The Bellagio Series on Development and Intellectual Property Policy

At the Rockefeller Foundation's Bellagio Study and Conference Center on Lake Como in Northern Italy,
30 October - 2 November 2002

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Description | Background Note | Programme | Participants | Documentation

  Background Note

Intellectual property rights (IPRs) have never been more economically and politically important or controversial than they are today. Patents, copyrights, trademarks and geographical indications are frequently mentioned in discussions and debates on such diverse topics as public health, agriculture, education, trade, industrial policy, biodiversity management, biotechnology, information technology, the entertainment and media industries, and increasingly the widening gap between the income levels of the developed countries and the developing, and especially least-developed, countries. There is no doubt that an understanding of IPRs is indispensable to informed policy making in all areas of human development including the alleviation of poverty.

Developing country members of the World Trade Organization (WTO) no longer have the policy options and flexibilities developed countries had in using IPRs to support their national development. The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) imposes minimum, relatively high, standards, which all WTO members must follow. But, TRIPS is not the end of the story. Significant new developments are taking place at the international, regional and bilateral level that build on and strengthen the minimum TRIPS standards.

Recent World Bank estimates suggest that the costs of adopting these standards, just in terms of financial transfers from developing to developed countries through royalties and licence fees, will be extremely high:

If TRIPS were fully implemented, rent transfers to major technology-creating countries - particularly the United States, Germany, and France - in the form of pharmaceutical patents, computer chip designs, and other intellectual property, would amount to more than $20 billion.
Stated baldly, and if the assumptions on which the research is based are reliable, this means that TRIPS represents a $20 billion plus transfer of wealth from the technology importing nations - many of which are developing countries - to the technology exporters - few if any of which are developing countries - that may or may not be outweighed by future gains. While benefits are also likely, such as through increased direct foreign investment, these are likely to take longer to accrue and their scale is difficult to predict. The dynamic efficiencies of stronger and more effective IPR systems may more than make up for the administrative and enforcement costs, as might increased direct foreign investments. Whether or not this turns out to be true, the costs must be borne before the benefits accrue and, for least-developed countries especially, these are likely to be particularly onerous.

For several reasons national policy making and international negotiating on IPRs is very difficult for developing and especially least-developed countries. This is due to three factors: (1) the cross-cutting nature of IPR regulation; (2) divergent views and lack of data; and (3) the dynamic nature of international IPR rule-making.

(1) The cross-cutting nature of IPR regulation

IPRs relate to and impact simultaneously on a broad range of economic activities and business sectors. For example, patents potentially affect industrial development, foreign direct investment, access to technologies, international trade, public health, food security, natural resource management, and sectors such as biotechnology, pharmaceuticals, engineering and software. Consequently, effective policy making requires the integration of technical expertise coming from a wide range of disciplines as well as coordinated decision-making by different government ministries that may have little experience of working together. This is a big challenge for many countries.

(2) Divergent views and lack of data

Informed opinion on IPRs varies widely. Some believe that strong IPR protection and enforcement is indispensable for a modern economy, and the stronger the better. Critics argue that IPRs - or at least the way they are currently contoured - have such deleterious effects as raising the prices of essential drugs to levels that are too high for the poor to afford; limiting the available of educational materials for developing country school and university students; legitimising the piracy of traditional knowledge; and undermining the self-reliance of resource-poor farmers. Understandably, debates on these issues are polarized and emotional. It is difficult to know where the truth lies. Policy makers need to be able to separate out the truth from the propaganda so that they can design IPR laws and policies that best meet the needs of the people they represent and negotiate effectively in future agreements. But this is far from easy. It is impossible to calculate with any certainty the long-term impacts of TRIPS on developing countries and their populations. It is possible that ultimately every country will benefit. But this is pure speculation. We can be certain, though, that developing and least-developed countries will incur short-terms costs in the form of administration and enforcement, and rent transfers, and that these will outweigh the initial benefits. The cost-benefit balance will vary widely from one country to another, but in many cases the costs will be extremely burdensome.

(3) The dynamic nature of international IPR rule-making

IPRs, like other regulatory systems, are not static but dynamic. During recent decades, there has been a tendency for protectable subject matter to be widened, for new rights to be created, and for the basic features of IPRs to be standardized. Consequently, national IPR regimes throughout the world are becoming increasingly held to harmonized minimum standards of protection. While these standards remain a long way from uniform law, this situation may be changing. Much of the recent debate has focused on the TRIPS Agreement. TRIPS seeks to establish enforceable universal minimum (and high) standards of protection and enforcement for virtually all the most important IPRs, but nonetheless allows for a certain amount of diversity between different countries in terms of levels of protection and exceptions.

Two other developments are also affecting the evolution of IPR law at the international and national levels: (1) new treaty development; and (2) harmonization. Taking the first development, since the TRIPS Agreement entered into force a number of new multilateral IPR treaties have been negotiated and adopted. These include the WIPO Performances and Phonograms Treaty, the WIPO Copyright Treaty, and the Patent Law Treaty. Harmonization of substantive IPR law is coming about in two ways. The first is through bilateral treaties between developed and developing countries which tend to require standards of protection to be on the same level as the developed country party and with narrowed-down exceptions. The second is through international and bilateral technical cooperation. There are concerns that such cooperation does not fully take into account the development needs of beneficiary countries nor the flexibilities allowed to them under TRIPS. Another emerging force for harmonization in the area of patent law is WIPO's draft Substantive Patent Law Treaty.

In sum, harmonization is likely to entail making the patent systems of the world more like each other using those of the technologically most advanced countries as the models. The effects of developments (1) and (2) overlap in the sense that both are raising the floor of minimum IPR standards above the level of the TRIPS Agreement and are therefore 'TRIPS plus'. The implications for developing countries are two-fold. First, their options are being rapidly narrowed. Second, because they have to be aware of related developments taking place in a wide range of forums and know where their national interest lies with respect to each one, the development of coherent, effective and sustainable policies and negotiating strategies on IPRs is becoming harder than ever before. Ensuring consistency between the positions adopted at the multilateral, regional and bilateral levels, and with national IPR regulations is an enormous challenge and a tall order for any country. In the case of developing countries and least developing countries, it might constitute an impossible endeavour.

© ICTSD 2004 - Last Update: 05-Oct-2009