Contrasting views continue at WIPO development seminar

By Meena Raman, Geneva, 4 May

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

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

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

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

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

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

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

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

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

He said that there is a special dimension of balance as far as developing countries areconcerned, which thus have to be taken into account when discussing thedevelopment dimension of IP. Most patents in developing countries are owned byforeigners, while their own citizens hardly own any patents abroad. There are manyconsequences. There is an outflow of foreign exchange, estimated at $60 billionextra a year resulting from TRIPS.

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

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

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

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

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

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

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

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

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

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

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

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

Dr Prabuddha Ganguli from the Indian Institute of Technology, and also representingUNIDO, said there was new international phenomena, knowledge politics, whereknowledge is owned and transacted. 'IPRs play a decisive role in this, what are rulesof the game and how do we play the game? In view of TRIPS, do developingcountries have viable options to survive in the market?'

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

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

Dr. Ganguli used India as an example to illustrate the changes that have taken place.'As India launches into the future, it is moving into a strong IPR regime in a phasedmanner, during the last 35 years, while growing its infrastructure,' he said. 'There isno one size that fits all. IPR is necessary in India to give it the competitive edge,' headded. He also traced how Indian IPR laws had strengthened as the country passedthrough higher stages of development.

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

Referring to IP assets, Love said that there is knowledge that is owned and that whichno one owns. For example, just because a medical database is free, it is does not meanthat it is not valuable. Asking when should knowledge become private property, Lovesaid it should when the assignment of property rights in knowledge promotes socialwelfare and protects human rights.

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

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

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

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

Love added that there are other ways than granting IPRs to support innovation. Hegave examples of open access research strategies which include public or privatelyfinanced open databases and open access publishing and archive models where theusers, advertisers and government pay.

He said that there is propaganda that the current IPR level is not enough and 'we arepushed to accept high levels in IPRs when it is not in our interest and does not evenreflect US practices in the public domain.'

'Open access publishing is a new business model which in a variety of ways fundsresearch to advance science,' he added. 'The Internet is a public domain and it hascreated more millionaires than any patent on earth. Nobody owns the Internet,' hestressed.

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

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

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

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

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

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

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

Cameroon under the present conditions characterized by heavy internal and externaldebts, cannot finance its research activities or upgrade its research infrastructure. Thefew private companies operating locally are mostly branches of MNCs and do notundertake innovative research in Cameroon.

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

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

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

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

In the implementation of strong IP protection, he said that TNCs 'go for more' oncetheir goal is achieved. He said that the TNCs first ask for product patents, and whenthey reach that goal, they immediately asked for data exclusivity, a device that makesit harder for generic producers to compete.

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

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

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