equipment and an adequate supply of drugs) to administer medicines safely and efficaciously.

Traditional knowledge

On the subject of patents on plants and traditional knowledge (TK), the report discourages developing countries from providing patent protection for plants and animals, as is allowed under TRIPS, because of the restrictions patents may place on use of seeds by farmers and researchers.

It recommends that developed countries respond constructively to the concerns of developing countries about the patenting of their genetic resources and associated traditional knowledge.

Patent applicants should be required to disclose the geographic source of the genetic material from which their “invention” is derived, the report says. In this way, developing countries can be informed of proposed patents that incorporate their resources and take action if their rights have been overlooked.

The report urges other reforms as well to make it harder for commercial interests to claim rights on what is already known in developing countries (such as knowledge of the medicinal value of a native plant). According to patent law, IP rights cannot be claimed on “prior art” knowledge already in the public domain. But some countries, the US for instance, do not recognize such knowledge when it comes from outside their own borders. Therefore, the report recommends a broader definition of prior art.

The Commission endorses the cataloguing of traditional knowledge with the appropriate consent of the holders of the knowledge. Examiners who weigh the validity of patent applications could then check claims of “invention” against existing traditional knowledge.

“India has been working with other countries to catalogue traditional knowledge, particularly following our experience with invalid patent claims on turmeric and basmati,” said Ramesh Mashelkar, a Commissioner who is Director-General of the Indian Council of Scientific and Industrial Research and Secretary to the Department of Scientific and Industrial Research, India.

Promoting development

On TRIPS, the Commission recommends that developing countries take advantage of the flexibilities built into the international TRIPS treaty. It also recommends that least developed countries be allowed a longer period of time to phase in TRIPS provisions until at least 2016.

“TRIPS allows compulsory licensing and other means of promoting lower-priced generic drugs and increased competition - these are valuable tools for developing countries,” Barton said. “But countries should have to apply TRIPS based on their own development milestones, not based on an arbitrary date.”

Developing countries need to shape their IP laws to promote development generally and keep in mind some of the negative impacts of overly generous IP protection, according to the report.

For instance, as some developed countries have found, the patenting of technologies needed to conduct research can provide an incentive for research, but it can also inhibit research which needs to make use of those protected technologies. The report considers how, for example, the search for an effective malaria vaccine may be complicated by the large number of patents on the genetic material required in the research. Developing countries should also restrict the patenting of minor advances, which can create a legal maze of patent claims, according to the report.

“But overall, IP rights are only one factor among many in the development process,” said Gill Samuels, a Commissioner and Senior Director of Science Policy and Scientific Affairs (Europe) at Pfizer Ltd, UK. “Their importance should be recognized, but not overstated. Even the complete absence of IP rights would not solve the lack of sufficient resources for adequate health facilities, health workers and medicines for all in developing nations.”

In particular, countries need other measures to stimulate development in the interests of poorer people, including increased public funding for health and agricultural research, Barton said. “The IP system is not well suited to encouraging this.”

Neither is the international IP system particularly effective at promoting the transfer of technology or foreign investment, despite this being an objective of TRIPS, the report found.

To accomplish these goals, countries need a combination of increased international funding; specific initiatives to support research into areas that lack a lucrative market (for instance, many drug companies hesitate to develop malaria drugs or vaccines because most countries that need them cannot afford them); and support for increased education and training within developing countries.

The report notes, in assessing the opposing arguments on the IPRs issue, that it is important to remember the technological disparity between developed and developing countries as a group. Low- and middle-income developing countries account for 21% of world GDP but less than 10% of worldwide research and development expenditure. The OECD countries spend far more on R&D than India’s total GNP. “Almost without exception, developing countries are net importers of technology.”

The report concedes the diversity of developing countries in respect of their social and economic circumstances and technological capabilities.

More than 60% of the world’s poor live in countries with significant scientific and technological capabilities, and the great majority of them in China and India. These two, along with several other smaller developing countries, have world-class capacity in a number of scientific and technological areas including, for instance, space, nuclear energy, computing, biotechnology, pharmaceuticals, software development and aviation.

By contrast, about 25% of the world’s poor live in sub-Saharan Africa including in South Africa, mainly in countries with weak technical capacity.

In 1994, China, India and Latin America together accounted for just 9% of worldwide research expenditure, while sub-Saharan Africa accounted for only 0.5%, and developing countries other than China and India, for only about 4 percent. Thus developing countries are far from homogeneous - a self-evident fact that is often forgotten. They have varying scientific and technological capacities, social and economic structures, and inequalities of income and wealth. The determinants of poverty, and the appropriate policies to address, will vary according to the countries, the Commission says.

Policies required in countries with relatively advanced technological capabilities, like China and India where most poor people happen to live, may well differ from those in others with a weak capability like sub-Saharan Africa. The impact of IP policies on poor people also varies according to socioeconomic circumstances. “What works in India will not necessarily work in Brazil or Botswana,” the report says.

Drawing attention to the increasing concerns in the US that protection of patents, copyright and other rights under the influence of commercial pressures, insufficiently circumscribed by considerations of public interest, is being extended more for the purpose of protecting value of investments than to stimulate invention or creation, the Commission says: “We think the concerns about the impact of IP in the US and other developed countries are important for developing countries as well. But we consider that, if anything, the costs of getting the IP system ‘wrong’ in a developing country are likely to be far higher than in developed countries.

“Most developed countries have sophisticated systems of competition regulation to ensure that abuses of any monopoly rights cannot unduly affect the public interest. In the US and EU, for example, these regimes are particularly strong and well-established.

“In most developing countries this is far from being the case. This makes such countries particularly vulnerable to inappropriate intellectual property systems. We consider that developing countries can seek to learn from the experience of developed countries in devising their own IP systems suitable to their particular legal systems and economic situation.” (SUNS5190)                            

From Third World Economics No. 289 (16-30 September 2002)

 

 


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