International IP Cooperation and Developing Country Perspectives
BECAUSE IPRS ARE protected only within a particular territorial jurisdiction, authors and inventors cannot exercise their rights outside the country where they are recognised. International cooperation to facilitate protection abroad for foreign inventions and artistic works started in the second half of the nineteenth century. The Paris Convention for Protection of Industrial Property (Paris Convention), signed in 1883, was one of the first global treaties covering ‘industrial property’ such as patents and trademarks.1 The Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) was signed in 1886 to enhance international cooperation in protecting tangible manifestations of creative efforts, such as literature and paintings.
Patent protection rewards inventors for their scientific and technological endeavours, but the national economies of the Contracting Parties of the Paris Convention are heterogeneous and competitive in different industrial areas. Revision conferences of the Paris Convention became not only a focus of international cooperation but also a battleground of competing industrial and commercial policies and opposing ideas as to what form international patent protection rules should take. A new dimension was added to such conflicts in the 1950s, with increased membership of the Convention comprising newly independent states with even more diverse economies.
This chapter examines the origins of the controversies over the provisions concerning several substantive standards in the Paris Convention, particularly compulsory licensing provisions. It then looks at how developing countries gradually joined the discussions over these questions and summarises the history of the debate on ‘the global patent system’ and its consequences for the economies of developing countries since the 1950s.
Additionally, this chapter retraces the ‘the global patent system’ discussions at the United Nations (UN) and the United Nations Conference on Trade and Development (UNCTAD)2 during the decades prior to the Uruguay Round negotiations which started within the framework of the General Agreement on Tariffs and Trade (GATT)3 in 1986. As today, those discussions centred around the costs of patent protection in developing countries and the negative role of IPRs in technology transfer. Finally, the chapter examines economists’ analyses of international transfer of technology, with a focus on its impact on developing countries.
I THE BEGINNING OF GLOBAL INTELLECTUAL PROPERTY TREATIES
A Paris Convention for Protection of Industrial Property
The Paris Convention, which entered into force in 1884 with 14 Member States,4 establishes principles and procedures of cooperation among contracting parties of the Paris Union in relation to industrial property, such as patents, trademarks, trade names, well-known marks,5 industrial designs and indications of source or appellations of origin (‘geographical indications’ in the TRIPS Agreement), as well as the prevention of unfair trade practices. The Convention was designed to facilitate the ability of inventors of one Union member country to obtain protection in other member countries for their intellectual creations, in the form of industrial property rights.
Article 2 of the Convention, which concerns national treatment for nationals of countries of the Union, provides in its paragraph 1 that:
Nationals of any country of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with.
Article 3 also stipulates that: ‘nationals of countries outside the Union who are domiciled or who have real and effective industrial or commercial establishments in the territory of one of the countries of the Union shall be treated in the same manner as nationals of the countries of the Union.’
One of the principles of the Paris Convention is the right of priority, whereby the filing date in one Paris Union member must not be invalidated before the expiration of the periods referred by reason of any acts accomplished in the interval, in particular, another filing in another member, the publication or exploitation of the invention. In other words, it establishes that an applicant from one contracting party is able to use its first filing date (in one of the members) as the effective filing date in another member, provided that he or she files another application within six months (for industrial designs and trade marks) or 12 months (for patents and utility models) from the first filing.
The independence of patents, as affirmed in Article 4 bis, is another principle of the Paris Convention. According to Article 4 bis(1), patents applied for in the various countries of the Union by nationals of countries of the Union are independent of patents obtained for the same invention in other countries, whether Members of the Union or not. Article 4 bis(2) of the Convention specifically provides that ‘patents applied for during the period of priority are independent, both as regards the grounds for nullity and forfeiture, and as regards their normal duration’. However, in contrast to patents, Article 6 quinquies A provides that protection of marks registered in one country of the Union ‘shall be accepted for filing and protected as is [telle quelle6] in the other countries of the Union, subject to the reservations indicated in this Article’. At the same time, Article 6 quinquies B enumerates exceptions for accepting telle quelle the registration of marks protected in foreign countries. Most Paris Union members use Article 6 quinquies B provisions as conditions for not accepting ‘telle quelle’ marks (see also Chapter 6).
If disputes relating to interpretation or application of the Convention are not settled by negotiation (Article 28), the Paris Convention provides only the procedures of the International Court of Justice, which are onerous.
B Berne Convention for the Protection of Literary and Artistic Works
The Berne Convention for the Protection of Literary and Artistic Works was signed in 1886.7 There were and have been wide national differences in the ways literary and artistic works are protected and, therefore, the principles whereby certain rights held by the nationals of one country can be asserted in another have been important. The purpose of the Berne Convention was to facilitate the ability of nationals of its contracting State to obtain protection of their creative literary and artistic works and to exercise their rights in other Union member countries.
There are three basic principles underlying the Berne Convention. The first is the principle of national treatment. According to Article 5, when the works originate in one of the Union countries (ie, when the author of the work is a national of a Union country or when works were first published in such a country),8 foreign authors are given the same rights and privileges to copyrighted material as domestic authors in any other Union countries (Article 5(1)). However, there are exceptions to the principle of national treatment, such as the provisions concerning the term of protection (Article 7(8)). Unless otherwise provided in the legislation of the country where protection is claimed, the term of copyright protection cannot exceed the term fixed in the country of origin of the work (reciprocity). The second principle is that copyrights for creative works are, in principle, automatically recognised in each member State of the Convention without being asserted or declared (Article 5(2)).9 The third principle is, like the Paris Convention, the independence of rights in different countries (Article 5(3)).
The Berne Convention was influenced heavily by the French concept of the moral rights of the author (droit d’auteur), which contrasts with the American concept of ‘copyright’, which deals solely with economic aspects. In the US, the concept of ‘neighbouring rights’ does not exist and phonograms10 are protected by copyright (producers of phonograms are treated as authors), while performers and broadcasting organisations are protected under the common law rather than a copyright statute. The US was not a party to the Berne Convention until 1989. This was because the country would not accept significant changes to its copyright law, particularly with regard to moral rights, general requirements for the registration of copyright works and mandatory copyright notices. The Universal Copyright Convention was introduced in 1952 to accommodate these differences until the Berne Convention Implementation Act of 198811 came into force in the US in March 1988.
The original (1886) text of the Berne Convention did not state any standard or minimum term of copyright protection, variations in which are still a cause of international friction among countries. The US became a party to the Berne Convention in 1989. A minimum term of protection became obligatory in the Brussels Act of 1948 and was maintained in the current Paris Act of 1971. The revised Berne Convention sets out a minimum term of protection, and parties are free to provide longer terms (Article 7(6)). Generally, except for photographic, cinematographic and anonymous or pseudonymous works, the term of protection is 50 years after the author’s death (Article 7(1)). For cinematographic works, the term is 50 years after the work has been made available to the public with the consent of the author, or, failing such an event within 50 years from the making of such a work, 50 years after the making (Article 7(2)), and for anonymous or pseudonymous works, 50 years after the work has been lawfully made available to the public (Article 7(3)). For photographic works and works of applied art, in so far as they are protected as artistic works, the minimum term is until the end of a period of 25 years from the making of such a work (Article 7(4)).
C National, Regional and International Cooperation and the Establishment of WIPO
In 1893, the International Bureaux for the protection of intellectual property (Bureaux Internationaux Réunis pour la Protection de la Propriété Intellectuelle, BIRPI) was established to administer the Paris and Berne Conventions, as well as the Madrid Agreement concerning the International Registration of Marks (1891). The ‘Madrid system’ functions under the latter Agreement and the Madrid Protocol, adopted in 1989, and offers a trademark owner the possibility of having his trademark protected in several countries by filing one application with his own national or regional trademark office.
Based on the Convention Establishing the World Intellectual Property Organization (WIPO Convention), signed in Stockholm on 14 July 1967 (which entered into force in April 1970 and was amended on 28 September 1979), WIPO was created to take over the work of BIRPI, with a view to promoting and protecting intellectual property throughout the world (Article 3, WIPO Convention).12 The agreement that was concluded between the United Nations and WIPO in 1974 recognised WIPO as a specialised agency of the United Nations.13 Today, WIPO administers 24 international treaties.14
Certain aspects of IPRs which had not been dealt with in the Paris and Berne Conventions or Madrid Agreement gradually became the subject of international agreements.
In 1970, the Patent Cooperation Treaty (PCT) was adopted and entered into force on 1 April 2002.15 Any international application made under the PCT is given the same treatment as if the applicant had made simultaneous applications in each PCT contracting party.16 After filing a PCT application, an international examination will be conducted to confirm whether there has been any application in the past (which is publicly known) for an invention which is similar to the invention in the application in question. An examiner will prepare an opinion on whether the invention has the elements required for obtaining a patent, such as novelty, an inventive step and industrial applicability. If an applicant wishes, he or she can receive a preliminary examination of the elements necessary to obtain a patent (international preliminary examination) and can continue the patent application procedures in only selected countries based on his or her chances of obtaining a patent. Each country decides whether to grant a patent based on an actual examination by that country. The Patent Law Treaty (PLT), which attempts certain harmonisation of patent procedures, was adopted in June 2000 and came into effect in April 2005.17
The Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure (Budapest Treaty; see chapters 3 and 12) was signed on 28 April 197718 to be administered by the WIPO. For inventions relating to microorganisms, a deposit of biological material must be made to meet the disclosure requirement for enabling third parties to carry out the invention. The Budapest Treaty allows international recognition of the deposit of microorganisms to be made at a recognised institution for the purposes of patent procedure. This measure thus allows inventors to avoid the need to depositing microorganisms in all the countries where they wish to apply for patents. Today, the WIPO administers 24 international treaties.19
There have also been attempts at promoting regional cooperation relating to IPRs. Since the end of World War II, Europe has been working towards regional integration, but European countries have opted for keeping fundamental powers with respect to the protection of IPRs and only partially accepted regional agreements.20 The Convention on the Grant of European Patents, commonly known as the European Patent Convention (EPC), was signed on 5 October 1973.21 The EPC provides a legal framework and procedure for the granting of European patents. These are essentially nationally enforceable, nationally revocable patents, subject to central revocation or narrowing pursuant to unified, post-grant procedures.22 European patents, once granted, become a bundle of nationally enforceable patents in the designated states, but enforcement must be carried out through national courts in individual countries.23
As the membership to and the scope of international treaties relating to intellectual property rights increased, decision-making among contracting parties became complex and difficult. In 1973, the membership of the Paris Convention increased to 80 states, of which 44 were developing countries. In the same year, the number of developing countries with national patent legislation increased to 84 countries, up from 10 in 1873. Among the BIRPI Members, the number of developing country members was 15 in 1960. However, in 1967, this number increased to 42, of which 10 were Asian, 8 Latin American, and 24 African nations.24
Attempts at harmonising national patent law had been made among developed countries, but they stalled in the 1970s for a variety of reasons, including problems relating to the first-to-invent principle,25 which is characteristic of the US patent system, as opposed to the first-to-file principle used in most countries. As these efforts for international cooperation were being made, the international community became more diverse. WIPO Member states came to be divided into three groups: developed, developing and socialist countries. The countries in each of these groups developed widely different views with respect to the protection of IPRs, making it nearly impossible to reach a unanimous decision within WIPO.
II PARIS CONVENTION AND ITS CONTROVERSIES: INDUSTRIAL POLICY ASPECTS OF PATENT PROTECTION
Since the inception of international cooperation, patent protection has been designed differently in national laws. According to GHC Bodenhausen, Director-General of BIRPI from 1963 to 1973:
the Paris Convention leaves the Member States entirely free to establish the criteria of patentability, to decide whether patent applications should or should not be examined in order to determine, before a patent is granted, whether these criteria have been met, whether the patent should be granted to the first inventor or to the first applicant for a patent, or whether patents should be granted for products only, for processes only, or for both, and in which fields of industry and for what terms.26
Later, this passage from Bodenhausen was quoted in the Joint Report by the UN, UNCTAD and WIPO of 1974 (published in 1975 – hereafter the 1975 UN/UNCTAD/WIPO report)27 on the Role of the Patent System in the Transfer of Technology to Developing Countries, where it explains the ‘flexibility’ of international standards at that time.
Although the main purpose of the Paris Convention is to delineate the principles of international cooperation to ensure protection of industrial property, it contains several substantive provisions, the main examples of which are:
Article 5A: patents: importation of articles; failure to work or insufficient working; compulsory licences.
Article 5B: industrial designs: failure to work; importation of articles.
Article 5B: industrial designs: failure to work; importation of articles.
Article 5C: marks: failure to use; different forms; use by co-proprietors.
Article 5D: patents, utility models, marks, industrial designs: marking.
-Article 5 ter: patents: patented devices forming part of vessels, aircraft, or land vehicles.
Article 5 quater: patents: importation of products manufactured by a process patented in the importing country.
Article 6 bis: protection of well-known marks.
Article 6 ter: marks: prohibitions concerning state emblems, official hallmarks, and emblems of intergovernmental organisations.
Article 6 quinquies: marks: protection of marks registered in one country of the union in the other countries of the union.
Article 6 sexies: protection of service marks.
Article 6 septies; marks: registration in the name of the agent or representative of the proprietor without the latter’s authorisation.
Article 7 bis: protection of collective marks.
Article 8: protection of trade names.
Article 9: seizure, on importation, etc, of goods unlawfully bearing a mark or trade name.
Article 10: false indications: seizure, on importation, etc, of goods bearing false indications as to their source or the identity of the producer.
Article 10 bis: protection against unfair competition.
Article 10 ter: marks, trade names, false indications, unfair competition: remedies, right to sue.
i Compulsory Licences for Failure to Work
In the discussions concerning international substantive rules of patent protection, compulsory licensing and patentability questions have been continuously contentious issues. The original Paris Convention of 1883 contained a substantive rule concerning forfeiture of patents. Article 5A of the Convention stipulated that:
The introduction by the patentee into the country where the patent has been granted of objects manufactured in any of the States of the Union shall not entail forfeiture of the patent.
This provision was agreed upon in reaction to the prevalent industrial policy practices of countries at that time, including France, by which patents were invalidated if the patented products were imported but not manufactured locally in the country where the patent was protected. Paragraph (2) of Article 5A of the 1883 text stipulated, however, that: ‘Nevertheless, the patentee shall remain bound to work his patent in conformity with the laws of the country into which he introduces the patented objects’. This meant that, if the right holder did not ‘work’ his patent, it could be revoked, depending on how the local law defined ‘working’. The Paris Convention leaves to Members’ discretion the question of whether or not to consider importation (either by the patentee or by his licensee) as ‘working of patents’.28
The ‘working’ obligation of patented inventions was originally based on the idea that an invention to which the privilege of enjoying exclusivity is granted should be implemented, so that society also benefits from it. Incidentally, the statute of the City State of Venice, where the patent institution originated, enumerated four motives for the grant of a patent: the utility to society; the encouragement of inventive activity; the refund of costs incurred by the inventor; and the inventor’s rights to the fruits of his mind.29 This law provided explicitly that it was within the power and discretion of the government of Venice to use any patented invention, subject to the provision that the patentee should be a person who had the right to work the patent on behalf of the government.
In 1925, at the Revision Conference in The Hague, Article 5A was modified. The new Article 5A introduced the concept of compulsory licensing as a means ‘to prevent the abuses, which might result from the exclusive rights conferred by the patent, for example, failure to work’. When the above provision was instituted in Article 5A(2) in 1925, two conditions were attached. First, patents were not subject to forfeiture unless the grant of compulsory licenses was insufficient to prevent such abuses (Article 5A(3)). Second, compulsory licenses were not to be issued before at least three years from the date of grant or if the patentee proved the existence of ‘legitimate excuses’ (Article 5A(4)). Bodenhausen explains that ‘legitimate excuses’ may be based on the existence of legal, economic or technical obstacles to exploitation, or more intensive exploitation, of the patent in the country.30
The new rule was that Paris Union Members were allowed to forfeit patents only when the grant of compulsory licenses was insufficient to prevent such abuses. The rule remains in force today in the Paris Convention, as amended in Stockholm in 1967.
So that an industrial policy of one country would not override the rights of inventors beyond the scope that exceptions to the rights conferred would possibly justify, various proposals were made regarding Article 5A of the Paris Convention. At the Revision Conferences in London (1934) and Lisbon (1958), further conditions were added to Articles 5A(3) and (4).31 Thus, Article 5A(3) of the Paris Convention 1967 provides that ‘Forfeiture of the patent shall not be provided for except in cases where the grant of compulsory licenses would not have been sufficient to prevent the said abuses. No proceedings for the forfeiture or revocation of a patent may be instituted before the expiration of two years from the grant of the first compulsory license.’ Article 5A(4) reads:
A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license.
Proposals made at the Lisbon Revision Conference requiring compulsory licences for patents to be subject to a royalty payment by the licensee were not adopted. This was due to the US insistence on exceptions for antitrust violations.32 At the London Revision Conference, the application of the provisions in Article 5A to utility models was inserted. Article 5B was added at The Hague Revision Conference and stipulates that the protection of industrial designs shall not be subject to any forfeiture, either by reason of failure to work or importation of Articles corresponding to those which are protected in the importing country.
Article 5A of the Paris Convention has been one of the most discussed provisions. For developing countries which promote local manufacture of patented goods, employment and training, the ‘working of patents’ in the sense of domestic manufacturing has been considered as important, as reflected in their laws (see chapter 10).
India, which was not a contracting party to the Paris Convention before December 1998, asserted in a government report by Justice Ayyangar (the Ayyangar Report)33 that securing priority rights for Indian inventors would be the sole advantage of the Convention. He argued that this was not worth sacrificing India’s economic and industrial interest34 and jeopardising India’s system of ensuring local working of foreign patents by ‘licences of right’,35 compulsory licensing and revocation of patents to protect against the growing demands of developed countries to strengthen patent rights (see chapter 10).36 The Ayyangar Report warned against the former Patents Enquiry Committee recommendation that India join the Paris Convention for the Protection of Industrial Property.
In an interdependent economy, global efficiency may benefit a national economy more than reliance on domestic industrial production at any cost. The obligation to manufacture domestically in a country with patent protection may, in many cases, have little rationale. Those countries with technological competitiveness that consider importation in addition to local manufacturing to be part of the working of patents struggled for over a hundred years to make this conception an international rule.
On the other hand, those countries that view patent protection as a means of domestic industrial development (including those which protect inefficient domestic industry) continue to emphasise the importance of domestic manufacturing as the only acceptable form of ‘working’. Significantly, the Convention leaves each country to define the meaning of ‘working’ a patent. For more than one hundred years, the complexities of Article 5A were to entertain an interminable debate, notably over the question of whether merely importing the patented objects fulfils the requirement of ‘working’, which the TRIPS Agreement did not entirely resolve (see chapters 4, 5, 7 and 10).
A compulsory licence is an authorisation given by an authority (usually a competent administrative body or a court) to a person, other than the patentee, to undertake certain acts (such as manufacturing), without authorisation by the patentee, which would have otherwise been excluded by the patent.37 Other government-use authorisations can be given to permit use of patented technology for public non-commercial purposes or emergencies.
Most countries came to include in their patent laws, in one form or another, forms of non-voluntary use of inventions, for example, on the grounds of ‘public interest’, which includes emergency situations, or certain abuses such as certain anti-competitive behaviour. However, non-voluntary use of inventions could be resorted to by governments or companies in the name of public interest, for reasons closely related to their own economic interests, such as industrial progress, local manufacturing of patented goods and prices thereof, employment or training.
The Paris Convention deals with compulsory licences only from the point of view of abuses of exclusive rights, of which failure to work and insufficient working are considered examples. The criteria for determining whether there has been an abuse of rights contrary to the purposes of the patent system have changed. At present, there is still an extremely wide range of opinions about what constitutes an abuse, and there is no sign of any agreement being reached in the near future.
ii Compulsory Licences on the Grounds of Public Interest
The Paris Convention does not deal with public policy issues and does not refer to compulsory licensing on these grounds. Many countries provided for exceptions to patentability in certain technological fields and developed a compulsory licensing system for situations that could be subsumed under the term ‘public interest’ or public policy, particularly in medicines and food, as in the UK and Canada. The industrial policy objectives in these cases overlap with what the law enshrines as ‘public interest’.
The UK Patents Act 1949 also provided special rules for compulsory licensing of inventions capable of being used as food, drink, medicine or germicide or methods of manufacturing any such substances, or as a surgical or therapeutic device or any part thereof, with payment of reasonable royalties to the right holder, presumably for public interest.38 This provision was repealed in 1977.
For many years, the country that most often granted compulsory licences was Canada.39 From 1923 Canada had strong compulsory licensing provisions which allowed the granting of compulsory licenses for the manufacture of drugs and food products protected in Canada by patents. In 1969 the law was amended in accordance with compulsory licence policies, particularly for the pharmaceutical industry to provide compulsory licensing even for imports of bulk pharmaceutical ingredients. A provision was made under Canada’s Patent Act under which the Commissioner of the Canadian Intellectual Property Office was given the power to grant licences for substances or manufacturing processes for pharmaceuticals or foods, unless there were justifiable grounds to refuse the application. At that time it became possible to import under a compulsory licence not only pharmaceutical products manufactured by manufacturing process patented in Canada, but also active pharmaceutical ingredients (API).40 This system, together with the sufficient size of its pharmaceutical markets and its efficient regulatory organisations assuring the quality, efficacy and safety of the products, made it possible to build up an efficient generic drugs industry in Canada. The system was extensively utilised until 1992, when it was modified in conformity with the free trade agreement concluded between Canada and the US (Canada-United States Free Trade Agreement – see chapter 14).
With a succession of formerly colonised countries achieving their independence, there was growing criticism that patent protection only benefited multinationals, and this developed into a political issue in many developing countries.
In 1965, the Expert Committee of BIRPI adopted the Model Law for Developing Countries on Inventions.41 This Model Law stipulated the procedures for: granting of compulsory licences for important technology relating to economic development or public health; technology necessary for the exploitation of another patent; and the failure to work a patent (ie, to exploit the patented invention by, for example, manufacturing, making or selling). In order to prevent the abuse of compulsory licences for the purpose of protecting domestic industry, the Model Law emphasised the principle of national treatment and strict procedural rules, as well as the date from which compulsory licences can be granted (four years from the application or three years from the granting of the patent, whichever is sooner).
The US and other developed countries oriented the discussion to strengthen the Paris Convention so that importation would be considered to be the working of patents.42 Developing countries opposed this view and criticised these restrictions on compulsory licences as being contrary to the benefits they are intended to deliver to developing countries. No agreement was reached on this issue at the 1981 Nairobi Diplomatic Conference for the revisions of the Paris Convention. In July 1985, WIPO began discussions to harmonise the different patent systems among its Members. A diplomatic conference was held in June 1991 for this purpose, but it failed for multiple reasons, including the US refusal to give up its ‘first-to-invent’ principle (note 26).
B Patentable Subject Matter
The Convention left largely to national discretion substantive issues of patentability (ie patentable subject matter and patentability requirements). The survey on the role of the patent system in the transfer of technology to developing countries, conducted by the UN/WIPO/UNCTAD and published in 1975,43 revealed that any invention was patentable in 14 UN Member states, eight of which were developing countries. In contrast, Ghana, Iraq and Peru generally excluded all matters considered to be against the public interest from being patentable.44