International Policy Network
? September 2002

Owen Lippert

U.K. Study on IPR and Development Close But No Cigar

If goodwill alone could resolve the debate over extending intellectual property rights in the developing world, then the new report by the U.K.'s Commission on Intellectual Property Rights represents a major breakthrough. Regrettably goodwill cannot trump economic common sense. As a result, the report, "Integrating Intellectual Property Rights and Development," does not provide a workable blueprint to increase both economic growth and access to medicines and knowledge in developing countries. That is a shame really given how honestly the authors approached their subject.

Whatever the report's ultimate shortcomings, it does deserve a careful read. That in itself is an accomplishment. Literally tons of books and studies now come out each month on the question of whether and how developing countries should improve their intellectual property regimes. This is due in part to a new awareness of patents as a result of the HIV/AIDS crisis and the looming deadline of 2005 for many developing countries to implement the minimum standards contained in the 1994 World Trade Organization treaty, Trade Related Aspects of Intellectual Property Rights (TRIPS). Sadly most literature simply repeats the stale charge that intellectual property rights are a neo-colonialist conspiracy of big business. "Integrating Intellectual Property Rights and Development Policy" does not fall for that lie. The authors seek to find a balance between industrial interests and the claims of the NGO horde. Middle ground is not necessarily even ground.

A clue to the problem lies in who are the authors, themselves. Stanford University law professor, John Barton, chairs the commission. He is joined by Dr. Ramesh Mashelkar, Director General of the Indian Council of Scientific and Industrial Research and one of his country's leading scientists; Dr. Gill Samuels, Senior Director of Science Policy at Pfizer, a large pharmaceutical company; Professor Carlos Correa, a well known Argentine scholar; Dr. Sandy Thomas, Director of the Nuffield Council on Bioethics; and Mr. Daniel Alexander, a prominent London barrister. The authors represent ably the professions of science and law. Unfortunately their ranks did not include an economist and advice from "dismal science" would have improved the result.
The authors set out to answer three questions. "How national IPR regimes could best be designed to benefit developing countries within the context of international agreements, including TRIPS?" (The Trade Related Aspects of Intellectual Property Rights or TRIPS is the 1994 treaty negotiated through the World Trade Organization that sets forth the international minimum standard of IPR protection.) "How the international framework of rules and agreements might be improved and developed?" And, finally, what is "the broader policy framework needed to complement intellectual property regimes," e.g., competition policy and law.
To each question, the authors bring an understandable desire to find recommendations that could uphold at least the shell of intellectual property rights while giving developing countries leeway just short of defection. For instance, they recommend expanding the ability of developing countries to import drugs from countries who do not uphold patent rights. They recommend extending the TRIPS deadline to 2016. They recommend countries adopt an intrusive competition or anti-trust policies that would in effect trump intellectual property rights through arbitrary regulatory harassment. Such is the result of using the misguided politics of compassion rather than principle as your compass.

How could the authors have avoided the trap of capitulation disguised as compromise? To start they should have paid more attention to Professor Keith Maskus, the leading economist on intellectual property rights and public policy. They cite his work but fail to understand the importance of his perspective that "The main goal of an intellectual property system should be to create economic incentives that maximize the discounted present value of the difference between the social benefits and the social costs of information creation, including the cost of administering the system." Maskus or at least any knowledgeable economist was the missing member of the team.

The economic welfare analysis of Maskus and others transforms the research approach from bartering a deal to finding the evidence. It provides an understanding of how long-term dynamic gains in investment and research compensate for the short-term static losses resulting from price changes. The loss is particularly evident when the authors address the critical question of how higher level of patent protection affect drug prices in developing countries. They cite but fail to appreciate the new economic evidence that the existing market conditions have a stronger impact on prices than the potential gains from exclusivity.

Had the commission added an economic perspective to its scientific and legal expertise, the authors would have produced a different and more useful guide to truly integrating intellectual property and development.

Note: We are grateful to the International Policy Network for permission to reproduce.