TRIPS Agreement: benefits and costs for developing countries

International Journal of Technology Management

Volumn 19, Issue 1, 2000, Pages 57-76

  Sherwood, Robert M ^a,b  

^a Harvard Law School ^*  (United States)

^b HARVARD LAW SCHOOL   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

AGRICULTURE; COST BENEFIT ANALYSIS; COSTS; DEVELOPING COUNTRIES; INTELLECTUAL PROPERTY; INTERNATIONAL TRADE; PERSONNEL; TECHNOLOGY TRANSFER;

INVESTMENT STIMULATION; TRADE FACILITATION;

CONTRACTS;

EID: 0033906730     PISSN: 02675730     EISSN: None     Source Type: None    
DOI: 10.1504/ijtm.2000.002809     Document Type: Article

References (55)

1. The TRIPS Agreement is the name commonly given to the 'Agreement on Trade-Related Aspects of Intellectual Property Rights' which emerged from the GATT Uruguay Round and was approved April 15, 1994, as part of the agreement establishing the World Trade Organization. TRIPS is to come into full force for developing countries in most respects on January 1, 2000.
2. See 'The TRIPS Agreement: Implications for Developing Countries', IDEA: The Journal of Law and Technology, Vol. 37, No. 3, 1997. The author draws on over 40 weeks of work in 16 developing countries over the last five years on behalf of the Inter American Development Bank, the World Bank, the United States Agency for International Development and, in a few cases, for private companies, during which extensive interviews were conducted with local industrialists, university research scientists, government officials and industrial property lawyers.
3. At least on paper, the intellectual property system of Ecuador at that time approached the TRIPS Agreement's requirements. The system in Ecuador has since been upgraded.
4. This was both a patent and trade secret problem.
5. Primo Graga, C.A. (1995) 'Trade-related intellectual property issues: the Uruguay round agreement and its economic implications', in W. Martin and L.A. Winters, (Eds.), The Uruguay Round and the Developing Economies, World Bank Discussion Paper No. 307, The World Bank, Washington, D.C.
6. Much of the literature regarding intellectual property in developing countries has tended to correlate trade flows or foreign direct investment patterns with some indication of intellectual property system quality in various countries. The indicator is usually an appraisal of patent protection alone. While useful, these approaches are limited in their ability to help us appreciate the effect of intellectual property protection on potential local investors, inventors and authors.
7. In Nicaragua, a 'melon saver' was invented. It is a simple plastic stand, quite like an enlarged golf tee with extra legs for stability. When inserted under ripening melons, it reduces rot. The device was patented in both Nicaragua and the United States.
8. While the TRIPS level of protection is the highest global level yet agreed to, various regional agreements have already established more robust requirements.
9. See Sherwood and Braga (1996) for such accords within the Western Hemisphere.
10. To underscore this assertion, reference is made to a rating system developed by the author to permit assessment and comparison of national intellectual property systems. The system was largely derived from work performed for the InterAmerican Development Bank in the context of its Investment Sector Reform Programmes.
11. Sherwood, R.M. (1997a) 'Intellectual property systems and investment stimulation: the rating of systems in eighteen developing countries', IDEA: The Journal of Law and Technology, Vol. 37, No. 2. Also available in Spanish translation as Los Systemas de Propiedad Intelectual y el Estimulo a la Inversion: Evaluation y comparacion de 18 sistemas en paises en vias de desarrollo, Editorial Heliasta, Buenos Aires.
12. Sherwood, R.M. (1997a) 'Intellectual property systems and investment stimulation: the rating of systems in eighteen developing countries', IDEA: The Journal of Law and Technology, Vol. 37, No. 2. Also available in Spanish translation as Los Systemas de Propiedad Intelectual y el Estimulo a la Inversion: Evaluation y comparacion de 18 sistemas en paises en vias de desarrollo, Editorial Heliasta, Buenos Aires.
13. This observation has eluded most commentators thus far, perhaps because it is costly to conduct research that would elaborate the point.
14. See, in particular, TRIPS Agreement, Article 41 (5).
15. For an approach to a possible remedy, see Sherwood, Shepherd and de Souza (1994).
16. Sherwood, R.M., Shepherd, G. and de Souza, C.M. (1994) 'Judicial systems and economic performance', The Quarterly Review of Economics and Finance, Vol. 35, Special Issue, Summer, pp.101-116.
17. For an extended appraisal of the impact of the TRIPS Agreement on public administration of intellectual property, see Sherwood (1997b).
18. Sherwood, R.M. (1997b) 'The TRIPS Agreement: implications for developing countries', IDEA: The Journal of Law and Technology, Vol. 37, No. 3.
19. Sherwood, R.M. (1995) 'Compulsory licensing under the TRIPS Agreement', Latin American Law and Business Report, Vol. 3, No. 1, January 31.
20. Sherwood, R.M. and Primo Braga, C. (1996) 'Intellectural property, trade and economic development: a road map for the FTAA negotiations', in Morton, C.S., ed., Outlook for Free Trade in the Americas, Institute of the Americas and as Agenda Paper 21, North/South Centre, University of Miami. Also available in Spanish translation as 'La propriedad intelectual y el desarrollo comercial y economico: una hoja de ruta para negociaciones en la ALCA/FTAA', DAT Derecho de la Alla Technologia, Buenos Aires, Mayo.
21. Sherwood, R.M. and Primo Braga, C. (1996) 'Intellectural property, trade and economic development: a road map for the FTAA negotiations', in Morton, C.S., ed., Outlook for Free Trade in the Americas, Institute of the Americas and as Agenda Paper 21, North/South Centre, University of Miami. Also available in Spanish translation as 'La propriedad intelectual y el desarrollo comercial y economico: una hoja de ruta para negociaciones en la ALCA/FTAA', DAT Derecho de la Alla Technologia, Buenos Aires, Mayo.
22. The table is adapted from Sherwood (1997b).
23. Based on information provided by Jorge Amigo, Director of the Mexican Institute of Industrial Property (IMPI), in 1995.
24. Grossman, G.M. and Helpman, E. (1991) Innovation and Growth in the Global Economy, The MIT Press, Cambridge, Massachusetts.
25. Maskus, K.E. (1997) 'Intellectual property rights in the global information economy', in T. Courchene, ed., Policy Framework for a Knowledge Economy, John Deutsch Institute.
26. The postings are available for general public access on the Internet at http://www.vita.org/technet/knowarch. See under Topic 3 for postings regarding intellectual property.
27. Armstrong, J.A. (1993) 'Trends in global science and technology and what they mean for intellectual property systems', in Wallerstein, Mogee and Schoen, (Eds.) Global Dimensions of Intellectual Property Rights in Science and Technology, National Academy Press, National Research Council, Washington, D.C., pp. 192-207.
28. See Mansfield [26] and [27]. Mansfield, E. (1994) 'Intellectual property protection, foreign direct investment and technology transfer', International Finance Corporation, Discussion Paper 19, Washington, D.C.
29. Mansfield, E. (1995) 'Intellectual property protection, direct investment and technology transfer Germany, Japan and the United States', International Finance Corporation, Discussion Paper 27, Washington, D.C.
30. For example, after Brazil enacted copyright protection for software in later 1987 and liberalized import policies, local software producers wrote applications programs under commodity programs such as Lotus 123 and then moved to customized programs which helped local industry streamline production methods.
31. A leading example of this was provided by ElectroMetal, a maker of high temperature metal alloys, located in Campinas, Brazil.
32. See Mansfield [26] and [27]. The developing countries were Argentina, Brazil, Chile, Hong Kong, India, Indonesia, Mexico, Nigeria, Philippines, Singapore, South Korea, Taiwan, Thailand and Venezuela..
33. In the post-1978 experience in Italy, many 'pirate' firms adjusted to patent protection and eventually survived, licensing from or merging with other companies and turning to research-based products.
34. Sherwood [11] makes a rough correlation with the findings of Mansfield [26,27] to give further emphasis to this observation.
35. A 'pipeline' provision would permit the grant of patents to inventions made prior to the effective date of the change in the law, but the resulting products have not yet reached the market, that is, they are still in the pipeline, on their way to market.
36. This study does not attempt to review systematically or summarize that literature. A concise review of this literature appears in FIEL, [35], at 10-18. Particularly cogent works are Arrow [36], Burstein [37] and Mansfield, Schwartz and Wagner [38]. See Mansfield [39] for an overview of his many works. For a concise extension of this literature to the field of copyright, see Benko (1988).
37. FIEL - Fundacion de Investigaciones Economicas Latinoamericanas (1990) Protection of Intellectual Property Rights: The Case of the Pharmaceutical Industry in Argentina, Buenos Aires, Argentina.
38. Arrow, K.J. (1962) 'Economic welfare and the allocation of resources for invention', in The Rate and Direction of Inventive Activity, Princeton, National Bureau of Economic Research.
39. Burstein, M.L. (1984) 'Diffusion if knowledge-based products: applications to developing countries', Economic Inquiry, Western Economic Association International, Vol. 22, No. 4, October.
40. Mansfield, E., Schwartz, M. and Wagner, S. (1981) 'Imitation costs and patents: an empirical study', Economic Journal.
41. Mansfield, E. (1988) 'Intellectual property rights, technological change and Economic Growth', in Walker, C. and Bloomfield, M., (Eds.), Intellectual Property Rights and Capital Formation in the Next Decade, University Press of America.
42. Benko, R.P. (1988) 'Intellectual property rights and new technology', in Walker, C. and Bloomfield, M., (Eds.), Intellectual Property Rights and Capital Formation in the Next Decade, University Press of America.
43. See Jori [42]. Price controls may have played some part in this result.
44. Jori, G. (1988) 'The impact of pharmaceutical patents: the Italian Experience', monograph, cited in FIEL (1990), p.62.
45. There are indications that not all 'pirated' products are marketed at prices lower than original products. One study of the pharmaceutical market in Argentina suggests that in many instances, imitation products have been priced near or even above the price of research-derived original products [35]. To the extent that this is the case, the introduction of trade-enhancing protection for patents, as under the TRIPS Agreement, may not produce significantly higher prices. It can be argued, of course, that the prices of original products have been held down by the threat of imitation products. In countries without patent protection, original products typically enter the market first, with imitation products entering later and this can have an influence on entry prices.
46. Of course, price fixing among companies may occur both before and after patent law changes, depending on other laws and their enforcement.
47. Dam, K.W. (1994) 'The economic underpinnings of patent law', 23 Journal of Legal Studies, pp.247-271.
48. Subramanian, A. (1995) 'Putting some numbers on the TRIPS Pharmaceutical debate', in Correa, C., ed.., Int. J. Technology Management, Special Issue.
49. In one example, a leading Brazilian financial group formed a venture capital company in the early 1980s, only to learn by trial and error that the intellectual property system of the country, particularly in relation to trade secret protection, was too weak to permit them to pursue this activity. They eventually shifted to merchant banking.
50. Rahn, G. (1983) 'The role of industrial property in economic development: the Japanese experience', International Review of Industrial Property and Copyright Law IIC, Max Planck Institute for Foreign and International Patent, Copyright and Competition Law, Vol. 14, No. 4, pp.449-492.
51. Sherwood, R.M. (1990) Intellectual Property and Economic Development, Westview Press (out of print, but see www.kreative.net/ipbenefits). Also available as: Propriedade Intelectual e Desenvolvimentio Economico, Editora da Universidade de Sao Paulo and as Propiedad Intelectual y Desarrollo Economico, Editorial Heliasta, Bueonos Aires.
52. Sherwood, R.M. (1990) Intellectual Property and Economic Development, Westview Press (out of print, but see www.kreative.net/ipbenefits). Also available as: Propriedade Intelectual e Desenvolvimentio Economico, Editora da Universidade de Sao Paulo and as Propiedad Intelectual y Desarrollo Economico, Editorial Heliasta, Bueonos Aires.
53. Sherwood, R.M. (1990) Intellectual Property and Economic Development, Westview Press (out of print, but see www.kreative.net/ipbenefits). Also available as: Propriedade Intelectual e Desenvolvimentio Economico, Editora da Universidade de Sao Paulo and as Propiedad Intelectual y Desarrollo Economico, Editorial Heliasta, Bueonos Aires.
54. For an elaboration, see Sherwood [49].
55. For an elaboration of this theme, see Sherwood [17]. See also 39 IDEA: The Journal of Law and Technology 4 (forthcoming).