Innovation and Intellectual Property
Summary by F.M Scherer
(Harvard and Princeton Universities)
remarkable report is the product of a six-member commission created
in May, 2001, by the U.K. Department of International Development.
The commission was convened under an initiative by Secretary of State
Clare Short, who was lauded by The Economist (May 17, 2003, p. 51)
for making it her priority to "help the poorest people in the
poorest countries, [standing] up to both bad governments and commercial
interests." The commission was chaired by John Barton of the
Stanford Law School. Two other members of the commission were also
from outside of the United Kingdom.
commission's formation was evidently prompted by implementation of
the World Trade Organization's TRIPS (Trade-Related Aspects of Intellectual
Property Rights) agreements, which began to take effect on January
1, 1995. Under TRIPS, all members of the World Trade Organization
are expected by 2006 to offer a bundle of intellectual property rights
equivalent to those accepted in fully-developed industrial nations.
The committee's report questions the rationale for this expectation,
concluding that although "some IP protection is likely to be
appropriate at some stage for developing countries …incentives
work differently according to whether there is a capacity to respond
to them" (p. 5). In many developing countries, the authors argue,
"IP rights do little to stimulate innovation … because
the necessary human and technical capacity may be absent." On
the contrary, "rapid growth is more often associated with weaker
IP protection" (p. 22). The report acknowledges (p. 8) the complaint
that in signing on to TRIPS, the world's developing nations may have
accepted a bad bargain, since developed nations have not honored their
TRIPS commitments to liberalize agriculture and textiles and to reduce
reached these and many other conclusions after reading virtually everything
written on the subject and listening to everyone with a relevant viewpoint.
Members visited at least seven countries, four of them less-developed.
No new data sets were assembled, no formal theoretical models deployed.
The report's compass
is best gauged by recapitulating some of its principal findings:
* At the Doha
Round of WTO deliberations, a decision was made to delay the compliance
deadline regarding pharmaceutical products for the least-developed
nations to the year 2016. This delay should be extended to the implementation
of TRIPS as a whole, with flexible implementation by less-developed
countries after that date.
* The evidence
on the impact of economic research on innovation is inconclusive.
More research is needed.
* The small potential
size of the market for treatments of diseases prevalent mainly in
the third world means that little R&D is done, and granting patent
protection is unlikely to induce major changes. However, patenting
of pharmaceutical products in the third world is likely to increase
* The threat and
actuality of compulsory patent licensing, authorized under the TRIPS
agreement, can be and should be used by less-developed nations to
procure drugs at modest prices.
nations should be able to procure drugs under compulsory licensing
from the most competitive sources in the world, despite the mandate
of TRIPS Article 31 that licensing be "predominantly for the
supply of the domestic market." Implicitly, the TRIPS Council
should go back to work seeking a strong compromise agreed to by most
member nations but blocked in 2002 by the United States.
farmers should have the right to make whatever use they wish from
the hybrid seeds they have purchased, including regeneration of new
nations should be compensated for the use of their traditional knowledge
in the development of pharmaceutical and other products.
copyright protection could impede the education needed to spur growth
in less-developed nations. Copyright fees should be lower in those
parts of the world. Less-developed nations should have the right to
use technological measures to read materials encoded using technical
* Genome patents
should be issued only when strict and narrowly-defined utility criteria
* Business methods
and computer program inventions should be excluded from patentability
in the third world.
nations should receive outside help, e.g., from organizations such
as WIPO and the European Patent Office, in designing and administering
their intellectual property systems, including the implementation
of compulsory licensing regimes. The financing of IP systems should
be covered by fees, the bulk of which will fall upon applicants from
* WIPO, which
has tended to preach the gospel of IP-rich nations, should be more
sensitive to the special circumstances and needs of less-developed
* The developing
nations should have full-time representation in Geneva concerning
intellectual property matters. The necessary personnel would best
be installed under the mandate of the United Nations Conference on
Trade and Development.
Commission members endorsed these and other conclusions and recommendations
unanimously. What I find most remarkable about the report is that
one member of the commission was senior director of science policy
and scientific affairs at Pfizer's laboratories in Sandwich, England.
During the early 1980s, the initiatives that led to unilateral U.S.
Section 301 trade sanctions against nations lacking "adequate"
patent systems and to the subsequent organization of a powerful coalition
that put IP questions on the Uruguay Round treaty agenda were spurred
by Edward Pratt, chief executive office of Pfizer at the time. How
a high-ranking Pfizer official was able to endorse the commission's
findings and hence reject the philosophical viewpoints that led to
TRIPS deserves explanation. My tentative hypothesis is that, to attract
the first-rate scientific talent responsible for its continuing success
in world pharmaceutical markets, Pfizer recognizes that substantial
freedom of inquiry and expression must be accorded. That, at least,
has been my own experience working on several occasions as a consultant
for the company.
I conclude with
a query that will soon be answered: could a body commissioned in the
United States to investigate the rationale and consequences of intellectual
property rights come up with an analysis as broad and well-balanced,
one that reaches beyond special interests and takes into account,
among other things, the needs of less-developed nations' citizens,
as the U.K. Commission on Intellectual Property Rights did? A parallel
committee operating since early 2000 under the auspices of the U.S.
National Academy of Sciences has missed several publication deadlines
and seems to be having a hard time reaching closure. Closure will
eventually come, so we shall see.
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