By Vishwas H Devaiah

The world is at war over the ownership of 'intangible ideas'. The war is being waged between the developed and developing worlds. The major aggressors in this battle are giant business corporations and nations belonging to the industrially advanced world, which are attempting to combat stiff competition from industrially developing nations of the global South. But whose knowledge is it anyway? This section demystifies the debate over GATT, TRIPS, the WTO, and more.

Forging an alliance/Tools of the trade/ GATT to TRIPS: A Brief History/What's in it for me?/ MFN and National Treatment/Objectives and Principles/ Objectives/Principles/ Enforcement of Obligations/Dispute Settlement/ Transitional Arrangements/Conclusion

"He who receives an idea from me , receives instruction himself without lessening mine; as he who lights his taper at mine , receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property. Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody"

– Thomas Jefferson

"The patent system…secured to the inventor, for a limited time, the exclusive use of his invention and thereby added the fuel of interest to the fire of genius, in the discovery and production of new and useful things"

-- Abraham Lincoln

The above quotations represent the contrasting opinions of two great Americans of different eras. Significantly, the former was not only the architect of the Constitution of the United States of America, but also its Patent Administrator. Little did they know that the last decade of the 20 th century would set the stage for a global war over the ownership of 'intangible ideas.' The battle to establish proprietary rights over ‘the intangible’ has been fought at every stage and at different levels, from the legislature to the courtrooms. The major aggressors in this battle are giant business corporations and nations belonging to the industrially advanced world.

The Agreement on Trade Related Intellectual Property Rights (TRIPS) annexed to the World Trade Organisation (WTO) represents the culmination of the attempt by industrially developed countries to combat stiff competition from industrially developing nations of the global South, such as India, South Korea and Brazil, whose intellectual property rights (IPR) laws were framed to suit the needs of their own economies. For example, the fact that India did not provide product patents in pharmaceutical and agricultural chemicals allowed local pharmaceutical companies to replicate drugs by adopting a different manufacturing process. By sidestepping the IPR regulations of other countries, they were able to manufacture cheaper drugs that would be accessible to more in their home countries. Likewise, many other developing countries either provided protection to intellectual property subject to larger public policy or did not strictly enforce the IPR regime.

This paper attempts to trace the efforts made by US-based multinational corporations (MNCs) over the years to forge a formidable alliance with like-minded corporations based in the European Union, Canada, etc. The common interests of these MNCs have enabled them to lay down the rules of the 'game,' which has become the battleground between the developed and developing world.

Forging an alliance
The General Agreement on Trade and Tariff (GATT), 1947, provided guidelines for the free trade in goods. But nation states rarely followed these rules as various mechanisms within the agreement could be effectively used by member countries to escape from liabilities under the agreement. Moreover, intellectual property rights were hardly regarded as a trade-related matter when the agreement was formulated. In 1985 a new round of trade negotiations began at Panta Del Este in Uruguay, which concluded in 1994 at Marrakesh in Morocco. The formation of the WTO and a package of agreements under it were the result of these negotiations. The WTO charter is the umbrella that co-opts all the other detailed agreements, such as GATT, which provides the general rules for trade in goods, GATS for rules in services, and TRIPS for trade in ‘intangible property.’

The background to the negotiations can be traced back to when US-based MNCs, seeking to extend their monopoly to the rest of the world, began to face increased competition from Asian companies in international markets. For example, Japanese car manufacturers dominated the automobile industry, giving US companies a run for their money. South Korean companies dominated the semiconductor industry, eating into the profits of US manufacturers. This hitherto unfamiliar situation led US-based corporations to join hands to bring about a global agreement on intellectual property rights under the GATT framework on the pretext that such an agreement was essential for free trade.

The early years of the 1980s witnessed US-based multinational companies like Pfizer, IBM, Monsanto etc forging a formidable alliance called the International Intellectual Property Alliance (IIPA) to offset the 'free riding' problem. The IIPA aimed at mustering support at home for a standard IPR code that would be applicable at the global level. The IIPA coaxed other US-based companies to join in the fight against counterfeit goods as the absence of a code had resulted in stiff competition in the international and domestic markets, cutting into their market share as well as profits.

Pharmaceutical and chemical industries were affected by the phenomenon of 'their drugs' being manufactured at a lower cost in developing nations where IPR laws either did not exist or were under-enforced. The entertainment industry also suffered losses due to the ‘copy culture’ practiced in many countries of the South, with modern technology simplifying the replication of entertainment goods at a low cost, and thereby providing greater access to ‘pirated’ goods to a much larger public. The companies involved were of the opinion that such ‘free riding’ was robbing them of a chance to tap Southern markets. The emerging software industry, which had the potential to monopolise the market, believed it was vulnerable to the ‘copy culture,’ too. As a result, companies like IBM and Microsoft also advocated for strong IPR protection at the global level. As they grew in strength, the alliance was in a position to drive home the need for an international agreement on intangible property.

The US government could not afford to ignore the combined force of these powerful corporations. In addition, the prospect of expanding trade provided the option of breathing new life into a saturated economy. The strong lobbying and propaganda worked in favour of those who were demanding a global IPR regime. The office of the United States Trade Representative (USTR), which was monitoring the free trade negotiations, became the hot seat as they pushed for an agreement on intellectual property rights within the GATT framework.

Tools of the trade
There was strong opposition from many nations to the US effort to bring IPR under the purview of GATT on the ground that only trade issues could merit discussion in that forum. Even some industrially developed nations/entities, like Canada, Japan and the European Union (EU), preferred to deal with IPR at the domestic level. The initial setback did not, however, deter the US government, which was convinced that an international legal IPR regime was necessary to protect the rights of its industries. Accordingly, it adopted a three-pronged strategy to deal with the matter:

a)The dreaded '301'
Section 301 of the US Trade Act was amended, empowering the US President to suo motto hold back any preferential benefits provided to developing countries. Sometimes known as the Special 301, the amendment was effectively used to coerce developing nations into either enforcing the IPR standards prescribed by the US or/and agreeing to negotiate IPR under GATT. The USTR used to publish an annual report listing those countries under-enforcing or violating the IPR of US companies. Any country which came under the priority watchlist became vulnerable to severe pressure or even sanctions from the US.

South Korea was one of the first countries to be brought under the US scanner. The publishing industry as well as the electronic and semiconductor industries in the US had to compete with their South Korean counterparts who relied heavily on reverse engineering. Translated works of US publications found their way into South Korean markets. The arm-twisting tactics of the US government and the threat of sanctions were enough to persuade South Korea to implement changes in its IPR laws. Unilateral action under Section 301 was effective in taming most defiant countries since sanctions would mean losing out on trade which, in turn, would result in the loss of valuable foreign exchange. Unable to bear such short-term losses, most developing countries agreed to implement and enforce the IPR standards prescribed by the US.

b) One to one negotiations
Bilateral agreements between the US and developing countries were used to persuade the latter to comply with the wishes of the former. The uneven bargaining power between the two sets of actors meant that the US could call the shots in bilateral trade agreements, using the carrot of access to the sizeable US market as well as the stick of threatened denial of such access, at will, to ensure the effective implementation and enforcement of IPR laws. Countries like Brazil, Argentina, Thailand etc were forced to implement and enforce changes in their IPR laws. Thus, by the time discussions on a legal regime for IPR began within the negotiations for free trade, most developing countries had been disarmed, having already amended their domestic laws to adhere to the standards prescribed by the US.[1]

c) Taming the mighty
The persuasive efforts of the IIPR and the US government succeeded as the industries of other industrially developed countries, like Japan and Canada, increasingly bought the idea that greater protection across borders would enable them to tap Third World markets while reducing competition from the 'free riders.' However, the US faced opposition from the EU on certain issues; the latter used this as leverage to strengthen their hands in negotiating other areas of trade. The US negotiated all issues related to standards and implementation through bilateral or multilateral discussions with other developed countries. Thus it ensured that any differences between them were overcome and that, as a result, there was little opposition to concluding the discussions and adopting the agreement.

In this way the US succeeded in isolating developing countries like Brazil and India, which vehemently opposed the proposed global IPR regime. Ultimately even they had to fall in line and accept the agreement on Trade Related Intellectual Property rights (TRIPS) as WTO member countries had to either accept all the agreements under it or be left out of the organisation altogether. Although the TRIPS agreement was not in the best interests of developing countries they were left with no option but to accept it as a necessary evil.

It was through a combination of concerted and persuasive efforts -- the threat of unilateral sanction, the lure of transfer of technology, the temptation of increased access to developed country markets -- that the US succeeded in bringing about a standard agreement on intellectual property which could be enforced through the agency of the dispute settlement body (DSB) which settles disputes between WTO member countries.

What's in it for me?
TRIPS was the first multilateral agreement which obliges all member countries of the WTO to provide protection to as many as seven types of IPRs -- copyright and related rights, patents, trademarks, geographical indications, industrial designs, layout designs and trade secrets -- thus marrying trade law with intellectual property law. Although the agreement has not succeeded in 'harmonising' the law, it prescribes a minimum set of standards to be adhered to by member countries.

Lack of expertise in these matters, varied interest groups, and the larger issue of access to developed country markets worked to the disadvantage of developing nations. In the absence of an informed, united opposition, industrially advanced nations were able to set higher standards of protection to serve their own interests, ignoring the special needs of developing economies.

The several ambiguities within the agreement could be used to the advantage of developed countries. The objectives and principles of TRIPS appeared to encourage transfer of technology but this turned out to be a mirage. The precarious balance between the larger public interest and incentives to protect and promote private interests was heavily in favour of the latter. The African AIDS crisis seems to vindicate the deep suspicions articulated by some experts about the instruments of ‘exceptions to exclusive rights’ carved out in the TRIPS agreement.

The next section of this article examines some of the provisions of the agreement, such as the Most Favoured Nation (MFN) principle, national treatment, principles and objectives, transitional agreements and transfer of technology.

MFN and National Treatment
The TRIPS agreement has incorporated the principles of National Treatment and Most Favoured Nation (MFN). Accordingly, WTO member countries cannot discriminate based on nationality or origin of the intellectual property. If a member country enters into an agreement with another member country, allowing certain concessions or facilities to the latter, then such concessions and facilities must be permitted to all other member countries. For example, if 'X' country enters into an agreement with 'Y' country regarding a cut on import duties on cement imported from 'Y' country, then a similar concession has to be extended to all other member countries.

According to National Treatment, a WTO member country cannot discriminate between goods originating from other member countries and domestic goods once the former has entered the domestic markets. For example, if the Indian government imposes additional sales tax on Chinese-made auto parts which makes them expensive compared to Indian-made auto parts, that would be a clear instance of discriminatory practice.

Although these principles were incorporated into the agreement with the intention of enabling a level playing field for member countries, other instruments -- like the anti-dumping measures, countervailing duties and PhytoSanitary measures -- have been used effectively by developed countries to gain leverage over goods from developing countries.

Objectives and Principles
In the wake of the public health crisis faced by the developing world, the objectives and principles can be used to counter any narrow interpretation of the exceptions to the exclusive rights of intellectual property. They are important for interpreting other provisions of the agreement, including measures taken by member countries to meet the public interest.[2] Articles 7 and 8 of the TRIPS agreement deal with the objectives and principles, which are outlined below:

Objectives
The TRIPS agreement provides for the transfer and dissemination of technology, providing an advantage to the users of technological knowledge, subjecting it to social and economic welfare and, at the same time, balancing rights and obligations between the producers and users of such knowledge.

The objectives of the agreement are laid out in Article 7 as follows:

"The protection and enforcement of intellectual property rights 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.”

It is clear from the above that the protection and enforcement of IPR should be interpreted in a manner conducive to the social and economic welfare of member countries while, at the same time, balancing rights and obligations. Developing countries can make use of the above flexibility, which can serve the interests of the larger public (as, for example, in the area of public health) by relaxing the right of the patent holder. But, so far, such actions by developing countries have been countered with threats of unilateral sanction or disputes taken before the WTO panel.[3]

The objectives have to be kept in mind while interpreting the rest of the agreement as it envisages a situation where member countries have to promote the larger public interest – eg, through a public health policy – and, at the same time, protect the interests of the intellectual property rights holder. For example, if a member country experiences an epidemic that threatens to wipe out or otherwise seriously affect the population, then it can exercise the exceptions to the exclusive rights, interpreting them in the light of the objectives of the agreement, especially concerning the social and economic welfare of the populace. However, the threat of action by developed countries has discouraged developing countries from taking advantage of the social and economic welfare clause to formulate public health policies: sanctions and disputes tend to have adverse effects on trade in other sectors and, at the same time, drain scarce resources as international legal disputes involve substantial financial costs as well as technical expertise.

Moreover, with most IPR holders located in the industrially advanced world, no transfer or dissemination of technology is likely as most of their research and development cater to their own requirements.[4] For example, multinational companies of the developed world have concentrated on developing drugs to deal with diabetes, obesity, etc -- clearly these are not the most pressing problems facing developing countries. On the other hand, diseases like malaria, tuberculosis etc which affect the vast populace in the developing world, have developed resistance to existing drugs. But the multinational pharmaceutical companies reckon that it is not profitable to develop drugs for these diseases since they would have to price them low to make them accessible to the majority of people in the developing world.

This clearly demonstrates that the transfer and dissemination of technology in a manner conducive to social and economic welfare, particularly in areas like health,[5] has not been achieved despite the existence of Article 7. Developing countries have been unable to avail of exceptions like parallel imports and compulsory license to gain access to certain essential products, including life-saving medicines.

Principles
Article 8 permits member countries to take public health and nutrition into consideration while amending domestic laws but also asserts that the latter have to be consistent with provisions of the TRIPS agreement:

“1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

2. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.”

The reference in Article 8 to the need for domestic legislation to be consistent with TRIPS widens the scope of the agreement and throws open the door for domestic laws to be subjects of disputes before the WTO Dispute Settlement Body. In the instance of the US action against Brazil in May 2000, the former contended that Article 68 of Brazil’s industrial property law was not in conformity with TRIPS since it provided for the issue of compulsory license if there was no ‘local working’ of the patent (ie, if the patented product is not manufactured in Brazil, but is sought to be supplied only through imports, or if the patented process is not used in Brazil).[6] And that the Brazilian law enables import of a patented product or products obtained from the patented process by persons other than patent-owners, if the patent is not worked in Brazil. Brazil devised this provision to prevent patent holders from importing the patented goods and to encourage the manufacture of the goods in Brazil, which would enable the transfer of technology as well as reduce the price of the goods. It argued that its law was not in contravention of TRIPS.

However the US action demonstrates that, although Article 8 apparently provides flexibility to member nations to follow public policies in domestic legislation, the possibility of such policies being viewed as inconsistent with the agreement and the far-reaching consequences and implications of such an interpretation deter most member countries from taking advantage of the provision.

Enforcement of Obligations
Under the agreement all member countries are under obligation to implement and enforce its provisions. Each nation must ensure that an effective system is in place for the protection of the rights of domestic as well as foreign right holders, for the enforcement of these rights and the prevention of the abuse of procedures. The cost of setting up and sustaining such a system places an additional financial burden that many developing countries can ill-afford.

Dispute Settlement
The previous experience of developed countries with international IPR agreements, such as the Paris and Berne conventions, had left them frustrated, mainly because of the absence of effective enforcement and dispute settlement mechanisms. This led them to argue for the inclusion of IPR under the GATT framework as a trade issue even while developing countries were insisting on dealing with IPR issues within the World Intellectual Property Organisation (WIPO). The effective implementation of decisions on disputes would mean that developed countries could better enforce their rights. They were, therefore, in favour of the Dispute Settlement Body (DSB) set up under GATT 1994 to settle all intellectual property disputes arising under TRIPS. The decision of the DSB has some sanctity since most WTO member countries agreed to settle all trade-related disputes before it. Any non-compliance with the decisions of the DSB could lead to sanctions imposed by the member country party to the dispute. Developed countries are in a position to use this as a weapon because the process of dispute settlement is expensive and time-consuming and developing countries would be averse to wasting valuable resources through the dispute. Moreover, the possibility of sanctions in the case of non-implementation of decisions has acted as a deterrent against the use of the exceptions provided under the TRIPS agreement.

Transitional Arrangements
The agreement provides for a moratorium on the implementation of the provisions of TRIPS with respect to ‘developing countries’[7] and ‘least developed countries,’[8] with the exception of MFN treatment and National Treatment. According to Article 65, developing countries were give time until 2000 to bring in their national laws in line with the TRIPS agreement and least developed countries were given time until 2005 to do the same. The public health crisis created by the lack of access to medicines, and the pressure generated by NGOs and developing countries, resulted in the extension of the moratorium on pharmaceutical product patents up to 2005 and 2016 for developing and least developed countries respectively. However, this is only a temporary solution to the public health crisis. At the same time, the possibility of tapping superior technology is denied to them as they have to enforce the agreement in all other areas. As a result, the larger issue of access to superior technology and information remains unresolved, as the high costs of new technologies put them beyond their reach.

Conclusion
The article has attempted to highlight the circumstances under which the TRIPS agreement was brought under the WTO framework. It aims to answer some of the questions posed to developing countries regarding their lack of resistance to the inclusion of TRIPS within the WTO. TRIPS stands as testimony to the increasing power of multinational companies to dictate terms and policies to sovereign states.

The TRIPS agreement appears flexible enough for member countries to implement and promote the larger public good but the flexibility available (like the exception to the exclusive right of the patent holder) is far too limited to promote any sort of public policy. The relevant sections are so ambiguous that they nullify their stated purpose, especially in view of the constant pressure exerted by developed country members seeking to protect their own interests by restrictively interpreting the provisions.

(Vishwas H Devaiah is with the Alternative Law Forum, Bangalore.)

Endnotes:

1. Jayashree Watal (2001) Intellectual Property Rights in the WTO and Developing Countries, Oxford University Press, Oxford.
2. Carlos M Correa, Implications of Doha Declaration on the TRIPs Agreement and Public Health
3. US initiated an action against Brazil regarding the local working of patents before the WTO Dispute Settlement Body
4. Carlos Correa, Implications of Doha Declaration on the TRIPs Agreement and Public Health
5. Frederick.M.Abbott, (2002) “The TRIPs Agreement, Access to Medicines, and the WTO Doha Ministerial Conference,” Journal of World Intellectual Property, Vol 5(1)
6. Chakravarthi Ragahavan, Panel set on US complaint against Brazil over patent law, see http://www.twnside.org.sg/title/set.htm
7. Article 65
8. Article 6

InfoChange News & Features, May 2004

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