Flexibilities in the Patent System: WIPO Patent Colloquium

What room for maneuver do governments need within the international patent law system so as to enable them to safeguard national interests? Should the balance between obligations and flexibilities in the current system be adjusted? Such questions were debated at a recent WIPO colloquium on patent issues – one in a series of public colloquia, designed to offer information on a range of patent-related topics, and to provide an informal forum for participants to exchange views.

The February 16 colloquium, held at WIPO headquarters, addressed the topical theme of the "flexibilities" in the patent system, i.e., the space for maneuver by national governments, which is allowed within the rules governing the international patent system. These flexibilities recognize that, while international harmonization of patent standards helps facilitate trade and investment in a global economy, there also needs to be sufficient leeway to accommodate national differences, notably in terms of differing levels of economic development, and public policy concerns. This surfaced as a hotly debated issue during negotiations leading up to – and following – the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Two invited experts presented the colloquium with complementary views on the evolution and effectiveness of the flexibilities in the current system: Dr. N. S. Gopalakrishnan, Professor in IP law at the Cochin University of Science and Technology, India; and Professor Joseph Straus, Director of the Munich-based Max Planck Institute for Intellectual Property, Competition and Tax Law, Germany.

"Historically, the space provided to national governments in the patent system enabled industrialization to grow." - Professor Gopalakrishnan.

Narrowing of flexibilities

Professor Gopalakrishnan gave an historical overview, in which he traced the progressive narrowing of flexibilities through three main phases: from the 1624 English Statute of Monopolies to the Paris Convention (1883); from the Paris Convention to TRIPS (1995); and from TRIPS onwards.

During the initial phase of "total flexibility," each country’s patent system was based on standards determined entirely by the national government. Patents, seen as a privilege granted by the state, were used to facilitate investment and build up the national, industrial base. But there was no obligation to protect foreign inventions, imitation was rife, and incentives for innovation were inadequate.

The Paris Convention, Professor Gopalakrishnan explained, imposed a set of minimum international standards, so introducing a period of "minimum obligations with maximum flexibilities." States were left free to determine, for example, their own standards regarding the criteria of novelty and non-obviousness/inventive step; their own limitations and exceptions to patent protection; the term of protection; and the conditions for issuing compulsory licenses. The patent system came to be recognized as a powerful tool for innovation and industrialization. New economic powers emerged, but while some Asian countries shared the benefits with Europe and the U.S., development was not equal. Moreover, member states failed to observe the minimum standards, and the system lacked effective mechanisms to prevent trade distortions.

The TRIPS Agreement marked the start of the current period, characterized by binding obligations on member countries, with limited flexibilities. Dr. Gopalakrishnan noted that TRIPS leaves open some scope for states to determine standards of patentability, (e.g. regarding novelty and inventive step); to limit patent protection in respect of key new technologies, (such as biotechnology and software patents); and to set their own enforcement standards and procedures. Article 30 allows room for interpretation by each country regarding limitations and exceptions to patent protection, for example, to allow patented technology to be used for research purposes. And the Doha Declaration codifies the flexibility allowed for governments to issue compulsory licenses on public health grounds.

Professor Gopalakrishnan highlighted challenging questions facing World Trade Organization (WTO) and WIPO members as they consider the future direction of the patent system: Do patent rights now exceed the optimum level required to incentivise innovation and investment? Have economic arguments been allowed to outweigh public policy concerns, e.g. regarding access to patented medicines? Should the TRIPS-based system be revisited? He noted that, historically, the right balance of flexibilities had facilitated industrial growth and enabled the patent system to grow. And he called for governments now to pinpoint where flexibilities are most needed in order to fulfil their dual purpose of promoting investment and innovation, and meeting public needs.

"The TRIPS deal – higher patent standards in exchange for developing country access to technology – is working." - Professor Straus.

TRIPS  - a successful marriage of convenience

Professor Straus regretted that too much debate in this area was based on ideology rather than on facts. He produced multiple sets of statistics in support of his central contention, namely that the "TRIPS marriage of convenience," in which developing countries accepted higher standards of patent protection in return for ease of access to technologies, was working well. He showed economic indicators to demonstrate that, in the 10 years following the introduction of the TRIPS Agreement, developing country economies had expanded at a healthy rate (China at 9 percent; Latin American and Caribbean countries at 4.5 percent; India at 7 percent; compared to the industrialized countries’ average of 2.5 percent). And he highlighted the rapid rise in patent applications from developing countries.

Taking China from 1996 to 2002 as a test case, Professor Straus cited a two-fold increase in investment in research and development (R&D), plus the establishment by foreign firms of over 200 R&D laboratories in the computer and telecommunications sector alone, as evidence that technology and knowledge transfer was thriving under TRIPS. In the same period, average manufacturing wages paid to Chinese employees had increased three-fold.

He gave examples of how some Latin American states, in defining their patentable subject matter, were using TRIPS flexibilities with regard to the notion of an invention – as against a discovery or product of nature. The Andean Group had opted to exclude from patentability all substances pre-existing in nature. Brazilian law excluded any plant and animal parts, including active substances isolated from plants, animals or natural micro-organisms. Professor Straus questioned whether these exclusions were truly advantageous, drawing a link with the debate on benefit-sharing from genetic resources, which he believed would be facilitated by IP protection in this area.

IP rights, he stressed, were only one factor required to promote economic development. But high standards of IP protection combined with liberalized markets, low labor costs, a reliable judiciary, good education, and a stable political environment, made a country irresistible to companies looking to relocate their R&D.Compulsory licenses

In the ensuing discussion, participants discussed, inter alia, developing countries’ use of the flexibility under the TRIPS Agreement to issue compulsory licenses for drugs. The recent cases in Thailand were explored, with further information contributed by a Thai official. Some questioned why so few countries had used this provision, while others noted that it only worked where there was adequate local drug-manufacturing capacity. Professor Straus cautioned that over-use of compulsory licenses risked "killing" investment incentives in e.g. HIV drug research, and he called on the international community to find solutions to such public health needs outside the framework of the TRIPS Agreement. A WTO participant drew attention to the significant value of the compulsory licensing provision as a negotiating tool. This, he said, had been used to powerful effect by developing countries in various negotiations with pharmaceutical companies to date, thus achieving its purpose in an alternative way.

Speakers and participants alike shared the view that the key lay in finding the right balances: a patent system, in which international standards were balanced with flexibilities appropriate to national needs; and a balanced, objective approach by policymakers and stakeholders in shaping the future development of the system.

By Elizabeth March, WIPO Magazine Editor, Communications and Public Outreach Division;

Acknowledgements: Philippe Baechtold, WIPO Patent Law Section

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