Ad-Hoc Expert Group on the Role of Competition Law and
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Ad-Hoc Expert Group on the Role of Competition Law and Policy in Promoting Growth and Development Geneva, 15 July 2008 What Role Can Intellectual Property Play in Promoting Competition and Development? by Josef Drexl Max Planck Institute for Intellectual Property, Competition and Tax Law, Munich The views expressed are those of the author and do not necessarily reflect the views of UNCTAD. 1 UNCTAD Ad-hoc Expert Group on the Role of Competition Law and Policy in Promoting Growth and Development 15 July 2008 What Role Can Intellectual Property Play in Promoting Competition and Development? Prof. Dr. Josef Drexl Josef Drexl Max Planck Institute for Intellectual Property, Competition and Tax Law, Munich Unit for Intellectual Property and Competition Law Max Planck Institute for Intellectual Property, Competition and Tax Law 2 1. Introduction Does IP really promote competition? Does IP really promote development (Technology Transfer)? What role can regulation play - On the multilateral level (TRIPS)? Prof. Dr. Josef Drexl - - On the bilateral level (FTAs)? Unit for Intellectual Property and Competition Law On the domestic level of developing countries? Max Planck Institute for Intellectual Property, Competition and Tax Law 3 2 2. Relationship of IP and Competition Position of IP Lawyers Î IP law is meant to create incentives to innovate (and to create), not necessarily to enhance competition Traditional Position of Competition Lawyers Î Concept of IPRs as “legal monopolies”; IPRs as an exception to competition Modern Economic View Î Theory of Complementarity = IPRs and competition law as two necessary elements of an integrated system that enhances dynamic competition Î IPRs exclude competition by imitation = Solving the problem of public goods (free-riding) Î IPRs do not usually exclude competition by substitution = Prof. Dr. Josef Drexl Unit for Intellectual Property and Competition Law Firms therefore compete for better products Conclusion: Developing countries should also protect competition Max Planck Institute for Intellectual Property, Competition and Tax Law Areas of Conflict Î Anticompetitive use of IPRS (licensing, refusal to license) Î Exclusion of competition by IPRs as such 4 3 3. Relationship of IPRs and Development Q: Do IPRs in Developing Countries Respond to the Need for Development? Insufficient Responsiveness of IP to Consumer Needs in Developing Countries Incentives to innovate stem from the market, not from the IP system itself Firms tend to prefer to invest in consumer needs that generate higher income (e.g., lack of investment in curing third-world diseases) “Access Problem” in Developing Countries IPRs increase the price of protected goods Developing countries cannot afford “distributory justice systems” (e.g., health care) that would ensure access to essential goods Prof. Dr. Josef Drexl Unit for Intellectual Property and Competition Law IPRs as a Tool for Development IPRs as an incentive for local innovation IPRs as an incentive for licensing (transfer of technology) Max Planck Institute for Intellectual Property, Competition and Tax Law Î Adjusting IP protection to the local level of development 5 4 4. Relationship of IP and Technology Transfer Q: Relationship of Local IP and Technology Transfer First Strategy: “Imitation” General technological basis for imitation required Need for specific product-related know-how may be required (pharmaceuticals v. complex technological products) Political pressure against imiation in a globalized world Second Strategy: Licensing Two economic advantages of licensing (1) Dynamic efficiency: Spreading knowledge, which may generate additional innovation (2) Static efficiency: Ensuring that the most productive firm produces the protected subject matter Prof. Dr. Josef Drexl Unit for Intellectual Property and Competition Law Three stages of development with regard to licensing (1) No capacity to imitate Î Licensing will not take place Max Planck Institute for Intellectual Property, Competition and Tax Law (2) Capacity to imitate Î Licensing may help if additional know-how required (3) Capacity to absorb technology Î Licensing generates local innovation 5 6 5. The Mulitlateral Dimension - TRIPS IP and Development TRIPS harmonizes IP protection at a very high level and thereby largely excludes national IP policies TRIPS creates IP protection even in countries that have no capacity to innovate. Consumers have to pay although IPRs will not enhance development TRIPS is deficient with regard to rights for which developing countries may acquire capacity most easily (geographic indications, traditional knowledge) IP and Competition WTO law does not oblige countries to have competition laws TRIPS authorizes WTO members to apply domestic competition laws to IP in some provisions (Arts. 8(2), 31(k) and 40 TRIPS) Prof. Dr. Josef Drexl Problems of applying competition law in developing countries Unit for Intellectual Property and Competition Law (1) Difficulties of enforcement with regard to cross-border licensing Max Planck Institute for Intellectual Property, Competition and Tax Law (2) Power imbalance with regard to large dominant multinationals 6 7 6. The Bilateral Dimension - FTAs IP and Development TRIPs-Plus standards (US, Japan, EFTA, EPAs of EU) MFN (most-favoured-nation) clause applies European Economic Partnership Agreements with a more balanced approach (general objective of sustainable development) EC-CARIFORUM EPA: obligations concerning technology transfer Art. 142(2): “The EC Party and the Signatory CARIFORUM States shall take measures, as appropriate, to prevent or control licensing practices or conditions pertaining to intellectual property rights which may adversely affect the international transfer of technology and that constitute an abuse of intellectual property rights by right holders or an abuse of obvious information asymmetries in the negotiation of licences. IP and Competition Only some FTAs provide for obligations on competition law (USSingapore; European EPAs) Provisions do not take the IP dimension into account Art. 142(2) EC-CARIFORUM EPA: Q: Prof. Dr. Josef Drexl Unit for Intellectual Property and Competition Law Max Planck Institute for Intellectual Property, Competition and Tax Law A duty to apply European competition law on TT also to outbound restraints? Does this provision contain a ban on export cartels? 8 7 7. Designing Domestic Strategies (Conclusions Developing countries should try to avoid IP standards that exceed their ability to imitate and absorb in the framework of their TRIPS obligations; should avoid signing FTAs that promote TRIPS-plus standards that do not correspond to their level of development or even promote “anticompetitive” IPRs; should have domestic competition laws that also apply to IPRs (at least to the extent that these countries have capacity to imitate or absorb technology); should control licensing agreements according to the standards in the EU or the U.S. (high degree of consensus); should also provide for a compulsory licensing scheme as part of their competition laws; Prof. Dr. Josef Drexl to the extent that protection hinders access to essential products (e.g., drugs), such licensing schemes may also be justified. Such schemes should be regulated in specific IP laws since such access problems only constitute a social problem provided that the competitive process is not harmed 8 Unit for Intellectual Property and Competition Law Max Planck Institute for Intellectual Property, Competition and Tax Law 9 Thank you very much! Prof. Dr. Josef Drexl Unit for Intellectual Property and Competition Law Max Planck Institute for Intellectual Property, Competition and Tax Law 10
