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Least developed countries and their development partners should use alternative mechanisms for promoting technological progress, report recommends
Rules on intellectual property rights (IPRs) should be selectively adapted to give a break to the world´s poorest countries, which otherwise may not be able to achieve the technological development that is necessary for them to grow economically and to reduce poverty, a new UNCTAD report says.
The report adds that it is unrealistic on current trends to expect that most such countries will achieve "a sound and viable technological base" by 2013, the deadline now set for their compliance with international standards as required by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO).
The Least Developed Countries Report 2007, subtitled "Knowledge, Technological Learning and Innovation for Development", says current, strong IPR regimes favour the holders of intellectual property, who tend to be in industrialized countries, over users or potential users, such as the world´s 50 least developed countries (LDCs). The difference is significant, because economic globalization increasingly rewards intellectual, rather than physical, assets. Innovative ways of conducting business and managing assets such as patents, copyrights and trademarks -- all governed by IPRs -- can lead to significant economic benefits. A strong case can be made for adapting the IPR system to the needs of particularly vulnerable countries, the report contends.
Patenting and IPRs in LDCs
Few global patents originate in LDCs, and, according to the World Bank, the number has been declining -- from an average of 66 per year in the first half of the 1990s to 10 per year between 2000 and 2004.
In principle, LDCs can benefit from extended grace periods before they must comply with all terms of TRIPS. They have until 2013 -- and until 2016 for certain parts of the agreement applying to pharmaceuticals. And there are various flexibilities and exceptions available. But the report shows that in practice a growing number of free trade agreements, bilateral investment treaties, and other international trade pacts (such as the African Growth and Opportunity Act, and the draft trade agreements between the European Union and the African, Caribbean and Pacific Group of States) override these special conditions. They restrict the use of flexibilities and exceptions and actually impose more stringent requirements on LDCs than those required of other developing countries or even of non-LDC WTO members. These so-called TRIPS-Plus requirements exceed standard WTO commitments on intellectual property. More stringent requirements also are imposed in the process of accession by LDCs to the WTO, as was the case with Cambodia.
Obtaining technology is critical for LDCs. Intellectual property regimes need to be tailored to such countries´ specific needs and conditions, the report contends: A "one size fits all" model, such as the TRIPS Agreement, does not hold much promise of increased innovation, whether within LDCs or through the transfer of technology to such countries.
The history of successful industrializers -- both in Europe and North America and the newly industrializing countries of Asia -- shows that in the early stages of their industrialization, creative technological imitation was critical -- and also possible, because of weak or non-existent intellectual property protection, the report says. Strong IPR regimes, by pre-empting imitation and increasing the price of access to technology, may lock countries with low innovation capacities onto a low-technology path, the report warns.
The report´s key recommendation is that the transitional period for LDCs should not be subject to an arbitrary, predetermined deadline, but last until an LDC has reached what the TRIPS Preamble calls, "a sound and viable technological base". Other recommendations are that the concept of "transfer of technology" should be clarified in the WTO, and that "firm-based" incentives be designed for the transfer of technology. LDCs currently in the process of accession to the WTO should not be required to provide accelerated or TRIPS-Plus protection.
Generally, IPR regimes should be adapted to enable LDCs to improve their ability to produce and market internationally competitive products, the report counsels. Norms and standards should be fine-tuned to strike an appropriate balance between intellectual property protection and the needs of individual LDCs. Similarly, TRIPS flexibilities should be enhanced. And LDCs and their development partners should explore options not related to intellectual property that can spur innovation in LDCs. These include non-proprietary "open source" mechanisms; subsidized research through grants, tax credits, and work in government laboratories; development prizes; the use of trade secrets; patent buy-outs; advanced purchase commitments; and public-private partnerships.
LDCs should use, to the fullest extent possible, the flexibilities allowed by TRIPS and avoid the erosion of access to IP by free trade agreements, bilateral investment treaties, and other trade agreements, or through accession to the WTO, the report recommends. It adds that the international community should reconsider the development impact of international intellectual property rules seeking a more balanced approach, particularly in the case of LDCs.
Addendum: case study of Bangladesh
To evaluate the impact of intellectual property rights (IPRs) on innovation in an LDC, an in-depth study was prepared for the Least Developed Countries Report 2007 on the manufacturing sector of Bangladesh.
The study explored the effects of IPRs on 155 firms in the fields of agro-processing; textiles and garments; and pharmaceuticals. It found that innovative capacity at local firms remains very low across all three sectors, and that the presence of intellectual property rights does not play a role either as a direct incentive for innovation or as an indirect incentive enabling knowledge spillovers. Strong IPRs are most likely to benefit large transnational corporations operating in the country, as local firms are not sufficiently specialized to protect their innovations and lack the know-how and resources to engage in knowledge-intensive activities. The only important sources of technological progress for such firms are their own adaptation efforts, and innovation through imitation.
These findings demonstrate that strong IPRs do not encourage innovation among local firms and may thus undermine the evolution of nascent domestic industries, the report finds. Development of such industries requires less restrictive access to new knowledge, new technologies, and know-how so that such businesses can upgrade their economic activities.