Intellectual Property Rights: Impacts on Developing Countries Keith Maskus WBI TechNet 12 February 2002

Policy Environment Multilateral harmonization efforts - TRIPS - WIPO treaties Regional agreements Unilateral policy changes Expanding rights in US and EU New rights in developing countries?

Pressures for Change Globalization of knowledge as an input Rise of network industries Reduced copying and imitation costs Technical changes make traditional concepts of IPRs obsolete Strategic trade and industrial policy

Some Historical Perspective IPRs reform tends to follow market needs - U.S. patent and copyright history - Japanese post-war patent system - Korean and Taiwanese development - Recent changes in pharmaceutical patents Statistically IPRs are endogenous But IPRs can promote technical change

What Are IPRs? Patents, copyrights, trademarks, trade secrets, etc. provide: Legal ability to exclude others from using a designated piece of created information; Temporary provision of market power within a specific territory; Rights are limited for purposes of economic and social policy.

Why Protect IPRs? Society has an interest in knowledge creation and dissemination. Markets for knowledge and information are subject to failure. - Invention and creation are costly and face uncertainty. - Appropriability problems - Difficulties in selling information - Problems in signaling origin and quality

IPRs Are 2d-best Solutions Reduce dynamic market failures Avoid problems with government failure Objectives of IPRs: - Stimulate invention, innovation, creation; - Promote use of new knowledge; - Disseminate new knowledge to others; - Provide certainty about products

Why Worry About IPRs? Market power raises static monopoly costs. Excessive protection could reduce dynamic competition (“anti-commons”). Higher costs of imitation, diffusion, learning Higher costs of achieving social objectives

Invention Patents Purpose: stimulate and disseminate inventions Cover inventions in any technology that are novel, inventive, commercially useful. Inventive step must be disclosed. Minimum 20 years from filing Key limitations: eligibility; inventiveness; prior art; breadth of claims; fees; disclosure; opposition; experimental use; compulsory licenses; parallel imports; competition policy

Other Patent-like IPRs Utility Models Industrial Designs Plant-Breeder Rights - Lower standards for eligibility; - Farmer’s privilege; - Breeder’s research exemption. Integrated Circuits Design

Trademarks Purpose: guarantee origin of goods and services; promote product development and quality Apply to distinctive names, marks, logos, slogans, colors, etc. Available upon registration with indefinite renewals.. Key limitations: fair use; use in dissimilar goods; definition of “well-known marks”

Other Trademark-like IPRs Service marks Collective marks Domain names Geographical indications - Currently applied to wine and spirits - Some scope for expansion

Copyrights Purpose: stimulate literary and artistic works (or simply recognize ownership rights to creation); overcome transactions costs in use Apply to any new expression without registration Minimum 50 years exclusivity Extend to derivative rights Standard protection for software, databases, electronic content on internet Key limitations: fair use; compulsory licenses; reverse engineering; creativity in databases

Copyright-related IPRs Moral rights Neighboring rights Rights to broadcasts and satellite transmissions

Trade Secrets Purpose: protect confidential information that is not patented Apply to any proprietary secret that firms take efforts to escape disclosure Trade secrets are “liability rules” defining what is unfair competition Anything learned through fair competition enters public domain Protection of confidential test data

A Brief Primer on TRIPS Original purpose and negotiating history Component of single undertaking Sets minimum standards with important changes for developing countries in - Patents (duration, coverage, limits on CLs) - Plant variety protection - Trademarks - Copyrights (software, databases) - Confidential information and test data Administration, enforcement, transition periods

Potential Impacts on Developing Countries Impacts would depend on: - Level of development and incomes; - Net trade in technology and new products; - Human capital and ability to absorb technology; - Openness and competition on domestic markets; - Effectiveness of national innovation systems; - Competition policy and other regulation - Many other factors

Impacts on Least Developed Countries Significant administration and enforcement costs; Labor adjustment costs; Slightly negative effects on trade, technology transfer, FDI; Little effect on most prices and products; Larger costs in terms of patented medicines; protected seeds; Little prospect for innovation gains unless other reforms are undertaken.

Impacts on Middle-income Countries Significant administration and enforcement costs; Labor adjustment costs; Negative short-run rent transfers; Positive long-run effects on trade, TT, FDI (including quality of TT); Perhaps considerably larger costs in medicines, protected seeds; Greater prospects for domestic innovation but reduced possibilities for low-cost imitation

Policy Implications: Domestic Work with flexibility in TRIPS standards (GEP table 5.2); Administration and enforcement costs may not be efficient allocation of development resources; Need for technical and financial assistance; Simply adopting stronger IPRs is not enough and could be costly; Supplement IPRs with appropriate policies; Consider parallel imports regime

Policy Implications: TRIPS Reform Longer implementation periods; Avoid adding new and stronger global standards; Consider extending geographical indications; Global recognition of oral prior art; Consider protection regime for traditional knowledge; Work on consistency with Convention on Biodiversity