Why is intellectual property important?

Intellectual property (IP) refers to a number of distinct types of legal monopolies over creations, both artistic and commercial, and to corresponding fields of law and other types of rights that the law gives for the protection of investment in creative effort and knowledge creation. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Copyrights, trademarks, patents, industrial design rights and trade secrets in some jurisdictions are some common types of intellectual property.

Although, there have been several evolution of many of the legal principles governing intellectual property over centuries, it was only in the 19th century that the term intellectual property began to be used, and became a commonplace in the late 20th century in the United States. The Origin of copyright and patent law originate from The British Statute of Anne 1710 and the Statute of monopolies 1623 respectively. 

However, intellectual property rights differ in one fundamental respect. The intangible, abstract objects constituting intellectual property have no natural, self-defining boundaries like physical objects do. In fact, they do not even exist until they are created by explicit definition and designation. For this reason, in addition to general property legislation, IPRs are covered by specific legal systems, and most forms of IPR require a specific registration procedure. Applications need to be made and examined by specialists in order for an IPR to be established. Frequently, the exact boundaries of an IPR subsequently become the subject of litigation between the holder and holders of related IPRs. In short, the transaction costs of acquiring and holding IPRs are much higher than for ordinary physical property. While the subject matter of intellectual property is intangible objects such as information, knowledge or ideas, intellectual property rights are expressed in practice as rights over the tangible products resulting from those intangible objects. For example, an industrial patent confers the exclusive right to manufacture the protected product or use the protected process, and copyright the exclusive right to perform the protected work of art or multiply it in the form of books, compact discs, etc.

1.2 TYPES OF INTELLECTUAL PROPRETY RIGHTS

The main categories of intellectual property rights are:

Patents: As the strongest form of IPR, patents are awarded subject to a thorough examination procedure. They confer a very high level of exclusive rights over an invention for a period of 20 years from the date of the application. Any use of the patented matter, except strictly private use, requires permission (license) from the owner. To receive a patent, an invention must fulfill three main criteria: novelty, non-obviousness (inventive step) and industrial applicability (usefulness). A detailed description of the invention must be submitted, which becomes public after the grant of the patent.

Copyrights: As the name implies, and in contrast to patents, copyrights do not protect the intellectual content itself, only the reproduction of that content in tangible form. Copyright is granted without any registration or application procedure to authors of original works, and also to computer software and databases. A copyright holder cannot prevent others from using the copyrighted material in development of other original works, as long as it is not directly copied. The period of protection is normally granted by adding 50 years to the life of the author, or 50 years only when the author is a corporate body.

Trademarks: Names, signs and symbols used to identify goods or services can be registered as trademarks. There is no limit to the period of protection given the trademark continues to be used.

Trade secrets: The right to keep trade secrets (confidential business information, undisclosed information) is protected through civil and/or criminal law. In the nature of the case, there is no registration procedure, nor is there any exclusive right guaranteed.

Industrial designs: The form of an industrial product can be protected. Exact requirements for protection vary widely between countries.

Layout designs (topographies) of integrated circuits: A recently created Sui generis2 IPR similar to copyright, although with much shorter term of protection, typically 10 years. Only the right to reproduction and distribution is protected, not use in further research and development.

Plant breeders’ right: A Sui generis IPR specifically created to protect new plant varieties. Varieties can be registered provided they are new, stable, homogenous and distinguishable. Protection is similar to a copyright in that it protects the rights to sell and distribute propagating material, while use of the protected variety in further breeding and development is not restricted. The term of protection is comparable to that for patents, around 20 years.

Geographical indications: Typically used for food products and in particular for wines and spirits, these are signs or names which indicate that a product or service originates from a particular geographical location.

Utility model: Sometimes referred to as petty patents, this more unusual form of IPR provides protection for models and designs. Although there are normally requirements for novelty and inventive step, these are less strict than for patents, and examination is simpler or sometimes nonexistent. The term of protection is correspondingly shorter, typically less than 10 years.

Expanding IPRs in Developing countries is still a major concern for policy makers and a constant topic of discussion and debate among the civil society. There is considerable speculation on the impact that expansion in IPRs will have on Research & Development, technology transfer, and economic development in developing countries.

2.1 DEFINING DEVELOPING COUNTRIES

Developing countries a term referring a nation with a low level of material well being. There is no one single agreed upon internationally-recognized definition of developed country, where the levels of development may vary widely within some developing countries, which result in some developing countries having high average standards of living. 

Some international organizations like the World Bank strictly use  numerical classifications. The World Bank considers all low- and middle- income countries as “developing”. In its most recent classification, economies were divided using 2008 Gross National Income per capita. In 2008, countries with GNI per capita below US$11,905 were considered as developing countries. While other institutions use less specific definitions.

Newly industrialised countries are those countries with a more advanced economy than other developing nations, but which have not yet completely demonstrated the signs of developed country.

Therefore,it seems quite difficult to get an exact definition for developing nations. The characteristics of developing countries can vary from one person or organization to another. The World Trade Organization (WTO), for example, recognizes some nations as developing countries but mainly allows the members to classify themselves. Therefore for each, the standards and definition could differ.

Generally, everyone agrees that developing countries are poor. But what is the meaning of poor? The range of poverty found greatly varies in developing nations. A person from one developing country may travel to another which seems richer and may not realize that the two nations carry the same status.

This reveals a common misconception; which is ,people believe that in developing nations everyone is poor. In almost every developing country, we can find wealth and luxury. However, these wealth and luxury is usually concentrated only among a small portion of the population, thus, the majority of the people are usually poor.

The lack of income, skills and knowledge often affect the source of revenue and standard of living of the average citizens; Leaving large portions of the population, without water or electricity in their homes, and limited access to quality medical care. There may be inadequate military resources to protect the population during times of attack or unrest.

Developing countries generally suffer from inadequate social services programs, if they have them at all. For that reason, it is common to find aid groups active in developing countries which provide the citizens with items, such as food, medicine, and education, which would be inaccessible to them otherwise. Other aid groups’ work is to protect human rights, which are commonly violated.

In the following sections, we present a conceptual analysis of the issues, challenges and options faced by developing countries in expanding their IPR framework.

For a long time, Developing countries have been facing demand from developed nations to implement intellectual property rights. The main concern by the developed countries was to protect the inventions or innovations in the developing countries from the dishonest replication and copying. The debate among both developed and developing nations is getting more prevailing since the last two decades. The protection for the innovation has been extended from innovation to discovery, from mechanical devices to living organisms (Byström et al., 1999; chakravathi,1999); from privately funded research and development to publicly funded scientific and technological results; from information technology to information about scientific information (David, 2000); from industrial products and technological processes to services,financial and administrative methods (Lerner, 2000) and from `brick’ to `click’ trademarks (Bubert and Bning, 2001).However the emerging countries are divided on the basis of their economic situation, foreign direct investment and technological sophistication. The concern for the developing countries is the economic implications for the execution of such intellectual property regimes in their respective countries. The case can be even more harsh for the Least Developed Countries (LDCs), where intellectual property rights are seen as the driver for the high technology cost, difficulties to access technology by the public. On the other hand, higher technology transfer with foreign direct investment may somehow excuse such establishment. However such `lucrative’ offers in exchange for intellectual property rights in the developing countries, are according to some developing countries, in view of the developed nations’ benefits and not to raise the economic conditions of those developing countries from their present states. The debate for the introduction of `proper’ intellectual property rights in the developed countries is motivated since the modern countries faced a menace to their innovative technological and non-technological inventions and their commercialization in the emergent countries. Until now, several measures, particularly led by the United States have indeed enforced the implementation of intellectual property rights in the developing countries, specifically backed by the strong business communities in the United States.

3.1 HISTORICAL PERSPECTIVE

Intellectual Property Rights are among those sensitive areas for developing countries whose correct execution and timing could boost the socio-economical situation of the developing countries. However, debates on the policies on intellectual property rights in the developing country have followed a pendulum like movement (Forero-Pineda, 2006). United Nations took the responsibility to highlight the importance of technology in trade and development, cooperated by independent economists from developing countries. The main dispute was the problem of monopoly and oligopoly in the technology markets thus preventing developing countries from having fair access to technology (Cruz, 1998) and its associated benefits. Penrose in 1951 also stressed that it is virtually inevitable for the developing countries to benefit from the strong intellectual property rights owned by inventors in the urbanized countries. From global welfare perspective, arguments on the fact that developing countries having weaker intellectual property necessarily means that inventors in industrialised countries would lose is not true, however only the relative economic benefits associated with such inventions could be less.

From the years 1950s to 1980s, developing countries were able to abstain from the implementation of intellectual property rights, maintaining a special status in the IPR system (David, 1993, p.19). Regional trading blocs like Latin American Free Trade Association (LAFTA), the Andean Pact, and other pacts among the developing countries pursued the common system of intellectual property rights. In 1970, India was the first developing country to adopt a patent law with substantial restrictions on the patent holders (SUNS/IPS, 1995)3. Raghavan in 2001 argued that the choice of process patents rather than product patents allowed local production of imported products given that the use of a different process was demonstrated. Such legislation in India had the biggest impact on its pharmaceutical industry, making it one of most competitive in pharmaceutical research and development. Those practices were carried out in Brazil and Argentina which set up their own national offices which were charge of controlling technology transfer and contracting. Yet those practices and initiatives could not pilot a consolidated intellectual property and technology transfer offices, in lines to the European countries (Cruz, 1998). In the mid 1980s, a shift in this scenario began to occur on the United States Government initiative. Responding to the concerns of the US based firms, and in context to the agreements with advanced countries, David, in the year 1993, concluded that US followed `a direct, unilateral course of action’, instead of renegotiating the international intellectual property rights agreements i.e., Paris or Bern Conventions. Such type of intellectual property regulation was further enacted in Uruguay round of 1990s negotiations, as part of conditions to join the World Trade Organization.

In developing countries, the terms of the debate changed beyond what could be expected; Local interests in support of enforcing stronger intellectual property protection had emerged, together with the commercialization of imported goods and with the development of local technology. Products such as software, video films and music are easier to copy than traditional industrial products are to copy. For this reason, copyrights have been the focal point of debate for less developed countries, whereas in newly industrialized countries, both in Asia and Latin America, patents and trademarks are issues.

Passing from 1970s and 1980s, very recently the debate for introduction of intellectual property rights in different systems within different regions of developing countries have spurred. The main concern, as obvious was raised by the highly influential business lobbies and association in most the developed nations, led by United States. As discussed earlier, United States rebound to the similar kind of strategy by offering market access, technology transfers and foreign direct investments in the (developing) countries, which will successfully implement the intellectual property regimes. Somehow, this was and still a very lucrative incentive for the developing countries, which would definitely raise their present economical conditions, however the policy makers in these countries have different perspective. The u-turn in the developed countries strategy is to position differently the impact of implementation of intellectual property protection in developing countries, as it was done in negotiations at Doha Round of the WTO on the Trade Related Aspects of Intellectual Property Rights (TRIPS). The Doha Round of discussion was meant to exclude the development related IPR issues as the cost of medicines, agricultural products, bio-diversity or genetic materials (Lall, 2003). Doha Declaration classified the countries based on their domestic technological imports, research and development and their innovation system.

4.1 IPR IS IT A BENEFIT OR A DETRIMENT FOR DEVELOPING COUNTRIES?

According to World Bank Global Economic Perspective, there are certain specific reasons for developed countries, and interestingly for the developing countries to follow the TRIPS agreement, i.e., it may provide developing countries better access to agricultural and apparel markets in rich nations, an expectation that stronger IPRs would also encourage additional technology transfer and innovation. 

However, according to World Bank, the promise for long-term benefits seems uncertain and costly to achieve in many nations, especially the Least Developed Countries (LDC’s). In addition, the administrative costs and problems with higher prices for medicines and key technological inputs loom large in minds of policy makers in developing countries. Many are pushing for significant provisions in the agreement. Certain developing countries also applied for the provisions in implementation for the patent protection, particularly in pharmaceutical industry.

Certainly there are specific short-term costs associated with intellectual property rights for the developing countries, like higher prices for the technology and protected products. Given this, the case for stronger intellectual property rights in these countries must rest on long term benefits like larger technology or foreign direct investment inflows and stronger stimuli to local innovation. This would be an economic case only if the present value of these benefits is more than the present value of these costs. Given the mechanics of the compound interest, this means that the long-term benefits would have to be very large indeed, particularly if they accrue after some time.

Some countries have also agreed to support TRIPS in return for the concessions in other (non technological) spheres of economic activity, such as larger aid, freer access to developed country markets for primary exports and so on. Whether they actually benefited in these ways remains an open question, since neither the costs nor the benefits of TRIPS related concessions have been properly measured.

However the discussion might be fruitful, if the implementation of intellectual property rights are associated with the state of economy of the country in which it is being implemented, for instance in the case of developing countries. One main fact regarding the IPR is the certainness of the benefits to developed countries by implementing the intellectual property rights in developing countries. Nevertheless such implementation would also stimulate the local innovation in the developing countries, allowing them to import the foreign technologies and have hands-on experience in learning and using the technologies. The state in which present developing countries is analogy of the state in which the developed countries were in the era of their industrialization, by having weak intellectual property rights, to promote, build and foster the development of local firms and industries. Theory also suggests that the benefits of IPRs rise with income and that at very low levels the costs of strengthening IPRs may well outweigh the gains.

In a world where so many industrial country firms are acquiring strong intellectual property rights, often covering fundamental research tools (e.g., tools used for genetic transformation) and marketable products, it is becoming difficult for developing countries to play isolationist and ignore IPR policies. Given the concerns highlighted in the previous sections, the challenge for policy makers in developing countries is to strike a balance between their need to access modern technologies and developed countries’ need to access the markets and biodiversity. Policy makers in developing countries need to also ensure that the Research and Development sector serves the country well and safeguard the interests of local companies

Scope of protection

Policy makers face the difficult task of defining the scope and breadth of protection (within the minimum standards framework defined by WTO) so as to maximize social welfare and to achieve certain distributional objectives. Too weak protection may lead firms to invest less than socially desirable in the creation of new knowledge. Overly stringent protection may lead to wasteful research spending as firms compete to be first to innovate, which may make public research more socially desirable than private Research & Development. Only rarely will a single level of protection for all technologies or sectors maximize domestic welfare as the trade-off between the economic benefits of innovation and imitation will depend upon the sector involved.

Complying with various international treaties.

Developing countries are under pressures of not only the TRIPS Agreement but also other international treaties and conventions such as CBD, which have conflicting requirements in terms of protecting a country’s natural resources and intellectual property. The laws and regulations for intellectual property protection in developing countries have to meet the international standards and practices specified in the TRIPS Agreement and, the CBD (if they are members of both treaties). If they chose to join UPOV they will also be bound to accept the requirements of the UPOV Convention.

Social and Administrative costs.

IPRs may have social costs if the granting of temporary monopolies, lead to excessive rent seeking by firms. To minimize these social costs, governments will need to ensure competition from both private and public sector. The public sector may have to play an important role in continuing research in traditional crops and technologies and strengthening capacity in modern biotechnology research. 

Legislation without implementation is of little value; and implementing the IPR system involves a number of administrative and institutional costs to the society. These include the costs involved in developing the appropriate laws and enforcement mechanisms within each country. Patent examiners need special training to deal with biotechnological applications or countries need to hire new examiners with degrees in biology and biotechnology. For PVP, an appropriate administrative system must be established. WIPO and UPOV operate training schemes for developing countries and provide assistance to those seeking to implement the TRIPS Agreement. Empirical evidence suggests that these direct costs to the society could be particularly large in a developing country.

Enforcement legislation. 

TRIPS is the first agreement in the IPR field to create direct obligations to enforce the protection granted. It sets standards both for civil and criminal law. In the fields of copyrights and trademarks, it also requires that customs authorities assist right holders in preventing trade with counterfeited or pirated goods. For most developing countries, there will be a need both for new legislation and perhaps even more for strengthening capacity in the judiciary, in customs, and in the police force. Particularly in countries where illegal trade in copyrighted or trademarked goods is widespread, this may be a major implication of TRIPS.

Infrastructure and human capacity.

In many cases, TRIPS will entail a considerable need for investment in infrastructure and human capacity. New forms of IPR, as well as expansion of existing systems to new fields of protection, will require increased numbers of staff, better training, and new computer and administrative systems. The expansion of IPRs to living organisms will require access to systems for deposition of biological material and facilities for identification of plant varieties, both entirely new branches of activity for most developing country IPR administrations.

Costs of implementation.

Apparently, no attempts at estimating the costs of TRIPS implementation were made prior to the finalization of the agreement. Some rough estimates done later by UNCTAD and the World Bank (UNCTAD 1996, Finger & Schuler 1999) have not yielded reliable figures but indicate that the costs may be substantial, in the magnitude of 10 or more million dollars per country. Costs can be expected to be relatively higher in less developed countries, because they start from a lower level of IPR legislation. It is likely that in many developing countries, much of this cost will need to be covered by development assistance funds, at least the initial investment in new legislation, infrastructure and human capacity. At any rate, especially in LDCs, TRIPS implementation will directly compete for resources with other development needs.

However, IPRs can also be beneficial to Developing countries.It is widely assumed, especially at the policy level in developed countries, that strengthened IPR protection will generate economic benefits for developing countries. It has also been argued that this will more than offset the cost of TRIPS implementation. In particular, the importance of strong IPRs for attracting foreign direct investment (FDI) is routinely cited as a key mechanism to this effect.

The scientific literature is however inconclusive on this point. There are studies which demonstrate some correlation. But there are also studies which document substantial increases in FDI despite weak IPR protection (Kirim 1985, cited in South Centre 1997), and studies which show little correlation between strengthened IPR protection and changes in FDI. The provisional scientific consensus appears to be that the level of IPR protection most likely is one factor influencing FDI decisions, but far from the only one and not usually the decisive one. With standardization of IPR protection under TRIPS, differences in this respect will no longer exist and other factors will decide FDI choices. Moreover, it has been argued that the TRIPS agreement may also lead to reductions in the flow of FDI (South Centre, 1997); with stronger IP protection, the risk of imitation will be lower and title-holders may prefer export of products rather than local production in export market countries.

It has also been pointed out that any benefits will likely be concentrated in NICs, while LDCs and other countries at the opposite end of the development scale will risk net costs even over the longer term (UNCTAD 1996).

Strictly speaking, however, even if economic benefits from strengthened IPR protection could be conclusively demonstrated, they would not be benefits of TRIPS implementation, but of IPR implementation. Also before TRIPS, developing countries were free to implement TRIPS levels of IPR protection, or indeed higher levels, if they saw fit. None of the potential benefits of IPRs depend on the existence of TRIPS. What would need to be demonstrated are benefits of having mandatory minimum standards of IPR protection, which is the only new contribution of TRIPS.

These administrative costs may only be partially borne by governments.Patent and trademark offices can be self-financing operations through the levies from application and renewal fees. A careful balance has to be struck, however, between generating revenues for the administrative office and keeping fees sufficiently low so as not to exclude small-scale inventors from the IPR system. An alternative to reduce administrative costs is to contract researchers at universities and other institutions to provide technical reports (the cost of which should be borne by the applicants). Another alternative is to provide for a “deferred system” (which exists in many countries), whereby a special request for examination needs to be made by the applicant during a certain period (UNCTAD 1996). The rationale for this system is that some inventors may decide to abandon the application, thus reducing the number of applications to be examined by the patent office. Yet another option for keeping the costs of running the patent system down, as is the case in South Africa, is to not require any patent examinations and let the patent holders defend their patents in court.

5.1 FACTORS TO BE CONSIDERED

Administrative costs are likely to increase with the implementation of the IPR framework. But these should be viewed in light of the costs of alternatives. Thus, an important question that policy makers need to address is whether the costs of setting up a patent or a PVP system are large relative to the cost of strengthening public sector research and development in agriculture? Intellectual property protection provides greater benefits than costs in the advancement of science, technology, and economic performance. However, the benefits of intellectual property protection often accrue in the future, thereby making the near-term costs seem large. The protection benefits both private and the public sectors and it is the allocation of the return, which is determined by public policy. Yet another factor that policy makers need to consider in establishing an IP system is the cost of protection to the innovators as well. The standard system of patenting would be inaccessible for many small entrepreneurs and grassroots innovators due to limited resources and their risk-averse nature. National governments may have to think about establishing innovative low cost system like Petty Patents that can ensure protection for shorter time at lower cost (Gupta 1999).12 Petty patent will help small entrepreneurs to explore the commercial application of their invention in a given (shorter) time. Later they can choose to go for regular patent or else their petty patent expires and their invention becomes part of regular “prior art.”

Some recommendations on how developing countries can reduce the cost of implementing IPR:

Developing countries need to be given a greater sense of ownership and involvement in the IPR system. Many see TRIPs as primarily a mechanism for shifting profits to creative interests in rich countries. Thus it is important for developed countries and multilateral organizations to provide adequate technical and financial assistance for implementation of the new standards in developing nations, to remove impediments to future technology flows, and to meet and extend their own commitments to liberalize market access for products of interest to poorer countries (notably apparel and agriculture). Assistance should aim to develop rights and opportunities suitable to the needs of entrepreneurs, inventors, and artists in poor economies. Analysis is also needed of potential mechanisms for securing the rights of developing countries to export interests of their own such as geographical indications, traditional knowledge, and genetic resources.

Sensible methods need to be found for balancing rights of patent holders in pharmaceuticals against users’ needs for product availability at reasonable cost. Evidence in the book points to potentially large increases in drug prices in developing countries as patents are implemented. Governments should work to offset these impacts by using innovative procurement programs. In particular, development and transfer of treatments and vaccines for diseases in the poorest countries should be expanded via public-private partnerships.

WTO members should not rush to expand multilateral protection in controversial areas until we know more about how new systems function. Requiring broad scope for biotechnology patents, and extending them to plant and animal varieties, could damage the interests of lagging countries in return for little gain in innovation. Many countries need to adopt or strengthen systems of plant breeders’ rights and it would be premature to require global patents in this area before such systems are given a chance to work. Neither is it sensible at this time to push for a global code on territorial exhaustion of rights (parallel imports).

6.1CONCLUSION

The debate for intellectual property rights implementation in developing countries provides the base for the demarcation among developed, developing and poor or least developed countries (LDC). Every member group has their own reservations, depending on their local technological system, economic conditions and the level of their prosperity. On one side, developing countries views the TRIPS agreements, in association to intellectual property rights as an intimidation for their present economic systems, which might eventually increase the access to technological products by increasing their cost.

However such an implementation, with accessibility to developed countries markets, technology transfer and foreign direct investment, becomes unusual for a developing country with relatively lower exports and limited technology accessibility. Presently, there is a need to establish a framework on the base of TRIPS agreement which could allow the uniform implementation of strong or relatively better IPR regimes in the developing economies, excluding the LDCs.

An appropriate analysis for the cost and benefit for TRIPS agreement might give a solid rational for implementing it in the developing countries, justifying the higher costs of imported technology, pharmaceutical and health related products and the impact of imitation which is done in the developing countries. Furthermore, the analysis could also help the economists to yield the TRIPS benefits in terms of its value for the developing countries.

All these arguments for weaker IPRs from developing countries may not equally qualify or justify the importance of the stronger IPRs which is already exhibited from the industrialization, success and prosperity of the developed nations which had already implemented strong intellectual property rights for sufficient time period, and in spite of this, noticing higher growths in their economies as compared to developing countries.