On Thursday, 7 April 2016, Dr. Rob Davies, Minister of Trade and Industry of South Africa, delivered a keynote address at the World Intellectual Property Organization’s (WIPO) International Conference on Intellectual Property and Development.
On compulsory licensing, in relation to voluntary licensing, the Minister remarked:
Compulsory licenses are another avenue of policy flexibility permitted under the TRIPS Agreement that may be used as an instrument to promote domestic production where voluntary licenses are not available on reasonable commercial terms. There are several examples around the world where compulsory licenses were issued and employed successfully to ease access to affordable medicines.
Here are some key extracts from Minister Davies’ intervention.
I want to start by situating my remarks on IP protection in a wider historical view that all countries that have succeeded in breaking out of poverty and underdevelopment – beginning with Venice in the middle ages, through Britain in the 18th and 19th century, to the Asian newly industrializing economies, and to China and India today – all of them without exception have done so by nurturing a cluster of industrial activities characterized by increased, rather than diminishing, returns…
Strengthening and extending IPR regimes and enforcement are strongly advanced by countries at the cutting edge of innovation globally. One can understand that, for those countries, it is of strategic value to use IP protection as a mechanism to preserve the rent-generating and other advantages that arise from the technological capabilities built up by their firms. In this sense, such an approach could welll be understood as a de facto industrial policy and there is an argument to be made that this may need to be balanced by approriate diffusion policies in catching-up countries.
In any case, in the history of development and ‘catching up’, successful strategies always appear to have involved ‘emulation’ that requires measures that are targeted at acquiring knowledge in increasing returns activities. Furthermore, all successful catching-up episodes occurred under condition of weak IPR regimes that permitted easier knowledge acquisition and imitation. During the 19th Century, today’s advanced economies used the IP system and the flexibility it accorded in a judicious manner as they pursued their industrialization. This allowed those countries to strengthen their IP regimes at their own pace, and in support of overall progress in their economic development.
We may recall that Switzerland did not institute a national patent law until 1888. When the law was introduced, it was very narrow in scope and did ot provide protection to chemical inventions. It is argued that this allowed domestic chemical industries to develop imitative capacity. Today, Switzerland boasts some of the most innovative and accomplished chemical and pharmaceutical industries in the world. Similarly, countries such as Germany, Switzerland, France and Japan only introduced pharmaceutical product patent protection in the 1960s.
Only a handful of countries have made the transition from “developing” to “developed”. If one looks at the performance of the “Asian Tigers”, it is clear that they relied on a heterodox of policy measures to achieve industrialisation. For example, Korea’ relied less on FDI and initially acquired most of its technology through trade, reverse engineering and technology licensing. When it became competitive, its own companies began to invest heavily in R&D to develop their own innovative technology…
Strengthening and extending IPR regimes and enforcement are strongly advanced by countries at the cutting edge of innovation globally. One can understand that, for those countries, it is of strategic value to use IP protection as a mechanism to preserve the rent-generating and other advantages that arise from the technological capabilities built up by their firms. In this sense, such an approach could welll be understood as a de facto industrial policy and there is an argument to be made that this may need to be balanced by approriate diffusion policies in catching-up countries.
In any case, in the history of development and ‘catching up’, successful strategies always appear to have involved ‘emulation’ that requires measures that are targeted at acquiring knowledge in increasing returns activities. Furthermore, all successful catching-up episodes occurred under condition of weak IPR regimes that permitted easier knowledge acquisition and imitation. During the 19th Century, today’s advanced economies used the IP system and the flexibility it accorded in a judicious manner as they pursued their industrialization. This allowed those countries to strengthen their IP regimes at their own pace, and in support of overall progress in their economic development.
Singapore followed a different model. Singapore has always had an open trade regime and depended very much on FDI for its technology. While generally working with market principles, the government was heavily involved in attracting the kind of foreign investment that it believed would bring cutting edge technology that could underpin wider economic development. The development story of Singapore may be characterised as one of moving quickly from cheap unskilled labour to a knowledge-based economy. The government continued to invest heavily in education, skills and, in time, research and development. It has now become an important regional hub for knowledge-based services.
More recently, we can see that India pursued a somewhat different path in so far as it has taken advantage of the transitional provisions in TRIPS to develop a globally competitive pharmaceutical industry. By so doing, India has been able to increase global output and competition, thereby enhancing economic welfare. In the process, the industry in that country has become increasingly innovative and has sought to make greater use of the patent system.
The essential point of drawing on these examples is simply to reiterate that countries have taken different paths in pursuing economic development and they have used IP protection in different ways and at different times to support their development effort.
Opponents also contend that stronger IPR regimes can retard industrial development, as weak IPR can function as a kind of infant industry policy, allowing indigenous firms to learn from, absorb and experiment with foreign technology at low cost. In other words, establishing a strong IPR regime prematurely limits the diffusion of innovative technology more widely and by imposing high prices for patent-protected goods thereby lowering consumer welfare.
The role of patent protection in promoting innovation has also been controversial. There are arguments that patents are unlikely to foster innovation in developing countries at early stages of industrialization. The evidence on the extent to which patent protection, which is of particular relevance in the context of industrial policies, contributes to encouraging innovation is, at best, inconclusive. Some studies contend that other factors, notably ‘first mover’ advantages, are more decisive in promoting innovation.
TRIPS and FlexibilitiesHaving made all these points, it is also clear that as many developing countries pursue industrialization, they do so in the context of an international IP regime that is more constrained than it was in the 19th century. The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) establishes extensive standards of IP protection that are almost without exception legally binding on all WTO Members.
While developing countries are committed to implementing and enforcing these standards, it is also clear that the TRIPS Agreement contains flexibilities that can be exploited to craft a greater developmental role for IP protection in respect to industrialisation…
Compulsory licenses are another avenue of policy flexibility permitted under the TRIPS Agreement that may be used as an instrument to promote domestic production where voluntary licenses are not available on reasonable commercial terms. There are several examples around the world where compulsory licenses were issued and employed successfully to ease access to affordable medicines…
In doing this, we aim to harness the capabilities across the government and draw in expertise across society through a strengthened national consultative process. We have taken this approach in two recent initiatives.
First, following many delays, we have recently ratified the WTO Paragraph 6 mechanism that allows the issuance of compulsory licenses for export of medicines to countries that lack pharmaceutical manufacturing capacity. As part of the future work to give greater effect to this effort, we will engage with our regional partners to make effective use of the regional waiver contained in the Paragraph 6 mechanism to augment what are relatively small markets by harnessing economies of scale…
Second, we are now engaged in a process to strengthen the capacity of the Companies and Intellectual Property Commission (CIPC) so that it is able in due course to undertake substantive examination of patent applications. For reasons of allocation of scarce resources, South Africa has traditionally used the “depository” system in terms of which patent applications are examined to determine whether they meet the patentability criteria only if the patents are challenged in litigation. The work being done to capacitate our registry to conduct substantive examination is crucial if the patent system is to truly fulfil its intended purpose of effectively promoting innovation….
African countries have consistently strived for the promotion of IP regimes which are balanced and supportive of their public policy objectives. In recent years, there has been much debate over the extent to which the WIPO Development Agenda (DA) recommendations have been effectively implemented as well as reservations over the extent to which the development dimension has been mainstreamed in WIPO’s work. The implementation of some of these recommendations remains at best a work in progress, particularly when it comes to the delivery of technical assistance to poorer countries and the promotion of innovation and access to knowledge. Recommendation 1 of the WIPO DA underlines that “WIPO technical assistance shall be, inter alia, development-oriented, demand-driven and transparent, taking into account the priorities and the special needs of developing countries, especially LDCs, as well as the different levels of development of Member States.” Africa has also been a strong advocate for the conclusion of legally binding global norms for the protection of genetic resources, traditional knowledge and traditional cultural expressions against misappropriation particularly in the context of WIPO’s main body dealing with these issues, the IGC.
In all these efforts, we would want to be in a position to continue to call on WIPO, through the Committee on Development and Intellectual Property (CDIP) and pursuant to its development agenda, to support us to craft IP policies that support our objectives for African industrialisation. We look forward to continued dialogue and to hearing the advice and learning from experts at this conference over the next two days.
I wish us all a successful Conference and thank you for your attention.