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Intellectual Property Rights Overview

This document discusses intellectual property rights (IPR) and the challenges of enforcing them globally. It provides background on copyrights and patents, explaining their original purpose to incentivize innovation by protecting inventors' work. However, intellectual property enforcement has become difficult as production has moved to developing countries with weaker protections or enforcement. Additionally, new technologies like photocopiers and the internet make unlicensed copying and distribution easy, hurting copyright holders. Overall, while IPR systems aimed to benefit societies and economies, the globalized digital era presents significant challenges to their application and enforcement across borders.

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0% found this document useful (0 votes)
88 views18 pages

Intellectual Property Rights Overview

This document discusses intellectual property rights (IPR) and the challenges of enforcing them globally. It provides background on copyrights and patents, explaining their original purpose to incentivize innovation by protecting inventors' work. However, intellectual property enforcement has become difficult as production has moved to developing countries with weaker protections or enforcement. Additionally, new technologies like photocopiers and the internet make unlicensed copying and distribution easy, hurting copyright holders. Overall, while IPR systems aimed to benefit societies and economies, the globalized digital era presents significant challenges to their application and enforcement across borders.

Uploaded by

TOBI JASPER WANG
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

A Note on Intellectual Property Rights

Jerrold J. Garcia, Armando M. Guidote Jr., and Darwin Angeles

One issue that has risen to considerable importance lately, brought about by the digital revolution, the
advent of the internet, and outsourcing of manufacturing to the developing countries, is the matter of
Intellectual Property Rights, or IPR, and the protection extended to such rights. IPR and IPR protection
are relatively new terms which have been coined to subsume the older, more familiar terms of
“copyright” and “patent”. Copyright traditionally refers to the exclusive rights granted by governments to
authors and composers over the printing and marketing of their literary works or musical compositions,
while patents are exclusive rights granted to inventors over the manufacture, use and marketing of their
inventions.

Rationale

The rationale for patents is as follows: in the absence of protection for inventors over their inventions,
society would face two problems when dealing with the production, marketing, and distribution of
inventions: the free-riding problem and the secrecy problem. In the free-riding problem, every invention
is open for all to copy. In theory, this is best for society, inasmuch as every beneficial invention is open for
everyone to use, and thus, the price for the resulting product would sink to the lowest possible level which
would cover only the production cost, together with minimal profit for the producer in the absence of a
monopoly or cartel. But the other side of the coin is that there is no incentive for putative inventors to
come up with new inventions, since the resources that they expend in inventing will take a long time to
recover if, indeed, they can be recovered at all.

Given this situation, every inventor would then keep his invention a secret, selling only to the world the
product of his invention, without revealing the method or principle that he invented; this is the secrecy
problem. Here, society loses in two possible ways: the inventor may not utilize the most efficient
production method, thus raising production cost; secondly, other people might undertake to duplicate the
research and development (R&D) efforts to produce the same product, thus needlessly expending
resources in “reinventing the wheel”.

A solution that solves these two problems simultaneously is the patent system: the inventor is required to
reveal his invention, and in return he is granted the monopoly to produce and market the fruits of his
invention. This solves the problem of compensating the inventor, the problem of inefficient
production—for the inventor may now sell or license his invention to the most efficient firm, and this
precludes other people from unnecessarily allocating resources to duplicate the invention. At least, that is
the theory. The application turns out to be far messier.

Today, in the era of high technology, patents cover consumer goods, machines, microchips (both the
production aspects and design) and, in the United States and Japan, even computer software (already
covered by copyright in their source code versions as a human readable works) insofar as they control the
actions of machines. But more than material goods, patents can also cover mere ideas, designs, and plans
for products, which may have never been implemented or put into practice, provided only that such ideas
are original, non-obvious, and the implementation of which is plausible.

Similarly, the idea behind copyright is to encourage authors or musical composers to produce written
works and musical compositions without worrying that income from their works would accrue to other
people who would pass off such works as their own.

Intellectual property, on the other hand, protects various human endeavors. It includes (a) literary, artistic
and scientific works; (b) performances of performing artists, phonograms, and broadcasts; (c) inventions
in all fields of human endeavor; (d) scientific discoveries; (e) industrial designs; (f) trademarks, service
marks, and commercial names and designations; (g) protection against unfair competition; and (h) all
other rights resulting from intellectual activity in the industrial, scientific, literary, and artistic fields
Page 1 of 18
(WIPO, 2002a).

Brief History
The recognition by states of the rights of inventors to their inventions dates back to the 1300s in
England and the 1400s in Venice, although its first formal expression in statutes date back only to the late
1700s in the United States Constitution, and in France after the 1789 revolution. Copyright, in the
modern concept, had its statutory beginning in the British Copyright Act of 1710, known as the Statute
of Anne. The present concept of copyright received its first international recognition in the Convention
for the Protection of Literary and Artistic Works, signed at Berne, Switzerland on September 9, 1886 (last
updated in 1971), now known simply as the Berne Convention (WIPO, 2002b).

Other international agreements came along over the years, finally culminating in the 1994 Trade-Related
Aspects of Intellectual Property Rights or TRIPs, one of the major agreements that member-nations in
the World Trade Organization (WTO) subscribe to. This was negotiated in the Uruguay Round of the
General Agreement on Tariffs and Trade (GATT) in 1994, and subsequently integrated into the WTO. In
2001, after some controversies surrounding the conduct of pharmaceutical companies, and other
criticisms raised by the less developed countries (LDCs), the WTO came out with the Doha Declaration,
which was basically an amendment not of the provisions itself of TRIPs, but of the interpretation of
those provisions. This new declaration has however fallen short of addressing completely the objections
raised against some provisions of TRIPs.

Enforcement Problems
Before late 1900s and the advent of high technology and the rise of developing countries like India,
China, Brazil, Mexico, etc., enforcement of patents and copyrights was fairly straightforward. This was
because most high level and modern productions were done in developed countries, which alone had the
means to establish expensive manufacturing plants, and these were also the countries, which had the
independent legislature to enact IPR regulations, and the mature judicial systems to enforce IPR
protection. Moreover, most of the consumers of the end products were also from the developed
countries who had income sufficiently high to purchase the products of their own industries. In contrast,
the less developed countries during that period generally lacked the factories, the trained technical
workers, scientists and engineers, and these countries did not have internal markets big enough for
industrial consumer and capital goods. Furthermore, in the LDCs, which were not fully integrated into
the capitalist system, the concept of IPR and their protection were not fully understood and accepted.

Today, however, many industrial productions have moved to developing nations or LDCs where
governments still do not have the capability to strictly enforce IPR rules, or may be deliberately lax in
enforcing them. For example, almost all of the sophisticated electronic goods like the smart phones,
notebook computers, etc., are made in China, India, and other developing nations, as are other consumer
goods like athletic shoes, designer shirts, and other expensive products. At the same time, due to their
rising level of affluence, the consumer base within the LDCs has expanded. As a result, production of
imitation products has also gone up in the LDCs. Thus, while the popular iPhones are being produced in
China under contract with the Apple Corporation, the Chinese have also come up with their own mobile
phones with the brand “HiPhone” which, for all practical purposes, has the same power and features as
the iPhone. Similarly, there has also been wholesale copying of the Nike running shoes and other upscale
brands of sneakers in China. Producing the genuine goods in China has given the Chinese the capability
to copy the designs and come out with imitation products, violating patent and copyright protections.

The spread of modern information technology all over the world has become a nightmare to copyright
owners. The invention and proliferation of photocopying machines, to cite an example, has made
possible the rampant copying of copyrighted books and other publications. With their numbers, plus the
fact that one can purchase and set up these photocopying machines anywhere in the world for as long as
there is electrical power available, it is practically impossible to stop the unauthorized reproductions of
books. And it has not stopped there; hundreds, if not thousands of books have been scanned and their
images are now available freely in the internet.
Page 2 of 18
In the same manner, while the steady progress of electronic sound reproduction has promoted their
business in the past, this very same technological progress in the end wrought havoc on the business
model of the big recording companies. In the old days, when vinyl phonograph records were the main
means of music reproduction, music piracy was almost unheard of. Although there were already
unauthorized reproductions of vinyl records in the 1960s, the volume of pirated music was miniscule
compared to the volume of legitimate ones sold by the big music recording companies. With the
development of the cassette tape (an invention by Philips Corporation of the Netherlands), piracy began
spreading. People started making tape copies of vinyl discs for their own private entertainment, or sold
them. But the analog nature of the music recording placed a natural limit to the extent of music piracy.
Analog copying produces distortions and noise, so that the pirated version was never as good as the
original records.

But the invention of the compact disc, the digitization of music, and the advent of the internet changed
all that. Digitization, which converts any music to a string of binary numbers 1 and 0, has enabled people
to produce perfect copies of digital music every time, thus providing the opportunity to the unscrupulous
to copy and sell the music in the compact disc (CD) medium very cheaply. With the advent of recordable
CDs, music copying could now be done even at home with the simplest kind of computers. In addition,
the development of the internet has vastly increased the incidence and geographic spread of music
sharing for free. The same thing has happened to movies and audio-visual productions. When movies
were still limited to the old film medium, movie piracy was literally nil. You would not find anybody
copying rolls of film— which would have been a very expensive proposition— except the movie studios
that produced them in the first place. With the digitization of movies and the appearance of digital
versatile discs (DVDs), however, movie piracy became rampant as discs were easily copied by the
thousands, costing only several cents each, and sold all over the developing world.

But a lot of what the music industry calls illegitimate copies of music—and perhaps, also of movies and
videos—do not end up in the underground market; these copies end up simply being shared freely all
over the world. While there is no reliable estimate as to how many thousands or even millions of copies
of music are being shared freely through the internet, it could conceivably dwarf the number of copies
being sold, both legally and otherwise. Large-scale free file-sharing started with the now-defunct Napster
system, where the music files that were being shared were first indexed in a central server, which served as
some sort of a hub for the network of file sources and recipients. The existence of the central server
was the system’s Achilles heel. The Recording Industry Association of America (RIAA) sued in court and
obtained an order to shut down the server. But the RIAA’s victory turned out to be a short-lived; for, with
the demise of Napster, the file sharers came up with a Hydra-like monster that has proved to be, so far,
immune to every effort to kill it: the peer-to-peer file sharing systems exemplified by the so-called bit-
torrent. In this system, there are no central servers that store the music files or their indices. All the digital
music files are in the individual computers of the file sharers— and there are millions of them worldwide.
Consequently, there is no central server which a court can order shut down.

In an attempt to put a stop to this peer-to-peer sharing, the RIAA decided to run after individual college
students in several universities in the US. College students all over the world are among the most
notorious file sharers. Using software that can detect file sharing over the internet, the RIAA would then
seek to identify the students who were sending out music files, often with the cooperation of the
universities who own the internet lines connected to the university dormitories. Once identified, the
students are then threatened with lawsuits unless they cease file-sharing and settle with the RIAA by
paying certain amount as fine, which strikes some people as unreasonably exorbitant. Nevertheless, while
the RIAA can put a stop to file-sharing by a handful of students at any time, one wonders how much
overall impact such action really makes, considering that at any given time of night or day, literally
thousands, if not millions, of digital music and video files are hurrying along internet data lines that span
the entire globe, as they are being shared.

One could argue that what the major recording companies are doing is trying to forestall the inevitable
Page 3 of 18
collapse of their business model, which may be compared to a dinosaur: lucrative perhaps in the past, but
hopelessly overtaken by technological progress and thus doomed. Perhaps as a recognition of this, some
rock groups like The Radiohead, and singers like Madonna, have fled the major recording firms and
moved to the smaller labels. Radiohead itself has even gone much farther, placing their music on a
publicly accessible server. Their music can be downloaded for free, although the listener can opt to pay
them what he thinks their music is worth. Surprisingly enough, their fans do pay them for the
downloaded music. Definitely this is a new business model where rock bands go directly to their fans,
cutting out the record companies as unnecessary middlemen. The bands are then expected to earn their
money by going regularly on live concerts. In this business model, downloading or sharing music for free
or with optional payment ceases to involve ethics, morality or legality. The free or nominally paid
download becomes simply more of an advertisement. The concerts are where the money is.

Discontentment with the Present IPR Rules and Arrangements


Although every member country of the WTO must subscribe to the provisions of TRIPs, the
formulation of TRIPs within the WTO actually had been a contentious issue, and remains so. Countries
have found themselves in informal alliances and groups in the IPR debates within the WTO and, as
expected, the fissure runs between the developed and the less developed countries, or the so-called north-
south divide. Actually, even before the formation itself of the WTO, there had been skirmishes in relation
to IPR protection. Two well-known incidents involved the United States (US) and the European
Commission (EC) on the one side, and South Korea and Brazil, separately, on the other.

Originally, South Korea's laws granted patent protection not to pharmaceutical products, but to processes.
Thus, if company A manufactured product X using process a, while company B also produced X, but
using a different process, b, then neither A nor B was held to have violated the patent granted to the
other. Both were issued different patents. But upon the urging of the US pharmaceutical industry, the US
government, through the US Trade Representative (USTR), threatened trade sanctions against South
Korea, in the form of excessive tariffs on Korean exports, unless it legislated IPR protection that was
more in line with the USA's patent laws, which protect both products and processes. Despite strong
opposition from its domestic pharmaceutical industry, the South Korean government buckled under
pressure from the US and enacted in 1986 a new patent law that the US demanded. In 1987, this US-
Korean settlement was amended to provide the protection to US pharmaceuticals only; but the EC took
umbrage over this and removed Korea from its General System of Preferences (GSP), which would have
resulted in a drastic reduction of Korean trade with EC countries. Consequently, South Korea had to
amend its patent laws a second time to provide protection to European pharmaceuticals too.

Brazil's was a similar case. Before 1990, Brazil did not have laws that offered sufficient protection to
pharmaceutical products or processes. In 1988, the Pharmaceutical Manufacturers of America, a trade
organization of drug companies in the US, filed a petition with the US government alleging that Brazil
did not provide protection for pharmaceutical products and processes. The US government, after
investigation, launched a retaliatory measure of imposing a 100% ad valorem tariff on some Brazilian
products including pharmaceuticals. Brazil lodged a protest against the US with the General Agreement
on Trade and Tariff (GATT) organization, the forerunner of the WTO, claiming that the absence of IPR
protection was a result of its international legal obligations. The GATT panel actually sided with Brazil;
nevertheless, the US government did not relent, but maintained the trade pressure on Brazil until the
latter, in 1990, also buckled under pressure and legislated new laws providing patent protection to
pharmaceutical products and processes.

India is yet another example, although this time the conflict occurred within the WTO already. Prior to
2005, India, like South Korea before 1987, provided patent protection only to processes, not products.
This enabled Indian pharmaceuticals to come up with the same anti-HIV and anti-cancer drugs already
produced by US and European pharmaceutical companies simply by using different processes, and to
obtain Indian patents for them. Under pressure from the WTO, and despite opposition from its domestic
pharmaceutical companies, India had to amend its laws to provide protection to products also. However,
in this case, India exacted its own price, by tightening the requirements for a new product to be
Page 4 of 18
considered patentable: it has to be more efficacious than previous and existing drugs. This “efficacy”
criterion has been used by India to deny local patents to foreign drugs, leaving Indian pharmaceuticals like
Cipla and Ranbaxy free to keep on producing copies thereof, using their patents issued prior to 2005.
Foreign pharmaceuticals like Novartis and Bayer then sued, but lost in Indian courts. Today, there is a
standoff between Western pharmaceutical companies and the Indian government, and the issue has not
been resolved, nor is there any sign that it will be resolved anytime soon.

As has been mentioned above, the LDCs have raised substantial criticisms against TRIPs. Among these
criticisms are: 1) TRIPs would hinder the transfer of technology from the industrial countries, who hold
the main bulk of IP, to IP-poor nations in Africa, Asia and South America, and offers no protection to
LDCs from the abusive behavior of corporations who own the IPs; 2) the provisions of TRIPs would
allow multinational corporations to patent indigenous knowledge and practices by local indigenous
communities in the developing world. This applies especially to agriculture and pharmaceuticals; and 3)
TRIPs is too lax to prevent the patenting of plants, animals and other organisms—the so-called “life-
patenting”, contrary to the traditional concept of patents as exclusively applied to “invention, as opposed
to discovery”.

The first objection stems from the fact that patent holders can deprive LDCs the use of patented
technology by simply withholding license to use the patent. In many cases, the patents being withheld are
“sleeper-patents” or patents that are not being used by the patent holders themselves, yet the same
owners would not allow others to utilize the technique or invention. The reason for this is that the patent
itself takes on the nature of a commodity, and the patent owner may now bide his time in licensing or
selling the patent, in order to maximize his profit. The most extreme case of this is what is now
commonly called “patent trolling”. This is a pejorative term that is applied to a company which holds a
number of patents—and simply sits on them, waiting for some unsuspecting party to infringe one or
more of the patents, at which point, an army of lawyers spring into action, hauling the offender to court
and forcing it to settle the matter most handsomely to the benefit of the patent troll.

In addition, TRIPs contains a provision that protects trade secrets. This, of course, is contrary to the
traditional concept of patents, where the patent applicant is required to reveal everything about the
invention, in return for the monopoly granted to him. Furthermore, research data submitted by
pharmaceutical and agricultural/chemical companies to licensing authorities to obtain approval for
marketing is now considered off-limits for use by other companies.

The second objection of the LDCs to TRIPs mentioned above stems from the fear that foreign
multinational corporations or any private individual could hold a patent on traditional knowledge in
healing and medicine or in agriculture. What LDCs want is, perhaps through a revised TRIPs or some
other mechanism, for the legitimate holders of traditional knowledge to have control over access to and
transmission and exploitation of traditional knowledge, and even folklore and indigenous literature. In
short, the LDCs want a kind of IPR protection over these traditional knowledge and culture that applies
to the community of traditional holders and users, and not to private corporations or individuals. That
this fear is well founded was borne out by at least two events. Two expatriate Indian scientists, together
with the University of Mississippi, obtained a patent for the medicinal use of turmeric in 1995. And as of
2007, the US patent office had issued 150 yoga-related copyrights, 134 patents on yoga accessories and
more than 2,000 yoga trademarks. All these despite the fact that Indians had traditionally been using
turmeric and practicing yoga for centuries. In 1997, the patent for the medicinal use of turmeric was
cancelled when an Indian research organization filed a protest with the US Patent and Trademark Office
(USPTO).

The third objection of the LDCs to TRIPs is that it is too lax in preventing the patenting of certain life-
forms like bacteria, plants, and other organisms. This problem was brought to the fore in 1997 when a
Texas corporation, RiceTec, obtained a patent for a variety of rice, which it called “basmati”. Now, as
every rice connoisseur knows, basmati rice is grown only in certain regions in India and Pakistan, and has
been cultivated there for centuries. Despite this general knowledge, the USPTO issued twenty patents to
Page 5 of 18
RiceTec for the rice hybrid it has developed, covering such properties as its quality, starch content,
physical properties of the plant itself and its breeding. The patent further granted RiceTec the exclusive
use of the name “basmati” for the rice hybrid it was patenting, upon the claim by RiceTec that its rice
variety has characteristics similar—or even superior—to the traditional basmati rice. It should be stressed
here that RiceTec did not obtain a patent for the genome of the basmati rice. USPTO granted patents for
the rice hybrid which resulted from crossing the real basmati rice with some American long-grain variety.
Moreover, its patent would not have prohibited Punjabi farmers from planting the traditional basmati rice.

But with the official recognition of the name “basmati” as applied to its product, RiceTec could have
competed with the global exports of the traditional basmati rice from India and Pakistan, and could have
taken away a major portion of the of the global market share of India and Pakistan, especially since the
RiceTec variety could be grown more cheaply than the traditional one. Based on its actual patent grant,
RiceTec could have barred the export of the original basmati rice from India to the US, even if only
temporarily, on the grounds of patent infringement. This propensity of Western companies to patent for
their exclusive use plants or other organisms that have been widely used for generations by indigenous
people in LDCs has earned itself a name: biopiracy, a term that has attained currency not just in common
lingo, but in legal practice as well. In 2001, as a result of the challenge to the RiceTec patent filed by
India, the USPTO revoked sixteen of the twenty patents granted to RiceTec, and more importantly, it
now prohibits the latter from calling its rice “basmati” rice. India had wanted to establish the rule that the
term “basmati” be applicable only to rice grown specifically in areas in India and Pakistan where it has
been traditionally grown, in the same way that the term “champagne” can be applied only to sparkling
wine produced in the Champagne region of France, and the name “scotch” can be applied only to whisky
distilled in Scotland.

The basmati rice controversy has been only one of the many instances of plants being patented by
individuals or companies. We shall cite briefly two other examples.

The ayahuasca vine, which is a hallucinogenic plant in the Amazon region of South America, has long
been used by indigenous people in that region in their religious rites and healing ceremonies to diagnose
and treat ailments. A patent on this plant was obtained by a private American in 1986 on the basis
supposedly of the characteristics and colorings of the plant's flower's petals, and other minor
characteristics. The patent was challenged by a non-government organization in 1999, and the patent was
revoked. But in a subsequent hearing, the patent was reinstated in 2001, based on some slim legal
technicalities. Finally, the patent expired in 2003. In any event, the patent holder in this case never
commercialized the patent, and thus never profited from his patent.

Mexican yellow beans have been grown and eaten by Mexicans since, at least, the time of the Aztecs. By
the late 1990s, export of yellow beans to the US had amounted to as much as $50 million in 2000. In
1999, Larry Proctor, an American from Colorado, managed to obtain a patent to this yellow beans, and
thereupon sued importers on the grounds of patent infringement. US import of the Mexican yellow
beans ground to a halt. The patent was finally revoked by the USPTO in April of 2008.

Intellectual Property Rights and Economic Development


To be sure, violation of intellectual property rights, in some cases, clearly involve ethical issues. Although
in the case of written works, plagiarism as an offense has been recognized long before anyone had a clear
notion of copyright, and definitely long before copyright as a legal protection entered the statute books
of any nation. The Oxford English Dictionary traces the usage of the word “plagiarism” to early
seventeenth century, being derived from the Latin noun plagium which means a “kidnapping” or the verb
plagiare which means “to kidnap”. Hence we can say that plagiarism, as an ethical concept, predates
formal IPR and is not dependent on it; plagiarism today would still be plagiarism anytime and anywhere
even if all governments were to expunge copyright laws from their statute books.

In some other cases however, the ethical issues are fuzzy at best. But in all cases, one thing is certain: at
the level of the individual or corporation, IPR is an instrument for maximizing profits and income, and
Page 6 of 18
intellectual property—as property—may also be treated as a commodity at the same time, to be bought
and sold. At the national level, IPR, generically, is also used as an instrument of economic and trade
policies. A nation that is blind to this reality and considers IPR as a purely ethical issue, is doing so at its
own economic peril.

In the lofty provisions of TRIPs, the ideal world where intellectual property rights are respected and
protected everywhere is a benign and beneficial world, both to countries which possess most of the IPs,
and the LDCs which possess a meager number of IPs. The more developed countries are assured of
income from the fruits of their IPs, while the LDCs, as long as they protect the IPRs with their own local
laws, are assured of technology transfer which would hasten their own industrial development so that
they too would be transformed from being net users of IPs into net producers of IPs. This Pollyanna
vision of the world, however, clashes with reality. In the first place, the LDCs lack the trained scientists,
engineers, and skilled technicians for effective transfer of technology to take place. This systemic
bottleneck on the part of the technology-recipient country is a problem that defies easy solutions. A
country cannot build up its skilled manpower complement if there is not much industrial activity going
on; on the other hand, there cannot be much industrial activity taking place if there is not enough skilled
human resources—the classic chicken-and-egg conundrum.

Secondly, it is naïve even of those who formulated TRIPs to think that industrial giants and multinational
corporations would so easily agree to technology transfer and thereby create potential future competitors.
To many industrial conglomerates, the IPs they hold are oftentimes considered part of the crown jewels
of the corporation. What these companies do at times is reveal their inventions and/or designs, as
required by the laws on patents, but only up to a certain extent, while they hold on to key pieces of
information. Furthermore, by the very own provisions of the TRIPs, trade secrets and data exclusivity are
now allowed. And thirdly, corporations can simply take their own sweet time in sharing technology with
LDCs.

Meir Pugatch (2004), in his book, The International Political Economy of Intellectual Property Rights, cites
economic analyses which show that it is, in fact, more advantageous for an LDC with meager possession
of IPs to simply opt out of the international system of IPR protection: essentially, what the LDC gives
up in losing international protection over its own IPR is nowhere close to what it gains by not extending
protection to IPRs of companies from developed countries, and to be a free-rider on the IPs of
industrialized nations. But again, this could hold only in a world that is totally compartmentalized. In
reality, a country that refuses to protect the IPRs of multinational corporations would swiftly find itself
under trade sanctions by the developed countries. This is a stark illustration of the saying from the Melian
dialogue: “Strong nations do as they will; the weak do as they must.”

To elucidate this further, recall that the owner of a patent is granted the monopoly to manufacture and
market the products resulting from his patented idea. This monopoly extends to the export of the said
products. Any importation of the product by a foreign country, which does not originate from or is not
authorized by the manufacturer, is, under present regulations, a violation of the manufacturer's IPR. To
illustrate, suppose that Apple, for business and profitability considerations, decides to ban the sale of the
iPad in the Philippines. Then, not only does Apple stop exporting this computer to the Philippines, but
no other trading company is allowed to ship it to the Philippines—because it would violate Apple's IPR.
Now, under the TRIPs provisions of the WTO agreements, the Philippines is supposed to enact local
laws to protect all companies' IPR. Hence, if a local computer trading company were to import iPad from
a foreign source, the Philippine government is obligated to block the unauthorized—and therefore
illegal—importation of the computer. In other words, you have the situation where the Philippine
government enforces a blockade imposed by a foreign company against its very own people.

Yet, there is the example of China, as mentioned in the opening part of this article, which drags its feet
on IPR protection—making imitation smart phones utilizing advanced electronics, imitation athletic
shoes, imitation designer bags, etc. On the surface, it may look just nothing more than simple piracy,
copying patented products. But there is more than meets the eye here. The Chinese are not just copying
Page 7 of 18
or pirating Western products. More than that, the Chinese are in the midst of a learning process: learning
to make smart phones, learning to manufacture athletic shoes, learning to design and manufacture its own
version of expensive designer bags with the same—if not better—quality. This goes hand in hand with
the fact that China has flooded the West with Chinese students, with more than a hundred thousand in
just the United States alone. At some point in the future, the Chinese will have learned enough, through
reverse engineering and legitimate training, to design their own technology and manufacture their own
products, and when that day comes, we can expect piracy in China to come to an end, and for it to
become an ardent and militant defender of intellectual property rights. This is a familiar development
trajectory that has been observed before. China is simply following the footsteps of those who came
before it—Taiwan, South Korea, even the United States during its early history.

In the meantime, its immense productive capacity serves as an armor protecting China from retaliatory
measures by industrialized nations even with its blatant IPR violations. The industrialized nations need
the booming productivity of Chinese factories and workers to turn out the goods that the world's Wal-
Marts sell. To impose trade sanctions on China—to the extent that would really hurt the Chinese
economy—is just simply inconceivable. Take China out of global trade and the world economic system
would promptly collapse. And neither does it hurt China that it happens to hold almost a trillion dollars'
worth of US debt notes. Any country armored as such can thumb its nose at any “inconvenient” IPR
rules and get away with it without much more than a verbal slap on the wrist delivered most gingerly.

Intellectual Property Rights and Public Health


The disease known as Acquired Immunodeficiency Syndrome (AIDS) was first observed in the United
States in 1981. In 1983, the retrovirus that caused the disease, the Human Immunodeficiency Virus (HIV)
was identified in two laboratories in the US and France, almost simultaneously. Although there is yet no
permanent cure for HIV infection, or vaccine against it, there are a few drugs that have been synthesized
that could reduce the viral count to practically undetectable level, and ward off the opportunistic
infections that are the ones that actually kill the patient. With these modern anti-retroviral drugs, the
effects of the HIV could be mitigated so that the disease becomes chronic instead of being fatal.

Spread through intravenous drug usage, indiscriminate sex, and tainted blood supply, HIV spread most
extensively in sub-Saharan Africa. By 1991, HIV had become a raging epidemic in Africa, which had more
than 71% of worldwide HIV cases. The Joint United Nations Programme on HIV/AIDS (UNAIDS)
estimated that a quarter of a million died of AIDS in South Africa alone in 1991. Given the prices of the
anti-viral drugs during that decade, all the governments in that region of Africa would have gone
bankrupt before they could provide the necessary drugs to all their HIV-positive citizens. Alarmed, the
government of South Africa in 1997 passed a new law that would allow local production of anti-HIV
drugs and parallel importations from other sources, even if it entailed the extreme measure of revoking
the patents in South Africa held by multinational pharmaceutical companies.

A group of thirty-nine companies, including GlaxoSmithKline, Hoffmann-La Roche, Squibb, and Merck,
filed a lawsuit against the measure, with the support of the US and the EU. On the other side,
international NGO's like Médicins Sans Frontières (MSF) and Oxfam banded together in an anti-patent
campaign and brought the controversy to the attention of the entire world. Oxfam, in particular came out
with two publications in 2001: “Patent Injustice: How the World Trade Rules Threaten the Health of
Poor People” and “Fatal Side Effects: Medicine Patents Under the Microscope.”

By the time the case was heard in the High Court of Justice in Pretoria in March 2001, the international
outcry against the pharmaceutical companies had become so strong and loud that the companies found
themselves as defendants instead in the court of public opinion. The government of South Africa
continued with its plans, the US government quietly disengaged itself from the controversy and
disappeared into the shadows, and finally, the pharmaceutical companies themselves withdrew their suit
and entered into a compromise agreement with the government of South Africa, allowing the latter to
manufacture the anti-HIV drugs locally and to import the same from other sources (notably India),
subject to restrictions like prohibition against exportation, or re-exportation, in the case of imported
Page 8 of 18
drugs.

That was the first major confrontation over IPR between a government concerned with public health
problems and IP-owners. The next confrontation would come a few months later.

One month after the 9/11 terrorist attack on the United States, there followed an anthrax scare, when
several letters were sent to television networks and offices of some US senators. When the envelopes
were opened, out came white powder which contained anthrax spores that attack the pulmonary system.
A few people died and several were hospitalized. The population panicked, and the US government
decided to set up an emergency stockpile of Cipro, a ciprofloxacin-based antibiotic produced by Bayer.
When Bayer said it could not, and would not deliver millions of tablets of Cipro within the deadline set
by the US government, the latter threatened to authorize the manufacture of the antibiotic by other drug
companies, the Bayer patent notwithstanding; Bayer protested, invoking its IPR. In the end, the US did
not push through with its threat; Bayer and the US government settled the matter between themselves,
with Bayer ending up reducing the price of Cipro by about 50%, although it would still have been unable
to supply adequate amount of Cipro, had the anthrax incident turned out to be a full scale terror attack
on the Americans. What Bayer managed do was to stave off successfully the threat to its IPR, even if
only temporarily.

Partly as a result of this incident and of the South Africa HIV drug controversy—the hypocrisy in both
not lost on the LDCs—a group of developing countries led by India, Brazil, and Kenya submitted to the
WTO a proposal seeking modifications to the TRIPs agreements regarding pharmaceutical IPRs. Among
the items in the proposal was the statement that “nothing in the TRIPs Agreement shall prevent
Members from taking measures to protect public health”. This statement was incorporated in the Doha
Declaration of 2001, although the declaration itself did not in the main amend the provisions of TRIPs,
but merely clarified the interpretation of the TRIPs provisions.

Consequently, by the official interpretation of TRIPs today, a member nation of the WTO may issue
compulsory licenses to other companies to manufacture drugs, regardless of the patent held by a
pharmaceutical company, if public health so dictates; similarly, it may also authorize parallel importation
of drugs from other sources, again regardless of the existing patents. However, the Doha Declaration
also reiterated that pharmaceutical IPRs are an integral part of the TRIPs agreements. While this may
seem to have diminished the rights of the pharmaceutical companies, at least during public health
emergencies, Pugatch (2004) asserts that it also has left the pharmaceutical companies in a strategically
stronger position, for the LDCs effectively acknowledge that pharmaceutical IPRs are not obstructions in
the promotion of public health and access to affordable drugs. Thus, if a singularly resistant epidemic
were to spread, the pharmaceutical companies could use that as an argument for tightening of the TRIPs
provisions on the ground that a diminution of their IPR does not after all help to check a public health
menace.

Intellectual Property Rights and Innovation


IPR protection is supposed to encourage R&D and thereby promote innovation, leading to newer
products and industrial growth. That is the theory, but is it necessarily true? The answer seems to be a
mixed bag. In some cases, yes. To be fair to pharmaceutical companies, developing a drug involves very
expensive clinical trials; if the companies are not provided IPR protection over the resulting drugs, then it
is understandable if they would not even start the research process at all, and come out with no new drug.
In this case, therefore, we can say that IPR protection does lead to R&D and innovative drugs. But the
bone of contention here is not the existence of IPR protection, but the level of protection
pharmaceutical companies are entitled to (see Box 1 for the case of Omeprazole and Esomeprazole). On
the other hand, in general, once a technology is patented, other firms tend to keep out of it for fear of
any litigation for patent infringement. Consequently, if the original patent owner does not develop it any
further or is incapable of doing so, that technology stagnates and may eventually die unless somebody
picks it up and develops it further when the patent expires after seventeen years. In this case then, the
answer is a definite no.
Page 9 of 18
Box 1. The Patent of Esomeprazole: Is it Fair to the Public?

Gastric acid secretion is a normal biological activity that happens as a result of stimuli related to food.
The stimuli can be actual consumption but can also be caused by smell, sight, and thoughts. Excessive
activity results in Gastroesophaegal Reflux Disease (GERD) and peptic ulcers. These are characterized by
stomach pains, uncontrolled burping, and bloated feelings. Patients can have difficulty sleeping due to the
pain, which can range from mild to severe. Patients are advised to sleep inclined using several pillows so
that the acid does not go up the esophagus. Millions are affected by these conditions that are also age-
and stress-related.

The accepted process of gastric acid secretion happens in the parietal cells. See Figure 1 below.

Figure 1a. Acid generation in the parietal cells. Figure 1b. Conversion of Omeprazole to active form. (Olbe, Carlsson &
Lindberg, 2003)

Acid production starts with the stimuli activating the receptors: Histamine H2, Muscarinic M3, or CCK2.
Any or all of these, result to the activation of H+K+-ATPase, which is the final step in acid production.
H+K+-ATPase is the one targeted by proton pump inhibitors like omeprazole.
Shown in Figure 1b is the conversion of Omeprazole to its active form – the Suphenamide intermediate.
This reacts with the H+K+-ATPase making it unable to produce acids.
A breakthrough to controlling excessive gastric acid secretion was made through AstraZeneca’s developed
drug, Omeprazole. This is described as a proton pump inhibitor. Unlike other drugs, this stops the
production of gastric acid. Earlier remedies to GERD and peptic ulcer are antacids. These are considered

Page 10 of 18
inferior to omeprazole as they have side effects of rebound hyperacidity and alkali effects due to the
metal cation in the antacid. Other drugs inactivate only certain receptors leaving other receptors open for
the activation, and thus the inability to control gastric acid secretion. Omeprazole has proven to be
superior to other drugs to alleviate and control GERD and peptic ulcers.

AstraZeneca has invested substantially to the development of Omeprazole. It is only fair that they recoup
and benefit from such investment through the patent system. And rightly so! Omeprazole was a
blockbuster drug. The protection for this intellectual property has been disclosed as early as 1988. In the
Philippines, the patents were granted in 1994, 1998, 2001 and 2002.

Omeprazole structure

Omeprazole has a three-dimensional nature like any other molecule and is a chiral molecule. Being chiral
means that there are two kinds that are mirror images of each other. The two are different from each
other much like a left hand glove is different to a right hand glove.

Figure 2. Omeprazole structure

Chirality is brought about by the four different substituents in the sulfoxide group including the unshared
electron pair.

Figure 3. Mirror-image structures of components of Omeprazole. The left structure is Esomeprazole or (S)-Omeprazole.
Solid wedge from the S atom goes towards the reader. The broken wedge from the S atom goes away from the reader. The
other two bonds from S, the S=O and the single bond are on the plane of the paper.

Omeprazole is a drug that contains a mixture of two molecules that are mirror images of each other
(Figure 3). They are manufactured using one process that yields the two products at the same time in
equal amounts.

With the lapse in the patent of Omeprazole, other companies were able to manufacture the drug freely.
Competition has brought prices down. This has benefited many patients specially those who are
financially challenged.

Page 11 of 18
AstraZeneca continued its search for a better drug than Omeprazole. Based on their studies, (S)-
Omeprazole or Esomeprazole fared better than other candidate molecules, (R)-Omeprazole and
Omeprazole, which is a mixture of the (R)- and (S)- mirror image molecules.

The issue here: Is Esomeprazole patentable?

An invention that forms part of prior art is non-patentable due to the invention’s lack of novelty. In this
regard, prior art means anything available to the public anywhere in the world before the filing date or
priority date of the invention patent application.

An invention is non-patentable if it lacks an inventive step. It is not patentable if the invention claimed, in
the context of prior art, is obvious to a person skilled in the art at the time of the filing date or priority
date of the patent application. In other words, an invention lacks inventive step if the difference between
the invention and the prior art does not go beyond the normal progress of technology or merely follows
plainly or logically from the prior art.

Is Esomeprazole part of prior art? Esomeprazole is part and parcel of Omeprazole. It has been used to cure
GERD and peptic ulcers.

Was there an inventive step in the preparation of Esomeprazole? Esomeprazole is obtained when omeprazole is
prepared. It comprises 50% of the yield of Omeprazole. It is obvious to anyone skilled in chemistry that
it can be separated from the (R) mirror image by standard processes like the formation of diastereomers
or the use of chiral chromatographic columns.

Is this fair to the public?


Esomeprazole is sold at almost 4 times the price of a generic Omeprazole. Some medical doctors
continue to prescribe Esomeprazole despite the lack of difference in effect between Omeprazole and
Esomeprazole. Whether it is Esomeprazole or its (R) mirror image, it does not matter. Both are
converted to the active drug which is the Sulphenamide intermediate (see Figure 1b). With a patent, only
one company can sell Esomeprazole. If the patent is cancelled, other companies can produce or sell
Esomeprazole – this results into lower prices.

Is it really fair?
The company who filed for patent cancellation of Esomeprazole is allowed to produce or sell
Esomeprazole. Other companies cannot do this. They must file separate patent cancellation cases.

Was it fair for Esomeprazole to have been granted a patent in the first place?

And then there are the patent trolls. One of the celebrated cases involving a patent troll was the patent
infringement suit filed against Research in Motion (RIM), the maker of the well-known BlackBerry phone
and e-mail system, by NTP, Inc., a previously unknown company whose only possessions were patents for
a crude wireless e-mail system which the company simply sat on since 1985. In 2001, NTP sued RIM for
infringing five patents it owned, and RIM lost the initial cases in court. Although RIM could have
continued the court battle (towards the end, the USPTO in fact had rejected three patents of NTP) RIM
decided to settle the case out of court to the tune of $612.5 million, for fear that further litigation would
place its more than three million US subscribers in jeopardy, and would trigger an exodus of its clients.
Clearly, here we had a case of a patent troll intimidating a large innovative company servicing millions of
subscribers worldwide, with a patent infringement litigation. By no stretch of imagination can one say
that the patents held by NTP helped promote innovation. To the contrary, one could even say that
innovation by RIM occurred despite the patents held by NTP and not because of them.

In this country, there have been quite a number of articles in newspapers and magazines warning the
people against patronizing pirated products from fake Guccis to bootlegged DVDs and CDs, and against
Page 12 of 18
installing unauthorized software in their computers, citing the threat that foreign investments in the
country would dry up if rampant piracy is not stopped. While there may be a hundred other valid reasons
why the government should put a stop to the sales of pirated products, foreign investments definitely is
not one of them. China is one country where a lot of pirated products originate. Yet China is also the
very same country where foreign companies from the US and EU are falling all over themselves in setting
up branches and subsidiaries. As an example, Intel, the world's No. 1 microchip manufacturer, has opened
a $600-million plant in Chengdu. This is in addition to its semiconductor research facility already existing
in Beijing. In contrast, Intel Philippines shut down its entire operations in early 2009. And the Philippines
is no way in the same league as China when it comes to piracy, nor is the Philippines any threat to the
Intel IPRs. If anything at all, this only shows some of the myths that Filipinos believe regarding IP and
IPR protection, myths that have been spawned by multinational corporations themselves.

Intellectual Property Rights and Human Rights


In a curious twist to the issue of IPR, this property right has been used by the government of Russia to
crack down on dissent in that country. In dozens of cases, Russian police raided the offices of advocacy
groups and dissenting newspapers, confiscating computers on allegations that they contained pirated
software. And the police found a staunch ally in Microsoft. In the words of the New York Times reports,
“As the ploy grows common, the authorities are receiving key assistance from an unexpected partner:
Microsoft itself. In politically tinged inquiries across Russia, lawyers retained by Microsoft have staunchly
backed the police. Interviews and a review of law enforcement documents show that in recent cases,
Microsoft lawyers made statements describing the company as a victim and arguing that criminal charges
should be pursued.”

One well-known case of suppression that made it to international news headlines involves the Baikal
Environmental Wave, an environmental group that has been protesting the reactivation of a paper factory
that had been polluting Lake Baikal in the past. In January 2010, the police raided the office of the Baikal
Wave in Irkutsk, Siberia and confiscated twelve computers allegedly containing pirated software. The
group leaders protested that they have been using duly licensed Microsoft software, and reached out to
Microsoft, asking for confirmation that their software was legally acquired. Microsoft refused, and its
local lawyer in Siberia testified on the value of the software that was supposed to have been pirated.

Only after the New York Times ran an extensive article on the case in September 2010 that Microsoft
started backpedaling on its stand that the alleged software piracy case be filed in Russian courts. Microsoft
issued a statement that it would no longer support the Irkutsk police on the alleged case of software
piracy. Moreover, a Microsoft spokesman issued an apology, acknowledging not that Microsoft had been
wrong in failing to confirm that the software had indeed been legal, but that “Microsoft needed to
address the damage to its image”. In other words, Microsoft was not concerned about making a
principled stand on whether in fact there was piracy or not. It was more concerned about its image.

Alternative IPR Protection


The perception that conventional IPR protection, i.e., the usual laws on patents and copyright actually
hobble not only technological innovation but also enjoyment of, and creativity in the arts, has led to
alternative IPR protection systems that radically differ from the conventional one. The first one is the so-
called “copyleft” protection, a play on the term “copyright”. The copyleft license protection was designed
especially for computer software, although it is also applicable to documents, music, and art. Under the
usual copyright protection, an author prohibits other people from distributing, selling, or modifying his
works. It is the author who sets the conditions of his copyright protection. In the copyleft license, the
author uses the conventional copyright law, but changes the conditions radically. First, the author grants
everyone the right to distribute his work freely and, most importantly, to modify his work, but with the
proviso that the derived work as a result will not have a more restrictive copyright protection than the
original one. It goes without saying, of course, that the source code (the human-readable program) for
every machine-executable software must be freely available also, under the so-called “open-source”
system. Since the copyleft protection is actually based on the conventional copyright laws, the original
author of a copyleft-protected work can sue a downstream author if the latter tries to clamp more
Page 13 of 18
restrictive conditions on the ownership or possession of the work in question or its derivatives. (As with
the usual copyright protection, one can go around the copyleft protection provided it is within the so-
called “fair-use” regime. But this is not a significant deviation from the main conditions).

The other alternative IPR protection, which shares a significant similarity with the copyleft protection that
many people do not put a distinction between the two, is the Creative Commons Licenses. The author
registers his work with the Creative Commons, a non-profit organization based in San Francisco,
California, which in turn issues licenses to those who want to make use of the registered work (the
licensees). These licenses are issued by the Creative Commons (Creative Commons, 2012) in San
Francisco, California. The licenses granted, which depend on the wishes of the author, may be one of the
following or combinations thereof:
 attribution: the licensee can distribute, make copies, display, perform, modify the work, even for
commercial purposes, provided he gives credit to the author
 non-commercial: the licensee cannot use the work or any derivative thereof for commercial
purposes
 no derivative work: the licensee can distribute the work, copy it, perform it, provided he does not
modify it or produce any work derived from the original work
 share-alike: a licensee can produce and distribute derivative work, provided it is done on license
identical with the license on the original work.

According to [Link], there were already 1.4 billion works licensed under Creative
Commons as of 2018.

Ultimately, despite the complex issues surrounding IPR, efforts to recognize and protect these should
encourage innovators, inventors, composers, authors, designers, and artists to continue their creative
endeavors.

Page 14 of 18
Guide Questions
1. What does IPR cover?
2. Why is there a need for IPR?
3. What are the antecedents to IPR?
4. Why is IPR difficult to enforce?
5. What are issues against IPR rules and arrangements?
6. What are the alternatives to conventional IPR protection?

Points for Reflection


1. Why is IPR protection important to science and technology?
2. Why is IPR relevant to our society?
3. In what instances do IPR become unfair and oppressive?

Page 15 of 18
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Page 18 of 18

Common questions

Powered by AI

LDCs criticized the TRIPs agreement for hindering the transfer of technology from industrial nations to IP-poor countries, jeopardizing local innovation and economic growth. Specific concerns include permitting multinational corporations to patent indigenous knowledge and practices without safeguarding local communities. TRIPs provisions also inadequately prevent the patenting of life forms, threatening traditional practices. These issues are closely linked to public health because restrictive patent rules can limit access to affordable generic medicines, crucial for tackling health crises in developing nations .

The TRIPs-induced changes required India to extend patent protection to products, not just processes, affecting its pharmaceutical industry by limiting simple process modification as a strategy to bypass patents. Indian pharmaceutical companies like Cipla and Ranbaxy adapted by focusing on producing more efficacious drugs, as the law now requires significant advancement over existing ones for new patents. This has encouraged innovation but also led to legal clashes with foreign pharmaceutical firms such as Novartis and Bayer, which have largely been unsuccessful in Indian courts .

The United States and European Commission reacted negatively to South Korea's initial patent laws, which protected processes but not products, by exerting economic pressure. The US threatened trade sanctions unless South Korea amended its laws to align with US standards, leading to the creation of new patent legislation in 1986 favoring US pharmaceuticals. When this amendment didn't accommodate European interests, the EC removed South Korea from its General System of Preferences, prompting further legal changes to protect European products as well .

Conflicts such as those between the US and South Korea, and Brazil demonstrate the tensions arising from differing patent laws. In both cases, these countries initially provided patents only for processes, not products, which allowed local industries to produce similar products without infringement. Developed nations, through economic pressure and threats of trade sanctions, forced these countries to amend their laws to align with Western standards, emphasizing protection for both products and processes. This highlights a broader north-south divide, where developed countries push for stringent IPR rules that can disadvantage developing nations .

Creative Commons framework offers alternatives to traditional IPR protection by allowing content creators to grant permissions through a standardized set of licenses. These licenses enable creators to specify how their works can be used, shared, and modified, thereby offering flexibility in use and encouraging creativity. For instance, licenses can authorize non-commercial use, require share-alike distributions, or permit derivative works. This system supports creators who want to encourage broader dissemination and use of their work while maintaining some control over it .

The new business model for rock bands involves placing their music on a publicly accessible server where fans can download it for free, with an option to pay what they think the music is worth. This approach eliminates the need for record companies by allowing bands to go directly to their fans. Record companies traditionally acted as intermediaries, but this model cuts them out as unnecessary middlemen. Bands instead aim to earn their revenue through live concerts, repositioning the free or nominally paid downloads as more of an advertisement .

The Doha Declaration clarifies that nothing in the TRIPs Agreement should prevent WTO Members from taking measures to protect public health. It allows nations to issue compulsory licenses or authorize parallel imports of drugs regardless of patents to address health emergencies. While this provision seems to diminish pharmaceutical companies' rights, it nonetheless affirms the protection of pharmaceutical IPRs as central to TRIPs. The declaration provides legal backing for countries to prioritize public health over strict IPR enforcement during pandemics or crises .

Compulsory licensing under the Doha Declaration allows countries to bypass pharmaceutical patents to manufacture or import generic versions of life-saving drugs during health emergencies. This approach has been utilized by several countries to ensure access to essential medicines without the financial burden of patented drugs. It provides a mechanism for public health prioritization over strict IPRs, thereby aiming to balance the needs for innovation incentives with broader societal health interests .

Life-patenting provisions under TRIPs potentially allow corporations to patent plants, animals, or other organisms, which can undermine traditional agricultural practices and threaten biodiversity in developing countries. This poses ethical concerns as local communities could lose access to resources they have cultivated and used for generations. Additionally, it may lead to exploitation by multinationals seeking patents on indigenous flora and fauna without adequate benefit-sharing agreements, destabilizing rural economies .

IPRs are intended to incentivize innovation by protecting the investment required for R&D, particularly in the pharmaceutical industry where high costs are involved in drug development. However, once a technology or product is patented, other firms may steer clear due to litigation fears, which can stifle further development unless the original patent holder continues innovation. Thus, IPRs can both promote and hinder innovation, depending on the industry's existing dynamics and how the protection level is managed .

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