2nd Article in series on IPRs

Earth Trends by Martin Khor

IPRs system a block to development?

Recent studies have shown that when they were developing, the presently advanced industrialised countries did not have such strict standards of intellectual property that the developing countries are today being asked to follow.  Concerns are now being raised by development experts and by governments of developing countries that the World Trade Organisation's treaty on intellectual property may hinder technological development, and also accelerate the process of "biopiracy", or the corporate patenting of biological resources of the South.  (This is the second article in a series on IPRs and Development).



The heightening of consumer prices is the most obvious effect of effect of high standards of intellectual property protection.  But there are also other effects.

Historically, technology transfer has played a key role in industrialisation, and a large part of this transfer took place by firms imitating or copying the technologies used by others.  However, producers in developing countries will find it difficult or impossible to copy technology which is IPR protected, when the World Trade Organisation's agreement on intellectual property (known as TRIPS) and associated national legislation takes effect. 

Domestic firms that wish to make use of the technology would have to obtain permission from the patent holder (which may or may not grant the permission, even if the applicant intends to pay the commercial rate), and pay expensive royalties.  Many firms may not be able to afford the fees; and those that can would find that the high cost reduces their ability to be competitive.   

The one-size-fits-all or rather minimum-size-for-all approach of TRIPS thus places high obstacles to developing countries' efforts to upgrade technology levels, to modernise and industrialise.

Many of the present-day developed countries did not adopt IPR legislation, or strict IPR standards, when they were going through the stages of development that the developing countries of today are attempting to go through. 

In Switzerland a hundred years ago, as a rule, Swiss industrial inventions could be patented abroad where patent legislation was in effect, but as Switzerland had no patent laws, Swiss industries were free to copy foreign inventions without restrictions, according to a study by the Swiss development expert Dr. Richard Gerster.

When most of the now-developed countries established their patent and other IPR laws in the 19th century, all of these IPR regimes were highly "deficient" by the standards of today.  Few of them allowed patents on chemical and pharmaceutical substances until the last decades of the 20th century, according to another study by the Cambridge University economist, Dr. Ha-Joon Chang. 

Pharmaceutical products were patented only in 1967 in West Germany and France, 1979 in Italy and 1992 in Spain.  Chemical substances were patented only in 1967 in West Germany, 1968 in Nordic countries, 1976 in Japan, 1978 in Switzerland and 1992 in Spain.

If at their stage of development the developed countries had had to adhere to the minimum standards set by TRIPS, it is most doubtful many of them would have attained the levels of technology and industrialisation that they achieved.  Yet the developing countries of today are asked to adhere to IPR standards that would effectively prevent them from taking the same technology path as the developed countries.

As the Argentinian law professor, Carlos Correa, concluded:  "The strengthening and expansion of IPRs are likely to adversely affect the conditions for access to and use of technology, and thereby the prospects for industial and technological development in developing countries…Under the TRIPS agreement, reverse engineering and other methods of imitative innovation--that industralized countries extensively used during their own processes of industrialization--shall be increasingly restricted, thereby making technological catching-up more difficult than before."

A study by Jayashree Watal, formerly a senior official in the Commerce Ministry of India,  provides an example of difficulties facing local firms in developing countries is that of Indian industry attempting to adjust to India's implementation of its obligations under the Montreal Protocol, in which Members have agreed to phase out their use of the CFC chemicals and other ozone-damaging substances by target dates. 

Indian-owned firms have been producing CFCs that are used in the manufacture of refrigerators and air-conditioners in India.  The Indian CFC producers wanted to shift from making CFCs to an environmentally-sound substitute, HFC 134a.  A few companies in developed countries control the patents to HFC 134a. 

An Indian company seeking access to the technology of producing HFC 134a was quoted a very high price (US$25 million) by a transnational company holding the patent.  The supplier proposed to the Indian firm two alternatives to the sale, that it be allowed a majority share in a joint venture with the Indian firm; or that the Indian firm agree to restrict its exports of HFC 134a produced in India. 

Both options were unacceptable to the Indian firm, and the quoted price was also far too high as it was estimated that the fee should at most have been US$2 to $8 million. 

This case shows not only the difficulty for a developing country firm and industry to modernise its technology, but also for a developing country to meet its commitments under a multilateral environment agreement.  Even if a local firm is willing to pay the market rate to obtain permission to use patented technology, the patent holder can quote an unreasonably high price, or impose unacceptable conditions, or even refuse permission outright. 

Moreover, although some multilateral environment agreements (MEAs) may have financial-assistance, technology-transfer and technology-assistance clauses supposedly to benefit developing countries, in practice developing countries are finding that the developed countries may not fulfil their obligations on assistance, and developing countries find difficulties and disadvantages in fulfiling their environmental obligations.

Another criticism levelled against the TRIPS agreement is that it has allowed the patenting of lifeforms as well as "biopiracy", or the exploitative appropriation by transnational companies of the biological resources and traditional knowledge of local communities based mainly in developing countries.

Previuously, most countries had excluded patenting of lifeforms, biological resources and knowledge on their use.  This changed with TRIPS.  Article 27.3b of TRIPS allows patent exclusion only for plants and animals (but not microorganisms) and exclusion for essentially biological processes for production of plants and animals (but not for non-biological and microbiological processes).  

Thus it appears that WTO Members have to allow patents for certain types of lifeforms and living processes;  and it is being debated whether this also applies to naturally occurring life forms and processes.   If it applies, then the basic foundation on which the patent system rests is undermined, for patents must be given for what are at best discoveries and not inventions.  

In any case, there is no scientific basis for allowing exclusions for certain organisms and not for others, ad for certain living processes and not for others.  This contradiction sticks out like a sore thumb and is currently being heatedly debated at the WTO, as well as outside.

Several scientists also argue that there is no scientific basis for the patenting of life forms even if they are genetically modified.  The patent system is an inappropriate method for rewarding innovations in the field of biological sciences or in relation to biological materials and processes. 

A fundamental critique of life patenting has been made by Dr. B.G.E. Tewolde, the African scientist, who is also general manager of the Ethiopia Environment Authority, and chairperson of the Africa Group in the Convention on Biological Diversity.  

According to Dr. Tewolde the patent system was drawn up to reward innovation in relation to mechanical processes, and this system is inappropriate when applied to biological processes as living things are not invented, and they also reproduce themselves, unlike mechanical things and processes. 

This is also true of genetically modified organisms.  He further argues that discoveries relating to life forms and living processes should also be rewarded, but not through the patent system.  

"Distorting the meaning of patenting in order to make it applicable to life only serves to attract the rejection of the whole system," states Tewolde.  "Who ever worried about the legitimacy of patenting before the 1990s, before it became known that the USA was allowing the patenting of living things?  But now, opposition is growing all the time, opposition not only to the legitimacy,  but also to the legality of patenting."

The TRIPS agreement also requires WTO Members to grant IPRs for plant varieties, either through patents or a sui generis system.  Previously, few developing countries granted IPR protection for plant breeding and plant varieties.  TRIPS opens the road for either patenting or a system of plant breeders' rights that may restrict the right of farmers to save, exchange and use seed. 

Many developing countries in the WTO have argued that Article 27.3b of TRIPS should be amended.  The Africa group has proposed that the TRIPS review process "should clarify that plants and animals as well as microorganisms and all other living organisms and their parts cannot be patented, and that natural processes that produce plants, animals and other living organisms should also not be patentable."  

It also proposed that the review clarify that in implementing their option on plant varieties protection, developing countries  should be allowed to institute a sui generis law that protects the knowledge and innovations of indigenous and local farming communities, and provides for continuation of traditional farming practices including the right to save, exchange and use seeds and sell their harvest.

Meanwhile TRIPS has opened the floodgate to the corporate patenting of life, and to biopiracy.  The London-based Guardian's special report on The Ethics of Genetics (15 November 2000) found that as of November 2000, patents are pending or have been granted by 40 patent authorities worldwide on over 500,000 genes and partial gene sequences in living organisms.  Of these there are over 9,000 patents pending or granted involving 161,195 whole or partial human genes.

Patents have been given on genes or natural compounds from plants that are traditionally grown in developing countries (including rice, cocoa, cassava) and on genes in staple food crops originating in developing countries (including maize, potato, soybean, wheat).

Patents have also been granted on plants used for medicinal and other purposes (eg as an insecticide) by people in developing countries. 

Examples include a US patent for the use of tumeric for healing wounds (this was successfully challenged by the India government on the ground that it has been traditionally used by Indian people for healing wounds),  and the patenting by American scientists of a protein from Thai bitter gourd after Thai scientists found its compounds could be used against the AIDS virus.

The thousands of cases of life patents and the increasing evidence of biopiracy has aroused indignation among a wide range of people and institutions, including governments of the South and their delegations at CBD and WTO;  organisations of farmers and indigenous people worldwide, particularly the South;  development NGOs in the South and North;  the environment community;  and also the human rights community.   As Tewolde noted, the controversy has threatened the legitimacy and questioned the legality of the IPR system and TRIPS.