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International policies toward protecting intellectual property rights (IPRs) have seen
profound changes over the past two decades. Rules on how to protect patents,
copyrights, trademarks, and other forms of IPRs have become a standard component of
international trade agreements. Most significantly, during the Uruguay Round of
multilateral trade negotiations (198694), members of what is today the World Trade
Organization (WTO) concluded the Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS), which sets out minimum standards of protection that most of
the worlds economies must respect. Additional international IPR rules have been
created in various bilateral and regional trade agreements and in a number of
intergovernmental treaties negotiated under the umbrella of the World Intellectual
Property Organization. At a general level, these policy reforms were driven by two
related forces.

First, the emergence of new technologies has demanded continuous adaptation of IPR
instruments. Key examples of areas in which technological developments have raised
new intellectual property questions include integrated circuits, computer software, and
biotechnology inventions. The advent of the Internet has posed special challenges to
the printing and publishing and entertainment industries, because content in digital form
can be perfectly reproduced at minimal cost.
Second, the Intellectual Property and Development process of economic
globalization has enabled intellectual property to cross international boundaries more
easily. Indeed, for many rich countries, IPR-intensive goods and services constitute a
rising share of the income they derive from their presence in foreign markets. It is
therefore not surprising to see political economy forces at work in these countries,
leading governments to raise IPR protection as a key negotiating issue in international
trade agreements.
Many scholars have however argued against the enforcement of intellectual property
rights in developing countries, and one of the strong opposers to introduction of
intellectual property rights in developing countries is Vandana Shiva.

Vandana Shiva believes that current international patent law reflects the arrogance of
western civilization. As proof she cites the case of neem, a tree with pesticidal
properties, native to India. For more than 2,000 years, Indians have developed ways to
use neem to purify air and fight disease. Knowledge of neems applications is universal
in India.

Neem does not grow naturally in the United States. Americans first imported it for
cultivation as a pesticide in the 1970s. After a decade of research and development,
the federal government began to issue patents for neem-based products. W.R. Grace
(Grace), a multinational chemical corporation, purchased many of the patents. To
ensure itself a steady supply of reasonably priced neem seeds, Grace established a
base in India. The price for neem, which had always been free or cheap, now has risen
beyond what Indian farmers can afford.

On this basis, more than 200 organizations have challenged Graces patents on neem
products. Grace defends its patents, maintaining that the company creates new
products to which it is entitled property rights. Farmers, scientists and activists, Dr.
Shiva among them, contend that multinational companies like Grace are using
international patent law and new conceptions of intellectual property to plunder the
knowledge and resources of the third world, hence her book Protect or Plunder

The debate over neem, illustrates many of the issues that transnational intellectual
property law raises in developing nations. In Protect or Plunder, Shiva presents a
passionate argument in favor of reforming international patent laws. She argues that if
the natural resources and knowledge of these countries continue to be patented by
corporate outsiders, developing nations will become beholden to industrialized countries
at the expense of their own development. Shiva opens with an examination of the
history of patents. Europeans developed patents during the Renaissance to encourage
the spread of knowledge across national borders. Individuals bringing knowledge or
technology from abroad would receive exclusive patent rights for a fixed period of time.
This gave underdeveloped countries the opportunity to acquire new technology, while
providing profits to the person who imparted the knowledge. The knowledge transfer at
the heart of the creation of the patent would now be viewed as piracy due to the
evolution of intellectual property laws.

Shiva argues that current international patent regulations emphasize the protection of
innovation, not the transfer of knowledge. She deconstructs and simplifies the
decisions that have lead to the current patent regime. She begins with the Supreme
Court decision in Diamond v. Chakrabarthy, 447 U.S. 303 (1980), which enabled living
organisms to be patented for profit.

The Trade Related Intellectual Property Rights (TRIPs) agreement negotiated at the
Uruguay Round of GATT is singled out for criticism. Trade Related Intellectual Property
Rights (TRIPs), which regulates international intellectual property laws, is too closely
styled after American patent laws, Shiva argues. American patent law and TRIPs allow
corporations to patent knowledge or inventions that are novel to the United States. The
story of neem demonstrates how corporations use these regulations to own and profit
from knowledge that has existed elsewhere for centuries simply by asserting intellectual
property rights through the patent system. American corporations plunder the third world
of its resources by placing patents on these natural products or processes and then
selling them back to the countries in which they developed. The countries in which the
patented products originated receive none of the profits, and are often priced out of a
market they created.

As Shiva sees it, the patent regime is designed to keep developing countries poor by
allowing industrialized nations access to their knowledge and native organisms. She
characterizes current intellectual property laws as instruments of colonization. She
maintains that national wealth in coming years will be based on intellectual property,
rights and argues that current international patent laws allow industrialized nations to
exploit developing nations

Shiva asserts a disproportionate amount of control. She brands the United States as
the primary colonizer because of its global dissemination of policy that permits
multinational corporations to easily obtain patents and enforce them across international
borders. TRIPs and US-Style patent laws, writes Shiva, annihilate rights of Third
World communities by not having any system of recognition and protection of
indigenous knowledge and not having any system for preventing patents claiming piracy
of such knowledge as an invention.

Should the current regulatory regime continue to allow profit-hungry multinational
corporations to patent the resources of the developing world, Shiva envisions a new
era of colonialism in which not only are we decolonized as a people, but all life forms
are colonized.
But according to the book Intellectual property and Development by the World Bank
and Oxford University Press, Intellectual property rights (IPRs) affect international trade
flows when knowledge and intensive goods move across national boundaries. They
argue that the importance of IPRs for trade has gained more significance as the share
of knowledge-intensive or high-technology products in total world trade has doubled
between 1980 and1994 from 12 percent to 24 percent.

At the international level, IPRs have traditionally been governed by several conventions,
most prominently the Paris Convention for patents and trademarks and the Berne
Convention for copyrights, which are administered by the World Intellectual Property
Organization (WIPO). In the 1980s, mounting disputes over IPRs led to the inclusion of
trade-related IPRs on the agenda of the Uruguay Round of multilateral trade
negotiations. The resulting Agreement on Trade-Related Aspects of Intellectual
Property Rights, (TRIPS) of 1994 represents the most far-reaching multilateral
agreement toward global harmonization of IPRs.

Several studies have attempted to estimate the extent to which IPRs relate to trade.
Maskus and Penubarti (1995) use an augmented version of the HelpmanKrugman
model of monopolistic competition to estimate the effects of patent protection on
international trade flows. Their results indicate that higher levels of protection have a
positive effect on bilateral manufacturing imports into both small and large developing
economies. These results are confirmed by Primo Braga and Fink (1997), whose
results for a similar model showed the same positive link between patent protection and
trade flows.

In totality, the overall effect of IPR protection on levels of bilateral trade flows is
ambiguous. From a static welfare point of view, IPRs can be viewed as a rent transfer
mechanism that worsens the international allocation of production. Most studies
conclude that the destination country loses from tighter protection, whereas the source
country is usually better off (see, for example, Chin and Grossman 1988; Deardorff
1992; and Helpman 1993). However, benefits of a dynamic nature can be identified for
both trading partners. On average, it is not clear whether these dynamic benefits can
compensate for the static losses in the countries strengthening their IPR systems and
whether tighter IPRs improve world economic welfare through their effect on trade

It is worth pointing out however that, these factors seen properly, IPRs do not
necessarily generate monopoly market positions that result in high prices, limited
access, and exclusive use of technologies. They are more similar to standard property
rights, in that they define the conditions within which a right owner competes with rivals
(UNCTAD 1996). According to World Bank, except in particular sectors, cases are
infrequent in which a patent holder or copyright owner becomes a strong monopolist.
Rather, there are likely to be competing products and technologies, including new ones
that do not infringe the property right. Much depends on the scope of the product and
process claims protected and on the technical characteristics of the invention. For
example, narrow patent claims are relatively easy to invent around in generating follow
on innovation.

Therefore, IPRs may encourage dynamic competition, even if they may sometimes
diminish competition among existing products. Advocates of strong IPRs maintain that
they create competition with long-run consumer benefits. For example, survey evidence
indicates that patent disclosure requirements are significant mechanisms for diffusing
technical information to competitors within a short period (Mansfield 1985).

The information may then be used to develop a new product or process that competes
with the original. This incremental nature of innovation is a key fact in most technical
progress. It generally builds dynamic competition rather than vesting unassailable
market power in a firm. Therefore, patents, copyrights, and other IPRs can raise the
costs of imitation but likely do not materially retard competing product introduction.
Moreover, patents and trademarks provide greater certainty to firms, lower the costs of
transferring technology, and facilitate monitoring of licensee operations.
Additional licensing could then result in greater adaptive innovation in user firms. In this
view, stronger IPRs in developing economies promise long-term growth and efficiency
benefits as they attract additional FDI and licensing and spur further follow on
innovation and technology spillovers. This outcome is far more likely, however, if the
implementation of stronger IPRs is accompanied by complementary policies that
promote dynamic competition.

In implementing stronger IPRs, as required by TRIPS, or in other policy initiatives,
emerging economies will need to strike a balance between needs for technology
acquisition, market access, and diffusion. Most nations will wish to adopt a set of IPR
regulations that do not significantly disadvantage follow-on inventors and creators,
making use of sensible fair-use exemptions, compensated compulsory licensing under
tightly defined conditions, and a carefully defined scope of protection. Furthermore, it
will be important to implement effective competition rules to ensure that IPR systems
are used advantageously. Each of these policy initiatives requires the development of
considerable administrative and judicial expertise. For example, countries may wish to
monitor the terms of key technology licensing agreements or to intervene in contracts
for the development of indigenous public resources.
For many developing countries that traditionally have not provided strong protection for
intellectual property and, indeed, host industries that rely on copying foreign Technology
and products, IPR reforms pose some special questions. For example, how great are
the costs of tighter IPRs, in particular if rights holders are predominantly of foreign
origin? One such cost relates to higher prices for intermediate and final goods, ranging
from pharmaceuticals to computer software. Quantifying potential price effects is
important when designing complementary policies and regulations that seek to soften
the effect on firms and consumers. Another cost is the loss of employment in copying
industries, which must be evaluated against the ease with which laid-off workers can
find new jobs. Again, quantifying the potential employment effects is important when
predicting possible fiscal implications and developing labor market policies that would
facilitate job transition

In principle, when a country strengthens its IPR protection, it must strike a balance
among several important tradeoffs. In a closed economy, IPRs provide incentives to
inventors to develop new knowledge and to authors and artists to create forms of artistic
expression. Thus, over time there are dynamic gains from the introduction of new
products, information, and creative activities. But from the perspective of efficiency, they
are only a second-best means of encouraging invention, because the market exclusivity
conferred by IPRs reduces current competition and may therefore lead to a static
distortion in the allocation of resources.


1. Diamond v. Chakrabarthy, 447 U.S. 303 (1980),

2. How Trade-Related Are Intellectual Property Rights? Journal of International
Economics, vol. 39, 227-248. Maskus, Keith E. and Mohan Penubarti, 1995,

3. The Economic Justification for the Grant of Intellectual Property Rights:Public
Policy and Global Technological Integration", (The Netherlands: Kluwer
Academic Publishers). PRIMO BRAGA, C.A. AND C. FINK, 1997, "

4. Intellectual Property Rights and North-South Trade", NBER Working Paper No.
2769, (Cambridge, MA: National Bureau of Economic Research). CHIN, J.C.

5. Welfare Effects of Global Patent Protection", Economica, Vol. 59, pp. 35-51

6. How Rapidly Does Industrial Technology Leak Out? Journal of Industrial
Economics, vol. 34, 217-223. Mansfield, Edwin, 1985,

7. United Nations Conference on Trade and Development, 1996, The TRIPS
Agreement and Developing Countries, (Geneva: UNCTAD).