Technology tansfer, intellectual property rights and the environment

Although the Rio Earth Summit recognised that the transfer of environmentally sound technology (EST) was essential to enable the countries of the South to embark on the course of sustainable development, there has since been little or no progress on this issue. The fact that the patents for such technologies are mainly held by TNCs in the North has also frustrated attempts by the South to develop such technologies independently. The main obstacle is the stringent intellectual property regime imposed by the TRIPs agreement under GATT, and its successor, the World Trade Organisation.

UNCED recognised that technology transfer was essential for developing countries' transition to sustainable development. Indeed, technology transfer was one of the two critical cross- cutting issues in the North-South compact, the other being financial resources. In the UNCED process, the key issue in technology transfer was intellectual property rights. The South argued that IPRs had to be relaxed in the case of environmentally sound technology (EST), for otherwise IPRs would hinder the South's access to such technology.

The Northern delegations were very sensitive on this point and refused to concede. Whilst agreeing that concessional terms should be encouraged for the transfer of ESTs, the Northern governments insisted that IPRs (such as patents) be applied and that an exception should not be made in IPR regimes on such technologies.

Finally, the Agenda 21 chapter on technology called for action to promote and finance the access to and transfer of environmentally sound technologies to developing countries on favourable (including concessional and preferential) terms. But it also says these terms must be 'mutually agreed' upon and also take into account the need to protect intellectual property rights.

The full application of such rights would of course be a major barrier to technology transfer, and deprive the commitment to transfer technology of much of its content. There is thus a fundamental tension within the agreement on technology, and room for more discussion on how to operationalise the Agenda 21 proposals on technology cooperation, transfer and capacity building. The Southern countries consider this to be an area where assistance from the North is critically needed.

IPRs as obstacles to transfer of environmental technology

Since Rio, there has also been little or no progress on facilitating the transfer of environmentally sound technology to the South. Instead, the international IPR regime has become much stricter, especially through the TRIPs Agreement in the WTO, which will have to be translated to policies and laws at national level. Evidence is also emerging that the IPR regime can prevent developing countries from having effective access to environmentally sound technologies (ESTs).

Holders of the patents to these technologies, which are usually Northern-centred transnational companies, can refuse to grant permission to companies in the South to use the technologies, even if they are willing to pay market prices; or else the technologies may be made available at high prices (due to the monopoly enjoyed by the patent holders). Companies in the South may not afford to pay at such prices, and if they do their competitiveness could be affected. As a result, developing countries may find difficulties in meeting their commitments to phase out the use of polluting substances under international environment agreements.

Third World firms find it difficult or impossible to have access to substitutes for chlorofluorocarbons (CFCs), chemicals used in industrial processes as a coolant, that damage the atmosphere's ozone layer. This hinders the South's ability to meet commitments under the Montreal Protocol, an international agreement aimed at tackling ozone layer loss by phasing out the use of CFCs and other ozone-damaging substances by certain target dates.

Under the Protocol, developed countries originally agreed to eliminate production and use of CFCs by the year 2000, whilst developing countries were given a 10-year grace period to do the same. A fund was set up to help developing countries meet the costs of implementing their phase-out, and the protocol includes articles on technology transfer to the South on fair and favourable terms.

According to the Indian Commerce Ministry, developing countries like India that manufacture products (such as refrigerators) with CFCs are finding it very difficult to phase out the use of these substances because of the lack of access to environmentally acceptable substitutes controlled by Northern multinationals.

There are five Indian companies that are major manufacturers of products that depend on the use of CFCs. They face closure if they are unable to meet the deadline for eliminating CFCs use by the year 2010. However, the pledged technology transfer on fair and most favourable terms has not materialised. Three of the Indian companies formed a consortium to commission a local institute of technology to produce a substitute for CFCs. The research is at an advanced stage and India now has a real possibility of locally producing the substitute substance, HFC 134A.

However, the implementation of this plan faces a major obstacle because of the WTO's TRIPs agreement. The patent rights to the substitute are held by a few multinational companies. They may not want to grant permission to use the technology to companies in developing countries which they view as rivals. Some of the Indian companies are willing to pay the market price or even higher for the technology. But a multinational holding the patent has refused to license it unless it can take a majority stake in the companies' equity. This example shows how much the developing countries have been put on the spot.

On one hand they are persuaded or pressurised to join international environmental agreements and commit themselves to take painful steps to change their economic policies or production methods. Financial aid and technology transfer on fair and most favourable terms are promised during the hard negotiations, to persuade the South countries to sign on. Then, when the agreements come into force, the funds are far from the promised level, and technology transfer fails to materialise.

Meanwhile in another forum like the WTO, other treaties such as TRIPs are negotiated which produce an opposite effect, and that is to block the South's access to environmental technology. Yet, when the time comes, the South can be expected to be pressured or coerced to meet their full obligations, such as phasing out the use of CFCs (in the Montreal Protocol) or reducing emissions of Greenhouse Gases (in the Climate Change Convention). There is thus an unfair imbalance. The North does not follow its obligation to help the South, but the South has to meet its commitments, which because of the lack of aid and technology, will cause economic dislocation.

One remedy being proposed by some public interest groups and developing countries is to change the international laws on patents so that the full weight of IPRs is not applied to environmentally sound technology.

The Indian government has made out a strong case for amending the TRIPs accord in the WTO in order to recognise developing countries' need for transfer of ESTs on 'preferential and non-commercial terms'. It tabled a paper on the issue of TRIPs and the transfer of ESTs at the WTO in 1996 (see below).

TRIPs and the environment at the WTO

In the WTO's Committee on Trade and Environment (CTE), the 'TRIPs and environment' is being discussed, under two issues: (a) the relationship of TRIPs agreement to access to and transfer of technology and the development of environmentally sound technology; and (b) the relationship between the TRIPs agreement and MEAs which contain IPR-related obligations.

A key issue, as defined by NGOs and some Southern governments, is an important clause in the TRIPs agreement relating to patentability and non-patentability of biological materials, i.e. the issue of 'patenting of life forms'.

At the March 1996 meeting, India presented a paper, a brief outline of which is as follows. The paper states that the five types of intellectual protection (IP) covered in TRIPs are relevant in this context: patents, plant variety protection, layout designs of integrated circuits and undisclosed information. Two types of technologies incorporating IP are distinguished: those that harm and that benefit the environment. The use of the first should be discouraged, the second encouraged, by the international community.

On patents, for technologies harmful to the environment, measures needed to discourage their global use may include exclusion from patentability (so that incentives are not given to generate such technologies) and ban of their use or commercial exploitation. The TRIPs agreement recognises this reasoning in Article 27.2 which allows exlusion from patentability 'inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.'

For environmentally beneficial technologies, to encourage their global use, and in cases where other measures for technology transfer are not possible, India proposes three points:

(a) Members may have to exclude from patentability to allow free production and use of such technologies as are essential to safeguard or improve the environment. Such an exclusion is not incompatible with TRIPs and may have to be incorporated through a suitable amendment;

(b) For currently patented technologies, Members may revoke patents already granted, if this is done in consonance with the Paris Convention and must be subject to judicial review;

(c) To encourage the use of environmentally beneficial technology, Members should be allowed to reduce the term of patent protection from the present minimum of 20 years to say 10 years, 'so as to allow free access to environmentally- beneficial technologies within a shorter period'.

The paper also deals with layout designs of integrated circuits and protection of undisclosed information, and with plant variety protection.

It suggests that amendments to the TRIPs agreement may be required in Section 5 (articles 27, 31, 32, 33), Section 6 (articles 36,37,38), Section 7 (Art 39), and an understanding on plant variety protection (Art 27), dispute settlement (Art 64) and undisclosed information (Art 39).

Another key aspect of technology transfer and IPRs is the TRIPs provision in relation to biological materials. It requires governments to afford patent protection for microorganisms and biological processes involving them, which include genetic engineering processes and genetically engineered animals and plants. It also requires that intellectual rights on plant varieties be protected either through patenting or an 'effective sui generis system of protection'. This raises concerns that the knowledge of Third World farmers and indigenous communities that has mainly contributed to the development of crops and the use of plants will not be legally recognised, whilst the corporations which genetically engineer biological resources will be unfairly rewarded. Countries of the South would then have to purchase biotechnology products at high prices (which are facilitated by the patent protection) even though they are the origin of the biological resources (and of the knowledge on their utilisation) used in biotechnology. This is likely to lead to higher cost of seeds and food products in developing countries. There is widespread opposition, including from farmers' organisations in India and the Philippines, against the TRIPs agreement. This provision will be up for review in 1999, and in that process a change or reinterpretation can be proposed.

In its 1996 paper to the WTO, India has stated that on plant variety protection, under TRIPs, IP protection can be provided either by patents or by an effective sui generis law. This and other provisions of Article 27.3 (b) are subject to review by 1 January 1999. The India paper states: 'As it now stands, Members are free to incorporate in their sui generis laws any measures for exclusion, revocation, use without the authorisation of the right holder, reduction in the term of protection and even for sharing of benefits with traditional communities, in the context of discouraging the production and use of plant varieties which are injurious to the environment and encouraging the production and use of those that safeguard or are beneficial to the environment, provided that these provisions are otherwise consistent with the TRIPs agreement.' It urged the CTE to accept this interpretation. These and other related issues in the context of biotechnological inventions and biodiversity should be borne in mind during the review in 1999.

Patenting of life forms, community rights and environment

In this section, further details are given of the TRIPs provisions relating to patenting of biological materials (or 'life forms' in popular language) and its implications. This is an issue which has aroused great public interest and controversy.

At the June 1995 meeting of the CTE, the issue of patenting of biological materials was also discussed in some detail.

In the crucial and relevant section, the TRIPs agreement (Article 27: 3b) states: 'Members may also exclude from patentability plants and animals other than microorganisms, and essentially biological processes for the production of plants and animals other than non-biological and microbiological processes. However, members shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO Agreement.'

This subparagraph is rich with implications for issues including the nature, evolution and ownership of knowledge in the use of biodiversity, the sharing of benefits derived from the use of biodiversity, the nature of 'invention' in matters relating to nature and biological processes and products (life forms), the rights of local communities, the ecological, social and ethical impacts of modern biotechnology (in particular, genetic engineering).

The subparagraph can be open to different interpretations in its many parts. Some issues and interpretations are examined below.

* Protection of plant varieties

Article 27(3)(b) of TRIPs obliges Parties to provide for the protection of plant varieties. This they may do either by patents or an efffective sui generis system or any combination of these. The only such system available now is that under UPOV which favour plant breeders. Each country is, of course, free to set up its own system. But the text's requirement that it be 'effective' suggests that an external criterion will be applied by major industrial countries. This term, which appears in US regulations (e.g. section 301 of the Trade and Competitiveness Act of 1988), has been used to retaliate against countries whose IPR legislation is at variance with US standards.

A distinction is drawn between genetic material developed mainly in the North by the technologists and corporations and that which has been developed mainly in the South by local communities of farmers or indigenous populations. Essentially, there is a clash of definition of knowledge systems. TRIPs tends to recognise only the Western industrialised model of innovation and to ignore (or not recognise) the more informal, community-based system of innovation through which Southern farmers produce, select, improve and breed a diversity of crop and livestock varieties. This collective intellectual property of local communities is in danger of being denied recognition, and hence protection.

For traditional societies, biodiversity is common property, and knowledge related to it is in the intellectual commons. For biotechnology corporations, biodiversity becomes private property through their investments, and TRIPs are the means for such privatisation. Additionally, IPRs are only recognised when knowledge and innovation generates profits, not when it meets social needs. Article 27.1 makes clear that to qualify for patenting, an innovation must be capable of industrial application. TRIPs could lead to an extension of the domination of multinational corporations over production and distribution of products involving or derived from biological materials, including genetic material from plants, crops, animal and human life. At the same time, innovation in the public domain which is mostly for domestic, local and public use could rapidly be undermined and the related institutions dismantled. This will deepen the North-South rift with the ensuing unfair and unequal exchange.

Millions of farmers in the South could increasingly face a situation where they would be compelled to buy patented seeds which originate in the South. This will discourage the continuation of seed diversity and create high-priced dependency by farmers. Similarly, consumers will have to pay exorbitant prices for pharmaceutical drugs developed from genetic material and often, from the knowledge of indigenous forest communities, of the South.

Some NGOs and also a few governments are now examining alternative interpretations of what could constitute a 'sui generis' system of intellectual protection for plant varieties that is based on a recognition of the evolution of knowledge and innovation by local communities in the use of biodiversity.

* Patenting of Life

Parties may exclude from patentability plants and animals, but this exclusion may apply only to what are considered naturally-occurring plants and animals. Those considered to be technologically improved varieties may not be exempted. Microorganisms are not excluded from patentability. Again, microbiological processes are not exempted. The implication could be that plants and animals which contain genetically engineered microorganisms are not exempted from patentability. Biotechnology has opened great opportunities for the commercial exploitation of genetic resources in various fields. Though still largely unrealised, promises of biotechnology have prompted a face 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 (at least until the relevant provision is revised, four years after entry into force of the agreement).

In the US, the Supreme Court has created a precedent by holding that microorganisms modified minimally (by shuffling genes) are not naturally occurring and are patentable. This is the slippery slope which has led to the patenting (and ownership) of a wide variety of life forms, including human genes. (The US Commerce Department for instance applied to patent a cell line of the whole Guyami population of Panama.) The terminology of the TRIPs provision is strikingly similar to that of the US and is an attempt to globalise the US position. As TRIPs now stands, WTO parties will be required to enact national laws for the compulsory patenting of microorganisms and eventually all life. 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.

* Biosafety

The biotechnology industry plans to release a wide range of genetically modified organisms (GMOs) into the environment, with unknown and potentially serious or even devastating health and environmental hazards.

Because they are alive, genetically engineered products are inherently more unpredictable than chemical products. They can reproduce, mutate and migrate. They cannot be recalled. There is increasing scientific evidence of the serious damage that genetically engineered plants, crops, animals and fish, and food can do to the ecology and to biodiversity as well as human health. There is also evidence that experiments, projects and products containing GMOs are being transferred to the South, often without the knowledge or prior informed consent of governments or people of recipient countries.

In acknowledgment of the potential threats, the Biodiversity Convention in November 1995 agreed to begin negotiations on an international legally-binding biosafety protocol.

Amendments to TRIPs should be considered to take into account the need to discourage the spread of hazards, should scientific evidence increase about the need to protect health and the environment from these biohazards. (TWR No. 81/82, May/June 1997)