COMMISSION
ON INTELLECTUAL PROPERTY RIGHTS
CIPR Associate member
The Pharmaceutical Research and Manufacturers of America (PhRMA)
reacts to the UK Intellectual Property Rights Commission Report:
"Integrating Intellectual Property Rights and Development Policy"November 5, 2002
Preface
Overview
Chapter 1: Intellectual Property and Development
Chapter 2: Health
Chapter 3: Agriculture and Genetic Resources
Chapter 4: Traditional Knowledge, Access and Benefit Sharing and Geographic Indications
Chapter 5: Copyright, Software and the Internet
Chapter 6: Patent Reform
Chapter 7: Institutional Capacity
Chapter 8: The International Architecture------------------------------------------------------------------------------
The Report
The authors reach pre-determined conclusions by starting from the basis of questionable assumptions (pp.iii-iv):
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By assuming that current minimum international Intellectual Property Protection (IPP) standards hurt developing countries, they ask "How national IPR regimes could best be designed to benefit developing countries with the context of international agreements, including TRIPS?"
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By assuming that the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is slanted against developing countries they ask "How the international framework of rules and agreements might be improved and developed?"
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By assuming that there is conflict between intellectual property and public health they ask: "What is the broader policy framework needed to complement intellectual property regimes?"
Analysis and Response
By asking these questions, the Report starts with a number of unstated, implied and unproven assumptions:
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That the TRIPS Agreement provides an unreasonably high level of IP protection with unprecedented, new patent obligations. In fact, the TRIPS Agreement simply provides on an MFN basis patent and other protections that date back more than 100 years in well-established Treaties of the World Intellectual Property Organization (WIPO).1 TRIPS provides a minimum level of IP protection, weaker in many respects than laws in the US, EU states, and Japan.
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That one size fits all for developing countries — i.e. while attacking TRIPS as "one size fits all," the report assumes that all developing countries have the same needs, lumping together sophisticated industrializing states and UNDP Least Developed Countries. The assumption is that the so-called "South" will never have any ideas worth protecting, and will rely on theft of others' IP for their development. This is not only untrue, but insulting.
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That the US and other developed states achieved their development goals in large part by flouting patent and other IP protections, and so should developing countries. In fact, the US and other countries have provided patent protection as part of their Constitutional or other basic laws.2 Even if this were true in the past, economists now believe that growth in the future will depend not on reverse engineering or compulsory licensing, but through FDI and technology transfer, both of which need strong rule of law regimes, including IP protection.3 The Report reflects the authors' professional backgrounds and their views, which are consistent with the views of developing countries.
Had the authors started with different questions, for example: How has protection of IPRs benefited developing countries?, and consulted with other disciplines from within the developed countries, then the broad conclusions of the Report might not have tilted so negatively toward the "costs" of IPRs and so favorably toward exceptions to TRIPS rules and compulsory licensing.4
The issue of "Integrating Intellectual Property Rights and Development Policy" is an important one; however, there exists fundamental disagreement with the Report and its authors that weaker IPRs and weaker protection of those rights would better assist the world's poor.
Strong intellectual property rights are critical to provide incentives and protection for innovation, including research into finding new cures for diseases particularly affecting developing countries, as well as diseases affecting all of humankind. For example, heart disease and diabetes affect millions in developing countries.
The Report
There are polar opposite views of the impact of IP policies on the world's poor: IPP helps to stimulate economic growth and reduce poverty vs. IPP does little to stimulate invention in developing countries because the "human and technical capacity" does not exist. (Introduction, p.1)
IPP has dramatically increased in level, scope, territorial extent, and role over the last 20 years (Background, p.2), adding "heavy costs" with less easily identifiable benefits to developing countries. (Our Task, p.6),
IPP can be viewed as akin to political or human rights, or as economic or commercial rights (Our Task, p.6); the Report considers an IPP as "one of the means by which nations and societies can help to promote the fulfillment of human economic and social rights." (Our Task, p.7)
IPP systems and policy, in turn, may introduce distortions that are detrimental to the interests of developing countries. (Our Task, p.9)Analysis and Response
In reality the TRIPS Agreement merely incorporates many of the substantive obligations included in the WIPO Paris Convention and other treaties.5 (Under the WTO, these obligations are provided on an MFN basis, which means that if Indian inventors benefit from patents in the US market, US inventors should gain these rights in India. The WTO also provides enforcement.)6 While it is true at the broadest level that the impact of IP policies on the poor "will vary according to socio-economic circumstances" (p.2), this ignores the fact that all countries need to adopt a minimum international standard for IP protection (represented by TRIPS) to ultimately succeed in achieving higher levels of economic growth and development.7The Overview appears to set the tone for the oft-repeated charge that IPP is a neo-colonialist conspiracy of big business.
"The Commission began with a false premise-that intellectual property protection impedes economic development efforts and forces a transfer of wealth from poor nations to the rich. Clearly this is at odds with mainstream economic theory." Ms. Shannon Herzfeld, PRMA Senior Vice President, International Affairs, News Release, September 12, 2002.8
The overview fails to take into account the need to provide a rule of law culture, including IPP to reverse brain drain and encourage innovators to remain in their countries of origin.
Chapter 1: Intellectual Property and DevelopmentThe Report
Patents and copyrights provide incentive for innovation or creation that may benefit society, but they also impose costs on users of the protected works. (The Rationale for IP Protection, pp. 16, 20)Countries have historically been able to adapt IPP regimes to facilitate technological learning and promote their own industrial policy objectives; however, today, with the "advent of TRIPS," the flexibility in the design of IPP regimes can no longer follow the paths of other countries. "Technological learning" and "establishing a genuine indigenous innovative capacity" must be done differently. (History, p.23)
The Report focuses not on IPP as an end in itself, but on how IPP contributes to development and the reduction of poverty. (The Evidence About the Impact of IP, p.23)
For developing countries, any beneficial trade and investment effects are unlikely to outweigh the costs at least in the short and medium term. (p.28)
Developed countries must promote more effective research and cooperation with and among developing countries to strengthen their scientific and technological capabilities. (Technology Transfer, pp. 30-31)
Analysis and Response
"Countries at every stage of development benefit from protecting the intellectual capital of their people. No part of the world has a monopoly on good ideas. Intellectual property rights insure that the benefits of a novel idea flow to the inventors, no matter where they might live. Respect for intellectual property rights helps developing countries build their economies and improve public health for their people." Herzfeld September 12, 2002 News Release. 9The Report
Healthcare considerations must be the main objective in determining what IP regime should apply to healthcare products. (Introduction, p.35)The evidence suggests that the IPP system does not play a role in stimulating research on diseases prevalent in developing countries (except for those diseases that are also prevalent in developed countries). (Research and Development, p.38)
Globalization of IPP will not increase R&D expenditure for diseases affecting developing countries. (R&D, p.39)
Countries must adopt a range of policies to improve access to medicines, including improving services, delivery mechanisms and infrastructure; Countries must ensure that their IPP regimes do not run counter to their public health policies and that they are consistent with and supportive of such policies. (Access to Medicines for Poor People, p.46)
Developing countries should be permitted to use "compulsory licensing" as a means to facilitate the availability of lower cost medicines, as well as differential pricing and parallel imports. (Policy Implications, pp.48, 49, 51-61)
Analysis and Response
Health breeds wealth, and there is demonstrated association between increased IPP standards and improved access to medicines and better public health. Where IPP systems are established as part of a rule of law culture, with transparency and in conformity with other WTO standards, PhRMA companies have a great track record of developing medicines for patients in poor countries. For example, pharmaceutical investment in Mexico and Brazil increased significantly after each country strengthened IPP in the 1990s. Investment in Brazil totaled $2 billion between 1996 and 2000, increasing jobs, tax revenue, exports, and GDP.10 Indeed, in many other countries the chemical and pharmaceutical/biotech sectors can become engines of growth. Countries benefiting from adoption of IPP include Italy, South Korea, and most recently Jordan.11 The case of Argentina is also instructive: from the mid-1800s through the 1930s, Argentina had healthy institutions, including strong IPP and an open economy [IPN, p.12], and as a consequence was one of the world's wealthiest countries. After the 1930s, IPP deteriorated, rule of law was undermined, and political corruption became rife. Today, Argentina's infant mortality rates continue to fall, capital flow into Argentina has slowed, and brain drain from Argentina continues.12As stated in the WTO Doha Declaration: TRIPS protections encourage pharmaceutical innovation and should be fully implemented as stated, taking into account the flexibilities in the Agreement.
Compulsory licenses, are an exceptional remedy for use only in the case of market failure or significant abuse of a patent (e.g. a demonstrated antitrust violation linked to use of a specific patent, or a state of national emergency under which normal rules of commerce are suspended). In most countries in the developing world, patent systems are still evolving. Compulsory licenses severely curtail or eliminate the anticipated benefits that accrue from the exclusive rights associated with a patent.13 Significantly, apart from Zimbabwe, no developing country has stated its intention to issue a compulsory license as the best mechanism to address public health needs.
Parallel trade has never been shown to facilitate the availability of lower costs medicines. Parallel traders buy goods in low-price countries and re-sell at a higher price in the importing country. This form of arbitrage benefits neither patients nor governments; only the parallel trader is financially enriched. In fact, it sucks medicines from poorer, lower-cost markets into higher cost markets.14
Parallel trade is not the panacea for lowering prices of medicines; little, if any, savings are passed on to purchasers. Instead, the integrity of the pharmaceutical market can be compromised by the infiltration of counterfeit and poor quality goods.15
The Report ignores the inherent dangers of counterfeit medicines. Indeed, in its negative attitude toward the relationship between IPP and the interests of developing countries, the Report overlooks the TRIPS provisions on trademarks (Article 16), one of the most important tools for consumers in developing countries to avoid lower quality products.
The adverse impact of counterfeit drugs on public health is enormous: "In most cases, counterfeit drugs are not equivalent in safety, efficacy and quality to their genuine counterparts. Even if they are of the correct quality or contain the correct amount of active substance, their production and distribution are not within the control of the drug regulatory authority of the country concerned. … In many cases [counterfeit drugs] have been found to be without active ingredients, or with wrong ingredients or with incorrect quantities of active ingredients. … As a consequence of such damaging effects, counterfeit drugs may erode public confidence in health care systems [and] health car professionals…."16
The Report
Under TRIPS countries must apply some kind of IP protection to plants, generally patents; however, patents also pose a threat to farmers' traditional practices of reusing, exchanging and selling seeds. (Intellectual Property in Agriculture, p.66, 75)Developing countries should generally not provide patent protection for plants and animals because of restrictions patents place on use of seeds by farmers and researchers. (The Impact of Patents, p.75)
Research should be oriented to the needs of the poor farmers; public sector varieties of seed should be available to provide competition for private sector varieties; the world's plant genetic resource heritage should be maintained. (Conclusion, p.76)
Analysis and Response
Strong IPP are critical to provide incentives and protection for innovation regardless of industry, including research based on plants and seed.
Chapter 4: Traditional Knowledge, Access and Benefit Sharing and Geographic IndicationsThe Report
The debate over the protection and promotion of traditional knowledge is complex: some wish to conserve traditional knowledge and protect it from commercial exploitation, and others wish to ensure that it is exploited in an equitable manner for the benefit of its holder. (Traditional Knowledge, pp.83-92)Analysis and Response
The Report seeks to influence the discussion of the intellectual property value of traditional knowledge, which is a topic of WTO review.All TRIPS protections, along with contract protections available under national legal regimes, should be used to protect traditional knowledge.
Chapter 5: Copyright, Software and the InternetThe Report
Today there is an enormous knowledge gap between the riches and the poorest countries; stronger copyright protection may help to stimulate local cultural industries in developing countries, as long as other conditions affecting the success of those industries are also met. In the short to medium term, copyright protection is likely to reduce the ability of developing countries and poor people to close this gap by getting textbooks, scientific information and software they need at affordable cost. (Copyright as a Stimulus to Creation, p.109)TRIPS-required strong protection and enforcement of copyrights would reduce access to knowledge-related products in developing countries, with potentially damaging consequences for poor people. (Copyright-based Industries and Copying of Protected Works, p. 112)
Developing countries should be entitled to "fair use" rights in reasonable numbers for educational and research purposes. ((Delivering the Potential of the Internet for Development, p.120-121)
Analysis and Response
Consistent with the overall tone of the Report, Chapter 5 assumes that (1) all knowledge is sacred and therefore must be in the public domain; (2) IPP restricts the flow of ideas; and (3) that countries can close the knowledge gap only through piracy or copying.IPP makes knowledge available and provide financial incentives for copyright holders to divulge information so that the information may be disseminated, further researched and enjoyed. Arguably, without copyright protections, many people would elect not to share their creativity, and public access to that information and those ideas would suffer.
The authors' neo-colonialist implications that poor economies cannot develop without adopting illegal means (see p.112), such as pirating software, source codes, music, literature, and the like, are insulting to developing countries.
The Report
Developing countries, because of the vast differences in their technical and scientific capacities, must choose an IP system that they feel best meets their development objectives and economic and social circumstances. (Introduction, p.125)The best patent system for a developing country may be one that applies strict standards of patentability and results in fewer patents meeting these criteria. (The Design of Patent Systems in Developing Countries, pp.136-137)
Harmonization of a patent system may not be suitable for developing countries as it would further limit their freedom to design appropriate patent policies. (Executive Summary, p.23)
Fewer and better patents would be the most effective way of "reducing the burden on the major patent offices and, more importantly, securing widespread support for the patent system." (International Patent Harmonization, p.149)
Analysis and Response
The Report's contention that the patent system must be reformed in order to assist developing countries is an extreme one. Patents may adversely affect some powerful vested interests, such as generic pharmaceutical manufacturers, and thereby will have an economic and political cost in the short term; however, the benefits of IPP protection in the medium to long term-in the form of increased foreign direct investment, technology transfer, and local product development-vastly outweigh these transitional costs.Because the benefits of IPP will create entirely new economic actors, such as clinical research organizations, academic/private research partnerships, etc., it is important not to let the voices at the table drown out the opportunities for the future that will bring greater opportunities to a broader class.17
Chapter 7: Institutional CapacityThe Report
For developing countries, the implementation of TRIPS requires changes to IP legislation; however, many developing countries have weak institutional capacity, and in particular lack experienced and skilled personnel. (Introduction, p.153, 154)Developing countries should not divert resources from already over-extended health and education budgets to subsidize the administration of a system for IPRs. (Executive Summary, p.25)
Analysis and Response
WIPO and OECD countries have an obligation to provide technical assistance and capacity building. USTR and the US private sector, WIPO and other UN organizations are working at meeting these obligations and can and should do more. This developed country assistance is critical for developing countries to achieve the benefits of the TRIPS Agreement.
Chapter 8: The International ArchitectureThe Report
"TRIPS and other agreements that encourage developing countries to adopt higher standards of IP protection (TRIPS-plus Agreements, p.181) can undermine the multilateral system by limiting use of flexibilities and exceptions permitted by TRIPS and other treaties. (The TRIPS Agreement, pp.177-179)NGOs have generally made a positive contribution to voicing concerns about the impact of IP on developing countries. (The Role of Civil Society, p.184)
The authors recommend creating an "international network and partnership initiative which would bring together development agencies, developing country governments, IP researchers and NGOs. The aims would be to identify priorities and promote coordination of research programmes; improve knowledge sharing amongst partners; and facilitate wider dissemination of finding through sponsorship of publications, conferences and Internet-base resources." (Deepening Understanding About IP and Development, p.186)
Analysis and Response
Contrary to the sweeping, broad conclusion of the Report, strong IPP advances development policy.It is simplistic and incorrect to blame IPP for denying healthcare treatment in the developing world. Few patent applications for innovative medicines are filed in developing countries (even though such patents are available).18 Ninety-five percent of essential medicines needed in developing countries are not protected by patents.
TRIPS provides the flexibility to take into account public health needs of developing countries, and actions taken by developing countries demonstrate that the TRIPS approach is practical and workable.
Combating disease in the developing world is a complex struggle that requires constructive partnerships between the public and private sectors. The U.S. research-based pharmaceutical industry is leading the private sector's fight against widespread diseases, especially in the world's poorest nations.
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- See Keith E. Maskus, Intellectual Property Rights in the Global Economy 129, 141-142 (2000) (analyzing various IPR, FDI & technology transfer-related studies to conclude that FDI, licensing, and technology transfers for pharmaceuticals would significantly increase in developing countries as IPRs are strengthened). The author also notes that "[w]eak patent rights are significant barriers to manufacturing trade, particularly in IPR-sensitive goods."). id. at 118.
- See e.g., supra note 3, 4; George G. Korenko, Intellectual Property Protection and Industrial Growth, 2 J. of World Intell. Prop. 47, 70-71 (1999) (comparing the potential economic growth in developing countries that have strong IPP, like Brazil, with the "brain drain" and loss of innovative scientists present in India, which provides no pharmaceutical patent protection); Charles E. Barfield & Mark A. Groombridge, Parallel Trade in the Pharmaceutical Industry: Implications for Innovation, Consumer Welfare, and Health Policy, 10 Fordham Intell. Prop. Media & Ent. L.J. 185, 220 (noting economic surveys indicating significant benefits for developing countries with stronger IPP and resultant inflows, not outflows, of investment).
- See Singham, infra note 14, at 378 (noting that Mexico has benefited greatly from strong IPP).