TOWARDS A PRODEVELOPMENT AND BALANCED
INTELLECTUAL PROPERTY
REGIME
World Intellectual Property Organization (WIPO)
Ministerial Conference on Intellectual Property
for Least Developed Countries
Seoul, October 25, 2004
Joseph E. Stiglitz
Columbia University and the Initiative for Policy Dialogue
THE GOAL
1. TO ENSURE THAT THE WORLD’S
INTELLECTUAL PROPERTY REGIME
PROMOTES DEVELOPMENT
2. TO IMPLEMENT THE DECISION MADE AT
WIPO GENERAL ASSEMBLY IN GENEVA ON
OCTOBER 4
3. TO ESTABLISH A DEVELOPMENT AGENDA
FOR WIPO
Knowledge and development
• WHAT SEPARATES DEVELOPED AND LESS
DEVELOPED COUNTRIES IS NOT JUST A GAP IN
RESOURCES
– A VIEW PREVALENT IN THE DECADES FOLLOWING WORLD
WAR II
– MOTIVATED THE CREATION OF THE WORLD BANK
• BUT A GAP IN KNOWLEDGE AND TECHNOLOGY
– Important not just for increasing GDP
– But for improvement in health and other dimensions of living
standards
– Reflected in 1998 WDR ‘Knowledge for Development’
SUCCESSFUL DEVELOPMENT
• NEEDS TO OVERCOME THAT GAP
– Historically, reverse engineering, copying, and
compulsory licensing played an important role
– Most successful countries developed explicit
strategies to do so
• AND TO DEVELOP TECHNOLOGIES
APPROPRIATE FOR THE CONDITIONS OF
DEVELOPING COUNTRIES
– Need to have incentives
The role of intellectual property
Knowledge, however, is not costless.
• Intellectual property provides incentives
– Long recognized
• But there are other ways in which
knowledge can be created
Intellectual property rights are
different from other forms of
property rights
• They create a distortion—a (temporary)
monopoly power
– Particularly problematic since reward under patent not
directly related to social value of contribution
• Evident in bio-piracy (patents on traditional knowledge)
• Social value related to knowledge being available earlier than
otherwise
– Social costs of distortion especially high in the case of
life-saving drugs
• Ordinarily, property rights are argued for as a
means of achieving economic efficiency
– Intellectual property rights, by contrast, result in a
static inefficiency, justified by the dynamic incentives
Knowledge as a public good
• fundamental problem is that knowledge is a public good
– In fact, it’s a global public good
• no marginal cost associated with use
• intellectual property circumscribes its use and thus
necessarily causes an inefficiency
• Key policy issue--Balancing static inefficiencies and
dynamic gains
– unbalanced intellectual property regime—say with an
excessively long patent life—leads to overall inefficiency
– In TRIPS agreement careful balancing was totally missing.
• The argument was essentially, the stronger the intellectual property
rights, the better
• But this is wrong.
Assessing costs
• Not just loss of static efficiency
– But static efficiency is important
– Patents used to create cartels (automobile)
• Losses of lives
• Losses of dynamic efficiency
– Knowledge is the most important input into the production of knowledge
• Especially of concern when patents involve ‘enclosing the commons’
• Intellectual property rights restrict access to knowledge
– Incentives for innovation with monopoly less than in more competitive
market place
– Patent conflict can impede innovation
• Development of the commercial airplane
– Much of R &D activity directed at circumventing or strengthening
monopoly
• Not at creating new products and lowering costs which enhance welfare
Does stronger intellectual property
protection promote faster
innovation?
No, if ‘too’ unbalanced
• Intellectual property only one of several mechanisms for providing
incentives and supporting research
– Trade secrets
– First mover advantage
– Public support
• Most knowledge creation not protected or protectable by intellectual
property rights
– Basic mathematical insights
– Open source movement
– Especially true of much of knowledge which is relevant for development
• Which products will work well in this environment
• What products are demanded in market
BALANCE
•
ALL PROPERTY RIGHTS ARE ‘CIRCUMSCRIBED’ IN INTERESTS OF
PUBLIC GOOD
– Endangered species act
– Zoning
– Represent ‘balancing’
•
ESPECIALLY IMPORTANT IN INTELLECTUAL PROPERTY RIGHTS
– Compulsory licensing
– Restrictions arising from concerns about excessive monopolization
• Monopolies are restricted in their right to engage in discriminatory pricing
• And in leveraging monopoly in one area into another
– Inevitable because one has to decide on standards
• What is protectable
– Business practices, genes
• Scope
• Novelty standards
– To increase likelihood of dynamic benefits traditionally has been a disclosure
requirement
• In recent cases, there has been an attempt to suppress disclosure
Alternative Ways of Funding and
Producing
There exists alternatives
• Government financed research
• Research produced by government
laboratories and universities
– Large fraction of most important innovations
IPR IS AN INEFFICIENT WAY OF
PROVIDING FINANCE
• REVENUES FOR RESEARCH
PROVIDED BY MONOPOLY PROFITS
– DIFFERENCE BETWEEN PRICE AND
MARGINAL COST CAN BE VIEWED AS A
‘TAX’
– ONE DESIRABLE PROPERTY: ‘BENEFIT
TAX’
– BUT IN MOST OTHER ARENAS, ONLY
LIMITED RELIANCE ON BENEFIT TAXES
• INEFFICIENCY AND INEQUALITY
INEQUITIES ASSOCIATED WITH
IPR
• KNOWLEDGE AS A GLOBAL PUBLIC
GOOD
• SHOULD BE FINANCED BY THOSE
MOST ABLE TO PAY
• IPR DOES NOT RECOGNIZE
DIFFERENCES IN CIRCUMSTANCES—
OTHER THAN EXTENT TO WHICH
PROFITS CAN BE EXTRACTED
IPR AND TRIPS
• INTELLECTUAL PROPERTY SHOULD NOT HAVE
BEEN INCLUDED IN URUGUAY ROUND
– NOT REALLY TRADE ISSUE
– AND IN FACT SOME ENFORCEMENT PROVISIONS ACTUAL
RESTRICT TRADE
• E.G. ON COMPULSORY LICENSING
• MOREOVER TRADE MINISTERS NOT APPROPRIATE
FORUM FOR ‘BALANCING’ WHICH IS AT CENTER OF
AN EFFICIENT AND EQUITABLE IPR REGIME
– LET ALONE ONE WHICH IS PRO-DEVELOPMENT
– EVIDENCED BY THE FAILURES OF DOHA
• DEVELOPMENT ROUND NOT TRUE DEVELOPMENT ROUND—
IPD/COMMONWEALTH REPORT
• AND EVEN RENEGED ON PROMISE OF DOHA
LEGAL SYSTEM CAN LEAD TO
UNFAIR OUTCOMES
• HIGH COSTS OF IMPLEMENTING IPR
• INCLUDING HIGH COSTS OF CHALLENGING
PATENTS
– PUTS DEVELOPING COUNTRIES AT A
DISADVANTAGE
– EXACERBATING RISKS OF BIO-PIRACY
• PRESSURE NOT TO ISSUE COMPULSORY
LICENSES AND TO HAVE STRONG IPR
REGIMES REINFORCED BY INTERNATIONAL
ECONOMIC INSTITUTIONS AND ‘MARKET’
TOWARDS AN IPR REGIME
WHICH PROMOTES
DEVELOPMENT
• It is in the interests of the international
community to have an IPR regime which
promotes development and the well being of
those in the developing world
– It is necessary to do so if the divide between the
developed and less developed countries is to be
reduced
– And if the aspirations reflected in the millennium
development goals are to be achieved
• This will require revision of TRIPs
• And that WIPO take on a greater role in defining
the appropriate IPR regime
TOWARDS AN IPR REGIME
WHICH PROMOTES
DEVELOPMENT
• IPR is a means, not an end in itself
• The IPR regime which is appropriate for the most advanced
industrial countries will be different from that which is appropriate for
developing world
– Nature of ‘balance’ will be different
• Dictum that the stronger IPR rights the better is never true
• But weighing costs and benefits is especially important for developing
countries
– Must be careful about single standards
• What is rationale behind ‘single standard’? Is there a need?
• Consistent with “conservative principle” of Commonwealth Report on a “True
Development Round”
– Recognizing the asymmetries in bargaining
– Reflected so strongly in Uruguay Round
– Especially when the standards reflect those of special interests in
advanced industrial countries
• As was the case in TRIPs
TOWARDS AN IPR REGIME
WHICH PROMOTES
DEVELOPMENT
• Will be relevant in determining every aspect
of IPR regime
– Scope
– What can be patented
– Standards for novelty
– Exceptions and limitations
TOWARDS AN IPR REGIME
WHICH PROMOTES
DEVELOPMENT
• Importance in ensuring effective competition
– Greater risk in smaller developing countries
• Importance of ensuring access to life-saving medicines
• Importance of ensuring the transfer of technology
• Importance of ensuring protection of traditional knowledge
– Recognizing special problems in creating patents
– And the dangers of ‘fencing in the commons’
• Importance of the need for impartial technical assistance, financial
assistance in creating an appropriate IPR regime within each country
and in establishing any international standards
• And legal assistance (financial and technical) to challenge patent
applications and to obtain patents in more advanced industrial
countries
– Without which, de jure there cannot be fairness
TOWARDS AN IPR REGIME
WHICH PROMOTES
DEVELOPMENT
• A NEW LENS THROUGH WHICH TO APPRAISE
EVERY ASPECT OF THE INTELLECTUAL PROPERTY
REGIME
• NEED TO HAVE GREATER VOICE TO THE
CONCERNS OF THE DEVELOPING WORLD
• A MATTER OF BOTH EFFICIENCY AND EQUITY
• UNLESS THIS IS DONE, THERE IS THE PROSPECT
OF AN EVER INCREASING GULF BETWEEN THE
DEVELOPED AND LESS DEVELOPED WORLD—
– Between the owners of intellectual property
– And the users