Trips Agreement and Its Impact on Developing Countries Technology - Research Paper Example

Research paper On The perception that the TRIPS Agreement is a new way of preventing Developing Countries from becoming technologically independent; Is this a fair assessment of the Agreement? Subject: Law Order: 387786 November 2011 Executive Summary Prior to the coming into force of the TRIPS agreement, developing countries had little incentives to create high protective Intellectual Property Rights (IPRs) regimes; rather they were focusing on imitation and reverse engineering technologies. Little global consensus existed on what was considered to be the patentable subject matter. However, with the enactment of the TRIPS agreement there emerged more restrictions imposed on technological transfer. The agreement provides high protection on the novel IPRs invented in Africa and beyond in an effort to promote intellectual development and innovation on the globe. On one hand, the Agreement has to a small extent contributed to the technological development of the developing countries although there may be need for some improvements to make the Agreement more beneficial to both the developing and developed countries. On another hand, the TRIPS Agreement has to a large extent negatively affected technological advancement through western industrialization. This is because developed countries are prospering faster than low developed countries due to the fact that they can afford to compete favorably on the global market than Developing countries. In this paper, the researcher is basically focusing on the impact of the TRIPS Agreement to developing countries’ technological advancement through innovation. This analysis includes the effects of the TRIPS agreement on developing countries and barriers created by the TRIPS agreement on technological transfer as well as its impact on trade between developed and developing countries. The legal issues guiding this research as identified are; a) whether the TRIPS agreement is affecting technological independence of developing countries; b) whether the agreements has anuy benefits to developing countries and c) If it’s likely to lead to growth or reduction in international trade between developed and developing countries. These issues have been answered in the following essay. Introduction The TRIPS Agreement is an agreement that was concluded in Uruguay Round of Multilateral Trade Negotiations (1993, P.2241). It created the World Trade Organization (WTO) that came in to force on January/1/1995. This Agreement is the greatest achievement in the field of intellectual property among member states. The Agreement is backed up by some other international conventions that are significant in the field of intellectual property and these are; the Paris convention of 1883, the Berne Convention of 1886, the Rome Convention of 1961. It also includes provisions of the Washington Treaty of 1989 on the integrated circuits and acknowledges the protection of undisclosed information as a formal Intellectual Property Right, it further ensures that computer software’s should be protected as copy right within the minimum term of protection set at the author’s life and 50 years thereafter. The major aim for the enactment of this TRIPS agreement was to promote IPRs with the view of encouraging innovations. The effects of the TRIPS Agreement to Developing Countries; evaluation of its Relevancy to Technological Independence of Developing countries It is notable to say that even prior to the signing of the TRIPS agreement, IPRs existed. It is argued that these IPRs provide incentives majorly for investment in research and technological development through inventions, inventive step, and industrial applications. Although the enactment of the TRIPs agreement created stricter protections for IPRs which have greatly affected technological development in the developing countries, there are still positive effects of the TRIPS agreement associated with technological transfer. The Agreement contains provisions that are intended to protect the developing (Walker, 2001). Positive effects of the TRIPS agreement The Trade-related Aspects of Intellectual Property Rights (TRIPS) create and impose a general strengthening of Intellectual Property Rights (IPR) system to many developing countries by taking into consideration their economic development. The Agreement has got a bundle of minimum standards of IPR throughout the member countries. It is notable that prior to the Agreement, most of the developing countries had a weak IPR protection resulting into an abated copying of the inventions which were then commercialized. Consequently, it facilitated technological development in some countries such as Hong Kong, Singapore, South Korea and Taiwan. However, with now the strong IPR protection, the developing countries are assured of either economic down fall or development (Kumar, 2002). It should be noted that the TRIPS agreement protects the developing countries technologies that were or are not registered under the agreement to be registered. This is because the spirit of the TRIPs agreement relies on the argument that, the boosting of the technology will create development among the member states. Therefore, the TRIPS agreement has set up objectives under Article7 and 8 with the view of protecting private IPRs, socio-economic and technological development which is also supported by Articles 27 through 34 that establish the standards for IPRs protection. Under the agreement, patents for instance are available for invention of both products and processes so long as they are; new, involve an inventive step and that they are capable of industrial application. These stringent provisions of the TRIPS agreement prompted countries to establish regimes that provide protection of either products or process in order to promote innovation (Ngugi, 1994) There are provisions in the agreement that have taken into consideration the development of the developing countries technologies. For example Article 67 of the TRIPS agreement require all industrialized countries to assist the developing countries in their efforts to reform their domentic IPRs regimes, that is to say, assisting these countries in the preparation of their laws and regulations on the protection and enforcement of the intellectual property rights as well as the prevention of their abuse ((Ngugi, 1994). Furthermore, the TRIPS agreement also provides measures of encouraging the development of technologies in the developing countries like pharmaceuticals, chemical and machinery products in particular as observed from Article 65 which relate to products and proceses not protected under the agreement and Article 66 that provides for patent applications for new inventions in these area to be filed during the transition period of these countries. Wherefore, if the period has expired, patent protection is extended for the remaining period counting from the filing date((Ngugi, 1994). Blomstrom (1998) concludes that by upholding and accepting to implement the TRIPS Agreement, developing countries will tap foreign technologies through the designated channels. This view is extended by Maskus who states that there are two forms of technological transfer, that is, market-based and non market-based. Market based is where there is a buyer and a seller which includes trade, foreign direct investment, licensing, and joint venture and cross boarder movements of personnel. Whereas non market based is where there is no buyer or seller but includes imitation and reverse engineering (1995, P.623). He further adumbrated that acquisition of compulsory licenses is one of the methods associated with a market based channel of technological transfer from developed countries. This enables these countries to enhance their technologies. However, one should strictly interpret the provisions of Article 28 regarding the rights conferred by the patents in conjunction with Article 31, regarding use without authorization of the right holder. The latter limits the use of these technologies in such situation where countries may engage in compulsory licensing of products or processes without the prior consent of the rightful owner of the patent. This is a mechanism aimed at lowering technological development in the developing countries whose innovations are still low and even the avenue of acquiring compulsory licenses for them to benefit from foreign patents and invention is restricted by the agreement. On the issue of compulsory licenses being given to the aspirants in the developing countries, some of the inventors from mostly the developed countries have created barriers to acquiring of this technology by charging prices above the invention’s marginal cost of production because of the monopoly rights given to them by the TRIPS agreement. This monopoly right given to the inventor promotes anti-competitive behavior which is detrimental to the use of technology by the developing countries that are in most cases not able to afford the high costs of these inventions. The assignment made by these inventors largely benefits developed countries that can afford such technologies because of their financial status and sound economic structures. It is therefore important to consider the argument that, the overall objective of strengthening the IPR protection on the use of the foreign technology, will depend on whether the exposure to new technology outweighs the costs of acquiring it. This analysis is also a characteristic of the published works of Whobrey, (2007, P.623). According to Ho (1997,P.106) another channel associated with technological transfer that is of benefit to the developing countries is the foreign direct investment (FDI). This calls for foreign investors’ participation since they have direct interest in the successful technological transfer. The investors role in FDI is not only to supply equipement to its foreign affiliate, but also high quality knowledge in particular tacit knowledge such as the general technological, business and managerial know-how. This knowledge will be required by the investor when establishing his business in such countries. However, this will largely depend on the strength of the IPR protection in the given territory. Weak IPR will discourage FDI . Park and Lippoldt have observed that stronger patent system is largely associated with the inward flow of FDI through international trade and technological transfers of the high tech products such as the pharmacautical goods, chemicals, computer services and agriculturial products although they still emphasize that this is not helpful for the developing countries since they have weak IPRs protection (Park and Lippoldt, 2007). Kim (2003) observes that trade in goods and services is another channel of technological transfer especially of capital good and high tech products by the firms in the developing countries. This is impacting most of these countries domestic economy by improving productivity and encourgement of local innovation through reverse engineering. This is one of the ways of indirect mechanisms for technological transfer into developing countries. By virtue of these countries participarting in some of these global value supply chains, patent protection in some cases would be based on territorial line. Therefore in those countries where there is no protection, the invention is always open to the them to aquire such technologies through immitation of the creations. However as stronger patent system is associated with high legal limitations to reverse engineering, the importation of some of the high technology products may not be importance because the law limits reverse engineering was observed by Park and Lippoldt (2007,P.62). It’s notable though that the exposure to the TRIPS Agreement has in one way or another promoted technological transfer among the member states most especially the developing countries. The fact that most developing countries produce few inventions or even none, acquiring and adapting new technologies to their local condition is of partial importance for these countries to catch up with the rest of the world. This adaptation of new technologies will reduce on the costs of research and development. Secondly, exposure to foreign technologies will in one way or the other, enable these countries to build their own technological experiences. Therefore the agreement should not only be perceived in the negative but also in the positive correct right sense per the published works of Helpman (1998,P.2241). Arora, ( 2009,P. 46), notes that, technological transfer channels always keep changing over time due to the strengthening of the IPR protection by TRIPS agreement. IPR protection is a factor in the change of the mechanisms which is vital in the technological transfer among member states. The IPR rights of protection are in most cases expensive to acquire from the developed countries by developing countries which has barred technological development in developing countries. Patent protection on the other hand promote disclosure by the applicants wanting protection under the TRIPS agreement and this to a great extent have helped the developing countries in the development of their technologies. The need for disclosure is normally associated with the non market based technological transfer channel. This disclosure is for public consumption and it always details the technical aspects of the invention for a specific time after patent application. The disclosure further exposes the working of the invention as it is a requirement in the TRIPS agreement which to a great extent have helped the developing countries to develop their technologies without wasting more time and money on research and development(Corsi, 2007). The TRIPS agreement provides for transitional periods that have permitted developing countries amalgamate these provisions into national legislation and practices in conformity with the TRIPS agreement. There are majorly three transitional periods; first was the 1995-2000 which required the developing countries to impliment the TRIPS agreement, 2000-2005 which allowed countries to delay providing product patent protection in the areas of technology that had not been so protected at the time when the TRIPS agreement came in to force. The purpose was to exclude products that needed patent protection and then later register them as new inventions. Third period of 2005-2006 was arranged to allow these countries implement their obligations under the agreement in view of their economic, financial and admnistrative constraints. In a bid to enhance the novel creations, Developing countries have been given an extension period until 2016 in respect to patents on pharmarceutical products as well as the exclusive marketing rights by the Doha Declaration on the TRIPS agreement and public health. Therefore, developments by the TRIPS agreement of the three transitional periods is away of bringing the developing countries in the legal ambit of commercial transactions across the globe (WHO, 2011). With the above benefits, it’s of prudence to note therefore that, overlooking the clear contribution of the agreement to the developing countries as opposed to barrier to their development is not only fair but also injurious to the development of international trade and technological transfer that have been achieved over years by some of the developing countries although to large extent, the agreement is a barrier to the Developing countries’ with poor technology as can be seen in the barriers below. Barriers caused by the TRIPS agreement in the techhnological transfer. Although it may be said that developing countries have benefited out of the agreement, it’s also arguable that today, novation and innovation has become complex in the intellectual property law thereby causing retarded technological transfer of novelty to the developing countries. This is because TRIPS agreement makes copying and reverse engineering more difficult and at the same time hard to strengthen market based channels according to the published works of Cassier, M.a ( 2005). Though technology can be transferred through involuntary dissemination via copying and reverse engineering, this technology is placed on the global market where by it only benefits developed countries who can afford the competition as opposed to Developing countries whose economies of scale is still very weak. Developing Countries cannot therefore compete with developed countries. The adapted stringent protection of the IPRs is affecting developing countries negatively in a sense that if this is left open to all countries to purchase such invention on open markets, some of these countries are too poor to compete with developed countries. It is therefore arguable that entreprenuers, or small businesses in the developing countries may in one way or the other be constrained from having access to cheaper versions of the foreign technologies due to such strignent protections per Kim (2003). Another question that calls for determination is the ability of the developing countries to implement the TRIPS agreement. This may either facilitate or hinder the local entreprenuers’ use of new foreign technologies. This can also depend on whether these countries implement and enforce TRIPS agreement. The implimentation of the the TRIPS provisions by the developing countries is still a big challenge though some may have the provisions of the agreement incoporated in to their local legislations as observed by Cohen (2000). The contributions of the TRIPS agreement to the technological development of Developing Countries is further quetionable on ground that there is strong IPR protections which according to most studies is likely to lead to increased FDI. In the study carried out by the American, German and Japanese firms in the field of pharmaceutical, chemical, machinery and electrical equipment, 80% of the firms are of the view that the strength of the IPR protection has influeced decisions concerning investment in research. It is only logical that most of the research activities are being carried out by the developed countries and protection alone of the IPRs is not sufficient to encounrage these industries to move their research facilities from their countries to developing countries(Mansfield, 1995). It has been also observed that the TRIPS agreement will not promote innovations in the developing countries because most of the innovation relevant to these coutries is often informal in nature and is basically carried out by individuals or local communities in the field that in many cases have got limited means. For TRIPS to be able to stimulate these informal innovations, there is need for IP systems which is cheap and easy to access. The TRIPS agreement by its nature is more suitable for developed countries that have got well established IP systems and are only seeking to promote more technical and formal business innovations (Gupta,2004). Thurow, Lester C (1997) observes that on the question of efficacy of the TRIPS, one should look at the effectiveness of the modern IP systems in the promotion of innovations. Patents mainly allow their holders to control the major ingredients in the area of research. By controlling the use of this knowledge, the holders and companies of such patented items can keep these areas of research to themselves by claiming patent infringement incase a competitor is cited trying to enter in such a field. Consequently, this will slow down research rather than stimulate research in Developing Countries. In the US for instance, there are regulatory frame works in place which enable the patent office, grant large fields of technology to their inventors, which on the other hand have the effect of blocking related research activity to Developing countries (Hart, 1998). Compulsory licensing also has its negative side in a sense that it affects technological transfer among the countries basically on the field of research. For example where the core licenses are granted and monopolised by a specific company, the research efforts of other companies will be blocked which is to their detriment and hence causing laxiety in technological develoment. The TRIPS agreement in its own way has to this extent encouraged and blocked avanues of research and in most cases has entrusted a few companies from the developed countries with such rights there by giving no chance to Developing Countries to engage in active novation (Eisenberg,1987). With reference to the published works of Loufti (2004), whereas the developed countries have devised mechanisms of protecting abuse of IPRs, the developing countries have been left to struggle with the implementation of the TRIPS agreement with very little guindance from some of these countries, on how they can regulate anti-competitive practices and ensure that IPRs are used to their advantage. It is now a debatable issue that the TRIPS agreement has got patterns of technological development and transfer. Although those who support the agreement may argue that enforcement of the IPRs helps in technological transfer, increase on the rights of the technology holders in the protection of their invetions and consolidate their influence on the users of their technologies, it remains a question of jurisprudence. Developing countries are still behind the ecstasy of new technology as discussed above. The effects of the TRIPS agreement on trade between developed and developing countries. While globalization is trying to break the barriers in trade and communication, it is also creating new forms of exclusion as technology widens the gap between developed and the developing countries. With the new error of industrialization, developed countries have retained economic power at the expense of the developing countries that are facing economic marginalization. On first instance, the negotiation and bargaining power of the developed countries is more influential in international trade using the patented innovations that have acquired protection under the TRIPS agreement than those of the developing countries whose innovations are weak or even not developed. This means that Developing countries cannot compete with their counterparts like USA, European countries and Japan in the international market because on the global market, the standard and quality of the innovation is measured by the level of economic development. Notable though is the fact that the decisions of developed countries to a large extent influenced the formation of the TRIPS agreement. Consequently, the agreement is helping mostly developed countries than developing countries in international trade (Wasserman, 1993). The move for imposition of the IPRs in the trade agenda by the developed countries was with the motive of reducing trade in counterfeit goods that greatly impacted on some of these countries such as the US trade balance and losses in their industries. Resultantly such countries were eager to lobby for the creation of more stringent agreements such as TRIPS to restrict on counterfeit goods on to the world market without putting into consideration the impact of such agreement on the economy of the developing countries. Although the move to control counterfeit is a good regulation, developing countries are unable to compete favorably in the international markets because their per capita income is small and cannot consumer the same products as those in other markets. This is a challenge because Developing Countries will only compete through indirect foreign investment (Walker, 2001). According to Evans (1994,P.136) , industries for films and pharmaceuticals have been included in the international trade agenda through alliances like the International Intellectual Property Alliance, the Union of Industrial Employers’ Confederations of Europe, and the Japanese Federation of Economic Organization .The debate of inserting IPRs on the trade agenda began in the early 1970’s and went through 1973. At the end of the negotiations, Europe and USA worked on a draft to combat commercial counterfeiting of trademarked goods. The developed countries exploited the situation of the effects of international markets on counterfeit goods in trade balances to justify the inclusion of Intellectual property Rights on the trade agenda. This pressure to include IPRs on the GATT went on through the 1970s and 1980s and by the time the Uruguay Round commenced in 1986, the negotiators accepted a multilateral frame work of principles, rules and regulations to deal with trade counterfeit goods which was to the advantage of developed countries than developing countries in the field of trade (Cornish, 1989). It’s argued further that there is lack of coherence between the TRIPS agreement and the WTO agreements. There is also a strong observation that the rules intended to remove barriers in trade by the agreement are just theoretical but not practical. Accordingly, whereas the WTO agreements on goods and services seek to create liberal trading systems under which enterprises of one member state can trade under conditions of fair competition and reduce barriers to trade and to ensure that there are perfect principles governing non-discrimination among members, the TRIPS agreement on the other hand requires governments to introduce minimum standards for the protection and enforcement of property rights over the invented products, processes, works and signs. This in practice is granting the rightful holders a monopolistic degree of control in the market and the determination of high prices for their products. It can therefore be concluded that the TRIPS agreement effectively allows technology holders the opportunity to control trade which is a benefit attributed mainly to developed countries (Cornish, 1989). It is also important to note that as World Trade Organization (WTO) members have opposed the use of production and processes methods (PPMs) as a way of regulating trade by the governments, the IPRs that have been granted over products on the basis of processes give the technology holders the avenue of using those rights to restrict the importation of products, solely on the basis of processes involved in the making of that product. This is actually a double standard by WTO, in that they are advocating for the differentiation of imported products in the international markets on the basis of PPMs. However, at the same time they are also protecting the rights of private technology holders on the basis of the rights they hold over PPMs. Looking at the fact that IPRs, restricts free market competition, it is still a problem to make conclusions that there is protection under WTO (Dutfield, 2000, P.18). Conclusion In conclusion therefore, it’s a fair evaluation that the TRIPS agreement is a way preventing developing countries from being technologically independent through copying and reverse engineering. It has to a large extent benefited developed countries than developing countries. Despite of this, the agreement as we have already observed has to small extent contributed to technological development of the developing countries through the various economic channels discussed above. Although the agreement has produced principles that are intended to bring developing countries at the same level with the developed countries, it is still holds Developing Countries behind in the practical sense of innovation and invention. The stringent provisions by the agreement on the protection of IPRs are mainly favoring technological development of the developed countries with better research mechanisms. Therefore, due to the low level of technological advancement in developing countries, Developed countries are thriving in international trade because they are better placed technologically and can compete favorably than developing countries. For this reason, it’s likely to lead to growth of trade in developed countries and a reduction of trade activities in developing countries. For the betterment of all member states, the agreement therefore should create a balance in technological transfer and innovations by putting in place mechanisms that could promote innovation and novation in Developing countries through promotion of economic stability as well as encouraging domestic investments in developing countries. References Arora, A. (2009). The Economics of Intellectual Property: Suggestions for Further Researchin Developing Countries and Countries with Economies in Transition,Chapter Intellectual Property Rights and Intellectual Transfer of Technology. . 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