TWN Info Service on WTO and Trade Issues (May05/8)

11 May 2005

Contrasting views continue at WIPO seminar on IP and Development

The international seminar on Intellectual Property and Development held at WIPO headquarters in Geneva pn 2-3 May 2005 saw some interesting exchanges of views and experiences on its second day, with contrasting points made by speakers, chairpersons and participants from the floor.

The seminar was organized by the World Intellectual Property Organisation (WIPO) jointly with UNCTAD, WHO, UNIDO and the WTO, as part of the activities relating to the WIPO Development Agenda initiative launched by some developing countries at the WIPO General Assembly last October.

Below is a report on the second day of the WIPO seminar. It was first published in the SUNS (South North Development Monitor) and is reproduced here with permission.

With best wishes
Martin Khor


Contrasting views continue at WIPO development seminar

By Meena Raman, Geneva, 4 May

The international seminar on Intellectual Property and Development saw some interesting exchanges of views and experiences on its second and final day (3 May) with contrasting points made by speakers, chairpersons and participants from the floor.

The seminar was organized by the World Intellectual Property Organisation (WIPO) jointly with UNCTAD, WHO, UNIDO and the WTO, as part of the activities relating to the WIPO Development Agenda initiative launched by some developing countries at the WIPO General Assembly last October.

At a final session, which was a general discussion on issues raised at the seminar, the Chair, Douglas Lippoldt of the OECD Trade Directorate, said the main question was how to exploit IP that is friendly to development and that could see the developing countries gain and advance and close the gap with the developed countries.

Referring to the previous sessions of the day, on cases of successful use of intellectual property (IP), he said, "we don't have a road map that is universally applicable." The answers are complex, and IP policy must be tailored to each country and the problems it is facing.

He said an OECD empirical study had shown that an increase in IP strength is linked to increase in FDI stock, but this was not applicable everywhere as responses differ depending on how the investor views the developing country concerned.

Speaking from the floor, Martin Khor of Third World Network said he agreed with the Chair that the crux of the meeting was how to establish an IP system that was friendly to development, benefit the developing countries and help close the North-South gap. He said that IP has an important role, if the balance is right. The question is how to get the balance right.

One key balance is that between the interest of the IP holder who has a monopoly, and the interests of users and the public, as well as development needs. This balance would be different in developed and developing countries, because of certain characteristics and differences between the two.

Khor said that on the one hand it is recognized that innovators need to charge more than the normal price for a short time to enable profits to cover the innovation cost. But if this line is crossed and the IP holder charges excessive prices to make exorbitant monopoly profits and for too long, then there is no longer the balance sought for. It was thus important for the IP system to prevent this kind of imbalance.

Khor added that the balance is also upset if IPRs are too easily given, for example, for trivial purposes or to the wrong persons, or if the IP holders use their IP as a tool to suppress competition and to harass their competitors. For example, there has been increasing debate in the US if its patent system has gone too far in providing too many bad patents and enabling patent holders to successfully take up court cases.

He said that there is a special dimension of balance as far as developing countries are concerned, which thus have to be taken into account when discussing the development dimension of IP. Most patents in developing countries are owned by foreigners, while their own citizens hardly own any patents abroad. There are many consequences. There is an outflow of foreign exchange, estimated at $60 billion extra a year resulting from TRIPS.

In addition, local researchers and companies find it difficult or are not able to use patented material for their innovation or as production inputs. Local firms are unable to produce the patented product. There is an adverse effect on the competitiveness or viability of local firms.

In relation to the wrongful patenting of biological resources and traditional knowledge, there is the additional situation of foreigners patenting these even in the countries of origin themselves, and thus ironically the local people could not make use of the patented products or knowledge that actually originate with them.

Achieving balance is thus made more difficult in developing countries, since the competitiveness of local firms may be hindered by foreigners owning the patents in the countries. All these factors have to be carefully considered if a development dimension or agenda is to be incorporated in the IPR system globally and nationally.

An official of the European Patent Office said the debate on IPRs had often been too ideological. In reality there is no system that fits all and what was key is the possibility of developing a dynamic industry in the country. "We can create a win-win situation in a non-ideological way, and if it works for your country, then that is good. It is in the interest of Europe to make the system work in different countries."

He referred to an earlier presentation by an African speaker that protection reduces a developing country's ability to learn, and said that this could not be an obstacle because there were only a few hundred patents a year registered in the region, thus no one is patenting there and thus the constraint is an ideological one. Regarding technology transfer, the European Patent Office had been willing to transfer scientific knowledge, but there had been no demand and thus it was not supplying the information.

In responding, Prof. B. Nyasse of the University of Yaounde, Cameroon said if you look at it as an ideological debate, you would create more problems. It was more useful to be concrete as IP is a very sophisticated problem, and even in developed countries it is not a simple matter and thus there were legal disputes.

The first problem facing developing countries is that the right people involved in policy should be given the expertise and training to understand the issues. He added that both consumers and producers had to be educated on their roles. It was important to design an IP system where the IP holders earn a marginal profit and consumers would also benefit.

Prabduhha Ganguli of UNIDO said wrong patent granting is a malady of the patent office and had nothing to do with the patent system. To counter wrong patents, the patent offices should be provided with a manual with examples of good and bad patents granted.

He added that the issue of balancing comes in two areas. First, in patent law, there needs to be balance and thus there is need for compulsory license and competition law. Second, in all laws there is a need for clarity, and recent decisions could cloud the situation further. For example, there is need for clarity on what is the meaning of experimental exemptions, and under what circumstances can this exemption be used.

Regarding LDCs, they face a real gap, and WIPO and other agencies should bring together a package of what LDCs can do.

An Australian participant said that having a majority of patents owned by foreigners is not a major issue. Most countries have high number of foreign-owned patents than local-owned patents. He added that the outgoing of royalties is also not a problem for developing countries. A good question, he said, is why some countries have used the IP system to develop more, and others not. He said it was the level of skills and the will from the top that makes things happen.

In an earlier panel on 'Creating Value from IP assets and technology transfer', the chairperson, Lakshmi Puri, Director of UNCTAD's Trade Division, asked the question, "who wins and who loses in the present circumstances and trends relating to IP." She said: "We would like to see win-win outcomes and what are the ingredients for that?" She added that IPRs are supposed to spur innovation but they can also go against innovation. "How do we, developing and developed countries, consumers and the public take a step back and find a middle path for reconciliation?"

Dr Prabuddha Ganguli from the Indian Institute of Technology, and also representing UNIDO, said there was new international phenomena, knowledge politics, where knowledge is owned and transacted. "IPRs play a decisive role in this, what are rules of the game and how do we play the game? In view of TRIPS, do developing countries have viable options to survive in the market?"

"What is the appropriate stage of national development when a country needs to introduce strong IPR laws?" he asked. "History has shown that all countries such as the USA, Europe, Japan, China, Korea, India and others have waited for the appropriate socio-economic political stage to introduce strong enforceable IPR frameworks," he added. "Can we force countries to higher IPR before their time?" he questioned.

He added that IPRs enabled knowledge incubation and wealth realization, and "we need to integrate IPR for private and public benefit. There are risks and benefits. We need to see the innovation chain, and manage IP at each level."

Dr. Ganguli used India as an example to illustrate the changes that have taken place. "As India launches into the future, it is moving into a strong IPR regime in a phased manner, during the last 35 years, while growing its infrastructure," he said. "There is no one size that fits all. IPR is necessary in India to give it the competitive edge," he added. He also traced how Indian IPR laws had strengthened as the country passed through higher stages of development.

James Love, Director of Consumer Project on Technology, a US based NGO, responding to Ganguli, said it is important to realize that the Indian pharmaceutical industry was well established before the patent system was introduced to pharmaceuticals. It was the absence of the patent system that was the reason for the strong pharmaceutical industry. He added it was not that India changed the patent law on its own volition, but it was the US that put pressure on it and India had also signed the TRIPS agreement and had to change their laws.

Referring to IP assets, Love said that there is knowledge that is owned and that which no one owns. For example, just because a medical database is free, it is does not mean that it is not valuable. Asking when should knowledge become private property, Love said it should when the assignment of property rights in knowledge promotes social welfare and protects human rights.

A wide range of things that have been assigned property rights after a period enter the public domain. Thus, the IP rights are temporary and limited. Knowledge should likewise be freely shared when it promotes social welfare and protects human rights. This requires a cost-benefit analysis.

Love added: "Private strategies to create value from property rights in knowledge restrict access to inventions, works and other knowledge resources in order to charge fees, restrict competition and impose private regulations on the use of data.

"Exclusionary practices that maximize private rents can reduce the social value of inventions," he stressed. "In the context of medicines, the higher the prices to maximize private gains, the less the number of people who get treated and leads to the loss of lives."

Citing the example of asthma drug Singulair, Love said that "while Merck maximizes profit, many kids cannot use the drug until the patent expires". He also said that Norvatis, in 2004 at a World Bank meeting, had disclosed that it considered India to be a market of 50 million people for their drug. Thus, when it prices the drug in that market on a profit-maximising basis, most people would have to wait.

Love added that there are other ways than granting IPRs to support innovation. He gave examples of open access research strategies which include public or privately financed open databases and open access publishing and archive models where the users, advertisers and government pay.

He said that there is propaganda that the current IPR level is not enough and "we are pushed to accept high levels in IPRs when it is not in our interest and does not even reflect US practices in the public domain."

"Open access publishing is a new business model which in a variety of ways funds research to advance science," he added. "The Internet is a public domain and it has created more millionaires than any patent on earth. Nobody owns the Internet," he stressed.

Carlos Braga from the World Bank commented that he was fascinated by the debate. "Times have changed and it is fascinating to see an American (referring to Love) support open source systems and an Indian (referring to Ganguli) who is promoting IPRs."

Asking whether IPRs and its strengthening foster economic development, he said, "It depends and can be yes and no. It depends on how one uses the institution. There can also be a transfer of rents from South to North, but there also have been countries in East Asia that have also benefited from IPRs."

He added that IPRs can play an important role in knowledge creation and economic growth, but one has to be attentive to the balance between creation and dissemination of knowledge. The empirical evidence suggests a positive role between IPRs and technology transfer (licensing) in broad terms, Braga concluded.

In responding to Braga's presentation, James Love commented that the debate in 2005 should no longer be about whether one should or should not have IP. "The debate in the US is about what kind of incentives or business models should exist for solutions. There has been a sea of change in the US, with questions if the IP system has gone too far.

"We need to solve problems and not to create new ones for consumers. Is the IP system at war with consumers and solves problems or is it killing and frustrating the consumers? The question now is how do you find solutions," he said.

In another session, Prof. Barthelemy Nyasse of the University of Yaounde, Cameroon, spoke on the relation to R&D and IPRs. He said that for industrialized countries, IPRs is widely recognized as an important instrument for promoting development. But for most developing countries, any further enforcement of the IP system is detrimental to their welfare as these countries seek a system which favours learning by imitation.

He said the negotiation power of poor countries like his could be questioned as many believe that poor countries cannot challenge the views of those providing financial support to their ill economies. Conventions, treaties and agreements like TRIPS will enter into force in Cameroon as national laws.

Cameroon under the present conditions characterized by heavy internal and external debts, cannot finance its research activities or upgrade its research infrastructure. The few private companies operating locally are mostly branches of MNCs and do not undertake innovative research in Cameroon.

It is not enough to adopt international norms or IP protection. Cameroon cannot compete in all fields of science and technology (S&T) given its present state of technology. "When we speak of IPs, there are many problems. There is a monopolistic market and since the legal system is not strong enough, it cannot address the monopolistic effects. The current IPR regime does not permit us to learn by imitation," he said, adding that "we cannot talk of IP without looking at the implications for development."

In response to a question, Prof Nyasse said that he had been "fed with IPRs" when he was in university abroad and knows what it is in developed countries. "However, I do not know what it is in my country. Our people do not know what IP is. Development does not mean having value; development means having food, water, hospitals, medicine available, and education for children and so on.

"Do not speak of IP for these countries. The question is what approach we can use to improve quality of life in these countries. If we can do it by creating value and not by creating monopoly, do it. Let us put IP aside and wait till people reach certain living standards. We have to design a measure of development and good standard of living and need to measure the impact of IPs on our countries."

Dr. Istvan Greiner from Richter Gedeon, a drug company in Hungary, said that Hungary was driven to implement strong IP protection when it acceded to the European Union. His firm was the only local drug firm able to survive (the others were taken over by TNCs) due to restructuring, new strategies and investing in a team of patent lawyers to fight cases in court.

In the implementation of strong IP protection, he said that TNCs "go for more" once their goal is achieved. He said that the TNCs first ask for product patents, and when they reach that goal, they immediately asked for data exclusivity, a device that makes it harder for generic producers to compete.

He added that there are good and bad effects of strong IP implementation. Prices of drugs are remarkably higher. Domestic production was challenged. Before 1990s, there were 6 drug companies and were mainly generic producers. At present, there is only one independent company. All the others are now owned by MNCs.

He added that the market share of local drug producers was 70% during the socialist era and now it is 30% by value. Given his experience, "It is better to have more delicate patent laws and step by step introduction [and] avoid retroactive application of laws which are always bad," he said. He added that " strong negotiation teams are necessary and support from government is a basic requirement for survival."

Presentations were also made by others on "best practices in national experiences", including from the Chinese and Singapore governments, a music composer from Brazil, the director of an entertainment company in India, and the director of the tequila council of Mexico.