The right to good ideas

21st June, 2001

Intellectual-property rights are not just for the rich world. Carefully constructed, they can help the poorest too.

"PATENTS kill!" was the simple message of AIDS activists in South Africa earlier this year. Battle had broken out between the government and multinational drug companies over the relaxing of patent restrictions which, it was hoped, would improve the flow of costly medicines to the country’s 5m sufferers from HIV. Meanwhile, in north-west Mexico, poor farmers are furious about a patent issued to an American company giving it the exclusive right to market yellow enola beans in the United States. The Mexicans say the bean, which they have grown for generations, is not a novel invention, and that the patent unfairly restricts their ability to export the crop north of the border.

So patents are obviously bad for poor countries—or so many activists argue. They are largely the preserve of western multinational companies, allowing them to establish monopolies, drive out local competition, divert research and development away from the needs of poor countries and force up the price of everything from seeds to software. In the process, patents prevent poor people from getting life-saving drugs, interfere with age-old farming practices and allow foreign "pirates" to raid local resources, such as medicinal plants, without getting permission or paying compensation.

Yet the picture has another side. In Mexico, local musicians are finding it increasingly hard to sign contracts with international record companies, since almost two-thirds of the cassettes and CDs sold in the country are pirated. In India, biotech entrepreneurs are busy trying to hawk their products abroad but are wary of commercialising them at home. Since Indian patent law does not fully cover pharmaceuticals, the fruits of their costly research are hard to protect from copycats.

By this token, intellectual-property protection is good for poor countries. It encourages domestic industry, boosts foreign investment and improves access to new technologies. To true believers, intellectual-property protection is part of the gospel of modern economic growth, along with free trade and democracy.

These two conflicting views have turned intellectual-property rights—such as patents, copyright, trademarks and trade secrets—into one of the most contentious areas in international development. The debate has been sharpened by two new forces. The first is increased interest in the "knowledge economy", in which a company’s chief assets are not so much physical capital as bright ideas and the intellectual-property rights which control their exploitation and give the firm a competitive advantage. Some of these patentable innovations, such as "one-click" business methods, challenge conventional ideas of invention. Other advances, such as genetically modified organisms, not only tilt at that standard, but also raise tricky questions about the ethics of laying claim to living things. Between them, however, such developments have led to a surge in patent applications.

The second force is globalisation. Intellectual-property rights used to be largely a domestic issue, with countries deciding on their own levels of legal protection and enforcement. The World Trade Organisation (WTO) has changed all that. As part of the trade deal hammered out seven years ago, countries joining the WTO also signed on to Trips (trade-related aspects of intellectual-property rights), an international agreement that sets out minimum standards for the legal protection of intellectual property.

Many poor countries think that Trips gives them a raw deal. According to Rashid Kaukab, of the South Centre in Geneva, they feel it commits them to the heavy expense of bringing their legal protections and enforcement up to western levels without much sign of the benefits claimed for it. Like almost every other measure associated with the WTO, Trips has become a battleground between those who favour, and those who oppose, the spread of global capitalism.

What Trips demands

On June 18th, the 141 member-governments that make up the Trips council sat down in Geneva for their regular review of how members are getting on with the tricky business of implementing its provisions. Contrary to popular misconception, Trips does not create a single, universal patent system. Much to their annoyance, multinational companies seeking protection round the world still depend on each country’s patent office to grant those rights and their judicial, customs and police services to enforce them, although some European countries, for example, have got together to offer region-wide patents.

What Trips does, however, is lay down a long list of ground-rules describing the protection these systems must provide. These include extending intellectual-property rights to include computer programs, integrated circuits, plant varieties and pharmaceuticals, which were unprotected in most developing countries until the agreement came along. Patents can be granted for any technological process or product, so long as it is new, inventive and has an industrial application; such protection lasts 20 years from the date of application. Patent rights are valid no matter whether the products are imported or locally produced, and protection and enforcement must be extended equally to all patent-holders, foreign or domestic.

Countries vary greatly in how closely their existing law matches the Tripsmark, largely according to their degree of economic development. America, for example, has a Patent and Trademark Office with an annual budget of $1 billion and a staff of more than 3,000 highly-trained scientists, engineers and legal experts to examine claims. It also has more than 600 judges to preside over patent disputes, an extensive antitrust authority on the lookout for monopolies and a vast customs service to clamp down on counterfeiting. At best, least-developed countries have half a dozen patent examiners and not much else.

Such disparities are nothing new. As Graham Dutfield, at the Oxford Centre for the Environment, Ethics and Society, points out, countries tend to clamour for strong patents once they have an industry to protect. For most of the 19th century, Switzerland had no patent system at all. Once its industrial base was mature enough to foster home-grown innovation, patent enforcement became a matter of urgent self-interest.

With Trips, however, developing countries no longer have the luxury of moving at their own speed. According to the terms of the agreement, most of the poor world had until the beginning of 2000 to bring their legal protections up to scratch. The least-developed countries were given a stay of execution until the end of 2005.

Upgrading does not come cheap. Keith Maskus, an economist at the University of Colorado, reckons that it will cost a poor country roughly $1.5m-2m just to build a bare-bones infrastructure to implement Trips. The World Intellectual Property Organisation gives technical assistance to countries trying to draft intellectual-property legislation or set up their patent offices, but poor places like Mauritius say more money and skilled manpower is needed. Not surprisingly, countries fighting infectious disease or civil war would rather deal with these than with patents.

So far, few countries have managed fully to comply with the agreement. As with other trade-related squabbles, countries that consider themselves damaged by another’s failure to live up to Trips can take their grievance to a dispute-settlement panel at the WTO. There are other means of persuasion, too. The office of the United States Trade Representative has a special procedure for investigating countries whose legal protections do not come up to scratch, and reserves the right to take action against them. America has also been busy signing trade agreements with countries such as Jordan, which include a requirement for higher standards than Trips demands.

The rich world’s language

In theory, such mechanisms should serve both rich and poor alike. But Trips is essentially a set of rich-world conventions that include a few concessions to poor countries. It was pushed on to the trade agenda by America, Europe and Japan, which together hold the lion’s share of the world’s patents and whose companies wanted more protection abroad. The American pharmaceutical industry, for example, estimates it loses $500m in India alone each year because of poor patent protection. The rich world certainly does well out of stronger protection abroad: America, for example, earned $36 billion in royalties in 1998 from patent licences and the like.

As Jayashree Watal, a former trade negotiator for India and now an intellectual- property expert at the WTO, recalls, developing countries went along with Tripsin the hope of winning trade concessions in such areas as farming and textiles. Such indirect gains have yet to materialise. Some developing countries would like to see Trips taken out of the WTO altogether. But most see a virtue in keeping it in the hothouse of world trade, and using it as a bargaining chip with industrialised countries.

In the meantime, the world’s poorest countries are still waiting for the promised benefits of stronger patent protection at home. But that flood of foreign direct investment, technology transfer and home-grown innovation also depends on other things, including market size and competition policy. More advanced developing countries, such as India, may see such rewards eventually. In the short term, however, a stronger patent regime will mean higher prices for goods and more unemployment once copycats are driven from the market.

Room to wriggle

Much of the poor world’s anxiety about Trips is focused on two issues: access to medicines and protection of traditional resources. Both were on the agenda at this week’s meeting in Geneva, where members aired their differences. Many developing countries, among them India and a clutch of sub-Saharan states, would like clarification of the agreement’s provisions and exceptions to protect public health and the environment, and amendment of its articles on the patenting of life-forms. America and Japan are opposed to any change in the letter of the agreement; the EU may be more accommodating.

Patents have attracted much of the blame for the gap between rich and poor countries in their supply of high-tech medicines. Earlier this year, Oxfam, an international aid charity, launched a campaign to improve poor countries’ access to such drugs with a call for a wide reform of Trips. Yet some developing countries, such as Brazil, concede that the agreement is flexible enough in theory, giving them sufficient room to craft their domestic patent legislation in a way that also protects public health. What they want to ensure is that the developed world interprets these provisions in the same generous light.

Many of the most effective drugs to treat such scourges as HIV and malaria are covered by patents in the industrialised world. These allow the developers to recoup their steep research spending, but also drive the cost of the drugs far higher than poor countries can afford. In much of the least-developed world, however, these patents do not apply. In theory, these countries could import generic copies from other poor countries that are not yet obliged to comply with Trips but have the capacity to churn them out, such as India. In practice they do not, largely because they lack both the money to buy the drugs even at bargain-basement prices, and health-care systems to deliver them.

There is, however, a group of developing countries, such as South Africa, that are expected to toe the line and enforce such drug patents, but find it hard to pay the sort of prices pharmaceutical companies have, until recently, been asking. The Trips agreement offers two main options to ease their way. The first, called "compulsory licensing", allows countries either to manufacture or import copies of a drug without the patent-holder’s approval, in some circumstances—a national emergency, for example—provided that they fulfil certain conditions, such as paying the patent-holder compensation. The second possible fix is parallel importing, which allows countries to seek cheaper sources of a patented drug from abroad. Drug companies hate this practice, but Trips has nothing to say against it.

Rich as well as poor countries are worried about the effect of patents on drug prices. They are equally concerned about the patenting of plants, animals and genes. Part of this is a moral objection to the exclusive exploitation of living things. But poor countries also have practical objections. The developing world, home to a rich array of the world’s plants, animals and micro-organisms, is a potential treasure trove of starting material for new drugs and crops, which could do the poor much good. But few people in, say, Andean or Indonesian villages have the $20,000 needed to obtain a patent in America, or the $1.5m it costs to challenge one.

Money is little object, however, to many western entrepreneurs who venture to far-flung parts, bring home such riches and then proceed to patent them. Some of these patents will be warranted, since the "bioprospectors" will have enhanced nature with some inventive step. But ActionAid, a British charity, and other NGOs have documented dozens of instances where nature is left pretty much unadorned and a patent is issued anyway, without any acknowledgment or reward for the villagers who may have tipped off the "inventor" in the first place.

A growing alliance of developing countries would like to see this "biopiracy" stopped. Costa Rica, for example, has laws exempting genes from patenting. Others are introducing laws that would require all those applying for intellectual-property rights over, say, a plant variety, to declare where they got it and to prove that they not only have the consent of its native users, but have arranged to share the eventual rewards of commercialisation. Brazil, among other countries, would like to see such provisions explicitly written into Trips. The United States, however, is strongly opposed to any change.

For richer, for poorer

As the fuss over biopiracy shows, poor countries are not opposed to a proper patent regime; they simply want one that fits their needs. A few interesting experiments are in progress. One of them is the Honey Bee network, run by the Society for Research and Initiatives for Sustainable Technologies and Institutions (SRISTI), which sends out volunteers into rural India to find village "oddballs", the people who are known for working in a different way from others. The volunteers then document their bright ideas or early inventions, such as a motorcycle-powered plough or a tilting manure cart, in a database which comes in seven local languages, and includes plenty of pictures to help illiterate farmers understand the gist of the invention. The network now has 10,000 innovations on its database, with eight patents pending, and has also benefited from a micro-venture-capital fund to help get the inventions off the ground.

A similar project is under way in Venezuela, where Otro Futuro, a local charity, and the Policy Sciences Centre of New Haven, Connecticut, are working jointly to help the Indians of the Dhekuana tribe assemble their traditional myths, music, knowledge of medicinal plants and other traditional folklore into an atlas. A written record is not only a valuable precaution against a sudden loss of this largely oral heritage, but also serves as a safeguard against piracy abroad. The United States Patent Office, for example, will not grant a patent on an invention if there is "prior art", or earlier evidence of its existence in the public domain. But, unlike its European counterpart, the American office does not recognise foreign oral evidence as prior art.

Making the Dhekuana database public might help to stem biopiracy. But as Frank Penna of the Policy Sciences Centre points out, it may not bring the tribes much material reward, since they themselves cannot patent the contents of the database once it has been disclosed. The Dhekuana now have their own team of patent lawyers, paid for by the World Bank, who are trying to find a way to register their traditional knowledge, possibly as a trade secret, in order to secure the tribe’s interests.

But according to Michael Blakeney, of Queen Mary and Westfield College in London, there are limits to shoehorning such traditional practices into the holes provided by conventional intellectual-property law. Western patent systems grew out of a particular model of innovation at a particular time in history. They assign specific rights to individuals or corporate entities for well-defined developments for prescribed periods of time. This model does not fit neatly with the sort of collective ownership the Dhekuana have, where the "invention" is vague and its origins are lost in the mists of time.

New models will probably be needed to protect such traditional knowledge, and these will not be easy to create. To some, such initiatives smack of political correctness; others see them as fair reward. Their introduction would help to turn the rising tide against Trips by showing even the poorest developing countries that intellectual-property rights can be an opportunity, not just a threat.

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