IPR rules and their uncertain effects

When the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement came into force in 1995, it was the most comprehensive multilateral agreement on IPRs (Intellectual Property Rights). Globally, it set the minimum standards for protecting and enforcing almost all forms of IPR, including patents.

To comply with the TRIPS obligations, developing countries had to make significant changes to their IP laws.

These nations were told that since TRIPS expanded and strengthened IPR protection, there would be an increased flow of FDI (foreign direct investment) and technology transfer, besides local innovation being stimulated.

Fifteen years later, looking at where India and other developing nations stand in terms of intellectual property and FDI, it is clear that the promises of benefits from TRIPS have not all come true. For instance, the technological gap between the North and the South has not narrowed.

Many developing countries had then voiced the fear that higher IPR protection would actually limit access to technology. Critics had also warned that TRIPS would foster an environment favouring developed countries with advanced national systems of innovation where multinational companies hold patents over many high-technology products they can manufacture or sell worldwide.

TRIPS essentially has an innate inclination to favour big companies seeking returns from existing innovations, making future innovations more difficult for the less technologically advanced countries. Even within developed nations, over-protective IP regimes have been seen to have a negative impact on downstream innovations.

CORRELATION WITH FDI FLOWS

On the supposed link between stronger IP laws and higher FDI inflows, there is little evidence to substantiate such claims. Instead, data on FDI inflows to nations with low IPR protection indicates that FDI was not hindered by this. In Brazil, FDI rose substantially after the 1970s, until the debt crisis of 1985. Thailand experienced an FDI boom in the 1980s.

Conversely, many developing nations that adopted stringent IPR laws still failed to show significant FDI inflows. This lends credence to the argument that FDI inflows are likely influenced by many factors such as availability of skills, R&D infrastructure, macro-economic policies, and so on, rather than only the IPR protection level.

After the TRIPS experience, developing nations are again at the crossroads since the ACTA (Anti-Counterfeiting Trade Agreement) looms large.

Unlike the multilateral TRIPS, ACTA is a plurilateral agreement on enforcement of IP rights among a group comprising the US, Japan, the European Union, Australia, Mexico, Morocco, New Zealand, the Republic of Korea, Canada, Singapore and Switzerland.

Concerns over ACTA

There are some potential areas of concern with ACTA, as proposing nations seek to increase cross-border protection of IPRs beyond the present multilateral regime's coverage.

ACTA seeks to empower judges to issue injunctions not only against accused infringers but against third parties too; thereby, suppliers of materials used to produce a product infringing IPRs might be subject to these provisions even if they themselves have not violated IPRs anywhere.

Provision of damages could lead to excess valuation of damages to the rightsholder as it allows judges to use “lost profits, value of infringed goods or services measured by the market price or the suggested retail price”, as submitted by the rights-holder in estimating the total damages.

ACTA would allow the Customs authorities to act on their own initiative against ‘suspect' in-transit goods. Even if goods are in transit between two nations not party to ACTA but the transit port is in an ACTA member's territory, the latter can act against ‘suspect' in-transit goods. Moreover, ACTA doesn't need legal establishment of IPR violations.

Furthermore, if goods don't violate IPRs in the nation of origin or the destination country, but are suspected of doing so in the transit country that's an ACTA member, the latter can “suspend the release of, or detain” the suspect goods. Although these provisions don't cover patents and won't justify seizures of Indian drugs (as happened in Europe in 2008), they could be applied to other forms of IPRs.

For example, if it is alleged that a drugs consignment used trademarks incorrectly, ACTA provisions would apply automatically, seriously jeopardising legitimate trade in generics, particularly in the absence of effective judicial review norms. Worse, with no prescribed time limit for the Customs to initiate legal action, the goods could be detained indefinitely.

Given the certainty of such unsavoury incidents, it is imperative that India and other like-minded nations assess the potential impact of ACTA on their legitimate trade and social interests. Developing nations would do well to also bear in mind that while TRIPS contained provisions permitting some degree of flexibility for countries to accommodate their own patent and intellectual property systems and development needs, ACTA allows no such leeway with its TRIPS-plus provisions.

(The author is Professor, Centre for WTO Studies, Indian Institute of Foreign Trade.The views are personal.)

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