Published by

Commission on Intellectual Property Rights

c/o DFID

1 Palace Street

London SW1E 5HE

Tel: 020 7023 1732

Fax: 020 7023 0797 (for the attention of Charles Clift)

Email: ipr@dfid.gov.uk

Website: http://www.iprcommission.org

November 2002 (2^nd Edition)

The full text of the report and the executive summary can be downloaded from the Commission website: http://www.iprcommission.org

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THE COMMISSIONERS

Professor John Barton (Commission Chair)

George E. Osborne Professor of Law, Stanford University, California, USA

Mr Daniel Alexander

Barrister specialising in Intellectual Property Law, London, UK

Professor Carlos Correa

Director, Masters Programme on Science and Technology Policy and Management, University of Buenos Aires, Argentina

Dr Ramesh Mashelkar FRS

Director General, Indian Council of Scientific and Industrial Research and Secretary to the Department of Scientific and Industrial Research, Delhi, India

Dr Gill Samuels CBE

Senior Director of Science Policy and Scientific Affairs (Europe) at Pfizer Inc., Sandwich, UK

Dr Sandy Thomas

Director of Nuffield Council on Bioethics, London, UK

THE SECRETARIAT

Charles Clift – Head

Phil Thorpe – Policy Analyst

Tom Pengelly – Policy Analyst

Rob Fitter – Research Officer

Brian Penny – Office Manager

Carol Oliver – Personal Assistant

PREFACE

Clare Short, the Secretary of State for International Development, established the Commission on Intellectual Property Rights in May 2001. We are made up of members from a diversity of countries, backgrounds and perspectives. We have each brought very different viewpoints to the table. We incorporate voices from both developed and developing countries: from science, law, ethics and economics and from industry, government and academia.

I believe that it is a considerable achievement that there is so much that we have been able to agree on about our approach and our basic message. As our title implies, we consider that development objectives need to be integrated into the making of policy on intellectual property rights, both nationally and internationally, and our report sets out ways in which this could be put into practice.

Although appointed by the British Government, we have been given absolute freedom to set our own agenda, devise our own programme of work, and come to our own conclusions and recommendations. We have been given the opportunity and financial support to improve our understanding of the issues through commissioning studies, organising workshops and conferences, and visiting officials and affected groups throughout the world. We have been supported by a wonderfully capable Secretariat supplied by the DFID and the UK Patent Office, and we want to thank them especially.

We first met on 8-9 May 2001, and have held seven meetings since. All or some of us have visited Brazil, China, India, Kenya, and South Africa, and we have consulted with public sector officials, the private sector and NGOs in London, Brussels, Geneva, and Washington. We visited the Pfizer research facility in Sandwich. A list of the main institutions we have consulted appears at the end of the report. We have commissioned seventeen working papers and held eight workshops in London on various aspects of intellectual property. And we held a large conference in London on 21-22 February 2002 to ensure that we could hear questions and concerns from many perspectives. We regard these sessions as important parts of our work in their own right. They brought together a range of individuals with a view to facilitating dialogue and exploring the scope for moving some of the issues forward.

On behalf of all of us I want to thank all those people from all over the world, far too numerous to mention, who provided input to our discussions and who prepared working papers.

Our tasks were to consider:

· how national IPR regimes could best be designed to benefit developing countries within the context of international agreements, including TRIPS;

· how the international framework of rules and agreements might be improved and developed – for instance in the area of traditional knowledge – and the relationship between IPR rules and regimes covering access to genetic resources;

· the broader policy framework needed to complement intellectual property regimes including for instance controlling anti-competitive practices through competition policy and law.

We decided early on not just to attempt to suggest compromises among different interest groups, but to be as evidence-based as possible. This has been challenging, for there is often limited or inconclusive evidence, but our Secretariat, extensive consultations, and the papers we commissioned, helped us in identifying the available evidence, which we then carefully evaluated.

We also recognised early on the importance of distinguishing nations (middle or low income) which have substantial scientific and technological capability from those which do not. We attempted to learn about the real impacts of intellectual property, both positive and negative, in each of these groups of nations. We chose to concentrate on the concerns of the poorest, both in low and middle income nations.

We all concur in this report. Our aim is practical and balanced solutions. In some cases we have adopted suggestions made by others but the responsibility for the conclusions is ours alone. We hope that we have fulfilled our task and that the report will be a valuable resource to all those engaged in the debate on how intellectual property rights might better serve to promote development and reduce poverty.

Finally I want to thank Clare Short, and the UK Department for International Development, for their foresight in creating the Commission on Intellectual Property Rights. I have been honoured to chair it. It has been an extraordinary experience for me, and for all of us on the Commission. We received a challenging remit. We greatly enjoyed our task and the opportunity to learn from one another and, in particular, from the many who have contributed to our work.

JOHN BARTON

Chairman

FOREWORD

There are few concerned with IP who will find that this report makes entirely comfortable reading. No greater compliment can be paid to Professor Barton and his team of Commissioners. Nor can there be any greater indication of the foresight and courage of Clare Short, the UK Secretary of State for International Development, in creating the Commission and setting its terms of reference in the first place.

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 certainly has affected the whole area of intellectual property rights. On the one side, the developed world side, there exists 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. They believe and argue that, if IPRs are good, more IPRs must be better. On the other side, the developing world side, there exists a vociferous lobby of those who believe that IPRs are likely to cripple the development of local industry and technology, will harm the local population and benefit none but the developed world. They believe and argue that, if IPRs are bad, the fewer the better. The process of implementing TRIPS has not resulted in a shrinking of the gap that divides these two sides, rather it has helped to reinforce the views already held. Those in favour of more IPRs and the creation of a “level playing field” hail TRIPS as a useful tool with which to achieve their objectives. On the other hand those who believe that IPRs are bad for developing countries believe that the economic playing field was uneven before TRIPS and that its introduction has reinforced the inequality. So firmly and sincerely held are these views 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 a good or bad thing, the developed world has come to an accommodation with them over a long period. Even if their disadvantages sometimes outweigh their advantages, by and large the developed world has the national economic strength and established legal mechanisms to overcome the problems so caused. Insofar as their benefits outweigh their 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.

It is against that background that the Secretary of State decided to set up the Commission and ask it to consider, amongst other things, how national IPR rights 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 Commissioners themselves represent as impressive a cross-section of relevant expertise as one could wish. They have consulted widely. This report is the result. It is most impressive.

Although the terms of reference have required the Commission to pay particular regard to the interests of developing countries, it has done this without ignoring the interests and arguments of those from the other side. As it states, higher IP standards should not be pressed on developing countries without a serious and objective assessment of their development impact. The Commission has gone a long way to providing such an assessment. This has produced a report which contains sensible proposals designed to meet most of the reasonable requirements of both sides.

However, the production of a series of workable proposals is not enough by itself. What is needed is an acceptance and will to implement them. Once again, in this respect the Commission is playing a major role. This is not the report of a pressure group. The Commission was set up to offer as impartial advice as possible. Its provenance and makeup should encourage all those to whom it is directed to take its recommendations seriously.

For too long IPRs have been regarded as food for the rich countries and poison for poor countries. I hope that this report demonstrates that it is not as simple as that. Poor countries may find them useful provided they are accommodated to suit local palates. The Commission suggests that the appropriate diet for each developing country needs to be decided on the basis of what is best for its development, and that the international community and governments in all countries should take decisions with that in mind. I very much hope this report will stimulate them to do so.

SIR HUGH LADDIE

UK High Court Patents Judge

THE COMMISSIONERS ii

PREFACE iii

FOREWORD v

OVERVIEW 1

INTRODUCTION 1

BACKGROUND 2

OUR TASK 6

Chapter 1: INTELLECTUAL PROPERTY AND DEVELOPMENT 13

INTRODUCTION 13

THE RATIONALE FOR IP PROTECTION 15

Introduction

Patents

HISTORY 20

THE EVIDENCE ABOUT IP 23

The Context

Redistributive Impact

Growth and Innovation

Trade and Investment

TECHNOLOGY TRANSFER 28

Chapter 2: HEALTH 34

INTRODUCTION 34

The Issue

Background

RESEARCH AND DEVELOPMENT 37

Research Incentives

ACCESS TO MEDICINES FOR POOR PEOPLE 40

Prevalence of Patenting

Patents and Prices

Other Factors Affecting Access

POLICY IMPLICATIONS 46

National Policy Options

Compulsory Licensing for Countries with Insufficient Manufacturing Capacity

Developing Country Legislation

Doha Extension for Least Developed Countries

Chapter 3: AGRICULTURE AND GENETIC RESOURCES 65

INTRODUCTION 65

Background

Intellectual Property Rights in Agriculture

PLANTS AND INTELLECTUAL PROPERTY PROTECTION 67

Introduction

Research and Development

The Impact of Plant Variety Protection

The Impact of Patents

Conclusion

ACCESS TO PLANT GENETIC RESOURCES AND FARMERS’ RIGHTS 76

Introduction

Farmers’ Rights

The Multilateral System

Chapter 4: TRADITIONAL KNOWLEDGE

AND GEOGRAPHICAL INDICATIONS 82

INTRODUCTION 82

TRADITIONAL KNOWLEDGE 83

Background

The Nature of Traditional Knowledge and the Purpose of Protection

Managing the Debate on Traditional Knowledge

Making Use of the Existing IP System to Protect and Promote Traditional Knowledge

Sui Generis Protection of Traditional Knowledge

Misappropriation of Traditional Knowledge

ACCESS AND BENEFIT SHARING 93

Background

Convention on Biological Diversity (CBD)

Disclosing the Geographical Origin of Genetic Resources in Patent Applications

GEOGRAPHICAL INDICATIONS 98

Background

Geographical Indications and TRIPS

Multilateral Register of Geographical Indications

The Economic Impact of Geographical Indications

Chapter 5: COPYRIGHT, SOFTWARE AND THE INTERNET 105

INTRODUCTION 105

Collecting Societies

WILL COPYRIGHT RULES ALLOW DEVELOPING COUNTRIES TO CLOSE

THE KNOWLEDGE GAP? 109

Educational Materials

Libraries

DELIVERING THE POTENTIAL OF THE INTERNET FOR DEVELOPMENT 117

Technological restrictions

Chapter 6: PATENT REFORM 123

INTRODUCTION 123

THE DESIGN OF PATENT SYSTEMS IN DEVELOPING COUNTRIES 126

Introduction

Scope of Patentability

Patentability Standards

Exceptions to Patent Rights

Providing Safeguards in a Patent Policy

Encouraging Domestic Innovation

Conclusions

THE USE OF THE PATENT SYSTEM IN PUBLIC SECTOR RESEARCH 137

Introduction

Evidence from the United States

Evidence from Developing Countries

HOW THE PATENT SYSTEM MIGHT INHIBIT RESEARCH AND INNOVATION 140

The Issues in Developed Countries

The Relevance to Developing Countries

INTERNATIONAL PATENT HARMONISATION 146

Background

WIPO Substantive Patent Law Treaty

Chapter 7: INSTITUTIONAL CAPACITY 153

INTRODUCTION 153

IP POLICY MAKING AND LEGISLATION 153

Integrated Policy Making

IPR ADMINISTRATION AND INSTITUTIONS 156

Introduction

Human Resources

Information Technologies

EXAMINATION VERSUS REGISTRATION SYSTEMS 159

Regional or International Co-operation

COSTS AND REVENUES 161

The Cost of an IP system

Meeting the Costs

ENFORCEMENT 163

Enforcement in Developing Countries

Enforcement in Developed Countries

REGULATIING INTELLECTUAL PROPERTY RIGHTS 165

TECHNICAL ASSISTANCE AND CAPACITY BUILDING 167

Current Programs

Assessing the Impact of Technical Assistance

Financing Further Technical Assistance

Ensuring Effective Delivery of Technical Assistance

Chapter 8: THE INTERNATIONAL ARCHITECTURE 172

INTRODUCTION 172

INTERNATIONAL STANDARD SETTING: WIPO AND WTO 173

THE TRIPS AGREEMENT 177

Assisting Developing Countries to Implement TRIPS

Timetable for Implementing TRIPS

IP IN BILATERAL AND REGIONAL AGREEMENTS 180

DEVELOPING COUNTRY PARTICIPATION 182

Permanent Representation in Geneva

Expert Delegations

THE ROLE OF CIVIL SOCIETY 184

DEEPENING UNDERSTANDING ABOUT IP AND DEVELOPMENT 185

ACRONYMS 189

GLOSSARY 190

ACKNOWLEDGEMENTS 194

OVERVIEW

INTRODUCTION

The Millennium Development Goals recognise the crucial importance of reducing poverty and hunger, improving health and education, and ensuring environmental sustainability. The international community has set itself the target of reducing the proportion of people in poverty by half by 2015, along with associated specific targets for improving health and education and environmental sustainability.

It is estimated that in 1999 nearly 1.2 billion people lived on less than $1 a day, and nearly 2.8 billion people on less than $2 per day.[1] About 65% of these are in South and East Asia, and a further 25% in sub-Saharan Africa. There were an estimated 3 million deaths from HIV/AIDS in 2001, 2.3 million of them in sub-Saharan Africa.[2] Tuberculosis (TB) accounts for nearly 1.7 million deaths worldwide.[3] On present trends, there will be 10.2 million new cases in 2005.[4] There are also over 1 million deaths annually from malaria.[5] In 1999 there were still 120 million children not in primary school. Sub-Saharan Africa has the lowest current enrolment rate at 60%.[6]

It is our task to consider whether and how intellectual property rights (IPRs) could play a role in helping the world meet these targets – in particular by reducing poverty, helping to combat disease, improving the health of mothers and children, enhancing access to education and contributing to sustainable development. It is also our task to consider whether and how they present obstacles to meeting those targets and, if so, how those obstacles can be removed.

Some argue strongly that IPRs are necessary to stimulate economic growth which, in turn, contributes to poverty reduction. By stimulating invention and new technologies, they will increase agricultural or industrial production, promote domestic and foreign investment, facilitate technology transfer and improve the availability of medicines necessary to combat disease. They take the view that there is no reason why a system that works for developed countries could not do the same in developing countries.

Others argue equally vehemently the opposite. IP rights do little to stimulate invention in developing countries, because the necessary human and technical capacity may be absent. They are ineffective at stimulating research to benefit poor people because they will not be able to afford the products, even if developed. They limit the option of technological learning through imitation. They allow foreign firms to drive out domestic competition by obtaining patent protection and to service the market through imports, rather than domestic manufacture. Moreover, they increase the costs of essential medicines and agricultural inputs, affecting poor people and farmers particularly badly.

In assessing these opposing arguments, it is important to remember the technological disparity between developed and developing countries as a group. Low and middle income developing countries account for about 21% of world GDP,[7] but for less than 10% of worldwide research and development (R&D) expenditure.[8] The OECD countries spend far more on R&D than India’s total national income.[9] Almost without exception, developing countries are net importers of technology.

It is essential to consider the diversity of developing countries in respect of their social and economic circumstances and technological capabilities. Altogether more than 60% of the world’s poor live in countries that have significant scientific and technological capabilities, and the great majority of them live in China and India. China and India, 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.[10] By contrast, 25% of poor people live in Sub-Saharan Africa (excluding South Africa), mainly in countries with relatively weak technical capacity.[11] It is estimated that in 1994 China, India and Latin America together accounted for nearly 9% of worldwide research expenditure, but sub-Saharan Africa accounted for only 0.5% and developing countries other than India and China only about 4%.[12]

Thus developing countries are far from homogeneous, a fact which is self-evident but often forgotten. Not only do their scientific and technical capacities vary, but also their social and economic structures, and their inequalities of income and wealth. The determinants of poverty, and therefore the appropriate policies to address it, will vary accordingly between countries. The same applies to policies on IPRs. Policies required in countries with a relatively advanced technological capability where most poor people happen to live, for instance India or China, may well differ from those in other countries with a weak capability, such as many countries in sub-Saharan Africa. The impact of IP policies on poor people will also vary according to socio-economic circumstances. What works in India, will not necessarily work in Brazil or Botswana.

BACKGROUND

Over the last twenty years or so there has been an unprecedented increase in the level, scope, territorial extent and role of IP right protection.[13] Manifestations of this include:

· The patenting of living things and materials found in nature, as opposed to man-made products and processes more readily recognisable to the layman as inventions

· The modification of protection regimes to accommodate new technologies (particularly biotechnology and information technology), such as the EU Biotechnology Directive[14] or the Digital Millennium Copyright Act (DMCA) in the United States (US)

· The extension of protection into new areas such as software and business methods, and the adoption in some countries of new sui generis regimes for semiconductors and databases

· A new emphasis on the protection of new knowledge and technologies produced in the public sector

· The focus on the relationship between IP protection and traditional knowledge,[15] folklore and genetic resources

· The geographical extension of minimum standards for IP protection through the TRIPS agreement (see Box O.1), and of higher standards through bilateral and regional trade and investment agreements

· The widening of exclusive rights, extension of the duration of protection, and strengthening of enforcement mechanisms.

Box O.1 The World Trade Organisation and the TRIPS Agreement

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)[16] emerged from the Uruguay Round of trade negotiations completed in 1994. The Final Act of these negotiations created the World Trade Organisation (WTO) and set out rules – the WTO Agreements including TRIPS – with which members of the WTO have to comply. A dispute settlement system was also streamlined to resolve trade disputes between WTO Members. The WTO, as of January this year, has 144 Members, accounting for over 90% of world trade. Over 30 further countries are negotiating membership.

TRIPS requires all WTO Members to provide minimum standards of protection for a wide range of IPRs including copyright, patents, trademarks, industrial designs, geographical indications, semiconductor topographies and undisclosed information. In doing so, TRIPS incorporates provisions from many existing IP international agreements such as the Paris and Berne Conventions administered by the World Intellectual Property Organisation (WIPO). TRIPS however also introduces a number of new obligations, particularly in relation to geographical indications, patents, trade secrets, and measures governing how IP rights should be enforced.

A special body, the Council for TRIPS (commonly known as the TRIPS Council), on which each WTO Member is represented, was established to administer the operation of the TRIPS. The TRIPS Council is responsible for reviewing various aspects of TRIPS as mandated in the agreement itself and also as requested by the biennial WTO Ministerial Conference.

Among the issues raised by TRIPS that have provoked the most discussion are:

· whether the objective set out in Article 7 that IPRs should contribute to the transfer of technology is achievable, particularly in respect of developing country members of the WTO.

· the perceived tensions between Article 8 which allows countries to adopt measures necessary to protect public health, and to prevent abuses of IP rights, provided they are TRIPS consistent, and other requirements in the agreement. These include the requirements to provide patent protection for pharmaceutical products, limitations on the conditions for issuing of compulsory licences (Article 31) and on the scope of provisions providing exceptions to patent rights (Article 30).

· the requirement to protect test data against “unfair commercial use” in Article 39.

· the justification for providing additional protection for geographical indications for wines and spirits, (Article 23) and whether this additional protection should also be extended to cover other or all geographical indications.

· the extent to which patents should be allowed on inventions relating to living forms, for example microorganisms (Article 27.3(b)), and the requirement to provide IP protection for plants. In that context, the compatibility of TRIPS with agreements such as the Convention on Biological Diversity (CBD) has been raised.

· the cost of meeting the requirements of TRIPS for many developing and least developed WTO Members in relation to the administration of IP rights and their effective enforcement.

TRIPS took effect on 1 January 1995. WTO Members considered as developed countries were given one year to comply whilst developing countries and transition economies were given until 1 January 2000 although for developing countries required to extend product patent protection to new areas such as pharmaceuticals, a further five years was provided before such protection had to be introduced. Least Developed Countries (LDCs)[17] are expected to enact TRIPS by 2006 although the Doha Ministerial Declaration on the TRIPS Agreement and Public Health allowed them a further 10 years in respect of pharmaceutical products.

Where there are disputes over the interpretation of TRIPS and its implementation by national laws, members may bring cases to the WTO’s Disputes Settlement Body (DSB) to resolve. To date there have been 24 cases involving TRIPS, where the disputes procedures have been invoked. Of these 23 were brought by developed country members, and one by Brazil. Sixteen were disputes between developed countries, seven were cases brought by developed against developing countries, and one by Brazil against the US. Of the 24, ten have been settled by mutual agreement, seven were decided by panels set up under the procedure, and seven are still pending.

The concerns about the operation of the intellectual property system and the extension of IPRs are not confined to their application to developing countries. There are currently two prominent enquiries in the US, one by the National Academies of Science and one by the Department of Justice and the Federal Trade Commission, looking at this important question.[18] These concerns centre on the rapid increase in patent applications in the US in recent years (a more than 50% increase in the last five years), and the perception that many more patents of “low quality” and broad scope are being issued. A fear is commonly expressed that too many patents have been and may be granted in respect of developments of minor importance. For instance, in the pharmaceutical industry this can have the effect of prolonging monopolies on valuable therapies. Patents may also be granted in some jurisdictions over biological materials on the grounds that they have been isolated from nature, if a possible function or utility is identified. The extent to which such practices affect competition by making it more difficult for rival inventors to sell competing products, or more expensive for consumers to buy them, is a matter of concern and growing debate. Considerable debate also exists about their effect on research, particularly in software and biotechnology, where patents taken at an early stage in the research process may be an obstacle to downstream research and commercialisation.

In a seminal article, the biologist Garrett Hardin[19] coined the phrase “tragedy of the commons” to explain how common resources tended to be overutilised in the absence of rules for their use. The proliferation of IPRs, particularly in areas such as biomedical research, has suggested the possibility of “a different tragedy, an “anticommons” in which people underuse scarce resources because too many owners can block each other…more intellectual property rights may lead paradoxically to fewer useful products for improving human health”.[20] Companies may now incur considerable costs, in time and money, determining how to do research without infringing other companies’ patent rights, or defending their own patent rights against other companies. This gives rise to a question as to whether the substantial costs involved in patent searching, analysis and litigation are a necessary price to pay for the incentives offered by the patent system, or whether ways can be found to reduce them.

The issues are not confined to patents. In the US, the term of copyright has extended in the last century from 28 years (renewable for a further 28 years) under the 1909 Copyright Act to 70 years after the death of the author, or 95 years from publication (in line with European practice). The question is whether this extension of protection can credibly be regarded as enhancing the incentives for future creation, or whether it is more about enhancing the value of existing creations. In 1998, Congress passed the Digital Millennium Copyright Act (DMCA) which, inter alia, forbids the circumvention of technological protection (i.e. encryption). In Europe, the Database Directive requires all Member States to provide sui generis protection for any collection of data arranged in a systematic way, whether the data itself is original or not. So far the US has not followed this approach. Increasingly there is concern that protection, under the influence of commercial pressures insufficiently circumscribed by considerations of public interest, is being extended more for the purpose of protecting the value of investments than to stimulate invention or creation.

We think that 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 the EU, for example, these regimes are particularly strong and well-established. In most developing countries this is far from being 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 intellectual property systems suitable to their particular legal system and economic situation.

Apart from the impact of local intellectual property rules internally in a developing country, there are also indirect impacts of the developed country intellectual property system on developing countries. In the digital age, restrictions on access to materials and data on the Internet affect everyone. Scientists in developing countries, for instance, may be prevented from gaining access to protected data, or have insufficient resources to do so. Research on important diseases or new crops affecting developing countries, but carried out in developed countries, may be hampered or promoted by the IP system. The IP regime in developed countries may provide powerful incentives to do research of particular kinds which mainly benefit people in developed countries, diverting intellectual resources from work on problems of global significance. Practice in developed countries may allow knowledge or genetic resources originating in developing countries to be patented without prior arrangements for sharing any benefits from commercialisation. In some cases developing country exports to developed countries may be restricted as a result of such protection.

Equally important for developing countries is the continuing trend towards the global harmonisation of IP protection. The movement towards harmonisation is not new – it has been going on for over 100 years. However the TRIPS agreement, that entered into force, subject to specified transitional periods, in 1995 (see Box O.1) has made minimum standards of IP protection mandatory for WTO members. But TRIPS is only one element of international harmonisation. There are continuing discussions in WIPO aimed at further harmonisation of the patent system, which may supersede TRIPS. Moreover, bilateral or regional trade and investment agreements between developed and developing countries often include mutual commitments to implement IP regimes that go beyond TRIPS minimum standards. Thus there is sustained pressure on developing countries to increase the levels of IP protection in their own regimes, based on standards in developed countries.

We have also been struck by the inconclusive and contested nature of much of the economic research devoted to elucidating the impact of IPRs, even in relation to the developed world. There is much that is uncertain, and given the nature of the subject, may remain so. The impact of IPRs is very often contingent on particular circumstances and context. Many academic observers, for this reason, remain determinedly ambivalent as to whether the social benefits of IPRs exceed their costs. Typical of these is the following example:

“It is almost impossible to conceive of any existing social institution {the patent system} so faulty in so many ways. It survives only because there seems nothing better to do.”[21]

In the case of developing countries, several recent reports by international agencies have commented on the likely impact of the globalisation of IP protection on developing countries.[22] All of these reports reflect to varying extents a concern that heavy costs may be incurred, but that the benefits for many countries are less easy to identify.

OUR TASK

We take the setting up of our Commission to be evidence that the British government is sensitive to these concerns. In that light our fundamental task is to consider whether the rules and institutions of IP protection as they have evolved to date can contribute to development and the reduction of poverty in developing countries.

Our starting point is that some IP protection is likely to be appropriate at some stage for developing countries, as it has been historically for developed countries. There is no doubt that it can make an important contribution to research and innovation in developed countries, particularly in industries such as pharmaceuticals and chemicals. The system provides the incentive for individuals and companies to invent and develop new technologies that may benefit society. But incentives work differently according to whether there is a capacity to respond to them. And, by conferring exclusive rights, costs are imposed on consumers and other users of protected technologies. In some cases, protection means that potential consumers or users, who are unable to pay the prices charged by IP owners, are deprived of access to the innovations the IP system is intended to make available. The balance of costs and benefits will vary according to how rights are applied and economic and social circumstances. Standards of IP protection that may be suitable for developed countries may cause greater costs than benefits when applied in developing countries which must rely in large part on knowledge or products embodying knowledge generated elsewhere to satisfy basic needs and foster their development.

The Nature of Intellectual Property Rights

Some see IP rights principally as economic or commercial rights, and others as akin to political or human rights. The TRIPS agreement treats them in the former sense, while recognising the need to strike a balance between the rights of inventors and creators to protection, and the rights of users of technology (Article 7 of TRIPS). The Universal Declaration of Human Rights has a broader definition recognising “the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author”, balanced by “the right…to share in scientific advancement and its benefits”.[23] The crucial issue is to reconcile the public interest in accessing new knowledge and the products of new knowledge, with the public interest in stimulating invention and creation which produces the new knowledge and products on which material and cultural progress may depend.

The difficulty is that the IP system seeks to achieve this reconciliation by conferring a private right, and private material benefits. Thus the (human) right to the protection of “moral and material interests” of “authors” is inextricably bound up with the right to the private material benefits which result from such protection. And the private benefit to the creator or inventor is derived at the expense of the consumer. Particularly where the consumer is poor, this may conflict with basic human rights, for example, the right to life. And the IP system, as manifested in TRIPS, does not allow – except in rather narrow ways - discrimination between goods essential to life or education, and other goods such as films or fast food.

We therefore consider that an IP right is best viewed as one of the means by which nations and societies can help to promote the fulfilment of human economic and social rights. In particular, there are no circumstances in which the most fundamental human rights should be subordinated to the requirements of IP protection. IP rights are granted by states for limited times (at least in the case of patents and copyrights) whereas human rights are inalienable and universal.[24]

For the most part IP rights are nowadays generally treated as economic and commercial rights, as is the case in TRIPS, and are more often held by companies rather than individual inventors. But describing them as “rights” should not be allowed to conceal the very real dilemmas raised by their application in developing countries, where the extra costs they impose may be at the expense of the essential prerequisites of life for poor people.

Regardless of the term used for them, we prefer to regard IPRs as instruments of public policy which confer economic privileges on individuals or institutions solely for the purposes of contributing to the greater public good. The privilege is therefore a means to an end, not an end in itself.

Thus in terms of assessing the value of IP protection, it may be compared to taxation. Hardly anybody claims that the more taxation there is, the better. However, there is a tendency among some to treat more IP protection as self-evidently a good thing. More taxation might be desirable if it delivers public services that society values more than the direct and indirect cost of taxation. But less can also be beneficial, for instance if excessive taxation is harming economic growth. Moreover, economists and politicians spend much time considering whether the structure of the tax system is optimal. Are heavy social security taxes harming employment? Are particular tax breaks serving their intended purpose, or merely subsidising their recipients to do what they are already doing? Is the effect of the tax system on the distribution of income desirable from a social point of view?

We think there are very analogous questions for intellectual property. How much of it is a good thing? How should it be structured? How does the optimal structure vary with sectors and levels of development? Moreover, even if we get the level and structure of protection right, to balance the incentive to invention and creation against the costs to society, we also have to worry about the distribution of gains.

Equitable Sharing of Benefits and Costs

The immediate impact of intellectual property protection is to benefit financially those who have knowledge and inventive power, and to increase the costs of access to those without. This is obviously relevant to the distribution of gains between developed and developing societies. Even if there were economic gains to the world as a whole from extending protection, on which there is some debate, the distributional consequences for income may not accord with our sense of equity. In the majority of developing countries, with weak scientific and technical infrastructures, the benefits in the form of the stimulus to domestic innovation will be muted, but they will still face the costs arising from the protection of (mainly foreign) technologies. Thus the costs and the benefits of the system as a whole may not be fairly distributed.

If most developing countries do not have a strong technological base which could benefit from IP protection, they do have genetic resources and traditional knowledge, which have value both to them and to the world at large. These are not necessarily IP resources in the sense that they are understood in developed countries, but they are certainly resources on the basis of which protected intellectual property can be, and has been, created. This raises a number of difficult issues as to whether and how these resources should interact with, and be valued by, the “modern” IP system, the extent to which these resources and knowledge require their own protection (not just in the IP sense), and how commercial benefits derived from these resources should be equitably shared.

The Internet also offers enormous opportunities for access to information required by developing countries, in particular scientists and researchers, whose access to printed media may be limited by lack of resources. But there is a concern that forms of encryption (or “digital rights management”), designed to counter widespread copying, will make material less accessible than is now the case with printed media. Such trends endanger the concept of “fair use”[25] (and similar doctrines) as it applies now to printed works, and at the extreme may provide the equivalent of perpetual copyright protection, by technological rather than legal means.

How Should Intellectual Property Policy be Made?

When there is so much uncertainty and controversy about the global impact of IPRs, we believe it is incumbent on policy makers to consider the available evidence, imperfect as it may be, before further extending property rights in scope or territorial extent.

Too often the interests of the “producer” dominate in the evolution of IP policy, and that of the ultimate consumer is neither heard nor heeded. So policy tends to be determined more by the interests of the commercial users of the system, than by an impartial conception of the greater public good. In IPR discussions between developed and developing countries, a similar imbalance exists. The trade ministries of developed nations are mainly influenced by producer interests who see the benefit to them of stronger IP protection in their export markets, while the consumer nations, mainly the developing countries, are less able to identify and represent their own interests against those of the developed nations.

Thus we recognise that the rules and practices of intellectual property, and how they evolve, are the product of political economy. Developing countries - and in particular poor consumers of products which may be protected by IP rights - negotiate from a position of relative weakness. There is a fundamental asymmetry in relationships between developed and developing countries, based ultimately on their relative economic strength.

The negotiations on TRIPS in the Uruguay Round are but one example. Developing countries accepted TRIPS not because at the time the adoption of intellectual property protection was high on their list of priorities, but partly because they thought the overall package offered, including the reduction of trade protectionism in developed countries, would be beneficial. Now many of them feel that the commitments made by developed countries to liberalise agriculture and textiles and reduce tariffs, have not been honoured, while they have to live with the burdens of the TRIPS agreement. The agreement on a new “development” WTO Round at Doha last year recognises that this bargain, between developed and developing countries, needs to be made explicit and meaningful.

The difficulty for developing countries in this context is that they are “second comers” in a world that has been shaped by the “first comers”. And because of that, it is a very different world from that in which the “first comers” developed. It is a cliché to say that we live in an age of globalisation, when the world economy is becoming more integrated. It is an article of faith in the international community that integration on appropriate terms into the world economy is a necessary condition for development. The question from our point of view is what are the appropriate terms for that integration in the field of IPRs. Just as the now-developed countries moulded their IP regimes to suit their particular economic, social and technological circumstances, so developing countries should in principle now be able to do the same.

We therefore conclude that far more attention needs to be accorded to the needs of the developing countries in the making of international IP policy. Consistent with recent decisions of the international community at Doha and Monterrey, the development objectives need to be integrated into the making of IP rules and practice. At Monterrey in March 2002, governments welcomed “the decisions of the World Trade Organization to place the needs and interests of developing countries at the heart of its work programme”. They also acknowledged the concerns of developing countries, including:

“the lack of recognition of intellectual property rights for the protection of traditional knowledge and folklore; the transfer of knowledge and technology; the implementation and interpretation of the Agreement on Trade-Related Aspects of Intellectual Property Rights in a manner supportive of public health…”[26]

We believe this is a satisfactory but partial agenda. There is far more that needs to be thought about and done in considering the impact of the existing system upon developing countries. It is our contention that intellectual property systems may, if we are not careful, introduce distortions that are detrimental to the interests of developing countries. Very “high” standards of protection may be in the public interest in developed countries with highly sophisticated scientific and technological infrastructures (although we note, as above, that this is controversial in several respects), but this does not mean the same standards are appropriate in all developing countries. In fact we consider that developed countries should pay more attention to reconciling their own perceived commercial self-interest, with their own interest in the reduction of poverty in developing countries.

To achieve that end, so far as possible developing countries should not be deprived of the flexibility to design their IP systems that developed countries enjoyed in earlier stages of their own development, and higher IP standards should not be pressed on them without a serious and objective assessment of their development impact. We need to ensure that the global IP systems evolve so that they may contribute to the development of developing countries, by stimulating innovation and technology transfer relevant to them, while also making available the products of technology at the most competitive prices possible. We need to make sure that the IP system facilitates, rather than hinders, the application of the rapid advances in science and technology for the benefit of developing countries.

We hope our report will make a contribution by defining an agenda for making the global IPR system, and the institutions in that system, work better for poor people and developing countries.

We have identified a number of key issues for developing countries which we deal with in the following chapters:

· What can we learn from the economic and empirical evidence about the impact of IP in developing countries? Does the historical experience of developed countries hold any lessons for developing countries today? How can technology transfer to developing countries be facilitated? (Chapter 1)

· How does the IP system contribute to the development of medicines that are needed by poor people? How does it affect the access of poor people to medicines and their availability? What does this imply for IP rules and practices? (Chapter 2)

· Can IP protection on plants and genetic resources benefit developing countries and poor people? What sort of systems should developing countries consider for protecting plant varieties while safeguarding farmers’ rights? (Chapter 3)

· How could the IP system contribute to the principles of access and benefit sharing enshrined in the Convention on Biological Diversity (CBD)? Can it help to protect or promote traditional knowledge, biodiversity and cultural expressions? Can the extension of Geographical Indications[27] (GIs) benefit developing countries? (Chapter 4)

· How does copyright protection affect developing countries’ access to knowledge, technologies and information that they need? Will IP or technological protection affect access to the Internet? How can copyright be used to support creative industries in developing countries? (Chapter 5)

· How should developing countries frame their own legislation and practice on patents? Can developing countries frame their legislation in ways that might avoid some of the problems that have occurred in developed countries? What would be the best position for developing countries in relation to patent harmonisation? (Chapter 6)

· What sort of institutions do developing countries need to administer, enforce and regulate IP effectively and how can these be established? What complementary policies and institutions are necessary, in particular in relation to competition? (Chapter 7)

· Are the international and national institutions involved in IPRs as effective as they could be in serving the interests of developing countries? (Chapter 8)

Chapter 1

INTELLECTUAL PROPERTY AND DEVELOPMENT

INTRODUCTION

Intellectual property is a form of knowledge which societies have decided can be assigned specific property rights. They have some resemblance to ownership rights over physical property or land. But knowledge is much more than intellectual property. Knowledge is embodied in people, in institutions and in new technologies in ways that have long been seen as a major engine of economic growth.[28] Alfred Marshall, the “father” of modern economics, thought so in the 19^th Century.[29] With recent scientific and technical advances, particularly in biotechnology and information and communications technologies (ICTs), knowledge has become to an even greater degree than before the principal source of competitive advantage for both companies and countries. Trade in high technology goods and services which are knowledge-intensive, and where IP protection is most common, tends to be among the fastest-growing in international trade.[30]

In developed countries, there is good evidence that intellectual property is, and has been, important for the promotion of invention in some industrial sectors, although the evidence as to exactly how important it is in different sectors is mixed. For example, evidence from the 1980s indicates that the pharmaceutical, chemical and petroleum industries were predominant in recognising that the patent system was essential to innovation.[31] Today, one would need to add biotechnology and some components of information technology. Copyright has also proven essential for the music, film and publishing industries.

For developing countries, like the developed countries before them, the development of indigenous technological capacity has proved to be a key determinant of economic growth and poverty reduction. This capacity determines the extent to which these countries can assimilate and apply foreign technology. Many studies have concluded the most distinctive single factor determining the success of technology transfer is the early emergence of an indigenous technological capacity.[32]

But developing countries vary widely in the quality and capacity of their scientific and technical infrastructures. A commonly used indicator of technological capability is the extent of patenting activity in the US and through international applications through the Patent Cooperation Treaty (PCT).[33] In 2001, less than 1% of US patents were granted to applicants from developing countries, nearly 60% of which were from seven of the more technologically advanced developing countries.[34] In the PCT, developing countries accounted for under 2% of applications in 1999-2001, with over 95% of these applications coming from just five countries: China, India, South Africa, Brazil and Mexico.[35] In these countries patent applications, although small, are growing faster than PCT applications generally. PCT applications grew by nearly 23% between 1999 and 2001, but the share of these countries in the total increased from 1% in 1999 to 2.6% in 2001. As we have seen R&D expenditure is heavily concentrated in developed countries, and in a few of the more technologically advanced developing countries. Few developing countries have been able to develop a strong indigenous technological capability. This means that it is difficult either for them to develop their own technology, or to assimilate technology from developed countries.

The crucial question is whether or not the extension of IP regimes assists developing countries in obtaining access to such technologies, and whether and how intellectual property right protection might help developing countries to achieve economic and social development and to reduce poverty. In this chapter we examine:

· The rationale for IP protection

· Its use historically in developed and developing nations

· The available evidence on the impact of IP on developing countries

· The role IP might have in facilitating the transfer of technology to developing countries.

Box 1.1 What are Intellectual Property Rights?

Intellectual property (IP) rights are the rights awarded by society to individuals or organisations principally over creative works: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. They give the creator the right to prevent others from making unauthorised use of their property for a limited period. IP is categorised as Industrial Property (functional commercial innovations), and Artistic and Literary Property (cultural creations). Current technological developments are blurring, to some extent, this distinction, and some hybrid sui generis systems are emerging.

Industrial Property

Patents: A patent is an exclusive right awarded to an inventor to prevent others from making, selling, distributing, importing or using their invention, without licence or authorisation, for a fixed period of time (TRIPS stipulates 20 years minimum from filing date). In return, society requires that the patent applicant disclose the invention in a manner that enables others to put it into practice. This increases the body of knowledge available for further research. As well as sufficient disclosure of the invention, there are three requirements (although details differ from country to country) that determine the patentability of an invention: novelty (new characteristics which are not "prior art")[36], non-obviousness (an inventive step not obvious to one skilled in the field), and utility (as used in the US) or industrial applicability (as used in the UK). Utility models are similar to patents, but in some countries confer rights of shorter duration to certain kinds of small or incremental innovations.

Industrial Designs: Industrial designs protect the aesthetic aspects (shape, texture, pattern, colour) of an object, rather than the technical features. TRIPS requires that an original design be eligible for protection from unauthorised use by others for a minimum of 10 years.

Trademarks: Trademarks provide exclusive rights to use distinctive signs, such as symbols, colours, letters, shapes or names to identify the producer of a product, and protect its associated reputation. In order to be eligible for protection a mark must be distinctive of the proprietor so as to identify the proprietor’s goods or services. The main purpose of a trademark is to prevent customers from being misled or deceived. The period of protection varies, but a trademark can be renewed indefinitely. In addition many countries provide protection against unfair competition, sometimes by way of preventing misrepresentations as to trade origin regardless of registration of the trademark.

Geographical Indications: Geographical Indications (GIs) identify the specific geographical origin of a product, and the associated qualities, reputation or other characteristics. They usually consist of the name of the place of origin. For example, food products sometimes have qualities that derive from their place of production and local environmental factors. The geographical indication prevents unauthorized parties from using a protected GI for products not from that region or from misleading the public as to the true origin of the product.

Trade Secrets: Trade secrets consist of commercially valuable information about production methods, business plans, clientele, etc. They are protected as long as they remain secret by laws which prevent acquisition by commercially unfair means and unauthorised disclosure.

Artistic and Literary Property

Copyright: Copyright grants exclusive rights to the creators of original literary, scientific and artistic works. Copyright only prevents copying, not independent derivation. Copyright protection begins, without formalities, with the creation of the work, and lasts (as a general rule) for the life of the creator plus 50 years (70 years in the US and EU). It prevents unauthorised reproduction, public performance, recording, broadcasting, translation, or adaptation, and allows the collection of royalties for authorised use. Computer programs are protected by copyrights, as software source and code have been defined as a literary expression.

Sui Generis systems

Integrated Computer Circuits: A specific sui generis form of protection for the design of integrated computer circuits. As the inventive step is often minimal and originality is the only requirement, the minimum period of protection under TRIPS is 10 years.

Plant Breeders’ Rights: Plant breeders’ rights (PBRs) are granted to breeders of new, distinct, uniform and stable plant varieties. They normally offer protection for at least fifteen years (counted from granting). Most countries have exceptions for farmers to save and replant seeds, and for the use of protected materials for further breeding.

Database Protection: The EU has adopted legislation to provide sui generis protection in respect of databases, preventing unauthorised use of data compilations, even if non-original. Exclusive rights to extract or utilize all or a substantial part of the contents of the protected database are granted.

THE RATIONALE FOR IP PROTECTION

Introduction

Intellectual property creates a legal means to appropriate knowledge. A characteristic of knowledge is that one person’s use does not diminish another’s (for example, reading this report). Moreover the extra cost of extending use to another person is often very low or nil (for example, lending a book or copying an electronic file). From the point of view of society, the more people who use knowledge the better because each user gains something from it at low or no cost, and society is in some sense better off. Economists therefore say that knowledge has the character of a non-rival public good.[37]

The other aspect of knowledge, or products embodying knowledge, is the difficulty - often intrinsic - of preventing others from using or copying it. Many products, incorporating new knowledge, can be easily copied. Probably most products, with sufficient effort, can be copied at a fraction (albeit not necessarily small) of the cost it took to invent and market them. Economists refer to this latter characteristic as contributing to market failure. If a product takes considerable effort, ingenuity and research, but can be copied easily, there is unlikely to be a sufficient financial incentive from society’s point of view to devote resources to invention,

Patents

Patents are one way of addressing this market failure. By conferring temporary market exclusivities, patents allow producers to recoup the costs of investment in R&D and reap a profit, in return for making publicly available the knowledge on which the invention is based. However, someone else can only put that knowledge to potential commercial use with the authorisation of the patentee. The costs of investment in R&D and the return on that investment are met by charging the consumer a price based on the ability to exclude competition.

Protection is therefore a bargain struck by society on the premise that, in its absence, there would be insufficient invention and innovation. The assumption is that in the longer run, consumers will be better off, in spite of the higher costs conferred by monopoly pricing, because the short term losses to consumers are more than offset by the value to them of the new inventions created through additional R&D. Economists take the view that the patent system improves dynamic efficiency (by stimulating technical progress) at the cost of static efficiency (arising from the costs associated with monopoly).

This rationale for patent protection is relatively straightforward, but it is dependent on a number of simplifying assumptions that may not be borne out in practice. For instance, the optimal degree of patent protection cannot be accurately defined. If protection is too weak, then the development of technology may be inhibited through insufficient incentives for R&D. If too much protection is conferred, consumers may not benefit, even in the long run, and patentees may generate profits far in excess of the overall costs of R&D. Moreover, further innovation based on the protected technology may be stifled because, for instance, the length of the patent term is too long or the scope of the protection granted is too broad.

The length of the monopoly granted is one determinant of the strength of patent protection. Another is the scope of the patent. A broad patent is one that allows a right that goes considerably beyond the claimed invention itself. For example, a patent which claims a gene might only specify one use of that gene. But, under certain approaches to the scope of protection, the patentee will also have the rights to uses of the genetic information other than those disclosed in the patent, including those discovered later by someone else. Broad patents can tend to discourage subsequent innovation by other researchers in the general area of the patent. In contrast, narrow claims will encourage others to ‘work around’ the patent, offering less restriction on related research by others. They may also tend to create stronger rights which are less vulnerable to challenge in the courts.[38] The licensing policy pursued by the patentee will also have an important effect on the dissemination of new technologies, and the extent to which further research is affected by the granted rights.

The optimal degree of protection (where the social benefits are judged to exceed the social costs) will also vary widely by product and sector and will be linked to variations in demand, market structures, R&D costs and the nature of the innovative process. In practice IPR regimes cannot be tailored so precisely and therefore the level of protection afforded in practice is necessarily a compromise. Striking the wrong compromise - whether too much or too little - may be costly to society, especially in the longer term.

One underlying assumption is that there is a latent supply of innovative capacity in the private sector waiting to be unleashed by the grant of the protection that the IP system provides. That may be so in countries where there is substantial research capacity. But in most developing countries local innovation systems (at least of the kind established in developed countries) are weak. Even where such systems are stronger, there is often more capacity in the public than the private sectors.[39] Thus, in such contexts, the dynamic benefit from IP protection is uncertain. The patent system may provide an incentive but there may be limited local capacity to make use of it. Even when technologies are developed, firms in developing countries can seldom bear the costs of acquisition and maintenance of rights and, above all, of litigation if disputes arise.

Economists are also now very aware of what they call transactions costs. Establishing the infrastructure of an IPR regime, and mechanisms for the enforcement of IP rights, is costly both to governments, and private stakeholders. In developing countries, where human and financial resources are scarce, and legal systems not well developed, the opportunity costs of operating the system effectively are high. Those costs include the costs of scrutinising the validity of claims to patent rights (both at the application stage and in the courts) and adjudicating upon actions for infringement. Considerable costs are generated by the inherent uncertainties of litigation. These costs too need to be weighed against the benefits arising from the IP system.

Thus the value of the patent system needs to be assessed in a balanced way, acknowledging that it has both costs and benefits, and that the balance of costs and benefits is likely to differ markedly in diverse circumstances.

Amongst academics, notably economists, IPRs have generally been viewed critically. Such rights necessarily involve restrictions on competition which may be to the detriment of consumers and the freedom of trade, and the question is whether these costs are outweighed by the incentives for research and invention. The quotations in Box 1.2 below reflect well the ambivalence that is widely expressed about the effects of the IP system in developed countries, and its impact on developing countries. This ambivalence has tended to strengthen as the IP system has embraced new technologies.

Box 1.2 Conclusions on the Value of the IP System

Edith Penrose in “The Economics of the International Patent System” in 1951:

“Any country must lose if it grants monopoly privileges in the domestic market which neither improve nor cheapen the goods available, develop its own productive capacity nor obtain for its producers at least equivalent privileges in other markets. No amount of talk about the “economic unity of the world” can hide the fact that some countries with little export trade in industrial goods and few, if any, inventions for sale have nothing to gain from granting patents on inventions worked and patented abroad except the avoidance of unpleasant foreign retaliation in other directions. In this category are agricultural countries and countries striving to industrialise but exporting primarily raw materials…whatever advantages may exist for these countries…they do not include advantages related to their own economic gain from granting or obtaining patents on invention.”[40]

Fritz Machlup concluded after studying the US patent system in 1958:

“If one does not know whether a system…is good or bad, the safest “policy conclusion” is to muddle through – either with it, if one has long lived with it, or without it, if one has lived without it. If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it. This last statement refers to a country such as the U.S. – not to a small country and not a predominantly non-industrial country, where a different weight of argument might well suggest another conclusion.”[41]

And another leading economist, Lester Thurow, wrote in 1997:

“In a global economy, a global system of intellectual property rights is needed. This system must reflect the needs both of countries that are developing and those that have developed. The problem is similar to the one concerning which types of knowledge should be in the public domain in the developed world. But the Third World’s need to get low cost pharmaceuticals is not equivalent to its need for low cost CDs. Any system that treats such needs equally, as our current system does, is neither a good nor a viable system.”[42]

A prominent academic lawyer, Larry Lessig, said of the US in 1999:

“No doubt we are better off with a patent system than without one. Lots of research and invention wouldn't occur without the government's protection. But just because some protection is good, more isn't necessarily better…There is growing skepticism among academics about whether such state-imposed monopolies help a rapidly evolving market such as the Internet…The question economists are now asking is whether expanded patent protection will do any good. Certainly it will make some people very rich, but that's different from improving a market…Rather than unbounded protection, our tradition teaches balance and the dangers inherent in overly strong intellectual property regimes. But balance in IP seems over for now. A feeding frenzy has taken its place - not just in the field of patents, but in IP generally…”[43]

And Jeffrey Sachs, an eminent economist, said in 2002:

“…there is an opportunity to re-think the intellectual property rights regime of the world trading system vis-à-vis the world’s poorest countries. In the Uruguay Round negotiation, the international pharmaceutical industry pushed very hard for a universal coverage of patent protection without considering the implications for the poorest countries. There is little doubt that the new IPR arrangements can make it more difficult for consumers in the poorest countries to access key technologies, as we’ve seen vividly in the case of essential medicines. The countries negotiating the new Doha round have already committed to re-examining the IPR issue in light of public health priorities, and they are wise to do so. It also may well be the case that the tightening of IPRs may slow the diffusion of technology to the world’s poorest countries that has traditionally come through copying and reverse engineering. Those hallowed pathways of technological diffusion are increasingly being slowed, and the effects on the poorest countries may be unduly hindered. This is an area for close observation, policy attention, and continuing research."[44]

Copyright

The rationale for copyright protection is not dissimilar to that of patents, although historically greater weight has been given to the inherent rights of creative artists to receive fair remuneration for their works than to the incentive effects. Copyright protects the form in which ideas are expressed, not the ideas themselves. Copyright was and remains the basis for making the publishing of literary and artistic works an economic proposition by preventing copying. Unlike patents, copyright protection does not require registration or other formalities (although this was not always the case).

As with patents, the trade-off for society is between the incentive offered to creators of literary and artistic works and the restrictions this places on the free flow of protected works. But, unlike patents, copyright in principle protects the expression of ideas, and not the ideas as such, which may be used by others. And it only prevents the copying of that expression, not independent derivation. The central issue for developing countries concerns the cost of access to physical or digital embodiments of the protected works, and the approach taken to enforcement of copyright protection.

As with patents, there are normally exceptions in law where the rights of owners are moderated in the wider public interest, known in some countries as “fair use” provisions (for example in the US), as “fair dealing” in the UK tradition, and exceptions to the reproduction right in the European tradition.[45] It is the issue concerning the cost of access, and the interpretation of “fair use”, that is particularly critical for developing countries, made more so by the extension of copyright to electronic material, and to software.

Copyright protects works for much longer than patents but does not protect against independent derivation of the work in question. Under TRIPS copyright allows a minimum of fifty years after the death of the author, but most developed countries and several developing countries have increased this to 70 years or more. While the main reason for the extension of copyright has been pressure from the copyright industries (notably the film industry in the US), there is no clear economic rationale for copyright protection being so much longer than that for patents. Indeed, the rate of technical change has led in several industries to a shorter effective product life (for example, successive editions of software programmes) which point to longer copyright protection being redundant. The successive increases in the period of copyright protection have given rise to concern in some quarters. This year the US Supreme Court is hearing a case that challenges the 1998 Copyright Term Extension Act on the grounds that it violates the Constitution which specifies that protection must be for “limited Times”. In addition, it is asserted that an extension of protection granted for a work that already exists can have no incentive effect, and also violates the quid pro quo requirement in the Constitution that monopoly rights are provided in exchange for public benefits.[46]

As with patents, a key issue for developing countries is whether the gains to be elicited from the incentives provided by copyright outweigh the increased costs associated with the restrictions on use that flow from copyright. Although there are exceptions, such as India’s film or software industry, most developing countries are net importers of copyrighted material, just as they are net importers of technologies. Since copyright does not need registration or other formalities, once a country has copyright laws in place, the impact of copyright is more ubiquitous than in the case of patents. Software, textbooks, and academic journals are key items where copyright is a determining factor in pricing and access, and which are also essential ingredients in education and other spheres crucial to the development process. For instance, a reasonable selection of academic journals is far beyond the purchasing budgets of university libraries in most developing countries, and increasingly in developed countries as well.

The interaction of the Internet and copyright is an issue of particular and growing importance for developing countries. With printed media, there are provisions for “fair use” under copyright law, and the nature of the medium lends itself to multiple use either formally through libraries or informally through borrowing and browsing (as may be done in a bookshop before deciding to purchase). With material accessed through the Internet, the technology allows encryption and other means to exclude potential users even from browsing, unless they have paid the relevant charge. While the “philosophy” of the Internet has hitherto been about free access, increasingly sites with material of value are moving towards charging for use, or limiting access in other ways. Further, the DMCA in the US and Europe’s Database Directive have provisions that go well beyond what is required under TRIPS, and are held by many users to have shifted the balance of protection too far in favour of investors and originators of collections of data.

Thus, as with patents, there is a need for balance. Too much protection by copyright, by other forms of IP protection, or by technology, may restrict the free flow of ideas on which the further progress of ideas and technology depends. For developing countries, affordable access to works essential for development such as educational materials and scientific and technical knowledge may be affected by unduly strong copyright rules.

HISTORY

There are several lessons that we can learn from history, particularly from the experience of the developed countries in the 19^th century, and the emerging economies of East Asia in the last century.

First, historically IP regimes have been used by countries to further what they perceive as their own economic interests. Countries have changed their regimes at different stages of economic development as that perception (and their economic status) has changed. For instance between 1790 and 1836, as a net importer of technology, the US restricted the issue of patents to its own citizens and residents. Even in 1836, patents fees for foreigners were fixed at ten times the rate for US citizens (and two thirds as much again if one was British!). Only in 1861 were foreigners treated on an (almost wholly) non-discriminatory basis. In his Annual Report for 1858, the US Commissioner of Patents noted:

“It is a fact, as significant as it is deplorable, that of the 10,359 inventions shown to have been made abroad during the last twelve months, but forty-two have been patented in the US. The exorbitant fees exacted of the foreigner, and the severity of the offensive discrimination established to his prejudice, afford a sufficient explanation of the result…it might well be concluded that the government of this country regarded an invention made beyond the seas as something intrinsically dangerous, if not noxious, the introduction of which it is morally just and politically wise to burden with taxation, just as you would thus burden the importation of some foreign poisonous drug. There is a loftier view of this question, and one deemed more in harmony with the progressive spirit of the age -- a view which hails the fruits of the inventive genius, in whatever clime matured, as the common property of the world, and gives them cordial welcome as the common blessings of the race to whose amelioration they are devoted.”[47]

Until 1891, US copyright protection was restricted to US citizens but various restrictions on foreign copyrights remained in force (for example, printing had to be on US typesets) which delayed US entry to the Berne Copyright Convention until as late as 1989, over 100 years after the UK. It is for this reason that some readers may remember purchasing books which had on the cover the words: “For copyright reasons this edition is not for sale in the U.S.A.”

Until the adoption of the Paris Convention (on protecting industrial property) in 1883, and its 1886 Berne counterpart (on literary and artistic works) countries’ ability to tailor the nature of their regimes to their own circumstances was unconstrained. Even then, the rules of these Conventions exhibited considerable flexibility. The Paris Convention allowed countries to exclude fields of technology from protection and to determine the length of protection afforded under patents. It also permitted revocation of patents, and compulsory licences[48] to remedy abuses.

Secondly, numerous countries have at times exempted various kinds of invention in certain sectors of industry from patent protection. Often the law has restricted patents on products confining protection to processes for their production. Typically these sectors have been foodstuffs, pharmaceuticals and chemicals, based on the judgement that no monopoly should be granted over essential goods, and that there is more to be gained by encouraging free access to foreign technology, than by potentially stimulating invention in domestic industry. This approach was adopted by many countries which are now developed in the 19^th Century, and for some until late in the 20^th Century, and also in the East Asian countries (such as Taiwan and Korea) until relatively recently. However, TRIPS now forbids discrimination in the grant of patent protection in respect of different fields of technology.

Thirdly, intellectual property, and patents in particular, have often been politically contentious. Between 1850 and 1875, a debate raged in Europe, both in academic and political circles, on whether the patent system was a blight on free trade principles or the best practical means of stimulating inventions. John Stuart Mill took the latter view:

“…an exclusive privilege, of temporary duration is preferable [as a means of stimulating invention]; because it leaves nothing to anyone’s discretion; because the reward conferred by it depends upon the invention’s being found useful, and the greater the usefulness, the greater the reward; and because it is paid by the very persons to whom the service is rendered, the consumers of the commodity.”[49]

In essence, this remains the case for the system today – a relatively inexpensive way (at least for governments, in so far as they are not purchasers of the goods) to provide an incentive for invention with a reward proportionate to the use subsequently made of it.[50]

Opposition to patent protection was advanced on various grounds but was summed up in the words of the Economist in 1851:

“The privileges granted to inventors by patent laws are prohibitions on other men, and the history of inventions accordingly teems with accounts of trifling improvements patented, that have put a stop, for a long period, to other similar and much greater improvements…The privileges have stifled more inventions than they have promoted…Every patent is a prohibition against improvements in a particular direction, except by the patentee, for a certain number of years; and, however, beneficial that may be to him who receives the privilege, the community cannot be benefited by it…On all inventors it is essentially a prohibition to exercise their faculties; and in proportion as they are more numerous than one, it is an impediment to the general advancement…”[51]

Again, this clearly illustrates a theme that recurs in current discussions. If the system protects one set of inventions, can it avoid deterring those who seek to make improvements upon the first?

Foreshadowing the debates concerning TRIPS, the 19^th Century argument was also related to the free trade controversy in that the patent system, by conferring monopolies, was seen by some as a contravention of free trade principles. Moreover there was self-interest at work. In Switzerland in the 1880s, industrialists did not want a patent law because they wished to continue to use the inventions of foreign competitors. This opposition was maintained in spite of the fact that the Swiss were enthusiastic patentees in other countries themselves. And because Switzerland had low tariffs, they feared that those competitors would take out patents in Switzerland and then drive out Swiss competition under their protection.

Switzerland did eventually adopt a patent law, with various exclusions and safeguards, not because most Swiss thought there was any net benefit to be had from allowing foreign patents, but because Switzerland came under intense pressure, particularly from Germany, to do so and did not wish to invite retaliation from other countries.[52] Safeguards adopted included provisions for compulsory working[53] and compulsory licensing which enabled the government to enforce production in Switzerland by one means or another, if it so desired. In addition, chemicals and textile dyeing were excluded from patent protection. Elsewhere in Europe the proponents of the patent system also largely won the argument, just as the free trade movement waned in the face of the Great Depression in Europe. Only in Holland did the movement against patents wholly succeed, and from 1869 until 1912 no patents were issued there.[54]

Fourthly, the best examples in the recent history of development are the countries in East Asia which used weak forms of IP protection tailored to their particular circumstances at that stage of their development. Throughout the critical phase of rapid growth in Taiwan and Korea between 1960 and 1980, during which their economies were transformed, both countries emphasised the importance of imitation and reverse engineering[55] as an important element in developing their indigenous technological and innovative capacity. Korea adopted patent legislation in 1961, but the scope of patenting excluded foodstuffs, chemicals and pharmaceuticals. The patent term was only 12 years. It was only in the mid-1980s, particularly as a result of action by the US under Section 301 of its 1974 Trade Act, that patent laws were revised, although they did not yet reach the standards to be set under TRIPS. A similar process took place in Taiwan. In India, the weakening of IP protection in pharmaceuticals in its 1970 Patent Act[56] is widely considered to have been an important factor in the subsequent rapid growth of its pharmaceutical industry, as a producer and exporter of low cost generic medicines[57] and bulk intermediates.[58]

The general lesson history shows us is that countries have been able to adapt IPR regimes to facilitate technological learning and promote their own industrial policy objectives. Because policies in one country impinge on the interests of others, there has always been an international dimension to debates on IP. The Paris and Berne Conventions recognised this dimension, and the desirability of reciprocity, but allowed considerable flexibility in the design of IP regimes. With the advent of TRIPS, a large part of this flexibility has been removed. Countries can no longer follow the path adopted by Switzerland, Korea or Taiwan in their own development. The process of technological learning, and of progressing from imitation and reverse engineering to establishing a genuine indigenous innovative capacity, must now be done differently from in the past.

THE EVIDENCE ABOUT THE IMPACT OF IP

The Context

Analysis of the available evidence on the impact of IPR regimes on developing, or developed countries, is a complex task. As noted above, we do not wish to focus on IPRs as an end in themselves, but on how they can contribute to development and the reduction of poverty. We believe that a prerequisite for sustainable development in any country is the development of an indigenous scientific and technological capacity. This is necessary to allow countries to develop their own process of technological innovation, and to enable them to absorb effectively technologies developed abroad. It is obvious that the development of such capacity is dependent on a large number of elements. It requires an effective education system, particularly at the tertiary level, and a network of supporting institutions and legal structures. It also requires the availability of financial resources, both public and private, to pursue technological development. There are many other factors that contribute to what are often known as “national systems of innovation”.

Viewed this way, the issue is whether IPRs can contribute to promoting effective national systems of innovation in principle and, given the wide existing variations in the indigenous scientific and technological capacity, how they can do so effectively in practice, taking account of the circumstances in particular countries. Moreover, since we are not just interested in the dynamic effect of IPRs in promoting innovation, but also the costs that IP protection imposes on society, particularly on poor people, we need to take account of these costs in considering the evidence and the value of any given IP system.

Much of the evidence about IPRs is either indirect or based on proxy measures. We cannot measure directly a country’s capacity for innovation (for example, we might commonly use R&D expenditures or innovations-related expenditures as a proxy). Nor can we directly measure the strength of patent protection in a country (although indices have been compiled using a mixture of proxies). The use of econometrics, which attempts to isolate the independent effect of IPRs on economic variables, is often contested, particularly as to whether it demonstrates association rather than causation. For instance, some authorities argue that the absence of IP protection encourages technology transfer and technological learning (through copying and imitation). Others argue that IP protection is a mechanism which encourages technology transfer from abroad through direct investment or licensing, and the indirect effects are an effective means of technological learning. Determining where the truth lies can be difficult for policymakers.

Redistributive Impact

Developing countries, taken as a whole, are net importers of technology, most of which is supplied by the developed countries. Organisations in developed countries own the overwhelming proportion of patent rights worldwide. Econometric models have been constructed to estimate what would be the global impact of applying the TRIPS agreement (i.e. globalising minimum standards for IP protection). The latest estimate, by the World Bank, suggests that most developed countries would be the major beneficiaries of TRIPS in terms of the enhanced value of their patents, with the benefit to the US estimated at an annual $19 billion.[59] Developing countries, and a few developed ones, would be the net losers. The country sustaining the largest loss in the study by the World Bank was Korea ($15 billion). Not too much should be read into the exact value of these figures, which depend on a number of debateable assumptions, but it can safely be said that the effect of applying patent rights globally will be to benefit very considerably the holders of patent rights, mainly in developed countries, at the expense of the users of protected technologies and goods in developing countries. Between 1991 and 2001, the net US surplus of royalties and fees (which mainly relate to IP transactions) increased from $14 billion to over $22 billion.[60] In 1999, figures from the World Bank indicate a deficit for developing countries for which figures are available of $7.5 billion on royalties and licence fees.[61]

Growth and Innovation

That the extension of IPRs would tend to benefit the developed countries is not surprising and explains why pressure was applied by industry in developed countries for the adoption of TRIPS. But the calculations above only consider the cost side of the IPR equation for developing countries. If IPRs are to benefit developing countries that benefit will need to come through promoting invention and technological innovation, and thereby enhancing growth.

At the country level, there appears to be little economic research on developing countries that directly links the IPR regime to domestic innovation and development. An approach common to Germany, and the East Asian countries (including China), was the introduction of easily obtained utility models (or petty patents), which combined a lower standard of inventiveness, with registration rather than examination, and a shorter protection period.[62] When introduced in Germany, in 1891, these provided for three years of protection (renewable for a further three years) and by the 1930s, twice as many utility patents as examined patents were granted.[63] Studies of Japan’s patent system in the period 1960-1993 have suggested that utility models were more important than patents in stimulating productivity growth.[64] There is also some evidence relating innovation in particular sectors in Brazil and the Philippines to the availability of such utility models.[65] In Japan, the evidence suggests that a system of “weak” protection based on utility models and industrial designs facilitated incremental innovation by small enterprises, and the absorption and diffusion of technology. This was associated, as in Taiwan and Korea, with an absence of patent protection for chemical and pharmaceutical products. Japan introduced protection for the latter only in 1976.[66]

There is more evidence about the impact of patent protection in developed countries. It appears to indicate that large firms consider patent protection of considerable importance in particular sectors (for example pharmaceuticals) but that in many sectors they are not considered important determinants of innovation.[67] Moreover, patents seem to be hardly used by small and medium enterprises in most sectors in many developed countries, as a means of promoting their innovation, or as a source of useful technical information. An important exception is the biopharmaceutical sector where companies often view their patent portfolios as their most important business asset.[68] A recent large study in the UK concluded that “formal IP regimes are applicable only to a small proportion of business activity, such as large manufacturing companies.” Other informal methods of protection, and of obtaining technical information, were generally more effective for SMEs.[69]

The crucial question from our point of view is to what extent IPRs promote growth. The evidence we have reviewed does not suggest strong direct effects on economic growth in developing countries.[70] One recent study found that the more open (to trade) an economy, the more likely it was that patent rights would affect growth. According to this calculation in an open economy, stronger patent rights might increase growth rates by 0.66% per annum.[71] But there is some debate about causation because both openness to trade and the strength of the IPR regime tend to increase in any case with per capita income.

Other evidence suggests that the strength of patent protection increases with economic development, but that this does not occur until quite high levels of per capita income. Indeed, prior to the recent global strengthening of IP laws, there was a reasonably consistent observed relationship between the strength of IP rights and per capita income. At low levels of income, protection is quite high (reflecting past colonial influences) but then falls to a low point of weak protection at an income of about $2000 (at 1985 prices) per capita. This low point is maintained until a per capita income of nearly $8000 when the strength of protection begins to increase again. This association is not necessarily causal but it does indicate that until relatively high levels of per capita income, IPR protection is not a high priority in developing country policy.[72]

Maybe the simplest evidence of the impact of the IP system is how much it is used, particularly by nationals. The propensity to take out patents will reflect some judgement as to the benefits, albeit private rather than social benefits. In sub-Saharan Africa in 1998 (excluding South Africa), 35 patents were granted to residents compared to 741 for non-residents. By contrast in Korea, 35900 patents were issued to residents, compared to 16990 to non-residents. In the US, the corresponding figures were 80292 and 67228.[73]

The main conclusion seems to be that for those developing countries that have acquired significant technological and innovative capabilities, there has generally been an association with “weak” rather than “strong” forms of IP protection in the formative period of their economic development. We conclude therefore that in most low income countries, with a weak scientific and technological infrastructure, IP protection at the levels mandated by TRIPS is not a significant determinant of growth. On the contrary, rapid growth is more often associated with weaker IP protection. In technologically advanced developing countries, there is some evidence that IP protection becomes important at a stage of development, but that stage is not until a country is well into the category of upper middle income developing countries.[74]

Trade and Investment

Although the direct impact on growth is difficult to discern, much effort has been devoted to establishing the impact of changing IPR rights on trade and foreign investment. We do not find some of this work very helpful to our study. Much of it does not address the impact of IP rights on developing countries, but focuses instead on the question of how developed country exports and investment may be affected by strengthening IP rights in developing countries. These two approaches are not the same.

For instance, some studies show that stronger patent rights in developing countries would significantly increase imports from developed countries (or indeed other developing countries).[75] The argument is that some imports are a form of technology transfer (for example, high technology machinery imports have an independent impact on productivity). But strengthening IPRs is also particularly effective in increasing imports of low technology consumer items and is associated with the decline of indigenous industries based on imitation.[76] This effect is clearly a mixed blessing for a developing country. It may be that there is access to more high technology imports previously withheld for lack of IP protection but the costs may be very substantial in terms of lost output and employment, or even retarded growth. This issue is now a very real one in countries such as China. These studies also imply that countries with little technological capacity may experience reduced imports because the patent laws have the effect of increasing import prices on average, and hence reduce import capacity. Countries in the past have protected themselves against the possible adverse effects of increased imports on domestic industry through provisions relating to compulsory working of patents, as Switzerland did in the 19^th century.

As regards the analyses of the impact on foreign investment, we have similar reservations. There is a considerable literature which discusses the extent to which stronger IPRs influence foreign investment, licensing behaviour and the transfer of technology. Much of this literature reaches only tentative conclusions, because of weaknesses in data or methodology.[77] Many of the studies pose the question, partly for reasons of data availability, in terms of how strengthening patents rights in developing countries will affect the investment, production and licensing behaviour of US multinationals in developing countries. For instance, one of the conclusions reached in a recent study, but it is typical of others working with similar datasets, is as follows:

“…these results suggest that if an average developing country were to strengthen its patent index by one unit, local sales of US affiliates would rise by…about 2% of average annual sales…a one-unit increase in the patent index of the average developing economy would raise the asset stock of US multinational affiliates by…about 16% of average asset stock.”[78]

For policymakers in a developing country, the framework and questions might be rather different. He or she would want to know, if IPRs were strengthened, whether that would be likely to affect economic growth, employment, investment and R&D in the private sector, access to foreign technology, the domestic innovation process, and exports (as well as imports). There is a paucity of studies that directly address these issues of critical importance to policymakers in developing countries, let alone reach definitive conclusions on the impact of IPRs.

What is clear from the literature is that strong IP rights alone provide neither the necessary nor sufficient incentives for firms to invest in particular countries. If this was the case, then large countries with high growth rates but weak IPR regimes would not have received large foreign investment inflows in the past and even now. This includes many of the East Asian and Latin American economies which have received the bulk of such flows.[79] If the question is addressed in terms of what factors are most important in determining foreign investment, it is quite common for IPRs to be omitted altogether. For instance, recent reports from international institutions and bodies on investment flows almost entirely fail to mention IPRs as a factor. These include, for instance, the World Bank’s report on Global Development Finance 2002,[80] and the Zedillo report on Financing for Development.[81] Similarly, a recent draft World Bank report on improving India’s investment climate makes no mention at all of the role of IPRs. [82]

As we have noted, there is some evidence that for particular industries (such as chemicals) and for particular activities (such as R&D) IPRs may be a significant factor in the decision by firms to invest.[83] But the investment decision is contingent on many factors. For most low technology industries, of the kind that less technologically advanced developing countries are likely to attract, IPRs are unlikely to be a relevant factor in the investment decision. Where technologies are more sophisticated, but relatively easy to copy, then IPRs may be – though not necessarily - a significant factor in investment decisions if a country has both the scientific capacity to copy and a sufficiently large market to justify the costs of patenting and enforcement and other relevant factors are favourable. In other cases, however, the introduction of IP protection has been associated, as noted above, with an increase in imports, rather than investment in local production. Finally, in high technology industries and for countries with sophisticated technological capabilities, technology owners may opt to license their technologies, protected by the IP regime, rather than invest directly in production. Thus strong rights may deter investment flows but facilitate technology transfer under licensing, which we return to in the next section.

We conclude from the existing studies the following:

· There is some evidence that trade flows into developing countries are influenced by the strength of IP protection, particularly for those industries (often high technology) that are “IPR sensitive” (for example, chemicals and pharmaceuticals), but the evidence is far from clear.

· These flows may contribute to productive capability. But they may also be at the expense of domestic output and employment in local “copying” and other industries. Developing countries with no or weak technological infrastructure, may be adversely affected by the higher prices of importing IP protected goods.

· The evidence that foreign investment is positively associated with IP protection in most developing countries is lacking.

· For more technologically advanced developing countries, IPRs may be important to facilitate access to protected high technologies, by foreign investment or by licensing.

· Achieving the right balance may be difficult for some countries such as India or China where some industries have the potential to benefit from IP protection, but the associated costs for industries that were established under weak IP regimes as well as consumers are potentially high.

· Most of the evidence concerning the role of IP in trade and investment relates to those developing countries which are more technologically advanced. For other developing countries, we conclude that any beneficial trade and investment effects are unlikely to outweigh the costs at least in the short and medium term.

TECHNOLOGY TRANSFER

In a sense, the crucial issue in respect of IP is not whether it promotes trade or foreign investment, but how it helps or hinders developing countries to gain access to technologies that are required for their development. If a supplier of foreign technology licenses production to a domestic firm, rather than itself establishing manufacturing locally, less foreign investment will have been attracted. However, the overall result may be more beneficial to the domestic economy because of the indirect contribution to domestic technological capabilities. If high technology imports increase as a result of strengthening IP regimes, a transfer of technology may be achieved (for example, as embodied in capital goods), but there is no guarantee that the domestic economy will be capable of absorbing that technology as a basis for further innovation. Therefore the transfer of technology may not be sustainable. Rather, as we have seen, some countries may use weak IP regimes as a means of gaining access to foreign technologies and developing them using reverse engineering, thereby enhancing indigenous technological capacity. The implementation of TRIPS now restricts the ability of developing countries to follow this path.

But the determinants of effective technology transfer are many and various. The ability of countries to absorb knowledge from elsewhere and then make use and adapt it for their own purposes is also of crucial importance. This is a characteristic that depends on the development of local capacity through education, through R&D, and the development of appropriate institutions without which even technology transfer on the most advantageous terms is unlikely to succeed. The effective transfer of technology also often requires the transfer of “tacit” knowledge, which cannot be easily codified (for example, as in patent disclosures or instruction manuals). This is why even the best-designed programmes to foster national capacity for research which are funded by donors have not always been successful. Since many technologies of interest to developing countries are produced by organisations from developed countries, the acquisition of technology requires the ability to negotiate effectively based on an understanding of the particular area of technology. This process requires a determined approach on the part of the recipient of technology to acquire the necessary human capital and the appropriate institutions. Countries such as Korea started at a low level of technological expertise forty years ago, comparable to many low income countries today, but have now become innovators in their own right.

This aspect of the process of technology transfer is largely in the hands of developing countries themselves. But this does not mean that developed countries, or international policies more generally, cannot facilitate or hinder the process. The TRIPS agreement recognises in Article 7 that IPRs should contribute to the “transfer and dissemination of technology” but also, in Article 8, that measures may need to be taken to prevent the abuse of IPRs including practices that “adversely affect the international transfer of technology.” Article 40 includes provisions to prevent anti-competitive practices in contractual licences. And Article 66.2 obliges developed countries to provide incentives to their enterprises and institutions to promote technology transfer to least developed countries (LDCs) in order to “enable them to create a sound and viable economic base”. These provisions in TRIPS reflect some of the provisions in the draft International Code of Conduct on Technology Transfer, on which negotiations between developed and developing countries failed in the 1980s.[84]

Since then, the global economy has changed. Notably, economic policies around the world have shifted from import substitution and directed industrialisation behind high tariff barriers towards open market policies which emphasise the benefits to be gained through low tariffs, global competition and a less directive role for governments in economic development. The so-called knowledge-based industries, and trade in high technology products, have grown apace. The importance of R&D has increased and product life cycles have shortened. In this liberalised and competitive environment, firms in developing countries can no longer compete on the basis of importing “mature” technologies from developed countries and producing them behind tariff barriers. Firms are more wary of transferring technology in ways that may increase the competition they face.

Thus the problem is not so much now about obtaining more or less mature technologies on fair and balanced terms, but of accessing the sophisticated technologies that are required to be competitive in today’s global economy. TRIPS has strengthened the global protection offered to suppliers of technology, but there is no international framework to ensure that the transfer of technology takes place within a competitive framework which minimises the restrictive technology licensing practices with which the Code was concerned.

We are uncertain as to how this gap in the international framework could best be filled. Recommencing discussions on a Code of Conduct is not a viable option in the changed environment. But we do think encouraging and assisting them to build their own competition law regimes could better serve the interests of developing countries. The development of a framework for international competition policy has been discussed for some time in the WTO. We understand the reluctance of developing countries to embark down this path, but the development of national competition laws and effective international cooperation could act as a counterbalance to the aspects of the TRIPS agreement which have the effect of restricting competition globally, and inhibiting technology transfer in certain circumstances.

As regards TRIPS, the evidence suggests that the provisions in Article 66.2 have been ineffective. Developed countries do not appear to have taken additional measures to encourage technology transfer by their firms and institutions. Moreover, the fact that the article applies only to LDCs seems unduly restrictive. As noted above, these are likely to be countries for the most part with the least absorptive capacity. We do not therefore consider that Article 66.2 is the most appropriate way to address the entire issue of technology transfer to developing countries. Moreover some of the IPR provisions used historically to facilitate technology transfer, such as the use of compulsory working, have been significantly diluted under TRIPS. Since technology is mostly in private hands and TRIPS is principally concerned with the protection of IPRs, rather than technology transfer, we are unsure as to whether TRIPS, rather than the WTO more generally, is the right focus for a discussion on technology transfer.

We therefore welcome the establishment of the Working Group on Trade and Technology Transfer which will report to the WTO Ministerial Conference next year.[85] We suggest this includes consideration of whether the TRIPS agreement could be made to work better as one mechanism to promote technology transfer, and what measures might be desirable to ensure that the IPR system promotes, and does not hinder, technology transfer. However, we see the range of complementary measures that will be required to promote technology transfer as equally important.

Although most applied technology is privately owned, it is important to remember the extent to which public spending on basic and applied research supports the process of technological development. Developed country public research spending now often has the explicit objective of enhancing international competitiveness and increasingly, the results of such research may be patented, as we discuss in Chapter 6. Not only is research funding often tied to nationals, perhaps understandably, but also the benefits of such research may be restricted to nationals. For instance the law in the US restricts for the most part the licensing of publicly financed technologies to nationals, a policy for which the scientific and economic logic is less clear.[86]

Much of the technology transfer agenda goes well beyond our brief but we think the following measures need to be seriously considered:

· Appropriate incentive policies in developed countries to promote technology transfer, for instance tax breaks for companies that license technology to developing countries.

· Establishment of effective competition policies in developing countries.

· Making more public funds available to promote indigenous scientific and technological capability in developing countries through scientific and technological cooperation. For instance, supporting the proposed Global Research Alliance[87] between developing and developed country research institutions.

· Commitments to ensure that the benefits of publicly funded research are available to all.

· Commitments to ensure open access to scientific databases.

Chapter 2

HEALTH

INTRODUCTION

The Issue

The impact of intellectual property rules and practices on the health of poor people in developing countries has generated substantial controversy in recent years. Although this predated TRIPS,[88] and featured prominently in the TRIPS negotiations, impetus has been added by the coming into force of TRIPS, and the dramatic rise in the incidence of HIV/AIDS, particularly in developing countries. For the developed countries, the pharmaceutical industry was one of the main lobbyists for the global extension of IP rights.[89] For developing countries, a major concern was how the adoption of intellectual property regimes would affect their efforts to improve public health, and economic and technological development more generally, particularly if the effect of introducing patent protection was to increase the price and decrease the choice of sources of pharmaceuticals.

We are aware of the importance of effective patent protection for the industry most directly involved in discovering and developing new pharmaceuticals. Indeed, without the incentive of patents it is doubtful the private sector would have invested so much in the discovery or development of medicines, many of which are currently in use both in developed and developing countries. The pharmaceutical industry in developed countries is more strongly dependent on the patent system than most other industrial sectors to recoup its past R&D costs, to generate profits, and to fund R&D for future products. Successive surveys have shown that the pharmaceutical companies, more than any other sector, think patent protection to be very important in maintaining their R&D expenditures and technological innovation.[90] The industry understandably takes a close interest in the global application of IPRs, and generally resists the contention that they constitute a major barrier to access or a deterrent to development in developing countries. For instance, Sir Richard Sykes, the former Chairman of GSK, said in March this year:

“Few would argue with the need for IP protection in the developed world, but some question whether it is appropriate to extend its coverage to the developing world, which the TRIPS agreement is gradually doing. As I have said, IP protection is not the cause of the present lack of access to medicines in developing countries. At Doha last November, WTO members agreed to defer TRIPS implementation for the least developed countries until 2016. I do not believe that TRIPS will prevent other developing countries like Brazil and India from obtaining access to the medicines they need. On the other hand, I firmly believe that these countries have the capacity to nurture research-based pharmaceutical industries of their own, as well as other innovative industries, but this will only happen when they provide the IP protection that is enshrined in TRIPS. TRIPS needs to be recognised as an important industrial development tool for developing countries.”[91]

That said, we are also fully aware of the concerns expressed by, and on behalf of, developing countries about the impact that such rights may have in those countries, particularly on prices of pharmaceuticals. If prices are raised, this will fall especially hard upon poor people, particularly in the absence of widespread provision for public health as exists in most developed countries. Thus others from many developing countries, and the NGO community, have argued the opposite:

“Why do developing countries object so strongly to TRIPS? Its essential flaw is to oblige all countries, rich and poor, to grant at least 20 years' patent protection for new medicines, thereby delaying production of the inexpensive generic substitutes upon which developing-country health services and poor people depend. And there is no upside: the increased profits harvested by international drug firms from developing-world markets will not be ploughed back into extra research into poor people's diseases - a fact some companies will in private admit.”[92]

Our starting point in this analysis is that healthcare considerations must be the main objective in determining what IP regime should apply to healthcare products. IP rights are not conferred to deliver profits to industry except so that these can be used to deliver better healthcare in the long term. Such rights must therefore be closely monitored to ensure that they do actually promote healthcare objectives and, above all, are not responsible for preventing poor people in developing countries from obtaining healthcare.

Background

A spur to much of the recent debate has been the HIV/AIDS pandemic, although the issue of access to medicines in developing countries goes much wider. It is particularly important not to allow the debate in this area to be influenced unduly by the HIV/AIDS experience, dramatic though it is. Apart from HIV/AIDS, which is the biggest single cause of mortality in developing countries, TB and malaria claim almost as many lives. Together all three diseases claimed nearly six million lives last year, and led to debilitating illness for millions more.[93] In addition, there are a number of less common diseases which are collectively important. These include, for instance, measles, sleeping sickness, leishmaniasis and Chagas disease.[94]

Each group of diseases presents different problems in respect of the development of cures and treatments, and the economics of the R&D process. For diseases prevalent in the developed world as well as developing countries, such as HIV/AIDS, cancer or diabetes, research in the private or public sector in the developed world may produce treatments that are also appropriate to the developing world. For these diseases, one would expect that the promise of strong IP protection in the developed world would act as a major incentive for investment in R&D. But it should be noted that some strains of HIV/AIDS in Africa, for example, are different from those in developed countries, so different treatments may need to be devised.

Where appropriate treatments already exist, access to them depends on affordability, and the availability of the health service infrastructure to support delivery. We regard the cost of pharmaceutical products as an important concern in developing countries because most poor people in developing countries pay for their own drugs, and state provision is normally selective and resource-constrained. This is generally not the case in the developed world where costs are mainly met by the state or through insurance schemes. Even so the cost of drugs is a controversial political issue in developed countries, for governments and for patients not covered by effective state or insurance schemes.[95] In developing countries, inadequacy of the infrastructure is an important problem, and may mean that even inexpensive medicines are not used, or that they may be misused and contribute to the emergence of drug resistant pathogens or a virus.

Again, HIV/AIDS provides a helpful illustration of the issues. The treatment of HIV with anti-retrovirals (ARVs), or drugs to treat opportunistic infections associated with the disease, raises the affordability issue acutely. The minimum annual costs of ARV therapies, even at deeply discounted or generic prices which do not cover R&D costs, far exceed the annual health expenditure per capita of most developing countries. Current per capita health expenditures in low income developing countries average $23 per year, but the most inexpensive ARV triple therapies are now just over $200 per year.[96] Thus, without extra funding for medicines and health delivery services, treatment for all those requiring it will remain unaffordable even at the cheapest generic prices. The World Health Organisation (WHO) estimates that fewer than 5% of those who require treatment for HIV/AIDS are receiving ARVs. Only about 230,000 of the 6 million estimated to be in need of such treatment in the developing world actually receive it, and nearly half of these people live in Brazil.[97]

Similar questions about affordability arise for treatments of other diseases. For example, TB and malaria are for the most part prevalent in developing countries, although there is a resurgence of TB in the developed world. It also needs to be remembered that TB is the leading cause of death among HIV-infected people, and about one third of them are co-infected with TB.[98] For these diseases, and for diseases exclusive to the developing world, the issue is both how to mobilise resources for R&D from the private and public sectors for new medicines, and having developed them to ensure access for those that need them.

The latter point is one of the most crucial questions concerning healthcare in developing countries. How can the resources necessary to develop new drugs and vaccines for diseases that predominantly affect developing, rather than developed, countries be generated when the ability to pay for them is so limited? Even when there is a developed country market from which these resources can be recovered through high prices, how can the affordability of these drugs in developing countries be secured? How can conflicts between the two objectives – covering R&D costs and minimising consumer costs – be resolved? As with technological development more generally, does the IP system have a role to play in stimulating the capacity of developing countries themselves to develop and produce drugs that they or other developing countries need?

This is the context in which we need to consider the role that IPRs could play in helping to address these dilemmas. It is not for us to consider in any depth the wide range of factors that affect the health of poor people or the quality of health services in developing countries. These have been discussed at some length in the recent report of the WHO Commission on Macroeconomics and Health (CMH).[99] The CMH concluded that a large injection of additional public funds into health services, infrastructure and research was required to address the health needs of developing countries. It took the view that patent protection offered little incentive for research on developing country diseases, in the absence of a significant market.[100] As regards access to medicines, it favoured coordinated action to establish a system of differential pricing[101] in favour of developing countries backed up, if necessary, by the more extensive use of compulsory licensing.[102]

Those conclusions are relevant for our current task. It is our role to indicate in greater detail how changes in intellectual property rules and practices could contribute to better health for poor people, while being fully aware that such changes have to be complemented by the range of actions suggested by the CMH.

We do this by considering three main questions:

· How does the intellectual property system contribute to the development of drugs and vaccines that are needed by poor people?

· How does the intellectual property system affect the access of poor people to drugs and availability?

· What does this imply for intellectual property rules and practices?

RESEARCH AND DEVELOPMENT

Research Incentives

It is estimated that less than 5% of the money spent worldwide on pharmaceutical R&D is for diseases that predominantly affect developing countries.[103] Pharmaceutical research by the private sector is driven by commercial considerations and if the effective demand in terms of market size is small, even for the most common diseases such as TB and malaria, it is often not commercially worthwhile to devote significant resources to addressing the needs. In 2002, the world drug market is valued at $406 billion, of which the developing world accounts for 20%, and low income developing countries very much less.[104] In many pharmaceutical companies, research objectives are set by reference to threshold returns. We were given to understand that the large pharmaceutical companies are unwilling to pursue a line of research unless the potential outcome is a product with annual sales of the order of $1 billion. Given that private companies have to be primarily responsible to their shareholders, this necessarily leads to a research agenda led by the market demand in the markets of the developed world, rather than by the needs of poor people in the developing world, and thus a focus mainly on non-communicable disease.

Regardless of the intellectual property regime prevailing in developing countries, in reality there is little commercial incentive for the private sector to undertake research of specific relevance to the majority of poor people living in low income countries. Accordingly, little such work is done by the private sector. Total pharmaceutical R&D in the private sector has more than doubled in the last decade to an estimated $44 billion in 2000.[105] Exactly what proportion of this is directed to diseases afflicting mainly developing countries is difficult to determine. However it has been estimated that of 1393 drugs approved between 1975 and 1999, only 13 were specifically indicated for tropical diseases.[106] Where diseases are common to both developed and developing countries, the picture is different. Thus, there is significant private sector R&D on HIV/AIDS. This contrasts with the limited work on tuberculosis and malaria, and virtually none on diseases such as sleeping sickness.[107] As regards HIV/AIDS, there are now 64 approved drugs in the US for treatment of the disease and opportunistic infections, and 103 in development.[108]

In the case of the public sector, such as the National Institutes of Health (NIH) in the US or Medical Research Councils (MRCs) in other developed countries, the situation is little different because their research priorities are principally determined by domestic considerations. Public sector spending on health research was estimated to be $37 billion in 1998, of which $2.5 billion was spent in low and middle income developing countries.[109] In 2001 the US National Institutes of Health (NIH) alone accounted for over $20 billion. In addition, charitable foundations are estimated to have spent $6 billion.[110] The WHO’s Special Programme for Research and Training in Tropical diseases (known as TDR) receives only about $30 million annually. The exact proportion of public sector spending on diseases relevant to developing countries has not been authoritatively estimated, but seems unlikely to be higher than 10%.[111] This situation is now being addressed through the WHO, the Global Forum for Health Research, the initiative of Médecins Sans Frontières (MSF) on drugs for neglected diseases, additional funding by foundations and the development of several public-private partnerships to address specific diseases.[112] But the overall level of funding for these new efforts is still very modest in relation to the scale of the problem and global R&D expenditure of about $75 billion, and the outcome uncertain.

So what role does IP protection play in stimulating R&D on diseases prevalent in developing countries? All the evidence we have examined suggests that it hardly plays any role at all, except for those diseases where there is a large market in the developed world (for example, diabetes or heart disease). There is some weak evidence related to an increase in indicators of research activity in malaria since TRIPS was agreed, but the relation between cause and effect is not at all clear.[113] The heart of the problem is the lack of market demand sufficient to induce the private sector to commit resources to R&D. Therefore, we believe that presence or absence of IP protection in developing countries is of at best secondary importance in generating incentives for research directed to diseases prevalent in developing countries.

Thus this research may be inadequate in quantity because of inadequate effective demand from developing countries where the disease is heavily concentrated. Moreover research, particularly on vaccines, may require tackling characteristics of diseases specific to developing countries, where the solution for the developed world may not address the problem in the developing world. For example, the majority of HIV vaccines are being developed for genetic profiles of subtype B, prevalent in developed countries, but most AIDS sufferers in developing countries are types A and C. Vaccine research for HIV is also particularly scientifically challenging because of the way the virus evades the body’s natural immune responses, and the way it mutates.[114] Malaria vaccine research is also challenging, because of the size and diversity of the malaria parasite, and the complexity of its mutations.[115] Thus, for the private sector, vaccine research is a high risk/low return investment, particularly in relation to disease types prevalent in developing countries. The market tends to undervalue the social returns from vaccines, more than is the case for treatments.[116] In the case of malaria, the market demand is dominated by prophylaxis for travellers from developed countries, rather than vaccines which would be of greater relevance to sufferers in the developing world.

In respect of TB, where there are an estimated eight million people in developing countries that have the disease, no new class of anti-TB drug has been developed for over 30 years. Current treatments require drug courses of 6 months or more. A drug that produced the same effect in two months could have a dramatic impact in helping to control the disease globally. The scientific challenge of producing such a medicine is significant because of the characteristics of the disease.[117] A recent report by the Global Alliance for TB Drug Development has estimated that based on market demand (both private and public, including from developed countries) there might in fact be a respectable financial rate of return on the estimated cost of developing a new and improved drug. Nevertheless it is still not considered that IP protection, and favourable economics, will induce investment without considerable public sector involvement.[118] The current business model of the research-based pharmaceutical companies is such that research expenditure and profit generation are dependent on the sales of a few “blockbuster” drugs (normally with sales in excess of $1 billion per annum), which help finance the high percentage of failures in the R&D process.[119] But these companies have the freedom to pursue promising avenues wherever they may lead (for example, treatment for a disease or condition not previously envisaged). The economics of research for a specific treatment for a particular disease have to be very favourable to induce significant research effort.

Some, such as Sir Richard Sykes above, have argued that providing IP protection in developing countries with significant scientific and technical skills will help to increase the amount of research devoted to developing country diseases. Evidence on this is lacking because most of the relevant countries have only just introduced TRIPS-compliant laws, or are yet to do so. But we see no reason why firms with research capability in developing countries should respond to global IP and market incentives significantly differently from those based in developed countries. There is some evidence for this behaviour from firms in countries such as India.[120] The reality is that private companies will devote resources to areas where an optimal return can be made. Moreover, widely supported moves to establish differential pricing would reduce margins to reward R&D in developing countries, further undermining any incentive for additional research on developing country diseases.

In short we do not think that the globalisation of IP protection will make a significant contribution to increasing R&D expenditure by the private sector relevant to the treatment of diseases that particularly affect developing countries. The only feasible way to do this is by increasing the quantity of international aid resources devoted to such R&D. The CMH recommended an additional $3 billion annually to be spent on R&D through a new Global Health Research Fund, existing mechanisms and public-private partnerships.[121]

How increased publicly funded research should be directed requires careful consideration. It should not act as a form of subsidy to the existing pharmaceutical industry, although the industry certainly has an important part to play. The opportunity should be taken to build up the capacity of developing countries themselves to undertake R&D on treatments for those diseases which particularly affect them. In the technologically more advanced developing countries, such research can be highly cost-effective. For instance, General Electric has established its second largest R&D Centre in the world in India, employing about 1000 PhDs and 27 other global firms set up R&D centres in India between 1997 and 1999.[122] Thus research could be conducted with the active participation of selected research institutions and companies in developing countries, taking advantage of the human resources available in such countries and lower R&D costs. The institutional structure of for such funding also needs thought. The CGIAR[123] network of agricultural research institutes (which we discuss in Chapter 3) is one model. More promising in this context might be a network of public-private partnerships in developing countries, taking advantage of the concentration of research resources in public sector institutions but also the opportunity to build research capacity in the private sector. In particular the arrangements for intellectual property arising from such research need to be such that access by the poor to the products of research is ensured as much as possible.

Public funding for research on health problems in developing countries should be increased. This additional funding should seek to exploit and develop existing capacities in developing countries for this kind of research, and promote new capacity, both in the public and private sectors.

Although IP may not have much to contribute in generating additional research relevant to poor people, it is clear to us that there are important issues about the impact of the patent system on the research process. While patent protection provides an incentive for R&D, the patenting of intermediate technologies (particularly gene-based ones) required in the research process may actually create disincentives for researchers in terms of accessing, or unwittingly infringing patents on, technologies they need.[124] This is an area where patent practices in the developed world can impinge directly on what research is done for people in the developing world, and there are implications for the type of patent regimes that developing countries adopt. The IP arrangements in public-private partnerships also give rise to important questions of managing IP to benefit poor people. We consider these questions in Chapter 6.

ACCESS TO MEDICINES FOR POOR PEOPLE

The purpose of patents, as we have noted, is to provide a temporary monopoly to rights holders as a stimulus to inventions and their commercialisation. However, it should also be noted that the monopoly right provided by a patent normally only excludes others from making, using or selling that particular invention. It does not prevent competition from other drugs, patented or not, that address the same medical conditions. Nevertheless, other things being equal there is a presumption that the producer of a patented product, through the ability to exclude copies, will attempt to earn a monopoly profit and charge higher prices than would otherwise be the case. That, indeed, is the basis of the system. The bargain with society is precisely that the benefits to society generated by the extra innovation induced (for example, a lifesaving drug which might not exist but for the patent system) should exceed the extra cost of the product.

Given that in developing countries most people are poor and that patent protection can increase prices, it is necessary to examine with particular care the arguments put forward by some that patents in developing countries are not likely significantly to affect access to pharmaceuticals subject to patent protection. There are two grounds on which this argument is made. First, because patents are not always sought in some – especially smaller - developing countries, they cannot be a significant problem in accessing medicines. Secondly, even if they are sought, either this is not a determining factor in pricing or there are other overriding factors that prevent access to drugs by the poor.

Prevalence of Patenting

It is true that, although patent protection for pharmaceutical products is available in most developing countries, multinational companies have not patented their products in all of them. This is normally the case for countries with small markets and limited technological capacity. Companies may take the view that it is not worth the expense of obtaining and maintaining protection when the potential market is small, and the risk of infringement low. For instance, a recent study in 53 African countries found that the extent of patenting of 15 important antiretroviral drugs was 21.6% of the possible total.[125] In 13 countries there were no patents on these medicines at all. The conclusion was drawn that, because the patenting rate was so small, patents “generally do not appear to be a substantial barrier to…treatment in Africa today”, although it was recognised that there would be an issue when TRIPS came into force for all WTO members.[126]

Although the overall prevalence of patents found in the study is relatively low in aggregate, it is perhaps surprising that it is not lower, given the very low treatment rates, small markets, and the fact that few countries are capable of producing generic copies. The prevalence of patents is very much higher in countries where there is a substantial market, and technological capacity. Thus in South Africa (which alone counts for over 17% of Africa’s HIV cases) 13 of the 15 drugs are patented. There are 6-8 patents for these drugs in Botswana, Gambia, Ghana, Kenya, Malawi, Sudan, Swaziland, Uganda, Zambia and Zimbabwe, which together account for another 31% of HIV cases in sub-Saharan Africa.[127]

The industry points out that the prevalence of patenting is very much lower, or nil, for a wide range of drugs to treat other diseases. Until the latest revision this year, less than 5% of the drugs on the WHO Essential Drugs List were patented.[128] An industry survey indicated that 94% of countries surveyed had no patents on TB and malaria drugs, and no country has patents on all the relevant drugs for these diseases. There were no patents at all on drugs for trypanosomiasis or diarrhoeal diseases.[129] The argument advanced by industry is that even where there is no patent protection, the drugs are still not available.[130] For instance, even where vaccines are available for various common diseases and cheap (for example, less that $1 for a polyvalent vaccine), WHO’s Expanded Programme of Immunisation (EPI), in spite of undoubted successes, still fails to reach many children who could benefit.

This is of course true, but it does not follow that the patent system has no adverse effects. Even if patents do not exist for particular products and countries, the patent system may still have an effect on access to medicines. Most low income developing countries have to rely on imports for their supplies. The existence of patents in potential supplier countries may allow the patentee to prevent supplies being exported to another country, particularly through controls on distribution channels. This is another reason why companies may selectively patent in countries such as South Africa because it is a potential supplier to its poorer neighbours in the rest of Southern Africa (or indeed elsewhere). At present, importing countries where there is no patent protection have the option of importing supplies from generic companies, principally in India, because India need not have pharmaceutical product protection until 2005. But thereafter, under TRIPS, new drugs and those for which patent applications were submitted after 1994 will be patentable, and the opportunity for these imports will diminish correspondingly over time. However, it should be noted that all existing drugs produced as generics in India or elsewhere will continue to be available for export provided, of course, they are not patented in the importing country. We return to this issue below in our discussion of policy options.

Patents and Prices

The importance of prices of medicines to poor consumers in developing countries is perhaps obvious. But it is worth emphasising that if a sick person has to pay more for a pharmaceutical product as a result of a patent, it means that he or she will have less to spend on other essentials of life such as food or shelter. Alternatively, foregoing the medicine because it is unavailable or unaffordable may result in long term ill health, or death. That is why it is essential to consider the impact of the introduction of an IP regime on prices, while recognising that prices are affected by many factors. These include purchasing power, competition and market structure, responsiveness of demand to price and government price controls and regulations.

It is particularly difficult to observe directly and isolate the impact of introducing patents in developing country markets. In part we have to rely on econometric models to simulate the impact of introducing patent protection, and in part the experience of developed countries where generic producers compete with research-based ones.

Developed Countries

There is extensive evidence from developed countries that prices fall quite steeply as soon as drugs go off patent, assuming there are generic competitors. The price fall seems to be greater the more generic competitors enter the market. Governments can encourage price reductions by facilitating the early entry of generic producers into the market. For instance, the 1984 Drug Price Competition and Patent Term Restoration Act in the US (known as the Hatch-Waxman Act) did precisely that, resulting in the share of generics in prescriptions dispensed rising from 19% in 1984 to 47% in 2000.[131] In other developed countries, such as the UK, the generic share of the market is often much higher. Pharmaceutical companies have also brought or defended expensive court actions to delay or prevent generic entry, and to protect or extend a monopoly on a best selling drug.[132] Correspondingly, we must remember that generic producers are governed by market incentives just as the research-based industry, and that it is necessary to encourage competition within the generic industry if lower drug prices are to be achieved. A recent study in the US found that prices fall when generic competition enters the market but at least five generic competitors are necessary to push prices down to a minimum.[133] The number of competitors entering the market, and the speed with which they do so, will depend on the expected profits. A crucial finding is that the full benefits of competition will only be felt at quite large market sizes – in smaller markets fewer generic firms will consider the market worth entering and prices to consumers will be higher. This is very relevant to the position of developing countries, as discussed below.

Developing Countries

Developing countries can also limit the costs of the patent system for their population by facilitating generic entry and generic competition. But in most cases their options are severely limited by the small size of their markets and lack of indigenous technological, productive and regulatory capacity. It is this lack of capacity to create a competitive environment for both patented and generic products that makes the existence of patents more contentious than in developed markets with greater capacity to enforce a strongly pro-competitive regulatory environment.

International comparisons show that copies of drugs patented elsewhere are much cheaper in markets which do not offer patent protection. The Indian market, where there is no product protection, is the lowest priced in the world. One of our studies indicated that for 12 drugs covering a range of conditions US prices range from four to 56 times the price of equivalent formulations in India, and yet still a large number of people in India cannot obtain access to them.[134]

However, studies of multinational company pricing policies (mainly for ARVs) indicate that until recently there was remarkably little correlation between the price of the same drug and a country’s per capita income. This correlation is expected on theoretical grounds because companies should be able to make more profits by charging low prices in low income markets and high prices in high income markets (known as differential pricing), than by charging a uniform global price. But prices have appeared to vary more or less randomly between countries. Some developing countries paid more than US prices and some less. At best there was a very weak relationship between wholesale drug prices and per capita income.[135] The actual price to the patient is complicated by import duties, local tariffs, taxes and wholesaler profits.[136]

In the last two years this situation may have changed somewhat as some companies have drastically lowered prices offered in response to international pressure, principally from NGOs, and potential competition from generic manufacturers, particularly from India. For instance, between July 2000 and April 2002 the annual cost of a branded triple therapy ARV combination fell from over $10000 to just over $700 for selected groups of consumers. By then the lowest generic price for this combination had fallen to $209.[137]

But to estimate the impact of introducing patent regimes anew in developing countries, it is necessary to use econometric models. There is a small but growing literature, that relates almost entirely to lower and middle income developing countries which already have significant pharmaceutical industries. This literature demonstrates that the introduction of patent regimes into such developing countries has, or is predicted to have, the effect of raising prices. The estimates range widely depending on the drugs and countries being considered – from 12% to over 200%, but even the lower estimates imply very substantial costs for consumers.[138] The range of estimates is indicative of the degree of uncertainty about the dynamic effect of introducing patents, and suggests that the outcome will be very much determined by market structure and demand, in particular the degree of competition.

There is also considerable evidence that consumption of medicines is sensitive to price. One study in Uganda estimated that reducing the price of an ARV triple therapy from $6000 per annum to $600 per annum would increase the demand for treatment from 1000 to 50000 patients if associated with relatively modest investments in treatment infrastructure (of $4-6 million).[139] Another study, also in Uganda, indicated that price cuts arising from discounts by brand name companies, further lowered by the import of generic equivalents, increased the number of patients being treated threefold between 2000 and 2001.[140] A global econometric study estimated that the effect of eliminating patents in a cross-section of developing countries would be to increase access to ARVs by 30%, albeit from the very low existing level.[141]

The impact of introducing patent systems is likely to be most strongly felt in the group of countries that have developed strong generic industries, with a degree of competition that has kept prices low. There is evidence from some countries that the introduction of patents (for example in Italy in 1978) or strengthening the regime, as in Canada in the 1990s, by increasing the market power of foreign multinationals, will result in the consolidation and restructuring of the domestic industry. This may entail significant costs to the consumer by reducing the degree of competition in the market and increasing imports. Whether these costs may be offset by other benefits (for example, a boost to local research) is much debated. In Italy and Canada, two developed countries, the evidence is mixed.[142] In Italy multinational companies took over many local companies, exports of generic drugs declined and imports of patented drugs increased. There was little evidence of increased R&D. In Canada, there is evidence of a significant rise in R&D, partly as a result of a deal struck with the multinational manufacturers and tax credits allowed under the Income Tax Act (1987), but R&D is focused on preclinical and clinical trials and improvement of manufacturing processes rather than on the development of new molecules.[143] In both countries price controls were used to limit price increases on patented products.

In developing countries with strong generic industries, the outlook is also uncertain. On the one hand, manufacturers of mainly generic drugs are likely to be adversely affected by the introduction of patent protection, and also consumers and governments who will need to pay more for drugs that receive patent protection. On the other hand, producers who are developing a research capability, or who may be able to obtain licences from multinational companies, may perceive benefits from patent protection. These conflicting impacts explain why the introduction of patent protection in India is so controversial. Sections of the Indian pharmaceutical industry support the introduction of patent protection, and are gearing up their research in anticipation of its introduction, while other sections strongly oppose it. And, of course, it is controversial with consumer groups and NGOs.

More generally, as the TRIPS agreement is implemented, the supply of generic copies of new drugs will be prevented. At present, the threat of international competition from generic suppliers of copies of patented drugs is a restraining factor on the prices that can be charged in countries with no patent regimes, and to a lesser extent in countries with patent regimes where there is a credible threat of compulsory licensing. When all producer countries have patent laws, generics will increasingly be limited to older off-patent drugs. This will be no different from the current situation in developed countries, but developing countries will still find it difficult to afford new on-patent medicines. Means will need to be found, within the patent system and outside it, to generate the competitive environment that will help to offset the adverse price effect of patents on developing country consumers. We consider below some of the measures that need to be considered to ensure that the patent system supports a country’s right to protect human health and to promote access to medicines, in line with the Doha Declaration on TRIPS and Public Health (hereafter Doha Declaration – see Box 2.1).

Other Factors Affecting Access

It is argued, for instance by the pharmaceutical industry, that the most important constraints to access to medicines in developing countries, are not patent protection but the lack of spending on healthcare in developing countries, and the absence of a suitable health infrastructure to administer medicines safely and efficaciously. Improper administration may contribute to the development of drug resistance, apart from being ineffective. In the case of HIV, where the virus mutates readily, wide distribution of ARVs without the development of adequate infrastructure may contribute to the emergence of drug resistance.[144] It is also argued that generic versions of patented drugs may be of sub-standard quality, or even hazardous.[145]

A report by the US pharmaceutical industry association says:

“Handicapped by limited financial resources, these nations’ ability to contain AIDS and address a host of other killer diseases is compromised by inadequate infrastructure, cultural barriers to care, and mismanaged health care systems. Some developing countries also are hampered by political leadership that lacks the will to confront or even acknowledge their nation’s health care needs.”[146]

Other than patents, there are a number of factors that affect drug prices, such as tariffs and other forms of indirect taxation.[147] It can appear perverse to complain about the price impact of patents, while ignoring other policies under national control that have a similar effect. Thus it is important that national tax systems operate in a way that supports public health policies, just as the patent system should.

In order to help allay concerns about delivery mechanisms for AIDS drugs, the WHO has this year produced the first treatment guidelines for using ARVs in poor settings and issued a list of manufacturers and products (including eleven ARVs) which meet WHO quality standards as suppliers to UN agencies. The list currently includes both producers of patented products and a number of generic versions of these products including, so far, two Indian suppliers. In addition the WHO has included for the first time twelve ARVs for the treatment of AIDS (two were already there but for the treatment of mother-to-child transmission) on its Essential Drugs List.[148]

There is much debate about the comparative relevance of patents and other factors in determining access to medicines. We consider it important that all these factors are addressed. But we also do not consider that there is a real trade-off between improving IP arrangements to pursue the objectives of public health and addressing the issues of policy, infrastructure and resources for the same objectives. Both need to be pursued, and pursuing one has no bearing on one’s ability to pursue the other. One of the participants at our conference said:

“…I would like to discourage the Commission from arriving at the conclusion in this debate {that it is all} about infrastructure and resources. If that is the conclusion, I think you will have what the title says: "People are Poor". So don't make recommendations that people are poor because we know that. We are trying to solve their problems, not to tell them that they are poor.”[149]

Countries need to adopt a range of policies to improve access to medicines. Additional resources to improve services, delivery mechanisms and infrastructure are critical. Other macroeconomic policies need to be in harmony with health policy objectives. But so also does the IP regime. Countries need to ensure that their IP protection regimes do not run counter to their public health policies and that they are consistent with and supportive of such policies.

POLICY IMPLICATIONS

National Policy Options

The Context

The context of our discussion of the policy implications is the Doha Declaration agreed at the WTO Ministerial Meeting in Doha in November 2001 (see Box 2.1). Ministers clarified that TRIPS should not prevent countries from taking measures to protect public health. They confirmed that, within the terms of the agreement, compulsory licences could be granted on grounds determined by member countries. Moreover, domestic demand could be supplied by parallel imports (governed in legal terms by what is known as the “exhaustion of rights” doctrine).[150] They recognised that a special problem existed for countries with insufficient manufacturing capacity in making use of compulsory licensing, and instructed the TRIPS Council to find a solution by the end of this year. Members also agreed to exempt least developed countries from implementing, applying or enforcing pharmaceutical product and test data protection[151] until 2016. The TRIPS Council confirmed this decision on 27 June 2002. The Council at the same time approved a waiver that would exempt LDCs from having to provide exclusive marketing rights for any new drugs in the period when they do not provide patent protection. The latter waiver, now approved by the General Council of WTO, has to be reviewed annually by the Ministerial Conference of WTO (or the General Council between Ministerial meetings) until it terminates.

The premise of our recommendations is that for most developing countries any benefits in terms of the development of new treatments for diseases that afflict them will be, at best, long term, while the costs of implementing a patent system are both real and immediate. Thus we concentrate on measures within the IP system that will reduce to a minimum the prices of drugs, while maintaining their availability. As noted above, we have not found evidence to suggest such measures will diminish the incentives for research on diseases specific to developing countries, because it is the lack of demand rather than the IP system which is the determining factor. But we recognise that, because we are entering uncharted waters, continuing research will be necessary to establish how much TRIPS implementation in practice affects both research incentives and access, particularly in the longer term.

Box 2.1 Doha WTO Ministerial Declaration on TRIPS and Public Health

Adopted on 14 November 2001

1. We recognize the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, TB, malaria and other epidemics.

2. We stress the need for the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to be part of the wider national and international action to address these problems.

3. We recognize that intellectual property protection is important for the development of new medicines. We also recognize the concerns about its effects on prices.

4. We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.

5. Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

a) In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.

b) Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

c) Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, TB, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

d) The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 & 4.

6. We recognize that WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.

7. We reaffirm the commitment of developed-country Members to provide incentives to their enterprises and institutions to promote and encourage technology transfer to least-developed country Members pursuant to Article 66.2. We also agree that the least-developed country Members will not be obliged, with respect to pharmaceutical products, to implement or apply Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights provided for under these Sections until 1 January 2016, without prejudice to the right of least-developed country Members to seek other extensions of the transition periods as provided for in Article 66.1 of the TRIPS Agreement. We instruct the Council for TRIPS to take the necessary action to give effect to this pursuant to Article 66.1 of the TRIPS Agreement.

Differential Pricing

As we have noted, differential pricing in principle should be an economically rational way for global companies to maximise their profits on products that are sold in both low and high income markets.[152] It should also be a way of ensuring that poorer people obtain less expensive products.

There are several initiatives aimed at facilitating a global system of differential pricing. As noted above, there are many other factors unrelated to IPRs that affect the prices and availability of medicines. In establishing a differential pricing system, which would allow low prices in developing countries to coexist with higher prices in developed countries, there are two important factors:

· Markets with different price levels must be segmented so that low priced medicines cannot enter higher priced markets. This means controlling exports and imports of relevant products.

· Pricing decisions in higher priced markets, where these are set or influenced by government policy, must not be made by reference to prices in the low priced markets.

The second factor does not involve IP considerations, but represents a political problem in many developed countries because of the existing variation in prices of pharmaceuticals, even between developed countries, and the pressure on the budgets of patients, insurance schemes and the state to meet ever rising bills for patented drugs.

But the tools of the IP system, including parallel imports and compulsory licensing, are likely to play an essential part in underpinning differential pricing and market segmentation. In order to ensure an effective operation of a differential pricing system, national laws in developing countries should retain the right for the government to admit parallel imports and to issue compulsory licences.

We are also aware of recent price reductions and of the number of special schemes operated by some companies, sometimes in cooperation with international agencies, to provide heavily discounted or free drugs and, in conjunction with local government and NGOs, supportive infrastructure to ensure delivery to the patient. These offers generally apply only to purchasers who are governments, NGOs, aid organisations or private sector employers, not commercial suppliers of medicines. These are all welcome contributions to improving access to medicines in developing countries.[153] But there is also the need to seek more broad-based solutions, which are also sustainable, to the serious public health problems that are being addressed. That is why continued efforts are required to make differential pricing effective.

Parallel Imports

In principle, it is undesirable for there to be restrictions upon the free movement of products once placed on the market by a manufacturer. But in practice and strictly for the purpose of ensuring that lower priced products can be supplied to, and only to, those who need the lower prices, it may be necessary to derogate from that general principle. Therefore an important component in establishing a system of differential pricing is that markets need to be segmented to prevent low priced products undermining high priced markets. For that purpose, it is essential that developed countries put in place effective mechanisms that prevent parallel importing of medicines. This is already broadly the case for the US and the EU, but appears not to be so for Japan.[154]

Developed countries should maintain and strengthen their legislative regimes to prevent imports of low priced pharmaceutical products originating from developing countries.

However, to secure the segmentation of markets, it would also be desirable for developing countries to act to prevent exports to developed countries of drugs that are part of a donation or differential pricing scheme. It is especially important to avoid product diversion from those patients for whom the medicine is intended. But, recognising limitations in their capacity for enforcement, the primary burden of segmentation between developed and developing countries will realistically need to rest with developed countries.

Developing countries should not eliminate potential sources of low cost imports, from other developing or developed countries. In order to be an effective pro-competitive measure in a scenario of full compliance with TRIPS, parallel imports should be allowed whenever the patentee’s rights have been exhausted in the foreign country. Since TRIPS allows countries to design their own exhaustion of rights regimes (a point restated at Doha), developing countries should aim to facilitate parallel imports in their legislation.

Compulsory Licensing

As noted above, the result of implementing TRIPS will be to curtail the supply of generic copies of patented products. This will remove an important element in restraining and reducing the prices of patented products in developing countries. Providing effective legislation and procedures for compulsory licensing may have an important role to play in maintaining a pro-competitive IPR policy in the new environment. We do not regard compulsory licensing as a panacea, but rather as an essential insurance policy to prevent abuses of the IP system.

Although TRIPS allows compulsory licensing (as clarified in the Doha Declaration), subject to certain procedures and conditions, developing countries have yet to use it. Ironically, it is the developed countries that have been the most active users of compulsory licensing (not only in the pharmaceutical field) for a number of purposes, including importantly in anti-trust cases in the US. Canada used compulsory licensing extensively in the pharmaceutical field from 1969 until the late 1980s. This resulted in prices of licensed drugs being 47% lower than in the US in 1982.[155] The UK also used compulsory licensing until the 1970’s, including for important drugs such as Librium and Valium. More recently in 2001, the US Secretary for Health and Human Services (HHS), publicly envisaged the possibility of procuring generic equivalents prior to his negotiations with Bayer (the patentee) on the purchase of the drug Cipro to deal with the consequences of anthrax attacks although, in the end, agreement was reached with Bayer.[156]

Developing countries have not used the system for a number of reasons. First, it requires an administrative and legal infrastructure that is absent in many developing countries. Secondly, developing countries have feared that sanctions might be threatened, bilaterally or multilaterally. Thirdly, compulsory licensing has to be “predominantly for the domestic market”. Fourthly, the word compulsory refers to the legitimate limitation of patent owner rights by a government. The actual producer of the licensed drug manufactures voluntarily and for profit (at least in the case of a private sector licensee). Thus the licensee must have the know-how to reverse engineer and manufacture the drug without the cooperation of the patent owner, and must also foresee a sufficiently large market to justify the costs of investment and manufacture and adequate remuneration to the patentee. If these conditions are not fulfilled, the threat of a compulsory licence will not be credible.

The threat of compulsory licensing has been successfully used by Brazil in the pursuit of its National STD/AIDS Programme (see Box 2.2). As a result of its research capability, and the development of public sector manufacturing capacity, Brazil has been able to use the threat of compulsory licensing in negotiations with pharmaceutical companies. This includes an ability to use estimates of its own production costs under compulsory licensing when negotiating prices with patentees. But there are relatively few developing countries which are in the same position as Brazil, so the threat will lack credibility in most developing countries unless they are able to rely on imports from countries with the requisite capacity.

Box 2.2 The Brazilian National STD/AIDS Programme (NSAP)

The primary mission of the Brazilian National STD/AIDS Programme (NSAP) is to make HIV/AIDS medications available free of charge to all citizens who need them though the national public health care system. NSAP was initiated in the early 1990s and the treatment of HIV/AIDS patients was made a legal obligation in 1996. With the assistance of HIV/AIDS NGOs, there has been a major reorganisation of the national public health services network for drug distribution, AIDS testing and care. There are now hundreds of Drugs Dispensing Units across the country.

NSAP now supplies anti-retroviral drugs to currently nearly 105,000 of Brazil’s estimated 600000 HIV/AIDS patients. It has now reduced the number of cases of HIV and mortality among AIDS victims to half what was predicted in the early 1990s. Hospital admissions have decreased by 80 percent since 1996. So, although the NSAP is expensive (the total annual cost is about US$500m out of a total health budget of US$10bn), the costs avoided due to reduced illness, hospitalisation and other impacts of HIV/AIDS are beginning to balance the budget. The Brazilian Ministry of Health estimates that in 2001, the final cost of NSAP, incorporating reduced morbidity expenditure, was negative (a net saving of US$50m).[157]

Of the total cost of the programme, $300 million is spent on AIDS drugs. The cost of acquiring the antiretroviral drugs has reduced recently, as the Ministry of Health/NSAP develops local production in the public sector - establishing national laboratories, and tools to negotiate with multinational companies, including the threat of compulsory licensing. Far-Manguinhos (part of the Oswaldo Cruz Foundation - FIOCRUZ) is the main government drug producer, developing the technology that provides the country with low-cost anti-retroviral drugs. The institute already produces seven of the 15 medicines used in the antiretroviral cocktail offered in Brazil. None of these drugs are patented in Brazil. The prices of these drugs, when developed for local production, fell by an average of 72.5% between 1996 and 2000. In 1999, 47% of antiretrovirals were produced in Brazil but accounted for only 19% of total expenditures. Thus 81% of expenditure was on ARVs purchased from multi-national companies.

Because Far-Manguinhos has the technical capacity to reverse engineer patented drugs, and can estimate realistic production costs, the Health Ministry is in a strong bargaining position for negotiating price reductions with foreign producers, backed up by the credible threat of compulsory licensing. In 2001 the Health Minister used this approach with Roche and Merck for their drugs Nelfinavir and Efavirenz, eventually negotiating price reductions of 40 to 70%.

While Brazil’s programme has been widely acclaimed as a possible model for other countries, it needs to be noted that the cost of the programme amounts to nearly $5000 per annum per treated person, or $800 for each HIV infected person, or $3 for every person in Brazil. Thus Brazil has prioritised the treatment of HIV/AIDS. This is affordable for Brazil because it is a relatively affluent developing country, and because in proportionate terms it has a low rate of HIV infection. Moreover, its technical know-how allows the Ministry of Health to negotiate price reductions effectively. As noted above, it may be an investment that pays for itself in reduced mortality and morbidity. But the initial investment in this type of programme may not be affordable in poorer countries with much higher rates of HIV infection, without external assistance. For such nations, their weak technological capacity will also be a constraint in the absence of effective means of compulsorily licensing as proposed in Doha.

National Arrangements for Compulsory Licensing

An important barrier to compulsory licensing in developing countries is the absence of straightforward legislative and administrative procedures to put it into effect. Because legal systems in most developing countries are overburdened, it would be most appropriate to legislate for a quasi-judicial and independent administrative system for implementation of compulsory licensing. The essential elements would include:

· straightforward, transparent and fast procedures

· procedures for appeals that do not suspend the execution of the licence

· legislation that fully exploits the flexibilities in TRIPS for determining the grounds for compulsory licensing, as well as for non-commercial use by government, including production for export (see below)

· clear, easy to apply, and transparent guidelines for setting royalty rates (which may vary).

There is much to be learnt from the experience of developed countries, particularly Canada, which seems to have had the most comprehensive programme. Canada set a more or less universal royalty rate of 4%, for which an early precedent was set in an important test case. US practice has varied considerably from very low rates to quite high, depending on Court judgements. Developing countries will need to develop rules and procedures adapted to their own circumstances for setting royalty rates, but the implication of other countries’ experience is that royalty rates need not be very high.

Developing countries also need to consider adopting in this context strong provisions on government and non-commercial use. This is different from compulsory licensing but has a similar effect in the public health sector. Again, many developed (and developing) countries have such provisions in their laws. In Commonwealth countries these derive from the British 1883 Act, which has been retained in current law.[158] These powers are quite sweeping and do not specify closely particular circumstances in which they can be used. For instance, in New Zealand:

“…any Government Department …may make, use, exercise and vend any patented invention for the services of the Crown and anything done by virtue of this subsection shall not amount to an infringement of the patent concerned.”[159]

Developing countries should establish workable laws and procedures to give effect to compulsory licensing, and provide appropriate provisions for government use.

Compulsory Licensing for Countries with Insufficient Manufacturing Capacity

Paragraph six of the Doha Declaration directs the TRIPS Council to develop an expeditious solution to the problem faced by certain countries not having sufficient manufacturing capacity in the pharmaceutical sector. It defines the problem as the inability of these countries to use compulsory licensing to obtain needed pharmaceuticals from a producer located in their territory. A compulsory licence ordinarily could be used for this purpose - the country could authorise through a compulsory licence a domestic producer to produce the product within its territory, or an importer to procure from elsewhere. The countries identified as having this problem, however, cannot turn to a domestic producer for products under this approach, and would need to rely on a producer from another country.

We agree that it is important to get the interpretation or amendment of TRIPS right, bearing in mind the longer term scenario when patent protection will apply to countries that can currently produce and export generic copies of patented drugs. The ultimate need is to create a pro-competitive solution for the market in patented drugs in developing countries after TRIPS is fully in force which allows expeditious procurement of drugs in a sustainable manner at the lowest possible cost. This applies whether we are considering the direct procurement of patented drugs where there are a range of therapeutic substitutes, or about procurement under compulsory licensing.

Compulsory licensing needs to be viewed as a means to an end. The end in this case is to help achieve the lowest possible cost of medicines in developing countries in order to facilitate access. The only point of compulsory licensing in this context is if it will help to achieve this. As noted above, aside from the legal and administrative aspects, compulsory licensing will only be effective if the compulsory licensee sees the possibility of a reasonable return from his investment while also supplying at a significantly lower price than the patentee (or his licensee).

While there are now several countries, particularly those with significant domestic markets, with the capacity to produce copies of drugs cheaply, this will become more difficult after 2005. There will be no incentive, as now, for manufacturers in these countries to reverse engineer newly patented drugs and take the other steps necessary for manufacture and sale (including obtaining regulatory approval), because the domestic market would be closed. Thus the ready supply of generic substitutes for patented drugs now available will gradually disappear. Potential compulsory licensees would therefore have to charge a price closer to full economic cost (including start-up and manufacturing costs) as compared to the possibility of providing off-the-shelf generics at prices where start-up costs have already been amortised to some extent on the domestic market. Moreover, if the necessary investment is only triggered by the availability of a compulsory licence, there will inevitably be long delays before the drug actually reaches the intended patients.[160] In addition, there is some evidence that reverse engineering of new medicines is intrinsically more difficult in biopharmaceuticals than in traditional process chemistry.

This suggests that, without special arrangements, the possibility of compulsory licensing being a vehicle for price reductions will be more limited than at present, even in the few technologically advanced developing countries. For most countries, the only feasible supplier may be the patentee (or his licensee).

We therefore see the problem identified at Doha as being as much economic as legal. A quasi-legal solution as may be identified in the TRIPS Council is necessary, but is by no means sufficient to solve the problem we have outlined. In particular the quasi-legal solution is less likely to be effective the more compulsory licensing is hedged around with restrictions. Such restrictions reduce the likelihood that such licensing can be an effective bargaining tool for developing countries negotiating prices with patentees – it can be effective only if the compulsory licensing alternative is a viable economic proposition.

Legal Aspects

In this section we consider and comment on the various proposals put forward by different countries and groups of countries to address the WTO resolution of the problem identified in paragraph 6 of the Doha Declaration. This revolves around the substance of Articles 28 (Rights Conferred), Article 30 (Exceptions to Rights Conferred) and Article 31(f) of TRIPS, where Article 31 deals with “Other Use Without Authorisation of the Right Holder”. Article 31(f) provides that a compulsory licence must be “predominantly for the supply of the domestic market of the Member authorising such use.”

Countries with no or insufficient manufacturing capacity cannot therefore issue a compulsory licence to a domestic manufacturer, or to one overseas because patents are territorial. At present they could issue a compulsory licence to an importer, who could source the supply from a generic manufacturer in a country where the product is not patented. After 2005, this option will not be possible for drugs that are patented in the supplier country.

The practical effect of this provision is to render the compulsory licensing provisions practically worthless for the very countries which are likely to need it most – namely the poorest. With limited domestic manufacturing capacity, there is no one to invoke those provisions in those countries. This is plainly unsatisfactory and the Doha Declaration rightly recognised that a swift solution should be found to this problem.

There are a number of interpretative problems raised by the Doha Declaration, a few of which we note in passing. The Declaration notes that countries are free to determine the grounds on which compulsory licences are granted (paragraph 5b), and the right to determine what constitutes a “national emergency or other circumstances of extreme urgency” (paragraph 5c). The latter provision reflects the shortcut in procedures allowed in these circumstances in Article 31(b) of TRIPS. Thus paragraph six refers to procedures for compulsory licensing in the pharmaceutical sector needed to address “public health problems…especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics” (paragraph 1).[161] It does not, as sometimes assumed, refer only to compulsory licensing in situations of emergency or urgency. Nor is it limited to a particular type of disease.

It also needs to be clarified which countries have no or insufficient manufacturing capacity. Again we think this requires an economic interpretation. If production of a needed medicine is technically possible but extremely costly, there is no point in issuing a domestic compulsory licence. If the objective is affordable access to medicines of appropriate quality and quantity, then the solution should allow production in the most economically viable manner, whether domestically or overseas. Developing countries generally favour an interpretation of “manufacturing capacity”, that takes account of economic criteria (for example, whether the capacity is such that economic production is possible in the envisaged circumstances), and place emphasis on a country’s ability to decide the criteria on a product by product basis. Developed countries, with one exception, suggest that criteria for defining this should be drawn up, without defining what these might be.[162]

Since the Declaration also allows LDCs not to apply pharmaceutical patents until 2016, countries that take advantage of this provision will not be able to issue compulsory licences, nor will any country where a patent has not been taken out. At present, such countries may be able to import cheaper supplies from other countries without patents on the relevant products, but again this situation will change after 2005. Thus paragraph six, while referring specifically to compulsory licensing, is clearly intended to address this wider context of action to address the affordability and accessibility of medicines, particularly in developing and least developed countries.

The Declaration does not specify which countries may act as suppliers to the countries in question. In order to maximise competition, and achieve the lowest prices possible, applying no restriction on which WTO members may act as suppliers would seem to be the logical market-based solution. For the same reasons, countries seeking a licence should logically seek out the most competitive compulsory licensee, wherever they might be located. Developing countries favour having the ability to import from suppliers in any country. One developed country favours the possibility of import from developed countries, but the EU has no fixed views and the US favours supply from developing countries only, as does the research-based pharmaceutical industry.

Five main solutions have been proposed to the problem mentioned in paragraph 6 of the Declaration which we examine in turn.

The Amendment of Article 31 of TRIPS. Article 31(f) could be deleted. However this may be regarded as altering the sense of the Agreement for compulsory licensing other than in relation to public health problems. The alternative is an amendment which would make a clearly demarcated exception to the restriction imposed by Article 31(f) covering compulsory licensing needed to address public health problems envisaged in the Declaration. Such an amendment to TRIPS would be very time-consuming and require ratification by national governments. An interim or provisional solution, such as a declaration of intent, and temporary waiver or moratorium on dispute settlement, could be provided to cover the period until any amendment is ratified. But many countries, both developed and developing may be reluctant to re-open TRIPS at all, because of the risk of other aspects of the agreement being opened up for renegotiation at the same time. Assuming a solution was found, it would then be necessary for a potential exporting country to delete the “predominantly” clause from its own legislation and to make sure that the grounds for compulsory licensing accorded with those envisaged in the Declaration. In the final stage compulsory licences would need to be invoked and paid for in both the importing and exporting countries, if there is a patent in both. The exporting country would need to be prepared, in any case, to issue a compulsory licence for the benefit of the importing country.

Developing countries have suggested a number of options for resolving the problem including the revision of Article 31 or deletion of Article 31(f), so as to ensure Article 31(f) would not apply to any laws, measures and administrative regulations including compulsory licences, adopted to protect public health and in particular to ensure affordable access to pharmaceutical products. Other developing countries note that under Article 31(f) there would be a need to issue compulsory licences in both the importing and exporting country which would be administratively burdensome. The EU favours the specific amendment to Article 31(f) described above. The US does not favour an amendment to 31(f), but a moratorium on dispute settlement proceedings to achieve the same effect.

Interpretation of Article 30. Article 30 provides for limited exemptions to patent rights that do not conflict with the normal exploitation of the patent. Under this proposed solution no amendment is required to TRIPS, nor a compulsory licence in the exporting country. One claimed advantage is that it would allow exports to countries where no patents exist on the relevant medicine. All that would seem to be required is an “authoritative interpretation” under Article IX of the WTO agreement, adopted by three quarters of WTO Members. This would clarify that an exception under patent rights to allow export in the circumstances envisaged in the Declaration is legitimate. National legislation in the exporting country would then need to be amended to ensure that the envisaged exception is incorporated. One issue with this proposed solution is whether the “Doha exception” would be compatible with the conditions of Article 30. An interpretation of this Article in a recent Disputes Settlement Panel[163] suggested that the “limited exceptions” should be interpreted narrowly. This was in the context of justifying Canada’s provision of an exception for early working by potential competitors for the purposes of obtaining regulatory approval. There is a case to be made that an exception, as suggested here, is “limited” to particular circumstances as defined in the Declaration. It could also be said that it does not “unreasonably conflict” with the normal exploitation of the patent, being for export at low prices, provided the “legitimate interests” of the patentee are safeguarded (for example, preventing diversion to other markets). Moreover, the legitimate interests of third parties (people suffering from diseases in developing countries) would need to be weighed appropriately against those of the patentee. For the most part the very different circumstances applying here, as contrasted to those in the Canada case, means this WTO case law is of limited relevance.

Some developing countries particularly favour the Article 30 solution, noting that it solves the problem of double remuneration under Article 31, and removes the need for a compulsory licence in the exporting country. In terms of administrative procedures they feel it is the least burdensome option. It should also be noted that activist NGOs think the Article 30 option is preferable to other options.

Moratorium or Waiver. An alternative is the proposal for a moratorium or waiver for exports in the “Doha circumstances”. Advocates argue that a waiver is the most expeditious solution noting that it could provide legal security and still avoid the need for either amendment or authoritative interpretation of the TRIPS agreement. The conditions for a waiver could be set out in advance to define the circumstances in which they would apply. Obviously there would be a need to set these out very clearly and unambiguously to the satisfaction of all WTO members. This has not yet been attempted and clarity may inevitably be compromised in negotiations on the criteria.

The WTO Ministerial Council would have to agree the criteria under which Members may be exempted from complying with the provisions of the TRIPS Agreement. Both in the case of a moratorium and a waiver, however, interested parties may only invoke protection under the Agreement if national legislation has been changed to implement the exemption to the 31(f) requirement.[164] If national legislation is not changed, a patentee may still make a case in national courts in spite of the fact that a WTO waiver or moratorium applies. It also needs to be remembered that a waiver requires regular review by the Ministerial Conference/General Council if granted for a period of more than one year.

The EU have suggested that a waiver (or moratorium) might be necessary while the amendment they propose to 31(f) is agreed. Some developing countries have suggested that that a waiver (or moratorium) would not amount to a sustainable and legally predictable solution. By contrast the US has suggested that a waiver or moratorium is more likely to achieve an expeditious, workable, transparent, sustainable and legally certain solution. We also understand that the pharmaceutical industry supports a proposal on these lines.

Non-Justiciability. The proposal for a non-justiciability option would achieve much of the Article 30 approach by a different means. It would operate in a similar manner to the position of TRIPS on the exhaustion of rights (paragraph six of TRIPS). By authoritative interpretation or amendment of the Agreement, it would be decided that settlement disputes under TRIPS would not be used to in relation to exports undertaken as envisaged in the Declaration. However, it is unclear exactly how this proposal would be implemented.

Export by a Nation with a Compulsory Licence. A final option, which is not in the hands of the WTO, is that countries which have the capacity to reverse engineer and manufacture, and large local markets for the required medicines, may issue compulsory licences in accordance with their own legislation. In that case, a proportion of the supplies manufactured could be offered for export to countries in need (on the basis of a compulsory licence for import if necessary) in a manner that did not breach Article 31(f). A compulsory licence can also be granted to remedy anti-competitive practices (Article 31(k)), and in this case the restriction on exports would not apply. But this option depends on the supplying country having legitimate grounds for issuing a compulsory licence in the first place, on its having a large enough market that exports constitute less than half of total production, and on its willingness to export.

The choice between these options will be worked out politically, but we strongly emphasise our concern that whatever the legal solution adopted by the WTO is, it should proceed upon the following principles. First, it should be quickly and easily implementable with a view to a long term solution. Second, the solution should ensure that the needs of poor people in developing countries without manufacturing capacity are given priority. Third, it should seek to ensure that conditions are established to provide potential suppliers the necessary incentive to export medicines that are needed

Economic Aspects

Whatever means are utilised to achieve the objectives at Doha, developed countries will require safeguards to prevent leakage of product from the intended recipient to other markets, and to ensure that production is only for export to the affected country, not for domestic sale. They may also require actions through WTO to ensure all Members are fully informed of the nature of the transaction in a transparent manner. Whatever safeguards are finally agreed upon, the crucial issue is that the economics of supply to one particular country with a limited market may be insufficient to attract potential generic suppliers. Moreover, if prices offered under compulsory licensing are to be as low as possible, then there should be competition between more than one supplier at the point of ordering, if not for the actual supply. To allow therefore for economies of scale, and a degree of competition, it is important that small markets are grouped together as much as is possible.

An obvious solution is for groups of countries with the similar needs for essential drugs to group together. International institutions, such as WHO or the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) may also have an essential role to play in facilitating and financing group purchases of medicines from both brand and generic manufacturers.

A way needs to be found to reconcile the nature of the solution adopted with the objective of providing medicines of the appropriate quality at the lowest possible cost. If that cannot be achieved, the legal solution will have little practical reality. Nor will the option of compulsory licensing be effective as a negotiating tool.

Developing Country Legislation

The main way that developing countries can use IPRs to address public health issues is to ensure that their legislation provides for appropriate standards and practices. What is appropriate will vary according to country circumstances and level of development. For instance, countries with well developed R&D capability, or with particular strengths in, say, biotechnology, may want to have “stronger” protection than countries that are almost entirely users of other countries’ technology.

Developing countries should not feel compelled, or indeed be compelled, to adopt developed country standards for IPR regimes. They might be overwhelmed if they did so. The number of new chemical entities approved for use by the US Food and Drug Administration (FDA) declined to 27 in 2000, compared to about 60 in 1985.[165] But the number of patents granted in the main patent class for new drug compositions (424) was 6730 in 2000.[166] The great majority of patents are granted not for new therapeutic compounds, but relate to variations in production processes, new formulations or crystalline forms, new combinations of known products, and new uses of known drugs. In the period 1989-2000, 153 of the 1035 new drug approvals by the FDA were reported to be for drugs that contained new active ingredients and offered significant clinical improvement. A further 472 drugs were classified as being modestly innovative.[167]

The underlying principle should be to aim for strict standards of patentability and narrow scope of allowed claims, with the objective of:

· limiting the scope of subject matter that can be patented

· applying standards such that only patents which meet strict requirements for patentability are granted and that the breadth of each patent is commensurate with the inventive contribution and the disclosure made

· facilitating competition by restricting the ability of the patentees to prohibit others from building on or designing around patented inventions

· providing extensive safeguards to ensure that patent rights are not exploited inappropriately.

All this would help to ensure that patenting rules as far as possible limit the scope for patenting that serves more to protect markets, and exclude competition, than promote local R&D. Moreover loose patenting standards and practices, as noted above, can actually inhibit innovation by impeding research by others. Because, under TRIPS, it is not possible to discriminate between different fields of technology, we deal with the application of these principles in more detail in Chapter 6.

However, specific to pharmaceuticals, most developing countries should as a minimum take up the possibility allowed by TRIPS[168] of excluding diagnostic, therapeutic and surgical methods for treatments of humans or animals from patentability, as well as new uses of known products (which, in essence, are equivalent to therapeutic methods). Since most developing countries are not in a position to develop such methods, they will have nothing to gain by not exploiting this flexibility. Of course, the few developing countries with research capabilities in these areas may wish to have such protection, but we should note that most developed countries also exclude these areas from patentability. We would also suggest that developing countries think very carefully about diluting this exception by relaxing the concept of novelty and allowing patent claims for essentially first or subsequent medical uses of known chemical compounds as has been done in a number of developed and developing countries.[169] Again, developed countries may consider that the incentive for research justifies allowing such claims, but for most developing countries with limited research capabilities we consider that the costs are likely to outweigh the benefits.

Most developing countries, particularly those without research capabilities, should strictly exclude diagnostic, therapeutic and surgical methods from patentability, including new uses of known products.

We also deal here with two issues which particularly affect the pharmaceutical sector, and the production of generic drugs.

Bolar Exception

In the US, the Drug Price Competition and Patent Term Restoration Act of 1984 overturned a landmark court decision (Roche versus Bolar, 1984) by introducing, inter alia, what is now known as the “Bolar Exception” (or “early working exception”). This makes it legal for a generic producer to import, manufacture and test a patented product prior to the expiry of the patent in order that it may fulfil the regulatory requirements imposed by particular countries as necessary for marketing as a generic. The WTO legality of this exception was confirmed in 2000 by the dispute settlement case brought by the EU against Canada.[170] For developing countries this is very important, particularly if they are actual or potential producers of generics, in order to ensure that lower priced generics can reach the market as soon as a patent expires. Even if they are not likely to be potential producers in the foreseeable future, it would be prudent to include the exception in their legislation. For instance, a foreign company may need to conduct trials for the purpose of gaining regulatory approval. Of 63 developing countries whose legislation we examined only eight specifically included a Bolar exception, although others may also allow “early working” under general exceptions to exclusive rights (covered by equivalent wording to Article 30 in TRIPS).[171]

Developing countries should include an appropriate exception for “early working” to patent rights in their legislation, which will accelerate the introduction of generic substitutes on patent expiry.

Marketing Approval

Another important step in marketing a generic drug is the need to meet regulatory requirements for that purpose. TRIPS provides in Article 39.3 an obligation on countries to protect against unfair commercial use of confidential data (for example, trials data) on new chemical entities submitted by companies to obtain approval for marketing new drugs from the regulatory agency (such as the FDA in the US).

The rationale for this is the “considerable effort” invested in the compilation of this data. Pharmaceutical companies understandably argue that it is unfair if the product of possibly millions of dollars of clinical trials and other investigations is made available to competitors who thereby avoid the need for comparable expenditure in order to obtain marketing approval. Against this it is argued, from the public health point of view, that such data should be in the public domain because they contain important medical information not available elsewhere and that excessive secrecy has undesirable effects (for example, the data might be usefully reanalysed to understand side-effects only detected after marketing). Moreover, from a societal point of view, it makes no sense for a potential generic competitor to repeat very expensive tests if the biopharmaceutical equivalence of their version of the drug can be reliably demonstrated. Data exclusivity can be a barrier to generic entry irrespective of whether the drug was patented, or the patent period has expired.

TRIPS does not require the imposition of data exclusivity, as such, on these test data, only protection against unfair commercial use. The EU, however, has rules that confer exclusivity on such data for a period of six to ten years, and is considering moving to ten years. This means, inter alia, that the health authorities cannot rely on such data to approve other applications without the originators’ consent. In the US, similar protection is applicable for five years.

In the light of the above, we take the view that developing countries should protect test data against unfair commercial use in order to protect the legitimate interests of the originators of data and their “considerable effort.” But TRIPS allows considerable freedom in how this may be done.

Countries may allow health authorities to approve equivalent generic substitutes by “relying on” the original data. Developing countries should implement data protection legislation that facilitates the entry of generic competitors, whilst providing appropriate protection for confidential data, which may be done in a variety of TRIPS-compatible ways. Developing countries need not enact legislation the effect of which is to create exclusive rights where no patent protection exists or to extend the effective period of the patent monopoly beyond its proper term.

Doha Extension for Least Developed Countries

The Doha Declaration (paragraph seven) instructed the TRIPS Council to allow least developed countries to defer introduction of patent protection for pharmaceutical products and protection of confidential test data until at least 2016. We applaud the intention behind this paragraph, but it also creates and highlights a number of anomalies.

At least 70% of the population in LDCs are in countries that provide pharmaceutical patent protection, and 27 of the 30 LDCs in Africa also provide it. These countries would need to amend their legislation to remove protection on pharmaceuticals to take advantage of this extension. It may well be in their interest to do so in view of the length of the extension granted. We presume, however, that amendments to legislation may not be retrospective and thus current patents would remain valid.

Further, certain countries will be constrained in amending their laws by bilateral or multilateral agreements. For instance the 12 LDC members of OAPI (three are not least developed) would need to agree on a revision to the Bangui Treaty which governs OAPI. Similarly, others may be bound by bilateral agreements which do not allow for this course of action.

For countries that have not yet implemented IP protection, we question whether it makes sense to implement the whole IP protection regime in 2006, except for pharmaceutical protection. Since pharmaceuticals account for a significant proportion of all patent applications (for example, 50 % of patents issued by ARIPO in 1994-1999 were related to pharmaceutical products),[172] it is even harder to justify the financial and human resources necessary for implementing an IP regime in these countries only for non-pharmaceutical sectors. Article 66.1 of TRIPS provides that the TRIPS Council may grant extensions to the transition period for LDCs taking account of their “special needs and requirements…their economic, financial and administrative constraints, and their need for flexibility to create a viable technological base”. It is not therefore very logical to grant an extension for one sector on the grounds of public health to a specific future date, when the criteria under TRIPS for granting extensions are far more broadly based.

Those LDCs which already provide pharmaceutical protection should consider carefully how to amend their legislation to take advantage of the Doha Declaration. Consistent with our analysis elsewhere, the TRIPS Council should review the transitional arrangements for LDCs, including those applying to join the WTO, in all fields of technology.

THE COMMISSIONERS

Professor John Barton (Commission Chair)

Mr Daniel Alexander

Professor Carlos Correa

Dr Ramesh Mashelkar FRS

Dr Gill Samuels CBE

Dr Sandy Thomas

THE SECRETARIAT

JOHN BARTON

SIR HUGH LADDIE

TABLE OF CONTENTS

THE COMMISSIONERS ii

PREFACE iii

FOREWORD v

GLOSSARY 190

ACKNOWLEDGEMENTS 194

INTRODUCTION

OUR TASK

INTELLECTUAL PROPERTY AND DEVELOPMENT

INTRODUCTION

Industrial Property

Artistic and Literary Property

Sui Generis systems

Patents

Copyright

HISTORY

THE EVIDENCE ABOUT THE IMPACT OF IP

The Context

Redistributive Impact

Growth and Innovation

Trade and Investment

Chapter 2

HEALTH

The Issue

Background

RESEARCH AND DEVELOPMENT

Developed Countries

Developing Countries

Other Factors Affecting Access

National Policy Options

The Context

Parallel Imports

Compulsory Licensing for Countries with Insufficient Manufacturing Capacity

Legal Aspects

Developing Country Legislation

Chapter 3

AGRICULTURE AND GENETIC RESOURCES

INTRODUCTION