This article is written by Abhilasha Bhatia.
Intellectual property, as defined by the World Intellectual Property Organization (WIPO), refers to the creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. By means of the legal framework, owners of such property receive certain rights, which may be used for recognition as well as for financial gain. The significance of intellectual property rights for economic activity in a world that relies on innovation is obvious. In the past years, the world has witnessed growing awareness with regards to the importance of IPR, amidst growing globalization, especially due to the fact that the world is moving towards a knowledge economy.
This awareness has clearly been demonstrated by the creation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), one of the most integral elements of World Trade Organization agreements, which aims at harmonizing standards of intellectual property amongst its signatories. As per Article 7 of the TRIPS Agreement, 1995, the protection and enforcement of intellectual property rights should contribute:
- to the promotion of technological innovation; and
- to the transfer and dissemination of technology;
to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare and to a balance of rights and obligations. Protection of intellectual property is considered to be a part of economic policy, despite the fact that economic theories concerning economic growth and development have either ignored it or considered it to be minor.
The present times, however, especially owing to COVID-19, are ridden by crises in health as well as business sectors. Economies all around the world are plagued and the IP field is no exception. While innovation and research in most fields have either been suspended or slowed in pace, the time has called for priority in research and development in health and pharmaceuticals sectors, especially for the development of a vaccine.
IPR and Economic Development
Since the early stages of the 19th century, various economists have investigated the role and significance of varied factors influencing economic development and growth. In the recent decades, a general consensus has emerged that how briskly an economy grows at any given point of time depends on how many people work, how much capital equipment they have to work with, and how the political and social environment promotes or impedes economic activity. Also, there is a broad agreement that an economy’s capacity to extend its growth and productivity depends essentially on its capacity to innovate, its pace in developing new technologies and ways of conducting business; how well its businesses adopt innovations; how effectively its workers cater to innovations, and whether the political and economic environment promotes or impedes these developments.
Developing v. Developed Nations
A number of renowned economists, including Joseph Stiglitz, believe that the differences between developed and developing countries are not just limited to resource gaps but also include gaps in knowledge. As a consequence, the success of economic development will depend upon the reduction of this gap, i.e. gap in resource and knowledge.
From an economic perspective, it would be socially efficient to provide open access of new discoveries to the public at large. In a free market, on one hand, where no or weak intellectual property rights exist, new products and technologies could easily be multiplied at marginal costs and therefore, would benefit the society at large. A weak protection system, however, will reduce innovation due to the lack of adequate returns on investments. On the other hand, an overprotected system will limit social gains by limiting the dissemination and use of results but may encourage greater innovation and initiatives.
The significance of intellectual property rights in economic activity differs across countries and depends, firstly on the amount of resources countries devote to creating intellectual assets and secondly, the amount of protected knowledge and information used in production and consumption.
Economic Goals of IPR
The protection of Intellectual Property essentially aims to achieve two major economic goals.
The first focuses on stimulating investment in creation and innovation in the field of knowledge by establishing exclusive rights of exploitation of novel technologies and products, the absence of which would allow competitors to use the resultant product for free and therefore, would discourage companies from investing in the further development as well as innovation of intellectual properties. A weak IPR regime creates negative dynamic externality since it fails to overcome problems of uncertainty in research and development and risks in competitive appropriation that are inherent in private markets for information.
The second is concerned with widespread dissemination of novel knowledge by encouraging holders of intellectual property to place the said property on the markets. Information, in the form of the public good, is an inherently non-rival in character and developers may find it rather difficult to restrict others from putting it to use.
There is a fundamental trade-off between these two objectives. An overly protective system of IPR could restrict social gains from an invention by causing a decrease in the incentives to disseminate its fruits. An excessively weak system could, however, reduce innovation by failing to provide for adequate returns on investment. Thus, a balance needs to be placed in such a way that it would be appropriate to the given market conditions and conducive to growth.
Studies show that a stricter regime for IPR stimulates activity in research-intensive industries in developing countries like India. The harmonization of intellectual property laws worldwide has opened a window of opportunities for Indian manufacturers adept at producing cheaper versions by “reverse engineering”, a result which has significant policy implications for other developing countries. Protection of Intellectual Properties is a very critical element in the offshore business models which are operating at present in India. Many Indian companies have placed importance on the protection of IPRs and taken initiatives to increase awareness and protection within the companies and promote IP as a policy. It is widely believed that stronger IPRs in India will greatly benefit software companies across sectors, and will encourage greater product development in India.
At present the Indian software industry employs over 500,000 software engineers, and software services in India have gained a worldwide reputation. Strong levels of protection for intellectual properties have encouraged foreign investment in India, with many companies choosing to either set up their own facilities in India or to outsource a large part of their business to India. The global technology generation or innovative activity is highly concentrated in a handful of technologically advanced developed countries with just top ten countries accounting for as much as 84 per cent of global R&D activity, 94 per cent of US, and 91 per cent of global cross-border technological payments. Prominent among the emerging countries that are beginning to obtain US patents in increasing numbers are Taiwan and South Korea. Therefore these countries together with Japan make important cases for analyzing the role played by IPRs in their technology development.
COVID-19 and IPR
With growing concerns coming up every day surrounding the impact of COVID-19, the IP sector would definitely not be left out. While most sectors are bearing the brunt of the pandemic, the worst phase for the IP sector is yet to be witnessed. The two major concerns that are being posed at present are the growing risks of IPR infringement with more and more people seeking ways to address their financial concerns and the issues surrounding the access of required drugs, products, etc and the possible threat that it may cause to IP holders.
There is no doubt that coronavirus is destroying economies across the globe. The uncertainty of the situation has led companies either out of business or to wonder how to adopt measures or develop solutions that would help them survive the crisis. The times have essentially put greater significance on the health and media and entertainment industry. More and more businesses are entering these industries at present, raising concerns of infringement and therefore, calls for better management of IP. Such a situation recently arose in Italy, where a local company, using 3-D Print Technology, manufactured an essential part of a ventilator. While the printed part cost only $1, the original component is worth $11,000.
Issue of Access
With growing concerns and needs, as well as with the upcoming possibility of development of a vaccine, issues to access come to the forefront and pose a major challenge for countries all over. The situation has put an immense unexpected burden on manufacturers of essential health care items such as ventilators and drugs to meet the growing demands. One such example is Roche, a Swiss MNC and a leading diagnostic kit maker, that has been accused of retaining the formula for a reagent used in polymerase chain reaction-based tests of COVID. The company has been unable to meet the enormous amount of world demand, causing delays in diagnosis. The fight for possibly useful drugs such as hydroxychloroquine was also widely witnessed by the world since demands for such drugs far exceeds the possible supply rate. These especially call for balancing out the interests of IP holders, to some extent, along with the need of the general public.
IP can be used by companies to fight financial imbalance, such as by licensing, allowing access to available research and forming alliances. Further, IP holders should also, keeping social needs in view, grant royalty-free licenses or charge lesser amounts for items that are essentially used to fight the virus. Various firms such as Microsoft, Facebook, Amazon and IBM have initiated the “Open COVID Pledge”, wherein they have pledged free use of their IP and companies that aspire to develop vaccines, medical devices, etc to combat COVID may come forward and advantage from this access, which may aid in their development.
Article 73(b) of the TRIPS Agreement, containing a security exception, allows WTO member countries to suspend the enforcement of any IPR(s) which may pose to be a hurdle in the procurement or local manufacturing of products that are needed to protect their populace. This provision would allow for countries to procure drugs, vaccines, devices, etc. or their production processes, that are required in the treatment of the virus. Governments may resort to this option in order to meet growing demands and to effectively address the pandemic.
The Indian Patent Act also has a similar provision which allows the central government to take over any patent that can be of use in a state of national emergency or in circumstances of extreme urgency under Section 100 and 102 of the Patents Act, 1970. The provision of compulsory license can also be availed if a potential IP is of use in a state of a public health crisis or against any epidemic under Section 92 of the Patents Act, 1970.
Countries like Germany, Israel and Chile have also amended their Patent Laws in order to facilitate compulsory licensing of any patented product so as to be able to use for purposes relating to coronavirus. The Director-General, World Health Organization, with regards to growing concerns relating to availability and access of COVID-19 drugs for the lesser influential and financially incapable persons, has authorized the voluntary sharing of patent rights and pooling of research data to aid the development of COVID-19 drugs and vaccines and to ensure greater access to the same.
It is also important, however, that the interests of IP developers be protected and they receive sufficient impetus for undertaking innovation and development related activities. In the present crisis, it is especially imperative that governments sufficiently reimburse or provide incentives to companies dedicated towards the research, development and manufacture of COVID related products and processes.
The Covid-19 is unfolding at an increasing pace, causing newer barriers at each stage. The impact of it on IPs may not be so significant at the present stage. The process, however, is ongoing and greater hurdles and difficulties will surely arise in the coming future, with continuing efforts being made to come up with medical preventive measures. It will indeed be challenging for governments to be able to address policy measures in light of changing scenarios and to be able to balance out and adequately manage the needs of the general public in consonance with the rights of IP holders.
- Livia Ilie, Intellectual Property Rights: An Economic Approach Procedia Economics and Finance (2014), (https://www.sciencedirect.com/science/article/pii/S2212567114008375)
- Maskus, K., 2020. [online] Scholarly Commons.law.case.edu, (https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?article=1499&context=jil).
- Joe C Mathew, ‘Coronavirus: Will Intellectual Property be a hurdle in India’s fight against COVID-19?’ Business Today, (https://www.businesstoday.in/latest/trends/coronavirus-will-intellectual-property-be-a-hurdle-in-indias-fight-against-covid-19/story/400200.html)
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