PHM-Exch> Intellectual Property Regime Undermines Equity, Progress

Claudio Schuftan cschuftan at
Tue Feb 13 16:58:55 PST 2018

Intellectual Property Regime Undermines Equity, Progress

Jomo Kwame Sundaram

KUALA LUMPUR, Feb 13 (IPS)  - Over the last few decades, people in the
developing world have been rejecting the intellectual property (IP) regime
as it has been increasingly imposed on them following the establishment of
the World Trade Organization (WTO) including its trade-related intellectual
property rights (TRIPs) regime. IP rights (IPRs) have been further enforced
through ostensible free trade agreements (FTAs) and investment treaties
among two (bilateral) or more (plurilateral) partners.

Despite their ostensible rationale, the IP standards rich country
governments insist on have never been intended to maximize scientific
progress and technological innovation. Rather, the IPR regime serves to
maximize the profits of influential pharmaceutical and other companies by
conferring them with exclusive monopoly rights.

In the pushback, initially led by Nelson Mandela soon after he became South
African President under the new dispensation in 1994, developing countries
have targeted access to essential medicines. Thus, the 2005 Indian law to
conform to the WTO's TRIPs safeguarded access to generic equivalents, as
allowed for by the public health exception to TRIPs.

However, the WTO rules disallow Indian generic manufacturers from exporting
their medicines to Africa and other poor countries lacking the necessary
pharmaceutical manufacturing capacities and capabilities. Even if the
African countries could produce the drugs domestically, they would be more
expensive as they would lack the economies of scale required to lower costs
in their relatively small economies.

Privatizing knowledge
In Innovation, Intellectual Property and Development, Joseph Stiglitz, Dean
Baker and Arjun Jayadev have shown that the economic institutions and laws
protecting knowledge in OECD economies not only poorly govern economic
activity, but are also especially ill-suited to developing countries'
needs, especially the global commitment to achieving universal health care
of Agenda 2030, the Sustainable Development Goals.

>From an economic perspective, knowledge is considered a global public good,
as the marginal cost of anyone using it is zero. Growth of knowledge can
presumably improve wellbeing.

Despite lack of evidence, the IP advocacy argument has been that market
forces ‘undersupply' knowledge owing to the poor incentives for research
and innovation. The usual claim is that this ‘market failure' is best
corrected by providing a private monopoly through property rights for new
knowledge, e.g., through enforceable patent rights. Private IP protection
is presumed to be the only one way to reward, and thus encourage research
and innovation.

The trio argue that the IP regime has been much more problematic than
expected, even in rich countries. They show how the 2013 US Supreme Court
decision that naturally occurring genes cannot be patented has shown that
the IP regime impedes, rather than stimulates research by limiting access
to knowledge. Following the ruling, innovation accelerated, leading to
better diagnostic tests (e.g., for genes related to breast cancer) at much
lower cost.

Stiglitz, Baker and Jayadev focus on three alternatives to motivate and
finance research in the US context. First, through centralized mechanisms
to directly support research. Second, by decentralizing direct funding,
e.g., via tax credits; government bodies or research foundations or
institutions can reward successful innovations or findings.

The patent system rewards legal ownership of innovation, but effectively
impedes the use of that knowledge by others, thus reducing its potential
benefits. Having a creative commons, e.g., open-source software, would
maximize the flow of knowledge.

The trio recommend that developing economies use all these approaches to
promote learning and innovation. They view the gap between developing and
developed countries as involving a gap in knowledge comparable to the gap
in resources.

Hence, to improve economic welfare in the world, they urge diffusion of
knowledge from developed to developing countries, as conventional social
scientists have urged as part of modernization theory for more than half a

Often dense ‘patent thickets', requiring many patents, are increasingly
stifling innovation. Payments to lawyers and patent investigators typically
exceed those to scientific researchers in such cases, with research often
oriented to extend, broaden and leverage monopoly rights due to patents.

One perverse consequence has been patent ‘trolling' by speculators who buy
up patents which they think has a chance of being necessary for any product
or process innovation. Thus becoming gatekeepers like the mythical trolls,
they effectively block innovation unless their price is met.

Neo-liberal monopolies
Ironically, while the case for more openness in sharing knowledge is
compelling, ‘neo-liberals' -- who typically claim the moral high ground in
opposing monopolies and related market distortions -- have effectively
served to extend and strengthen property rights and attendant monopolies.

Powerful corporate and developed economy government lobbies have influenced
the IP regime, e.g., by opposing competing rights associated with nature,
biodiversity or even traditional knowledge.

Hence, recent ostensible FTAs have extended IPRs to cover ‘biologics',
i.e., naturally occurring substances, such as insulin for those suffering
from diabetes, which is derived from mammals.

Thus, over the last few decades, the evolving IP regime has erected more
and more barriers to widespread use of new knowledge. The current IP regime
serves to maximize profits for a few monopolies, e.g., ‘Big Pharma', rather
than the progress and welfare of the many.

Widespread strictly enforced IP protection is historically new. IP
protections came very late to the early industrializing economies,
typically delayed to enable rapid ‘catch-up' industrialization and
technological change.

The ‘weightless economy' of data, information and knowledge is accounting
for a growing share of economic value in the world. Stiglitz, Baker and
Jayadev argue that existing rules governing global knowledge serve as
fetters that must be broken to reflect these realities.

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