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IPRs, Innovation & Development Keith E. Maskus UPF, Barcelona June 11, 2005 Questions raised What is the ¨current system¨? Which IPRs do we mean? What do we mean by innovation and are IPRs a stimulus? The current system TRIPS Set of minimum standards in comprehensive fields;

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iprs innovation development

IPRs, Innovation & Development

Keith E. Maskus

UPF, Barcelona

June 11, 2005

questions raised
Questions raised
  • What is the ¨current system¨?
  • Which IPRs do we mean?
  • What do we mean by innovation and are IPRs a stimulus?
the current system
The current system
  • TRIPS
    • Set of minimum standards in comprehensive fields;
    • Permits some limitations and safeguards;
    • Applies to all WTO members and prospective members;
    • Legislation in LDCs is far from complete;
    • Endemic enforcement and compliance problems.
the current system4
The current system
  • WIPO Conventions and newer treaties on copyrights and performance rights.
  • ¨TRIPS-Plus¨ standards imposed by US and EU in bilateral trade agreements.
  • Evolving protectionist standards in databases (EU), patents and digital copyrights (US), etc.
  • System has moved toward harmonization but far from it, even among developed countries.
what iprs do we mean
What IPRs do we mean?
  • Trademarks and related devices;
  • Copyrights for cultural goods and software;
  • Plant variety rights;
  • Patents, utility models, design protection;
  • Trade secrecy;
  • Confidential test data.
objectives of a balanced system of iprs
Objectives of a balanced system of IPRs
  • Ex-post market power to stimulate ex-ante investment in innovation;
  • Commercialization of new goods;
  • Publication and diffusion of new information;
  • Support markets for trading technology and information;
  • Consumer guarantees of product origin;
  • Support complex multi-actor transactions.
potential positive impacts on development
Potential positive impacts on development
  • Promote technical change, both internal innovation and imported technology;
  • Broader domestic and foreign markets;
  • More cultural goods created;
  • Commercialization of traditional knowledge;
  • More products for DC markets
potential negative impacts on development
Potential negative impacts on development
  • Support marker power in presence of weak competition;
  • Block follow-on innovation and restrict imitative competition;
  • Raise costs of inputs, medicines, agricultural technologies;
  • Restrict fair-use access to educational, scientific, and cultural materials;
  • Quasi-permanent shift in terms of trade.
evidence is scarce in developing countries
Evidence is scarce in developing countries
  • Studies tend to use aggregate data (need more micro surveys);
  • Most IPR reforms are recent or ongoing (TRIPS);
  • IPRs are only one factor in technical change and competition processes;
  • Significant causality problems.
some practical observations
Some practical observations
  • Problems of consumer confusion and product quality are endemic in poor countries and weak TM protection deters entry and product innovation.
  • Cultural industries have been damaged by weak incentives and CRs could help resolve them.
  • Trade secrecy in labor contracts can resolve some appropriability problems.
economists think of patent reforms and invention
Economists think of patent reforms and invention
  • Weak prospects for promoting local invention from stronger patents:
    • Vast disparity in international patenting.
    • Lerner’s historical study;
    • Branstetter’s work on Japan;
    • Declining patent registrations by Mexican companies post-reforms.
    • Rise in Korea’s patenting after lag;
    • Little evidence of productivity spillovers from patents.
  • But this is not very surprising; neither old system nor TRIPS could expand domestic R&D for patentable inventions except with a lag.
domestic patents may not be the important innovative factor
Domestic patents may not be the important innovative factor.
  • Inward technology transactions seem to be improved by reforms in patents and trade secrets.
    • Sensitivity of FDI;
    • Licensing and externalization;
    • Markets for technology services
    • This seems the case for middle-income economies but no evidence for poorest countries.
  • Trade secrecy can be key for acquiring know-how.
  • Trademark protection can encourage local firm entry and product development.
  • Weak copyrights can deter domestic development of software, music and films.
significant potential for higher costs
Significant potential for higher costs
  • Imitation prospects diminished and weaker bargaining position on technology transfer;
  • Patents on mature technologies can be damaging for acquisition prospects.
  • Patents on medicines and weak prospects for compulsory licenses;
  • Adoption of strong protection for plant varieties could diminish local experimentation;
  • “TRIPS-Plus” standards in pharmaceuticals and electronic technologies.
  • Database protection and limitations on fair use in copyrights.
is the system stimulating innovation
Is the system stimulating innovation?
  • Always a difficult question to answer.
  • Old system was not effective for LDCs.
  • Weak IPRs have been an effective component for technology adoption in some fast-growth economies.
  • New system (TRIPS) should generate somewhat better conditions for local innovation in middle-income economies.
  • Little direct impact in poorest countries.
  • Prior system failed in promoting innovation in public goods for poor countries.
but fundamental concerns arise
But fundamental concerns arise.
  • Market power in countries with weak dynamic competition processes.
  • Costs of procuring public goods (health care, education) subject to private rights.
  • Costs of imported seed varieties.
  • Potential for TRIPS to concentrate innovative activity even more in OECD, with quasi-permanent shift in terms of trade.
policy ideas need for ensuring differentiation and policy space
Policy ideas: Need for ensuring differentiation and “policy space”
  • IPRs matter little for poorest countries and needs (priorities) are broader.
  • IPRs can be pro-innovation and pro-competitive in middle-income countries if structured flexibly.
  • Experimentation with standards in developing countries may be important.
  • May need a moratorium on global standards setting (WIPO, TRIPS Plus).
policy ideas multilateral approaches
Policy ideas: Multilateral approaches
  • Dedicated funding sources for technical assistance and administraton.
  • Northern competition policy enforcement on behalf of South.
  • Technology transfer:
    • Liberalized visa programs for temporary movement of entrepreneurs and engineers;
    • Non-discriminatory tax advantages for ITT:
    • Move basic scientific results faster into the public domain.