After the introduction of the TRIPS Agreement, the international platform has significantly changed, especially concerning intellectual property.
The TRIPs Agreement takes into consideration the demands of industrialized countries concerning the need for higher international standards of protection by authorizing the extension of patentability to almost all fields of technology known in developed country systems, by extending the patent protection for a standard term of twenty years and, lastly, by giving legal recognition of the patentee's exclusive rights to import the patented products.
Terms and conditions in TRIPs is equally applicable to all member states, except to developing countries who were given additional time to implement the appropriate changes to their national laws, in two tiers of transition depending on their respective development levels The transition period for developing countries expired in 2005 and for least developed countries it was extended to 2016.
Developed countries are huge net-exporters of copyright, patent and trademark related royalties. As the TRIPs standard requires all countries to establish strict intellectual property systems, this system will be detrimental to poorer countries' development.
In 2005, a report of the WHO pointed out that several developing countries have not yet implemented TRIPS flexibilities (compulsory licensing, parallel importation, limits on data protection, use of broad research and other exceptions to patentability, etc) into their legislation.
Such a situation can be explained by a lack of legal and technical expertise required to draft legislation that implements flexibilities, and consequently this has often led to developing countries directly copying developed country IP legislation, or relying on technical assistance from the World Intellectual Property Organization (WIPO), which, according to critics such as Cory Doctorow, encourages them to implement stronger intellectual property monopolies.
3.2 Implications of the TRIPS Regime for Developing Countries
Many have argued that the integral implementation of the TRIPS Agreement is certainly going to have a significant influence on the development processes in developing countries.
a) Local Technological Capability Building
Acquisition of local technological ability by developing countries may highly be affected by the implementation of IPR regimes worldwide. For example, the provision of product patents on chemical and pharmaceutical products would unfavorably affect the innovative ability of enterprises involved in the production of chemicals covered by patents. The creation of more chemical compounds is normally beyond the capacity of the majority of developing country enterprises considering the huge resources involved. Thus, they focus interest on innovations methods for the known chemicals and bulk drugs. This imitative duplication or reverse engineering activity is a main source of learning in developing countries. In fact, nearly all present industrialized countries as well as newly industrialized countries promote local learning through soft patent laws and the absence of product patents in chemicals in the early stages of their development. This implies that today's poorer countries will not be able to benefit from a key source of total factor productivity growth (absorption of spillovers of foreign inventions) previously accessible to countries that have developed by now. Therefore, considering this fact, the TRIPS Agreement is highly inequitable. Possibilities of stronger IPR regime stimulating innovative activity in developing countries are very few. The implementation of utility models or petty patents and design patents has more chances of encouraging local technological activity than the requirements of TRIPs in poor countries.
b) Industrialization, Technology Transfers and Trade
Fully implementing IPRs regime may further restrict the access of technology to developing country enterprises. An example is the case of Korean corporations who were not given access to technology licenses by patent holders in the Western world pushing them to reverse engineer the products. It has also been found that many local enterprises found in developing countries will be forced to close down or form alliances with larger firms consequently creating concentration of the industry.
There will be a higher dependence on imports. Mascus and Penubarti (1997) discovered that there are high probabilities that TRIPS will have adversely affect import volumes.
c) Prices of Medicines and Loss of Consumer Welfare
Many studies have analyzed the consequence on prices of medicines following the introduction of product patents and therefore forecasted welfare losses for consumers in developing countries. It is widely believed that drug prices will go up upon introduction of product patents as happened in China which introduced them in 1993 [May 2000:99; also see Lanjouw 1998, Scherer and Watal 2001, and Panagariya 1999]. According to Nogues (1993), 6 countries in particular (Argentina, Brazil, India, Mexico, Korea and Taiwan) will experience welfare losses following the introduction of product patents and the cost is estimated to be between US$ 3.5 billion to $10.8 billion.
Likewise, Watal (2000) forecasts the probable increase in pharmaceutical prices and decrease in welfare in India after the implementation of product patents in 22 pharmaceutical products. The results revealed that the weighted mean drug price in India could increase from 26 per cent to 242 per cent, based on certain assumptions.
The above mentioned studies clearly suggest that with the introduction of product patents, prices of medicines would be affected and this may lead to a decline in the health levels of the population if new drugs are not good enough.
What recently happened in South Africa concerning enormous differences between prices of HIV Aids drugs sold by patent holders and their generic substitutes confirms the probability of price increases after the introduction of product patents.
Although most of drugs are out of patent protection, it can be argued that they will not be affected. However, the AIDS drugs controversy proves that effective treatment for many of present scourges such as cancer, cardiac failures, renal problems, can possibly be at risk.
d) Income Transfers from Developing Countries
Developed nations have near complete domination on technology generation with 95 per cent ownership of US patents. Hence, it is most likely that stronger IPR regimes will lead to a significant raise in flow of royalties and license fees from developing countries to developed countries.
According to McCalman (1999), this system is likely to cause large transfers of income between countries, where US is likely to be the main winner. Among the developing countries, China could experience an outflow of patent rents of the order of $5.1 billion, India $ 903 million, Israel $ 3.8 billion.
e) Impact on Global Technological Activity and Availability of Drugs
One argument favoring a stronger IPR system is based on the principle that expenditures on R&D were mostly determined by appropriability conditions. Therefore, ensuring adequate appropriability along with more strict IPR protection was considered to be a key requirement for supporting the rate of innovation worldwide.
On the other hand, empirical literature opposes this view because patent protection was found to be fundamental for only a small proportion of innovations. Conversely, studies prove that spillover effects of R&D activity of other firms are more important in encouraging firms to engage in R&D rather than appropriability. The R&D output of other firms act as an important inputs for the R&D efforts of these firms. Therefore, strengthening of IPRs is more probably going to negatively influence innovative activity by stifling these spillovers.
Thus, it is a fact that reinforcing IPRS will motivate more innovative activity in developed countries which will consequently help to solve problems and diseases faced by developing countries.
4.0 ANALYSIS
4.1 IPR: The Debate
While in the developed world side, there is a powerful lobby of strong believers in IPRs being beneficial for business, the public at large and also work as catalysts for technical progress, the other side offers a less profitable picture of IPRs. Developed countries believe and firmly advocate that if IPRs are good, then more IPRs must obviously be better. Conversely, in developing countries, there is a vociferous lobby of contenders arguing that IPRs are prone to hamper the development of local industry and technology, affect the local population and benefit only developed countries. In contradiction with developed countries, developing countries argue that if IPRs are bad, then the fewer the better.
The implementation of TRIPs has not produced the expected results of reducing the gap between developed and developing countries, but it has rather strengthen the views already held by both sides. While those in favor of more IPRs and the setting up of a "level playing field" view TRIPS as a valuable tool to achieve their objectives, its opponents believe that IPRs are detrimental to developing countries and argue that the economic playing field was uneven before TRIPS and that its introduction has led to an increase in inequality. Both sides firmly believe in their views and therefore neither side has shown interest in listening to the other.
Even though there are a lot of reservations concerning the benefits of IPRs, developed countries have long adapted with them for a long period now. Developed countries have the national economic strength and well established legal mechanisms to overcome the disadvantages of IPRs which often tend to outweigh their advantages. They can also extensively take advantage of the benefits and opportunities derived from IPRs for they have the required wealth and infrastructure. However, this is not applicable for developing and least developed countries.
It also argued that IPRs are a prerequisite to encourage economic growth which as a result contributes to poverty reduction. By encouraging invention and new technologies, there will be an increase in agricultural or industrial production. Other benefits expected are the promotion of domestic and foreign investment, easy technology transfer and improvement in the availability of medicines essential to fight disease.
Some argue that there is no rational that a system successful for developed nations would not do the same in developing countries. Others strongly oppose this view stating that IPR do nothing to stimulate invention in developing countries since the required human and technical capacity may be inexistent. They fail to stimulate research to benefit poor people as they will not be able to afford the products. They limit the alternative of technological learning through imitation. Foreign firms find it easy to drive out domestic competition by acquiring patent protection and to service the market through imports instead of domestic manufacture. Furthermore, they increase the costs of vital medicines and agricultural inputs, thereby adversely affecting people and farmers mainly.
In analyzing these opposing arguments, it is important to note the technological disparity between developed and developing countries.
For instance, Low and middle income developing countries contribute around 21% to the world GDP, still they account only for less than 10% of global research and development (R&D) expenditure. Even the OECD countries invest massively on R&D than India's total national income. Developing countries are more known as net importers of technology.
It is important to consider the diversity of developing countries according to their social and economic conditions and technological capabilities. Overall, more than 60% of the poor live in countries that have major scientific and technological capabilities and nearly all of them live in China and India.
China and India, along including many other minor developing countries, are recognized to have important capacity in many scientific and technological fields such as space, nuclear energy, computing, biotechnology, pharmaceuticals, software development and aviation. On the other hand, there is only 25% of poor people who are Sub-Saharan Africa citizens (excluding South Africa), although these countries have a rather weak technical capacity. In 1994, it was found that China, India and Latin America only, were liable to almost 9% of global research expenditure, while sub-Saharan Africa spent only 0.5% and developing countries (excluding India and China) just about 4%.
From the above facts, it can be argued that developing countries are far from being homogeneous. There are not only differences in their scientific and technical capacities, but also in their social and economic structures and most importantly huge inequalities of income and wealth exists. Determinants of poverty as well as the right policies to deal with them will considerably vary in each country.
Likewise, this notion also applies to policies on IPRs. Policies needed in countries with a fairly advanced technological capability where most poor people live (E.g. India or China) may be different than from other countries with a weak capacity, for instance sub-Saharan Africa. The effect of IP policies on the poor will similarly differ according to socio-economic conditions. What is successful in India does not imply that the same will happen in Brazil or Botswana, for instance.
4.2 Equitable sharing of benefits and costs?
The purpose of IPR is to benefit financially those having knowledge and inventive power while preventing access to those without it. However, there is certain debate over the fair distribution of gains between developed and developing countries. Full implementation of IPR is argued to produce worldwide economic gains; there is still a serious lack of equity in the distribution of income.
Although developing countries may gain more stimuli to domestic innovation, their weak scientific and technical infrastructures imply that they still will have to bear the costs related to the protection of mostly foreign technologies. This suggests that such a regime does not favor the equitable distribution of costs and benefits. However, developing countries possess genetic resources and traditional knowledge which are both highly valuable in the world. These are not categorized as IP resources but they are recognized as the foundation of which protected intellectual property can be, and has been, created.
Such a case raises a dilemma where there are questions on whether and how these resources should relate with, and be considered by, the "modern" IP system, the extent to which these resources and knowledge need their own protection (not just in the IP sense), and how commercial benefits obtained from these resources should be equitably shared.
Internet is a major source of access to information required by developing countries, more specifically scientists and researchers. They may be restricted access to printed media as a result of lack of resources.
4.3 IPR: Assessing its costs and benefits for Developing Countries.
Specific short-term costs concerning intellectual property rights for the developing countries, such as higher prices for technology and protected products are often incurred.
Industries that depend on imitating the products of developed nations are likely to experience a decrease in revenues as well price hikes of protected goods.
According to theory, the advantages of IPRs increase with income so at very low levels, the costs of strengthening IPRs is likely to outweigh the gains. Maskus (2000) outlines three possible costs:
Imported goods are going to be more expensive as well as innovative technologies under IPR protection
It is likely to lead to the downfall of imitative activities consequently resulting in a major loss of economic activity.
Patent holders (mostly large foreign companies) are likely to exploit the protection granted to them.
Conversely, according to Maskus, these costs are most probably going to be offset by the longer-term benefits of IPRs, including in developing countries. The benefits are below explained:
IPRs represent 'an important foundation for sophisticated business structures'. They have an important signaling function and their role will be to signify whether private property rights in general are well enforced.
Stronger IPRs also benefit the technological activities in developing countries in terms of enhanced copyrights and trademark protection (where strong protection may stimulate quality improvement). Conversely, the same cannot be expected for patenting for it is mostly the advanced newly industrialized countries that will need TRIPS to enhance local Research and Development. Countries ranking lower on the technological ladder are most likely to gain in any technological sense. Still, many may lose since the purpose of TRIPS is to give innovators higher prices for their protected products. This is to the detriment of poor countries for they cannot afford expensive technology.
Economies lacking advance technological capabilities may by reinforcing their IPRs, encourage global innovation by increasing demand for new products. According to the World Bank, till date, top innovators have lagged behind investing in R&D of particular concern to poor countries because it was not profitable enough.
Stronger IPRs in developing countries will encourage high level of technology transfer in developing countries from developed countries, thus increasing their foreign direct investment and licensing.
The benefits from stronger intellectual property rights in developing countries are likely to show in the long term. Larger technology or foreign direct investment inflows as well as stronger stimuli to local innovation are likely to be gained in the future. This would be an economic case only if the present value of these benefits (discounted at appropriate interest rate) is more than the present value of these costs. Given the mechanics of the compound interest, this means that the long-term benefits would have to be definitely very large, mostly if they accrue after some time.
Many countries have agreed with the implementation of TRIPS, with expectations for concessions in other (non-technological), field of economic activity such as larger aid, easier access to developed country markets for primary exports, amongst others. However, it is still not clear whether these countries really benefited from the TRIPS Agreement since neither the costs nor benefits of TRIPS related concessions have been correctly measured.
Local innovation in developing countries will be encouraged and as a result, these countries will be able to import the foreign technologies and therefore have hands-on experience in learning and using the technologies.
Based on econometric cross-section evidence, an inverted U-Shaped relationship between the strength of IPRs and income levels exists. The strength of IPRs falls with rising incomes, as countries move to relaxed IPRs to create local competences by copying, then rises as they engage in further competition. The turning point is US$ 77501 [1] per capita in 1985 prices.
As far as FDI is concerned, most studies advocate that IPRs come practically low on the list of factors affecting TNC location decision [2] . Yet, the general reinforcement of IPRs lately may have increased their signaling value to investors where countries having stronger IPRs will be seen as more positively inclined to business.
4.3.1 The Evidence about the Impact of IPR in Developing Countries.
Some evidence points out that trade flows in developing countries are affected by the type of IPR regime, more specifically for those industries (high technology) that are "IPR" sensitive (E.g., chemicals and pharmaceuticals). However, the evidence is far from clear.
These trade flows will in turn contribute to productive capability. However, it may also be deterrent to local output as well as to employment in domestic "copying" and other industries. Developing countries which have no or a weak technological infrastructure may be negatively affected by the expensive imports of IP protected produce.
Till date, there is no concrete evidence depicting the positive relationship between foreign investment and IP protection in developing countries.
In more technologically advanced developing countries, IPRs may help in having easy access to exclusive high technologies, through licensing or by foreign investment.
In countries such as India and China, it is almost difficult to strike the right balance. Some industries will highly benefit from IP protection, while the associated costs for consumers and industries that were set up under weak IP regimes are potentially high.
Nearly all of the evidence discussing about the role of IPR in trade and investment refers to technologically advanced developing countries. Therefore, for other developing countries, it is most likely that any beneficial trade and investment effects will not offset the costs certainly not in the short and medium term.
4.4 Different developing countries have different IPR needs and capacities.
The terms "Third World" and "developing countries" refers to countries having nuclear powers with widespread commercial agricultural production systems and sophisticated agricultural research capacity (e.g., India and Brazil) to rural countries that have relatively limited research capacity or are on the verge of starvation (e.g., Myanmar and North Korea). Therefore, it makes sense that a one-size-fits-all approach to IPRs is neither feasible nor desirable.
According to different countries' conditions, their needs and capabilities will vary accordingly. What is good for one is not necessarily the best for all.
The impact of IPRs will vary according to different contexts. Some are of the view that IPRs and patents act as tools promoting innovation and encouraging the dissemination of information. On the other hand, others refute this view and say that they are only tools to win market share. In any case, in most developing countries, they will not play either role, as neither markets nor sizable capacity to innovate (in the ways normally protected by IPRs) exist.
Furthermore, many developing countries lack legal, scientific, and administrative capacity to reinforce IPRs, a fact that raises doubts on its implementation. Also, as Fowler (2004) suggests, IPRs are national in character. There is no international IPR law, thus, IPRs given in one country do not automatically apply in others, except if specific steps are taken to secure the rights. Therefore, one country can disregard the patent laws of another. In some situations, this may increase access to technologies while in others decrease access for it may make patent holders reluctant to release their products. Wherever feasible, IPR policy should not restrict the free flow of information, both, within and between the private and public sectors. Innovation is fundamental for economic and social progress and IPRs contribute in achieving these goals.
5.0 CONCLUSION
Intellectual property is conventionally viewed as a "bad thing" for the developing world, given that this system primarily (if not exclusively) benefits the developed countries at the expense of developing countries. The debate on the implementation of IPRs in developing countries has aroused much interest lately.
Every country has its own reservations concerning the implementation of an intellectual property regime. This will highly be influenced by their local technological system, economic conditions and the level of prosperity prevailing in the country. In developing countries, the TRIPS agreement along with intellectual property rights is seen as a threat to their actual economic systems because it might increasing access to technological products by increasing their cost.
Implementation will allow accessibility to developed countries markets; technology transfer and foreign direct investment and this can be quite new for a developing country with rather lower exports and limited technology accessibility. So there is a need to set up a framework based on the TRIPS Agreement which allows the standard implementation of strong or much better IPR regimes in developing countries (excluding LDCs).
A systematic analysis of the cost and benefit of the TRIPS agreement might give a good rational not to implement it in the developing countries, clearly explaining the higher costs of imported technology, pharmaceutical and health related products and the impact of imitation which is done in the developing countries.
However, arguments against full implementation of IPR in developing countries are not enough concrete to contest the viability of stronger IPRs. Several advantages, notably, the industrialization, success and prosperity of the developed countries reinforce the view that stronger IPRs is a boon rather than a curse.
Previous discussion suggests that implementation of IPRs will significantly impact on the development process of poorer countries in by impeding on a major contributor of growth which refers to imitative duplication, reverse engineering or knowledge spillovers from abroad.
The prices of a large number of important drugs may also be affected and consequently have an adverse effect on the health systems in poorer countries. Such a regime is also likely to cause income transfers from poorer to richer countries. Moreover, the manufacturing activity in developing countries will also be affected where an increase in their imports may not secure higher FDI inflows, access to technology or R&D investments in tropical diseases. Actions both at national policy levels and from international community are required in this case.
