Meaningful Technology Transfer to the LDCs: A Proposal for a Monitoring Mechanism for TRIPS Article 66.2

16 May 2011

Technology and innovation play an increasingly important role in the global economy, and can potentially contribute to meeting urgent human needs for improved health, food security, water and energy, among others.

The role of technology in development has attracted increased attention in recent years, particularly around the question of how to bridge the technological gap between countries with different levels of industrial capacity. Considerable debate has centred on the impact of the 1994 World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) on technology transfer - especially, whether TRIPS has helped or hindered the flow of technology to developing countries and their capacity to generate technological innovation.

The Least Developed Countries (LDCs) have attracted special consideration in these debates, in recognition that TRIPS implementation would put an additional burden on the LDCs, with few perceived benefits in exchange. In general, WTO Members agreed that the protection and enforcement of intellectual property rights (IPRs) should contribute to the promotion of technological innovation and to the transfer and dissemination of technology to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Special consideration was given to LDCs in the TRIPS Preamble and Article 66.2, which requires developed country WTO Members to provide incentives to induce technology transfer to LDC Members, in order to enable them "to create a sound and viable technological base."

However, analysts and developing country Members have raised concerns that the impact of Article 66.2 has been rather limited, and that the existing reporting system is insufficient for monitoring.

The question of whether TRIPS can be implemented in a manner conducive to technology transfer is becoming more urgent as the end of the transition period for LDCs to implement the Agreement is rapidly approaching in 2013 - 2016 for pharmaceutical patents. Unless the technology gap between the least and most developed countries can be narrowed, LDCs risk becoming increasingly marginalised in the global economy.

Against this backdrop, it seems timely to revisit the question of TRIPS, technology transfer to LDCs and the implementation of obligations under TRIPS Article 66.2.

Country submissions to the TRIPS ips Council

TRIPS Article 66.2 establishes a mandatory, binding, positive legal obligation on "developed country" Members of the WTO, as follows: "developed country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base."

Developed country Member governments are obligated to provide incentives to their "enterprises and institutions" - private-sector entities, non-profits and public-sector entities - to encourage technology flows to LDC Members. It has been argued that Article 66.2 obligates developed countries not only to provide incentives for technology transfer, but also to ensure the effective functioning of such incentives.

From a purely legal perspective, there may be some disagreement on the extent to which countries are responsible for the impact of the incentives they provide. However, from a practical and development-oriented perspective, it is critical to understand how well the incentives are functioning, how they can be improved, and how Article 66.2 can be made into a more effective instrument for technology transfer.

Programmes and technology transfer

Technology transfer is interpreted in this report broadly to include training, education and know-how, along with any capital component - a definition submitted to the TRIPS Council by New Zealand.

Despite adopting a broad definition of technology transfer, many of the policies and programmes reported by developed countries to encourage technology transfer either barely targeted or did not at all target LDCs. While LDCs may have benefited from technology transfer as a result of broader policies covering all developing countries, under Article 66.2 LDCs should receive targeted action.

Furthermore, we found that many of the programmes or policies were either not technical in nature or did not include a technology transfer component. Of the 128 programmes that specifically targeted LDC WTO Members, about one-third qualified as technology transfer according to the definition we adopted.

If we consider the full set of 384 programmes listed by the reporting developed countries, only 11 percent met the criteria of targeting an LDC WTO Member with a programme or policy that encourages technology transfer.

Building a monitoring mechanism

The results of this analysis suggest that a more robust monitoring mechanism for Article 66.2 is required - as was stipulated by the 2001 Doha Ministerial Declaration, yet still not established. The objectives of such a mechanism would be twofold: first, to improve our capacity to assess how well Article 66.2 is achieving its intended purpose, and second, to improve technology flows to LDCs as a result.

Moreover, this analysis suggests that the existing reporting mechanism also clearly falls short of an effective monitoring system.

In order to improve the operation in practice of Article 66.2, the establishment of a Monitoring Mechanism Group (MMG) is proposed. The MMG could include individuals from WTO delegations with a few seats reserved for independent experts.

The MMG would have two primary functions. First, an informational function that would track the provision of incentives over time based on a uniform reporting format - that is, measuring outputs. Second, an evaluative function that would assess how effectively the incentives were functioning to achieve the desired objective - that is, measuring outcomes.

The work of the MMG would be informed by input from governments, experts, non-governmental organisations, enterprises and institutions in both LDCs and developed countries, along with other concerned stakeholders. In particular, it would seek input from those with first-hand experience in transferring or receiving technology.

The wide variation in developed country Article 66.2 reports makes it difficult to detect trends over time and to monitor implementation. As an essential first step, a uniform reporting format should be agreed upon that would make monitoring efforts both more feasible and meaningful. Next, it will be necessary to agree on which countries are obligated by Article 66.2 to provide incentives, and to clarify what types of incentives should qualify as fulfilling the obligation.

Because the WTO does not formally classify countries as "developed" there is difficulty in deciphering who is accountable under Article 66.2. Given a persistent difficulty in agreeing on a specific, concrete definition, the most practical way forward may be to generate a positive and negative list of incentives that should and should not qualify as fulfilling Article 66.2 obligations. Such a list could be developed by the MMG.

It will be critical to regularly monitor the functioning of list of incentives to assess the extent to which they contribute meaningfully to the intended purpose of Article 66.2. However, the text of Article 66.2 does not specify what level of activity would satisfy its requirements, and there is no clear and objective way to set that yardstick.

LDCs should play a central role in articulating needs and assessing performance. They should clearly identify priority areas in which they need improved access to technology. Such priorities could emphasise areas of particular importance to human development, such as medicines, food security, clean water, housing or energy.

International organisations, non-governmental organisations, experts and others may provide technical assistance to LDC governments in identifying priorities and needed technologies, as well as in assessing gaps and the functioning of existing incentives.

Developed countries should shape their incentives in response to these needs and assessments.

LDCs could then submit periodic reports to the TRIPS Council specifying their priorities and gap assessments with respect to technology transfer while also contributing independent assessments of how well existing incentives from developed countries are functioning. These assessments can be used by the MMG to carry out a global evaluation of how well Article 66.2 is functioning, and to generate improved practices over time.

Compliance

The MMG should seek to improve the quality and user-friendliness of the information provided by reporting countries, and to evaluate the effectiveness of provided incentives. The MMG would not and could not assess developed country compliance with Article 66.2, a function reserved for the WTO Dispute Settlement Body (DSB). It may become necessary to assess compliance formally if, even after the establishment of the MMG, it becomes clear that developed countries are not putting in place effective incentives and technology is not flowing to LDC Members.

Further analysis is required on how non-compliance might be determined, and what effective remedies might be available. If an LDC decides to proceed with such a complaint to the WTO DSB, legal assistance with the case may also be needed. However, no LDC has ever brought a TRIPS-related complaint to the DSB.

Conclusions

This updated analysis of developed country reports has found little evidence that TRIPS Article 66.2 has resulted in significant additional incentives beyond business-as-usual for transferring technology to LDC Members.

It also concludes that the existing reporting system does not function as an effective monitoring mechanism, and should be reviewed by the TRIPS Council. In order to operationalise Article 66.2 more effectively, the TRIPS Council should establish an effective monitoring system, the broad outlines of which have been sketched in this policy brief.

Knowledge and technology are playing an increasingly important role in addressing global development challenges, yet gaps in technological capacity and access between rich and poor countries remain vast. Developing countries and LDCs have pressed for enhanced technology transfer in a variety of forums, such as the WTO, WIPO (in the context of the Development Agenda), and in multilateral environmental agreements such as the UNFCCC.

At the same time, promises and commitments by developed countries in this area have played a critical role in helping to reach international agreement on difficult issues such as climate change. The credibility of such promises and commitments is essential. Building an effective global system for genuine, meaningful technology transfer is therefore in the interests of all countries, and the case of TRIPS Article 66.2 is a compelling place to begin.

Suerie Moon is an Instructor at the Harvard School of Public Health, an Associate Fellow in the Sustainability Science Program at Harvard's Center for International Development/Kennedy School of Government, and an Advisor to the Medicines Patent Pool. This article has been adapted from a longer policy brief, which can be accessed here.

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