The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS) brought about a very important change in international standards relating
to intellectual property rights. Because of its far-reaching implications,
particularly with respect to developing countries, the agreement has been
one of the most controversial components of the WTO system. Strong disagreements
on the scope and content of the Agreement emerged during the Uruguay Round
negotiations, both between developed and developing countries and among developed
countries themselves. Implementation of the Agreement and its review under
the "built-in agenda" have also been contentious with regard to
many aspects of the Agreement.
The developed countries (particularly the USA) insisted upon the negotiation
and adoption of standards on intellectual property rights (IPRs) in the Uruguay
Round, based on the argument that strengthened protection of IPRs would promote
innovation as well foreign direct investment (FDI) and technology transfer
to developing countries. Although the TRIPS Agreement only became effective
in advanced developing countries on January 1, 2000, meaning that there has
not been much time to assess its impact, most developing countries seem to
remain unconvinced about the benefits that they will obtain from the implementation
of the new IPR standards. Moreover, many of them fear that the costs to be
paid may be too high, particularly in critical areas such as public health.
Essentially, many developing countries feel that despite the balance sought
in some provisions, the Agreement mainly benefits technology-rich countries.
There are a number of reasons for these concerns.
First, higher levels of IPR protection do not appear to lead to tangible
increases of FDI in or technology transfer to developing countries. The evidence
on the relationship between IPR protection on the one hand and FDI and technology
transfer on the other continues to be inconclusive. In addition, the share
of developing countries in world research and development expenditures remains
very low. Certainly, IPRs may promote innovative activities to the extent
that they offer the promise of extraordinary benefits based on the temporal
exclusion of competitors. But in order for those benefits to be realized,
an adequate industrial and technological infrastructure must exist at the
national level, which is not the case in most developing countries. There
is also strong evidence suggesting that most of the rewards from innovation
are reaped by a small minority of successful companies, while the majority
of innovative efforts confer only modest benefits, in addition to the fact
that, because of the high cost of litigation, IPR enforcement is biased in
favor of large organizations.
Second, in some sectors IPRs appear to act as a powerful barrier to access
to technologies and products, particularly by the poor. This is notably the
case in relation to pharmaceuticals. By their very essence, patents enable
pharmaceutical manufacturers to charge higher prices than those that would
have existed in a competitive environment. While the high prices are said
to be justified by the need to recover costly investments in R&D, the
magnitude of such investment, as well as the pricing of drugs in developing
countries, has been strongly contested.
The AIDS crisis in Africa, and growing evidence about the negative implications
of patents for access to medicines by the poor, have brought the relationship
between TRIPS and health to the forefront. With more than thirty million people
living with HIV, most of them in the poorest regions of the world, the need
to address the problem of access to patented medicines has emerged as a global
priority. While it is true, as argued by the pharmaceutical industry, that
other factors such as infrastructure and professional support play an important
role in determining access to drugs, it is also true that the prices that
result from the existence of patents ultimately determine how many will die
from AIDS and other diseases in the years to come. It is important to note
that the problem of access to medicines is not limited to anti-retrovirals,
but involves all kinds of medicines that may fall under patent protection.
Some recent WHO-sponsored studies provide an indication of the potential
effects of the TRIPS Agreement in the area of pharmaceuticals. A study undertaken
in Thailand on the impact of that country’s 1992 revised patent law, which
essentially applies the same standards as those required by the TRIPS agreement,
found that there had been no significant increase in transfer of technology
or foreign direct investment, and that spending on pharmaceuticals had increased
at a higher rate than overall health care spending.
Another study on the implications of the new Industrial Property Code (1996)
on local production and access to medicines in Brazil revealed inter alia
that:
- Only 36 (2.6%) of the 1387 drug patent applications filed since 1996,
when the new Brazilian Industrial Property Act was signed into law, were filed
by residents of Brazil. More than five hundred of the filings were made by
U.S. residents. - While Brazil’s total imports roughly doubled during the period 1982-98,
pharmaceutical imports increased over 47 times.
The study concluded that "the greatest beneficiaries of recent changes
in Brazilian legislation and the implementation of the World Trade Organisation’s
TRIPs Agreement have not been Brazilian companies or institutions, but transnational
companies" .
More generally, Maskus has noted the scarcity of data on price elasticities
and market-structure parameters, and the uncertainty about the potential effects
of patents on prices, profitability, and innovation. However, based on available
literature, he found that "the preponderance of conclusions is pessimistic
about the net effects of drug patents on the economic welfare of developing
countries (or, more accurately, of net importers of patented drugs)."
Some of the concerns of developing countries about the implications of
the TRIPS Agreement on public health were reflected in the negotiation and
adoption of the "Doha Declaration on the TRIPS Agreement and Public Health"
, at the Fourth WTO Ministerial Conference (November 9-14, 2001). WTO Members
took the unprecedented step of adopting a special declaration on this controversial
matter. Discussion of the declaration was one of the major issues at the Conference,
and was the first outcome of a process that started in early 2001 when, upon
the request of the African Group and other developing countries, the Council
for TRIPS agreed to deal specifically with the relationship between the TRIPS
Agreement and public health. Unfortunately, the Council for TRIPS has failed
to find a solution for the supply of drugs to countries who, due to insufficient
or non-existing manufacturing capacity in pharmaceuticals, are unable to use
compulsory licenses in order to obtain access to drugs at lower prices than
those charged by patent owners.
While some developed countries have announced unilateral moratoria with
regard to the export of certain types of drugs, these measures do not provide
a stable framework to encourage Members and the private sector to act in response
to public health needs in Member countries with insufficient or no manufacturing
capacity in the pharmaceutical sector.
Even if a waiver were sanctioned under WTO rules to address this problem,
it would not dissipate the legal uncertainty about actions that can be legally
taken and it would be unlikely, hence, to induce potential exporting countries
to encourage production for export, nor would it provide the necessary economic
incentives for generic manufacturers to make the investments required to replicate
the technology, produce the active ingredients and dosage forms, and obtain
the respective marketing approval for the medicines in need.
A possible solution to the paragraph 6 problem should ensure:
- timely access to medicines by all;
- simple and speedy legal procedures in the exporting and importing countries,
to allow for the fast supply of needed medicines of the required quantity
and quality; - equality of opportunities for countries in need of medicines, even for
products not patented in the importing country and for countries that are
not WTO Members; - transparency and predictability of the applicable rules in the exporting
and importing countries, so as to provide the required incentives to the private
sector to act within the established framework; - the freedom of importing countries, confirmed by the Doha Declaration,
to grant compulsory licenses and authorizations for government use on the
grounds determined by the national law, including in cases of health emergencies; - broad coverage in terms of public health problems and the range of medicines
according to the priorities defined by the national health authorities; - stability of the international legal framework for a long-term solution;
- facilitation of a multiplicity of potential suppliers of the required
medicines, both from developed and developing countries, and the realization
of economies of scale.
The text of the Chairman of the Council for TRIPS of December 16, 2002
(JOB(02)/217), which received support from the great majority of Members,
establishes a number of conditions for allowing exports of patented medicines,
which is hardly compatible with the idea of an expeditious solution. The U.S.
opposition to apply this proposed solution to all diseases, as agreed in Doha,
has frustrated the approval of the Chairman’s proposal so far. A simpler and
more effective approach would be based on the recognition that acts exclusively
related to exports to countries with public health needs are not subject to
patent rights. Given the territoriality of patent rights, the commercialization
of a product in a foreign country does not affect the normal exploitation
of the patent in the exporting country. Though the patented invention would
be used in the latter, the effects of such use will take place in a foreign
jurisdiction and be subject, therefore, to the rules applied therein. Such
a limited utilization would not unreasonably prejudice the legitimate interests
of the patent owner in the exporting country.
It should be noted in this regard that on October 3, 2002, the European
Parliament adopted Amendment 196 to the European Medicines Directive, which
provides that "manufacturing shall be allowed if the medicinal product
is intended for export to a third country that has issued a compulsory licence
for that product, or where a patent is not in force and if there is a request
to that effect of the competent public health authorities of that third country."
This is the approach that should inspire a solution under paragraph 6 of the
Doha Declaration.
Third, the adoption of the TRIPS Agreement as a component of the WTO system
means that any controversy relating to compliance with the minimum standards
established by the Agreement should be resolved under the multilateral procedures
of the WTO. The adoption by another Member of unilateral trade sanctions would
be incompatible with the multilateral rules. Any complaint should be brought
to and settled according to the rules of the Dispute Settlement Understanding
(DSU).
Despite this, many developing countries have continued to be pressured
by unilateral demands by some developed countries, notably the U.S. and the
EU, in the area of IPRs, aiming not only at the implementation of the TRIPS
Agreement standards, but often asking for "TRIPS-plus" protection,
that is, levels of protection beyond the minimum standards required by the
TRIPS Agreement. A telling case that received considerable public attention
was the attempt by the U.S. government and pharmaceutical industry to block
the use of parallel imports and compulsory licenses by the South African government
to obtain access to cheaper HIV/AIDS drugs. In other cases, developing countries
were persuaded to adopt "TRIPS-plus" standards in order to benefit
from other trade concessions under bilateral agreements.
In addition, nothing seems to prevent WTO Members from applying unilateral
pressure, for instance, by threatening the removal of trade preferences that
go beyond WTO commitments, or cuts in development aid, or through simple moral
persuasion. As noted by Primo Braga and Fink, the United States has continued
to put unilateral pressure on countries where it felt that weak IPR systems
disadvantaged U.S. companies. One of the most prominent cases in this context
was, in addition to the South African case, the dispute with Argentina on
pharmaceutical patents, which in 1997 led to the removal of 50% of Argentina’s
benefits under the U.S generalized system of preferences (GSP).
Fourth, Article 66.2 of the TRIPS Agreement establishes an outright obligation
on developed countries "to provide incentives to enterprises and institutions"
in their territories for the transfer of technology to least-developed countries.
Though Article 66.2 leaves a great deal of leeway to developed countries to
determine what kind of incentives to provide, it does require the establishment
of a system to encourage technology transfer (including technology protected
under intellectual property rights) to least-developed countries. The provision
also provides a general standard to judge the appropriateness of such incentives,
i.e., that they should enable least developed countries "to create a
sound and viable technological base." This obligation remains unfulfilled.
Fifth, developing countries possess most of the biodiversity available
in the world and are the source of materials of great value for agriculture
and industry (e.g. medicinal plants). Traditional farmers, for instance, have
improved plant varieties and preserved biodiversity for centuries. They have
provided gene pools crucial for major food crops and other plants. A major
concern in many developing countries has been how to prevent the misappropriation
of their traditional and indigenous knowledge and genetic resources, and how
to ensure the sharing of the benefits obtained from the commercial exploitation
of biological materials and associated knowledge, as provided for by the Convention
on Biological Diversity (article 15).
The misappropriation by foreign companies and researchers, notably under
patents, of genetic resources and traditional knowledge found in developing
countries, has been illustrated by the cases of patents granted on ayahuasca,
quinoa, and turmeric, among others. Some governments and NGOs have counteracted
this form of so-called "bio-piracy" by challenging (in some cases
successfully) the validity of such patents or by promoting the publication
of traditional knowledge in order to preempt its patentability.
Some of these concerns have been addressed by the International Treaty
on Plant Genetic Resources for Food and Agriculture. The prompt ratification
and entry into force of the Treaty will ensure that the access to and use
of genetic resources for food and agriculture is subject to a Multilateral
System under which benefit sharing is provided for. The Treaty lays down international
rules to prevent the protection under intellectual property rights of materials
in the Multilateral System "in the form received."
The compulsory disclosure of the source of biological materials in patent
applications may also provide a mechanism to address developing countries’
concerns about misappropriation and benefit sharing. Article 29 of the TRIPS
Agreement may be amended to this effect, so as to incorporate an obligation
on the applicant to make a declaration about
(1) the source and the geographical origin, as known to the applicant,
of any biological material claimed or on which a claim is based;
(2) compliance, where appropriate, with any applicable national laws requiring
prior informed consent for the access to biological material claimed or on
which a claim is based.
These obligations do not create an additional patentability requirement,
but rather aim at obtaining information to apply the existing standards. As
a matter of principle, a patent should not be granted to a person who has
not made an "inventive contribution." Information about the source
or country of origin is important to determine whether the applicant has effectively
made the invention. Inventorship is a basic element in patent law and there
are no limitations under the TRIPS Agreement with regard to the means to determine
it. In addition, providing such information would not impose a significant
burden on the applicant, and may improve the quality of patent grants, as
far the supplied information may be used to improve the examination process.
The obligation to inform about compliance of access legislation, if it
exists and is applied in the country from which the material was obtained,
would ensure consistency with the prior informed consent principle under the
CBD.
The failure to comply with these obligations should lead to rejection of
the application. It is important to note that the EU recognized disclosure
of origin as a principle in the preamble to Directive 98/44 on the Legal protection
of Biotechnological Inventions, and that the EU and its member states have
expressed their support of a compulsory requirement relating to the "geographic
origin of genetic resources or TK used in the inventions," though they
argue that noncompliance or false information should have no effect on the
grant of the patent or its validity.
In sum, developing countries generally feel that the concessions they made
during the Uruguay Round with respect to IPRs are not providing them with
significant benefits. Strong asymmetries in the development of and access
to technologies remain or are even growing. Developing countries are bearing
the costs of a system of reinforced IPR protection under the WTO, while enjoying
few of its potential advantages. Concrete steps should be taken to redress
the asymmetries of the international IPRs system.
