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Global Dimensions of Intellectual Property Rights in Science and Technology (1993)

Chapter: 6 Comparative National Approaches to Intellectual Property Rights

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Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
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6
Comparative National Approaches to Intellectual Property Rights

Japan

JAMES E. ARMSTRONG III

Where do we start? We say the word "Japan," and it is a polarized word. The polarized charge means a lot of things. We saw a vigorous week of Japan bashing in December 1991 during the fiftieth anniversary of Pearl Harbor. The Japanese patent system is also a source of controversy, considered by its outspoken American critics as a nontariff trade barrier.

As I try to compare our patent system with that of the Japanese, I would like to raise some questions in your mind. I am not going to try to give you any answers because for some of the problems that we face today, there are no clear answers. Reflecting on Dr. David's comments in Chapter 2, I suppose I am in an opposite camp in defining what a patent is. To me a patent is not a monopoly. A patent is an industrial property right that gives someone the right to exclude others for a limited varying period of time, depending on the country in which the patent is held. If I make an invention covered by one of those "improvement" patents there may be a patent that dominates me, and I in turn may dominate someone else. I may not have the right to use commercially what I invented. So, unless I have a complete right to do everything without limitation, the patent cannot be, in my view, a monopoly.

Let us, in considering comparative national approaches, begin with a

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

country as different from ours as Japan. I first visited Japan about 40 years ago, and it seemed very, very different to me as a young U.S. Air Force officer. After years of seeing many different things in Japan, I would now like to try to find out what is the same. First, where are the similarities? Then we can analyze the differences.

Two similarities come to mind quickly when comparing the U.S. patent system or intellectual property system and the Japanese system. First, the benefits of a patent system per se to a modern industrial economy are well recognized by both countries.

What are those benefits? By disclosing knowledge, rather than keeping it secret, an intellectual property system serves as a stimulus to further technological development. Now, when your computer doesn't work, you may wonder whether technological development is good or bad. I often do, but an intellectual property system does stimulate dissemination of knowledge rather than hiding it. It also gives you a market edge. It gives you, for a limited time perhaps, the right to exclude others if you are an economic unit trying to compete. It also serves as a legal component for technology transfer. Dr. David writes about the know-how component which is usually, in my experience at least, 80 percent of technology transfer, but patents are an additional further legal component that serves to tidy things up. These are certain benefits. If you think about it, there may be many more.

A second similarity is that both systems, the United States and the Japanese, are dynamic; they change. I have been in this business—that is, the patent business—for 37 years now, and I cannot recognize U.S. patent law today as it was when I first knew it and began its practice in 1955. It is so different. Why is it so different? As Dr. David suggests, it had to be responsive to the society in which it exists and our society has changed dramatically since those placid days of the 1950s. The "fifties mind-set" is something that flashed into my head this morning. To me the years were a kind of nice, soft, hazy interlude, those Eisenhower years. It seemed things moved so quietly. Now nothing moves quietly. Why? I suppose Dr. Melvin Calvin, Nobel Prize winner from Berkeley, whom I heard speak about 13 or 14 years ago, was the ultimate prophet when he said that "the microprocessor will change our lives in ways that none of us will ever believe." Give it 10 years. Well, we have seen it in 10 years. Give it 20 years. The whole pace of transmission and dissemination of information is different. International communism collapsed as a result.

The Japanese are presently attempting to file patent applications in the Japanese Patent Office electronically. I have had many opportunities to talk with Japanese colleagues on the subject of electronic filing. I have spent at least, on average, three months in Japan every year for the last 21 years, am fluent in Japanese, and have many chances to talk and interact. I view this new Japanese paperless system as an American inspiration. The former

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
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Commissioner of Patents, Gerry Mossinghoff, went to Japan and first made the "paperless" pronouncement. It was his first visit to Japan. In fact, before going, he called me in for a friendly chat and told me that what he was going to say was that in the future there will be all electronic filing for patents. The Japanese were petrified. I must have had about 50 Japanese friends come up to me and say, "What are we going to do?" Well, the Japanese started electronic filing, and we are still talking about it. That fact might tell us something.

Now, what the Japanese have created I am not sure. They have created a situation in which Japanese patent attorneys have had to purchase—much to the profit of Toshiba and others—some very expensive equipment. They must send a floppy to the Japanese Patent Office, together with the electronic transmission, so the system cannot be called truly "paperless." On the other hand, because of this electronic feed, the Japanese Patent Office is building one of the most marvelous technical data bases that one can imagine. The ultimate result is hard to evaluate now, but of course, this is an age in which the ultimate result, in any case, is very difficult to evaluate.

A quick point: the life of the law is not logic but experience, and we are in a challenging age in which we must continue to learn. We have to learn to deal with these electronic beasts. We are in a period in which all nations are striving for intellectual property harmonization, at least among the industrialized countries. The European Community, Japan, and the United States are trying to harmonize their respective patent systems to benefit inventors and commercial enterprises throughout the world.

What are the differences in the various systems? First to file versus first to invent? Is the utility model good or bad? Is an opposition system good or bad? Is the limitation from the filing date of a patent application on the ultimate life of the patent good or bad? These are things we can debate. Back in those times of the fifties mind-set, I was a young man and a young attorney. I thought that the U.S. system was absolutely the best thing in the world. After many, many years I am open and receptive to other ideas, and I think that the modern world, to use the modern parlance "global village," which I first heard from Bruce Merrifield, is such that we are going to have to adopt and exchange ideas and try to harmonize.

I will leave you with a story on harmonization. On October 28, 1991, I visited one of my Japanese corporate clients, and after we disposed of our business at hand, my host said, "We would like to ask you some questions." There is an organization that many of you know called the Pacific Intellectual Property Association, or PIPA. PIPA has study groups working in cooperation with WIPO (World Intellectual Property Organization) as subcommittees on very specific points concerning harmonization. One point of difference is concerned with the doctrine of equivalents which, without going into technical patent jargon, simply is founded on the question, "Should we take

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

a patent claim literally and thus put the inventor in a straitjacket, or should we be expansive in interpretation while remembering we have to be fair to the public?" The public must know what a patent claim means in order to avoid infringement.

This is the social, economic thrust of equivalents. The United States, as we do in our pendulum society, has swung toward a liberal interpretation of patents. Twenty years ago, the Japanese also interpreted claims nuclearly, or as they said, according to the German system. Under the German system a claim is given a broad interpretation. The Japanese system of interpretation was gradually narrowed, and that is the center of the present debate. Let me continue the story. My Japanese hosts posed to me two problems that were under study in committee on the American side and on the Japanese side. They gave me a complete outline of the Japanese position and the American position and they said, "What do you think?" This conversation was all in Japanese. I got up with my chalk in hand, as I like to do. I said, "Let me take the challenge of taking my own position so that I won't be influenced by either the American group or your group."

In conclusion, I found the Japanese position to be methodical and logical in a Japanese sense, but very incompatible with American tastes. I found the American presentation to be superficial, winging it without going into any real depth on the problem. However, I found that there was a certain existing harmony. If the Japanese could only have looked at it with an understanding of the history, philosophy, and precedent of the U.S. law, they would have seen that American objectives were not off the mark. They could not do so because one's native language is a mind set for everyone. There was a sound basis under American law for achieving what they wanted, but not by Japanese rationale. I leave you with that thought. Harmonization is not easy.

The European Community,

BRYAN HARRIS

In many respects the subject of this report concerns, on a worldwide scale, some of the central problems with which, on the scale of half a continent, the European Community is at present preoccupied. The problems are

  • whether there is an intrinsic merit in harmonizing intellectual property rights or whether, on the contrary, individual states should be left to pursue what they see as the most advantageous ways of protecting those rights;

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×
  • whether the emphasis should be on strict protection of intellectual property rights as a reward to inventors and authors and as an incentive to investment, or whether, on the contrary, the emphasis should be on the widest possible dissemination of the technology and literature normally protected by intellectual property laws;

  • whether intellectual property, as a legal and economic concept, is consistent, appropriate, and up to date or whether, on the contrary, it has to be bent out of all recognition when new social or technological requirements demand; and

  • whether all can be illustrated from current trends in the European Community.

At first sight, the European Community (EC) appears to favor the maximum degree of harmonization. There is a provision for harmonizing national laws, under Articles 100 and 100A of the European Economic Community (EEC) Treaty. There is already on the EC statute books a first directive harmonizing national trademark laws, and there are various proposals for harmonizing national copyright laws. However, there are some constraints on harmonization. One is that the harmonization provisions are subject to the overriding need to show that they directly affect the establishment and functioning of the common market. According to the Green Paper on Copyright, which the Commission of the European Communities issued three years ago, the legal powers do not extend to law reform for its own sake. Another constraint is that the member states are reluctant to cede all their powers to a community legislature, and the Maastricht Treaty, which is expected to come into force on January 1, 1993, has a specific provision in favor of what Brussels calls "subsidiarity"—that is, the retention of legislative power at the national level unless it is manifestly more effective at the EC level.

Since European Community intellectual property measures are subject to the economic objectives of the common market, they have to meet the requirements of the EEC treaty on at least two points: the provisions on the free movement of goods and services, and the provisions on competition or antitrust. The judgments of the Court of Justice of the European Communities on intellectual property rights are almost entirely concerned with the problems of reconciling these rights with the provisions of the EEC treaty. The results are not always entirely clear or consistent. In Allen and Hanbury's v. Generics UK (case 434/85), the provisions of the EEC treaty on the free movement of goods took precedence over patent rights; in Warner Brothers et al. v. Christiansen (case 158/86), the protection of copyright took precedence over the provisions on the free movement of goods. In Volvo v. Veng (case 238/87), national laws on the protection of models and designs were upheld in the face of EEC rules on competition; but in the recent judgment of the Court of First Instance in BBC v. The Commission of the European

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

Communities (case T-70/89), the protection of copyright was clearly subordinated to EEC rules directed against the abuse of a dominant position.

Even European Community legislators have had to keep their eyes firmly on the reconciliation of the strictly defined economic aims and the legal rights appurtenant to intellectual property. In the patent field, the EC has been trying to bring into being a community patent, which will be valid throughout the 12 member states and will thus avoid all the problems of cross-border disputes. However, patentees are not overenthusiastic because relatively few wish to take out patents in more than three or four Member States and the cost of the community-wide patent may be hard to justify. There is a moral here for global protection: Uniformity has obvious merits, but must not be marketed at too high a price.

Although trademarks are an important form of intellectual property, they do not have the same bearing on science and technology as patents and copyright, but two aspects of the European Community's experience in this field are relevant and worth a brief mention. The first is that although the economic pressure to "globalize" the use of trademarks is strong and has benefited some firms trading in Europe, such as the Mars Corporation, there is still a cultural and linguistic resistance to the process. Thus, there is not quite the degree of support for a pan-European trademark system that the community authorities had expected. The second is that while the EC is nevertheless going ahead with its proposals for a community trademark, it is hamstrung by a purely political dispute over where the trademark office should be located. This is a salutary reminder that the concerns of intellectual property experts are in the last event always subordinate to the political process and that legislation on intellectual property is ultimately determined by political considerations.

To some extent this is illustrated by developments in copyright legislation in the European Community. Because the various proposals now under discussion in Brussels are beyond the scope of this report, one specific proposal will suffice to make the point. New technology has greatly facilitated the ability to copy protected works, which is particularly true in the field of audio and visual recording. There is a tendency in some of the member states of the European Community, though not in the United Kingdom or Ireland, to respond to the new technology by imposing a levy on blank recording tapes, the proceeds of which are supposed to go to copyright owners. The struggle among the blank tape industry, the record industry, and the representatives of artists and consumers is not yet resolved. However, a compromise does appear to have been reached in the United States and a similar compromise may well be reached in Japan, based on a small levy shared between the manufacturers of both hardware and software in respect of digital but not analogue, and audio but not video, recording tapes and equipment. The question is whether the European Community

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

will take the same route. If the United States, Japan, and Europe all adopted the same approach, it would be a striking example, from the field of intellectual property, of harmonization in an important sector of world trade. Unfortunately, there is a real risk that this salutary outcome may be frustrated by some of the less attractive features of European Community politics: in particular, a wish to demonstrate that the EC can do better than the United States and Japan and should, in any case, be different.

From a theoretical point of view, there are many loose ends in the community's approach to intellectual property matters. It is far from certain that either know-how or trade secrets are likely to be treated as forms of intellectual property, though for the purposes of EEC antitrust law, the licensing of know-how and the licensing of patents are treated rather similarly. One of the reasons for the uncertainty is the difference between the common law approach and the continental laws on unfair competition: the gulf between them is still quite wide. At the heart of the problem, however, is the question of the taxonomy of intellectual property rights: whether, for example, some of the categories of rights are validly described as a form of property at all; whether the property criterion inhibits the creation of new categories of legal relationships to meet new technological or social circumstances; whether there is really enough in common between patent rights and copyright, for example, to justify their being in the same general legal classification. Patents and trademarks are infringed as a rule only "in the course of trade," whereas copyright protection is far more extensive. This is a fundamental difference. Patents and copyrights can be protected even if their economic value is nil; fundamentally different rules apply to trademarks. (In passing, a conference held in Paris in November 1991 discussed modern methods of valuing intellectual property rights and cast a new light on many of the assumptions about their economic worth.) In both legal and economic terms it is difficult, at any rate on the basis of developments in the European Community, to arrive at a definition of intellectual property that applies to the whole range of existing intellectual property rights, let alone future candidates for recognition.

As for the extrinsic importance of intellectual property rights, more work needs to be done within the European Community to define not only the relationship between the monopoly inherent in those rights and the rules against monopoly abuse, but also the relationship between the economic interests of intellectual property owners and those of intellectual property users. From time to time the Commission of the European Communities and the European Parliament conduct hearings into intellectual property matters, and a letter published recently in the London Times commented on the fact that invitations were not being extended to consumers or to licensees and other commercial users of intellectual property. The complaint reflects a feeling, at any rate in Europe, that unless intellectual property

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

interests are prepared to widen the scope of their discussions, they will find themselves overtaken by events and that, ultimately, the really important issues will be dealt with at the international level, less by the World Intellectual Property Organization and more by successive rounds of the General Agreement on Tariffs and Trade. However, whether or not that is a desirable trend, and how far it is being encouraged by the European Community, are beyond the terms of reference of this chapter.

India

DEEPAK NAYYAR

This section attempts to explore the contours of the debate on national and international systems for the protection of intellectual property rights. It outlines the salient features of the system in India, compares it with the systems in industrialized countries, sets out the underlying economic rationale, and examines its relevance for the developing world. Concerns about the international system for intellectual property rights, now proposed in the Uruguay Round, emerge from the analysis. The object is to highlight the strategic issues rather than to provide a systematic or complete discussion of the complex problems.

First, the important characteristics of the patent system in India are described and contrasted with the system in the United States and other industrialized countries. Second, the economic rationale of the system for protecting intellectual property rights in India is outlined. Third, the relevance of the Indian view from the perspective of developing countries is considered. In conclusion, I would like to situate the discussion in the context of the Uruguay Round of multilateral trade negotiations, where India and the United States have been major participants in the debate on a possible international regime for the Trade Related Aspects of Intellectual Property Rights (TRIPS).

CHARACTERISTICS

There is an elaborate system for the protection of intellectual property rights in India embodied, inter alia, in the Patents Act of 1970, the Copyright Act of 1957, the Trade and Merchandise Marks Act of 1958, and the Design Act of 1911. The law of patents is, of course, at the heart of the system. It is neither necessary nor possible to provide an exhaustive description. The salient features of the patent system in India, as elsewhere, are incorporated in the scope, nature, use, and term of patents.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×
Exclusions from Patentability

Apart from the universal exceptions of public order, law, morality, and injury to human, animal, or plant life and health, the Patents Act in India excludes (1) methods of agriculture or horticulture; (2) any process for the treatment of human beings, animals, or plants; (3) substances intended for use as food or medicine or drugs; and (4) substances produced by chemical processes. The exclusion of microorganisms, plants, and animal varieties is implicit. In sharp contrast, the system in the United States provides for no exclusions except, perhaps, for human beings. Consider, for example, the seven areas of biotechnology: methods for treatment of humans and animals; animals and animal varieties; plants and plant varieties; microorganisms; substances derived from biotechnology; biological processes for the production of animals or plants; methods of horticulture and agriculture. None of them is patentable in India. All of them are patentable in the United States. However, in most other countries, including countries in the European Community where the first three are possibly nonpatentable, there is a fair amount of diversity in exclusions from patentability.

Rights Conferred

It is necessary to make a distinction between product patents and process patents. For chemicals, pharmaceuticals, and food products, the patent law in India permits patentability of processes alone, not of products. The rights conferred by a patent in India are very similar, though not identical, to those of the industrialized countries.

  1. For product patents, the rights conferred apply to making, using, and selling the product, which extend to importing and offering it for sale in some industrialized countries of Europe.

  2. For process patents, the rights conferred apply only to the use of the process. In the United States, a process patent also confers all rights for products obtained directly from that process.

Burden of Proof

When a patent has been granted and an infringement is claimed, the current general law applicable in India casts the burden of proof on the party that is claiming infringement. In the United States and several other industrialized countries, the burden of proof is reversed.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×
Compulsory Licensing

To curb monopolistic or restrictive practices and enable governments to use patents in the public interest, compulsory licensing is provided for in most intellectual property rights systems. In India, such provisions exist to meet situations in which reasonable requirements of the public interest with respect to the patented invention are not satisfied (e.g., the patented invention, whether product or process, is not worked on a commercial scale) or where the patented product is not available to the public at reasonable prices. The Patents Act, thus provides for

  1. compulsory licensing, on application, in such situations as those described above; and

  2. an automatic licenses-of-right system in the case of food, pharmaceuticals, and chemicals, where patents are deemed to be endorsed with the term ''licenses of right," on completion of three years from the date of sealing the patent.

The provisions are, of course, subject to the payment of a royalty to the patent holder. In the United States and other industrialized countries, provisions for compulsory licensing and government use are limited to established violations of antitrust laws and public noncommercial purposes, although the practice in some sectors (e.g., in space research), is less restricted.

Term of Protection

The law of patents in India provides for a term of 14 years from the date of filing complete specifications; with respect to process patents for food, drugs, and medicines, however, the term is limited to 7 years. In contrast, in the United States as in most industrialized countries, the term of patents is between 15 and 20 years from the date of filing complete specifications.

RATIONALE

The implicit rationale for, or philosophical foundation of, the intellectual property rights system in India is embodied in three underlying objectives.

First, it seeks to strike a balance between the interests of producers on the one hand and consumers on the other, that is, between those who develop the scientific knowledge or innovation and those who use the goods or services derived from it. Needless to say, every country attempts the same, but the point at which the balance is reached depends on a country's level of development. The level of income in the economy and the stage of development in the society are thus particularly important in this context.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

The logic of exclusion from patentability follows from this objective. Methods of horticulture and agriculture, as well as food, are excluded because such a large proportion of the population is dependent on agriculture for its livelihood, and the purchasing power of the poor, even for food, is limited. Drugs and medicines are excluded because millions do not have access to basic health care.

Second, it attempts to ensure rewards for the owners of knowledge or for the innovators but, at the same time, places a limit on the monopoly profits or quasi rents that may be appropriated by the entity that commercializes the technology or transforms the scientific knowledge into a marketable product. This is the logic of compulsory licensing. There are two underlying principles set out in the Patents Act: (1) patents are granted to encourage inventions and to secure that the inventions are worked in India; and (2) patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article.

Third, it attempts to create an environment that is conducive to the diffusion of existing technologies and the development of new technologies, insofar as technology is a basic determinant of development in a society that is a latecomer to industrialization. The patentability of processes but not products in some sectors, and the reduced term of protection for patents, derive from this objective.

RELEVANCE

It would be reasonable to ask whether the Indian approach to intellectual property rights is relevant for developing countries in general or those at similar levels of income and technological development. In my judgment, the answer must be in the affirmative, although there may be differences in degree, emphasis, or nuance.

First, technology is strategic in the process of industrialization. The direction and speed of technological development influence not only the pace but also the quality of economic growth. Thus, an economy that industrializes should be able to move from importation through absorption and adaptation of technology through to the stage of innovation, at least in some sectors, on the path to sustained industrialization. In the pursuit of this objective, late industrializers in Europe, Asia, and Latin America have sought to facilitate their technological transformation through intellectual property rights systems that are, or were, conducive to catching up with the industrialized countries. It is important to recognize that unlike comparative advantage based on natural resource endowments, comparative advantage derived from knowledge or skills can be acquired only through a framework of policies that foster rather than hinder the learning process. Economic history is replete with examples of technological leapfrog. Clearly, at this juncture in the world economy when absolute poverty is an important inter-

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

national concern, developing countries need to capture rather than forgo such opportunities.

Secondly, intellectual property rights systems must recognize differences in levels of development between economies. There are two dimensions of this proposition: (1) What purpose does a good serve if it is available only at a price that is beyond the reach of the majority of people in a society? For instance, medicine or computer software at international prices is simply not affordable in a country with the average income levels of India. (2) There are sectors in which the benefits of knowledge need to be socialized, rather than privatized, for human development. For example, the increasing commercialization of plant-breeding research in the developed countries, supported by patent systems, has far-reaching implications for food and agriculture in developing countries. In a world where a very significant proportion of humankind does not have enough to eat, scientific research on plant genetics or plant varieties should be a public resource rather than private property.

From the perspective of developing countries, therefore, it is both necessary and desirable to create a differential, rather than a uniform, international regime for the protection of intellectual property rights. Quite apart from the wider considerations set out above, the proposed uniform regime across countries raises two specific issues that need to be highlighted. First, the real constraint for several late industrializers in the developing world is that they do not possess the critical minimum in terms of resources for research and development; hence, technological leads and lags may be determined not so much by scientific ability as by resource availability. Second, there is a basic contradiction between the protection of intellectual property rights through a patent system that does not allow late industrializers to develop such technologies on their own and systems of restrictions on, or licensing of, exports of technologies that are closely held (or captive) so that late industrializers cannot import such technologies.

THE URUGUAY ROUND

In recent years, there has been a sharp acceleration in the pace of technical progress, particularly in sectors such as information, communications, and biotechnology. This has led countries that are technology leaders and technology exporters to seek a major change in the international regime for patent protection to include new products and processes particularly in the sphere of biotechnology, for copyrights to include computer software and informatics, and for strengthening related aspects of the system to protect intellectual property rights extending as far as trade secrets. The underlying logic is that technical progress in many of these sectors is more susceptible to replication, which may erode the rewards for innovators.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

Thus far, the international system for the protection of intellectual property rights has been embodied in the legal and institutional framework provided by the World Intellectual Property Organization. However, the industrialized countries have launched a strong initiative in the Uruguay Round of multilateral trade negotiations to create an extended and tighter international system for the protection of intellectual property rights, with provisions for dispute settlement and enforcement as part of the multilateral trading system. The text of the draft agreement, circulated by the Director General of the General Agreement for Tariffs and Trade (GATT) in December 1991, seeks to expand the scope of the intellectual property rights system, increase the life of privileges granted or rights conferred, extend the geographical spread where the privileges or rights can be exercised, reduce the restrictions on the use of rights conferred, and above all, create an enforcement mechanism with retaliation across sectors.

This important departure from the system of intellectual property rights, or patent law, of a country such as India must be recognized rather than ignored. Exclusions from patentability would be confined simply to animals and animal varieties, and plant and plant varieties. It would no longer be possible to limit patentability to processes alone, which would statutorily extend to products. The burden of proof would be reversed. Importation would be deemed as the equivalent of working a patent. Compulsory licensing would be possible only under a very restrictive set of conditions, while automatic licenses of right would disappear. The term of protection for patents would be extended to 20 years. Needless to say, the acceptance of these changes would necessitate amendments across the board in the patent law of India and several developing countries.

The implications of this proposed regime for the absorption, diffusion, and adaptation of technologies, let alone for innovation, in developing countries are far reaching. Much needed technologies may no longer be available at affordable costs. The emergence of a domestic technological capacity may be preempted. Transfer of technology may slow down. The incidence of restrictive business practices by transnational corporations may increase. These are just some of the important implications and consequences which suggest that the emerging international system for the protection of intellectual property rights is bound to be inequitable and inimical from the perspective of developing countries.

The need for a more balanced and equitable system is obvious. The interest of technology followers and technology importers is just as important as the interest of technology leaders and technology exporters. It is essential to ensure rewards for innovators, but surely the protection of monopoly profits or quasi rents for transnational corporations should not take precedence over the interests of consumers in a world characterized by uneven development. It would seem that the proposed agreement on Trade

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

Related Aspects of Intellectual Property Rights about to be concluded as part of the Uruguay Round, does not have such a balance. The interests of the industrialized countries are the focus of attention, while the interests of the developing countries are the object of neglect.

In conclusion, let me stress that it would be a mistake to consider the debate on TRIPS in isolation. It must be situated in the context of the political economy of multilateral trade negotiations in the Uruguay Round, with linkages across sectors and issues, that seek to change the rules of the game for the international trading system. What is more, it needs to be recognized that the contentious and controversial negotiations in GATT only skim the surface. The phenomenon is not simply about the rules of the game for international trade. It is far more complex than that and must, therefore, be placed in its wider context. The rise of transnational corporations, combined with prodigious technical progress, has brought about a fundamental change in the organization of production, marketing, and distribution in the world economy. It has pushed the frontiers of international trade far beyond goods, into services, technology, information, and knowledge, dismantling the traditional divide between them. This process has just begun. Technical progress has always been labor saving. What is new about recent developments is that informatics and robotics are displacing not only the muscles but also the brains embodied in labor. This is likely to have a profound impact on output, employment, and trade in the world economy. Most of these developments are concentrated in a few industrialized countries and, within these countries, in a few corporate entities. The degree to which the national interests of industrialized countries coincide with the corporate interests of transnational firms is uncertain. The national interests of developing countries, however, are very different, in view of the far-reaching implications for the development process.

The Newly Industrializing Economies,

CARLOS ALBERTO PRIMO BRAGA

The objective of this section is to provide a brief survey of the current status of intellectual property right (IPR) systems in newly industrializing economies (NIEs).1 This analysis focuses on the NIEs for two reasons: (1)

1  

An IPR system (or regime) has many dimensions. First of all, it encompasses many different instruments (patents, copyrights, trademarks, trade secrets, plant breeders rights, protection for mask works, etc.). The strength of a system, in turn, reflects not only the level (extent of limitations on titleholders' rights), duration, and scope of protection provided, but also the capacity of the system to enforce the conferred rights.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

these are, according to my perception, the economies best positioned to benefit from IPR protection in the developing world; and (2) in the mid-1980s, producers in these economies were frequently accused of "piracy" of intellectual property. NIEs are defined here as those developing economies that by 1989 had an income per capita of at least U.S. $2,000, a share of manufacturing in gross national product of at least 30 percent, and exports of manufactured products accounting for more than 40 percent of total export revenues. Brazil, Hong Kong, Malaysia, Mexico, Singapore, the Republic of Korea, and Taiwan qualify as NIEs according to these criteria. It is also worth mentioning that all of them were exporting more than U.S. $3 billion per year of knowledge-intensive products by the end of the 1980s.2 These are economies that either have recently "graduated" as developed countries (surpassing the income per capita threshold of U.S. $6,000) or that are among the top middle-income economies, according to World Bank criteria (World Bank, 1991). For the objectives of this section, however, what makes the NIEs particularly interesting is the fact that a few years ago, with the exception of Hong Kong, all of them were listed among the so-called problem countries (i.e, they were perceived to have defective IPR systems from the perspective of industrialized nations).3

The points that I would like to explore are the following: (1) since the mid-1980s, NIEs have strengthened IPR protection in their territories. Actually, many other problem countries (e.g., Argentina, Chile, Indonesia) outside the NIEs category have also enacted reforms of their IPR systems over this period; and (2) there is a close relationship between this cycle of reforms in developing countries and external pressure exerted by developed countries. Some NIEs, however, have approached IPR reform in the context of broader economic reforms. In other words, external pressures are not the only forces shaping these reforms.

2  

Knowledge-intensive (or high-tech) products are usually defined as those products for which investments in the creation of knowledge are responsible for a substantial share of their production costs. Industries engaged in the production of knowledge-intensive products typically have a strong interest in IPR protection. For further details on high-tech trade statistics see Primo Braga and Yeats (1992).

3  

Organizations such as the International Intellectual Property Alliance and the Pharmaceutical Manufacturers Association, as well as U.S. governmental institutions (e.g., the Office of the United States Trade Representative and the Patent and Trademark Office), organized several of these lists. It is worth mentioning that a country could, for instance, have a "good" patent law and yet be considered a "problem country" either because of inadequate enforcement of its patent law or because some other aspect of the IPR system (e.g., copyright law or trade secrets) was considered inadequate. For a summary inventory of the so-called problem countries, see Rozek (1990).

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×
RECENT IPR REFORMS IN NEWLY INDUSTRIALIZING ECONOMIES

The attitudes of developing countries toward IPRs changed significantly over the last decade. It is enough to remember, for instance, that many of these countries favored a revision of the Paris Convention in the early 1980s. The objective of this revision was "to weaken the international standards of industrial property protection" (Kunz-Hallstein, 1989:269). Unable to accomplish this objective, developing countries reacted strongly to attempts to introduce Trade Related Aspects of Intellectual Property Rights in the GATT negotiations.4 Yet, an analysis of the evolution of IPR systems over the last five years shows a clear trend toward higher levels of protection in the developing world.

The case of the NIEs is quite illustrative in this context. Recent developments in trade relations between the United States and the NIEs highlight the above-mentioned trend. Over the last three years, Mexico, South Korea, and Taiwan were removed from the "priority watch list" that identifies the main problem countries according to the Super 301 provision of the 1988 Omnibus Trade and Competitiveness Act. In July 1990 the retaliatory action against Brazil, introduced in October 1988 as a result of a Section 301 investigation focusing on Brazil's lack of patent protection for pharmaceutical products, was discontinued.

Those in favor of high standards of protection may still find many flaws in the current IPR systems of the NIEs, particularly with respect to enforcement. The debate, however, has lost most of its moral overtones, which tended to divide the world in a Manichaean fashion between the forces of light (the supporters of IPR) and the forces of darkness (the "pirates"). In short, as the public debate on IPR is now conducted, there are no more "bad guys" among the NIEs.

At the intellectual level, this may simply reflect a recognition of the inadequacy of attempts to frame the debate in terms of natural law concepts.5 More fundamentally, however, it reflects the broad scope of the reforms being implemented by these economies.

Probably the most dramatic example in this context is provided by Mexico (Villarreal, 1991). On June 27, 1991, Mexico introduced its new Law for the Development and Protection of Industrial Property. This new law expanded the scope of protection to technological fields, which were until then excluded from patentability (or for which issuance of patents

4  

For further details, see Primo Braga (1989).

5  

For a brief discussion of the role of fairness and morality in shaping IPR laws, see Primo Braga (1990a).

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

would be allowed only after 1997), and which include biotechnology (including genetic procedures to obtain animal and plant species or their varieties), plant varieties, microorganisms, chemicals, and alloys. The duration of patent protection, which used to be 14 years from the granting of the patent, was extended to 20 years from the date of filing the application. Limitations on patentees' rights (e.g., the granting of compulsory licenses) were restricted to exceptional circumstances. Protection for trademarks and industrial designs was also enhanced, and the law introduced more explicit protection for trade secrets.

The new law is also intended to improve the conditions for enforcement of IPRs by creating a new institution to help the Mexican Patent and Trademark Office: the Industrial Property Institute. It is also worth mentioning that Mexico amended its copyright law in 1991 in an attempt to correct some of its perceived weaknesses. The main change in this context was the adoption of tougher penalties for copyright violations.

Among the Asian NIEs—which, in general, already had higher levels of protection than the Latin American NIEs by the mid-1980s—the last few years have also been characterized by additional reforms designed to strengthen IPR protection: (1) Singapore enacted a new Copyright Act in 1987, expanding its scope and significantly increasing penalties for infringement. (2) Taiwan's Patent Law was amended in 1986, reversing the burden of proof to the alleged infringer and increasing penalties for IPR infringements. In 1991, a new Fair Trade Law was enacted, which provides for protection of trade secrets. Copyright law is also being revised with the goal of strengthening protection to a level similar to the one prevailing among Berne Convention signatories. (3) Korea amended its Patent Act in 1986, extending the term of patent protection (from 12 to 15 years), reverting the burden of proof, and increasing the requirements for compulsory licensing. Enforcement efforts have significantly increased since then, and a trade secrets law is being drafted. (4) Malaysia in turn revised its copyright law and acceded to the Berne Convention in 1990.6

Finally, let us take a look at Brazil, which was one of the main opponents of the movement toward higher levels of IPR protection in the early 1980s. The Brazilian Software Law of 1987 extended copyright protection to computer programs. Enforcement efforts to protect IPR have increased significantly over the last few years, particularly with respect to software and home-video cassettes. In 1991, the Collor administration submitted to the Brazilian Congress a draft law reviewing Brazil's system of "industrial protection." Among the main changes proposed in the new law are the

6  

For further details on the IPR systems of the Asian NIEs, see Schumann (1990) and U.S. Trade Representative (several years).

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

reduction of technological fields excluded from patentability, for example, patent protection for pharmaceutical products, the extension of the duration of a patent to 20 years from filing, and a more explicit provision for the protection of trade secrets. This new law is still being debated in the Brazilian Congress, but it is quite clear that Brazil is also moving—even though at a slower pace—in the same direction as the other NIEs.

The recognition that all NIEs have strengthened IPR protection since 1986 leads us to the next question: What forces have fostered these changes?

THE FORCES BEHIND IPR REFORMS IN THE NEWLY INDUSTRIALIZING ECONOMIES

Some analysts, including myself (Primo Braga, 1989, 1990b), believe that historically the level of IPR protection has been positively correlated with the level of economic development. Such a proposition could, in principle, be used to rationalize the recent "wave" of reforms as follows: The "trade-off between encouraging the diffusion of existing technology through unlicensed imitation and stimulating the creation of new technology becomes steeper over time" (Frischtak, 1989:1), as a country develops, accumulating human capital. Accordingly, there is a "development threshold" after which the protection of IPR generates net welfare gains and the political economy of the process would tend to favor innovators against imitators. If one assumes that the NIEs have reached this threshold, the ongoing cycle of reforms could be understood as the natural outcome of domestic pressures, with external forces acting as catalysts in the process.

An alternative characterization would stress the role of external pressures, particularly those exerted by the United States in paving the way for reforms. Actually, there is an obvious match between U.S. actions, either via unilateral initiatives (e.g., Section 301 investigations) or via bilateral negotiations, and the pace of reform in NIEs. It is also worth mentioning that the multilateral negotiations on TRIPS—a U.S. initiative—have likewise contributed to putting IPR protection on the agendas of policymakers around the world. From this perspective, the reforms reflect mainly the economic weight of the threat of trade retaliations.7

It seems to me that the truth is somewhere between these two alternative models. There is no doubt that external pressures have played a major role in the process. Yet, there is no simple relationship between the magnitude of the external pressure applied and the dimensions/characteristics of the reforms implemented. In the case of Brazil, for instance, despite sig-

7  

For a formal analysis of the relevant welfare function in this context, see Primo Braga (1989).

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

nificant external pressure, the pace and scope of the ongoing reform cannot be characterized as dramatic. On the other hand, the sweeping Mexican reform—Mexico now presents levels of protection similar to ones prevailing in the industrialized world—took most observers by surprise.

FINAL REMARKS

It seems that the greater the degree of openness (a concept encompassing both trade orientation and the treatment accorded to foreign capital) of an economy, the higher is the probability that it will pursue "systemic convergence" with its major economic partners. The recent evolution of IPR systems in the NIEs provide an illustration of this proposition. Countries pursuing "systemic convergence" (e.g., Mexico) are willing to upgrade their systems beyond the levels that would be typical for their stage of development.8

The net welfare impact of these reforms, however, remains an empirical question. Past experience shows that a strong IPR system is not a necessary condition for technological development. It is worth mentioning that some of the NIEs had already achieved comparative advantage in knowledge-intensive products in the 1980s and were able to attract significant flows of foreign direct investment, despite the flaws of their IPR system.9 It can be argued, however, that given the increasing globalization of economic activities, systemic convergence has become a necessary condition for countries to pursue an outward oriented development strategy.

There is a presumption that these reforms will foster domestic R&D and foreign direct investment flows, contributing to an expansion of the innovative capacity of these economies. The potential anticompetitive implications of the reforms, however, should not be forgotten.10 For those involved in research focusing on the economic role of science and technology in the developing world, the NIEs provide fertile ground for empirical analyses of the net welfare effects of strengthening IPR protection.

Finally, it is important to acknowledge the significant progress achieved in the TRIPS negotiations, as reflected in the draft final act of the Uruguay Round, presented by the GATT Secretariat in December 1991. The multilateral solution provides our best hope to avoid the proliferation of IPR-related

8  

For an analysis of predicted patent protection levels according to stage of economic development, see Rapp and Rozek (1990).

9  

See Primo Braga and Yeats (1991) for data on revealed comparative advantage in high-tech products.

10  

For conflicting evaluations of the welfare impact of introducing patents for pharmaceutical products in a developing country, see Rapp and Rozek (1990) and Challu (1991).

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
×

trade frictions. It is quite clear that the present text does not please all parties involved—for example the lack of retroactive ''pipeline" patents is considered a major shortcoming by certain segments of the pharmaceutical and chemical industries; the transition periods for the implementation of IPR reforms are considered excessive by some. Future negotiations will determine to what extent the TRIPS agreement will become an effective force in the promotion of systemic convergence. In its absence, however, the IPR debate at the international level can easily become a discussion about rent shifting. This would be unfortunate because it would preclude a more balanced evaluation of the role that IPR may play in the developing world.

REFERENCES

Challu, P., et al. 1991. Patenteamento de Productos Farmaceuticos: Consecuencias. Buenos Aires: Sociedad Impresora Americana.


Frischtak, C.R. 1989. The Protection of Intellectual Property Rights and Industrial Technology Development in Brazil, World Bank Industry Series Paper No. 13. Washington, D.C.: World Bank.


Kunz-Hallstein, H.P. 1989. The United States proposal for a GATT agreement on intellectual property and the Paris Convention for the Protection of Industrial Property. Vanderbilt Journal of Transnational Law 22(2):265-284.


Primo Braga, C.A. 1989. The Economics of Intellectual Property Rights and the GATT: A View from the South. Vanderbilt Journal of Transnational Law 22(2):243-264.

Primo Braga, C.A. 1990a. Guidance from economic theory. In Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature, W. Siebeck, ed. World Bank Discussion Paper No. 112. Washington, D.C.: World Bank.

Primo Braga, C.A. 1990b. The developing country case for and against intellectual property protection. In Strengthening Protection of Intellectual Property in Developing Countries: A Survey of the Literature, W. Siebeck, ed. World Bank Discussion Paper No. 112. Washington, D.C.: World Bank.

Primo Braga, C.A., and A. Yeats. 1992. The simple arithmetic of existing multilateral trading arrangements and implications for a post-Uruguay Round world. International Trade Division, World Bank, processed.


Rapp, R.T., and R.P. Rozek. 1990. Benefits and costs of intellectual property protection in developing countries. Journal of World Trade 24(5):76-102.

Rozek, R.P. 1990. Protection of intellectual property rights: research and development decisions and economic growth. In Intellectual Property Rights in Science, Technology, and Economic Performance: International Comparisons, F.W. Rushing and C.G. Brown, eds. Boulder, Colo.: Westview Press.


Schumann, G. 1990. Economic development and intellectual property protection in Southeast Asia: Korea, Taiwan, Singapore and Thailand. In Intellectual Property Rights in Science, Technology, and Economic Performance: International Comparisons, F.W. Rushing and C.G. Brown, eds. Boulder, Colo.: Westview Press.


U.S. Trade Representative. Several years. Foreign Trade Barriers. Washington, D.C.: U.S. Government Printing Office.


Villarreal Gonda, R. 1991. The New Mexican Industrial Property Law. Processed.


World Bank. 1991. World Development Report 1991: The Challenge of Development. New York: Oxford University Press.

Suggested Citation:"6 Comparative National Approaches to Intellectual Property Rights." National Research Council. 1993. Global Dimensions of Intellectual Property Rights in Science and Technology. Washington, DC: The National Academies Press. doi: 10.17226/2054.
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As technological developments multiply around the globe—even as the patenting of human genes comes under serious discussion—nations, companies, and researchers find themselves in conflict over intellectual property rights (IPRs). Now, an international group of experts presents the first multidisciplinary look at IPRs in an age of explosive growth in science and technology.

This thought-provoking volume offers an update on current international IPR negotiations and includes case studies on software, computer chips, optoelectronics, and biotechnology—areas characterized by high development cost and easy reproducibility. The volume covers these and other issues:

  • Modern economic theory as a basis for approaching international IPRs.
  • U.S. intellectual property practices versus those in Japan, India, the European Community, and the developing and newly industrializing countries.
  • Trends in science and technology and how they affect IPRs.
  • Pros and cons of a uniform international IPRs regime versus a system reflecting national differences.
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