The Global Intellectual Property Regulation - Essay Example

?Question: In the context of global intellectual property regulation, critically discuss Susan Sell's proposition that: "The TRIPs outcome constitutes structural power, the power to shape the environment and redefine options for others." (Sell, Private Power, Public Law (2003, 34) Introduction TRIPS has been the end-result of what Susan Sell calls structural power that could influence shape of things for others to follow. Until the early nineties, protection for the patents and copy rights had been fragmented. There was no guarantee against other nations’ exploiting them for their domestic purposes. Thus, Chile and some other developing countries had not been according protection for pharmaceutical products with a view to ensure their availability to suffering poor at affordable prices. This was in spite of pressure from the U.S. based pharmaceutical manufacturers association (PMA) ever since 1980 for revision of its laws to give patent protection of their pharmaceutical products. The PMA wanted to have 25-years protection But Chilean government revised its laws in 1990 giving patent protection for 15-year period, after tough negotiation. This facilitated monopoly pricing of their products as a result. This was probably for the first time in the history of commerce that a private lobby could prevail upon a government to enact or revise its existing laws. This soon was followed by Trade Related Aspects of Intellectual Property Rights (TRIPS) 1agreement to be enforced by the World Trade Organization (WTO) as a full-fledged intellectual property (IP) legislation that could make inroads into domestic laws of the member states. A powerful lobby representing the US based twelve member group eventually formed as a twelve-member Intellectual Property Committee. (IPC). The members represented pharmaceutical, entertainment and software industries and they managed to garner international support for patent protection of their intellectual property rights. They were Bristol-Myers, CBS, Du Pont, General Electric, General Motors, Hewlett-Packard, IBM, Johnson & Johnson, Merck, Monsanto, and Pfizer. The IPC soon collaborated with European states and Japan and they together presented their proposal to General Agreement on Tariffs and Trade (GATT) Secretariat in 1988 for formulation of TRIPS in 1994 at the Uruguay round of talks.2 The emergence of TRIPS demonstrated the role of private power in international politics and its ability to solve their trade problems by presenting concrete proposals to governments. The TRIPS has thus acquired the status of public international law which has given most of what the private sector wanted through a global agreement on intellectual property rights.3 The objective of this paper is to examine how TRIPS demonstrates the ability of structural power to shape the trade environment. At this juncture, meaning of structural needs to be understood. According to Susan, structural power is the power of deciding the manner of accomplishing things, and the one that shapes frameworks wherein “States can relate to one another, relate to people, or relate to corporate enterprises”. Elements of structural are 1) all actors are subject to same constraints and opportunities, 2) it is context-dependent, and reciprocal that ensures power is not absolute. These elements help understand IPE in a more realistic way. Structural power consists of internal dimensions of power security, power of production, power of finance and power of knowledge. Security is the ability to protect from external and internal threats. Those who are capable of giving protection are able to determine, and restrict choices available to others. They, in the process, gain special advantages in the production or consumption of wealth and in other areas of social structure. Power of production enables one to decide what shall be produced by whom and by what means and the choice of combination of land, labour, capital and technology, and how to reward them. Thus, power lies with those owning factories, land and capital especially within the context of globalized economy. Power of finance is the ability to create credit that can decide who shall be given or denied credit. Knowledge power is the ability to develop or acquire knowledge and deny access to it for those who respect it and seek it. Knowledge which once was in the domain of priests and sages is now in the hands of experts and scientists4 The structural power can also be understood by the power structure consisting of people committed to working together. 5 The Uruguay round of GATT negotiations The GATT 6 negotiating table usually concerned with multi-trade issues across the borders was resorted to by the above said IPC group to address issues arising within the borders. The issues are investments, trade in services, and protection of IP rights and intruding into States domestic regulatory policies and basically challenging the States discretionary policy making. TRIPS thus emerged as the assertion of rights of IP owners and the epitome of exercise of private power. The TRIPS agreement has resulted in high level of protection of IP rights as a major achievement for the US based activists representing knowledge based industries. They worked in tandem and exercised their authority to achieve what they wanted for preservation of their patents. The TRIPS agreement was modulated by the above mentioned private actors who gained access through multiple channels such as “domestic industry counterparts, domestic and foreign industry associations, domestic governments, foreign governments, and international organization” in order to strike their bargains. They pursued their interests in such a manner portraying their IP rights as a trade issue. It was not their structural power of finance that alone helped achieve this but also their knowledge power and framing skills transforming the complex issues into political process. The US based activists captured the imagination of their country’s policy makers who soon saw the interests of private players as national interests as a major solution for long standing US trade problems. TRIPS thus became a binding agreement on all the WTO members in the final Uruguay round. Those who want to continue as members or join WTO must adhere to the TRIPS agreement that covers all IP rights, patents, trademarks, copy rights, trade secrets and lately semiconductor chip rights. The Berne convention for copy right norms has been adopted and additionally the copy right protection for computer software, data bases and sound-recordings. Patent rights have been extended to all subject matter except plants, animals and other micro-organisms. The major items included are pharmaceutical products, chemicals, pesticides, and plant varieties eligible for twenty years of protection for their copy rights from the date of application. The states that do not comply with the TRIPS agreement are liable to abide by the rulings of the WTO’s Dispute Settlement Body’s (DCB) decisions. WTO has also the authority to ensure compliance by the defendants. In the event of their failure to comply, WTO is empowered to authorize trade sanctions on them. The agreement thus promotes innovation, research and development, economic development, industry location, and global division of labour. Industrializers can no longer choose backdoor route to copy technology. The agreement renders substantial value addition to information and technology owned by rights holders on monopoly basis. The agreement effectively commodifies what was once in the public domain no longer available to future creators. Comparative advantages that were once available to imitators are no longer available. It is simply astonishing how developing countries signed the TRIPS agreement when they are not producers but consumers of intellectual properties without actually realizing the future implications. They were put under economic coercion during the negotiations. What more, they even assented to the members of OECD encroaching the domestic and export markets of developing countries.7 Historical background Prior to TRIPS agreement globalizing IP protection, IP protection had been only of national and international concerns. During era up to 19th century, IP protection had been within nations. Their respective patent and copyright law could not go beyond the local jurisdictions. With the expansion of international commerce, bilateral agreements were being entered into between nations. Early nineteenth century witnessed widespread pirating of books of British authors in other countries without any resistance on the part of original authors’ or their successors. Same was the case with inventors whose patents rights could not prevent imitation in countries other than their own. It was in 1870 while Austro-Hungarian Empire proposed to convene Vienna international exhibitions of inventions, fears were raised by the potential exhibitors against their ideas being imitated. As a result, the empire enacted a temporary law providing patent protection to exhibitors during the exhibition. This proved to be the point of initiatives for a several meetings among nations which ultimately resulted in a draft convention of 1883 Paris Convention 8 for patent protection. Thus, two international conventions, the Paris Convention for the Protection of Industrial Property (covering patents, trademarks, and industrial designs) of 1883 9 and the Berne Convention of 1886 (for copyright)10 came into operation. They provided for non-discrimination, national treatment and the right of priority. Non-discrimination facilitated a foreign author or inventor‘s entry into a member nation’s domestic market without any barriers. National treatment gave the foreign inventor or author equal treatment available to nationals of a member state. The right of priority accorded rights holder protection from imitating his copy right and patent. States who were free to pass national laws however were required to extend legislative protection to foreigners of member states. Thus, territorial basis of IP rights were retained and expanded through treaties until the advent of TRIPS agreement which made new substantive laws to be imposed on member states. The international treaties on the other hand only reflected consensus among member states and ratified by their existing domestic laws. The old system legitimately denied protection to patents of pharmaceutical production in many countries in order to minimise cost of production of life saving medicines. This was perfectly legitimate under the Paris Convention. What the US patent or copyright owners decried as piracy were lawful under national legal systems and the IP agreements. The old system did not make variations across different countries illegitimate. In contrast, the TRIPS agreement made it an inflexible IP regime promoting universal protection of IP rights. What were once legal are now illegal requiring member states to provide for both civil and criminal penalties for IP rights violations. Thus, the globalization of IP rights reduced the state autonomy for determining the level of IP protection within their home state. TRIPS is therefore considered as the outcome of the sinister design behind the US-based proposal to achieve commitment for patent protection at the global level. It is quite surprising because enforcement of IP rights within the US was not aggressive until 1982. The US gradually changed its attitude and tightened protection by globalizing the commitment by incorporating IP into 1984 and 1988 amendments to its domestic laws. The US started denying trade benefits to countries whose IP regimes were weak. The TRIPS practically reflects the wishes of the twelve CEOs of the US based multinational corporations. Their rationale was that such an agreement as TRIPS would promote economic development. But there is no empirical support for the claim. The protection over intellectual property only prevents diffusion of private rights over public goods. Economists and legal scholars argue that it can have only deleterious effect on global welfare. Analysts have condemned this “one size fits all” approach. The idea that a lone standard can be uniform for countries is in contrast to the historical experience and economic analysis. The departure for the GATT precedent by the TRIPS only accords rights to private individuals rather than goods and enjoins the member states to take positive action on IP protection rather than rest with policy announcements. This monopoly over IP rights could only create tension between competition (anti-trust) policy and IP rights. Exclusive rights conferred by IP rights confer least monopolistic rights as suggested by Cornish. IP rights per se do not accord monopoly power but only the market forces determine their value. However, they give a monopoly rent to the innovator. The rights-holders can raise prices and cut the output. They can also withhold their inventions by not licensing them. James Watt who invented the steam engine was awarded with patent in 1769 and it was renewed in 1775 for additional twenty five years. His refusal to license his invention stopped development of metalworking industry for more than a generation. If his monopoly had expired in 1783, England could have had railways even earlier. The rationale for the IP rights is that unless the invention is compensated at its full potential value, it will serve as a disincentive to create it. If there is no compensation for invention or creation, economic development will suffer overtime. The justification is that individuals and firms will be discouraged to make costly investment if the inventions have the potential of being copied without premium. The demand for IP protection came from the innovators and the recent technological advancements have made it easier to copy what have been created at a prohibitive cost. Pharmaceuticals, computer software and compact discs are costly to develop but relatively cheaper to imitate. However, there must be a balance between private interest of IP holders and the public interest. Main aims of Uruguay round were deregulation and trade liberalisation. But the IP regime has become a form of internationally prompted re-regulation. According to Cornish, imitation is virtuous and not sinful in a competitive market. TRIPS agreement makes imitations sinful and once legitimate enterprising individuals as “knowledge criminals”. This is in quite contrast with the commitment of free trade at the global level and “smacks of residual mercantilism”. The TRIPS agreement protagonists claim that gains from unlicensed use of IP rights in developing countries represented the legitimate “losses to the entrepreneurs in developed countries”. (p16). Structural perspectives TRIPS agreement is the hallmark of privatization that enabled explosion of private liquidity which governments are unable to control. This has been due to deregulation of financial system that private firms have started using to play their transnational financial game. Private banking and securities are now more powerful than the State enjoys. The TRIPS has been made possible due not by all private interests but by a privileged few in the hierarchy of capital such as those controlling the large worldwide corporations, “nation-based big enterprises, and industrial groups and locally based petty capitalists” (p 19). The privileged sectors of pharmaceuticals, computers and software knowing one another closely have acted in concert to seize control of the global markets. Susan Sell argues that TRIPS agreement was brought about by the privileged few whose private causes were championed by the US government. Source: Susan K Sell (2003 p 31) The diagram above shows the movement from A to C depicting structural effects on institutions. Susan Kell argues that the global capitalism structure brought about institutional change in the US. The US embraced policies that would reinforce the abilities of the firms and its own abilities. The changes were visible in all the branches of the government. The movement of arrow A which is structure to B which are agents, demonstrates structural effect on agents. Changes in the structure were brought about new set of agents. Manufacturing interest which were powerful on the home front have been relegated by the new actors of global capitalism representing high technology and seeking to be instrumental in regulation of business. The gap between B agents and C institutions is sought to be closed by the IP activists. This demonstrates the crucial role played by private interests in the changes in regulations domestic, international and global levels. 11 Susan Sell argues that had there been no IPC regime, there would have been sanctions prescribed for seizure of counterfeit goods at the borders. It was Levi Strauss Corporation that took initiatives for fighting against counterfeiting of Blue jeans trade mark. But the efforts failed due to resistance by the developing countries for promulgation of anti-counterfeiting code. The IP activists turned a blind eye as they wanted a broader code that they had been aiming to discuss under Uruguay round. (P41) Susan Sell argues that TRIPS agreement is just the beginning and the private power has already been extended far beyond that of the architects of the agreement. The new international legislation for the regulation of intellectual property rights can be effective only with a “web of surveillance” since the majority of countries which are developing ones are likely to be adversely affected. Importers of IP protected goods pay higher costs with surveillance operating at multiple levels. The private power has been able to monitor implementation and enforcement. With this, surveillance also has become part of the structure. United States Trade Representative (USTR) has opened an office for monitoring and enforcement to show its seriousness. TRIPS agreement became fully operational from 1996 and by 1997 when the U.S. enlisted more number of trading partners to the extent of 25 percent. The US brought its first IP case before the WTO in 2000. The USTR is obligated to review and review IP practices of foreign countries every year. As a result of TRIPS, the US economy gained by $ 362.5 billion through copyrights industries contributions.12 TRIPS cases at WTO US has proved to be the most active country in the implementation and enforcement of IP rights in that it has brought in more complaints than all other member states put together. The fourteen cases of the US related to the cases of failure to enact TRIPS related regulations by countries as it wanted easy win at WTO which would pave way for building up support for the IP regime. The first six cases filed by the US in 1996 were against Japan for its failure to protect sound recordings made between 1946 -1971. As a result, Japan agreed to provide retroactive protection mandated by TRIPS. The US filed a case against India in 1996 at the instance of PhRMA in which the US prevailed. The WTO required India to legislate in conformity with TRIPS. In fact, India’s patent system was the most provocative factor for the US to bring about TRIIPS agreement. The US successfully brought complaints against other countries such as Portugal, Denmark, Sweden, Indonesia and Turkey.13 It has been argued that in the absence of IP rights, foreign direct investment (FDI) by multinational enterprises would not be forthcoming since FDI is mainly to introduce new products which developing countries need for their welfare. It would follow therefore that TRIPS would ultimately result in development through technological advancement. But there is evidence to show that TRIPS has been made a reality due to efforts by the select groups of executives who sought to consolidate their monopoly rights. It is argued that theirs is actually a sabotage camouflaged by the euphemism of “business strategy” of the vested interests. It is very hard to find a situation where in so many governments joined together to safeguard private interests. The IPC succeed in convincing the US government to adopt its demands at the Uruguay round of talks besides mobilizing support from their counterparts in European Union and Japan. It is argued that TRIPS’ strategy of harmonization of patent protection has actually hurt the developing countries by being forced to adopt measures at the cost of their poor populations.14 Conclusion The foregoing paragraphs examined at length how the private power can shape a public law to promote its own interest under the guise of economic development that would not take place with disincentives in place for innovation. That the twelve actors from the knowledge industry could foster a public enactment demonstrates the effectiveness of structural power that could redefine option for others. The “others” are the hapless developing countries having no option other than falling in line. One conveniently forgets the fact that all-round human development that has taken place in the past several thousands of years was not due to IP like legislations but owing to intrinsic motivation not guided by financial incentives. Therefore, the case for TRIPS has been poorly argued and it is obvious that the US and other governments have fallen prey to the sinister designs of the private actors who only acted to perpetuate their interests. Innovation actually flourishes in counterfeiting in that people become more and more innovative to find substitutes for the patented products. TRIPS actually would prove to be a disincentive for innovation in the long run with all loopholes plugged for human imagination. Bibliography Books Sell K Susan, Private Power, Public Law. The Globalization of Intellectual Property Rights (Cambridge University Press 2003). Websites Berne Convention for the Protection of Literary and Artistic Works. < http://www.wipo.int/treaties/en/ip/berne/trtdocs_wo001.html> accessed 1 December 2012 Fiani Ronoldo, Veblen and Patents: An assessment of the strategy of multinational enterprises for protecting intellectual property rights. (Rio De Jeneiro Federal University) < cors.edubit.com.br/files/12.pdf > accessed 14 November 2012. Paris Convention for the Protection of Industrial Property accessed 1 December 2012 Power structure: definition accessed 14 November 2012. Structural Power- definition accessed 14 November 2012. Trade related aspects of intellectual property rights. Agreement on Trade-Related Aspects of Intellectual Property Rights < http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm > accessed 1 November 2012. Read More