LDCs and the TRIPS Agreement: Exploring a viable, long-term win-win
This article takes the view that a forward-looking approach is necessary to assist least developed countries (LDCs) in bridging their technological gaps and facilitating their transition to the world trading system. What role could the intellectual property (IP) system play in facilitating this transition and how could LDCs benefit from their current status in the TRIPS architecture?
Science, technology and innovation play an important role in development. All LDCs are lagging behind in these critical areas which are key drivers for transformation ... LDCs have often not been able to move beyond outdated technologies that characterise their production processes and outputs. Acquiring new technologies and building domestic capacity and a knowledge base to be able to fully utilise acquired technologies and promoting indigenous capacity on a sustainable basis for research and development are needed to enhance productive capacities in LDCs. Furthermore, development of this sector should help to bridge the digital divide and technology gap in support of rapid poverty eradication and sustainable development.
The TRIPS Agreement and the special needs of LDCs
As echoed in the LDC 2012 Istanbul Conference, LDCs face major challenges in effectively harnessing science, technology and innovation to advance sustainable development. Most notably, the lack of adequate physical infrastructure and human capital as well as weak institutional capacities undermine efforts by LDCs to take full advantage of the opportunities offered by advances in science and technology, diminishing their chances of becoming active players in the global economic system.
The Istanbul Conference reiterates several of the earlier commitments made in the areas of trade in general (e.g., the WTO Doha Development Round); health (WHO Global Strategy and Plan of Action on Health, Innovation and Intellectual Property (GSPOA); climate change (the UNFCCC Technology Mechanism), and intellectual property (e.g., the TRIPS Agreement, the Doha Declaration on health and the WIPO Development Agenda).
Since the inception of the WTO's intellectual property framework, LDCs have campaigned for increased policy space given their particular circumstances and the difficulties they face in fostering technological development. These demands, articulated in terms of 'the special needs of LDCs', have received particular attention on several topics, including on the question of ensuring “maximum flexibility in the domestic implementation of laws and regulations in order to enable [LDCs] to create a sound and viable technological base.” (TRIPS, Preamble)
The TRIPS Agreement further calls upon developed countries to provide incentives that encourage the greater transfer of technology to LDCs (Article 66.2). The TRIPS Council has made efforts to address this issue, with the result that regular reports have been solicited from developed countries, detailing the measures they have adopted to fulfill this requirement. However, much controversy surrounds the adequacy of the measures reported by these countries with regard to Art. 66.2 TRIPS.
Additionally, and most importantly, the TRIPS Agreement granted LDCs an extended transition period of eleven years (until January 1, 2006) for the application and implementation of the Agreement. It also afforded LDCs the ability to request additional extensions to this transition period. Since then, the transition period has been extended twice. In June 2013, the TRIPS Council decided to extend the transition period for LDCs by an additional eight years (until July 1, 2021), or until such time as a country ceases to be an LDC. It should also be noted that LDCs enjoy an additional special waiver until 2016 with respect to pharmaceutical products.
Furthermore, with respect to the August 30, 2003 Decision on the Implementation of Paragraph 6 of the Doha Declaration and the pending revision of Article 31 bis, establishing a special mechanism in benefit of countries “with insufficient or no manufacturing capacities in the pharmaceutical sector,” LDCs are presumed “eligible importing countries” as a result of their special status with regard to the implementation of this mechanism.
The TRIPS Agreement has also acknowledged the special needs of LDCs in terms of technical and financial cooperation, upon request and on mutually agreed terms and conditions, from the time it gained particular momentum in the 2005 decision regarding the first extension.
Debates during the 2013 TRIPS extension revealed the existence of major information gaps on the practical situation within LDCs and their legal regimes on TRIPS standards. Discussions also exposed the lack of strategy and methodological tools in the TRIPS debates that would permit LDCs to benefit from the existing policy space and to take advantage of the current waivers in order to create a ‘sound and viable technological base’.
Any attempt to assist LDCs in their legitimate aspirations to become fully integrated in the international trading system, needs to be cognizant not only of the state of their technological base and by extension, their innovation systems, but also of the existing intellectual property landscape in those countries. Notwithstanding the various provisions that recognise the special needs of LDCs, a large number of countries in this sub-category continue to face immense challenges in using TRIPS-related flexibilities, for gaining access to medicines, education and nutrition. But at the same time, a number of LDCs are having positive experiences with the use of IPRs in other areas, such as trademarks and geographical indications, as a means of protecting and increasing the value of their products as illustrated by Ethiopia’s success in commercialising coffee products. There is a need to understand and articulate why and under which circumstances LDCs can make positive use of the TRIPS Agreement so that it is beneficial to their own industrial development. Failing this, discussions on extensions and special provisions are at best imprecise and run the risk of being ideologically tainted.
Measuring 'a sound and viable technological base'
The term 'sound and viable technological base' is not just appealing due to its occurrence in the TRIPS Agreement. It is a term that, in sum, denotes the ability of any economy to promote changes in productive capacity based on technological change. A sound and viable technological base is a pre-requisite for local actors to possess technological absorption capacity, and engage in activities that could lead to learning and knowledge accumulation within local contexts. Technological learning is the means whereby capabilities are built in firms. It involves not only technical learning, but also learning to build the right kinds of organisations and foster the institutional forms in which policies would have the desired impact. Defined in this way, the technological base of any economy would be comprised of the sum of its individual technological capabilities.
Technical change and innovation are largely incremental and vital in promoting growth in productivity. Technical change can generally be categorised into three different kinds:
- First, technical change that involves the introduction of new techniques (products and processes) into the economy through new investments in plants and machinery. This type of technical change broadens the industrial base of the economy.
- Second, technological change involving evolutionary (incremental) improvement to prevailing techniques by effecting technical change to existing products.
- Third, the generation of new knowledge through research within firms orwithin separate R&D institutions.
Each of these forms of technical change relies on a series of enablers, which are related to a country's knowledge, infrastructure and institutional framework.
Indicators for tracking this process therefore necessarily need to be associated with a set of variables designed to measure the individual and aggregate aspects of technological change in all these three dimensions. These indicators should reflect the requirements of an overall framework for technological change and technology acquisition. Such comprehensive measurements would include:
- Human skills – the number of people attaining secondary and tertiary education, conducting research and other study exchanges, and those returning from studies abroad, as well as the movement of people between enterprises, universities and industries.
- Scientific collaboration – movement between national and international universities and centres of excellence.
- Diaspora and migration of skilled labour – how many members of the diaspora return, in what capacity, and to which sectors of the economy.
- Productive use of remittances – how are diaspora remittances used to spur local entrepreneurship and in which sectors.
- Collaboration between local firms and universities and how IPRs are employed to facilitate commercialisation of products and processes.
- Collaboration between international and local firms, and in which areas - R&D, scientific collaboration or firm-level processes for production.
- Other technological indicators, such as licensing, royalty payments, joint ventures and the number of local patents and related IPR markers of creativity and innovation in general.
- Institutional infrastructure, such as the definition of property rights, contractual structures and other policies that influence the provision of physical and scientific infrastructure.
Table 1 attempts to establish these measurements, highlighting the links between the individual and aggregate indicators of technological change. National ecosystems should provide both sets of indicators as a basis for developing a technological base or in TRIPS parlance, a ‘sound and viable base’.
However, the process of creating these capabilities is time-consuming, and countries, firms, and individuals all progress through several stages in the accumulation of knowledge. A starting point in the capability-building process is the ability to perform simple routine-based activities, of the type that for instance, would be entailed in running a production plant or related machinery. Adaptive capabilities are the next stage in this process, comprising the ability not only to perform routine tasks, but also to search for technologies, as required, to improve the efficiency of the routine activities and to apply them to local needs. This, without being a perfect linear process, is followed by the ability to reverse engineer existing products and processes and create incremental innovations. A final stage in the accumulation of capabilities is characterised by the ability to conduct R&D and develop product and process innovations in-house.
In each of these capability- building stages, individuals or firms rely on the presence of the indicators shown in table 1. All three forms of investment – knowledge-based, infrastructure-related and institutional – create viable environments for innovation in a country. At the same time, innovation data and case studies from a wide variety of countries show, that although medium-income countries do not have perfectly functioning environments for innovation, they do have varying levels of innovation capacity, depending on which of the institutional indicators are functioning well. The same applies to LDCs, all of which show varying levels of innovation capacity.
Linking capabilities to the use of intellectual property rights
The prevailing view up until now, which has prevented reaching a consensus building in the WTO, is that LDCs are unable to use IPRs. However, in reality, a number of these countries have already implemented institutions and formal regimes at a level that is formally compatible with TRIPS. While some LDCs still possess antiquated IP laws inherited from the colonial era, others have taken progressive steps to promulgate new IP laws in addition to adopting IP strategies. It also seems that countries at each level of technical change and capabilities are able to either not make use of, or make partial use of the various intellectual property rights under the TRIPS Agreement. Therefore, a partial, gradual and consensual convergence based on the country's level of technological development, would be a fair means of promoting LDCs' inclusion in the TRIPS Agreement. LDCs could continue benefitting from special waivers, such as in the case of pharmaceuticals, or could be exempted from certain aspects of the Agreement, such as in the case of provisions for enforcement and in general with the dispute settlement system.
Simply put, at the first level of simple routine activities, a country would have limited capacity to make full use of the system. However, countries have used and are currently using such instruments as petty patents and other forms of protection to promote incremental and other adaptive innovations. A strong case can also be made for the protection of various forms of indigenous innovations, whether related to traditional knowledge of medicinal plants or other forms of indigenous expressions of art, or as the previously mentioned case of Ethiopia suggests, for making appropriate use of trademarks and geographical indications within global value chains. Countries would then make use of more sophisticated intellectual property rights, such as industrial designs and patents, only when they develop a significant innovation capacity at the local level. Otherwise, in the absence of solid institutions, which also need to be complemented by appropriate competition authorities or an independent and well-endowed judicial system, local firms tend to suffer, as they are unable to compete with large firms, thereby creating long-term barriers to economic catch-up.
Implementing the concepts: Concluding remarks
Implementing a 'sound and viable technological base' as laid out in this article is a feasible option. Most of the indicators listed in table 1 are already available within the countries or can be made available with minimal effort. Assessing the progress of a country's technological capacity would also provide for better information for reviewing and implementing national innovation strategies, in addition to determining a country's ability to gradually align itself with the TRIPS agreement in a way that local industry can also benefit.
By raising some of these issues, the article suggests an approach based upon the notion of 'a sound and viable technological base' of the TRIPS Agreement to assess the dilemna of determining the ideal time for a given LDC to be consistent with the TRIPS Agreement. The suggested approach calls for evidence-based deliberations on these matters, with the overarching goal of assisting LDCs in promoting technological change and building their corresponding knowledge, infrastructure and institutional-based components on their own terms.
The international system should encourage and support LDCs through appropriate technical cooperation to make use of intellectual property instruments for their own development and at their own pace. Ultimately, their full transition to TRIPS, if ever, should be transparent, evolutionary and based on the ground conditions prevailing in those countries.
Author: Padmashree Gehl Sampath - Expert on innovation and development, who also works at UNCTAD. Pedro Roffe - Senior Associate, Innovation, Technology and Intellectual Property, ICTSD.
 Paragraph 51, Programme of Action for the Least Developed Countries for the Decade 2011-2021, A/CONF.219/7, adopted on 13 May 2011, Istanbul