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Regional Dialogue on Intellectual Property Rights,Innovation and Sustainable Development in Eastern& Southern Africa

TIPS

Over recent years, there has been an unprecedented increase in the scope and level ofprotection of intellectual property rights (IPRs), including patents, copyrights, trademarksand geographical indications. This trend has generated new opportunities but also newtensions around key public policy concerns, such as public health, food security, education,innovation, transfer of technology and biodiversity management. While much of the debatestill focuses on the WTO TRIPS Agreement, higher standards of protection, with narroweddown exceptions (TRIPS-plus) are increasingly being included in new bilateral and regionalfree trade agreements. In a knowledge-based economy, a strong understanding of IPRs andtheir development implications is indispensable to informed policy-making in all areas ofhuman development.

As a contribution to this debate, the dialogue aims to:

• Provide a platform for a strategic discussion between relevant stakeholders (negotiators,capital-based policy makers, academia, NGOs and private sector) on relevant trendsand thematic issues in the area of intellectual property and their implications for sustain-able development; and

• Develop elements of a ‘regional agenda’ for development-oriented intellectual propertypolicies and informal mechanisms to advance it in the coming years, through, amongothers, joint research and networking.

The dialogue will be organised and conducted as an open, informal process, bringing to-gether 20-25 stakeholders with a variety of interests and experiences. Formal presentationswill be kept to a minimum, allowing enough time for a frank and open debate. Think pieceson the four topics for discussion identified in the agenda have been commissioned and will beconducted by resource persons from the region. The presentations by resource persons willbe followed by observations and comments by the discussants.

This initiative is developed in the framework of the joint UNCTAD-ICTSD Project on IPRs andSustainable Development, which aims to improve the understanding of the development im-plications of IPRs and facilitate an informed participation of developing countries in ongoingnegotiations, through policy-oriented research, multi-stakeholder dialogues and outreach.Further information about the project is available at www.iprsonline.org.za.

Regional Dialogue on Intellectual Property Rights,Innovation and Sustainable Development in Eastern& Southern AfricaP

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TIPS

General Trends in the Field of Intellectual Property:Issues and Challenges for the Establishment of aDevelopment-Oriented Framework

Sisule F. Musungu

ICTSD / UNCTAD / TIPS Regional Dialogue “Intellectual Property Rights (IPRs), Innovation and Sustainable Development” in Eastern and Southern Africa

29 June – 1 July 2004; Cape Town, South Africa

GENERAL TRENDS IN THE FIELD OF INTELLECTUAL PROPERTY: ISSUES AND CHALLENGES FOR THE ESTABLISHMENT OF A DEVELOPMENT-ORIENTED FRAMEWORK By Sisule F. Musungu∗ I. INTRODUCTION This year marks the tenth anniversary of the coming into being of the World Trade Organization (WTO) and the adoption of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).1 It is now widely accepted that the adoption and entry into force of the TRIPS Agreement significantly changed the international intellectual property regime in both institutional and conceptual terms. By introducing the principle of minimum intellectual property standards, the TRIPS Agreement became the de-facto conceptual and strategic basis for subsequent multilateral and bilateral intellectual property standard setting. The minimum standards approach meant that any intellectual property agreement negotiated subsequent to TRIPS and covering the same subject matter among and/or involving WTO members could only create higher standards. The TRIPS Agreement also ushered in the era where higher standards for intellectual property protection could be directly obtained in exchange for concessions in core trade areas such as agriculture and textiles and where trade measures could be used as an internationally accepted avenue to enforce intellectual property standards abroad. Institutionally, the adoption of the TRIPS Agreement under the auspices of the WTO meant that the World Intellectual Property Organization (WIPO) ceased to have its ‘exclusive competence’ on intellectual property matters. The TRIPS Agreement also marked the beginning of a significant high profile debate on the costs and benefits of intellectual property for developing countries, a debate that has led to unprecedented levels of attention to be given by civil society, academic and other groups to intellectual property matters with important implications for the institutional dynamics in this area. In particular, the debate on the benefits and costs of intellectual property for developing countries has culminated into a number of important international developments including significant levels of funding for public interest issues relating to intellectual property from both philanthropic foundations and development agencies of developed countries; the adoption of the Doha Declaration on the TRIPS Agreement and Public Health in November 2001 and a number of follow-up decisions in the WTO2; the ∗ The author is currently in charge of the Intellectual Property Project at the South Centre under the Centre’s Programme on International Trade and Development. The views expressed in this paper are, however, the personal views of the author and do not necessarily reflect the views of the South Centre, its Member States or any developing country. 1 The Final Act of the Uruguay Round of trade negotiations and the Agreement establishing the WTO were signed in Marrakesh, Morocco, in April 1994. The TRIPS Agreement was adopted as part of the Final Act. For the full text of the TRIPS Agreement see WTO, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations” Cambridge University Press, Cambridge, 1999. 2 The Declaration is contained in WTO document WT/MIN(01)/DEC/2. See also the TRIPS Council Decision extending the transition period for least-developed countries (LDCs) with respect to pharmaceutical patents to 2016 (WTO document IP/C/25) and the General Council Decision waiving the obligations of LDCs under article 70.9 of the TRIPS Agreement with respect to pharmaceutical patents (WTO document WT/L/478) and the General Council Decision implementing paragraph 6 of the Declaration (WTO document WT/L/540).

ICTSD / UNCTAD / TIPS Regional Dialogue “Intellectual Property Rights (IPRs), Innovation and Sustainable Development in Eastern and Southern Africa”


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establishment of the United Kingdom (UK) Commission on intellectual Property (IPR Commission) and the publication of its influential report in September 20023; and the establishment of the World Health Organization’s (WHO) Commission on Intellectual Property, Innovation and Public Health (CIPIH) in 20044, among others. By examining these and other important developments, a number of emerging general trends in the field of intellectual property are discernible. These range from trends towards the upward harmonisation of intellectual property standards both at the international and bilateral level to increasing academic and policy work examining the role of intellectual property in development. This paper reviews some of the main trends in the field of intellectual property and the issues and challenges that arise for the establishment of a development-oriented international intellectual property framework. The paper is divided into four main parts. Following the introduction, part II discusses some of the main institutional and issue-specific trends in the field of intellectual property at the international, regional and bilateral level. Part III then examines the issues and challenges that arise, in the context of these trends, for the efforts currently underway in various forms to establish a development-oriented intellectual property framework. Part IV concludes the paper with some final remarks.

II. GENERAL TRENDS IN THE FIELD OF INTELLECTUAL PROPERTY Over the last several years, a number of important trends have been emerging in the field of intellectual property. These general trends relate both to institutional developments and to issue-specific developments. It is important to note, however, that the various developments are intrinsically linked and it is not possible to draw a fine line between institutional and issue-specific trends. For our purposes, institutional trends refers to a pattern of developments relating to activities within the various institutions and outside which influence their overall approach or level of engagement with intellectual property issues. On the other hand, issue-specific trends refer to a pattern of developments on specific issues across fora and in different processes. Finally, it is also worth noting that this framework of analysis leaves out a few important trends such as the increase of developing country intellectual property experts and the increase in the number of universities and academic institutions in the South offering courses on intellectual property and other trade subjects including competition policy and investment.

3 See IPR Commission, Integrating Intellectual Property Rights and Development Policy, IPR Commission, London, 2002. The Commission was set up in May 2001 by the then UK Secretary of State for International Development, Clare Short, to consider how intellectual property could work better for developing countries and for poor people. The Commission published its final report in September 2002 in which, among other things, it concluded that for most developing countries any beneficial trade and investment effects of intellectual property are unlikely to outweigh the costs at least in the short to the medium term. 4 For more information see http://www.who.int/intellectualproperty/en/. The CIPIH was established in early 2004 following the adoption by the World Health Assembly (WHA) at its 57 Session in 2003 of a resolution on intellectual property, innovation and public health which mandated the creation of the Commission. See WHO document WHA56/27. The CIPIH’s mandate is to collect data and proposals from the different actors involved and produce an analysis of intellectual property rights, innovation, and public health, including the question of appropriate funding and incentive mechanisms for the creation of new medicines and other products against diseases that disproportionately affect developing countries.



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II.1 Institutional and Process-related Trends There is a significant number of institutions and processes that provide the fora for intellectual property negotiations and discussions. The main institutions and processes in this context include: the WTO; the United Nations (UN) and its specialised agencies including WIPO; and regional and bilateral processes. There are various trends that are discernible in terms of institutional processes and developments that warrant attention. II.1.1 The World Trade Organization In the last couple of years activities in the WTO Council for TRIPS have been fairly subdued, save for the negotiations relating to the implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. The TRIPS Council has therefore progressively become a routine gathering. For example, while in previous years the TRIPS Council generally met for up to three days with some sessions running into the late night, the TRIPS Council meeting in March 2004 lasted for barely a day.5 This low level of activity in the Council for TRIPS is, in part, attributable to the fact that most energy and political importance in the WTO has been dedicated to the main planks of work in the Doha Work Programme, namely, agriculture, non-agricultural market access (NAMA) and Singapore issues. The result has been that most of the development-related TRIPS issues which fall under the category of implementation-related issues and concerns and special and differential treatment have received little attention. Although there have been some discussions on the relationship between the Convention on Biological Diversity (CBD) and the TRIPS Agreement and related issues under the review of article 27.3b, it is fairly clear that less effort is being dedicated to these issues as compared, for example, to the 1999 to 2001 period. It is also noteworthy, that there has been virtually no discussion relating to the review of the TRIPS Agreement under article 71.1 over the last three or so years. This is a particularly significant development since this review had previously been billed as the avenue through which developing countries could push for the substantive revision of the TRIPS Agreement so as to take into account the development dimension. There are at least two other relevant developments that underlie this low level activity trend in the WTO. The first relates to the increased intensity and political profile of negotiations at WIPO. Following the launch of the WIPO Patent Agenda and the WIPO Intergovernmental Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore (IGC) in 2001, coupled with a number of critical reviews of these processes, most notably in the IPR Commission’s report and the South Centre T.R.A.D.E Working Papers 126, there has been a growing attention devoted to WIPO including by developing country negotiators and policy makers and civil society organizations around the world. This has led to reduced political visibility of TRIPS issues. At the same time, the major proponents of higher intellectual property, most notably the United States and the European Union (EU) have strategically shifted their focus to WIPO activities. The second development relates to the increasing number of 5 For a review of the current issues under discussion in the TRIPS Council see South Centre and CIEL, “Intellectual Property and Development: Overview of Developments in Multilateral, Plurilateral and Bilateral Fora”, South Centre/CIEL IP Quarterly, First Quarter 2004, 2004. 6 Correa, C., and S. Musungu, “The WIPO Patent Agenda: The Risks for Developing Countries”, T.R.A.D.E Working Papers 12, South Centre, Geneva, 2002.



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new negotiations on free trade agreements which contain intellectual property components. Consequently, the United States, in particular, as well as other major developed countries appear to have as their main interest the maintenance of the status quo at the Council for TRIPS. II.1.2 The United Nations and its Specialised and other Agencies On the other hand, there has been a considerable increase in the number of activities in important UN agencies relating to intellectual property in the last couple of years as compared to the period leading to and after the adoption of the TRIPS Agreement. While most of the activities and processes in the UN are concentrated at WIPO, there are also significant developments in other agencies including developments at the CBD, the Food and Agriculture Organization (FAO), WHO, the United Nations Conference on Trade and Development (UNCTAD) and in the UN human rights bodies and committees. While there are notable activities at other agencies such as the United Nations Educational, Scientific and Cultural Organization (UNESCO) and through processes such as the World Summit on Information Society (WSIS), the discussion here will concentrate on the former agencies and processes.7 A. The World Intellectual Property Organization The advent of TRIPS created significant strategic and institutional challenges for WIPO.8 As already noted, WIPO had to share its hitherto ‘exclusive competence’ on intellectual property matters with the WTO. WIPO responded to the challenges occasioned by TRIPS at two basic levels. At the first level, WIPO moved to establish its relevance in the new scenario by quickly adopting a resolution in 1994 mandating the International Bureau to provide technical assistance to WIPO Members on TRIPS related issues followed by a second resolution in 1995 to enter into a cooperation agreement with the WTO for WIPO to provide technical assistance to developing country Members of the WTO irrespective of their membership in WIPO. These responses were helped by the understanding by the proponents of the TRIPS Agreement that although lacking in enforcement, the standards established under WIPO treaties and the technical expertise that existed in the organization were indispensable in ensuring the success of the TRIPS project. At the second level, WIPO clearly realising that the circumstances leading to the adoption of the TRIPS Agreement in the WTO meant that for it to remain the main forum on intellectual property matters it had to show that it can deliver new standards faster and more efficiently, has embarked on a number of initiatives ranging from the patent agenda to the digital agenda which underlie its post TRIPS agenda. Consequently, WIPO has had a busy schedule in the past couple of

7 For example, in August 2003, UNESCO adopted the “International Convention for the Safeguarding of Intangible Cultural Heritage”, a legal instrument which aims to safeguard oral traditions and expressions. At WSIS there have been discussions relating to how intellectual property affects access to information. 8 For further discussions on the challenges that TRIPS brought about for WIPO and related discussions see Correa and Musungu, supra, note 6 and Musungu, S., and G. Dutfield, “Multilateral Agreements and a TRIPS-plus World: The World Intellectual Property Organization (WIPO)”, TRIPS Issues Papers 3, QUNO-Geneva and QIAP-Ottawa, 2003.



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years. Intense negotiations and/or discussions have characterised the various committees and assemblies of the organization during this period. Under the patent agenda, negotiations on a draft Substantive Patent Law Treaty (SPLT) in the Standing Committee on the Law of Patents (SCP) and the reform of the Patent Cooperation Treaty (PCT) in the Working Group on the Reform of the PCT, have evidenced trends towards upward patent law harmonisation although these processes have also evidenced a trend towards renewed and growing interest in WIPO discussions from developing countries and civil society groups. This interest has seen; in particular, the strong participation in the SPLT negotiations by developing countries which has led to calls by the trilateral group of patents offices (The United States Patents and Trademarks Office (USPTO), the European Patent Office (EPO) and the Japanese Patent Office) and industry associations for the scaling down of the ambitions in this process. Another trend that is discernible in these negotiations and other discussions in WIPO is the activism of the WIPO Secretariat. There is, at least, anecdotal evidence that the Secretariat does not always act as the servant of its membership as a whole but as a free agent with its own agenda. That agenda seems more closely linked to the interests and demands of some member states than to others, and more to pro-strong intellectual property protection than to the preservation of policy flexibilities for developing countries. The other subject on which there have been high profile discussions is the relationship between intellectual property and genetic resources, traditional knowledge and folklore. Although no significant outcomes have resulted in the IGC’s work, its existence has had a high political profile both within governments and civil society organisations.9 The WIPO General Assembly in September/October 2003 extended and modified the IGC’s mandate for another two years. Finally, there have also been important processes and discussions on copyright and related issues including encouraging WIPO member states to sign up to the 1996 WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) in addition to on-going negotiations concerning a possible convention to protect the rights of broadcasters outside the Rome Convention framework. At the same time, WIPO’s technical and legal assistance activities have come in for serious criticism for a variety of reasons in the recent past. The organisation’s activities under the Cooperation for Development Programme which include courses, seminars and legislative services,10 have been criticised, in particular, because they are geared to ‘facilitate the implementation’ of TRIPS and other Agreements meaning that the emphasis of the programmes is on performance of the obligations in the Agreements by the developing countries and least-developed countries. This technical assistance is unlikely to help developing countries tailor their intellectual property laws to meet their development objectives.

9 For a review of the work of the IGC as well as issues that arise with respect to its renewed mandate, see Lettington, R., and K. Nnadozie, “ A Review of the Intergovernmental Committee on Genetic Resources, Traditional Knowledge and Folklore at WIPO”, T.R.A.D.E Occasional Papers 12, South Centre, Geneva, 2003. 10 WIPO Annual Report for 2002. Available at http://www.wipo.int.



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Two main concerns underlie the various criticisms levelled at WIPO’s technical assistance.11 The first is that the International Bureau’s work especially with relation to legal technical assistance has over-emphasised the benefits of intellectual property while giving very little attention to its costs12. Other critics have pointed out that the International Bureau is partisan in its approach to the debate about intellectual property and development and that it is not giving developing countries the best advice13. The second concern is that because of the nature of activities under the technical assistance programmes; legal technical assistance, automation of offices and provision of software, training etc., the International Bureau may exercise undue influence on developing countries which may affect the stances of these countries in WIPO negotiations. Despite these criticisms, however, there has been no discernible reorientation of design and delivery of WIPO’s technical assistance. Overall therefore, there are a number of general trends that emerge with respect to WIPO as an institution. First, there has been, in general, an overall stepping up of standard setting activities at WIPO with respect to various categories of intellectual property ranging from patents to copyright and related rights. Second, there is a drive from within WIPO backed by the major intellectual property offices towards the upward harmonisation of patent law standards as well as the creation of new standards in other areas such as in the area of webcasting. Third, the processes linked to genetic resources, traditional knowledge and folklore continue to be characterised by a high profile political dialogue with no significant concrete outcomes so far. Fourth, despite the criticisms that have been levelled against WIPO’s technical assistance, the trends in its technical assistance programme continue to be biased towards stronger intellectual property protection as opposed to preservation of policy flexibilities for developing countries. Finally, there is increasing critical participation by developing countries and civil society groups in WIPO activities which is putting continuing pressure on WIPO to integrate the development dimension in its work. B. The Convention on Biological Diversity The CBD through various COPs including COP-7 which took place in Malaysia in February 2004 has been discussing various issues relating to intellectual property.14 It is in this context that the Bonn Guidelines on Access and Benefit Sharing were developed and on the basis of which the Working Group (WG) on Access to Genetic Resources and Benefit-sharing (ABS) has been mandated to elaborate and negotiate an international regime on ABS. The WG on ABS is expected to carry out its work in collaboration with the WG on Article 8(j), which deals with indigenous communities’ issues. In this context, there has been a clear trend at the CBD to elaborate and

11 For further discussion regarding WIPO’s technical assistance see the IPR Commission, supra, note 3 and Musungu and Dutfield, supra, note 7. 12 See, e.g., IPR Commission, supra, note 3. 13 See Medicines Sans Frontieres (MSF), “Doha Derailed: Technical ‘Assistance’ A Case of Malpractice?”, MSF, 2003. Available at http://www.msf.org. 14 For an overview of the most recent intellectual property developments at the CBD see South Centre and CIEL, supra, note 5.



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consolidate an ABS regime as well as to develop elements for sui generis systems for the protection of traditional knowledge and to explore the conditions under which the use of existing intellectual property rights can contribute to reaching the objectives of the CBD. Another important trend at the CBD, which has become particularly controversial, relates to a situation where the CBD Secretariat has been moving towards ‘sub-contracting’ issues relating to the relationship between intellectual property and genetic resources and associated traditional knowledge to WIPO. Although the latest decision from COP-7 ostensibly invites several international organisations to cooperate with the WG in elaborating the international regime on ABS, the underlying idea appears to have been to progressively increase the substantive role of WIPO in the debate about intellectual property and genetic resources in the CBD context. Inspite of the significant number of developing countries which have expressed their reservations about this approach both at the CBD and at WIPO, the trend appears to be the continued push for the delegation of matters relating to intellectual property and genetic resources and associated traditional knowledge to WIPO. C. The Food and Agriculture Organization The FAO International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA)15 is set to enter into force on 29 June 2004, 90 days after the ratifications and or accessions by 40 countries.16 This means that the ITPGRFA has come into force in a fairly short time (just over two and a half years following its adoption) considering the relatively high number of ratifications and or accessions that were required for its entry into force.17 Once the treaty comes into force, a governing body, composed of all Contracting Parties, will be established with the responsibility for the full implementation of the Treaty. The Treaty establishes a framework for the conservation and sustainable use of plant genetic resources for food and agriculture and, in particular, provides for a multilateral system for facilitated access and benefit sharing for selected plant genetic resources. It is likely that among of the most contentious issues that will come up in the initial meetings of the governing body and probably on an on-going basis thereafter, will relate to intellectual property issues including conditions relating to access to the crops in the multilateral system and the terms of the material transfer agreements (MTA). While it is too early to discern any particular institutional trends with respect to the ITPGRFA and, in particular, on how the issues relating to intellectual property will develop, it is clear that important developments are likely occur at FAO with various implications for the profile of intellectual property issues at the organization. The speed with which the Treaty has come into force demonstrates the large interest by countries in the issues covered and would suggest a likely trend towards increasing discussions on intellectual property issues at FAO, considering the importance attached to facilitated access and the MTA. 15 The FAO Conference, at its Thirty-first Session (November 2001) adopted the Treaty through Resolution 3/2001. For further information on the treaty as well as the status of ratification, approval, acceptance and accession see http://www.fao.org/Legal/TREATIES/033s-e.htm. 16 See article 28 of the Treaty. 17 Compare this with the Patent Law Treaty (PLT) at WIPO which required only ten ratifications and or accessions to come into force but which is not yet in force and has only eight ratifications/accessions so far 4 years after its adoption. The PLT was adopted on 1 June 2000.



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D. The World Health Organization The WHO has been working on issues of TRIPS and public health from quite early on and actively participated in the debates leading to the Doha Declaration on TRIPS and public health as well as the follow-up processes and negotiations. The organisation has also been involved in a significant amount of work at the regional and country level including the provision of technical assistance on matters on intellectual property and public health. However, most of these work was concentrated in the Department of Essential Drugs and Medicines Policy (EDM) and it was never clear that this represented a fully thought through organisation-wide policy on these matters. This situation has been changing in the last couple of years towards discussions and processes at the highest level in WHO on intellectual property and public health matters.18 There have been significant discussions on TRIPS and public health issues in the last three or so World Health Assemblies (WHA) which culminated in 2003 with the WHA Resolution on Intellectual Property, Innovation and Public Health which mandated the formation of the CIPIH. There is also important work that is being undertaken under the Human Genetics Programme on the impact of gene patents on access to genetic technologies in developing countries as a follow-up to the Genomic and World Health report which identified intellectual property as a factor affecting the accessibility of the results of genomic research.19 While the work of the CIPIH will complement WHO’s work on intellectual property and access to essential medicines in the EDM and the work on gene patents in the Human Genetics Programme as well as other related work in other WHO departments, the establishment of the CIPIH confirms a trend within WHO towards some form of organisation-wide approach on intellectual property and public health as opposed to the previous department based and ad hoc approach. Further, the trend which has emerged over the last few years where the WHA has addressed intellectual property issues in various contexts of WHO’s work is likely to continue. E. The United Nations Conference on Trade and Development UNCTAD has, over the years, played a key role in international intellectual property matters and has, in particular, conducted fundamental work relating to intellectual property and development including the relationship between intellectual property and technology transfer as well as competition policy. It is also noteworthy that UNCTAD played an important role during the negotiations between the UN and WIPO for WIPO to

18 At the 57th WHA which took place in May 2004 apart from a resolution regarding the report on genomics and world health which among other things authorises the Director-General to help Member States frame appropriate national policies to benefit from advances in genomics which would include intellectual property (See WHA57.13), adopted a resolution on HIV/AIDS (See WHA57.14) which specifically recalled the Doha Declaration on TRIPS and public health and urged Members “to consider, whenever necessary, adapting national legislation in order to use to the full the flexibilities contained in the Agreement on Trade-Related Aspects of Intellectual Property Rights” (para. 2(4) and “to encourage that bilateral agreements take into account the flexibilities contained in the WTO TRIPS Agreement…” (para. 2(6). 19 The Advisory Committee on Health Research, WHO, Genomics and World Health, WHO, Geneva, 2002.



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become a specialized agency of the UN. In the period leading to the adoption of the TRIPS Agreement and in many respects thereafter, UNCTAD’s work on intellectual property has been somewhat limited. This trend has been attributed to the fact that there was a deliberate effort by key players to sideline UNCTAD on these issues because UNCTAD had served as an important forum for developing countries to develop strategies and analytical work which demonstrated the serious negative consequences for technology development and related objectives that arose from the existing intellectual property regimes.20 That said, however, although there is no single major programme in UNCTAD on intellectual property, UNCTAD has continued to be involved in intellectual property work in the context of other policy areas and/or in collaboration with other organisations. In this context, there is significant work focusing on traditional knowledge as well as the continuing work on transfer of technology and the work on E-Commerce in relation to open source software and related issues. On the collaboration side, UNCTAD has over the last few years conducted a quite successful joint capacity building project on intellectual property rights and sustainable development with the International Centre for Trade and Sustainable Development (ICTSD). This project has been responsible for a large number of research works on intellectual property and development as well as meetings and conferences.21 Finally, it has emerged in the context of the preparations for UNCTAD XI, that the trend where developing countries make efforts to increase the work of UNCTAD on intellectual property and to have UNCTAD undertake analysis on strengthening the development dimension in international intellectual property rule-making, including effective transfer of technology to developing countries; protection of traditional knowledge, genetic resources, and folklore will continue. On the other hand, it is also clear that the opposition by the United States and other developed countries to the inclusion of intellectual property in the mandate of UNCTAD will continue. F. The United Nations Human Rights Bodies and Committees

Over the last four or so years, there has been a clearly discernible trend for the human rights community and various UN bodies especially the various human rights bodies and committees to examine and explore the implications of intellectual property for the protection and promotion of human rights. For example, the Sub-Commission on Human Rights adopted resolutions on intellectual property and human rights at both its session in 2000 and in 200122 in addition to a report by the High Commissioner for Human Rights in 2001 on the ‘Impact of the Agreement on Trade-Related Aspects of Intellectual Property Rights on the Protection of Human Rights’23. The reports of the Special Rapporteurs on globalisation and human rights also addressed the issue of intellectual

20 See, e.g. Braithwaite, J., and P. Drahos, Global Business Regulation, Cambridge University Press, Cambridge, 2000, p. 68. 21 Among the publications that have been produced under this project are the “The Resource Book on TRIPS and Development” and the policy discussion paper on “Intellectual Property Rights: Implications for Development”. This is in addition a significant number of issue specific research papers. For full information about the outputs of this project see http://www. iprsonline.org/unctadictsd/projectoutputs.htm. 22 See Resolutions 2000/7 and 2001/21.Both available at http://www.unhchr.ch. 23 See document E/CN.4/Sub.2/2001/13. Available at http://www.unhchr.ch.



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property and human rights.24 More recently, the Committee on Economic, Social and Cultural Rights (CESCR) has been working on a General Comment on article 15 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) which deals with the enjoyment of the benefits of scientific progress and its applications; and the concept of benefiting from the protection of the moral and material interests resulting from scientific, literary or artistic productions.

More interesting, the Human Rights Committee at its 80th Session this year in its concluding observations on the report submitted by Uganda with respect to the International Covenant on Civil and Political Rights (ICCPR), urged Uganda to adopt comprehensive measures to allow a greater number of persons suffering from HIV/AIDS to obtain adequate treatment. Although not specifically mentioned, it is considered that this meant the adoption, among others, of appropriate intellectual property rules and the use of TRIPS flexibilities. Finally, there has also been increasing activities by civil society groups in this area and organisations such as 3D and the Ethical Globalisation initiative have been developing significant programmes in this area.

II.1.3 Bilateral and Regional Trade Agreements The most active fora with respect of intellectual property standard setting today is the bilateral and regional fora in the context of free trade agreements and there is a clear trend that this will continue to be the favourite fora for, at least the United States, in the short to the medium term. In just a couple of years the United States has negotiated and or is negotiating free trade agreements with intellectual property components with all Latin and Central American and Caribbean countries individually, in groups or collectively and with Australia, Morocco, the Southern Africa Customs Union (SACU) countries, Singapore and Thailand. The EU has also been negotiating a free trade area with MERCOSUR countries where intellectual property has featured. There are also signs that Japan is getting more aggressive with free trade agreements, at least in Asia, and it is likely that there will be attempts to include intellectual property issues in these negotiations. These free trade agreements replicate the TRIPS approach where higher standards for intellectual property protection are directly obtained in exchange for concessions in core trade areas such as agriculture and other market access preferences and where trade measures are used as an agreed avenue to enforce intellectual property standards abroad. Another important trend in the bilateral approach to intellectual property negotiations has been the requirement that the parties to the free trade agreement ratify or accede to a host of, mainly, WIPO treaties. For example, article 15 of the United States and Morocco free trade agreement requires the parties to ratify or accede to eight WIPO treaties in addition to making best efforts to ratify or accede to two others. This trend, although having its origin in the approach taken in the negotiations of the TRIPS Agreement where the TRIPS Agreement incorporated, by reference, a number of substantive provisions of WIPO treaties, is more expansive as it requires not just adherence to selected provisions of particular treaties but adherence to whole treaties.

24 See e.g., Oloka-Onyango, J., and D. Udagama “Globalisation and its Impact on the Full Enjoyment of Human Rights” document E/CN.4/Sub.2/2000/13.



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II.2 Issue-Specific Trends Apart from the institutional trends described above, there are a number of important issue-specific trends that are emerging in the field of intellectual property. These include trends relating to intellectual property and public health, intellectual property and genetic resources and traditional knowledge, patent law harmonisation, copyright and related rights, intellectual property and transfer of technology and dispute settlement and enforcement of intellectual property, among others. II.2.1 Intellectual Property and Public Health The relationship between intellectual property and access to essential medicines and public health more generally, has dominated the discussions on intellectual property and development for the last four years or more. The result has been a number of high profile events and processes including the adoption of the Doha Declaration on TRIPS and public health, the WHA Resolution on Intellectual Property, Innovation and Public Health and the adoption of the 30 August 2003 Decision by the WTO General Council implementing paragraph 6 of the Doha Declaration on TRIPS and public health. There are, however, a number of new emerging trends regarding this issue. First, while there continue to be discussions on this subject at the WTO in the context of paragraph 11 of 30 August Decision, the energy as well as the massive international coalition between developing countries and civil society groups that characterised the earlier Doha processes has been dissipating progressively across the board.25 This trend can be explained by a variety of factors which include, among others, the deadlock in agricultural and other negotiations in the Doha Work Programme; the high political costs that have been associated with the efforts on TRIPS and public health for developing countries; the increasing view that the United States is unlikely to relent on its position on paragraph 6; and the shift in focus by major civil society groups such as MSF and Oxfam and policy analysts to bilateral and regional free trade agreements and national level processes. The second trend is that while the debate continues at the bilateral and regional level, the focus of the debate has shifted from the basic TRIPS flexibilities such as compulsory licensing and parallel importation to less understood areas, in particular, test data protection and the linkage of patent status to regulatory approval for generic medicines.26 The free trade agreement between the United States and Australia has even gone further and made Australia’s medicines benefits scheme subject to intellectual property considerations.27 The third major trend on the issue of intellectual property and public health has been the considerable shift of emphasise particularly by civil society groups and development friendly intellectual property technical assistance providers from international negotiations to national and regional implementation, as well as a general progressive trend towards 25 Paragraph 11 provides that the TRIPS Council shall initiate work by the end of 2003 on the preparation of the amendment with a view to its adoption within six months. 26 For further discussion see e.g., South Centre and CIEL, supra, note 5 and Abbott, F., “The Doha Declaration on the TRIPS Agreement and Public Health and the Contradictory Trend in Bilateral and Regional Free Trade Agreements”, Occasional Paper 14, QUNO, Geneva, 2004. Available at http://www.geneva.quno.info/. 27 For a discussion of the effects of the free trade agreement on Australia’s medicines policy see Drahos P., et al, “The FTA and the PBS”, mimeo, 2004.



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evidence based approach to the debate on intellectual property and public health. The evidence based approach is confirmed by such processes as the IPR Commission and the CIPIH as well as important national developments such as the Nuffield Council on Bioethics’ report28 and the report of the United States Federal Trade Commission (FTC) on the promotion of innovation29. II.2.2 Intellectual Property and Genetic Resources and Traditional Knowledge While the question of the relationship between intellectual property and genetic resources and associated traditional knowledge has been internationally discussed since the adoption of the CBD in the early 90s, the debate on this issue received a significant boost to its political profile starting with the review of article 27.3b of the TRIPS Agreement and the events leading to and at the WTO Seattle Ministerial Conference in 1999. Around the same time, the issue gained prominence in WIPO in the context of the PLT diplomatic conference which resulted into the eventual creation of the IGC. Since then, the issue has been discussed in many fora and there are a number of important processes underway to deal with this question ranging from the WTO discussion on TRIPS and CBD and issues around disclosure, prior informed consent and benefit sharing to the IGC and to the CBD ABS discussions. In these processes and discussions a number of trends have emerged. First, while the WTO debate has continued, the focus on this issue has narrowed to more specific discussions for a framework for disclosure, prior informed consent and benefit sharing as opposed to the earlier debate where these issues were discussed as part of a larger cluster of issues under the review of article 27.3b of TRIPS and the review under article 71.1 of TRIPS. Since the Doha Ministerial conference, the CBD TRIPS issue has acquired its own separate momentum and dynamics and has moved progressively forward. The second trend relates to the position of various players on this issue. In the WTO as in WIPO, the United States has continued with its insistence that these issues are not patent law issues and should be dealt with outside the intellectual property regime. On the other hand the EU, while agreeing that there are issues to discuss has pushed the line that these issues can only be discussed in terms of standard setting after the IGC has completed its work. Some other countries such as Switzerland while acknowledging that this is an issue to be dealt with in the patent system and that the IGC is not the only fora to discuss the issue, have proposed voluntary schemes as opposed to mandatory disclosure, for example.30 Most developing countries on the other hand have continued to argue that this is an issue to be dealt with in patent law standard setting; that the IGC is not the exclusive fora for these issues; and that a mandatory international regime is the solution to the problem.

28 See, Nuffield Council on Bioethics, “The Ethics of Patenting DNA, A Discussion Paper”, Nuffield Council on Bioethics, London, 2002. 29 See FTC, “To Promote Innovation: The Proper Balance of Competition and Patent Law Policy”, FTC, Washington D.C, 2003. Note, however, that this report is not dedicated on intellectual property and public issues but is a more general commentary on innovation. 30 Switzerland has proposed for example the amendment of PCT Regulations to allow countries to require disclosure of origin of genetic materials and associated traditional knowledge used in inventions in patent applications. See WIPO documents PCT/R/WG/4/13, PCT/R/WG//11 and PCT/R/WG/6/11.



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The third trend, which flows from the second trend, is that there continues to be very little tangible results on this issue. The happenings at the CBD, the lack of any tangible results from the IGC process and its designation as ‘the dumping ground’ by some players such as the United States and the EU as well as the scaling down of the developing countries’ agenda in the WTO and the difficulties in achieving results even on this smaller agenda illustrate this trend. Finally, is that the trend where the issue has been discussed in different fora continues with various implications including the pursuance of uncoordinated agendas by many developing countries. II.2.3 Patent Law Harmonisation The process of patent law harmonisation has mainly taken place at WIPO in the context of its patent agenda and related activities. While the negotiations on the draft SPLT continue at the SCP and the so-called first phase of the PCT reform has virtually been completed31, fortunes are changing for these processes and there is a clear trend in WIPO as well as outside WIPO towards scaling down the ambitions in these processes, at least, in the short term. This trend is a fairly direct result of another trend on this issue. While the earlier sessions of the SCP and the PCT Reform Working Group evidenced an asymmetrical participation of developing countries in relation to developed countries, the past few meetings have been characterised by increasing developing country involvement and influence. That said, however, the trend where the WIPO Secretariat and the major patent offices and industry and patent lawyers association have proceeded with these processes as if developing countries do not exist in the organization continues. The attitude that the issues under discussion in the patent harmonisation processes relate to matters that need to be sorted out between the United States and the EU and occasionally Japan, Australia and Canada continues unabated. Any significant developing country participation on this issue continues to be received with irritation and labelled ‘controversial’, ‘politically sensitive’ or ‘misplaced’. For example, at the tenth session of the SCP held in May 2004, the USPTO, EPO and Japan actively supported by the WIPO Secretariat and industry and lawyers’ associations sought to introduce a new framework (a reduced package of issues) for the SPLT negotiations on the basis that, among others:

o the debate in the SCP about the benefits of harmonisation, the balance between right-holders and the public interests and the relationship between the patent system and other policy and regulatory issues such as public health, “suggests that the original objective of the SCP to achieve broad and deep harmonisation of patent laws might be too ambitious and not easily achieved”32; and,

o while a good deal of progress has been achieved thus far, recent discussions in

the SCP suggest that the current model for discussion is not as productive as it could be and should be because of the sheer volume and complexity of the

31 This phase was aimed at making changes to the PCT Regulations with regard to the international search and examination procedures under system. The second phase is supposed to entail a more fundamental overhaul involving the amendment and changes in the treaty itself. 32 See the Memorandum of the International Bureau titled “Information on Certain Recent Developments in Relation to the Draft Substantive Patent Law Treaty (SPLT)”, WIPO Document SCP/10/1, 17 March 2004, para. 2.



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issues and because several provisions of the draft treaty have been extremely controversial and of high political sensitivity and much of the debate has focused on these issues which has hampered the achievement of the desired results.33

Finally, although the trends in WIPO on this issue reflect a slowing pace there is also a trend for upward harmonisation through bilateral and regional free trade arrangements. This trend continues apace and there are no signs of near term changes in the approach. In this context, it is important to note that, except in the negotiations on a free trade area in the Americas (FTAA), there has been no substantial developing country resistance at the bilateral/regional level to the pressure for upward harmonisation including in such politically high profile areas as public health. In addition, other development concerns such as the protection of genetic resources and traditional knowledge and transfer of technology which have prominently featured on the international scene have not featured significantly in the patent negotiations at this level except for a few notable exceptions such as the FTAA and the EU-MERCOSUR negotiations. II.2.4 Copyright and Related Rights Although the WIPO digital Agenda was initiated in 1999 with the aim of, inter alia, modifying the international legislative framework by adapting broadcasters' rights to the digital era and extending the principles of the WIPO Performers and Phonograms Treaty to audiovisual performances, there has been a recent trend both in WIPO and outside towards increased focus on copyright and related issues. For example, the Standing Committee on Copyright and Related Rights (SCCR) is currently discussing the possibility of a new treaty to deal with the rights of broadcasting organizations outside of the Rome Convention framework and there is a growing push for the holding of a diplomatic conference on this issue in the near future. The proposed treaty would create a system of ownership for material transmitted over wireless means such as television, radio and satellite, as well as wired communications over cable networks, and also over Internet computer networks. The push for this treaty has been accompanied by the renewal of discussions about updating the rights of performers in their audiovisual performances, an issue left unresolved by the 2001 diplomatic conference on the protection of audiovisual performances. On the other hand, mostly outside WIPO, there has been a growing movement on the issue of open source software and related concepts. Open access initiatives which are considered appropriate in fields where decentralised creation is efficient such as in academic research and software development, offers an alternative to the exclusive intellectual property rights model. Although WIPO has so far refused to discuss this issue, open source software has gained increasingly significant currency in copyright discussions outside WIPO including at the WSIS and in public procurement discussions in many governments including the United States and EU governments. In WIPO, though the resistance continues, civil society groups such as the Civil Society Coalition (CSC) continue to raise issues related to open source software and copyright from the observer benches.

33 See the Proposal by the United States of America, Japan and the EPO Regarding the Substantive Patent Law Treaty (SPLT); WIPO document SCP/10/9, 22 April 2004.



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II.2.5 Intellectual Property and Transfer of Technology In general, transfer of technology discussions in the context of the intellectual property and development debate continue to be just that -discussions with no concrete change in the situation despite the adoption on February 2003 Decision on a new framework for the monitoring and full implementation of article 66.2 of the TRIPS Agreement.34 Although there have been some improvements in the reporting under this new system, the trend continues to be the recital of overseas development aid as the incentives for the transfer of technology. At the same time, the WTO Working Group on Trade and Transfer of Technology (WGTTT) continues to totter on the brink of disappearing into oblivion. II.2.6 Dispute Settlement and Enforcement of Intellectual Property Rights It has already been noted that it is now generally accepted that trade measures are legitimate means for enforcing intellectual property abroad. However, there has yet been no agreement with respect to the application of non-violation and situation complaints to intellectual property in the WTO. The discussions in the WTO have been going on for over fours years with very little change in the countries positions nor any significant movement towards the resolution of this issue. Another trend on this issue in the WTO is a movement towards putting the issue on the back burner and maintaining the status quo. No country has presented any new proposal since September 2002 and no specific recommendations were forwarded to the Cancun Ministerial Conference on the subject. Further, although the issue was not placed on the TRIPS Council agenda in the December 2003 and in the March 2004 meetings, no country appeared to see any problem with that. There is however, an opposite trend on this issue in the bilateral and regional fora. Bilateral agreements such as the recently concluded US-Chile, Central American Free Trade Agreement (CAFTA), and US-Australia, for instance, explicitly place intellectual property within the scope of non-violation complaints. The FTAA Discussions may also result in the applicability of non-violation complaints in the field intellectual property.35 The bilateral agreements not only apply non-violation complaints to their intellectual property provisions, but the application is, in many cases, agreed to without any debate.36 One of the reasons for this may be that non-violation complaints are not dealt with in the intellectual property chapters of these agreements but, rather, in the dispute settlement chapters.37 On enforcement although WIPO has so far failed to get a mandate from the members to engage in norm setting in this area, the work of its Advisory Committee on Enforcement (ACE) continues to be geared towards establishing some form of soft law.38 The technical assistance in this area also continues to be fairly biased. On the bilateral and regional front there are more aggressive enforcement procedures that are emerging from the free trade agreements. 34 See WTO document IP/C/28. 35 For further discussions about this trend and the challenges in the bilateral and regional trade agreements see South Centre and CIEL, supra, note 5. 36 South Centre and CIEL, supra, note 5, p.3. 37 See e.g., Annex 22.2 of the US-Chile FTA, Annex 20.2 of CAFTA. 38 For more information about the ACE and its discussions, see http://www.wipo.int/documents/en/meetings/2004/ace/index_2.htm.



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III. TRENDS IN INTELLECTUAL PROPERTY: ISSUES AND CHALLENGES FOR THE ESTABLISHMENT OF A DEVELOPMENT ORIENTED FRAMEWORK In the context of the emerging trends in the field of intellectual property, developing countries and other proponents of a development-oriented framework face complex challenges in not only coordinating their strategies and positions across fora but also in addressing the various substantive issues that are under negotiation and/or discussion. Throughout the ten years of the existence of the TRIPS Agreement, the extent and effectiveness of developing countries’ participation in various fora and processes has varied.39 What is true though is that to a large extent most developing countries have argued consistently during this period that international rules on intellectual property can only promote development if they facilitate the transfer and diffusion of technology and contain enough flexibility to allow these countries take into account their development objectives in designing their intellectual property regimes. However, as is clear from both the institutional and issue-specific trends discussed above, there is a long way to go to achieve this objective and in fact some of the trends show that the situation is getting worse. The question that arises therefore is to how the advocates of the development-oriented intellectual property framework and developing countries, in particular, have been affected and/or are responding to the various general trends in the field of intellectual property. While there are some clear responses such as the shift by some countries and civil society groups to bilateral and regional level and to WIPO work, it is quite difficult to clearly map at the current time the effects and responses to the broad trends identified in this paper. However, a number of general conclusions can be drawn about what these trends mean for these countries and other groups. First, trends towards decreased activities at the WTO and an increase of activities at WIPO, in other UN agencies and at the bilateral level means that developing countries will have to significantly improve their policy coordination on intellectual property matters both in terms of national policy formulation and participation in negotiations in various fora. While it is true that some developing countries have followed the United Sates on its forum shifting journey and are equally engaged in the various fora many others are simply not engaged even at WIPO. Except for a few notable examples such as Egypt, for example, Africa countries including Kenya, Zimbabwe and South Africa which have been very active in the TRIPS Council have not demonstrated any serious engagement in WIPO and in other fora such as at WHO and at the CBD. This means that one can not necessarily argue that the subdued activities in WTO clearly reflect a thought through shift of focus by developing countries to other international processes and to bilateral negotiations. Second, these trends also suggest that the success stories such as those in the WTO on intellectual property issues may not be easily replicated in the new scenario. In addition,

39 For a detailed analysis of developing countries participation in WIPO see Musungu and Dutfield, supra, note 7.



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the changing nature of the alliances that had developed in the WTO between developing countries and civil society organizations and the change in the technical issues that need to be addressed means that assumptions can not be made about the readiness and ability of developing countries to respond effectively to the emerging trends. For example, the issues that will arise at the FAO, in the context of the CIPIH work and with respect in bilaterals such as test data protection do not neatly fall into the well known TRIPS flexibilities with the result that the expertise and experience that has been gained through the TRIPS Council and WTO processes may not be sufficient or even available in these other processes. In this regard, the continued need for capacity building should be appreciated. More strategic thinking will also have to go into managing and nurturing the developing countries, civil society and academics alliance and into the need for and suitability of new alliances. Third, the shift of these issues to the national and regional context means that the role of national and regional institutions including regional economic organizations, regional patent organizations and national courts and institutions such as the competition authorities need to be more seriously examined. Finally, the trend towards bilaterals and the shift of activities to other fora also means that the solidarity of developing countries on intellectual property issues will progressively be eroded But the above can only be preliminary conclusions. Many questions remain regarding the effect of these various trends in the field of intellectual property on the efforts to establish a development-oriented intellectual framework and regarding the responses of the proponents of this model. More research is needed to fully map the effects of the general trends in the field of intellectual property and the appropriate responses to them. Some of the questions that need to be more comprehensively answered include the following:

o To what extent can developing countries and other advocates of the development-oriented intellectual property framework dedicate significant resources and attention to TRIPS issues in the context of the on-going difficulties in the main areas of the Doha Work Programme, namely, agriculture and non-agricultural market access issues?

o Considering that the major intellectual property players have shifted their focus to

WIPO and bilateral activities, in part, because of the effectiveness of developing countries at the WTO, should developing countries and their partners simply shift focus to WIPO and bilaterals or should they seek to develop a strategy to try and make gains in the WTO? In other words, should developing countries also adopt a strategy of ‘maintaining the status quo’ in the TRIPS Council?

o How should developing countries and civil society groups effectively engage in

the various WIPO negotiations? For example, (a) in the patent harmonisation process should they simply seek flexibilities based on the TRIPS flexibilities? (b) Considering the lack of progress on genetic resources and traditional knowledge issues in both WIPO and WTO and the ‘sub-contracting approach by the CBD’ what should be the strategy on these issues both in institutional and substantive terms? (c) what needs to be done to push WIPO towards providing development-



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friendly technical assistance and increasing the critical participation of developing countries and civil society groups in its processes?

o How should developing countries approach the new processes and

developments, in particular, the entry into force of the ITPGRFA, the work of the CIPIH, open access initiatives, enforcement and human rights?

o There has been a significant increase in the number of works and materials on

intellectual property and development as well as the number of experts on these issues, how should this be harnessed and channelled?

o What needs to be done with respect to bilateral trade agreements and their

TRIPS-plus approach considering that there are no signs that the speed with which these are being entered into is not reducing and the fact that it is not necessarily true that the United States is the main demandeur for all these bilaterals in the first place?

o With respect to such an issue as TRIPS and public health is there still value for

expending political and other efforts at the WTO or should the processes move to the national and regional level? In this regard, what needs to be done to maintain or at least manage the changing relationship between developing countries and civil society groups on TRIPS and public health as well as on other intellectual property and development issues?

o Is there anything that can realistically be done on intellectual property and

transfer of technology at the international level? IV. FINAL REMARKS There are a variety of general trends that are discernible in the field of intellectual property which can be broadly categorised into institutional trends and issue-specific trends. These trends have important implications for the efforts to establish a development-oriented intellectual property framework both in the short and the long term. Although it is possible to identify some of the effects and responses to these trends by developing countries and other advocates of a development-oriented intellectual property regime, it is difficult and beyond the scope of this paper to clearly map the various responses and effects although some general conclusions can be drawn. What is clear, however, is that these trends raise a number of important issues and significant challenges for developing countries and other proponents on a development-friendly intellectual property regime. These issues and challenges need to be examined and discussed with a view to developing a clear view of the effects of the various trends and the appropriate responses to these trends.


ap

ers

TIPS

Advancing Public Health by Other Means:Using Competition Policy to Mitigate the Impactof Patent Protection

Jonathan Michael Berger

ADVANCING PUBLIC HEALTH BY OTHER MEANS: USING COMPETITION POLICY TO MITIGATE THE

IMPACT OF PATENT PROTECTION

ICTSD/UNCTAD Regional Dialogue on IPRs, Innovation and Sustainable Development

29 June – 1 July 2004 Cape Town

Jonathan Michael Berger Head: Law and Treatment Access Unit

AIDS Law Project

Centre for Applied Legal Studies University of the Witwatersrand

+27(0)11.717-8627 (direct)

+27(0)11.403-2341 (fax) +27(0)83.419-5779 (mobile)

[email protected]

www.alp.org.za

Jonathan Michael Berger – Head: Law and Treatment Access Unit, AIDS Law Project Centre for Applied Legal Studies, University of the Witwatersrand

ICTSD/UNCTAD Regional Dialogue on IPRs, Innovation and Sustainable Development, 29 June – 1 July 2004, Cape Town

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Introduction Recognising “the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics”, members of the World Trade Organization (WTO) agreed on 14 November 2001 that the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) “does not and should not prevent members from taking measures to protect public health”, and that it “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.”1 The Declaration on the TRIPS agreement and public health (the Doha Declaration) has since been the subject of much public discussion and debate, with significant attention being placed on the so-called public health “safeguards” or “flexibilities” within TRIPS that permit the taking of “measures to protect public health”. Recently, the WTO secretariat has embarked on a series of regional capacity-building workshops, with a particular focus on the flexibilities in TRIPS itself and the decision adopted by the General Council on 30 August 2003 on the Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health.2 Yet despite the considerable flexibility accorded to WTO members in dealing with anti-competitive practices, coupled with the clear recognition in TRIPS that such conduct is considered as particularly egregious, surprisingly little public attention has been accorded to the role of competition policy in advancing public health by mitigating the negative effects of intellectual property (IP) protection. The purpose of this paper is therefore to consider the role of competition policy in advancing public health in Southern Africa, with a particular focus on increasing access to essential medicines. This will be done within the broader framework provided by TRIPS, focusing on a number of key areas: the relevance of developed country experience; regulatory mechanisms to promote access; and the limitations of using competition policy within a developing world context. In addition, the South African experience in the field of IP, competition law and public health will be addressed insofar as it considers the key areas of focus. It is also important to understand what this paper is not. Essentially, this paper does not attempt to consider the merits of high levels of patent protection, nor the role of patent protection in economic development. Or put another way, this paper proceeds on the assumption that developing countries can and should take a wide range of measures to limit the potentially negative implications of IP protection and thereby advance public health. In short, the paper considers how and in what circumstances competition policy can and should be used to increase access to essential medicines in Southern Africa. 1 Declaration on the TRIPS agreement and public health, WT/MIN(01)/DEC/2, 20 November 2001, at paragraphs 1 and 4, available online at www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm. 2 WT/L/540, 1 September 2003, available online at www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm



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The TRIPS framework But before doing this, it is necessary to sketch the broader framework provided by TRIPS, not only to consider the extent to which the agreement limits the use of competition policy in respect of IP but also to seek guidance in determining in what circumstances it may be appropriate to invoke competition policy to increase access to essential medicines. This is not to imply that TRIPS is alone in limiting the use of competition policy, but rather that it is the only legal framework that legally binds Southern African countries at the moment. Other limitations may very well come at a later stage through regional and/or bilateral trade agreements.3 There are five key provisions in TRIPS that directly or indirectly provide the framework within which competition policy can operate. These range from broad principles regarding the need to deal with potential negative consequences of IP to specific provisions dealing with competition policy. While differing in focus, each of the five provisions underscore the proposition that TRIPS provides significant scope within which competition policy may be employed to advance a public health agenda that may be compromised if IP protection is left unchecked. Article 1.1 The most general of these provisions is Article 1.1, which grants members the freedom to determine an “appropriate method of implementing the provisions of … [TRIPS] within their own legal system and practice.” In essence, the provision grants members significant flexibility regarding the exact manner in which they deal with all matters relating to IP, such as remedying anti-competitive practices. Thus members may choose to go the route of a regulatory authority, linked to a specialist court or tribunal and with extensive powers of investigation. Alternatively, they may choose to locate dispute settlement within the regular court system, or within some form of hybrid system. In each option, they may choose the level and/or nature of state participation. This means, for example, that states that cannot participate actively in competition policy enforcement may simply choose to provide a forum and/or mechanism for dispute settlement by third parties. This flexibility is particularly important in a developing country context where resources for specific enforcement mechanisms may not necessarily be available. Further, members are free to determine appropriate rules of procedure and evidence, provided this is exercised within the framework of “their own legal system and practice”. Article 8.2 The second relevant provision, which is also particularly broad in its reach, provides that steps may need to be taken “to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.” In so doing, Article 8.2 expressly recognises that the exercise of exclusive rights in IP may result in up to three unwanted outcomes, only one of which is limited to the concept of abuse of rights in the IP concerned; that WTO members are within

3 For example, negotiators expect to finalise the United States/Southern African Customs Union Free Trade Agreement later this year.



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their rights to take action to prevent such problematic outcomes; and that other provisions of TRIPS do not prevent the taking of such action. While not expressly mentioning competition policy, it is clear that Article 8.2 of TRIPS contemplates regulatory frameworks other than IP law for dealing with problems that may arise from the exercise of exclusive rights expressly provided for in the agreement. Implicit in Article 8.2 is that the exercise of the exclusive right concerned cannot in and of itself be considered as abusive, unreasonably restraining trade or adversely affecting “the international transfer of technology.” Further, the provision also recognises that the simple exercise of exclusive rights – in circumstances that cannot be considered as abusive – may nevertheless be damaging to trade and technology transfer and therefore subject to regulatory control. In other words, the circumstances particular to a country may give rise to the need for and sanction the taking of particular regulatory steps, regardless of whether the conduct of the rights holder is abusive. In Southern Africa, for example, this may give rise to the implementation of competition policies that are responsive to developmental needs in general and possibly even public health needs in particular. This raises the possibility of using competition policy as an industrial policy that only has an indirect impact on public health needs. For example, the exercise of exclusive rights in IP may be regulated by competition policy in a manner that promotes the development of a strong domestic pharmaceutical industry. This would indirectly ensure access to a sustainable supply of affordable medicines. Articles 31(c) and (k) The third and fourth provisions of TRIPS that are relevant to competition policy, both of which deal with the granting of compulsory licences, recognise that anti-competitive practices involving patents are particularly egregious. These are Article 31(c), which limits the use of compulsory licensing in respect of semi-conductor technology to “public non-commercial use” or to remedy an anti-competitive practice; and Article 31(k), which exempts members from legislating certain conditions attached to the grant of compulsory licences where such licences are issued “to remedy a practice determined after judicial or administrative process to be anti-competitive.” In respect of the latter, members are exempt from requiring each of four particular conditions that ordinarily attach to the grant of compulsory licences. First they need not require that the state and/or prospective licensees engage in negotiations for the grant of voluntary licences. Second, they need not place limitations on exports of products manufactured under the licence. Third, they need not require the termination of the licence “if and when the conditions which led to such authorization are likely to recur”. In addition, licences issued to remedy anti-competitive practices may be subject to particularly low royalty rates. It is interesting to note that neither TRIPS in general nor Article 31 in particular defines what is meant by an anti-competitive practice. While members have significant flexibility to determine what they consider to be anti-competitive, TRIPS’ failure to provide a definition in this regard cannot be understood as providing a blank cheque to determine what practices may be considered as anti-



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competitive, particularly in the light of Article 8.2 that permits the taking of steps “to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.” It seems appropriate, therefore, that the concept of anti-competitive conduct be linked to these expressly identified and potentially problematic outcomes. Article 40 The fifth and final relevant provision, which comes closest to providing a definition of anti-competitive conduct, is Article 40. This provision, which is limited to certain anti-competitive practices that may arise in “contractual licences”, permits WTO members to legislate so as to prevent or control “licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market.” This is because TRIPS recognises that such practices or conditions may have “adverse effects on trade and may impede the transfer and dissemination of technology”. In general, Article 40 recognises that the exclusive rights holder is free to determine whom and under what circumstances to licence,4 provided none of the terms and conditions of the licensing agreement – or the manner in which it is implemented – constitute an abuse of rights that has an “adverse effect on competition”. While Article 40 provides some indication of what practices and conditions it considers as abusive,5 it does not go particularly far. In the result, members are left with considerable scope to determine for themselves which licensing practices or conditions to prevent or control through legislation. Relevance of developed country experience In its revised report on competition policy and IP, the United Nations Conference on Trade and Development (UNCTAD) secretariat notes that “[c]ompetition policies in major developed countries or regions generally take a favourable attitude to intellectual property rights”, understanding that “intervention may be undertaken where a pragmatic case-by-case analysis indicates IPR-based market power is unreasonably restraining competition in relevant markets.”6 On the face of it, this would seem to suggest limited scope for intervention. But the report further notes that notwithstanding “the general consensus in developed countries or regions about the appropriate treatment of the competition policy/intellectual property interface, there remain important differences with regard to specific issues.”7 In particular, the UNCTAD report notes that important differences remain in respect of issues such as “market definition, refusals to license IPRs or to sell IPR-protected products, the scope of the essential facilities doctrine in relation to IPRs, certain conditions in licensing … [and] certain

4 It would be counterproductive and certainly not in the interests of advancing public health to make it too difficult to licence. To the contrary, competition policy should encourage licensing. 5 Article 40 lists the following abusive practices: “exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing”. 6 UNCTAD, Competition Policy and the Exercise of Intellectual Property Rights, TD/B/COM.2/CLP/22/Rev.1, 19 April 2002 at 3, available online at www.unctad.org/en/docs//c2clp22r1.en.pdf 7 Ibid



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behaviour by dominant firms”.8 In other words, there is no consensus in the developed world on the exact reach of what is understood as anti-competitive in respect of crucial aspects regarding the exercise of exclusive rights in IP. The developed world experience is relevant to developing countries in at least three important ways. First, it shows that there is no single approach to many of the important issues discussed in this paper. In the result, developing countries wishing to exploit the flexibilities under TRIPS in respect of competition policy have significant space within which to manoeuvre. Second, the developed world approach to the IP/competition policy interface is grounded in a context informed both by levels of IP protection significantly in excess of the TRIPS minimums as well as domestic regulatory environments that are generally more tolerant towards conduct that the developing world may regard as abusive. Third, the approach to the IP/competition policy interface in certain developed countries has itself shifted over time.9 Thus even in the United States, the bastion of IP protection, the use of competition policy in this regard is hotly contested. Regulatory mechanisms to promote public health Introduction It is generally understood that the simple exercise of exclusive rights in IP cannot in and of itself provide a basis for using competition policy to advance public health. In such circumstances, which IP law ordinarily does not understand as abusive, states are nevertheless permitted by the TRIPS Agreement to take a range of regulatory measures to increase access to essential medicines and other patented technologies.10 Thus the freedom to determine the grounds upon which a compulsory licence can be issued cannot simply be translated into an unfettered discretion to define what is understood by TRIPS as being anti-competitive. Further, the regulatory mechanisms permitted under TRIPS can only increase access to essential medicines and other patented technologies in response to abusive or problematic conduct on the part of the exclusive rights holder. In addition, such tools can only be used to prevent the further limiting of existing levels of access where necessary to prevent the establishment of “facts on the ground” that are likely to result in abusive or problematic conduct. That being said, the TRIPS framework nevertheless provides significant scope within which boundaries may be pushed and public health promoted. In short, competition policy can only be used to advance public health in circumstances where access to health care products has been unfairly and unjustifiably limited, or to maintain access in circumstances where it already exists. This is primarily because competition policy is an inappropriate vehicle to 8 UNCTAD, above note 6 at 26 9 In discussing the use of compulsory licensing as a remedy in non-merger “antitrust” matters, for example, Delrahim of the US Department of Justice’s Antitrust Division writes of compulsory licensing as having “a long but contradictory history” in the US and a “history without a great deal of consistency” in both the US and the European Union. See Makan Delrahim, “Forcing Firms to Share the Sandbox: Compulsory Licensing of Intellectual Property Rights and Antitrust” at 3 and 9 respectively, presented at the British Institute of International and Comparative Law, London on 10 May 2004, available online at www.usdoj.gov/atr/public/speeches/203627.pdf. 10 See, in particular, Articles 7, 8, 27.2, 30 and 31 of the TRIPS Agreement, as well as the Doha Declaration, above note 1.



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promote access in circumstances where the exclusive rights holder’s conduct is not in and of itself problematic. In the result, it may seem appropriate to characterise the various regulatory options available into one of two groups: remedies and preventative measures. But as with public health, evident in struggles to contain the HIV/AIDS pandemic itself, this classic treatment/prevention dichotomy is a false one. For example, the existence of treatment for HIV infection is recognised as providing an incentive for a person to access HIV testing, with knowledge of one’s negative status further providing an incentive to take preventative measures. Similarly, the existence of regulatory measures to remedy anti-competitive practices may provide sufficient “incentive” for holders of exclusive rights in IP to refrain from engaging in abusive or otherwise problematic conduct. This may be important for those countries without significant institutional capacity to regulate proactively. In contrast, those countries with capacity may choose rather to frame such measures in the language of prevention, such as by subjecting licensing agreements to prior approval processes of the sort ordinarily associated with merger regulation. In essence, there are three main competition policy instruments that can be used to prevent or control the problematic – or potentially problematic – exercise of exclusive rights in IP: preventing and/or stopping the abuse of market dominance; regulating IP licensing; and controlling mergers. This paper does not consider mergers because jurisprudence in this field is well developed in many jurisdictions and is not particularly controversial. Further, it is well established and recognised that mergers are exceptionally difficult to undo, thereby requiring advance approval rather than ex-post facto remedial action. In the result, little is to be gained from seeking regulatory freedom where borders and boundaries are particularly well defined. Preventing and/or stopping the abuse of market dominance While exclusive rights in IP do not necessarily in and of themselves result in market exclusivity,11 their existence may – in particular circumstances – be sufficient to confer market dominance. Much depends on the nature of the product protected by the IP in question and the manner in which it and potentially competitive products (if any) are used. With this in mind, it would be very difficult to legislate so as to ensure sufficient certainty regarding the circumstances in which the mere existence of IP triggered prohibitions against market dominance. That said, however, there is little in the way of lawmakers ensuring that legislation provides detailed guidance regarding the circumstances within which IP protection contributes towards market dominance, the definition of markets and what sort of market share is sufficient to confer dominance. In addition, a wide range of practices may be considered as abusive, provided they involve the unfair advantage of market dominance. Under TRIPS, countries have some latitude in 11 According to the European Court of Justice (ECJ), for example, the “mere ownership of an intellectual property right cannot confer … a [dominant] position”. In this regard, see Radio Telefis Eireann and Independent Television Publications Limited (Intellectual Property Owners Inc. intervening) v EC Commission (Magill TV Guide Limited intervening) [1995] 4 CMLR 718 at para 46.



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determining for themselves what would be considered as unfair in the circumstances, provided they do not regard the mere assertion of exclusive rights as abusive. In other words, a mere refusal to license competitors cannot in and of itself be seen as abusive or problematic conduct, nor can the setting of prices that are higher than what prospective licensees are either willing or able to charge. Excessive pricing In respect of patents, for example, legislators may choose to define unfair advantage as that which would be gained when the exclusive rights in a patent are used to extract a benefit that does not necessarily flow from the exercise of such rights and is not necessary for creating or maintaining incentives to innovate. In other words, when an exclusive rights holder takes an unfair advantage by relying upon the market exclusivity that flows from the enforcement of the patent to extract an unjustifiable, additional benefit. Justification would have to be located within the context determined by the particular circumstances of the market concerned and the practical implications of the impugned conduct. This would include a prohibition against “excessive pricing to the detriment of consumers”,12 in effect precluding pricing models that cannot be objectively justified within a particular market. Central to the determination of what may be deemed abusive is the purpose served by the particular pricing model in question. In this regard, legislators would be advised to provide clear guidance in respect of what can be considered as excessive and what would be expected of an exclusive rights holder in order to justify prices that are alleged to be excessive.13 Predatory pricing On the issue of pricing, lawmakers should be cautious when legislating against predatory pricing by paying close attention to how rights in IP could be abused in this way, with the prohibition being framed accordingly. This is because rights in IP – in particular circumstances – can indeed create monopolies, providing little “incentive” to charge excessively low prices in any particular market as there would be no competitors to exclude from that or any other market. But where such rights do not in and of themselves create market dominance, such as in a market for pharmaceutical products that are considered as therapeutically equivalent, prohibitions against predatory pricing may prove to be particularly effective in keeping abuse of market dominance in check. Prohibitions against predatory pricing may even be effective in certain circumstances where excusive rights in IP create monopolies. In other words, the non-existence of actual – as opposed to potential – competitors need not necessarily imply that no incentive exists for undercutting prices in an unsustainable manner. For example, a dominant company may use excessively low pricing to prevent action aimed at introducing competition.

12 See section 8(a) of South Africa’s Competition Act, 89 of 1998 (the SA Act) 13 For a good example of how not to regulate, see the definition of “excessive price” in section 1(1)(ix) of the SA Act, which hinges on the reasonableness of the relation between the price in question and the “economic value” of a particular good or service. The SA Act provides no definition of economic value nor any indication of how such value is to be determined. After almost five years since the prohibition against excessive pricing came into effect, there is no South African jurisprudence on the issue.



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This can be achieved in a number of ways. For example, a patent holder may choose to “sacrifice” the public sector market and thereby ensure a long-term hold on the lucrative private sector market. This could be achieved by using an exclusive not-for-profit public sector deal to generate sufficient economies of scale so that marginal costs in the private sector drop significantly. Without access to such economies of scale, a potential competitor’s private sector margins may not be sufficient to ensure the ability to compete effectively. With this in mind, legislators may choose to frame their prohibitions against predatory pricing so as to apply not only to actual but also potential competitors. This may be done by framing the prohibition so that what is guarded against is excessively low pricing that has – or is likely to have – the effect of either “preventing or lessening competition”,14 rather than by limiting the reach to conduct that only lessens existing competition. Refusals to license While upholding the principle that a refusal to license cannot in and of itself constitute an abuse,15 the European Court of Justice (ECJ) recently clarified – in a case concerning copyright – that a refusal to license will be considered as abusive if it prevents the market entry of an innovative product for which there is consumer demand, is not objectively justifiable, and excludes competition in a “secondary market”.16 In an earlier case, the ECJ had held a refusal to license to be unlawful on the basis that it “prevented the appearance of a new product … which the appellants did not offer and for which there was a potential consumer demand.”17 In contrast, the bottom line in the US is that holders of exclusive rights in IP are ordinarily free to choose whether or not to license,18 with US law generally not recognising “antitrust liability for the refusal to license intellectual property.”19 Given this significant divergence of opinion within the developed world, legislators in developing countries would be well advised to take advantage of the lack of consensus and protect against the unintended negative consequences of the exercise of exclusive rights. Thus a refusal to license may be considered abusive when it allows the exclusive rights holder to extract a benefit from a product considered to be inferior to what prospective competitors would be both willing and able to introduce to the market. In such circumstances, the exercise of

14 Section 9(1)(a) of the SA Act 15 See Volvo AB v Erik Veng (UK) Limited [1989] 4 CMLR 122 at para 8, where the ECJ held that the mere refusal to grant a license “cannot in itself constitute an abuse of a dominant position.” 16 IMS Health GmbH & Co. OHG, Case C-418/01 at paras 34, 38 and 53, available online at www.curia.eu.int/jurisp/cgi-bin/form.pl?lang=en. Delrahim (above note 9 at 7) argues that a secondary market is best understood as a “market different from the copyright owner’s primary product line”, implying that “dominant firms can lawfully refuse to license any competitor who would operate in the same ‘primary market’ as the copyright owner.” 17 Radio Telefis Eireann, above note 11 at para 54 18 UNCTAD, above note 6 at 16 19 Delrahim, above note 9 at 8



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exclusive rights in IP may hinder innovation, preventing the market entry of a new product and thereby undermining the strongest rationale for the protection of IP.20 Such an example of abuse has been highlighted by the development of fixed-dose combination (FDC) medicines, including three-in-one antiretroviral (ARV) medicines that simplify chronic treatment for HIV infection to one pill taken twice daily.21 Simplified treatment regimens are well known for improving levels of adherence to and thereby the efficacy of treatment. The abuse in question results from two omissions: a failure to licence generic manufacturers combined with a failure to co-operate with other exclusive rights holders to manufacture the desired FDC. In this way, innovation is stymied, with the ordinary exercise of exclusive rights in a patent standing in the way of the market entry of better products. A refusal to licence may also result in anti-competitive conduct in circumstances that may not necessarily be considered as abusive, even when the licensor does not benefit from the anti-competitive conduct in question. This may happen, for example, when the refusal to license follows the grant of an exclusive licence in circumstances where the licensee is effectively given an unfair competitive advantage in another market. This would ordinarily be a market other than that within which the licensor operates. Consider the following example. Manufacturer 1, the holder of the patent on the ARV drug X, exclusively licenses generic manufacturer 2, which competes with generic manufacturers 3, 4 and 5 in the market for the ARV drugs Y and Z. Upon receipt of the licence, manufacturer 2 begins marketing the triple FDC X/Y/Z, one of the most common and recommended first-line regimens for ARV treatment. As a result of the availability of the triple FDC, which the other generic manufacturers would market if company 1 licensed them, sales of Y and Z plummet. In other words, the availability of the triple FDC gives manufacturer 2 an unfair advantage in the market for the other two drugs. Legislators have a wide range of regulatory options that can be used to prohibit or control these – and other – examples of problematic refusals to license. Some may choose to invoke the hotly contested essential facilities doctrine, whereas others may choose to locate such prohibited practices within the ambit of a narrowly tailored prohibition against certain forms of exclusionary conduct or a simple refusal to deal.22 In addition, lawmakers might wish to consider locating the provisions in question outside of the ambit of abuse of market dominance, focusing rather on the anti-competitive effects of the conduct instead of the abuse of exclusive rights in IP. 20 Developed country experience shows a concern with exclusive rights in IP being used “in a manner which impedes the very purpose for which they have been granted”. See UNCTAD, above note 6 at 26. 21 These include Cipla’s Triomune, Ranbaxy’s Triviro LNS and the Thai Government Pharmaceutical Organization’s GPO-VIR. 22 In section 8 of the SA Act, for example, dominant “firms” are proscribed from engaging in a range of a prohibited practices, including refusing “a competitor access to an essential facility when it is economically feasible to do so” and engaging “in an exclusionary act … if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain”. The SA Act further defines an “exclusionary act” as “an act that impedes or prevents a firm entering into, or expanding within, a market”.



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Regulating IP licensing While the previous section considered the various options available for controlling or preventing certain refusals to license IP, which may not necessarily involve the abuse of market dominance, this section focuses only on the conduct of the exclusive rights holder when it engages in the licensing of IP. It therefore focuses on the licensing practice itself, including the applicable terms and conditions of the license in question, regardless of whether other licence applications were granted or refused. But before doing so, it is helpful briefly to consider the general approach taken by the developed world, where the role of competition policy in the regulation of IP licensing is seen to protect potential “licensors’ willingness to license while enabling licensees to compete.”23 In the European Union, for example, “not every restraint of conduct in a licensing arrangement” is considered as a “prohibited restraint of competition”, or anti-competitive.24 In the US, on the other hand, the Antitrust Guidelines for Licensing of Intellectual Property (the US Guidelines)25 are based on the principle that the licensing of IP is generally considered as pro-competitive.26 Regarding restraints of conduct, the general approach under the US Guidelines is twofold: to determine whether the restraint in question is “likely” to have any anti-competitive effects; and if so, to determine whether the restraint is “reasonably necessary to achieve pro-competitive benefits that outweigh the anti-competitive effects.”27 A possible approach that members may wish to consider in advancing public health, consistent with the understanding that the simple exercise of exclusive rights in IP cannot in and of itself be considered as abusive or problematic, is whether the licensing practice or condition concerned further limits – or has the potential further to limit – access to essential health products. In other words, does the grant of the licence make things worse, meaning that consumers actually or potentially had greater access prior to the grant of the licence? Such an approach would thus allow countries to prevent licensing agreements, for example, that permit the exclusive rights holder to extract more from certain markets by surrendering market exclusivity in others.28 Consider the following example. Manufacturer P, the holder of the patent on an essential antifungal medicine that is excessively priced, has been informed by the state that it is about to issue a compulsory licence for both public and private sectors to manufacturer Q, the only local generic manufacturer of the medicine in question. To avoid this action, manufacturer P “voluntarily” licenses generic manufacturer Q to produce the antifungal medicine for the public sector, on

23 UNCTAD, above note 6 at 25 24 Ibid at 7 25 Department of Justice and Federal Trade Commission, 6 April 1994, available online at www.usdoj.gov/atr/public/guidelines/ipguide.htm 26 UNCTAD, above note 6 at 14 27 Ibid at 15 28 While this may be regulated under the rubric of restrictive horizontal practices, ordinarily understood as agreements or concerted practices between competitors, it may be more appropriate to regulate IP licensing separately when prospective licensees are not yet competitors.



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condition that it surrender its right under patent law to pursue legal action for a compulsory licence to supply the private sector. As a result of the action, the state has no option but to abandon the idea of issuing the compulsory licence, leaving excessively high private sector prices untouched. It further decides not to issue compulsory licenses for the importation of the antifungal medicine in question, given that foreign-based generic companies have yet to register their products with the local drug regulatory authority. In the result, the grant of the limited voluntary license to manufacturer Q has had the effect of ensuring that consumers in the private sector will have to wait until patent expiry before seeing any generic competition. Some may argue that preventing such a licensing agreement would be counterproductive in that it may potentially prevent even the public sector from gaining access to cheaper alternatives. In other words, it may result in the patent holder maintaining exclusivity in both markets. This may well be the case in circumstances where the state is unwilling to use its licensing powers under patent law, or where the third party compulsory licensing provisions under such a law offer TRIPS-plus protection, effectively precluding generic manufacturers from applying for licences themselves. But where a state has legislated to the full extent of the patent law flexibilities under TRIPS or is willing and able to issue licences, prohibiting the conclusion of such a licensing agreement may well serve to advance public health. Once a decision has been taken to legislate in this regard, lawmakers must then decide whether to subject licensing agreements to prior approval or to regulate simply by prohibiting certain licensing practices, making provision for licensing agreements to be challenged by interested parties after their conclusion. In large part, this decision may depend on the institutional capacity of the relevant competition authority. Lawmakers may decide on a third hybrid approach, given that many licensing agreements are often subject to competition authority approval. This approach could see countries deciding against automatic prior approval, whilst making provision (and charging) for a voluntary – but nevertheless binding – prior approval process. Limitations of using competition policy within a developing world context Despite the significant regulatory flexibility regarding competition policy accorded to all countries under TRIPS, many developing countries may find that they have neither the level of expertise nor the institutional capacity to take full advantage. In addition, such countries may decide against investing resources in competition enforcement unless and until required to do so. Instead, they may prefer to focus attention on the public health safeguards and flexibilities under patent law, particularly given the requirement under TRIPS to provide a minimum level of IP protection.29 29 Other than least developed countries (LDCs) that have until 1 January 2016 to provide patent protection for pharmaceutical products, all developing countries are required as of 1 January 2005 to provide the minimum levels of IP protection, including patent protection for technologies. Other than patent protection in respect of pharmaceutical products, LDCs must comply with the requirements of TRIPS by not later than 1 January 2006. In other words, all countries will have to invest resources in IP protection by not later than 2006.



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There are at least two reasons why this may prove to be an unfortunate and shortsighted approach to advancing public health. First, much of the IP regulatory flexibility under TRIPS requires either state or specific third party action. Take the example of the grant of a compulsory license to produce or import generic medicines. This would require either the state to issue a compulsory license or an “interested person” to institute legal action for a licence to produce or import.30 For good reason, neither the state nor generic manufacturers or importers may decide to take such action. Instead, not-for-profit organisations (NPOs) may wish to challenge the abuse of rights in the patent concerned, but may find that they are powerless to act, given the requirement under TRIPS that compulsory licences be non-assignable. Unless they are in the business of drug production or importation, NPOs might find that they are – legally speaking – powerless to act.31 Under competition law, however, a consumer-driven complaint to the authorities may result in the issue of licences to third parties, such as generic manufacturers or importers, regardless of whether they participated in the proceedings. Second, developing countries will most likely at some point in the not-too-distant future be required to commit to the enforcement of competition policy as part of the resolution of the “Singapore issues”, either as a result of the Doha Development Round or regional and bilateral trade agreements. It would be in their interests to enter such negotiations with relatively well-developed competition frameworks in place. This is both to ensure that the terms of the debate are not framed solely by developed countries, as well as to ensure that developing countries are fully aware of the implications of the competition policy framework under discussion. If such countries are concerned about the allocation of resources for enforcement, they may decide against the creation of a dedicated competition authority, opting instead to dispense with all prior approval procedures, outlawing certain anti-competitive conduct and practices and allowing for the private sector and NPOs – at this stage – to “enforce” the law in the ordinary civil court system. While this may not be ideal, it would certainly go some way in promoting a pro-public health agenda and laying the foundation for the law’s future development as and when circumstances allow. The South African experience South Africa’s new competition law framework has been in force for less than five years. While it goes some way in taking advantage of the regulatory flexibility 30 See, for example, section 56 of the South African Patents Act, 57 of 1978, which allows for such persons to apply to the Commissioner of Patents for a compulsory licence under the patent. 31 To some extent, his explains why NPOs in South Africa have been slow to use the provisions of patent law to increase access to essential medicines. In 2003, two NPOs successfully threatened the use of section 56 of the South African Patents Act, with the result that they were granted non-exclusive royalty-free licences to import generic nevirapine products. The two NPOs were only able to threaten the use of the law on the basis that they are actually involved in the procurement and distribution of medicines. For more information on the settlement agreement between the two NPOs (the Generic Anti-retroviral Procurement Project and the TAC Treatment Project) and Boehringer Ingelheim, see www.alp.org.za/resctr/other/pdf/20031215_GSKBI4.pdf.



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permitted under TRIPS, it is still relatively undeveloped, with little in the way of jurisprudence to give real meaning and content to its relevant provisions. Nevertheless, it has already been used to advance public health, most notably in the recent challenge to the pricing practices of two pharmaceutical giants. Hazel Tau and Others v GlaxoSmithKline and Boehringer Ingelheim As part of a national campaign to lower the costs of essential medicines for the treatment of HIV/AIDS, the AIDS Law Project (ALP) lodged the complaint against GlaxoSmithKline (GSK) and Boehringer Ingelheim (BI) with South Africa’s Competition Commission in September 2002,32 in essence arguing that the two groups of pharmaceutical companies were acting in violation of competition law by charging excessive prices for certain of their ARV drugs to the detriment of consumers. In short, the complaint alleged that the prices charged by GSK and BI for their essential medicines were directly responsible for the “premature, predictable and avoidable loss of life”,33 arguing that even when full allowance was made for the costs of research and development, higher profits, licensing fees and the incentive to develop new drugs, the prices of these patented medicines remained excessive and unjustifiable. At the time the complaint was lodged, the state had yet to commit itself to the development and implementation of a public sector ARV treatment programme,34 meaning that there were only three options available to people in South Africa for accessing potentially life-saving treatment: out-of pocket purchase from private pharmacies; medical insurance cover; and workplace treatment programmes for uninsured workers. By challenging the high prices of drugs, the complaint sought “to ensure that people living with HIV/AIDS who are working can afford to buy medicines to save their lives; that medical … [insurers] treat people living with HIV/AIDS without going bankrupt; and that employers are able to pay for the treatment of workers on a sustainable basis.”35 On 16 October 2003, the Competition Commission announced that it had decided to refer the complaint to the Competition Tribunal for adjudication. As a result of its year-long investigation, the Commission had found sufficient evidence to support the referral on the basis of prohibited excessive pricing as well as two additional grounds, both of which deal with the failure of GSK and BI to license generic manufacturers in certain circumstances. Simply put, the Commission

32 In addition to the Treatment Action Campaign (TAC), South Africa’s most powerful and successful organization representing the interests of people living with HIV/AIDS (PWHAs), the complaint was lodged on behalf of a number of PWHAs who are open about their status, health care workers treating PWHAs, the Congress of South African Trade Unions (COSATU), the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (CEPPWAWU) and the AIDS Consortium. With approximately two million members, COSATU is the largest trade union federation in South Africa. 33 See the Statement of Complaint at para 107, available online at www.tac.org.za/Documents/DrugCompaniesCC/HazelTauAndOthersVGlaxoSmithKlineAndOthersStatementOfComplaint.doc 34 The Operational Plan for Comprehensive HIV and AIDS Care, Management and Treatment for South Africa was adopted on 19 November 2003, some 20 days before the complainants entered into settlement agreements with both GSK and BI. 35 See “The Price of Life: Hazel Tau and Others vs. GlaxoSmithKline and Boehringer Ingelheim” at page 5, available online at www.alp.org.za/view.php?file=/camps/20030910_PatRights.xml.



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found that GSK and BI were using their exclusive rights in the patents concerned to deny appropriate licences to other manufacturers, whilst simultaneously keeping their own prices high. By December 2003, within two months of the Commission's announcement, GSK and BI had entered into separate settlement agreements with the complainants and the Commission respectively.36 In essence, the two groups of companies agreed to open up the market for these drugs to generic competitors. To date, both GSK and BI seem to have licensed only two generic manufacturers on terms no less favourable than those contained in the settlement agreements, which require the grant of up to four and three licences respectively. The ALP has written to the two companies regarding its concern that they appear not to have complied fully with the terms of the settlement agreements. If and when appropriate, the ALP will seek the enforcement of the agreements in the ordinary civil courts. Learning from Hazel Tau The South African experience highlights that competition law can indeed be used to great effect, particularly in a context where other key role-players are loathe to invoke the law. In this case, civil society was able to take the lead, not being constrained by the failure to take appropriate action on the part of both the state and generic pharmaceuticals companies.37 To date, the state has yet to invoke its powers under patent law to issue compulsory licenses,38 nor has it taken any steps to remove problematic TRIPS-plus protections in line with the Doha Declaration. Faced with the adverse findings of an independent competition authority, a protracted Competition Tribunal hearing into its pricing practices and the potential for the strengthening of the legal framework through unfavourable jurisprudence, GSK and BI decided to settle with both the Competition Commission and the complainants. For their part, the complainants chose to abandon a particularly strong case in favour of a relatively speedy resolution of the matter, despite the historical complaint and the complex legal and regulatory issues remaining unresolved. Through its use of the South African Competition Act, 89 of 1998 (the SA Act), the ALP has recognised that the regulatory framework requires a “little work”. Most crucial is an amendment that would expressly recognise the grant of a compulsory licence as appropriate relief for certain forms of prohibited conduct. While there are strong arguments in favour of interpreting the provisions on relief to permit the granting of compulsory licences to prevent and control prohibited excessive

36 The settlement agreements with the complainants are available online at www.alp.org.za/view.php?file=/camps/20030910_PatRights.xml 37 One generic company had in fact attempted to use the SA Act, but had not done so particularly effectively. It had argued that because it was both willing and able to provide certain ARV drugs at significantly lower prices than the exclusive rights holder was doing, the latter was unlawfully charging excessive prices to the detriment of consumers. In addition, no generic company had attempted to use the provisions of section 56 of the South African Patents Act to obtain compulsory licences on any essential medicines. 38 See section 4 of the South African Patents Act.



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pricing, the lack of express recognition is nevertheless problematic. Unless and until the Competition Tribunal rules favourably on the matter, the hand of both civil society and the Competition Commission remains weakened. For as long as the regulatory framework remains unchanged, through lack of jurisprudence or legislative reform, the Competition Commission would be advised to invoke its powers in section 79(1) of the SA Act to “prepare guidelines to indicate the Commission’s policy approach” to the IP/competition policy interface. Such guidelines, which must be published in the Government Gazette and are not binding on anyone, would nevertheless provide much-needed guidance for all role-players, including both holders of exclusive rights in IP as well as consumers.39 Conclusion This paper has focused on the role of competition policy in advancing public health in Southern Africa by increasing access to essential medicines. This has been done by considering the broader framework provided by TRIPS, as well as the relevance of developed country experiences and the limitations of using competition policy within a developing world context. By focusing on the availability and nature of and the extent to which certain regulatory mechanisms may be used to promote public health, with a short analysis of the South African experience dealing with the IP/competition policy interface, this paper has sought to provide certain concrete recommendations. But more important, it has hopefully placed new ideas on the table and helped to identify research gaps. In doing so, it has sought to stimulate creative thought and engaged debate.

21 June 2004

Johannesburg, SOUTH AFRICA

39 In publishing such guidelines, South Africa would not be doing anything particularly groundbreaking. In this regard, see the earlier reference to the US Guidelines, above note 25.


ap

ers

TIPS

Intellectual Property Tools, Innovation andCommercialisation of R&D

Rosemary Wolson

Rosemary Wolson: IP Tools, Innovation and Commercialisation of R&D ICTSD-UNCTAD Regional Dialogue on IPR, Innovation and Sustainable Development

29 June – 1 July 2004, Cape Town, South Africa

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Intellectual Property Tools, Innovation and Commercialisation of R&D:

Options to assist developing countries in positioning themselves to reap the benefits of a stronger intellectual property regime, with special

reference to the role of intellectual property management in research organisations

Rosemary Wolson

Intellectual Property Manager UCT Innovation, University of Cape Town

T: +27-21-650-2425 M: +27-83-784-3648 F: +27-21-650-5778 E: [email protected]

Introduction There is growing acknowledgment that a strong national intellectual property (IP) regime will impact differently on countries at different stages of development.1 Whereas in the past, nations in the process of industrialising had some freedom to choose when to adopt different types of IP protection and how strong the protection granted should be, today’s developing countries do not have the same flexibility of options as a result of the prevailing multilateral trade and IP environment (epitomised by, but not confined to, the World Trade Organisation’s TRIPS Agreement),2 together with increasing pressure to implement higher IP standards in order to benefit from bilateral relationships with powerful international trading partners. It is widely accepted that knowledge is a prerequisite for development to take place in the current “knowledge economy”. This knowledge must be acquired, absorbed and diffused. An aspect which has generated much debate is the role that intellectual property rights (IPRs) can play as both enabler and inhibitor of the learning processes of knowledge acquisition, absorption and diffusion. On the one hand, holders of technology are reluctant to transfer their technology if they cannot be guaranteed protection against unauthorised and uncompensated use of the technology developed as a result of their investment. IPRs are a tool for providing such protection and, as such, a strong IP regime is likely to improve the prospects of attracting cutting-edge technology. On the other hand, by restricting who can utilise the acquired technology and on what terms, IPRs can also result in limiting the absorption and diffusion of technology, for example by

1 Eg Commission on Intellectual Property Rights (2002) Integrating Intellectual Property Rights and Development Policy; Lall, S. (2003) Indicators of the Relative Importance of IPRs in Developing Countries ICTSD & UNCTAD; UNIDO (2002) Industrial Development Report 2002-2003. 2 Agreement on Trade-Related Aspects of Intellectual Property Rights.



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preventing reverse engineering, or by imposing high costs on use of incremental innovations based on the acquired technology. This means that the benefits of accessing the technology are diluted. However, as acquired technology is mastered, technological capabilities are built up locally, facilitating increased indigenous innovation, which is in turn incentivised by IPRs. But in developing countries where domestic innovation remains low, the lion’s share of patents issued by national patent offices goes to foreign applicants rather than to local innovators. While fairly substantial technical assistance has been supplied to help countries meet their TRIPS obligations,3 through amending and introducing new IP legislation and building capacity in national patent offices, efforts to assist potential local innovators to use the IP system remain largely inadequate, short-term and unsustainable. What options, then, are available to developing countries to leverage their TRIPS-compliant or even “TRIPS-plus” IP frameworks in such a way as to maximise effective acquisition, absorption and diffusion of knowledge and technology? It would seem that an integrated set of interventions is called for, targeted at different levels: institutional, national and international. Institutional capacity (in both firms and research organisations) must be developed to manage IP. At the level of national government, enabling policies should be implemented to encourage increased public and private sector research and development (R&D) expenditure, coupled with measures for building capacity in research management (of which IP management is one aspect), and creating a positive environment for business to thrive. At international level, developing country governments must ensure that their interests are represented and codified in multilateral and bilateral fora and instruments. This requires thorough understanding of the “rules of the game”, as well as of national needs. This paper focuses mainly on institutional approaches to managing IP for the promotion of development, and attempts to situate this within the broader policy environment. Institutional Management of IP In a well-functioning national system of innovation, much emphasis has been placed on the importance of closer ties between universities and public research institutions on the one hand, and the private sector on the other. One of the main instruments for facilitating these linkages is the institutional technology transfer

3 From a range of organisations including World Trade Organisation, World Intellectual Property Organisation, UNCTAD and the European Patent Office.



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office (TTO),4 which is tasked with ensuring that research results emanating from the institution concerned are transferred to society for social and economic benefit. The typical model for institutional technology transfer involves licensing the institution’s IP to an existing or a start-up company, which will engage in further R&D to add value to the IP in order to develop a market-ready product. The institution benefits financially from licence fees paid by the licensee company, useful new products reach consumers, employment opportunities are created and tax revenue is generated. This model is considered to have been particularly effective in the United States (US), its success widely attributed to the stimulus provided by the 1980 Bayh-Dole Act,5 a statute aimed at promoting the transfer to industry of federally-funded technology developed within universities and other non-profit and small business recipients of federal research funding (and later extended to all recipients of federal research grants). Lessons from Bayh-Dole Prior to Bayh-Dole, the US federal government owned the IP in federally-funded technology, but had a poor record of successful exploitation of the thousands of patents it held. By giving grantees the right to own the IP developed from federally-funded research, they were incentivised to become actively involved in the commercialisation of their technology, and by permitting grantees to issue exclusive licences to industry, companies were incentivised to invest in further development of the technology leading to the manufacture and sale of goods. Bayh-Dole applies to all research carried out in terms of a federal funding contract, even where the work may be only partially government-funded. Grantees take on certain obligations when they elect to retain title to intellectual property developed under such a contract. These obligations include reporting to the relevant federal funding agency, filing a United States patent application, taking active steps to commercialise the invention concerned, sharing any income generated from exploitation with inventors and using the balance of such income for research or educational purposes. Grantees may licence the technology concerned to industry on an exclusive or non-exclusive basis. In an effort to ensure a balance between private and public interests, the US government is entitled to a non-exclusive, non-transferable, worldwide, royalty-free right to practise the invention, and may additionally exercise “march-in” rights to take ownership of the technology, or to require that a third party be granted a licence, where this is in the public interest (eg for health or safety reasons, or if the invention has not been commercialised within a reasonable

4 Sometimes referred to alternatively as a licensing office, business development office, industry liaison office or IP office. 5 The Bayh-Dole University and Small Business Patent Procedures Act of 1980.



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time).6 In addition, manufacture of products under a licence governed by Bayh-Dole must take place substantially in the United States, and preference must be given to small business licensees, unless it can be shown that they lack the capacity to bring the invention to market. While some maintain that much of the commercialisation of public-funded research would have taken place even without Bayh-Dole, the legislation has been given credit for the availability of useful new products on the market, job creation and the establishment of new businesses, all of which have contributed to economic development and provide taxpayers with a worthwhile return on their investment in the federal research enterprise.7 Other experiences The US TTO model has subsequently been adopted (with certain adaptations) by most industrialised states in some form or another (in most cases in the absence of “Bayh-Dole-type” legislation), and increasingly many developing country R&D institutions are establishing technology transfer functions. However, even as institutional technology transfer is being heralded for the contribution it makes to economic development, questions are simultaneously being raised about whether the cost of this activity is justified by its impact, as widely differing returns are seen by different institutions, as well as in different national systems. Analysis of the data shows that the costs involved in generating these benefits are substantial, and that the distribution of returns is very skewed.8 Significant investment is required to operate a functioning TTO, which must be able to support professional salaries for highly specialised multi-skilled staff, patent filing and prosecution costs, travel costs, training and marketing expenses. Returns on this investment are only realised after a time lag of several years. Even in the US, few institutions have been fortunate to have “blockbuster” inventions that

6 Interpretation of the statutory conditions under which march-in rights may be exercised has recently been a topic of debate in the US Congress. 7 Council On Governmental Relations (1999) ‘The Bayh-Dole Act: A Guide to the Law and Implementing Regulations’, www.cogr.edu; Henderson, J.A. and Smith, J.J. (2002) ‘Academia, Industry, and the Bayh-Dole Act: An Implied Duty to Commercialize’, Center for Integration of Medicine and Innovative Technology, October, http://www.cimit.org/coi_part3.pdf; Valoir, T. (2000) ‘Government Funded Inventions: The Bayh-Dole Act and the Hopkins v CellPro March-In Rights Controversy’, Texas Intellectual Property Law Journal, Vol. 8, No. 2, pp. 211-239; Wolson, R.A. (2004) ‘Towards the establishment of a vibrant South African biotechnology industry: will the recent policy interventions achieve their objectives?’, International Journal of Biotechnology, forthcoming. 8 Scherer, F.M. and Harhoff, D. (2000) ‘Technology policy for a world of skew-distributed outcomes’, Research Policy, 29, pp. 559-566; Association of University Technology Managers – note 19; Heher, A.D. (2003) ‘Return on investment in innovation: implications for institutions and national agencies’, The First Globelics Conference on Innovation Systems and Development Strategies for the Third Millennium, Rio de Janiero, November.



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bring in substantial income,9 and it appears that many do not even recover the full costs of running their technology transfer operations out of licence fees.10 Options for developing country institutions For developing country institutions, where pressure on resources is usually severe, some question whether this investment is a wise or indeed a necessary one, especially since research budgets will often be too small to guarantee a sufficiently broad portfolio of IP, and qualified staff are few and far between. It is therefore opportune to look more carefully at what relevance this model might have for developing country institutions, including whether Bayh-Dole-type legislation ought to be considered as a potential driver of innovation, or whether alternative models should be explored, which might better promote effective linkages between the various components of the national system of innovation. “Pre-licensing TTO” It is worth distinguishing different tiers of activity carried out by TTOs. Arguably, in developing country institutions, an expanded (and/or alternative) role is called for over and above the typical “licensing model”. IP management involves more than protection and exploitation of IP (traditionally measured in terms of benchmarks such as number of patents issued and amount of licence income generated), and a TTO can add value to an institution’s R&D enterprise in a number of other ways, if IP management functions are integrated into the wider research management functions. The growing importance of IP means that failing to manage it at institutional level could expose an R&D institution to serious risk: for one thing, to lost opportunity where a commercialisable invention is not exploited, but perhaps more alarmingly, to potential liability which could arise out of infringement, breach of contract or statutory liability. As institutions attempt to grow the number of research collaborators and funders with whom they interact and transact, TTOs11 can assist in optimising the relationships by structuring beneficial and creative contractual arrangements which, at the least, guarantee freedom-to-operate (including ensuring that researchers are not restricted from building on their research after the funded project is concluded) and publication rights, and ensure that free enquiry is not constrained. Where appropriate, the institution should attempt to retain rights to IP (and/or share in benefits arising out of IP exploitation), and development goals can be advanced by seeking opportunities for access to know-how and equipment, as well as capacity building. Useful roles can also be played in 9 Only 1.3% of active licences and options yielded over one million dollars of income in FY 2002, and royalties earned amounted to less than 3% of total research expenditure (Association of University Technology Managers (2003) AUTM Licensing Survey, FY 2002 Survey Summary). 10 Heher – note 8; Wolson – note 7. 11 The term “TTO” is used broadly here, and the functions mentioned here could alternatively be housed in a sponsored research, industry liaison, research development or similar office, depending on the structures of the institution concerned.



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facilitating partnerships with other developing country institutions, and in ensuring that the special considerations attaching to research with genetic resources and traditional knowledge are properly handled. Assistance can be rendered to ensure that projects are properly budgeted, and compliance with national legislation and ethical practices can be checked. So, even if an institution decides that it cannot afford to invest in a traditional “licensing model” TTO, it is submitted that some level of IP management function is essential. This lays the building blocks for understanding the landscape, for equipping institutions to enlist outside assistance if needed, and for improving negotiating capacity that can be deployed down the line should the institution engage in licensing activity at a later stage, when its research capacity has matured. The specific functions taken on by any particular TTO can be tailored to institutional needs, and in particular, the level of development of the institution’s R&D enterprise. “Licensing TTO” For developing country TTOs which are engaging in licensing activity, appropriate practices should be cultivated, which incentivise innovation and promote exploitation and availability of the technology concerned. Patenting decisions should be made strategically, taking into account whether patent protection is a prerequisite for obtaining a commercial development partner, and selecting territories accordingly. Similarly, “pro-development” approaches to licensing should be followed wherever possible. Mechanisms and practices to consider include:12 - Preference for licensing over assignment:

Often companies wishing to gain rights to a technology insist on assignment of the IP in order to ensure that they have full control. This limits options for market segmentation and should be avoided if possible.

- Non-exclusive versus exclusive licensing:

While it is accepted that in certain cases exclusivity must be guaranteed in order for a licensee to take the risk of investing in further development of the technology to take it to market, non-exclusive use should be encouraged wherever feasible, and exclusivity should be limited to need (ie only for markets, territories and fields of use in which the licensee is actively

12 Lybbert, T.J. (2002) ‘Technology Transfer for Humanitarian Use: Economic Issues and Market Segmentation Approaches’, IP Strategy Today No 5-2002 pp17-25; Nelson, L. (2003) ‘The Role of Universities in Assuring Access in Developing Countries’ in MIHR Handbook of Best Practices for Management of Intellectual Property in Health Research and Development, ed Mahoney, R.T.; Reichman, J.H. (2003) ‘Managing the Challenge of a Globalized Intellectual Property Regime’, ICTSD-UNCTAD Dialogue, 2nd Bellagio Series on Development and Intellectual Property, 18-21 September.



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practising the invention, enforced via diligence provisions such as minimum royalty payments).

- “Open source” models and compensatory liability regimes:

These can be considered forms of non-exclusive licensing which make technology widely available to anyone wishing to obtain it, subject to compensation where this is warranted, and subject to the condition that improvements and follow-on applications are made available on a similar basis, thereby expanding the “knowledge commons”.

- Requirement to deliver in developing countries: A licensee can be obligated to guarantee availability of product in designated developing country markets. This type of provision can be enforced by coupling it with a provision for compulsory sub-licensing (including sub-licensing of related know-how), which requires the licensee to issue a sub-licence if it is not itself making the licensed product accessible.

- Market segmentation: The licensor can require the licensee to make the technology available on different terms (including differential pricing) in developed and developing countries, or to the public and private sector.

- “Humanitarian use” clauses:

Provisions can be inserted to oblige the licensee (or entitle the licensor) to make the technology available free or at nominal cost for “humanitarian use”. This requires agreement on a suitable definition. Also, licensees must be able to be assured that “leakage” will not take place (ie that “free riders” will not take advantage of the exemption and make uncompensated for-profit use of the technology).

- Preference for licensing to local firms:

This can create opportunities for employment creation and regional economic development.

- Donation of technologies which are unlikely to be commercially profitable, or which serve a compelling public interest: Where a technology offers little profit potential, but may have significant social benefit, a licensor could serve the public good by donating the technology to a public or private sector partner who is willing to exploit it.

This should not be viewed as an exhaustive list. Some of these provisions are commonly used, whereas others are more innovative, and as such might be viewed with suspicion by conservative licensees. As a contractual agreement, a licence is the subject of negotiation and the final outcome will depend on the relative bargaining power of the parties. The main objective of a development-



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oriented TTO will be to ensure that the technology is made easily accessible to all who can benefit from it, rather than on maximising returns to the institution. This calls for some flexibility on a case-by-case basis, depending on the parties involved and the nature of the technology. Policies to support TTOs in developing country research institutions TTOs require significant budgets. Even where income generation is prioritised, it is recognised that a significant lag period must be allowed before a TTO can be expected to become self-supporting. If development imperatives are being emphasised, a TTO might not ever aspire to generate sufficient finance to cover its operating costs. However, since the impact of this activity extends far beyond the institution, benefiting the broader economy and society, an argument can be made for state support. Types of support which could be offered include the following: - Bayh-Dole?:

In considering whether Bayh-Dole-type legislation could provide effective incentives for commercialisation of public funded research, it must be borne in mind that Bayh-Dole was enacted to remedy the failure of the US government to commercialise the IP it owned from research it funded. In many countries, government does not claim rights to IP arising from public-funded research, and in such cases, it can be questioned whether there is a need for such legislation. For example, a recent British report13 explicitly recommends that the United Kingdom not adopt similar legislation, observing that their current circumstances differ markedly from those which led to the need for Bayh-Dole. In South Africa, the proportion of university research funded by industry is much higher than in most developed countries. Since sponsoring companies usually claim ownership of the IP from the projects they finance, the proportion of research leading to unencumbered IP (which the universities are free to commercialise) is much smaller. As a consequence, the impact of Bayh-Dole-type legislation would be significantly weaker, as it would only apply to a much smaller subset of the institution’s research. But this does not mean that alternative legislation or other forms of support (which might borrow certain Bayh-Dole provisions) cannot play an important role in promoting innovation. The form that interventions of this type take, however, should be tailored to meet the needs of the particular environment, and different interventions would therefore be expected to be relevant for different institutions in different countries.

- Training and capacity-building:

The most critical support needed is in developing the human resources to staff TTOs. Without the requisite expertise, TTOs will not be able to provide the necessary services to their home institutions. It would seem that context-

13 Crown Copyright (2003) ‘Lambert Review of Business-University Collaboration’, December.



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specific training programmes containing elements of on-the-job training, secondments, internships and mentorships will be more effective than formal graduate education programmes.

- Funding for patenting and marketing expenses:

The cost of filing and prosecuting patent applications, particularly internationally, can be prohibitive to institutions with limited budgets. Likewise, marketing technologies to potential developed country licensees can require substantial investment. Government support could facilitate activity that could not take place otherwise. However, the mechanisms for accessing such funding must be practical: bearing in mind the non-negotiable time-lines involved in the patenting process, bureaucratic delays will render such assistance meaningless.

- A centralised TTO:

Many developing country institutions will lack the capacity, resources or both needed to establish a TTO (and in particular, the licensing functions of a TTO). For institutions performing only a small amount of research, it will be difficult to justify setting up a TTO, despite the potentially valuable role a TTO could play in growing the institutional research endeavour. In such cases, a centralised national or regional TTO could fill this gap, by serving multiple institutions (including the private sector), which together could provide a critical mass of technology to make the effort worthwhile. In addition to providing services to institutions and firms, a centralised TTO could act as a repository for model agreements, case studies and collections of “best practices”, and access to subscription databases could be provided. A centralised TTO could also co-ordinate national capacity-building efforts. There are however some potential pitfalls which might arise from a centralised office, and which must be avoided. Geographical location must be chosen carefully to ensure accessibility by client institutions. Issues of confidentiality are important, and distrust can arise if researchers believe that competitors at other institutions could get access to their ideas, or if there is any perception of conflict of interest. Even within a country, very different institutional cultures might prevail in different organisations, and these must be considered. A bottom-up approach taking heed of the needs, culture and conditions of the client institutions is likely to be more successful than a top-down assessment of what the needs ought to be.

Complementary Policy Approaches The impact of this activity on strengthening local research and innovation leading to the generation of technology capable of reaping the benefits of higher levels of national IP protection will only be realised if the activity is firmly anchored within a well-supported national system of innovation. It will be further enhanced with



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appropriate complementary policy interventions at both national and international level. It is to be expected that different government departments and agencies will be responsible for interventions at different levels. For this multi-pronged approach to be effective, mechanisms must be put in place to co-ordinate the efforts of different policymakers, to avoid possible conflicts between different policies and departments, and to seek synergies. National At national level, these will include (amongst other things): - Increased public spending on science and technology - An enabling policy framework which encourages public-private research

collaboration - Incentives for private investment in R&D (by both foreign and local firms) by

means such as tax relief and matched funding - Creating an environment conducive to attracting FDI, technology transfer and

joint ventures and collaborations with overseas firms particularly in areas identified as national priorities (which will differ from place to place)

- Support for research institutions and firms to exploit their IP through obtaining

local and foreign protection and in- and out-licensing of technology. Efforts should also be made to review the national IP framework to assess whether it is adequately serving the needs of local industry. If changes are called for, flexibilities permitted under TRIPS or other instruments should be investigated. Opportunities for advancing areas of national priority and building on any existing comparative advantages through the IP system should also be sought, both through conventional and alternative forms of IPRs. Different countries will of course have different needs in this regard, and many of the options require extensive further study to determine if they can provide viable solutions in a particular context. Some examples are: - Sui generis rights to promote the protection and exploitation of indigenous

knowledge - Utility models as an alternative to patent protection, being better suited to

incremental and follow-on innovations, by means of a more accessible, cheaper, and less stringent procedure



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- Geographic indications as a form of branding, signifying origin, quality and authenticity of a product

- Access and benefit-sharing regimes for the exploitation of biodiversity - Robust competition law to ensure that the monopolies inherent in the patent

system do not unjustifiably jeopardise the public interest (eg in the area of public health).

International - bilateral In bilateral negotiations between a developing and a developed country or region, any call for developing countries to implement stronger IP regimes should be balanced with measures ultimately aimed at enabling inventors and institutions in those countries to benefit from the strengthened IP system (with recognition that this goal might take some time to achieve). These could include undertakings to train researchers and technicians, transfer technology (including related know-how), invest in research infrastructure and to set up true research collaborations, where innovative work is not confined to developed country laboratories. International - multilateral In multilateral fora, developing countries with similar interests should enter into alliances14 to increase their bargaining power when presenting their positions or objecting to proposals that are not in their interests. In particular, efforts must be made to give substance to existing developed country obligations to provide technical assistance and technology transfer to developing countries, and where possible and appropriate, to expand these obligations. Multilateral institutions can play an important coordinating role and act as clearinghouses for information and technology. Multilateral funds could be established to finance research on areas of need for developing countries (preferably in, or in collaboration with, developing country research institutions) and to facilitate transfer of technologies of particular public interest to developing countries. A new multilateral agreement on access to basic science and technology has also been mooted, and although it will not be easy to obtain the political will needed, this ought to be further investigated.15

14 Such as the G-20 in the World Trade Organisation. 15 Maskus, K.E. (2003) ‘Transfer of Technology and Technological Capacity Building’, ICTSD-UNCTAD Dialogue, 2nd Bellagio Series on Development and Intellectual Property, 18-21 September.



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Conclusion For IPRs to achieve their objective of incentivising innovation in developing countries, it is essential that developing countries build capacity to manage IP “intelligently” – that is, with sufficient knowledge of how the system works, with a comprehensive understanding of the options available, and in a manner appropriate to the surrounding circumstances and environment. One of the most compelling indications that a stronger national IP regime is of benefit, is evidence of increased use of the system by domestic users. Under the new rules imposed by TRIPS and other instruments, this is unlikely to be achieved without policies targeted at supporting public and private sector innovators, both in their R&D endeavours generally and, more specifically, in using IPRs to promote exploitation of new technology they develop. Concerted efforts must be made to integrate the full suite of relevant policy interventions and support measures as seamlessly as possible for maximum impact.


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TIPS

Agrobiodiversity and Intellectual Property Rights:Selected Issues under the FAO International Treatyon Plant Genetic Resources for Food and Agriculture

Robert J. L. Lettington

Regional Dialogue on Intellectual Property Rights (IPRs), Innovation and Sustainable Development in Eastern and Southern Africa


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Agrobiodiversity and Intellectual Property Rights: Selected Issues under the FAO International Treaty on Plant Genetic Resources for Food and Agriculture Robert J. L. Lettington1 Executive Summary 1. Introduction 2. Definitions and scope

• Definitions and scope are complex concepts but often overlooked • Discovery versus Invention – to what extent are “parts and components” integral

to a resource versus independent inventions? • “parts and components” – primarily developing country and seen as supporting

prohibition of patents on life forms • “in the form received” – primarily developed country and seen as allowing for

intellectual property on derivatives • When is a genetic resource a genetic resource? • Article 2: “Plant genetic resources for food and agriculture” means any genetic

material of plant origin of actual or potential value for food and agriculture. • Utilitarian not physical definition • Rarely, if ever, clarified and excessively broad if not • Articles 2 and 12.3(a) do provide some clarity in the case of the ITPGR but may

become controversial • Most other agreements and many national laws do not provide clarity

3. Farmers’ Rights: positive and negative rights • Farmers’ Rights are inextricably linked to intellectual property rights • Some aspects of Farmers’ Rights, “positive rights”, are effectively a form of

intellectual property rights • Other aspects, “negative rights”, are limitations on intellectual property rights • Farmers’ Rights go considerably beyond their relationship with intellectual

property rights • The future of Farmers’ Rights depends very much upon national interpretation

and implementation 4. Material transfer agreements

• Invention versus discovery – which jurisdiction will determine the precise interpretation of Article 12.3(d)?

• Enforcement – private versus public enforcement • Transaction costs – excessive transaction costs could defeat the purpose of the

Treaty 5. Conclusion

• National implementation likely to have a major impact on developments under the ITPGR

• Whether countries focus on the functioning of the Multilateral System under the ITPGR or on the politics of intellectual property rights may prove decisive

1 Robert Lettington is Deputy Director of the Southern Environmental and Agricultural Policy Research Institute (SEAPRI), an initiative of the International Centre of Insect Physiology and Ecology (ICIPE). The opinions expressed in this paper are those of the author and do not represent the official positions of ICIPE, SEAPRI or the publishers.



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1. Introduction

The fundamental role that agriculture continues to play in the economies of developing countries and the livelihoods of the majority of their citizens means that the relationship between intellectual property rights and the sector is one of the most complex and intensely debated aspects of the international intellectual property rights framework. Perceptions of an increasing privatisation and monopolisation of the basic building blocks of crop-based agriculture, plant genetic resources for food and agriculture, through intellectual, and other property, rights have sharpened concerns about asymmetries between commercial and smallholder farmers and threats to public sector agricultural research. The FAO International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGR or Treaty) was developed as a response to these concerns and is intended to ensure facilitated access to a selected list of plant genetic resources for food and agriculture on a basis of mutuality and reciprocity. However, the future interaction of the ITPGR with the established proprietary frameworks, particularly those of plant variety protection and patents, raises a number of questions relating to the effective implementation of the Treaty. This paper considers three of these questions: the ongoing debate regarding concepts of invention versus discovery in intellectual property rights; the nature, and options for the implementation, of Farmers’ Rights; and, potential problems with the use of material transfer agreements under the ITPGR.

2. Definitions and scope

Definitions and scope of application have been complex concepts during the development of the ITPGR and in the negotiation and implementation of intellectual property rights regimes. In the context of the ITPGR two particular issues have achieved some prominence. The first relates directly to the question of the claiming of intellectual property rights and is the issue of the proximity of a genetic resource to its “genetic parts or components, in the form received”, as referred to in Article 12.3(d) of the Treaty. The direct relationship with IPRs lies in the fact that the controversy over this language is essentially a reflection of the wider debate over invention versus discovery. The second issue is less directly related to intellectual property rights but has the potential to have significant impacts in that field and is the question of what exactly is a genetic resource or, as will be seen, more accurately, when is a genetic resource a genetic resource?

• Definitions and scope are complex concepts but often overlooked • Discovery versus Invention – to what extent are “parts and components”

integral to a resource versus independent inventions? • When is a genetic resource a genetic resource?



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2.1 Discovery versus Invention

Article 12.3(d) is one of the most controversial provisions of the ITPGR and, as such, was one of the last to be agreed upon prior to the adoption of the Treaty text. The central point of controversy is one that links concepts of definitions and scope in that it revolves around the question of to what degree does a “genetic resource” include derivatives of that resource? The fact that this question is raised in the context of a prohibition on the claiming of intellectual property rights directly links it to the broader debate on the patenting of life forms and invention versus discovery that has been so heated in forums such as the Council for TRIPs, WIPO and the CBD. The text of Article 12.3(d) is a compromise or, more accurately, a deliberate ambiguity. The majority of developing countries sought the inclusion of the qualification of “or their genetic parts and components” while a core group of developed countries insisted on the reference to “in the form received”, 2 with each group seeing their proposal as an exclusive option. The compromise was to include both, which was essentially an agreement to disagree rather than a genuine compromise. As a consequence, it is not really clear what Article 12.3(d) means and thus whether things such as isolated and purified compounds or gene sequences are patentable or not.

A commonly held view of where the compromise over Article 12.3(d) leaves the situation consists of two parts. First, the debate is not over and will continue in all of the forums where it has been so prominent to date and the ITPGR will probably provide another battleground. Second, Parties to the ITPGR are, for the time being, relatively free to interpret 12.3(d) into their intellectual property laws as they deem fit. As is often the case, much may hinge on implementation at the national level. The more that countries seek to enact intellectual property rights legislation, or regulatory interpretations, clearly iterating their understanding of Article 12.3(d), the stronger their positions in the international debate are likely to be. 2 The developed country position, and to a large degree the debate, is clearly iterated in the declarations made by the European Community and its member states upon ratification of the Treaty, which all follow roughly the same language: “The European Community and its Member States interpret Article 12.3 d of the International Treaty on Plant Genetic Resources as recognising that plant genetic resources for food and agriculture or their genetic parts or components which have undergone innovation may be the subject of intellectual property rights provided that the criteria relating to such rights are met.” See <http://www.fao.org/Legal/TREATIES/033s-e.htm>, website last visited 23/06/04.

• Article 12.3(d): Recipients shall not claim any intellectual property or other rights that limit the facilitated access to the plant genetic resources for food and agriculture, or their genetic parts or components, in the form received from the Multilateral System;

• “parts and components” – primarily developing country and seen as supporting prohibition of patents on life forms

• “in the form received” – primarily developed country and seen as allowing for intellectual property on derivatives



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2.2 When is a genetic resource a genetic resource: Bolivian potatoes?

While the status of derivatives of genetic resources is a major point of ambiguity in the ITPGR, the actual meaning of “plant genetic resources for food and agriculture” is itself ambiguous. The origin of this ambiguity is the ITPGR’s use of the CBD definition of “genetic resources” as its model. The CBD definition is utilitarian, in that it depends on the uses of a genetic resource to define the term, rather than physical, i.e. focusing on the natural characteristics of a resource, in nature. Genetic material, or plant genetic material in the case of the ITPGR, becomes a genetic resource on the basis of the application of that material to some purpose and not on the basis of any intrinsic characteristic of the material. Therefore, the definition needs to be supplemented by provisions regarding the types of use of genetic material that will be considered as making that material a genetic resource. In the absence of such supplementary provisions, the default position is that all forms of biological material are genetic resources. Given the almost universal intention of countries to exclude products such as agricultural commodities from any understanding of genetic resources, this is clearly not the intention. However, the CBD definition merely establishes the utilitarian approach and does not provide its details, thus leaving considerable room for interpretation at the national level.

The ITPGR is almost unique in that it does provide some detail, and thereby narrows the scope of application of the definition, through the provisions of articles 2 and 12.3(a). The relevant text in Article 2 is the closing line of the chapeau: [t]hese definitions are not intended to cover trade in commodities. This text clearly demonstrates that the definitions provided are not self-sufficient, as the exclusion of commodities had to be added, and equally clearly places the emphasis on the uses, rather than the intrinsic nature, of material. This pattern is expended upon in Article 12.3(a):

This paragraph provides relatively clear lines for the types of uses that do, and do not, bring a particular use of plant genetic resources within the scope of the ITPGR. Whether

• Article 2: “Plant genetic resources for food and agriculture” means any genetic material of plant origin of actual or potential value for food and agriculture.

• Utilitarian not physical definition • Rarely, if ever, clarified and excessively broad if not • Articles 2 and 12.3(a) do provide some clarity in the case of the ITPGR but

may become controversial • Most other agreements and many national laws do not provide clarity

12.3 Such access shall be provided in accordance with the conditions below: (a) Access shall be provided solely for the purpose of utilization and conservation for research, breeding and training for food and agriculture, provided that such purpose does not include chemical, pharmaceutical and/or other non-food/feed industrial uses. In the case of multiple-use crops (food and non-food), their importance for food security should be the determinant for their inclusion in the Multilateral System and availability for facilitated access.



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this language is considered to impact the definition or the scope of application is largely a question of semantics, the fact that it considerably narrows the uses of plant genetic material that fall within the ambit of the ITPGR remains in either case. A recent example of why these issues of definitions and scope matter can be found in the case of a deal between Bolivia and a Swiss company regarding several traditional potato varieties.3 The potato varieties are being provided by Bolivia and they will be multiplied in Switzerland for sale as gourmet varieties in supermarkets in return for the payment of a royalty on sales to Bolivia. Given that potato is one of the key crops covered by the ITPGR, the question was whether the Bolivian-Swiss deal would be covered by the Treaty? If it was, Bolivia would be required4 to provide facilitated access to potato varieties subject to state ownership and control and, thereby, would forego any right to require the direct payment of royalties. The Swiss did not intend to undertake any breeding, or other form of research or improvement, involving the potato varieties and thus the deal does not appear to fall within the “utilization and conservation for research, breeding and training” scope provided for in Article 12.3(a). Thus the Bolivian-Swiss deal would appear to have been acceptable even had the Treaty been applicable to the countries at the time. While the Bolivian-Swiss situation is relatively easily resolved it highlights the fact that a variety of uses of crops covered by the ITPGR do not fall within the scope of the Treaty. Future examples may not prove to be as simple and could become controversial if individuals and countries begin to avoid the intellectual property rights and benefit sharing requirements of the ITPGR on the basis of its relatively narrow scope. 3. Farmers’ Rights: positive and negative rights

3.1 The nature of positive and negative rights From its initial formal iteration, the concept of Farmers’ Rights has been the subject of a variety of interpretations depending upon the particular perspectives or interests of the actors involved. An exhaustive analysis of these interpretations is not within the scope of this paper. However, in general terms, these interpretations can be broadly divided into two discrete, but related, groups: positive and negative rights.5 In

3 Information regarding this deal and the surrounding questions was provided in the context of a workshop on access to genetic resources hosted by IPGRI and InBio in San Jose, Costa Rica, in January 2004. 4 At the time of the deal the ITPGR had not entered into force and Bolivia had not ratified it meaning that the question was in the context of whether it was in Bolivia’s interests to accede to the Treaty rather than in that of the Treaty’s immediate application. 5 The nature of, and basis of division between, positive and negative rights is derived from the legal and political theories of imperfect and perfect rights and positive and negative community developed by

• Farmers’ Rights are inextricably linked to intellectual property rights • Some aspects of Farmers’ Rights, “positive rights”, are effectively a form

of intellectual property rights • Other aspects, “negative rights”, are limitations on intellectual property

rights • Farmers’ Rights go considerably beyond their relationship with intellectual

property rights • The future of Farmers’ Rights depends very much upon national

interpretation and implementation



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simple terms, positive rights are those that allow for the assertion of rights that affect, or impose on, others. Negative rights are those that allow for freedom of action, or a right not to be interfered with, on the part of those asserting the right. The most significant international iteration of Farmers’ Rights to date is that contained in Article 9 of the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGR). Article 9 contains concepts that reflect aspects of both positive and negative rights. The following discussion considers each of these in turn in an effort to highlight the fact that Farmers’ Rights is not a single, unified, concept but, rather, consists of at least two distinct sets of rights that may be recognized or supported as individual states deem fit. This point is particularly important when one considers that the chapeau to paragraph 9.2 provides that states should implement Farmers’ Rights “as appropriate, and subject to…national legislation”. As much as states may choose how they implement Farmers Rights’,6 they may also, presumably, choose from among the various elements provided for.

The discussion concludes by examining the assertion that basic elements of the concept of Farmers’ Rights are more broadly embedded in the ITPGR than the text of Article 9 suggests. In particular, Article 6 of the Treaty, providing for the “Sustainable Use of Plant Genetic Resources” has considerable potential relevance to Farmers’ Rights. 3.2 Farmers’ Rights as positive rights Positive Farmers’ Rights are somewhat akin to orthodox intellectual property rights and primarily consist of the right to share in any benefits that might be derived from the use of farmers’ varieties and the right to control or influence such use. The basic operative principle is one of equity, where one has a right to benefit from the fruit of one’s creativity. To the extent that positive Farmers’ Rights are considered at the international level, they are primarily debated in established intellectual property rights forums such as the World Intellectual Property Organization (WIPO) and the World Trade Organization’s (WTO) Council for TRIPs, in the latter case primarily within the context of sui generis regimes developed pursuant to TRIPs Article 27.3(b). Article 9 of the ITPGR primarily provides for positive Farmers’ Rights in paragraphs 9.1 and 9.2. Paragraph 9.1 is the iteration of the underlying principle of equity, recognizing that Farmers’ Rights are based on the historical and ongoing contributions of farmers to global agriculture. Paragraph 9.2 contains the operative elements of positive Farmers’ Rights, in particular in sub-paragraphs (a) and (b):

There are several ways in which the division between subparagraphs (a) and (b) may be interpreted. However, given that the two paragraphs are likely to be viewed as a holistic

Grotius and Puffendorf in the Seventeenth Century. See Tuck, R., The Rights of War and Peace: Political Thought and the International Order from Grotius to Kant at 152 – 158 (Oxford University Press, 1999). 6 The controversial question is whether they are required to implement anything or not. The language of the chapeau suggests that there is no mandatory requirement but it could be interpreted as requiring at least token measures.

(a) protection of traditional knowledge relevant to plant genetic resources for food and agriculture; (b) the right to equitably participate in sharing benefits arising from the utilization of plant genetic resources for food and agriculture; and



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whole,7 these divisions are not particularly significant. The main points to be noted are that knowledge and resources8 are given equal weight and that the right to benefit is accompanied by the right to control or influence use. The interactions between positive Farmers’ Rights and orthodox intellectual property rights revolve around a range of relatively well established, and often intensely debated, points. These can roughly be grouped into substantive and procedural issues. On the substantive side, the primary question is formal legal recognition allowing farmers to claim and enforce their rights. This question is not dissimilar from those relating to other aspects of traditional knowledge. One distinction might be that recognition at the national level is perhaps at least important as recognition at the international level given that landraces are often sourced, at least initially, for national purposes. The more challenging questions are those on the procedural side and include, inter alia: requirements for declarations of any use of landraces; mechanisms for benefit sharing that adequately balance the interests of individuals, communities and other groups; and, the transaction costs9 of implementing positive rights as balanced against the economics of plant breeding. This latter point of transaction costs is particularly important when one considers that the most widespread use of landraces is in the development of new varieties for use by smallholder farmers and, thus, any increase in costs may prejudice the situation of those who are already the most vulnerable. 3.3 Farmers’ Rights as negative rights Negative Farmers’ Rights have less in common with orthodox intellectual property rights than their positive cousins but still interact with them, in particular with plant breeders’ rights and the Convention for the Protection of New Varieties of Plants (UPOV Convention). They focus on freedom of action, rather than the assertion of rights to impose on others witnessed in the case of positive Farmers’ Rights. Forums such as the CBD and WIPO have occasionally considered negative Farmers’ Rights in the context of their broader mandates, but the only forums to consider them explicitly are UPOV and FAO. UPOV has not considered Farmers’ Rights, whether positive or negative, in their own right but has considered them in the context of the evolving nature of plant breeders’ rights. In particular, UPOV has traditionally considered some level of need for limitations to, or exclusions from, plant breeders’ rights to allow for the essential activities of smallholder farmers. However, as is the case with positive Farmers’ Rights, the clearest iteration of negative Farmers’ Rights can be found in Article 9 of FAO’s ITPGR:

7 The purpose of the division between 9.2(a) and 9.2(b) is more to do with emphasising benefit sharing rather than creating any genuine divisions between the subject matter of the two sub-paragraphs. 8 Which in turn, probably can be taken to imply that no distinction should be made between the use of resources alone and the use of resources in combination with associated knowledge. However, it should be noted that this interpretation is somewhat at odds with the basic intellectual property rights concepts underlying positive Farmers’ Rights, where human ingenuity and creativity “adds value” to a resource. 9 This includes a range of possible costs including tracking, traditional enforcement, assessment of relative contributions of landraces etc.



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Just as subparagraph 9.2(a)’s use of the term ‘protection’ can be interpreted as incorporating various concepts of positive rights, such as rights to control or influence in decision-making, the same term can be interpreted as also incorporating concepts of negative rights, such as the conservation and promotion of knowledge or resources. Subparagraph 9.2(c) reinforces this interpretation of ‘protection’ by providing that farmers should be included in national level decision-making that may directly affect their resources and practices. While the exact requirements of this subparagraph are, probably intentionally, unclear it could be said that other articles of the Treaty provide, at a minimum, guidelines to this effect, as discussed in 3.4 below. Subparagraph 9.3 is the most clearly iterated, and widely accepted, element of negative Farmers’ Rights. These basic rights to save, use, exchange and sell seed and propagating material reflect the traditional practices of smallholder farmers throughout the world. For many years these rights were taken for granted, but, efforts to curtail or otherwise limit them in regard to commercially developed varieties, and recently essential derivations of such varieties, have significantly increased in the last twenty years with the emergence and spread of UPOV and subsequent expansions of the implementation of patent rights.

It has been increasingly recognized that negative Farmers’ Rights require some form of explicit iteration or formal recognition to limit or prevent this erosion. Examples of the explicit implementation of negative Farmers’ Rights are almost as rare as examples of the implementation of positive rights. The most notable exception to this trend is Brazil which, while not mentioning the term Farmers’ Rights, has constructed its plant variety protection legislation in such a manner so as to exclude smallholder farmers from the ambit of plant breeders’ rights. Despite its vocal support for Farmers’ Rights during the negotiations for the ITPGR, examples of the implementation of negative Farmers’ Rights are few and far between in Africa, with most of the attention having gone to positive rights. However, it should be noted that the formal recognition of negative Farmers’ Rights is likely to be a more immediately, if not permanently, profitable undertaking for developing countries than the recognition of positive Farmers’ Rights. Implementation costs virtually nothing, as recognition is more recognition of traditional practice than the recognition of new rights. In addition, formal recognition provides more scope for the active promotion and further development of useful traditional practices than is currently the case under legal regimes dominated by the commercial plant variety development paradigm. 3.4 Additional aspects of Farmers’ Rights Despite the explicit relevance of Article 9 of the ITPGR to Farmers’ Rights, the provisions of Article 6 should not be underestimated in their potential to impact upon the issue. Article 6 was generally accepted as a non-controversial technical issue during the

9.2… (a) protection of traditional knowledge relevant to plant genetic resources for food and agriculture; (c) the right to participate in making decisions, at the national level, on matters related to the conservation and sustainable use of plant genetic resources for food and agriculture. 9.3 Nothing in this Article shall be interpreted to limit any rights that farmers have to save, use, exchange and sell farm-saved seed/propagating material, subject to national law and as appropriate.



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negotiation of the ITPGR. This is largely the case and it should also be borne in mind that the entire text of the Article is one that provides guidelines or a suggested framework rather than any mandatory measures. However, the interaction of the provisions of Article 6 with those of Article 9 contributes to the establishment of a pattern whereby the ITPGR requires, or at the very least recommends, a thorough consideration of national law and policy in the context of Farmers’ Rights. Virtually the entire text of Article 6, and in particular 6.2, is of potential relevance to Farmers’ Rights and three provisions are selected here as illustrations.

As with Article 9.2(a), discussed above, Article 6.2(a) is potentially applicable to

both positive and negative aspects of Farmers’ Rights. The subparagraph is potentially subject to a broad range of interpretations relating to agricultural research, development and trade but, in the context of intellectual property rights, the most important of these is probably the proposal that policies should promote diverse farming systems. It is widely acknowledged that plant variety protection following the UPOV model, and perhaps even in terms of its general concepts, has been developed in the context of commercial scale agriculture. It could be argued that the fact that, in most countries, there is no corresponding system for smallholder farmers means that such systems are free to develop as their needs determine. However, the encroachment of plant variety protection into smallholder farming systems suggests that a parallel system of rights for smallholder farmers is necessary to prevent asymmetries developing. The features of this system are not predetermined by Article 6.2(a) but, given the focus on a diversity of systems and sustainable use of resources, the emphasis would appear to be on what have been discussed as negative Farmers’ Rights, rather than the more equity oriented positive rights.

Article 6.2(c) has two potential implications as regards intellectual property rights. The first relates to orthodox intellectual property rights and is, again, a question that relates more to negative than positive concepts of Farmers’ Rights. This is that if government policy should promote participatory breeding efforts at the local level the same policy should seek to avoid a situation were orthodox intellectual property rights might interfere with such efforts. The breeders’ privilege, where plant breeders may make use of protected varieties in their research and development activities, under UPOV could be seen as one means of implementing this aspect of Article 6.2(c). The second implication of Article 6.2(c) relates more to positive Farmers’ Rights and the underlying concepts of intellectual property rights. This is that 6.2(c) could be interpreted as proposing the establishment of new forms of intellectual property right to provide

Article 6, Sustainable Use of Plant Genetic Resources 6.2 The sustainable use of plant genetic resources for food and agriculture may include such measures as: (a) pursuing fair agricultural policies that promote, as appropriate, the development and maintenance of diverse farming systems that enhance the sustainable use of agricultural biological diversity and other natural resources;

(c) promoting, as appropriate, plant breeding efforts which, with the participation of farmers, particularly in developing countries, strengthen the capacity to develop varieties particularly adapted to social, economic and ecological conditions, including in marginal areas;



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incentives for smallholder farmers to develop locally appropriate varieties. Efforts at the development of such systems to date have focused on the two central elements of capturing benefits and controlling or influencing subsequent use, as discussed earlier under positive rights.

Article 6.2(g) primarily relates to national seed laws but may also be interpreted

as having implications for plant variety protection legislation. Seed laws are not generally considered, or intended, to be intellectual property rights. However, in their requirements for the registration of seed, and prohibitions on the sale of any non-registered seed, they can sometimes have similar effects. Seed laws are increasingly being harmonised in a number of regions but, as with plant variety protection, are generally being harmonised on the basis of a model that focuses on the needs and interests of the commercial sector rather than smallholder farmers. Also as with plant variety protection laws, seed laws do not prejudice Farmers’ Rights per se but, rather, tend to risk such prejudice by not recognising the existence of parallel seed systems. The potential application of Article 6.2(g) to plant variety protection laws lies in the reference to “adjusting breeding strategies”. PVP laws are one component, along with seed laws, of regulatory efforts to encourage plant breeding. 4. Material transfer agreements

The use of material transfer agreements (MTAs) as a central mechanism of the ITPGR has been a hotly debated issue, particularly during the later stages of the negotiations on the Treaty’s text. Discussion here does not consider the full range of issues arising from the use and nature of MTAs but, rather, focuses on three questions that are likely to prove central as the implementation of the Treaty evolves. The first is essentially the same as that raised in section 2.1 of this paper relating to the debate over invention versus discovery. The current draft of the MTA, which is an interim document pending the adoption of a new text by the Governing Body of the ITPGR, adopts the language of Article 12.3(d) verbatim and, thus, incorporates the same ambiguities. This effectively means that the terms and conditions of the MTA will vary depending on the jurisdiction in which particular parties to an MTA are found. As a consequence, countries seeking interpretations of Article 12.3(d) that restrict the patenting of derivatives as much as possible will likely be frustrated by the policies and practices of countries with more expansive interpretations. Ultimately, this will simply mean that the current controversies regarding the patent practices of certain countries will be extended into a new forum. The second issue considered here is that of the enforcement of MTAs. There is something of a diversity of opinion regarding the role of the Governing Body in the enforcement of MTAs. A number of countries take the view that the effective

(g) reviewing, and, as appropriate, adjusting breeding strategies and regulations concerning variety release and seed distribution.

• Invention versus discovery – which jurisdiction will determine the precise interpretation of Article 12.3(d)?

• Enforcement – private versus public enforcement • Transaction costs – excessive transaction costs could defeat the

purpose of the Treaty



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enforcement of MTAs will be a key measure of the relative success or failure of the ITPGR and that, as a central pillar of the Treaty, the Governing Body should have the primary role in monitoring, and in some cases even implementing, enforcement measures. However, several other countries insist that the enforcement of MTAs must be a matter of private law between the particular parties to them. This, of course, raises the question of who exactly are the parties to an agreement whose terms and conditions are to be established by the Governing Body of the Treaty and how can the Governing Body not have responsibility for the enforcement of the Treaty that it governs? This situation poses a potential threat to the future of the Treaty in that an exclusively private law approach to the question of enforcement will largely be a reflection of the current situation with patent regimes. The relative cost and complexity of seeking redress for alleged cases of biopiracy through the judicial systems of developed countries has led many developing countries to protest that outcomes are determined according to economic strength and not according to the validity of claims. As is suggested by the previous discussion of problems relating to the diversity of interpretations of an MTA’s intellectual property rights provisions and the likely complexities of enforcement, particularly if a private law approach is adopted to the exclusion of state action, the use of MTA’s is unlikely to be a straightforward process. This is likely to mean that individuals and institutions seeking to make use of the Multilateral System for the exchange of plant genetic resources established by the ITPGR will need specific capacity to be able to fulfil their obligations under the Treaty. If the enforcement of MTAs is to be a private matter, the providers of genetic resources subject to the Treaty will need to be able to monitor the use of the material they provide to ensure that the terms and conditions of the MTA are being fulfilled. The burden of this responsibility is likely to be minimal for actors that are not publicly accountable or who are already accustomed to monitoring and enforcing rights in such a manner. However, it will fall more heavily on public institutions that are more directly accountable to governments and civil society and who are not generally accustomed to the aggressive assertion and enforcement of rights. If the burden of using material transfer agreements in the implementation of the ITPGR is more than minimal, this burden is likely to defeat the original purpose of the Treaty: to ensure facilitated, i.e. cheap and flexible, access to plant genetic resources for food and agriculture. 5. Conclusion The intellectual property rights, and other related, issues presented by the implementation of the ITPGR are all, in large part, reflections of controversies in the broader international context. This leads to two basic conclusions. First, that national law and practice has the potential to exert significant influence on the evolution of the implementation of the Treaty in the absence of clarity and consensus at the international level. Countries that postpone detailed implementation are likely to be surrendering valuable political capital at the international level. Second, much of the success or failure of the ITPGR may depend upon whether Parties to the Treaty continue, pending any resolution of fundamental intellectual property rights controversies at the international level, with the “agreement to disagree” demonstrated by the adoption of Article 12.3(d) or whether the Governing Body becomes a new battleground for these controversies and is paralysed in the same manner that the review of Article 27.3(b) in the WTO’s Council for TRIPs has effectively ground to a halt.

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