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TRIPS AND DEVELOPING COUNTRIES: AN OVERVIEW

Dost Mohammad*

Introduction:
          The protection of intellectual property rights (IPRs) worldwide has added a new dimension to the economic dialogue between the industrialized countries of the northern hemisphere and the less developed countries of the southern half of the globe. The policy makers in industrialized countries show awareness regarding the benefits of mutual interdependence, yet in actual practice, rigorously negotiate and push through international agreements which serve their country interests best without regard to the consequences on developing countries. One such agreement is the Trade Related Aspects of Intellectual Property Rights (TRIPS) negotiated during the 1986-94 Uruguay Round [1] and incorporated in the World Trade Organization (WTO) agreements [2]. The purpose of this paper is to present an overview of the provisions of TRIPS agreement and its consequences on the developing countries.
         
          The term “ intellectual property” refers to all economically valuable products, production processes or ideas that are bought and sold because of the information and creativity they contain, rather than the materials (e.g. Plastic, metal or paper) used in their production [3]. Films , audio and video recordings, books and other print materials, industrial designs, high technology products, computer software and on-line services come under intellectual property. Certain items of intellectual property are known targets of pirators, copiers and infringers. For example, foreign authored books and computer software are copied in certain countries and sold at home and even abroad without the permission of the authors. Since no royalties are paid, the authors suffer substantial losses especially when the copied product is sold in other countries as well. The items of intellectual property are often registered with the  government that awards the creators (i.e., artists, innovators, authors, etc.) the right to prevent others from using their creations during a given period of time. These rights are known as intellectual property rights. The basic purpose of such rights is to provide incentives to create intellectual properties by ensuing that the owners of the intellectual properties maintain exclusive control over these ideas, at least for a certain period of time.

         The intellectual property rights are mostly protected through copyrights, patents and trademarks. A copyright is the ownership of and legal right to control all possible ways of producing a copy of an original piece of work such as a book, a painting, play, photograph, computer software or a piece of music. The authors or the creators are also protected against unauthorized dissemination and public *Professor  &  Head  Department  of  Economics, University  of  Kashmir, Srinagar-190 006, J & K (India) performance of their works under copyright. Patent is the official legal right to make, use or sell an invention for a particular period of time. Patents ensure that the innovator receives returns on investment made to create and market the invention [4]. Trade mark is a name or a logo or a symbol which is put on a product to show that it is made by a particular producer. Trademarks including geographical indications cannot be used by any other producer for making the product and using its name for sale (e.g. Pepsi, Colgate, etc.), “ they thus facilitate market transactions by assuring consumers that they are purchasing what they intend to purchase” [5].

The TRIPS Agreement

                 The rules governing IPRs and their enforcement varied widely from country to country. There was no uniform code of conduct for trade in products involving intellectual property. The WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods (TRIPS agreement) is an attempt to provide common ground rules for effective and adequate protection of intellectual property rights. The Agreement prescribes uniform minimum standards and periods of time for which protection should be granted to different intellectual property rights. It also sets out basic procedures that deal with enforcement of rules and settlement of disputes between countries.

          The TRIPS agreement recognizes the obligations of other international agreements which existed before the creation of WTO. These include: the Paris Convention for the Protection of Industrial Property the Berne convention for the Protection of Literary and Artistic Works the Rome convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations; the Washington Treaty on Intellectual Property in Respect of integrated circuits; and the United Nations World Intellectual Property Organization (WIPO) which administers most of the international agreements and whose objective “is to support the world wide protection of intellectual property by means of intergovernmental cooperation” [6]. These agreements supervised by WIPO have achieved some degree of non-discrimination with regard to the application of  IPR regulations, but they have failed to establish minimum international standards of protection” [7].Moreover, some areas are left out of these conventions. The TRIPS agreement incorporates new areas and has much broader coverage than any of the existing international agreements on Protection of intellectual property rights. Most important, however, “is that ‘the signatories to the agreement commit themselves to taking the necessary steps internationally and at the border to ensure that the standards are put into effect” [8]. Like GATT and GATS in WTO, the TRIPS agreement is based on the principles of non-discrimination, national treatment and transparency [9]. The principle of national treatment is also included in other intellectual property agreements outside the WTO.

          The TRIPS agreement includes a wide range of intellectual property rights. These are : (1) copyright and related rights;  (2) trademarks including service marks;  (3) geographical indications; (4) industrial designs;  (5) patents;  (6) layout designs (topographies) of integrated circuits;  and (7) undisclosed information, including trade secrets.

Copyright:
         
          New rules prescribed for copyright prevent unauthorized recordings, reproduction and broadcast of live performances, sound recordings and films for a period of 50 years. The computer programmers are protected as literacy works under Berne Convention (1971). One of the important additions to the existing rules in the area of copyright and related rights are the provisions on rental rights which give authors of computer programmers and producers of sound recordings the right to authorize or prohibit the commercial rental of their works to the public. A similar exclusive right  applies to films where commercial rental has led to widespread copying, affecting copyright owner’s potential earnings from their films [10].

Trademarks and Geographical indications:

          The agreement clearly specifies the types of signs that are eligible for protection as trademarks and the minimum rights conferred on their owners. The service marks are protected in the same way as trademarks for goods. Additional protection is granted to the marks that have become well-known in a country. The agreement also lays down a number of obligations with regard to the use of trademarks and service marks, their term of protection, and their licensing or assignment [11]. The TRIPS agreement also provides rules for protection of geographical indication, that is, the use of a place name to describe a product and its characteristics. The agreement also provides for further negotiations in the WTO to establish a multilateral system of notification and registration of geographical indications on wines [12]. 

Industrial designs:

          Industrial designs are protected for at least 10 years. According to the TRIPS agreement “owners of protected designs must be able to prevent the manufacture, sale, or importation of articles bearing or embodying a design which is a copy of the protected design” [13]

Patents:

          The agreement stipulates that member countries are under obligation to comply with the provisions of Paris convention with regard to patents. A minimum of 20 years patent protection is granted to inventions whether of products or processes in almost all fields of technology. A patent can be refused to an invention if its commercial exploitation is prohibited for reasons of public order morality. Governments can also exclude diagnostic, therapeutic and surgical methods, plants and animals (other than micro-organisms) and biological processes for the production of plants or animals (other than microbiological processes) [14]. A patent issued to a production process must extend to cover the product directly produced by the process. Under TRIPS agreement, the patent bestows the right on inventor to exclusively use or commercialize the invention including the assuance of licence for someone else to produce or use the invention. The agreement recognizes that the terms of a licensing contract could restrict competition or impede technology transfer. It gives the governments the right to take action to prevent anti-competitive licensing that abuses intellectual property rights.

Other IPRs in TRIPS agreement:

          The protection to layout design of integrated circuits is provided on the basis of the Washington Treaty on Intellectual Property in Respect of Integrated Circuits which was adopted in 1989 but yet not entered into force. A minimum of 10 years protection is available to the integrated circuit designs under the agreement. The provisions of the agreement on undisclosed information and trade secrets which have commercial value call for protection against breach of confidence and other acts contrary to honest commercial practices. The agreement however, cautions that reasonable steps must have been taken to keep the information secret. The inclusion of trade secrets was greatly demanded by pharmaceutical and chemical industries.

Enforcement of Laws:

          The TRIPS agreement lays stress on enforcement of laws governing protection of intellectual property rights in member countries. It says, governments have to ensure that intellectual property rights can be enforced under their laws, and that the penalties for infringement are tough enough to deter further violations. The agreement also describes in some detail how enforcement should be handled, including rules for obtaining evidence, provisional measures, injunctions, damages and other penalties. It says courts should have the right under certain conditions, to order the disposal or destruction of pirated or counterfeit goods. Further, willful counterfeiting or copyright piracy on a commercial scale should be criminal offences. Governments should make sure that intellectual property rights owners can receive the assistance of customs authorities to prevent imports of counterfeit and pirated goods [15].

          The developed countries were granted one year to frame laws which are in line with the provisions of the agreement. The developing countries and transition economies were allowed a five year period and the least developed countries eleven years to implement the agreement in full. However, in respect of pharmaceutical, agricultural chemical products the transitional period applies only in part. The WTO has established A Council for Trade Related Aspects of Intellectual Property Rights to monitor the working of the agreement and compliance by member countries.

Developed Countries Perspective:

          One of the fundamental determinants of perpetual economic growth of industrialized countries is technological progress. By technological progress is meant generation of new products and production processes by means of inventions and creation of new ideas. A technological innovation resulting in a new product or a new processing method brings a number of economic benefits to the innovating firm and its home country. First, the innovating country’s exports grow as new demand is generated for the product abroad. Second, the home country’s imports become relatively cheaper thereby improving its commodity terms of trade. Third, the monopoly profits are created that bring additional gains to the innovating firm and the country. Fourth, expenditure on R & D is stimulated which generates a virtuous cycle of more inventions ( and innovations) and higher R & D expenditures. The protection of technological innovations within the country and throughout the world, therefore, constitutes the most important element of developed Countries policies on technological advancement and related investments. These countries consider patents and other forms of intellectual property protection essential for attracting investment in cost-intensive R & D activities which are the source of new products and processing methods.
          The major shift in the commodity composition of international trade witnessed during the past two decades has further invigorated industrial countrie’s interest in protection of intellectual property rights. The newly industrializing countrie’s gaining foothold in the exports of standardized manufactured goods and “ the domination of leading-edge technologies and a continued flow of innovation have emerged as main concerns of economic policies in the industrial world” [16]. Furthermore, the growing importance of knowledge- intensive and high-technology products in international trade has made industrialized countries highly protective about intellectual property rights. The technological know- how “has come to be considered something like a national asset in worldwide competition with other countries” [17].
         

The policymakers in industrial countries hold the view that ‘technical innovations do not fall from heaven; they require efforts and they impose costs’, therefore, strict standards for protection must prevail so that innovating firms reap innovation rents’ and perpetuate dominance on world market for high-technology goods. The TRIPS agreement predominantly reflects the views of industrial countries. Its provisions are drawn to fulfill the objectives of sustaining high levels of innovation in industrial countries.

TRIPS and Developing Countries:

          The intellectual property protection (IPP) was put on the agenda of the multilateral trading system at the behest of the industrial countries. The developing countries were of the opinion that existing conventions and treaties (under the administration of WIPO) are sufficient and that there was no need to make protection of intellectual property rights a part of trade negotiations. Since the developed countries had made the inclusion of IPP as one of their top priorities, they succeeded in achieving an agreement that strengthens the existing system of intellectual property protection for the knowledge- and information intensive activities.
          The TRIPS agreement was finally accepted and signed by developing countries in view of the following factors: (1)  no country can afford isolation from the multilateral trading system operated by the WTO;  (2)  the developing countries had to pay some price for the industrial countries tacit commitment to grant concessions on market-access in the areas of agriculture and textiles; and (3)  preference was given by developing countries to multilateral discipline over unilateral pressures which included the threat of Section 301 of the U.S. Omnibus Trade and Competitiveness Act of 1988.
          The developing countries are net importers of high-technology and knowledge-intensive commodities. However, their exports continue to be natural resource intensive except for a few newly industrializing countries (N I C s) which have acquired comparative advantage in manufactured goods such as consumer electronic goods, iron and steel products, textiles, wearing apparel and footwear. Since most of the developing countries are involved in the process of building industrial bases, the high standards of IPP embedded in TRIPS agreement are definitely going to hinder the transfer of technology and selection of appropriate technologies for economic development.
          The intellectual property rights are defined in national laws which have territorial jurisdiction, that is, protection of rights is granted within the boundaries of the economy. Most of the developing countries have IPP laws that are inadequate in comparison to minimum standards prescribed in the TRIPS agreement. The provision on harmonization of domestic laws with TRIPS norms and their effective enforcement necessitate amendments in the existing IPR systems in almost all developing countries. As pointed out by Carlos, Braga and Fink (2001), “ the implementation of TRIPS obligations requires changes in domestic laws, which typically entail legislative proceedings and the approval of a parliamentary majority. Improvements in enforcement mechanisms can necessitate reforms of the judicial system, and enhancements in administrative procedures may require significant organizational restructuring.” [18]. The required legislative, judicial and administrative adjustment entail significant financial costs for the developing countries. According to a recent study by Finger and Schuler (1999), developing countries beer significant costs in implementation of the provisions of the TRIPS agreement. [19]
          One of the major areas of conflict between the developed and developing countries was the coverage and duration of patent protection for technological innovations. Developing countries argued for exclusion of pharmaceutical products from TRIPS obligations so that access to medicines is not denied to anyone in the world. However, the developed countries succeeded in extending the TRIPS provisions to all inventions whether of products or production processes in almost all fields of technology ‘ including the pharmaceutical and agricultural chemical products. Moreover, the developing countries were effectively denied the transition period for these products which emerged as most sensitive issues in trade negotiations. Another issue related to patent is its duration, that is, the length of its legal validity. The TRIPS agreement has granted 20 years patent protection to all inventions irrespective of the level of technology and the cost involved in creating the invention. The duration of the patent is also important for consumers of products embodying intellectual property. The holders of patents are the multinational corporations which generally overcharge developing countries for their products and for the technologies that they have developed. The longer duration of the patent protection under TRIPS agreement goes to the disadvantage of the developing countries as it stretches the supernormal profits earned by multinational corporations under the protection of patent laws. The higher rates of exchange in developing countries make the matters worse. This also applies to books, and other sources of information including computer software where higher prices impede the dissemination of knowledge and are an invitation to piracy [20].

Another major area of concern for developing countries is the dispute settlement procedure specified in the TRIPS agreement. All disputes over TRIPS matters are subject to the WTO’s Dispute Settlement Body (DSB). The DSB has the sole authority to establish panels of experts to consider the case, and to accept or reject the panel’s findings or the results of an appeal. It monitors the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country dose not comply with a ruling’. Although WTOs dispute settlement system is hailed as the most individual contribution to the stability of the global economy, many developing countries find it cumbersome and costly. As pointed out by Hoekman and Kosteki (2002) “developing countries are generally disadvantaged in the dispute settlement process because they can commit fewer resources to defending their interests at the WTO, and their enforcement power is significantly weakened by their smaller economic size” [21]. This perhaps explains why developing countries do not raise TRIPS related disputes at WTO.

Conclusion:
          The TRIPS agreement was included in the multilateral trading system on the insistence of the developed countries. For them protection of intellectual property rights is a means of fostering technological innovations and improving the international competitiveness of their domestic firms.. Developing countries accepted the agreement on tacit understanding that some concessions will be granted to improve their access to the markets of manufactured goods in developed countries. The Agreement provides intellectual property protection more effectively and more widely than the existing international conventions and treaties operating under the supervision of WIPO. It fulfills the aspirations of the developed countries while inflicting heavy costs on developing countries. The high standards of protection in respect of the extent and duration of patents, copyrights and trademarks hamper the transfer of technology, obstruct dissemination of knowledge and deteriorate the terms of trade of the developing countries. The costs of legislative, judicial and administrative adjustment are exhorbitant but compliance with the rules of the multilateral trading system is necessary. The developing countries must strive for a balance between the costs and benefits of the TRIPS agreement.

Notes and References:          
  1. The long drawn trade negotiations culminated in the signing of the Uruguay Round Agreement by 121 countries on 15 April 1994 in Marakash, Morocco.
  2. The WTO, agreements took effect from 1 January 1995 Governing WTO are a number of legal texts, most notably the General Agreement on Tariffs and Trade ( GATT), the General Agreement on Trade in Services ( GATS) and the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). See U.S. Department of State, “ A chronology of Events Leading UP To The WTO” Economic Perspective, An Electronic Journal, March 2000, P -34.
  3. WTO Trading in Future: A Backgrounder on WTO, Trade Policy Division, Ministry of Commerce and Industry, Govt. of India, New Delhi, April 1999, P-28.
  4. Schumpeter was first to draw a distinction between innovation and invention. ‘Invention is the discovery of new technologies, and  innovation consists of the practical application of an invention in production for the market. Invention is performed by the inventor while innovation is the task of the entrepreneur, See Bimal Jalau, India’s Economy in the New Millenium, UBS publishers, New Delhi, April 2002, P-151.
  5. Carlos A. Primo Braga and Carsten Fink, Trade related intellectual property rights: from Marakash to Seattle, "in K.G. Deutech and B. Spever (eds.) the World Trade Organization Millennium Round, Routledge, London, 2001, P-181.
  6. H. GroBmann, G. Koopmann and A. Michaelowa, “ The New World Trade Organizatin: Pacemaker for World Trade,”. INTER ECONOMICS, Vol. 29, No. 3, May/June 1994, P-113.
  7. Carlos A, et al. Op. Cit; P-181.
  8. GroBmann H; et al. Op. Cit. P-113
  9. Under these principles the nationals of other countries must be given treatment no less favourable than that accorded to country’s own nationals with regard to the protection of intellectual property. The agreement also contains a most favoured-nation-clause under which any advantage a country gives to the nationals of another country must be extended immediately and unconditionally to the nationals of all other countries even if such treatment is more favourable then that which it gives to its own nationals. See WTO, GATT Agreements; Final Text of Uruguay Round, World Trade Centre, Bombay, 1994. PP17-19.
  10. WTO ( 1999) op. Cit. P-23.
  11. The provisions on trademarks closely follow the 1988 EC trademark directive including the right to hold and transfer trade marks without actually operating the business concerned. See Gerhard Fisch and Bernhard Speyer, “ TRIPS as an Adjustment Mechanism in North-Siuth Trade , in INTERECONOMICS, Vol. 30, No. 2, March/April 1995.
  12. EC insisted for strict rules governing protection of geographical indications to protect the interest of the European producers of wines, spirits and foodstuffs.
  13. WTO (1999) op. Cit. P-23.
  14. I bid;  p-23.
  15. One of the current problems of international trade is the cross-border exchange of counterfeit goods. Products like automobile parts, sporting goods including apparel, jewellry, cosmetics and toiletries, watches, to name only a few, are often counterfeited and sold with fraudulent trademarks. These goods are mostly sub standard and perform poorly. Legitimate manufactures may be blamed for this reputation and thereby lose further sales of these and other products. Health and safety may be threatened as counterfeiters move to produce goods such as pharmaceuticals, medical supplies and transportation equipment. Husted. S., and Melvin, M., International Economics, Harper Collins College Publishers, New York, 1993, P-197.
  16. Zeeb, M., “Intellectual property protection and Globalization of the World Economy” Intereconomics, Vol. 31 No. 1, January/ February 1996, p-21.
  17. I bid; p.21.
  18. Prino Braga and Fink (2001) op.cit. p-183.
  19. Finger, M. J; and Schuler ,P “ Implementation of Uruguay Round Commitments: The Development Challenge”. Policy Research Working paper No 2232, World Bank, Washington 1999.
  20. The software piracy amounting to $ 11 bn., approximately registered a rise of 40 percent in 2001. See Prabhat Kumar, “ How to contain software piracy” in Economic Themes, 9 Sept. 2002, Bombay.
  21. Hoekman, B. and Kosteki, M., The Political Economy of the World Trading System, Oxford University Presses, Oxford. 2001.

 

 
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