GLOBAL ECONOMICS


Kathleen Macmillan and Patrick Grady
Protecting Intellectual Property
from Seattle and Beyond: the WTO Millenium Round(1999), Chapter 9.

Intellectual Property and Trade

The Ancient Greeks used to preach that knowledge is power. But even those clever Greeks could not possibly have imagined how strong the link would turn out to be between technological know-how and global prosperity. Today it is more true than ever that those who control and have mastered the ideas end up holding all the cards.

Protecting ideas has become an important trade issue. The WTO Agreement on Trade-Related Intellectual Property (TRIPs) formally brought the enforcement of intellectual property rights into the multilateral arena. Possible extensions to the TRIPs Agreement will be one of the most contentious areas of the Millennium Round, one that is certain to accentuate the divisions between the developing and developed world.

One might well ask what the protection of ideas has to do with trade liberalization? This is a valid question since protecting intellectual property rights can end up restricting competition and trade something one would think the WTO would want to avoid. Ultimately, though, companies are more likely to export to and invest in other economies if they are satisfied that their products and processes will not be pirated. The argument is that trade will expand, along with the technology that accompanies it, if intellectual property rights are enforced worldwide.

What are Intellectual Property Rights?

Intellectual property rights are the entitlements that are granted to people for their original creations. Ordinarily, intellectual property rights give the creators exclusive rights to use their creations for a specific period of time.

There are two main branches of intellectual property with two quite different sets of concerns. The first is copyright which applies mostly to literary, musical, artistic, photographic and audiovisual works. In recent years, the notion of copyright has been expanded to include computer programs and data bases.

The second branch is loosely coined industrial property. It can be further sub-divided into two areas. One is chiefly concerned with protecting signs of various sorts trademarks and geographic indications (which are names for goods that are based on the location where the good is produced. Examples include "Champagne" and "Cognac"). The second area of industrial property rights is primarily concerned with inventions, innovations and the creation of technology.

The WTO TRIPs Agreement

The WTO certainly did not invent intellectual property. The concept of patent, copyright and trademark protection has been around for at least a hundred years. Berne Convention, which protects copyrights, was originally signed in 1886. The World Intellectual Property Organization (WIPO), which provides a forum for negotiating and enforcing various treaties on intellectual property, was created in 1967,. Like many similar international organizations, however, the WIPO lacks the necessary provisions to enforce its treaties and obligations.

The TRIPs Agreement obliges all WTO members to enforce its minimum standards by implementing them in their domestic legislation. While developing members were given a generous time frame for implementation, developed nations had only one year to incorporate into domestic law the proper kind of administrative and criminal procedures to make intellectual property rights fully enforceable.

The TRIPs Agreement also makes disputes over intellectual property matters subject to the WTO's dispute settlement system. There have already been a handful of disputes over intellectual property issues including the European Union's challenge of Canada's patent protection of pharmaceutical products. The EU maintains that Canada violates the requirements of the TRIPs Agreement because it offers patent protection for a 20-year period, which commences with the date an application for patent is filed. According to the EU, the 20-year protection period should begin once all the regulatory approvals have been granted, which might be as long as several years after the original patent application was made.

There is a great deal of interplay between the TRIPs Agreement and a variety of other intellectual property treaties that are administered by the WIPO. The TRIPs Agreement requires WTO Members to adhere to provisions of a variety of international conventions governing intellectual property including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works and the more recent Treaty on Intellectual Property in Respect of Integrated Circuits.

All of the seven target areas in the TRIPs Agreement (see box) must adhere to the basic principles of national treatment and most-favoured-nation. The Agreement establishes a set of minimum standards for intellectual property in certain specific areas.

The TRIP Agreement's Seven Target Areas for Intellectual Property Rights
  • copyright and neighbouring rights;
  • trademarks;
  • geographical indications;
  • industrial designs and models;
  • patents;
  • layout designs of integrated circuits; and
  • protection of undisclosed information. (Undisclosed information is the TRIPs term for trade secrets).
  • Several of the TRIPs Agreement's provisions bear special notice. Article 27 of the Agreement requires Members to make patents available without discrimination for any inventions, products and processes, in all fields of technology. The patent period is typically 20 years. Certain exceptions are permitted under strict conditions.

    The Agreement excludes patents on higher forms of life such as whole plants and animals, although it gives discretion to individual Members in this area. The United States, Europe and Japan are among those that do allow patents on higher life forms. Canada does not as yet. The Agreement's provisions on biotechnology are to be reviewed in the next set of negotiations. This is certain to be one of the most controversial areas of discussion.

    It is still early days for the TRIPs Agreement since many countries still have time left to implement its obligations. It remains to be seen whether it will achieve its stated purpose.

    Copyright

    Although we might be reluctant to admit it, we have probably all been guilty of breaking copyright laws in one way or another. Photocopying excerpts from a textbook, copying a friend's CD onto a cassette tape and recording a favourite television show on our VCR, all qualify as unlawful duplication. This is penny ante stuff though compared to the possibilities for piracy that the new technologies provide. The prospect of musical or artistic masterpieces being downloaded free from the Internet greatly concerns those in the cultural community. This is just one example of the scope for unauthorized reproduction, publication and transmission available in the digital age.

    It is difficult to find anyone who does not believe that people should be prevented from stealing the creative inventions of musicians, writers and other artists. This is like motherhood. Artists need the protection of copyright in order to support themselves through their artistic efforts. Otherwise, we will have potential Picassos washing dishes for a living. Clearly, we would far rather see Alanis Morrisette properly rewarded for the music she creates than toiling as a chambermaid to make ends meet.

    The trouble is that it is virtually impossible in this age of technological sophistication to prevent unlawful duplication of cultural works. Short of banning the sale of CD burners and restricting access to the Internet, a government's options are few. The issue becomes one of finding a way for all users to compensate the artists for the possibility that some users might steal from them.

    Many do not like the mechanisms imposed to ensure fair compensation for artistic products. A case in point is the griping that has accompanied the special tax imposed on blank cassette tapes and compact discs sold in Canada. The idea was to use the tax proceeds to compensate composers and musicians for infringements in their intellectual property rights.

    The TRIPs Agreement requires WTO Members to adhere to the Berne Convention. The Berne Convention applies to books and other written works, musical compositions, film works and various artistic works. The TRIPs Agreement added computer programmes and compilations of data to the Convention's scope. The Convention requires Member countries to protect the works for the life of the "author" and for 50 years after his or her death.

    The copyright provisions of the TRIPs Agreement are adequate but could do with a bit of updating. The Canadian Recording Industry Association argues that all WTO members should ratify two 1996 treaties of the World Intellectual Property Organization dealing with copyright, performance and phonogram issues. The treaties update the standards and legal principals governing copyright in the electronic age. Canada has begun the process of ratifying and implementing the WIPO treaties itself.

    Protecting Industrial Property

    The far more complicated issue is that of protecting industrial property. It raises fundamental questions of fairness and entitlement that are not easily resolved in the international context.

    The two sides of the debate line up as follows. The so-called "multinational viewpoint" which is advanced by U.S. and EU negotiators, is that strong enforcement of intellectual property rights is essential for the innovation process. Unless inventors are confident that their ideas will be protected and properly rewarded, they will be unwilling to undergo the time-consuming and expensive process of research and development that is so beneficial to the economy as a whole. It follows that countries that vigorously enforce intellectual property rights make themselves a better location for inward investment. This was the argument used to justify Canada's patent drug legislation.

    The multinationals' perspective has a number of detractors, beginning with developing country nations. They question why they are expected to pay so dearly for ideas that originate in the developed world, especially when these ideas would dramatically improve the well being of their citizens. A case in point is the drug regime used to treat AIDS, a disease that is devastating Africa. The AIDS cocktail that has proven effective in treating patients in North America is prohibitively expensive and beyond the means of most African nations. The South African government has passed legislation that would allow local pharmaceutical companies to manufacture imitation AIDS drugs in defiance of the patents that exist in the U.S. and Europe. South Africa is certain to incur the wrath of its powerful trading partners, in spite of its noble intentions.

    These sort of strains exist even within developed nations. Groups such as the Friends of Medicare point to the high percentage of Canada's overall health care costs that are accounted for by patented pharmaceuticals. Shortening the drug patent period from its current 20-year term would give cheaper generic drugs earlier access to the market. The savings in health care costs could be considerable. The trouble is that the government made important commitments to the brand-name drug industry in return for scores of jobs in important Montreal ridings.

    Another problem with vigorous patent enforcement is that the current trend is to patent anything that moves. The prospect of patenting human genes, rain forest bio-diversity and indigenous knowledge is positively repugnant to some. Especially since the source of the patented substances remote aboriginal communities or rain forest dwellers could end up paying to access to their own material. The advent of new biotechnologies and genetic materials complicate the issue even more.

    But developing nations have an even more fundamental problem with the very idea of protecting ideas. In their view, inventors and scientists give the problems of the developing world scant attention. While the best pharmaceutical brains in the world have dedicated themselves to improving the sex lives of well-healed Westerners through medications like Viagra, millions of children in Africa die from malaria and other potentially preventable diseases. The sad truth is that a malaria vaccine would never pay for two reasons. The first is because its likely customers are impoverished. Second, without patent enforcement, any effective vaccine that was developed would be quickly pirated.

    Developing countries are painfully aware that they lack the knowledge and technology necessary to create economic wealth and to care for their citizens. They view the intellectual property right system as somehow limiting their access to this knowledge, perpetuating a world of "haves" and "have nots". This is the perspective that they are likely to bring to Seattle and Geneva.

    Hard Choices for the Millennium Round

    What is a poor Canadian IP negotiator to do? On one hand the Business Council on National Issues urges Canada to work to ensure that creators of intellectual property have adequate incentives and effective protection. This position is also advanced by the U.S. and Europe whose multinationals offer the enticing prospect of jobs and investment to those countries that offer safe havens for patented technologies. To ignore the implicit threats of powerful research-intensive companies is to play a dangerous game indeed with Canada's economic prosperity.

    Our befuddled negotiator is also getting pressure from generic drug manufacturers and others to loosen the stranglehold multinational corporations have on the instruments of wealth creation. Concerned Canadians are raising important questions about the ethics of patenting some of the things that are being patented these days.

    Issues such as artistic copyright and trademarks are straightforward; the fruits of the artistic process so be protected to ensure that pirates do not divert proceeds away from genuine creators. Efforts should be made in the WTO to ensure that the rules pertaining to copyright fully capture the potential offered by today's electronic wizardry. Alanis should be the one making most of the money from her CD sales, not some bootlegger. Nike and Gucci should be free to charge exorbitant sums for running shoes and loafers bearing their logos.

    For other areas of intellectual property, some collective global navel-gazing might be in order. First, serious questions should be asked about the scope of patent protection. Unless and until we have thought through the ethical implications of patenting such things as biotechnologies, genetic products and indigenous heritage, we should resist efforts to extend the TRIPs Agreement to cover these items.

    Second, we must be highly sensitive to the views of those in the developing world. Intellectual property is an area that breaks very much on developed - developing country lines. There is some scope for compromise, if developed countries are up to it. One possibility would be to offer a shorter period of patent coverage in developing countries for those products that are essential to their basic development needs. Another is for multinational companies to undertake to fund a certain amount of basic research in developing countries on issues of importance to the developing world, in return for patent protection on other products.

    For their part, developing countries need to acknowledge that some form of intellectual property protection would enhance their own interests. Many of the advanced products and processes that developing nations regularly use in the telecommunications, transportation and health area would vastly improve the quality of life in the developed world. However, unless some basic level of patent protection is granted, they could very well remain outside the reach of the nations that they would benefit most.

    The challenge of intellectual property is to achieve a fair balance. Innovators need to be rewarded with intellectual property protection but there may be good and valid reasons for limiting this protection in some instances. Economic prosperity depends on the creation of good ideas. At the same time, these ideas need to be easily diffused if we are to improve the well being of our world community.