Intellectual Property Rights: Impacts on Developing Countries

Keith Maskus

WBI TechNet 12 February 2002

Policy Environment

• Multilateral harmonization efforts

- TRIPS

- WIPO treaties

• Regional agreements

• Unilateral policy changes

• Expanding rights in US and EU

• New rights in developing countries?

Pressures for Change

• Globalization of knowledge as an input

• Rise of network industries

• Reduced copying and imitation costs

• Technical changes make traditional concepts of IPRs obsolete

• Strategic trade and industrial policy

Some Historical Perspective

• IPRs reform tends to follow market needs

- U.S. patent and copyright history

- Japanese post-war patent system

- Korean and Taiwanese development

- Recent changes in pharmaceutical patents

• Statistically IPRs are endogenous

• But IPRs can promote technical change

What Are IPRs?

• Patents, copyrights, trademarks, trade secrets, etc. provide:

• Legal ability to exclude others from using a designated piece of created information;

• Temporary provision of market power within a specific territory;

• Rights are limited for purposes of economic and social policy.

Why Protect IPRs?

• Society has an interest in knowledge creation and dissemination.

• Markets for knowledge and information are subject to failure.- Invention and creation are costly and face uncertainty.- Appropriability problems- Difficulties in selling information- Problems in signaling origin and quality

IPRs Are 2d-best Solutions

• Reduce dynamic market failures

• Avoid problems with government failure

• Objectives of IPRs:

- Stimulate invention, innovation, creation;

- Promote use of new knowledge;

- Disseminate new knowledge to others;

- Provide certainty about products

Why Worry About IPRs?

• Market power raises static monopoly costs.

• Excessive protection could reduce dynamic competition (“anti-commons”).

• Higher costs of imitation, diffusion, learning

• Higher costs of achieving social objectives

Invention Patents

• Purpose: stimulate and disseminate inventions• Cover inventions in any technology that are novel,

inventive, commercially useful.• Inventive step must be disclosed.• Minimum 20 years from filing• Key limitations: eligibility; inventiveness; prior

art; breadth of claims; fees; disclosure; opposition; experimental use; compulsory licenses; parallel imports; competition policy

Other Patent-like IPRs

• Utility Models

• Industrial Designs

• Plant-Breeder Rights

- Lower standards for eligibility;

- Farmer’s privilege;

- Breeder’s research exemption.

• Integrated Circuits Design

Trademarks

• Purpose: guarantee origin of goods and services; promote product development and quality

• Apply to distinctive names, marks, logos, slogans, colors, etc.

• Available upon registration with indefinite renewals..

• Key limitations: fair use; use in dissimilar goods; definition of “well-known marks”

Other Trademark-like IPRs

• Service marks

• Collective marks

• Domain names

• Geographical indications

- Currently applied to wine and spirits

- Some scope for expansion

Copyrights

• Purpose: stimulate literary and artistic works (or simply recognize ownership rights to creation); overcome transactions costs in use

• Apply to any new expression without registration• Minimum 50 years exclusivity• Extend to derivative rights• Standard protection for software, databases,

electronic content on internet• Key limitations: fair use; compulsory licenses;

reverse engineering; creativity in databases

Copyright-related IPRs

• Moral rights

• Neighboring rights

• Rights to broadcasts and satellite transmissions

Trade Secrets

• Purpose: protect confidential information that is not patented

• Apply to any proprietary secret that firms take efforts to escape disclosure

• Trade secrets are “liability rules” defining what is unfair competition

• Anything learned through fair competition enters public domain

• Protection of confidential test data

A Brief Primer on TRIPS

• Original purpose and negotiating history• Component of single undertaking• Sets minimum standards with important changes for

developing countries in - Patents (duration, coverage, limits on CLs)- Plant variety protection- Trademarks - Copyrights (software, databases)- Confidential information and test data

• Administration, enforcement, transition periods

Potential Impacts on Developing Countries

• Impacts would depend on:

- Level of development and incomes;

- Net trade in technology and new products;

- Human capital and ability to absorb technology;

- Openness and competition on domestic markets;

- Effectiveness of national innovation systems;

- Competition policy and other regulation

- Many other factors

Impacts on Least Developed Countries

• Significant administration and enforcement costs;• Labor adjustment costs;• Slightly negative effects on trade, technology

transfer, FDI;• Little effect on most prices and products;• Larger costs in terms of patented medicines;

protected seeds; • Little prospect for innovation gains unless other

reforms are undertaken.

Impacts on Middle-income Countries

• Significant administration and enforcement costs;• Labor adjustment costs;• Negative short-run rent transfers;• Positive long-run effects on trade, TT, FDI

(including quality of TT);• Perhaps considerably larger costs in medicines,

protected seeds;• Greater prospects for domestic innovation but

reduced possibilities for low-cost imitation

Policy Implications: Domestic

• Work with flexibility in TRIPS standards (GEP table 5.2);

• Administration and enforcement costs may not be efficient allocation of development resources;

• Need for technical and financial assistance;• Simply adopting stronger IPRs is not enough and

could be costly;• Supplement IPRs with appropriate policies;• Consider parallel imports regime

Policy Implications: TRIPS Reform

• Longer implementation periods;• Avoid adding new and stronger global standards;• Consider extending geographical indications;• Global recognition of oral prior art;• Consider protection regime for traditional

knowledge;• Work on consistency with Convention on

Biodiversity