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August 2000

Intellectual Property Rights and Developing Countries in The WTO “Millennium” Round

by Esperanza Durán and Constantine Michalopoulos

Director, Agency for International Trade Information and Cooperation (AITIC, Geneva) and Senior Economic Advisor, World Bank, respectively. The views presented in this article are the responsibility of the authors and should not be taken as those of AITIC or the World Bank.


The Economic dimension of TRIPS

A) Transitional arrangements

B) Costs and Benefits

Implementation and Review

Strategies and Proposals for Reviewing the TRIPS Agreement

A) Negotiating Strategy Options

B) Developing Country Proposals

1. Transfer of technology

2. Exclusion and Alternatives to Patents - Article 27.3(b)

3. Extension of transition periods

4. Compulsory licensing

5. Protection for geographical indications of goods

Conclusions and Recommendations



I. Introduction

The inclusion of the topic of intellectual property rights (IPR) in the multilateral trade negotiations of the Uruguay Round (UR) involved a long-fought battle between developed and developing countries; and the negotiations themselves had  a clear North-South dimension.  The developed countries, firm supporters of promoting effective protection of IPRs, sought to increase the standards of IPR protection as a means to counter trade in counterfeit goods and to extend the rights of their producers/exporters worldwide. They argued that the benefits of an increased level of IPR protection would accrue to developing countries as well, since it would strengthen their own incentives for research and development (R&D), help promote foreign direct investment, and encourage the transfer and dissemination of technology. Most developing countries saw little benefit in committing themselves to abide by basic global standards for increased IPR protection, which would be better suited to protect developed countries’ interests, but might be inappropriate for their own socio-economic and technological needs.

Given this background, it is not surprising that the conclusion of an agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) has been one of the most controversial results of the UR for developing countries. Concerns about the TRIPS Agreement have focused not only on the equitable distribution of benefits that accrue to developed and developing countries, but even more fundamentally, on whether the agreement would actually result in net outright losses for many, if not most, developing countries (Deardorff, 1990, South Center, 1997; Third World Network, 1998).

Some elements of the Agreement will be reviewed in 1999 as part of the World Trade Organization (WTO) built-in agenda.  Moreover, the Agreement provides that the Council for TRIPS review its implementation after the expiration of the transitional period allowed for developing countries under Article 65.2.in the year 2000 and every two years thereafter. Although  not foreseen at the time the Agreement was drafted, it is now certain that the review of the Agreement will coincide with the launching of a new round of multilateral trade negotiations, the so-called “Millennium Round”, at the Third Session of the WTO Ministerial Conference in Seattle in November 1999. The precise agenda of the negotiations to be agreed on in Seattle is as yet unknown, and thus it is unclear whether TRIPS will formally be on the negotiating agenda, or whether a TRIPS review will proceed separately and in parallel. Irrespective of the modalities of the review/negotiation, many developing countries have a number of concerns about various aspects of the TRIPS Agreement.

Developing countries’ trade interests are not always analogous, either in the TRIPS or in other agreements. However, a large number of developing countries have expressed similar concerns regarding the TRIPS Agreement and have taken similar positions on several provisions in the seven categories of intellectual property covered by the TRIPS Agreement (Note 1: The Agreement covers copyright and related rights, trade marks, geographical indications, industrial designs, patents (including IPR regarding micro-organisms and plant varieties), integrated circuits and trade-secrets). The one issue on which most developing countries coalesce is that of patents, one of—if not the most—contentious during the UR negotiations.  Within patents, the particular area where most concerns are centered is bio-diversity and the provisions of Article 27.3(b).  Other areas of general interest for developing countries include: technology transfer, geographical indications, compulsory licensing (Note 2 : Referred to in the TRIPS Agreement as “other use without the authorization of the right holder”) ,and the transition periods for the implementation of the Agreement.

The purpose of this paper is to examine developing country concerns regarding the TRIPS Agreement as it stands, as well as the possible strategies for addressing them. Following this Introduction, Section II examines the economic dimension of IPR protection in developing countries, focusing especially on the issue of patents. The third section considers various aspects of the implementation of the Agreement heretofore, as well as the issues that are scheduled for review in 1999 and beyond. Section IV analyzes the key concerns of developing countries regarding the TRIPS Agreement and examines  proposals to address them. The concluding section summarizes recommendations regarding developing country strategies for dealing with TRIPS in the context of forthcoming WTO multilateral trade negotiations, as well as on how these countries, especially the less-advantaged countries (LACs) (Note 3 :This group of countries would include the 48 LDCs as defined by the UN, as well as other low income developing countries and economies in transition facing structural/institutional constraints in international trade, and a per capita income of the order of US$1,000 per annum)  could make the Agreement more supportive of their development process.

II. The Economic dimension of TRIPS

A) Transitional arrangements

Under the TRIPS Agreement a one-year grace period was provided to developed Members of the WTO to implement its provisions (1 January 1996). Developing countries and countries in transition were given four extra years from entry into force of the WTO agreements (1 January 1995) to begin applying its provisions. For least developed countries (LDCs) an additional six years, or a total of eleven years, were provided (Note 4: Except for obligations pertaining to most- favored-nation (MFN) and national treatment). Under a separate provision, an additional five years were given to countries that have to introduce product patent protection in areas of technology not so protected at the time of general application of the Agreement (Note 5 : But WTO members agreed to accept patent applications and exclusive marketing rights for pharmaceutical and agricultural chemical products as from the date the Agreement entered into force (see below section III).

Notwithstanding the existence of IPR protection in developing countries before the TRIPS Agreement, there is scant systematic empirical evidence regarding the impact of IPR protection on development either in general or for individual developing countries. Given the transitional periods under TRIPS all analyses of its costs and benefits are theoretical and prospective based on broad assumptions and generalizations rather than on actual developing-country experience (UNCTAD, 1996 attempted a preliminary assessment). These analyses have tended to focus on the economic costs and benefits of protection of intellectual property rights through patents and copyrights, as these are the areas where developing countries interests appear to be mainly at stake (Note 6 :The economic analysis regarding protection of industrial designs and integrated circuits is analogous to that involving patents).


B) Costs and Benefits

Patents. Generally, industrial countries account for the vast majority of patents worldwide, (about 95%).  Similarly, they devote the lion’s share of worldwide expenditures on R&D (Braga et al, 1999). In theory, better IPR protection should encourage more R&D and hence innovation. But even in industrial countries with long histories of strong IPR, there is limited empirical evidence of a positive link between IPR protection and R&D (World Bank, 1998, p.34).

On the other hand, innovation in most developing countries is concentrated on minor adaptive changes not likely to be captured by the patent system (Correa, 1998). Other innovations and forms in which knowledge is held—for example indigenous communities’ knowledge and utilization of plants and herbs for medicinal and other purposes—are not protected under the TRIPS Agreement. And the less developed the country, the more likely that such innovations will be the dominant form of invention.  Thus, most developing countries, with limited inventive and innovative capabilities, will be net importers and users of technology generated by foreign inventions. And the more stringent the protection of IPR, the more it will deter imitation and adaptation of foreign inventions to domestic needs.

In agriculture, a sector of great importance to developing countries and especially the LACs, intellectual property protection had traditionally played a limited role as most agricultural research was conducted by public-sector institutions in both developed and developing countries. Recently, however, public sector R&D has declined by comparison to R&D conducted by private firms in developed countries. As a consequence an increasing share of new seeds and farming technology of importance to poor countries is owned by developed country firms, sometimes based on biological and genetic material which has originated in the developing world. (Braga et al, 1999, World Bank, 1998).

Intellectual property rights have tended to be in some respects culture specific;  and the incentives needed for inventions to occur are different in different sectors of the economy and in different country settings. Hence, there is no presumption that IPR protection should be of the same length for all forms of intellectual property and  economic activity or for all countries (Deardorff, 1990). While developing countries which are WTO members did provide patent and copyright protection prior to the TRIPS Agreement, many (25) explicitly did not provide patent protection for pharmaceuticals, (Note 7 :  Four developed countries also did not) and a somewhat smaller number (13) did not provide it for chemicals, while more than half of the total provided general patent protection for shorter periods (Braga, 1996). The underlying rationale for not extending such protection in these areas was (and is) to permit the establishment of competitive markets with lower prices, so as to enhance access of drugs and health care to the poor, vulnerable and less-advantaged segments of the population, and reduce costs of fertilizers and other chemical inputs to low-income farmers. The shorter periods of protection had been designed to make the technology generally available sooner—and thereby reduce the rents accruing to the producer and patent holder.

The economic essence of the TRIPS agreement on patents, copyrights and related IPR issues is to standardize minimum IPR protection worldwide, and thereby extend IPR protection in sectors in which developing (and some industrial countries) did not provide it. Additionally, the Agreement seeks to extend and standardize the period during which IPR protection is afforded. The Agreement also provides for rules and procedures regarding acquisition, maintenance and enforcement of IPRs, as well as a dispute settlement mechanism. And it commits developed-country members to provide technical and financial assistance to help strengthen developing countries institutions and enforcement capabilities, as well as to provide incentives to enterprises and institutions in their territories to encourage transfer of technology to LDCs.

Flexibility is introduced in the implementation of the Agreement, both implicitly and explicitly: implicitly, by establishing minimum standards but leaving discretion to national legal procedures on how to enforce them and  by provisions whose  ambiguity permit alternative interpretations (see below, section III); explicitly, for example, by sanctioning, in certain circumstances, compulsory licensing; and permitting the use of a sui generis regime of protection for plant varieties (Note 8 : Under Article 27 countries may exclude essentially biological processes, as well as plant and animals other than micro-organisms and micro-biological processes with the proviso that: “… members shall provide for the protection of plant varieties either by patents or by an effective sui generis system, or any combination thereof”.  Article 27.3(b) ).

The main potential costs of TRIPS to developing countries involve the economic losses suffered by both their consumers and producers, as well as the so-called “deadweight” efficiency losses from reducing competition. These result from the introduction of patents owned by producers in the industrialized countries (and the consequent monopolization of these sectors and industries by these patent holders) or by increasing the time frame over which the patents are valid in all sectors (Deardorff, 1992).

As the overwhelming proportion of all patents is likely to continue to be owned by producers in developed countries, developing country losses would only be slightly offset by gains developing countries would obtain from their own inventions, stimulated by the introduction of more secure property rights in the context of TRIPS.  In short, developing country losses would be transferred as gains in the form of rents to patent holders in developed countries—which however, would be less than the developing country losses by the total overall deadweight efficiency loss resulting from the creation of monopolies based on patent rights.

The actual costs likely to be incurred by developing countries are sensitive to the kind of market structures assumed to prevail in the absence of the patent protection (Subramanian, 1995, Braga, 1996).  The more competitive the market structure assumed as an alternative, the larger the costs. The extreme case is one in which a previously competitive industry is substituted by a foreign monopoly. At the other extreme, if a foreign monopoly existed before the patent, economic welfare would not be affected by the introduction of the patent. But many in-between situations are likely to arise in which developing countries incur losses. For example, if a duopoly existed before the patent, consisting of one domestic and one foreign firm, the patent protection for the foreign firm might not affect prices significantly, but simply result in transfers from the developing country producer to the industrial one (Nogués, 1993). On the other hand, if the market is characterized by numerous fringe domestic firms offering significant competition to a foreign firm--a situation that might conceivably arise in the more advanced developing countries--the introduction of patent protection for this firm might result in greater losses than it would in less-advantaged countries, where the same foreign firm faced less competition. As a consequence, competition policies of the developing countries have an important role to play in determining the magnitude of the costs from the establishment of stronger IPR protection.

The pharmaceutical industry is the main sector for which estimates of potential losses as a result of TRIPS have been developed because it is the one that had not enjoyed patent protection in many developing countries. These estimates vary widely as between countries and depending on the assumptions made about market conditions as well as the share of patentable drugs in each market (Subramanian, 1995). Conversely, in some sectors, e.g. computer software or integrated circuits, better protection of intellectual property may result in gains to individual developing countries, some of which are at the forefront of research and development in this sector.

No estimates are available on the effects of lengthening the time for which patents are made available by developing countries across the board for all sectors. There is a theoretical presumption however, that such costs may well be substantial, as they are likely to include pure rents to industrial country patent-holders. The explanation is that, for most products, developing country markets are but a small portion of the world market, and inventions usually occur in industrial countries, regardless of whether protection was provided in a developing country for ten years or twenty.

In sum, developing countries as a group are certain to suffer increased costs through the introduction of patents involving stronger IPR protection for both their and developed country producers. The total magnitude of these costs is uncertain, as estimates are based not on experience but on assumptions about issues on which there is little information, including market structures, the effectiveness of competition policies and the fundamental link between stronger IPR and creation of new technology.  But it is also certain that the costs would vary substantially from country to country, and in some, those with very strong innovation potential, could conceivably involve gains.

Against these costs, the key benefit of stronger IP protection for developing countries is increased technology transfers and technological diffusion from developed countries that would result in increasing developing country productivity and reducing costs. This  would take place through various mechanisms:


(i) the publication of patents would make information publicly available that could be useful in new adaptations and inventions;

(ii) technology owners in industrial countries would be more willing to transfer proprietary knowledge to developing countries, either through licensing or foreign direct investment;

(iii) the private sector in developed countries would have greater incentives to devote resources for the development of drugs against tropical diseases endemic to developing countries (World Bank, 1998).

Nevertheless, the evidence in support of the increased technology transfer through these mechanisms to date is weak. Regarding technology transfer in certain industries, including pharmaceuticals, agricultural chemicals and software, reverse engineering and imitation can result in technology transfer irrespective of patents or the incentives to patent holders in industrial countries.  However, in other sectors, reverse engineering is not possible, and thus the increased information offered through the patent regime is basically irrelevant.

The same is true for technology transfer through foreign direct investment. Stronger IPR protection appears to be pertinent in those cases where technology can be copied only if the foreign patent owner establishes production in a developing country. The empirical significance of such cases is unclear. The World Bank (1998) offered as an argument in support of increased IPR protection a report prepared before the TRIPS Agreement.  This report found that 25 per cent of pharmaceutical and chemical firms in US, Germany and Japan felt that IPR protection in a number of developing countries was too weak to invest in joint ventures or to transfer advanced technology to a wholly owned subsidiary. A somewhat smaller proportion of machinery and electrical equipment industry in these countries felt the same.

The above arguments, however, can be looked at conversely: if 75 per cent of firms in the industries most clamoring for strengthening IPR protection felt that more stringent IPR protection would make no difference in their investment or technology transfer, this suggests the limits of the argument and the importance of increased rent-seeking as a motive behind strengthened IPR protection. China offers a clear illustration: its IPR protection is weak, it is not a Member of the WTO, and yet it has attracted huge foreign direct investment inflows in the last decade (Note 9 : It should be noted that the evidence of the effects of stronger IPR protection on trade flows appears to also be ambiguous, although there is some evidence that IPR market expansion effects may dominate the market restriction ones (Braga,1996), but much more work on developing countries aspects of this issue is needed).

Similarly, expectations that increased IPR protection would enhance pharmaceutical companies’ efforts to develop drugs for diseases endemic in developing countries have, sadly, also not materialized. Recent reports, (Sachs, 1999) show how little has been done in this regard with respect to diseases like malaria or certain strains of AIDS prevalent in developing countries. It is ironic that analysts are now recommending official funding to subsidize research for the development of such drugs, when only a few years ago, it was argued that if only the TRIPS Agreement were put in place, the private sector would take care of it given the enhanced incentives of strengthened IPR protection.

Trade Marks and Geographical Indications. Strengthening developing countries’ IPR regimes linked to trademarks and geographical indications, unambiguously results in increasing the rents that accrue to the holders/producers, which are mostly located in developed countries. Both trademarks and geographical indications involve producer efforts to introduce product differentiation by claiming superior quality or standard and hence product value that permits the owner/producer to charge a higher price than similar competitive products. “Pirates” using the trademark typically are able to undercut official licensees with products whose quality may or may not be inferior to the “real” one under license.

There is little doubt that piracy of trademarks results in significant losses to producers, usually located in developed countries. The issue here is primarily one of ethics and legal enforcement. The “pirate” by claiming a false trademark is able to secure a higher price- and hence a higher rent than without it. Tightening enforcement means lowering rents to the “pirates” but potential gains to developing country consumers, to the extent that they were paying a higher price than the quality of the product warranted, as well as increased transfers to the owners of the trademark.

Geographical indications are of importance in the food and wine and spirits industries in which it is claimed that a product originating in a particular location possesses superior qualities, and hence can command higher prices, on account of the prevailing unique plant varieties, climatic and/or soil conditions. With some exceptions in wines and spirits (Mexican tequila), such product differentiation has been of significance primarily in the developed countries.

The treatment of wines and spirits is not identical to that of other products: whereas the former has explicit additional protection for geographical indications (Article 23), general protection for other goods (Article 22) is less rigorous. Some developing countries have become aware of possible advantages of extending the additional protection granted to wines and spirits to other products of interest to them, e.g. foods and handicrafts.  However, it is not evident that all developing countries would benefit from this extension.  This would depend on whether the country is a producer of the protected geographical indication, for example India as producer of basmati rice, or a major consumer of the product. Furthermore, there is the case of developing countries that may have a comparative advantage in producing a like product more cheaply than the one protected by the geographical indication. Extending these rights may not be in the interest of these countries either.

In summary, “IPR are a compromise between preserving the incentive to create knowledge and the desirability of disseminating knowledge at little or no cost.” (World Bank, 1998, p.33). Whether the TRIPS agreement per se is a good compromise for the developing countries is still an open question. The agreement is probably unique among those negotiated in the Uruguay Round in that its implementation may well result in net long-term economic losses for developing countries as a group. By contrast, agreements involving liberalization of trade in goods and services may result in short-term adjustment costs, but there is a strong presumption based on extensive experience and empirical evidence that on the whole, more liberal trade regimes tend to be conducive to longer-term development. (Harrison, Rutherford and Tarr, 1996). The key issue in mutually liberalizing trade negotiations is the share of the overall gains that accrue to developed countries relative to the developing countries and to each country individually.

Some would argue that developing country losses, though potentially considerable, would only be short-term (Fisch and Speyer, 1995, p.69). The empirical evidence, however, is scant and unconvincing. It is insufficient to overturn the conclusion of theoretical analyses which suggest that greater protection to IPR could result in net long-term costs for many, if not the majority, of developing countries (Deardorff, 1990). Moreover, a sound evaluation of the effects of IPR protection on developing countries would have to take into consideration other elements, such as assumed market conditions, including the effectiveness of competition policies  in place, the capacity to imitate technology and degree of inventiveness—on which there is little information and which are inherently difficult to measure.

Given this conclusion, it may be asked, why did the developing countries signed  the TRIPS agreement. The answer partially lies on the pressure exerted by developed countries which were concerned about rent losses resulting from trademark piracy and copyright infringement. It was one of the areas in which developed countries were expected to obtain concrete benefits from the negotiations in exchange for “gains” by developing countries in other areas such as the general lowering of tariffs or the liberalization of developed countries’ textile trade. To an extent also, developing countries felt that the agreement was of symbolic importance: to demonstrate to foreign private investors that they were “open for business” through their adherence to international IPR norms. Still others felt that they would have to strengthen their IPR protection in order to share in the development of the new technologies of the future. Irrespective of what one thinks about the UR compromise, the question facing developing countries at present is what to do about implementing the agreement, and what changes to seek in the context of the upcoming review and likely new round of multilateral trade negotiations.

III. Implementation and Review

In implementing the TRIPS agreement, developing countries have to consider two sets of issues. First, how to utilize the flexibility allowed under the agreement in pursuit of their development objectives and, second, what steps are needed to strengthen their institutional capacity to meet their commitments after the expiration of the transitional period allowed to them under Article 65.2.

There are various aspects of flexibility that developing countries need to consider. Some pertain to legal interpretations of specific provisions. For example, regarding Article 27.3(b), important terms open to interpretation include “micro-organisms” “essentially biological processes”, “microbiological”, sui generis system etc. (Tansey, 1999). It may be to their advantage to limit the obligation to grant patents on micro-organisms only to genetically modified ones (Correa, 1998). Other aspects of flexibility involve the use of alternative policies—permitted under TRIPS—to pursue development objectives, such as price differentiation, parallel imports or compulsory licensing, which a rigid IPR protection would impede.

On the granting of patents for pharmaceutical products, for example, one of the more serious concerns of developing countries is that this would result in significant increases in the prices of medicines essential for improving the health standards of the population as a whole, particularly the poor and vulnerable segments. However, the flexibility in the TRIPS Agreement would permit pursuing this objective through the imposition of price controls—which are not prohibited under TRIPS and which have been used in the past by several European countries.

Similarly, compulsory licensing allows countries to compel the owner of a patent to license it to others for general social and other policy objectives, and has the effect of limiting the monopoly power of the patent holder. Finally, as the Agreement formally does not address the issue of IPR global “exhaustion”, parallel imports are permissible. If a patent holder charges a lower price in one country than in another, countries may be able to take advantage of the difference and obtain the product from the source with the lowest price (Correa, 1998).

In this connection, the recent South African Medicines Act apparently permits compulsory licensing, parallel imports, as well as domestic production of generic drugs against AIDS, as a means of combating the very high cost of such drugs under existing arrangements, even though patents on the brand name drugs are still in effect. International pharmaceutical companies and the US have raised objections to the Act. But the US Administration has stated that, while in its view the Act does not conform to the TRIPS provisions and rules regarding compulsory licensing it would “raise no objection to compulsory licensing or parallel importing of pharmaceuticals on the part of South Africa as long as it is done in a way that complies with TRIPS” (Note 10 : US Congress, 1999. At the time of writing, the issue had not yet been resolved).

Since developing countries do not have to implement most aspects of the TRIPS agreement until the year 2000, many issues involving implementation have focused on the preparatory, institution-building process aimed at permitting countries to meet all their obligations under the Agreement on a timely basis. WTO Members face two kinds of institutional requirements during the transition period under TRIPS. The formal one is narrowly focused on pharmaceuticals and agricultural chemical products. Notwithstanding the transition arrangements for developing countries, Article 70.8 stipulates that all Members which do not provide patent protection to the pharmaceutical and agricultural chemical products consistent with Article 27 are supposed to establish “a means by which such patents can be filed” and apply to them “the criteria of patentability as laid down in the agreement”. Moreover, under Article 70.9, where a product is subject to a patent application under the above procedures, Members have to grant exclusive marketing rights for five years, after obtaining marketing approval in the member country.

The US and the EU brought complaints against India over this matter in the WTO in 1996 and 1997 respectively. These concerned the absence in India of patent protection for pharmaceutical and agricultural chemical products and of any formal systems permitting the filing of patent applications and providing exclusive marketing rights on pharmaceutical and chemical products, thus failing to meet its obligations under article 70. The WTO set up dispute settlement panels that found for the complainants. The Panel Reports were adopted by WTO Dispute Settlement Body in September 1997 and 1998 respectively. The grounds for the decision were that India violated Article 70.8 as it failed to a establish a legal basis that adequately preserves novelty and priority in respect of application for product patents for pharmaceutical and chemical inventions; and Article 70.9 for failing to establish a system for the granting of exclusive marketing rights (WTO, 1997, 1998).

The broader institutional requirement for developing countries is to enact the necessary legislation as well as establish the rules, regulations and implementation capacity that will permit countries to meet all their commitments under the agreement. Implementation of the provisions under Article 27.3(b) is of special interest to developing countries for a number of reasons.  First, because of the importance of this article for agriculture, a sector of prime social and economic significance in most LACs, where a high percentage of the population lives in rural areas and where subsistence farming coexists in varying degrees with commercial agriculture.  Second, because developing countries feel they have a proprietary stake in biodiversity resources, most of which are located in their territories. Thirdly, because issues of biodiversity and agricultural research are central to the development prospects of many developing countries especially the LACs (see below).

Establishing proper institutional arrangements to meet the requirements of the TRIPS Agreement is a very difficult task for many developing countries. The best evidence of the difficulties encountered especially by LDCs and other LACs is the high demand for technical assistance on the part of developing countries documented in requests for assistance under the LDC initiative (Note 11 :  Integrated Framework for Trade-Related Technical Assistance to Least-Developed Countries) and other programs.

The international community has put in place a number of assistance efforts aimed at helping developing countries and LDCs to strengthen their capacity to meet their overall WTO commitments including on TRIPS. Most of these efforts have been initiated and led by international organizations, but  individual developed countries have also offered assistance. In particular, the WTO works closely WIPO and other intergovernmental organizations and with WTO Members to respond to these requests (Note 12 : The WTO and WIPO signed an agreement in 1998 to strengthen their provision of technical cooperation in this area). The modalities of this technical assistance are varied, including organisation of seminars and workshops for developing countries to understand the TRIPS Agreement and for reviewing the relevant national legislation necessary for implementing it.

Technical assistance aside, Article 66.2 of the TRIPS Agreement specifically stipulates that developed countries should provide incentives to their enterprises to promote technology transfer to the LDCs. So far no notification by developed Members in this regard has taken place.

Many developing countries, especially the LACs are in a major quandary: on the one hand, they lack the capacity to set up the institutions to implement the provisions of the TRIPS Agreement and they perceive that international assistance for this purpose is inadequate. At the same time, they fear the apparent willingness of the US and the EU, as evidenced by the India case, to use the WTO dispute settlement mechanism to enforce the Agreement. These circumstances have led several WTO members to propose various kinds of extensions of the transitional period for the implementation of the agreement (see below, section IV).

A formal review of the implementation of the Agreement (Article 71.1) is to begin after 1 January 2000. In addition, the built-agenda, calls for a review during 1999 of Article 27.3(b), as well as for a review of the questions of geographical indications (Articles 23.4, 24.1 and 21.2); and the exclusion of certain aspects of the GATT 1994 provisions on dispute settlement (Article 64.2 and 64.3) (Note 13 : WTO, 1996).

IV. Strategies and Proposals for Reviewing the TRIPS Agreement


A) Negotiating Strategy Options

In would be in the interest of developing countries to develop strategies regarding the kinds of changes they would like to see in the TRIPS Agreement and the setting in which to pursue them. Some basic options are probably foreclosed to them: for example, it would be very difficult to open up the issue of allowing the early expiration of patents in developing countries as a form of special and differential treatment—although it may make eminent economic sense to do so. Others, however, which have the effect of delaying the costs that they will have to incur, e.g. various kinds of extensions of the transition periods, could well be worth pursuing.  Another possible course would be to seek non-action in cases of non-compliance by developing countries of the TRIPS Agreement for an agreed period (Correa, 1999).  Still other issues may require modification of specific aspects of the Agreement of interest to them, as they have already stated in the proposals so far submitted.

At the same time, developing countries will have to confront the proposals and positions developed countries are putting forward. In the first instance, developed countries have stated that the TRIPS Agreement acquis should be used as a basis for further development of IPR protection and do not wish to contemplate the possibility of “lowering of standards or granting further transitional periods” (Note 14 : WTO, 1999a).  Moreover, it is certain that developed countries will be raising additional demands for increasing the level of IPR protection within the framework of the TRIPS Agreement. Their proposals would result in further reducing developing country flexibility, for example, by defining specific kinds of sui generis regimes for the protection of plant varieties; tightening the use of compulsory licensing and  limiting the time-frame under which it is allowed; and seeking firmer disciplines on parallel imports, pipeline protection, etc.

A fundamental question is whether it would be in the developing countries’ interest to actually seek to amend the agreement in some specific, substantive ways, and if so, which among these changes have high priority—recognizing that the developed countries would probably want to move in an opposite direction. Alternatively, if there is sufficient flexibility in the existing provisions to permit developing countries to minimize the costs inherent in complying with the Agreement, it might be more expedient to look for a quick review of it and avoid substantive changes (Correa, 1999). For some developing countries, especially those with a more developed institutional infrastructure, this may be a pragmatic option. Even if the majority of developing countries were to choose this strategic option, they may still wish to identify and propose specific ways in which they would want to modify the Agreement to their advantage. Tactically, this would be necessary in order to fend off the demands for tightening IPR protection they are likely to face from developed countries.

Another important procedural question is whether developing countries should try to pursue their proposed issues in the context of the review of TRIPS already scheduled, or in the context of the wider negotiations that may be agreed upon at the WTO Ministerial (Note 15 :  There is also the less important procedural question of the link between the review of certain items mandated for 1999, including Article 27.39(b), and the overall review of the Agreement and which issues to pursue when. In practice it is difficult to see how to separate the two reviews; and the Seattle Ministerial would have to decide both the terms of reference for the full review and what to do about certain issues, for example, extension of the non-violation provision needed before January 1, 2000). The more significant the issue on which they would want amendments, and the more drastic the changes they seek, the more difficult it will be to pursue their interests in the context of a TRIPS Review alone. If developing countries feel they can live with the flexibility TRIPS affords them, then they probably do not need to include a specific negotiation on TRIPS in the overall “Millennium” Round Agenda. The next Round however, offers opportunities for trade-offs across many areas and sectors. It could well be that in such negotiations developing countries will be faced with increased pressure, for example to liberalize their service industries, or reduce ceiling bindings on manufactured products, as seems likely in the already tabled proposals on industrial tariffs. These concessions or others in which developed countries would demand further trade liberalization and more rigorous disciplines could be traded against changes developing countries may wish to seek in TRIPS.


B) Developing Country Proposals

Developing countries have already tabled a number of similar proposals calling for changes in the TRIPS agreement which contain many similarities. These fall into five main areas: transfer of technology; higher level of protection for geographical indications of goods; exemptions and alternatives to patents (Article 27.39(b); compulsory licensing and extension of transition periods.


1. Transfer of technology

Developing countries highlight the TRIPS provision (Article 7) which states that the protection and enforcement of IPR protection should contribute to the promotion of technological innovation and the transfer of technology. In their view, not only has technology transfer not advanced significantly since the signing of the Agreement, but they are increasingly forced to pay exorbitant prices for the use of foreign technology. Developing countries and LDCs have repeatedly stressed that developed countries have failed to implement Article 66.2 which commits them to provide incentives to their enterprises and institutions to promote technology transfer to LDCs. This, they argue, casts doubts on the effectiveness of one of the prime objectives of the Agreement, namely the promotion of technology transfers.

To address this deficiency, developing countries have proposed that the review of the TRIPS Agreement consider ways to put into practice the objective and principles related to technology transfers and dissemination of technology to developing countries,  particularly to LDCs. The African group calls specifically for a regular and full review of the implementation of the provisions of Article 66.2 by developed countries (WTO, 1999c). Developing country proposals tabled so far, however, have failed to make specific recommendations on how the technology transfer should be accomplished and what kind of incentives would be useful to induce firms to transfer technology to LDCs.  Some specific suggestions on this issue are included in section V below.


2. Exclusions and Alternatives to Patents - Article 27.3(b)

Issues related to the patentability of plants and animals, genetic materials and micro-organisms are among the most controversial in the TRIPS agreement.  They relate to questions of high priority in developing countries such as the sustainability of agriculture and food security, access to plant genetic resources (PGRs) and the rights of indigenous peoples. Although in principle there should be no incompatibility between the objectives of conservation, access to, and sustainable use of PGRs for food and agriculture, as well as those of stimulating investments in plant development through IPRs (FAO/AITIC, 1998), the issue has given rise to much controversy in connections with Article 27.3(b), whose review has started already in 1999 (Note 16 : The Council on TRIPS has developed  information of the ways by which countries are implementing patent or sui generis protection for inventions of plants, animals and essentially biological processes for the production of plants or animals. Several of the countries reportedly did so based on the principles of the 1991 Act of the Union for the Protection of New Varieties of Plants (UPOV) Convention, under which parties are free to protect plant varieties by plant breeders rights).

The general developing-country concern is that companies, particularly those from the developed countries, will be able to establish monopolies, securing lawful claims on plant varieties containing genetic information obtained from farmers in developing countries, which would then be sold back to them with the added royalties. This they consider not only bad economics, but a gratuitous give-away of their agricultural biological resources.

Developing countries are also concerned about the discrepancy between provisions in the TRIPS Agreement and the UN Convention on Biological Diversity (CBD) and other related multilateral agreements, such as the FAO International Undertaking on Plant Genetic Resources (Note 17 :  The CBD agreement has been signed by 175 countries. An important exception is the US). An  example of apparent incongruity is that whereas the TRIPS Agreement recognizes IPRs as private rights in such areas as micro-organisms and microbiological processes, the CBD affirms that a nation has sovereign rights over (implicitly all) its biological resources. Furthermore, the CBD explicitly recognizes the usefulness of the equitable sharing of any benefits arising from the use of these resources and of traditional knowledge, innovations and practices related to the conservation of biological diversity and its sustainable use.

Some developing countries also see a discrepancy between the TRIPS agreement and FAO’s International Undertaking on Plant Genetic Resources.  The latter defines and recognizes “Farmers’ Rights”, i.e. past, present and future contributions of farmers in conserving, improving, and making available plant genetic resources. At the same time,  the International Undertaking recognizes that  Plant Breeders’ Rights, as provided for in UPOV are not inconsistent with the International Undertaking. (FAO/AITIC, 1998).

Still others give priority to ensuring that developing countries retain the flexibility they now have in choosing a sui generis regime for protection plants and animals. They would be concerned for example by efforts to narrow the choice of regimes  e.g. that provided in UPOV (1991), which has been developed and is seen as appropriate for developed country agriculture.

In keeping with these concerns, a number of developing countries (the African Group, India, Venezuela) have proposed that since the provisions of the TRIPS Agreement and CBD and the International Undertaking are intrinsically linked, their provisions should be examined to reconcile any contradictions, presumably in favor of the provisions in these other treaties, which reflect developing countries interests more fully.  In view of the fact that the process of reconciling the TRIPS and the CBD and the International Undertaking is a vital piece in the protection of biodiversity and strongly associated with IPR protection, developing countries argue that the status quo regarding Article 27.3(b) should not be altered in the interim.

At the same time, a number of countries have tabled specific proposals for modification or amendment of Article 27.3(b) and there have been numerous suggestions for changes that have evolved from different developing country meetings and individual reports. There are two main objectives to these proposed amendments. First, to expand  the definition of  items/products/processes  which countries can  exclude from the provision of   patents; second,  to strengthen protection or increase the returns to holders of traditional knowledge.

In pursuit of the first objective, some proposals aim to include micro-organisms and micro-biological processes to the list of items which members may exclude from patentability, on the grounds that they are not scientifically different from items and processes already excluded (WTO, 1999c).  This of course would cover a large number of products and processes involving seeds (and drugs) which are of great interest to patent holders in developed countries (Note 18 :  A somewhat less drastic version of this proposal would extend the exclusion to “the gene sequence and essentially biological process for the production of plants, animals and their parts” as well as to “naturally occurring micro-organisms” (Das, 1998). Another country (Venezuela) has proposed to exempt from patents all essential drugs on the list of WHO (WTO, 1999b); and similar proposals  are under consideration by African countries.

The main proposals to strengthen protection of traditional knowledge call for the following changes in TRIPS (Note 19 : These proposals can be found in various reports and analyses (Das, 1998, Tansey, 1999, Correa,1999);  some of these proposals have been put forth as recommendations for changes by individual or groups of developing countries) :


( i) Explicit legal protection of “traditional knowledge” and the innovations introduced by the farming and indigenous communities in developing countries;

(ii) Explicit recognition of protection for traditional farming practices including the “farmers’ rights” to save and exchange seeds;

(iii) restricting patents for items which had been available to the public by means of use, written description and other means;

(iv) forbidding patents of plant materials obtained from materials in international   germoplasm banks and other deposit institutions;

(v) ensuring that, if the subject matter of a patent is derived from the resources of a country, the patent holder should share the economic benefits of the patent with the country of origin.

This is a large number of recommendations whose support among various groups of developing countries is obviously going to vary depending on the level of a country’s institutional development, the importance of agriculture and biodiversity to its economy and other factors. But they constitute a wide enough “menu” of alternatives that can be used by many developing countries as a basis for formulating a strategy for participation in the review of Article 27.3(b) and the wider TRIPS negotiations.


3. Extension of transition periods

There are two main proposals related to the extension of transition periods, one narrow and one general. The narrow, which would apply to all countries, refers to an extension of the five-year transition period in Article 64.2 on dispute settlement. This sub-paragraph pertains to the non-violation of the nullification or impairment provisions in Article XXIII (c and d) of GATT 1994. The extension of this postponement has been proposed by a number of developing countries, economies in transition (WTO, 1999d) and even a Quad Member (Canada). Thus, this is not a developing-country issue as such. It can be  argued that there has not been enough experience with dispute settlement under TRIPS, or of non-violation complaints within the WTO, which would justify prolonging this suspension. Developing countries can ally themselves with other Members to recommend that the Ministerial meeting in Seattle decide to maintain the moratorium on the non-application indefinitely, or until a specified time in the future when members judge that sufficient experience has been gathered to justify lifting it.

A broader issue relates to the question of the extension of the transition period for the implementation of the overall TRIPS Agreement by developing countries (Article 65.2).  There is no doubt that many developing countries which are not LDCs  lack the institutional capacity to implement their obligations under the TRIPS Agreement and would like to seek an extension of the transition period foreseen, which ends in January 1, 2000.  Only a few countries are arguing for such a general extension. The African Group proposal—which includes many countries likely to have serious implementation difficulties—calls for a more modest extension which focuses on deferring the implementation of Article 27.3(b). The African Group maintains that additional time is needed for the review of the Article to take into account issues of consistency between this article and deliberations on the CBD, UPOV, the International Undertaking etc., and that an additional five years would be needed after the review is completed to establish the appropriate institutional arrangements (WTO, 1999c).


4. Compulsory licensing

Under the TRIPS Agreement (Article 31), a country can demand, under certain circumstances (situations of national emergency, or extreme urgency or in cases of public non-commercial use) that patent holders license their patent to other companies as a condition of selling the patented product.  This can result in less favorable conditions to patent holders than those under strictly commercial conditions. However, the Agreement also allows for the termination of authorized license if the “circumstances which led to it cease to exist and are unlikely to recur”. Compulsory licensing occurs particularly in cases of a new drug developed to treat a disease or health problem considered an epidemic or otherwise needing urgent treatment.

Pharmaceutical companies in developed countries—for example the pharmaceutical Researchers and Manufacturers of America (PhRMA)—are seeking to tighten the rules on this provision through more explicit restrictions on parallel imports and compulsory licensing (Note 20 : Inside US Trade, 28 August 1998). Developing countries on the other hand would like to extend compulsory licenses beyond domestic markets and to have no time limits on them. Many in African countries feel that there is a need to relax the exclusive rights of the patent holders in respect to the drugs listed as essential by the WHO and  permit countries to  use automatic compulsory licensing for the essential drugs in the  list in the interest of their supply at reasonable prices (Note 21 : Venezuela has made a similar proposal (WTO, 1999b).


5. Protection for geographical indications of goods

Many WTO members, including the CEFTA countries (Note 22 : CEFTA countries include the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia), several developing countries (Note 23 : Cuba, Dominican Republic, Egypt, Honduras, India, Indonesia, Nicaragua, Pakistan, Turkey and Venezuela), including the African group, would wish to extend the protection provided by geographical indications to products other than wine and spirits. A number of agreements to which developing countries participate (e.g. the Cartagena Agreement for the ANDEAN Community, the Bangui agreement concerning the creation of the African Intellectual Property Organization-OAPI) provide protection for a wider range of products including beverages, dairy and other food products, handicrafts etc. Some examples in the proposals would include basmati rice, Darjeeling tea, alphonso mangoes, Amazonian nuts etc.

Notwithstanding these examples, it is unclear whether an extension of the geographical indications to other products would be a net benefit to developing countries as a group. It would also result in increases in such designations for products originating in developed countries for which developing countries are consumers. In addition, developing countries with a comparative advantage in imitating these products, or producing like-products, may not wish to go along with a broader definition of geographical indications, which would result in higher protection.  On this issue the divide does not seem to be North-South and individual countries need to study with care what position to take and find suitable allies with other WTO members whether developed or developing.

V. Conclusion and Recommendations

The above analysis suggests that the TRIPS Agreement poses serious problems for many developing countries and should be an important priority in their upcoming “Millennium” negotiations. It is an agreement which, while in some respects flexible, contains many potential hazards. It would be important that the developing countries exert considerable efforts to try to improve the agreement and redress the present imbalance between producer/consumer, developer/user interests. The TRIPS Agreement should be viewed as a bargaining chip to obtain concessions in the negotiations in exchange for agreeing, for example, to further liberalize their trade in services or in industrial products—which is probably beneficial to them in any case. This would not be easy because developed countries are likely to seek changes in ways that would essentially tighten the disciplines under the agreement—which would not be to the developing countries’ advantage.

The main negotiating objectives of developing countries should include in order of priority:


(1) Maintenance of the flexibility they now have within the Agreement. To this end, they must try to ward off efforts by developed countries to limit flexibility regarding what is considered a sui generis system or expand the basic provisions on IPR protection already included in the TRIPS Agreement.

(2) Securing developed country commitments in support of concrete and effective ways to: (a) render operational  TRIPS provisions involving  technology transfer to developing countries and in particular to LDCs; and (b) share the benefits of R&D undertaken in the developed countries but originating in knowledge available to indigenous people and local communities.

The following specific suggestions could be considered in this regard:


(a)  Concrete financial  targets for developed country compliance with Article 66.2 or, more generally, technology transfer to developing countries should be agreed upon,  with developed countries being given a choice of alternative modalities of how to meet their obligation (Note 24 :  The approach of combining specific financial targets with flexibility in the means of achieving them has been used by the internationally community to raise funding in other priority areas, e.g. debt relief). This could include:

(i) the  purchase of patents and granting them to developing countries (e.g. gene donations in the case of bio-technology or environmentally-sound technologies) or selling them on concessional terms;

(ii) specific explicit increases of Official Development Assistance (ODA) through the establishment of new trust funds for technology transfer or other means;

(iii) fiscal incentives, such as guaranteed purchases of new drugs especially those that address epidemic diseases, or tax reductions or exemptions for firms transferring technology in such priority areas.


(b)  In order to ensure that benefits from patents based on animal, plants and other  micro-organisms originating in developing countries are shared between patent owners and the country of origin, explicit provisions for sharing of royalties and/or other economic benefits derived from such patents, should be explicitly included in TRIPS Agreement. The formula for benefit sharing should be flexible, with the agreement between Merck &Co. and INBio of Costa Rica serving as a useful model (Note 25 : Some details of  this agreement can be found in World Bank, 1998).


(3) Obtaining reasonable time extensions for implementing the Agreement. It  would probably be unrealistic to seek a general extension of the transition period for implementation of the Agreement by developing countries. On the other hand, since few developing countries have put in place suitable sui generis legislation, it may well be reasonable to argue very strongly for: (a) an examination of the means to ensure compatibility between Article 27.3.b and the CBT and IU;  (b) additional time to implement Article 27.3(b) in light of the findings of the review and the need to structure laws and regulations compatible with all the agreements dealing with bio-diversity. Alternatively, implementation of 27.3(b) may be put off until a specific time period after the conclusion of the next Round. Developing countries  could also can join other WTO Members in seeking an extension of the moratorium of application of the non-violation provisions of the GATT—but this is not an issue on which they should expend negotiating capital.

(4) Increasing, where possible, developing-country  flexibility under the Agreement. Some specific amendments of 27.3(b) that developing countries/LACs may be willing to pursue include the exclusion from patents of naturally occurring substances—including genes, and naturally occurring micro-organisms, as well as essential drugs on the WHO list. But, in considering whether to press specifically for these amendments, or any others, they need to evaluate whether they can accomplish this without giving up additional flexibility or incurring costs through further tightening of IPRs in this area that may be sought by developed countries.

In parallel to negotiating changes in the TRIPS agreement, developing countries need to take steps domestically to implement aspects of the Agreement in ways that are both consistent with existing provisions and which do the least damage to their development prospects. There are three areas in which work is needed: (a) adoption of an appropriate sui generis regime under Article 27.3(b) suitable to individual country needs; (b) adoption of legislation and regulations which exploit the flexibility offered by the Agreement with regard for example, to price controls, compulsory licensing and parallel imports but which are consistent with TRIPS provisions. Otherwise they face the unpleasant prospect of developed country complaints raised through the WTO Dispute Settlement mechanism; (c) design and implementation of suitable competition policies that limit the opportunities for monopolization of domestic markets by foreign firms. They should try to get as much technical assistance as possible from international organizations and bilateral donors in the design of the legislation, regulations and other institutional development needed for this purpose.

In order both to negotiate effectively, and to implement the TRIPS provisions,  countries need to place high priority to developing  national policy coherence. This would involve establishing mechanisms for information sharing and consultations between the public sector and its constituent parts as well as with the private sector and elements of the civil society involved directly or indirectly with IPR protection. This will not be an easy task because TRIPS involves a variety actors e.g. ministries or other institutions dealing with international trade, agriculture, industrial development, competition policy, science and technology, public institutions of higher education and/or research, private entrepreneurs in industry and agriculture, the legislative branch and other elements of civil society.  Similarly, policy coherence would be greatly promoted by strengthening the communications and links between officials in capitals dealing with trade and related matters and the country’s representatives in Geneva (Note 26 : In some cases, for example patent examination, regional or other co-operative approaches with other developing countries  may increase efficiency and provide important cost savings ( Braga et al, 1999).

Finally, an undeniable obstacle in any effort to gauge the economic implications of strengthening IPR protection in developing countries (or other types of intellectual property-related analysis) is the insufficiency of empirical research on this issue, compounded by a lack of factual information or compilations of statistics related to intellectual property-related sectors. The development of a sound data base as well as objective empirical analyses of intellectual property issues is a critical element to effective public policy making both in developed and developing countries. The international community, through such institutions as WIPO as well as others which work in support of development should take on this task sooner rather than later.

VI. References

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