Part II of a two-part series of articles on international intellectual
The Paris Convention for the Protection of Industrial Property
and the Berne Convention for the Protection of Literary and Artistic
Works have been the primary treaties governing the international
protection of intellectual property for more than a century. The
Paris Convention applies to inventions, trademarks, service marks,
and industrial designs and requires each member to grant to nationals
of other members the same protection that it grants to its own nationals.
The Paris Convention also grants individual nations the discretion
to require compulsory licenses if a patentee does not work a patent.
The Berne Convention, of which the United States is a member, is
the principal international copyright convention and contains the
most detailed provisions. It protects works "for the life of
the author and fifty years." Despite its comprehensiveness,
its weak enforcement mechanisms have proved inadequate to meet the
demands created by the dissemination of information in the digital
age. The Paris and Berne Conventions have provided a reasonable
framework for the formal protection of intellectual property, but
they have largely proved ineffective for dealing with piracy in
developing nations. The international dispute settlement mechanisms
provided by the Conventions have never been effective when dealing
with developing countries because any country at the time of accession
can declare itself not bound by the Conventions' dispute settlement
provisions. Even in the absence of such a declaration, when a dispute
reaches the International Court of Justice, the losing party can
leave the relevant Convention in order to avoid sanction.
Furthermore, the Conventions have delegated important issues to
be determined by the individual nations on a country-by-country
basis. The principal complaint about the Conventions, raised particularly
by the U.S. and other countries generating information-intensive
goods and services, has been that some member nations did not adequately
enforce the rights of intellectual property owners. As a result,
industrialized nations have come to realize that effective extraterritorial
intellectual property protection, particularly in developing countries,
required stronger rules and enforcement procedures.
One method of encouraging legal reform has consisted of tying intellectual
property issues to other foreign policy issues, such as international
trade. Because information-intensive goods are a major U.S. export,
tying intellectual property protection to trade sanctions has become
an effective U.S. foreign policy tool. In the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT), provisions regarding
the protection of intellectual property rights were for the first
time explicitly made a part of a broad multilateral trade agreement.
The Agreement on Trade-Related Aspects of Intellectual Property
Rights, Including Trade in Counterfeit Goods (TRIPs Agreement),
which was part of the Uruguay Round Agreements Act, is the most
comprehensive multilateral agreement on intellectual property to
date. It achieves several important objectives for international
intellectual property protection: it covers all the main categories
of intellectual property rights; mandates that the standard of intellectual
property protection in developing countries be raised; promotes
the transparency of rules governing intellectual property; applies
the principles of national treatment and most-favored-nation treatment
to intellectual property enforcement; requires that all signatories
establish and enforce a common paradigm of intellectual property
rules; and provides for the application of the World Trade Organization
(WTO) dispute settlement mechanism. A brief explanation of the most
important clauses of the TRIPs Agreement follows.
Nondiscrimination. One of the most important features of the TRIPs
provisions is that of nondiscrimination: GATT member states must
not favor the intellectual property rights of their own citizens
against the intellectual property rights of citizens of other members,
and they must not favor the rights of citizens of one member country
over those of another. The practical result is that products produced
within developing nations by local firms are equivalent to imports
of the same product. This principle of nondiscrimination formally
establishes that importing an innovative technique, product, or
process to a developing country is equivalent to producing it domestically.
Duration of intellectual property rights. The duration of a patent
term within TRIPs has been standardized to a minimum of twenty years
from the date of filing; copyrights are standardized at fifty years
on sound recordings and at least fifty years on motion pictures
and other works. Trademark protection is established for seven years
and is indefinitely renewable as long as the trademark is in use.
TRIPs requires contracting states to expedite administrative procedures
for the granting of patents as much as possible in order to avoid
the de facto reduction in the effective life of a patent. To the
extent that this provision proves effective, it will be a boon for
U.S. businesses, which have continually been frustrated by the long
backlogs in granting intellectual property rights in developing
Scope of intellectual property rights. Throughout the developing
world, the list of products that are declared ineligible for intellectual
property protection is long, and it includes software, pharmaceuticals,
and the products of biotechnology. TRIPs expands the existing scope
of protection for trade secrets, computer programs, and databases.
In the case of pharmaceuticals, although TRIPs extends the scope
of what is patentable, it excludes natural or artificially produced
biological material, animals, and plant varieties. The exclusions
clearly represent a blow to the U.S. biotechnology industry, in
which the U.S. has a distinct comparative advantage. TRIPs also
confers on patentees the following exclusive rights: the exclusion
of third parties from the acts of producing, distributing, selling,
or importing a product subject to a patent; the exclusion of third
parties from the acts of using, selling, and importing a patented
process and full protection of the product obtained through the
patented process; and the flexibility to sell or license patent
rights. Although protection for information-intensive products is
not airtight, TRIPs represents an increase in the previous level
Licensing. This is an area where international disputes are common.
TRIPs has failed to resolve this conflict, because it allows nations
to grant compulsory licenses for "adequate remuneration"
after considering each case "on its individual merits"
and after attempting to negotiate "reasonable commercial terms"
with the holder of the intellectual property right. TRIPs specifies
that compulsory license must be nonexclusive and of limited duration,
but then puts the fox in charge of the hen house by mandating that
appeals of compulsory licenses are subject to the jurisdiction of
the nation imposing the license. The result is that developing countries
can continue to require compulsory licenses.
Transition period for less developed countries. TRIPs allows a
grace or transition period of ten years for developing countries
to extend intellectual property rights to those industries that
were previously not subject to intellectual property protection.
The TRIPs provisions do not require "pipeline" or retroactive
protection for patents that are covered under the new proposed laws
but were not protected under the old laws. Both the grace period
and the lack of pipeline protection are particularly troubling issues
for U.S. investors in the pharmaceutical sector in countries where
an enormous industry producing pirate pharmaceuticals has developed
and where displacement of workers and capital is an economic and
Dispute settlement mechanisms. Violations of the TRIPs Agreement
can now be enforced through arbitration panels. Moreover, consequential
international penalties usually can be applied to countries that
infringe patent and copyright provisions. Within this framework,
the piracy of intellectual property rights abroad could be penalized
in accordance to the WTO-TRIPs rules. After a favorable arbitration
ruling, the U.S. could, as a way to penalize the infringement of
U.S.-held intellectual property rights, by law, totally or partially
bar exports to countries found in violation of TRIPs provisions.
As a result, developing countries can no longer simply disregard
international complaints. This WTO legal framework is expected to
enhance the enforcement of patent and copyright laws throughout
the developing world. The TRIPs Agreement attempts to cure the problems
in international market transactions of high-technology goods and
services. It also benefits developing countries that have had limited
access to high technologies due to their lack of technological capabilities.
By providing clear and enforceable rules plus dispute settlement
mechanisms, the TRIPs Agreement promotes the institutional capacity
of many developing nations to absorb complex technologies. In short,
the principles enunciated in the TRIPs Agreement are an example
of international legal convergence.
Nevertheless, the international legal convergence towards U.S.
standards of protection can be extremely slow. The process of intellectual
property reform must be carried out by the developing countries
themselves. TRIPs has a ten-year transition period for developing
countries to come into compliance with increased protection for
intellectual property rights. As a result, the challenge facing
the U.S. Trade Representative is to persuade developing countries
to implement the obligations of TRIPs as fast as possible. Responses
to pressures to enact intellectual property law harmonization can
be accelerated by incentives operating on developing country governments
through U.S. foreign policy channels.
The speed with which developing countries adopt standards of intellectual
property protection in compliance with the TRIPs Agreement, however,
will depend largely upon local domestic conditions and political
pressures. The U.S. approach to intellectual property protection
has always been based upon the philosophy that intellectual property
rights were to be granted as a reward for innovation. The innovator
receives the right to attempt to profit from an invention, and society
benefits from the publication of knowledge that otherwise would
have remained secret. In contrast to this spirit, many developing
nations have traditionally used intellectual property rights as
an instrument for regulating technology transfer and avoiding paying
royalties on innovations from the developed world. For example,
in many developing countries the same government agency that registers
patents also regulates foreign direct investment and technology
transfer. Seeking to maximize scarce foreign exchange, these countries
maintained a weak system of intellectual property protection so
as to minimize the outflow of royalty payments.
The feasibility of enacting intellectual property rights reforms
sooner rather than later depends on the assessment by developing
country leaders of the costs and benefits of providing enhanced
intellectual property protection. Mandated royalty payments, resource
redistribution, and possible anticompetitive effects are perceived
by some developing countries as unbearable costs caused by the introduction
of patent protection. On the other hand, possible benefits such
as enhancing technology transfers and capital formation, disclosure
of new knowledge, improvements in health/safety standards, and global
technological dynamism have traditionally been perceived as long
term speculative gains. As a result, many developing countries have
viewed intellectual property protection as an issue that can be
subject to international negotiation and have set their intellectual
property policy ad hoc.
The impetus to harmonize standards for intellectual property protection
is dependent upon the degree to which countries involved in a trade
agreement have compatible incentives for technological development.
More specifically, countries with emerging high-growth sectors will
experience private sector pressures to harmonize their intellectual
property laws with those of countries experiencing the same changes.
Because nonagricultural trade-related sectors of the economy have
shown themselves to be the most likely sectors to have a demand
for information-intensive products, such sectors can be expected
to lobby for improved intellectual property protection for nationally-produced
high technology and for free trade in foreign high technology. Traditional
agrarian economies, in contrast, do not have the same incentive
to reform their laws in ways that protect the assets of their own
or other nations' high-growth sectors.
Finally, increased political stability is a factor that increases
the chance that developing country politicians and business leaders
will support and adopt policies conducive to long-term gains, rather
than treating intellectual property as an economic variable aimed
at avoiding the short term costs of paying royalties. With a more
stable political environment subject to periodic elections, the
political actors responsible for enacting legal reforms perceive
a more stable stake in the political system. Their chances of reelection
make them and their parties long term players in the political system
and able to capture the long term benefits derived from the legal
reforms they propose. In many developing countries, intellectual
property reforms would increase the flows of foreign direct investment
into sectors protected by patents.
The political feasibility of intellectual property legal reform
in developing nations can only occur when developing country politicians
perceive that their long term benefits of enacting a new law are
greater than their short term costs. In this context, only a stable
political environment would allow a longer professional life expectancy
where a politician would have enough time to capture the long term
benefits of his or her actions. The present relative political stability
supported by periodic elections and a greater access to public office
has created a environment where legal reforms requiring politicians
to "think long term" are more feasible than ever before.
For example, in Latin America, groups representing pirate industries
have directed flows of unsupervised financial contributions to members
of Latin American legislatures, with the intent of lobbying against
enactment of stricter intellectual property laws. These contributions
are currently unmonitored in Latin America (except in Mexico). In
order to reduce the politicians' perceived costs of supporting legal
reform, these nations would have to establish close supervision
of political campaign financing and impose stiff penalties on members
of the legislature found selling their votes. For many developing
countries, reducing political corruption would enhance the likelihood
of enacting and enforcing well-defined intellectual property rights.
Clearly, the road to higher standards of intellectual property
protection and better enforcement will be slow. But developing countries
have the goad of decades of failed development policies and disastrous
economic planning prodding them toward adopting strategies that
will allow them to develop and compete in an increasingly high-technology
driven world. In the final analysis, foreign political and economic
pressures have provided the impetus for the current wave of intellectual
property reform observed in many developing nations. The marriage
of convenience between intellectual property and international trade
issues has caused many developing nations to see the enforcement
of intellectual property as one way to gain foreign market access
under preferential terms while avoiding possible trade sanctions.
Many developing country governments are now following the bumpy
and twisting road toward market-led growth and import competition
after decades of failed development policies. Reservations notwithstanding,
the cost-benefit perceptions of many developing country political
and business leaders about intellectual property legal reform have
begun to change during the past few years. TRIPs and the expected
trade gains have tipped the balance in favor of introducing a stronger
intellectual property framework that is more compatible with U.S.
laws; the question now is how soon developing nations will implement
increased levels of intellectual property protection. At this stage,
we can expect domestic political forces to provide the essential
engine of legal reform, and regional political stability to allow
governments to be able to reap the long-term benefits of those reforms.
Nonetheless, U.S. foreign policy pressure remains necessary to keep
the momentum of legal reform going.
*Clarisa Long is the Abramson Fellow at the American Enterprise
Institute for Public Policy Research in Washington, D.C., where
she specializes in intellectual property law and the public policy
issues surrounding genetic research and the biotechnology industry.
She is also a Vice Chairman for Membership of the Intellectual Property
Practice Group. Parts of this article have been adapted from Ms.
Long's monograph U.S. Foreign Policy and Intellectual Property Rights
in Latin America (Hoover Institution Press, 1997). They appear here
with the permission of the Hoover Institution on War, Revolution
& Peace, Stanford University.