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TWN
Info Service on WTO and Trade Issues (Aug26/05) WTO:
Colombia urges rethink of TRIPS innovation reward mechanisms Geneva, 3 Aug (D. Ravi Kanth) -- Colombia has seemingly brought several issues concerning the "development dimension related to technology access and technology learning and technology upgrading" that form part of the World Trade Organization's TRIPS Agreement to the forefront of the discussions on WTO reform, said people familiar with the development. Such a discussion could "create a better scenario for trust and rule-making at the WTO, even in the context of the reform of the organization," Colombia has forcefully argued. In its proposal (IP/C/W/742), titled "A better TRIP: Autonomous examination of TRIPS prerogatives, and existing examples", which was apparently discussed at a recent meeting of the TRIPS Council, Colombia noted that "the TRIPS Agreement establishes two main mechanisms to reward innovation through the protection of intellectual property rights (IPRs)." The two mechanisms, according to Colombia, are "(i) exclusivity and (ii) profit potential." According to Colombia, in the example of patents, Article 28 of the TRIPS Agreement states: 1. "A patent shall confer on its owner the following exclusive rights: (a) where the subject matter of a patent is a product, to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing for these purposes that product; (b) where the subject matter of a patent is a process, to prevent third parties not having the owner's consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process. 2. Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts." Clearly, a patent owner, who allegedly enjoys a monopoly right, has two distinct prerogatives, Colombia noted. Bogota maintained that "the first is a prerogative of exclusivity, which prevents third parties from performing certain acts with respect to the patented product or process without their consent." According to Colombia, "the second is a prerogative of remuneration, under which a given use generates an entitlement to compensation. In the ordinary patent bargain, the two are bundled." However, Colombia said the multilateral IP framework already recognizes configurations in which a right to remuneration is preserved independently of any power to prohibit use. As the two prerogatives differ in scope and serve different functions, "they do have distinct effects on innovation, access, market competition, technological diffusion, industrial learning and development," it argued. Therefore, Colombia said that "it is useful to examine these two dimensions separately,"adding to its earlier proposals. TENSIONS Colombia said that "regarding the possibility of excluding third parties from using a technology, this prerogative can generate tensions with technology users, limit cumulative innovation, hinder interoperability, restrict competition, or increase barriers to entry, both for companies in industrialized and developing countries." Furthermore, it said "among countries, this exclusivity often serves as an industry protection, as it creates a "moat"' in a specific market, with potential significant effects on other countries and their technological upscaling and development strategies." In contrast, Colombia explained that "the remuneration prerogative - the possibility of receiving remuneration for a technological contribution - is in many cases sufficient on its own as a legitimate and sufficient incentive for innovation, without the negative impacts." Moreover, it said "the differentiated effects of exercising or privileging one of these two prerogatives over the other are relevant to the design of an optimal IPR reward system." In this context, Colombia said "the question is not whether innovators should be rewarded, but whether the reward should necessarily depend on the possibility of exclusion." It emphasized that the above discussion "does not seek to question the importance of intellectual property rights in promoting innovation." "On the contrary," Colombia argued, "it aims to contribute to a more balanced understanding of the system, in accordance with the objectives and principles of the TRIPS Agreement." Colombia pointed out that "it is useful to examine existing mechanisms that preserve economic incentives for innovation but reduce the restrictive effects of exclusivity, as these run counter to public objectives of technology diffusion." SEPs The current regulatory experiences demonstrate that the functional separation between remuneration and exclusion is not purely theoretical, Colombia said, adding that "a prime example lies in Standard Essential Patents (SEPs)." It said that "when a patented technology is necessary to implement a standard, an institutional framework is set to ensure that the patent holder receives adequate remuneration through licensing on fair, reasonable, and non- discriminatory terms, while preventing the patent right from being used to block the standard's implementation." In short, "under specific circumstances (the decision on a standard in this example), the two prerogatives are separated." Against this backdrop, it said "the need to diffuse broadly certain technologies produces a solution in which a different, and better balance of public policy objectives is accomplished, even with potential increased monetary benefits for the right holder." Citing other existing examples, Colombia said that "in copyrights, statutory examples of the autonomy of the prerogatives can also be found." Article 12 of the Rome Convention "recognizes a right to equitable remuneration for performers and producers of phonograms independently of any power to prohibit use." These experiences demonstrate that "the promotion of innovation could be better anchored focusing on the monetary rewards, without the potential adverse effects of granting temporary monopolies of exclusion," said Colombia. Highlighting the benefits of the discussion, Colombia said that "the international community could achieve significant progress on several IP discussions by independently analysing the two described prerogatives." It noted that "discussions on technology transfer, IP rights in pandemics, IP rights for environmental objectives, the role of the objectives, principles, and flexibilities of the TRIPS Agreement, VMAT for tech transfer (Voluntary and Mutually Agreed Terms), industrial protection and competition, etc., have proven to be almost intractable in different international fora." It underscored the need to explore "different models with autonomous prerogatives" such as "using different periods of protection for the two prerogatives, or providing market reward incentives by augmenting the remuneration mechanisms when a commitment to limit the right to exclude is made - could provide venues for better collective solutions." Also importantly, Colombia pointed out that "the developmental dimension related to technology access and technology learning and technology upgrading could be better served by treating the two prerogatives independently, and create a better scenario for trust and rule-making at the WTO, even in the context of the reform of the organization". In conclusion, Colombia called for "an exploratory thematic discussion on alternative innovation reward mechanisms currently in use, in which exclusivity has been modulated without eliminating the remuneration reward, and its effects on different types of industries and different types of countries." +
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