TITLE: Negotiating Intellectual Property Rights: Between Coercion and Dialogue AUTHOR: Dr Peter Drahos PUBLICATION: Unpublished draft circulated on BIO-IPR with the permission of the author. DATE: April 2001
The use of the 301 process by the US against India and Brazil was particularly important.[5] For decades these two countries had been a thorn in the sides of multinationals seeking to globalise intellectual property standards. India especially had technical expertise with which to counter the OECD-led analysis upon which the US was relying in order to achieve its agendas on intellectual property, investment and services. The Brazil-India axis was one that had to be broken. There was a second vital reason to discipline Brazil. It was a regional leader in South America. For the US pharmaceutical and information technology sectors there could only be one voice on intellectual property policy in the Americas. In July of 1987, the USTR had begun a 301 investigation of Brazil on the issue of patent protection for pharmaceutical products, an investigation that had led the President to authorise tariff increases on Brazilian goods in October of 1988. The tariff penalties came less than two months before the meeting of Trade Ministers at the December mid-term review in Montreal. For the first time the US had followed up its threat under 301 in relation to intellectual property and actually lowered the trade boom - it imposed tariffs on Brazilian paper products, non-benzenoid drugs and consumer electronic items.[6] In June 1990, the President of Brazil had announced that he would seek the legislation that the US wanted. On July 2, 1990 the increased duties were terminated by the USTR. In the negotiating rooms in Geneva, India started to find that there was less support coming from Brazil.
The US retaliation against Brazil also sent a message about the level of the US private sector's commitment to the intellectual property cause. The Brazilian economy of the 1980s was one in which US multinationals, amongst others, had a strong presence. By imposing trade sanctions on a wide range of Brazilian goods, the risk was that the US would affect goods that were being made in Brazil by US multinationals. The internationalised nature of production set some limits on the use of 301. In the case of Brazil, however, the stakes were so high that US business was prepared to wear the possible costs of a 301 action in order to project the steely will of earlier conquistadors.
The negotiations on TRIPS are often said to have begun properly in the second half of 1989 when a number of countries made proposals, or the first part of 1990 when five draft texts of an agreement were submitted to the negotiating group.[7] A more sceptical view is that the negotiations were by then largely over. An even more sceptical view is to say that no real negotiation ever took place. Developing countries had simply run out of alternatives and options. If they did not negotiate multilaterally they would each have to face the US alone. In the GATT they were not part of the circles of consensus that set the agendas. Furthermore, if they resisted the US multilaterally they could expect to be on the receiving end of a 301 action. This was anything but a veiled threat by the US. Its 1988 Trade Act made resisting the US in a multilateral forum part of the conditions that could lead to a country being identified as a Priority Foreign Country and therefore the subject of a Special 301 investigation.[8] There could be no clearer articulation of a threat than to enact it as law. At least if developing countries negotiated multilaterally there was the possibility that they would be able to obtain some limits on the use of 301 actions. This at any rate was what they were being told by developed country negotiators and the GATT Secretariat. From 1990 onwards the main issue to be decided was how far an agreement on intellectual property would deviate from the blueprint that had been provided to negotiators in 1988 by Pfizer, IBM, Du Pont and other members of the international business community in the form of a draft proposal entitled "Basic Framework Of GATT Provisions On Intellectual Property: Statement of Views of the European, Japanese and United States Business Communities" (Intellectual Property Committee (USA), Keidanren (Japan) and UNICE (Europe).
4. POST-TRIPS -- COERCION OR DIALOGUE?
US bilateralism on intellectual property rights did not cease after TRIPs came into operation on 1 January 1995. One of the major disappointments of TRIPs from the point of view of US business was the transitional provisions that gave developing and less developed countries extra time in which to comply with TRIPs standards. The simple truth was the CEOs that had backed the vast lobbying efforts that had gone into TRIPs wanted to see some immediate returns for their companies. The result was that the USTR began on a bilateral basis to suggest that developing countries should adopt the standards of TRIPs earlier rather than later.
The 301 process in fact grew bigger, better and stronger after TRIPs was
concluded. The Clinton Administration, ignoring or perhaps not knowing the implications of stronger intellectual property rights for human rights like health and education, strengthened 301 by introducing immediate action plans for foreign countries on intellectual property rights as well as out-of-cycle 301 reviews. The then USTR Charlene Barshefsky began to use Special 301 announcements to publicise the actions that the US would take in the WTO against countries on intellectual property. The symbolism of these announcements is interesting. It is almost as if the WTO dispute resolution process has been folded into the US 301 process. Certainly US trade law does not defer to TRIPs. As special 301 makes clear, a country may be still be determined to deny adequate and effective protection of intellectual property rights even if it is in compliance with TRIPs. In her "2000 Special 301 Report" Barshefsky pointed out that more than seventy countries had been reviewed under Special 301. She named 59 foreign countries that failed to meet standards of intellectual property that were satisfactory to the US; 59 countries which had been graded into various categories; 59 countries whose laws and practices on intellectual property had to be watched, analysed and acted upon.
A trade enforcement tool like 301 costs a lot to run. It is only really possible because corporate America picks up the tab. It provides the global surveillance network, the numbers for the estimates on piracy and much of the evaluation and analysis. The US state in return provides the bureaucracy that negotiates, threatens and if necessary carries out enforcement actions. It is a system that has complete bipartisan support in the US. US bilateralism on intellectual property rights remains relentless.
It would be relatively easy to draw a bleak conclusion about intellectual property standard-setting in the post-TRIPs era. Congress and the Executive continue to demonstrate a bipartisan unity on an agenda of ever stronger and more globalised intellectual property rights, an agenda written for them by big business. The US now has more enforcement strategies at its disposal than before TRIPs:
(a) It continues to monitor on an annual basis the performance of all countries under its 301 process.
(b) Bilaterally, it continues to negotiate intellectual property agreements with states, sometimes bundling intellectual property standards into agreements establishing free trade areas between itself and other governments (for example, the Agreement between the US and Jordan on the Establishment of a Free Trade Area concluded and signed in 2000). Regionally, it continues to link trade agreements to the provision of adequate and effective protection of intellectual property rights (for example, the Andean Trade Preference Act of 1991 which was modelled on the Caribbean Basin initiative of the 1980s)
(c) It uses a litigation strategy of going to the WTO dispute resolution process, if it thinks countries are in breach.
(d) It uses TRIPs Council processes and TRIPs reviews to put pressure on countries with respect to implementation.
One view is that the US, Europe and multinational corporations will continue to dominate the international standard-setting process in intellectual property. The WTO and WIPO will be used as alternative multilateral fora for standard-setting exercises. Where desirable and possible WIPO standards will be folded into the WTO. TRIPs standards will be a floor from which further bilateral, regional and multilateral standard-setting exercises will proceed, a floor with no ceiling above. Article 18 of the Free Trade Agreement between the US and Jordan, for example, allows for fewer exclusions from patentability than does Article 27 of TRIPs. Over time the US and European Union[9] may well develop a web of free trade agreements that globalize a new set of minimum international standards of intellectual property protection higher than those contained in TRIPs. The economic price for this will be less competitive markets with no real corresponding gains in innovation, as well as new and more sophisticated global knowledge cartels.
This paper concludes by suggesting another possible future for intellectual property standard-setting in the post-TRIPs era. The reality of intellectual property standard-setting has been that of an insiders' game dominated by a few producers of intellectual property supported by states with the most to gain. Developing countries for most of the time have not been able to influence international standard-setting. Following TRIPs, however, another type of actor has become interested in how intellectual property standards are set. Increasingly, the members of civil society are making TRIPs the subject of transnational advocacy networks. For the time being, it is patent standard-setting and its effects on biodiversity, the prices of drugs and agriculture that most interest these networks. As their analytical understanding of intellectual property norms improves they will begin to ask questions about other areas of intellectual property such as trade marks and copyright. In his classic study of barriers to entry into a market, Bain concluded that trade marks constituted an even bigger barrier than did patents. This something understood by developing countries, for in the 1970s Mexico, Brazil and India attempted to reform their trade mark law as it related to pharmaceutical products (Gereffi, 1983). Amongst other things, they were interested in seeing foreign pharmaceutical marks being used in conjunction with local marks as well as having the generic name accompany the use of the mark. For a variety of reasons, most of these reforms never made it into law. During the TRIPs negotiations the EC, the US, Switzerland and Japan united on the drafting of a trade mark provision that would make it difficult for developing countries to impose special requirements on the use of trade marks in areas such as the pharmaceutical sector.[10]
It is not only NGOs which have become more interested in the intellectual property standard-setting process. The increase in the length and breadth of intellectual property rights, a process that was occurring before TRIPs, has seen users of information including business users take much more interest. Second generation computer software companies such as Sun Corporation have called for much more balance in the setting of copyright standards[11] and have taken an active role in specialists areas such as licensing issues under the Uniform Commercial Code. Educational institutions have also become more engaged as they have come to realise the cost implications of stronger copyright protection for mass education.
Nationally and internationally the process of intellectual property standard-setting is becoming caught up in webs of dialogue, webs in which an increasing number of non-state actors and non-business actors participate.[12] The discussions about the impact of intellectual property rights on biodiversity in the context of the Convention on Biological Diversity and on agriculture in the context of the negotiations on the International Undertaking are examples of these webs.
From the point of view of a theory that links the efficiency of international intellectual property standards to a theory of democratic bargaining, dialogic webs help to meet conditions 1 and 2 of democratic bargaining. Such dialogic webs help to represent interests that were previously not represented, as well as providing fuller information about the effects of the standard-setting process. Even more importantly, webs of dialogue can help to displace the use of webs of coercion, which in the case of intellectual property, exist and have been used. In a study of global business regulation Braithwaite and Drahos (2000) found in their interviews of more than 500 actors that almost all had a preference for playing games of global regulation through dialogic webs rather than webs of coercion. The reasons for this relate to the high costs of using coercion. The USTR cannot and does not act on every recommendation of coercion that Washington business lobbyists make. So, for example, when the USTR called for public comments on the operation of the Caribbean Basin Recovery Act in the mid 1990s the International Intellectual Property Association, a key copyright lobbyist, expressed 'concern that USTR has never formally acted upon, or even acknowledged, any petition filed to remove countries from the CBERA program for violations of the intellectual property rights of the U.S. copyright industries'.[13] Why the USTR would not want to poison its dialogue with the Caribbean states on its doorstep is readily understandable. The announcement on December 1, 1999 by the USTR and the Secretary of Health and Human Services (HHS) that they would develop a "co-operative approach on health-related intellectual property matters" and the participation of the HHS on the Special 301 Trade Policy Staff Sub-Committee is also an example of a strand in a dialogic web.[14] Even if a single strand seems weak the construction of a web with many strands lessens the likelihood of a precipitous rush to coercion.
It follows that weaker actors should continue constructing dialogic webs around the intellectual property standard-setting process, taking into account the fact that TRIPs and the WTO form only a part of a much more complex process of system of standard-setting that has bilateral, regional and global aspects. NGOs focussing on intellectual property must not lose sight of the importance of standard-setting at the national level. One of the reasons that the social cost of the patent system remains unacceptably high is that many of those who sit on the policy committees that quietly advise the important patent offices around the world are drawn from the large industries that are the biggest users of the patent system. It would be rare for such committees to have members drawn from health, food, environmental and consumer movements even though all these areas are profoundly affected by patents. National standard-setting in intellectual property will be highly significant in determining the way in which TRIPs evolves. Once states begin to negotiate specific positive standards of the kind to be found in TRIPs they inevitably look to their national systems for precedents and models. For those better resourced NGOs with good analytical capabilities, long term engagement with this national standard-setting process should be a goal.
Another possibility is that the institutional arrangements that underpin TRIPs might be used by states to develop better macro-policy co-ordination than has existed in the past in relation to intellectual property standards. The connection between trade and intellectual property is hardly new. It has always been there. States have always kept a weather eye on the trade implications of intellectual property standards. They have always used intellectual property rules to play out 'beggar thy neighbour' trade games (Penrose, 1951: 115-117).
Once states committed themselves to national intellectual property regimes, some form of international co-ordination to deal with the trade issues was necessary. International intellectual property regimes, TRIPs included, are means of co-ordinating national regimes, not a replacement for them. The need for such co-ordination has never been greater. Transnational companies in the global economy capable of moving investment resources into transformative technologies such as biotechnology may push states into races that might otherwise undermine the welfare benefits that intellectual property rights are capable of delivering to consumers. So, for example, national patent law generally imposes a requirement that the invention be useful. A patent office which relaxes this requirement may trigger a rush to the patent office seeking patents on information that may or not prove to be useful rather than useful products. Arguably this is exactly what has happened in the US with biotechnology inventions.[15] Other patent offices, worried about the investment implications of the rush for their domestic economies, may respond by also dropping their standards of usefulness. It is very much an open question as to whether this kind of regulatory competition is desirable. In these kinds of races those companies with the best lawyers do best, something that contributes nothing to efficient resource allocation. Consumers in all states bear the cost of patent protection without there being any corresponding gain in innovation.
The purpose of TRIPs is to eliminate distortions in international trade relating to intellectual property rights. Since these distortions are not just confined to a lack of standards of intellectual property protection, there is no reason in principle why the Council for TRIPs could not become a forum in which states began to address distortions that are occurring in global information markets because of either excessive intellectual property protection by one or more states or slippage in the application of intellectual property standards. The Council for TRIPs, as Article 68 makes clear, is there to be of service to all its members. The Council for TRIPs might prove to a good forum for this kind of international policy co-ordination because it is itself nested within a regime that recognises a diversity of principles such as sustainable development (see the WTO Agreement) and food security (see Agreement on Agriculture). It is a potentially a forum in which intellectual property might become an object of cross-cutting regulatory co-ordination. It is vital that this happen: intellectual property regimes like the patent system have for too long been allowed to operate as if hermetically sealed from other forms of social regulation.
TRIPs is an example of a much broader truth about the globalisation of business regulation: [w]hen the US and EC can agree on which direction global regulatory change should take, that is usually the direction it does take (Braithwaite and Drahos, 2000: 27). On intellectual property standards the US and Europe have generally taken hard lines. Europe like the US has been prepared to use coercion in the field of intellectual property. It enacted its equivalent of the 301 process, but it was rarely ever used because the European Commission was unable to get consensus amongst it members on its deployment. The European Commission was also the quiet free-rider on US aggression on intellectual property, sometimes sending in negotiators to conclude a bilateral agreement on intellectual property with a developing country after US negotiators had brought that country to the negotiating table using the 301 process.
The tough lines that have emerged from the metropoles of the west on the rules for the production and flows of knowledge suggest that developing countries will have to be very tightly organised on any future negotiations involving TRIPs. In particular they should give consideration to creating a developing country counter-weight to the Quad. In the last round developing countries had no equivalent to the Quad, meaning that they had no counter-weight to the agenda-setting powers of the Quad or its capacity to manage the crucial stages of a trade negotiation. The emergence of such a countervailing power would bring WTO negotiations closer to the ideal of democratic bargaining.
One possibility is that four developing country leaders (for example, India, Brazil, Nigeria and China) could form a group that would represent developing country interests in the hard or final stages of a multilateral trade negotiation. Each of these countries could chair a working group on some of the key negotiating issues of a given trade round. There could, for example, be a group on Services and Investment, a group on Intellectual Property and Biotechnology, a group on Agriculture and Goods and another on Competition, Environment and Labour (or whatever emerging issues there were in that trade round).[16] Other developing countries could join one of these four groups, perhaps with some taking responsibility for forming a working party on some aspect of the negotiations for which that group had overall responsibility (eg an African country could take responsibility for forming a working group on intellectual property and biodiversity within the Intellectual Property and Biotechnology Group). One advantage of this structure would be that the expertise of developing countries would be pooled, thereby reducing the capacity problems that they faced in the last round.
As early as 1989 an OECD report observed that because of OECD countries advantages in biotechnology developing countries, especially those heavily reliant upon agriculture, would "bear the brunt of trade impacts for a long time to come" (OECD, 1989: 81). It follows that developing countries have also little to gain from a regimes like TRIPs that diminish the flow of biotechnological information to them as a public good. But developed states should also be questioning whether they ought to continue to support the rent-seeking agendas of big business on intellectual property rights. It is clear that much of the research that ends up in corporate intellectual property portfolios is public research in the first place. In biotechnology the dependence is striking with, for example, more than 70% of scientific papers cited in biotechnology patents originating in solely public science institutions compared to 16.5% originating in the private sector (McMillan, Narin and Deeds, 2000: 5). Strengthening global intellectual property standards imposes costs on consumers in developed countries. There is a little point in doing this if, as the evidence suggests, there are no significant gains to innovation. There is also recognition in some developed countries that the impact of intellectual property standards on the rate and direction of innovation cannot be considered in isolation from environmental and health regulation as well as development issues. The negotiations that led to the Cartagena Protocol on Biosafety saw most states accept the need for a more integrated approach towards intellectual property standard-setting. The same might be said of the current negotiations on the International Undertaking on Plant Genetic Resources that are due to be completed in November 2001. One suspects that states which obstruct the pursuit of regulatory complementarities between intellectual property regimes on the one side and environmental, health and agricultural regimes on the other will in the long run find themselves isolated.
CONCLUSION
There are good reasons to think that democratic bargaining amongst states will increase the likelihood of obtaining efficient international intellectual property norms. Democratic bargaining minimally requires that the conditions of representation, full information and non-domination be met. In the past these conditions have not often been fulfilled. The international expansion of intellectual property regimes has been more a result of processes of colonisation and coercion than democratic bargaining. On the basis of the evidence it is also difficult to say that TRIPs itself was the product of democratic bargaining. This in turn raises questions about the efficiency of its norms and its legitimacy. Lying behind the current criticisms of TRIPs are also feelings of unfair treatment that will not easily disappear.
A future for TRIPs that sees it become more responsive to development and welfare goals lies with three distinct groups of actors - developed countries, developing countries and members of civil society. A summary of the prescriptions for action that this paper has suggested for each of these groups is as follows:
* Members of civil society should continue to foster a more integrated approach to intellectual property standard-setting by linking intellectual property regimes to other regimes through webs of dialogue.
* Members of civil society should not ignore the importance of the national standard-setting process to the future evolution of TRIPs. They should seek representation on those national policy committees that advise governments on intellectual property standards.
* All states should be wary of further extensions to TRIPs standards in the absence of evidence that this contributes in some significant way to dynamic efficiency.
* All states should explore the possibility of turning the Council for TRIPs into a forum for the international co-ordination of a trade-based intellectual property system that has as its goal the global welfare of citizens.
* Developing countries will have to adopt a more co-ordinated approach to bargaining over intellectual property rights at the bilateral, regional and multilateral level. At the multilateral level they should give consideration to the formation of a counterweight to the Quad structured along the lines suggested by this paper.
The future of TRIPs depends most heavily on the decisions of the US and the European Union. Whether these two states can transcend their past on intellectual property and shift WTO processes on intellectual property in the direction of improving welfare gains for all citizens is another matter.
NOTES
[1] See 'Industry that stalks the US corridors of
power', The Guardian, Tuesday February 13, 2001, 3. [2]
See section 305 of the Trade and Tariff Act of 1984. [3]
See 19 USC sec. 2242. [4] See section 505 of the Trade and
Tariff Act of 1984. [5] The US brought 301 actions relating
to intellectual property against Brazil in 1985 and 1987
and against India in 1991. Both were GSP beneficiaries. See
Sell (1995) [6] The history of all section 301 cases is
available from the USTR website. See
http://www.ustr.gov.
[7] See, for example, Daniel Gervais, 'The TRIPS
Agreement: Drafting History and Analysis', Sweet and
Maxwell, London, 1998, 15; Jacques J. Gorlin, 'An Analysis
of the Pharmaceutical-Related Provisions of the WTO TRIPS
(Intellectual Property Agreement)', Intellectual Property
Institute, 1999, 2. [8] See 19 USC 2242(b)(1)(C) [9] The
European Union is including intellectual property in the
Euro-Mediterranean negotiations. These negotiations are part
of an objective to create a free-trade area between 15 EU
Member States and 12 Mediterranean partners by 2010. Thus
far Euro-Mediterranean Association Agreements have been
concluded or are being negotiated with Algeria, Egypt,
Israel, Jordan, Lebanon, Morocco, Palestinian Authority,
Syria and Tunisia. [10] See Article 20 of TRIPs. [11] See
'Open Systems: The Need for a Balanced Copyright Regime in
the European Union (EU)' available at
http://www.sun.com/aboutsun/policy
[12]
Braithwaite and Drahos define dialogic webs as follows
(2000: 553): Dialogic webs are more fundamentally webs of
persuasion than webs of control. They include dialogue in
professional associations, self-regulatory dialogue in
industry associations, auditors from one subsidiary of a TNC
auditing the compliance with regulatory standards of
auditors from another subsidiary, naming and shaming of
irresponsible corporate practices by NGOs, discussions in
intergovernmental organizations at the regional and
international levels, plus any number of idiosyncratic
strands of deliberation that occur within and across
epistemic communities. [13] The review is available from
the USTR website. See
http://www.ustr.gov.
[14] See 2000 Special 301
Report, USTR website. See
http://www.ustr.gov.
[15] Significantly the USPTO has recently issued revised
guidelines on the utility requirement. See 'PTO Final
Examiner Guidelines on Utility Requirement' 66 Federal
Register 1092, December 29 2000. [16] I am indebted to a
late night email conversation with John Braithwaite for
helping me to think through this possibility.