Archive for February, 2012
I just finished reading the WIPO report on innovation (The Changing Face of Innovation) released in November 2011, the first “World IP Report” published by the Organization.
The report confirms a point made (see TRIPS 3.0: Policy Calibration and Innovation Displacement in Chantal Thomas and Joel Trachtman’s Developing Countries in the WTO Legal System (Oxford UP, 2009) that TRIPS and TRIPS Plus have in many cases put the policy cart before the empirical horse. It seems we are just starting to identify linkages. In fact, WIPO hired its first (though highly qualified) Chief Economist (Carsten Fink) in 2009. It now has a small but very capable team. This is a major deliverable, with a strong patent focus.
The report debunks the statistical myth that patents = innovation and the (incorrect) conclusion that more patents necessarily means more net innovation. Simply put, we don’t really know. Patents are not synonymous with innovation; they are “intermediate innovation outputs” (Report, p. 29). They may lead to more commercial innovation, but they may also fail to do so for a number of reasons: bad technology; unresponsive markets, lack of funding, poor commercialization, and because patents are also used very often to fence in or block competitors. Whether that leads to more or better innovation overall seems debatable; it is admittedly possible that it does in certain cases.
Innovation rests on a mixture of intellectual property rights such as patents, but also know-how, trade secrets etc. “Innovation” is both hard to define and probably impossible to quantify. Perhaps broader correlations between GDP growth and IP metrics can be established but as I wrote in the piece mentioned above, higher IP also imposes welfare costs, which calls for calibration of the implementation at the national level including use of flexibilities.
However, the report may be making a preliminary case for higher IP protection in some developing countries. The report shows that innovation is growing faster in middle-income countries than in the “West,” and China is a spectacular example (see the graph p. 7). The metrics used are of intermediate steps like patents, however and subject to the same caveats.
I cannot summarize the full report here but two other major points are striking. First, the emphasis on open innovation. This is not a new phenomenon (see p 112) but it is growing. The report notes that some (like open source) does not require IP incentives (see p 119). It also notes that open innovation produces innovation spillovers and may allow even competitive firms better access to complementary skills and technologies (pp 95-96).
Second, the report emphasizes the push to patent/privatize publicly funded research, in particular at the level of universities. The report makes clear that universities are critical players in national innovation systems (p 139) and that basic research is mainly conducted by the public sector (p 140–and see my paper on innovation clusters here). The report identifies a long list of potential benefits AND additional costs that may arise from creating incentives to privatize publicly funded research (pp 157-158). This points clearly to the need to deepen the analysis, as many countries are debating whether to join the Bayh-Dole Club and patent ever closer to basic science (see the four models described in the box on page 145). The data are certainly noteworthy. For example, we learn that in 2009 the average tech transfer agreement by universities in Canada and the United States generated $75,000 and $436,000, respectively, though most of the income seems to reflect a few major patents.
This is a must-read. It points to the need for much more research on the impact of IP on developing countries in their various stages of development. Hopefully, this can be translated into lessons that national policy makers can use to calibrate their IP laws and infrastructure.
A proposal was reportedly floated recently by Russia to use the G20 as a platform to revamp the Berne Convention. The Convention was last revised (on substance) in 1967, and an Appendix offering developing countries a labyrinthine path to issue compulsory licenses for translation and reproduction of books was added in 1971. The received wisdom is that the Convention would never be revised because unanimity is required to revise the substantive part of the Convention (Berne, art. 27(3)). The generally held view is that getting the current membership (165 countries as of January 2012) to agree to anything is simply impossible.
This led to the elaboration in the 1980s and 1990s of a possible protocol to Berne (not requiring amendment), which in turn became the WIPO Copyright Treaty, signed on December 20, 1996.
The backdrop for the proposed changes are the massive use of digital content of course and indirectly a recognition, as I’ve argued elsewhere, that copyright has traditionally been ill-equipped to deal with mass uses where the licensee is the end-user not a distributor or other professional. Even more so, when that end-user becomes a creator of content in his or her own right. See here for a discussion on excludability and here for a discussion of user-generated content (UGC).
The approach raises a question which I found much more interesting, namely whether the “ships passing in the night” approach currently used to advance international IP norms is the best way forward. I mean by this that “pro-IP” lobbies push for ACTA and other TRIPS-Plus agreements and national measures designed to elevate the level of protection while ”anti-IP” lobbies push for separate agreements, for example on print-disabled users or libraries.
I have indicated my support for exceptions for print-disabled users. However, I also indicated that I was unsure that the “pro” and “con” discourse is misguided. A true reform should include BOTH higher and/or clearer protection of copyright where needed AND new limitations to reflect changes since 1971 and inadequacies that need to be corrected. This would be normatively balanced and politically much more palatable.
Is the Russian proposal clever? Perhaps. Rhetorically at least. It leaves aside the “unanimity” language, which tends to signal the quasi-impossibility of moving forward, and replaces it with a search for consensus. If unanimity is near-impossible (per the received wisdom), consensus is not, as the WTO, which essentially functions on that basis, demonstrates each and every day. So, a consensus reform of Berne? Here, this would mean, however, a real negotiation instead of the development of competing norm sets. Lobbies in this field have not won medals for the ability to compromise and negotiate.
The issue of geographical indications (GIs) will not go away. Some people are willing to pay more (whether or not they should is a different issue) for products that are produced in a certain region. There is at least a perception of higher quality or value, and this is what GIs and other rights (appellations of origin) aim to protect. Because GIs take time to emerge, many “Old World” countries have the advantage, as for French wines or cheeses. However, in the United States and many other “New World” countries, indications of this type (protected not as GIs per se but rather as collective or certification marks) are becoming commonplace: Napa or Niagara for wines; Vidalia for onions; Wisconsin for cheese.
Conflicts arise as when an indication is shared by two countries (“Pisco” shared by Chile and Peru) or when an Old World GI clashes with a New World non-geographic trademark (Budweiser for beer which may refer both to the Anheuser-Busch product and to the “original” one, Budějovický Budvar, from the Czech Republic).
The World Intellectual Property Organization has been operating an international registry of appellations/GIs since 1958, the Lisbon system. The system has flaws and may contain a number of administrative and substantive “irritants” which reduce its attractiveness to a number of countries. I took a detailed look at the system here. In December 2011, WIPO held meetings at which changes to the Agreement (a draft ”new instrument” reminiscent of the protocol to the Madrid Agreement on Trademarks). It made progress, according to the Chair.
The issue is also on the WTO radar because articles 22-24 of TRIPS protect GIs (GIs in general if their use is deceptive; GIs on wines and spirits even without deception) and mandates negotiations on a registration/notification system for wines, a mandate extended to spirits in the Doha Declaration (para 18). The WTO made available proposals to establish such a system.
The obstacles are more apparent than real. Companies such as food giant Kraft, which use many GIs (but not as GIs) on their products (Italian cheeses etc.) are afraid of the potential impact on their brands. However, preventing the United States and other New World countries from engaging will not prevent the establishment of GIs in other parts of the world, thus potentially restricting their export markets. It would be ironic to some if the US, a champion of IP protection had to argue against GIs in bilateral treaties, as seems to be happening in the TPP context. More importantly, the matter could be resolved by establishing a “new” register (either from scratch or with a possibility for new members to challenge existing Lisbon entries) and/or grandfathering certain GIs as was done for wines in the EU-US Wine Pact (discussed here), and by removing the irritants mentioned above. This is one case where taking a hard look at preconceived notions might be useful.