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8/9/2019 IntellectualProperty&WTO Ru Eng

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Intellectual Property and the WTO

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28 - 8 2005

CARSTEN FINKCARSTEN FINK

Trade Policy and WTO Accession

A Training of Trainers Course for Russia and the CISMarch 28 April 8, 2005


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Overview

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What are intellectual property rights (IPRs)?The economics of IPRs protectionThe pharmaceutical debateTRIPS and access to medicines


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What are IPRs?


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D efinition

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In general, intellectual property refers to creations which result fromintellectual activity in the industrial, scientific, literary, and artisticfields

Rights to intellectual property give legally enforceable power to

exclude others from using the creation


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Patents

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1980- : , ,

Protect inventions that are new, non-obvious, and commercially usefulProtection for 20 years, after which the invention moves into public domainMain users :

All manufacturing industriesSince the early 1980s : agricultural biotechnology, computer software, businessmethods


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C opyright and neighboring rights

50-70

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Protects the expression of an intellectual creationProtection lasts for the life of author plus 50-70 yearsMain users :

Authors in literary, artistic, and scientific fieldsPerformers and broadcasting organizationsProducers of computer software


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Trademarks, , , -

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Words, signs, or symbols that identify a certain product of companyProtection can endure virtually indefinitely provided they remain in useMain users

All goods and service industries

Of high importance for certain consumer goods


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P la t ree ers ri ts

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15 . :

Protect new plant varieties that are distinct from existing varieties, uniform, and stable . Exclusive sale and distribution rights for 15 years . But

Research exemptionFarmers privilege to reuse harvested seeds

Main users :Plant breeders


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C omponents of an IPRs system

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Intellectual property lawsNational registries for patents, trademarks, and plant breeders rightsJudicial system responsible for enforcing IPRsTreaties to promote international cooperation and facilitate registration of IPRs in morethan one jurisdiction

Control of anti-competitive practices


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The economics of intellectual property protection


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Two categories of IPRs,

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IPRs that stimulate inventive and creative activitiesPatents, copyright, industrial designs, plant breeders rights, layout designs for integrated circuits,utility models, trade secrets

IPRs that resolve information asymmetriesTrademarks, geographic indications


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Resolution of market failure

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Information (and knowledge) possess characteristics of public goods

Non-rival in consumption

Creators (typically) cannot appropriate new information


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R es l ti f ar et fail re

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If left to the market, there would be few resources devoted to theproduction of information, as competitors could take a free ride


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: Patents: a second best solution

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Through time-bound exclusivity, creators of knowledge can charge prices abovemarginal costs and thereby recoup initial investment in generating informationSecond-best : because static market distortionBut : decision-making decentralized and driven by profit motiveGovernment can, in principle, fix the length of protection, such as to maximize socialbenefits and minimize associated economic costs


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Practical complications ,

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Lack of information on parameters needed to optimize scope of protectionOptimal scope of protection differs across economic sectors,depending on the availability of other means to appropriateknowledge-generating activities (e .g., technology, first moveradvantage, etc .)


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Practical complications

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Patents and the diffusion of knowledge :Restrict imitationDisclosure of knowledge; tool for licensing


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, 1958 C onclusion in 1958 ,

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(1958)

If we did not have a patent system, it would be irresponsible, on the basis of ourpresent knowledge of its economic consequences, to recommend instituting one . But since we have had a patent system for a long time, it would be irresponsible, onthe basis of our present knowledge, to recommend abolishing it .

Fritz Machlup (1958)


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: T ra e ar s are iffere t

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Market failure of asymmetric informationTrademarks assure consumers that they purchase what they intend to purchaseTrademarks thus offer an incentive to invest in reputation and superior qualityTrademark protection can co-exist with competitive marketsProtection is not time-bound


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Practical complications

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Special case : status goods, which confer prestige on their owners (apart fromany utility derived from their function and physical characteristic)

Brand ownership can confer substantial market power to producersShould trademark protection also be considered as a tool to stimulate inventiveand creative activities?


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IPRs in open economies :

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Deardorff (1992) , , -

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Northern countries are both producers and consumers of intellectual assetsSouthern countries are mostly consumers of these assets

Deardorff (1992) shows that the North gains from stronger protection in the South, but theSouth loses due to higher prices for new technologies . Effect on world welfare ambiguous .


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S ome additional considerations

Diwan Rodrik (1991),

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Diwan and Rodrik (1991) show that a Southern country may benefit frompatent protection if it stimulates R&D specific to its preferences (e .g., tropicdiseases)Stronger IPRs affect the international diffusion of technologies, through trade,foreign direct investment, and international licensing


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The TRIP S Agreement


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TRIP S Overview , -

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Multilateral WTO Agreement, applicable to all existing and newly acceding MembersGeneral obligations : national treatment and most-favored nation treatment Minimum standards of protection for all types of IPRsObligations on the enforcement of IPRsMembers can invoke the WTO s inter-governmental dispute settlement system


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Unresolved areas of rule-making

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Geographic indications : registration system and level of protectionPatentability of biotechnology inventions

Relationship between TRIPS and the Convention on Biodiversity

Protection of traditional knowledge and folklore


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E conomic effects of TRIP S

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Two polar views :Proponents : more R&D, more FDI, more rapid economic growthOpponents : forestalled access to new technologies, higher prices and rent transfers

High implementation costs?WTO+ commitments in the accession process?


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TRIPS leaves important flexibilities

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Definition of novelty, non-obviousness, and usefulness of patentable inventionsUse of compulsory licensesFair use exemptions in the area of copyright No obligation on the permissibility of parallel trade


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The pharmaceutical debate


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Critical r le f ate tr tecti

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Long and expensive R&D process :

Research, development, clinical testing, regulatory approvalRisky process : only a small share of promising chemical entities make it to the market Up to 10 years before drugs are marketed

Without legal protection, new chemical entities are weakly appropriable from the viewpoint of the innovating firm


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Two main industry players,

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Research-based companies :Create intellectual property (primarily patents, but also trademarks, clinical test data)Multinational in scope, relatively few number of firmsGeographic concentration of R&D


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Two main industry players,

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Generic drug companiesProduce drugs that are off-patent Large number of firms, competitive market structureEfficient developing country producers


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Patentsand drug prices

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: (Prozac)

240 $ 5 $

*Significant price falls documented upon expiry of pharmaceuticalpatents :

Example : wholesale price of Pfizer s blockbuster drug Prozac fellfrom $240 to less than $5 per bottle within six months afterpatent expiry *

, 19 2003* As reported by Frontline documentary Th e ot h er drug war , June 19, 2003


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K ey TRIP S obligations

27 :

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Article 27 :Patents to be awarded without discrimination among fields of technologyPatents to cover both processes and productsPatents to be protected for 20 years from the date of filing


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K ey TRIP S obligations

Article 39 :

Article 39:

Protection of undisclosed test data against unfair commercial use, wheresuch data is submitted to regulatory authorities


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TRIPS transition periods,

, 1 2005

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12006 .

1 2016 .Developing countries without product patent laws have until January 1, 2005 to comply,but must, nonetheless, grant market exclusivity to pharmaceutical productsLeast developed countries were given until January 1, 2006 to comply . The DohaDeclaration extended the deadline to January 1, 2016 for least developed countries


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Where TRIP S is flexible

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TRIPS allows the use of compulsory licensesIn case of emergencies, compulsory licenses can be granted without an attempt to obtain voluntarylicense from patent holderTRIPS permits use exception to allow generic producers to obtain market authorization prior topatent expiryNo obligation on legality of parallel importsMembers are free to impose price regulations


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D oha D eclaration:

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Background :Spreading HIV / AIDS pandemic in large parts of the developing worldGeneral concern that there may be conflicts between TRIPS and publichealth objectives


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D oha D eclaration:

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Content :Confirms TRIPS flexibilities (political endorsement)Extension of implementation deadlines for LDCsUnresolved issue : compulsory licensing when manufacturing capacity is insufficient


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, 2003 August 2003 decision

:30 /31 (f) :

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Problem :

TRIPS Article 30 /31(f) : legal uncertainty to what extent generic versions of patenteddrugs can be exported

Solution (so far) : Article 31(f) is waived if importing country has established that it has insufficient manufacturing capacitiesSafeguards and reporting requirements


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IPRs in bilateral/regional FTAs

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New wave of US FTAs include IPRs provision that go beyond TRIPS :Concluded agreements : Jordan, Singapore, Chile, Central America,Morocco, AustraliaCurrently under negotiations : Thailand, Dominican Republic, SACU, Bahrain

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