9:25 AM Jul 23, 1993
INCREASE IN TNC MONOPOLY, CATCHING-UP MORE DIFFICULT
by Carlos M Correa Buenos Aires July (TWN) -- One of the results of the Uruguay Round, if finally concluded, will be a far-reaching and comprehensive international agreement on intellectual property rights (IPRs). The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) will establish minimum standards for practically all categories of IPRs, with the sole exception of plant breeders rights (which confer a sui generis protection for new varieties) and utility models (or 'petty patents' which protect 'minor' innovations mainly in the mechanical field). The adopted standards mirror those in force in the industrialized countries, and particularly in the US. Little room has been left for modelling IPRs legislation in accordance with different levels of technological and economic development. Under the new TRIPs rules, most developing countries will be forced to amend their legislation in order to introduce higher standards of protection or extend it to new areas, including living forms. Some of these countries (e.g. South Korea, Mexico, Andean Group countries, China) have already made substantial changes as a result of unilateral US pressures under S. 301 of the US Trade and Tariffs Act. Since the last century, a number of international conventions on intellectual property have been adopted, which cover different areas of industrial property, copyright law and other specialized matters (breeders' rights). The W.I.P.O. and UNESCO are in charge of administration of the main conventions in force. WIPO, in particular, is a UN specialized body active in recent years in the development of new forms of protection (layout designs of integrated circuits), as well as in the consideration of new applications of patents (e.g. biotechnological inventions) and copyright (e.g. computer programmes). Notwithstanding these conventions, and the specialized role of these organizations, the TRIPs negotiations were conducted, and its outcome would be enforceable, within GATT -- a forum without any tradition in IPRs and established to deal with trade issues. The explanation for this strategic choice is manifold. On the one side, the negotiating power within GATT is a simple reflection of countries' economic power, particularly as measured by their participation in international trade. Unlike negotiations within UN bodies, where different 'groups of countries' coordinate their positions and interact with other groups, within GATT countries participate individually. In addition, given that a multiplicity of trade issues are simultaneously dealt with, alliances among developing countries are more difficult. Thus, developing countries with strong interests in the liberalization of agriculture felt closer to the US position than to any other developing country. On the other, there are more substantive reasons for choice of forum. IPRs have become an important tool for channelling trade under exclusive/monopolistic rights. In the present stage of globalization of the world economy and of reduction or elimination of tariff barriers for manufactures in developing countries, patents and other titles provide a coverage for exports of products incorporating the protected innovations. The purported elimination of working obligations in the patent system, is a clear indicator of the emphasis given to trade at the expense of promotion of local exploitation of inventions. Finally, an agreement within GATT may permit the application of trade sanctions for non-fulfilment of specific obligations. Countries failing to comply with TRIPs standards could be subject to trade retaliations, in a similar way as under the S.301 of the US Trade and Tariffs Act which will be legitimized under the GATT. TRIPs has no provision specifically outlawing the unilateral pressures. The drafting process of TRIPs can hardly be considered a "negotiating" process. The whole exercise did not entail any real trade-off for the countries making concessions in terms of higher levels of protection. The demands by industrialized countries to increase such levels were not in any way compensated by advantages in this or other areas of the negotiations. With this caveat in mind, the discussion of the finally proposed text can be characterized as an essentially asymmetric, non-transparent and autocratic process. The asymmetries reflected themselves, first, in the determination of the negotiating agenda. The introduction of IPRs as a component of the Uruguay Round, approved in principle at Punta del Este in 1986, was resisted by developing countries until 1989. Why these countries finally gave in is a complex question. There is no doubt, however, that the threat of US retaliatory trade sanctions under S.301 played a role in changing the stand of many developing countries. Brazil, for instance, was sanctioned in 1989 over its non-recognition of pharmaceutical patents. The "negotiating" capabilities of developing countries were not only weak due to their economic position and lack of possible trade-offs within the area of TRIPs, but due to the overwhelming differences in expertise available to conduct the extremely complex negotiations. While the developed countries were able to mobilize teams composed of top specialists on the various areas dealt with, developing countries lacked the necessary technical support. In most cases, officials of the Geneva missions, without any training in IPRs, had to sustain positions on intricate legal issues. Though many of them made a remarkable task, the technical (and psychological) asymmetry was another striking feature of this process. The actual drafting process was confined, in practice, to a few countries. The US, EC, Japan and Canada, were those that provided the basic texts on which further discussions took place in a sacculate "five plus five" drafting group -- composed of five developed and five developing countries. The agreements reached within this group was then transferred to a broadened "ten-plus-ten" group. With the exception of the members of these groups, the remaining countries have hardly had any real opportunity to influence the outcome of the drafting groups. In particular, unlike the negotiations on existing IR conventions, no record of discussions were made for TRIPs. Proposals have no recognized source and only direct participants know who and why certain provisions were adopted or not. The TRIPs negotiations have been, hence, the most non-transparent negotiations ever conducted on IPRs. GATT staff is prevented from revealing such information and contracting parties will lack any background to interpret the proposed rules and, particularly, better understand the premises and intent of the adopted text. Finally, it has to be mentioned that the composition of the working groups was determined by its respective Chairman in an autocratic manner. It was not the result of a consensus process, or of the search of balanced representation of country situations. African countries were almost systematically excluded from participation in the key drafting groups. The assessment of the Dunkel 'package' submitted in December 1991 may be made from very different perspectives. Clearly, agriculture is the major point of contention and the outstanding obstacle for the conclusion of the Round. Some developing countries may feel that, in the present international scenario, they will not be able to get a better outcome, or that any other result might even be less favourable to their interests. From the perspective of the results obtained in IPRs, the general output of the negotiations is unbalanced. On the one side, the developed countries have extracted concessions from developing countries in this strategic area, while restrictions against textile exports from the South are still preserved, the outcome of market access negotiations is unclear and the liberalization of services has only been agreed upon for those areas where US interests may not be affected. The TRIPs chapter itself presents built-in imbalances. The section on patent rights include high and detailed minimum standards, the adoption of which will force changes in legislation in most developing countries. In exchange, the copyright section mirrors in many respects the US legislation that provides less protection to authors than the European law. For example, the US succeeded in excluding compulsory and universal recognition of moral rights, as provided under article 6bis of the Berne Convention. While this is not the place to analyze the complex factors behind the launching of the Trips exercise, two of them may be mentioned. The first is technological protectionism. The TRIPs agreement and other initiatives in IPRs are elements in a broader strategy aimed at establishing a new form of technological protectionism. The key value of technology as a competitive asset, the globalization of the economy, and the threat from newly industrializing countries,, has led, mainly in the US, to a set of measures aimed at restricting the access to new technological and event scientific developments. Such measures were prompted, in particular, by the relative decline in technological leadership in various US industries, such as consumer electronics, capital goods and micro-electronics. Stronger IPRs will make the "catching up" process more difficult, since imitation via reverse engineering will be excluded on a wider scale, while the costs for obtaining licenses are likely to increase. IPRs may thus permit to some to "freeze" the comparative advantages of the developed countries visavis the developing world and consolidate an international division of work between those countries where innovations are produced and those where products containing them are imported and consumed. The second is the appropriation of life Biotechnology has opened great opportunities for the commercial exploitation of genetic resources in various fields. Though still largely, unrealized, promises of biotechnology have prompted a race for patenting of life forms, including subcellular elements such as genes. The Trips agreement provides a basis for appropriation through patent rights of microorganisms and cells, while admitting the non-patentability of plants and animals (atleast until the relevant provision is revised, four years after entry into force of the agreement). The agreement does provide for protection of plant varieties through patents, a sui generis regime or a combination of both. The implications of appropriation through patent rights of parts of nature are far reaching, not only in economic but also in ethical and socio-political terms. This would be the case, in particular, if patents are allowed not only for materials that have been modified by human invention, but also those that exist in nature. Though this latter has been admitted in US and in Europe, it has been rejected in recent legislative changes in several Latin American countries. Since TRIPs has the hypothesis of non-patentability, but has no definition of 'invention', any member country could exclude protection of naturally occurring materials if they are deemed to constitute a mere "discovery". Current efforts to strengthen and expand the IR system cannot be understood if the role of powerful and well-articulated industry lobbies are not taken into account. These have included the US film and phonogram producers, the semiconductors industry and, most notably, the pharmaceutical industry. these lobbies, since the Reagan administration, have been able to strongly influence US foreign policy and in particular the US position in GATT. The phonogram industry has obtained, for instance, provisions in TRIPs that make their rights closer to those of authors' rights, despite the substantial differences existing on the matter between US and European legislation. The semiconductor industry was able to introduce in TRIPs provisions that were rejected when the Washington Treaty was negotiated in 1989. More strikingly, TRIPs obliges compliance with that treaty even though it has never entered into force. The pharmaceutical industry, finally, has been able to get universal recognition for product patents, only accepted by many developed countries in the last 20-30 years and still unavailable in many developing countries. No doubt the US pharmaceutical industry -- the most profitable industry in the USA during the eighties which, President Clinton criticized in February 1993, for having spent more on lobbying and marketing than in R & D and for its high prices and profits -- will be a major beneficiary. However, there are two points in that text which has left the industry unsatisfied: the transitional period for developing countries and the provision in Article 6 which permits any country to adopt the principle of "international exhaustion of rights" -- which means that the title holder cannot prevent importation of a protected product in a country if that product was put on the market elsewhere by him or with his consent. The US pharmaceutical association has sought acceptance of sacculate 'pipeline protection' i.e. retroactive application of product patentability. Rejected in GATT, this has been admitted in NAFTA and in Mexican legislation, and in a more limited form by China. If finally accepted, Trips will reflect the asymmetries, non-transparency and non-democratic procedures applied. It will reflect the power of well-organized groups and lack of preparation and strategic views of developing countries. The major concessions -- on pharmaceutical products and lack of working obligations -- are not offset by any compensation within or outside Trips. The catching up process will become more difficult and slow while trade under monopolistic rights will ensure dominant positions for innovating/exporting firms. The agreement has also left little margin for national legislation. There are a few principles, however, that can and need to be implemented, such as the international exhaustion of rights and a clear distinction between what actually constitutes an invention and what does not, such as material existing in nature. Also, the agreement allows for establishing compulsory licenses, without limiting the grounds under which they can be conferred. (Carlos Correa is Director, Revista Del Derecho Industrial, Buenos Aires, Argentina and has been Argentine delegate to WIPO and UNCTAD meetings on technology. He wrote this article for SUNS)