H.R.

COLLEGE OF COMMERCE &

ECONOMICS
123, Dinshaw Wachha Road, Churchgate, Mumbai - 400020

A PROJECT
ON

CONTENTIOUS ISSUES OF THE WTO

INTELLECTUAL PROPERTY RIGHTS
in the subject of
ECONOMICS
SUBMITTED TO

UNIVERSITY OF MUMBAI
FOR (SEM-I ) OF

MASTER OF COMMERCE
BY

Name: RADHIKA. GOHIL

Roll No: 28
UNDER THE GUIDANCE OF

Prof. GEETA. NAIR

YEAR 2013-14

H.R. COLLEGE OF COMMERCE & ECONOMICS

INTERNAL ASSESSMENT
PROJECT (40 Marks)
Name of the Student

First name

MCOM

: RADHIKA

R. No.

ACCOUNTS

28

PART- I

Fathers Name : MUKESH

Surname

Class

: GOHIL

Subject: ECONOMICS
Topic for the Project: CONTENTIOUS ISSUES OF THE WTO
INTELLECTUAL PROPERTY RIGHTS

Marks Awarded

Signature

Documentation
Internal Examiner
(10 Marks)
External Examiner
(10 Marks)
Presentation
(10 Marks)
Viva and Interaction
(10 Marks)
TOTAL MARKS (40 Marks)

H.R. COLLEGE OF COMMERCE & ECONOMICS

123, Dinshaw Wachha Road, Churchgate, Mumbai - 400020

DECLARATION BY THE STUDENT

I, RADHIKA MUKESH GOHIL student of M Com Part-I Roll Number 28 hereby

declare that the project for the Paper ECONOMICS
titled,
CONTENTIOUS ISSUES OF THE WTO INTELLCTUAL PROPERTY
RIGHTS submitted by me for Semester-I during the academic year 2013-14, is
based on actual work carried out by me.
I further state that this work is original and not submitted anywhere else for any
examination.

Signature of Student

H.R. COLLEGE OF COMMERCE & ECONOMICS

TO BE FILLED IN BY STUDENTS WHO DEFAULT

LATE SUBMISSION
I hereby understand that I have submitted the Project late, on
_________________at ____________ a.m.
The

date

of

submission

announced

by

the

college

was

_________________at ______________ a.m.

Signature of Student
-------------------------------------------------------------------------------------------INTERNAL VIVAS
I declare that I was not present at the time of Internal Viva arranged by the
College.
This has been a serious lapse on my part.
Signature of Student
-------------------------------------------------------------------------------------------EXTERNAL VIVAS
I declare that I was not present at the time of External Viva arranged by the
College.
This has been a serious lapse on my part
Signature of Student
INDEX

1. WORLD TRADE ORGANISATION.

What Is World Trade Organization?

Principles Of Trading System.

A Closer Look On These Principles.

2. NATIONAL TRADE.
3. FREER TRADE.
4. PROMOTING FAIR COMPITION.
5. TRIPS.

Introduction.

What Are Intellectual Property Rights?

Literature Review.

Intellectual Property.

The Economics Of Intellectual Property Protection.

6. STANDARDS CONCERNING THE AVAILABILITY, SCOPE AND USE OF

INTELLECTUAL PROPERTY RIGHTS.

Patents, Copy-Rights And Related Rights.

Trademarks And Geographic Indications.

Industrial Design.

Patents.

Layout Design Of Integrated Circuits.

Protection Of Undisclosed Information.

7. THE TRIPS AGREEMENT.

Economic Benefits And Costs Of TRIPS

8. ENFORCEMENT OF INDUSTRIAL PROPERTY RIGHTS, COPY-RIGHTS

AND RELATED RIGHTS.
9. ENFORCEMENT OF INDUSTRIAL PROPERTY RIGHTS IN GENERAL.
10. CRITICISM OF TRIPS.
11. BIBLOGRAPHY.

WORLD TRADE ORGANISATION

5

The first step is to talk. Essentially, the WTO is a place where member governments go,
to try to sort out the trade problems they face with each other. At its heart are WTO
agreements, negotiated and signed by the bulk of the worlds trading nations. But the
WTO is not just about liberalizing trade, and in some circumstances its rules support
maintaining trade barriers for example to protect consumers, prevent the spread of
disease or protect the environment. The table in action: WTO Trade Negotiations
Committee, meeting in Geneva, 14 September 2005.

The WTO was formed on 1st January 1995 and was established in Centre William
Rappard, Geneva, Switzerland. There are 159 member States in all. The official
languages spoke are English, French, Spanish. The approximate budget of the
organization was 196 million Swiss francs (approx. 209 million US$) in 2011.It has the
staff capacity of around 640. The WTO was born out of negotiations; everything the
WTO does is the result of negotiations.

What is the World Trade Organization?

Simply put: the World Trade Organization (WTO) deals with the rules of trade between
nations at a global or near-global level. But there is more to it than that. Is it a bird, is it a
plane? There are a number of ways of looking at the WTO. Its an organization for
liberalizing trade. Its a forum for governments to negotiate trade agreements. Its a place
for them to settle trade disputes. It operates a system of trade rules. (But its not
Superman, just in case anyone thought it could solve or cause all the worlds
problems!) Above all, its a negotiating forum. Essentially, the WTO is a place where
member governments go, to try to sort out the trade problems they face with each other.
The first step is to talk. The WTO was born out of negotiations, and everything the WTO
does is the result of negotiations. The bulk of the WTOs current work comes from the
198694 negotiations called the Uruguay Round and earlier negotiations under the
General Agreement on Tariffs and Trade (GATT). The WTO is currently the host to new
negotiations, under the Doha Development Agenda launched in 2001.
6

Where countries have faced trade barriers and wanted them lowered, the negotiations
have helped to liberalize trade. But the WTO is not just about liberalizing trade, and in
some circumstances its rules support maintaining trade barriers for example to protect
consumers or prevent the spread of disease. Its a set of rules At its heart are the WTO
agreements, negotiated and signed by the bulk of the worlds trading nations. These
documents provide the legal ground-rules for international commerce. They are
essentially contracts, binding Governments to keep their trade policies within agreed
limits. Although negotiated and signed by governments, the goal is to help producers of
goods and services, exporters, and importers conduct their business, while allowing
governments to meet social and environmental objectives.
The systems overriding purpose is to help trade flow as freely as possible so long as
there are no undesirable side-effects because this is important for economic
development and well-being. That partly means removing obstacles. It also means
ensuring that individuals, companies and governments know what the trade rules are
around the world, and giving them the confidence that there will be no sudden changes of
policy. In other words, the rules have to be transparent and predictable. And it helps to
settle disputes This is a third important side to the WTOs work. Trade relations often
involve conflicting interests. Agreements, including those painstakingly negotiated in the
WTO system, often need interpreting. The most harmonious way to settle these
differences is through some neutral procedure based on an agreed legal foundation. That
is the purpose behind the dispute settlement process written into the WTO agreements.
Born in 1995, but not so young.
The WTO began life on 1 January 1995, but its trading system is half a century older.
Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules
for the system. (The second WTO ministerial meeting, held in Geneva in May 1998
included a celebration of the 50th anniversary of the system.) It did not take long for the
General Agreement to give birth to an unofficial, de facto international organization, also
known informally as GATT. Over the years GATT evolved through several rounds of
negotiations. The last and largest GATT round, was the Uruguay Round which lasted

from 1986 to 1994 and led to the WTOs creation. Whereas GATT had mainly dealt with
trade in goods, the WTO and its agreements now cover trade in services, and in traded
inventions, creations and designs (intellectual property).

Principles of the trading system

The WTO agreements are lengthy and complex because they are legal texts covering a
wide range of activities. They deal with: agriculture, textiles and clothing, banking,
telecommunications, government purchases, industrial standards and product safety, food
sanitation regulations, intellectual property, and much more. But a number of simple,
fundamental principles run throughout all of these documents. These principles are the
foundation of the multilateral trading system.

A closer look at these principles:

Trade without discrimination
1. Most-favored-nation (MFN): treating other people equally Under the WTO
agreements, countries cannot normally discriminate between their trading partners. Grant
someone a special favor (such as a lower customs duty rate for one of their products) and
you have to do the same for all other WTO members. This principle is known as mostfavored-nation (MFN) treatment it is so important that it is the first article of the General
Agreement on Tariffs and Trade (GATT), which governs trade in goods. MFN is also a
priority in the General Agreement on Trade in Services (GATS) and the Agreement on
Trade- Related Aspects of Intellectual Property Rights (TRIPS), although in each
agreement the principle is handled slightly differently. Together, those three agreements
cover all three main areas of trade handled by the WTO. Multilateral trading system .i.e.
the system operated by the WTO. Most nations including almost all the main trading
nations are members of the system. But some are not, so multilateral is used to
describe the system instead of global or world. In WTO affairs, multilateral also
contrasts with actions taken regionally or by other smaller groups of countries. (This is
8

different from the words use in other areas of international relations where, for example,
a multilateral security arrangement can be regional.)

NATIONAL TREATMENT:
Treating foreigners and locals equally imported and locally produced goods should be
treated equally at least after the foreign goods have entered the market. The same
should apply to foreign and domestic services, and to foreign and local trademarks,
copyrights and patents. This principle of national treatment (giving others the same
treatment as ones own nationals) is also found in all the three main WTO agreements
(Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the
principle is handled slightly differently in each of these. National treatment only applies
once a product, service or item of intellectual property has entered the market. Therefore,
charging customs duty on an import is not a violation of national treatment even if
locally-produced products are not charged an equivalent tax.

FREER TRADE:
Gradually, through negotiation lowering trade barriers is one of the most obvious means
of encouraging trade. The barriers concerned include customs duties (or tariffs) and
measures such as import bans or quotas that restrict quantities selectively. From time to
time other issues such as red tape and exchange rate policies have also been discussed.
Since GATTs creation in 194748 there have been eight rounds of trade negotiations.
A ninth round, under the Doha Development Agenda, is now underway. At first these
focused on lowering tariffs (customs duties) on imported goods. As a result of the
negotiations, by the mid-1990s industrial countries tariff rates on industrial goods had
fallen steadily to less than 4% But by the 1980s, the negotiations had expanded to cover
non-tariff barriers on goods, and to the new areas such as services and intellectual
property. Opening markets can be beneficial, but it also requires adjustment. The WTO
agreements allow countries to introduce changes gradually, through progressive
liberalization. Developing countries are usually given longer to fulfill their obligations.
9

Predictability: through binding and transparency sometimes, promising not to raise a

trade barrier can be as important as lowering one, because the promise gives businesses a
clearer view of their future opportunities. With stability and predictability, investment is
encouraged, jobs are created and consumers can fully enjoy the benefits of competition
choice and lower prices. The multilateral trading system is an attempt by governments
to make the business environment stable and predictable.
In the WTO, when countries agree to open their markets for goods or services, they
bind their commitments. For goods, these bindings amount to ceilings on customs tariff
rates. Sometimes countries tax imports at rates that are lower than the bound rates.
Frequently this is the case in developing countries. In developed countries the rates
actually charged and the bound rates tend to be the same. A country can change its
bindings, but only after negotiating with its trading partners, which could mean
compensating them for loss of trade. One of the achievements of the Uruguay Round of
multilateral trade talks was to increase the amount of trade under binding commitments.
In agriculture, 100% of products now have bound tariffs. The result of all this: a
substantially higher degree of market security for traders and investors. The system tries
to improve predictability and stability in other ways as well. One way is to discourage the
use of quotas and other measures used to set limits on quantities of imports
administering quotas can lead to more red-tape and accusations of unfair play. Another is
to make countries trade rules as clear and public (transparent) as possible. Many WTO
agreements require governments to disclose their policies and practices publicly within
the country or by notifying the WTO. The regular surveillance of national trade policies
through the Trade Policy Review Mechanism provides a further means of encouraging
transparency both domestically and at the multilateral level.

PROMOTING FAIR COMPETITION

10

The WTO is sometimes described as a free trade institution, but that is not entirely
accurate. The system does allow tariffs and, in limited circumstances, other forms of
protection. More accurately, it is a system of rules dedicated to open, fair and undistorted
competition. The rules on non-discrimination MFN and national treatment are
designed to secure fair conditions of trade. So too are those on dumping (exporting at
below cost to gain market share) and subsidies. The issues are complex, and the rules try
to establish what is fair or unfair, and how governments can respond, in particular by
charging additional import duties calculated to compensate for damage caused by unfair
trade. Many of the other WTO agreements aim to support fair competition: in agriculture,
intellectual property, services, for example. The agreement on government procurement
(a plurilateral agreement because it is signed by only a few WTO members) extends
competition rules to purchases by thousands of government entities in many countries.
And so on. Encouraging development and economic reform the WTO system contributes
to development. On the other hand, developing countries need flexibility in the time they
take to implement the systems agreements. And the agreements themselves inherit the
earlier provisions of GATT that allow for special assistance and trade concessions for
developing countries. Over three quarters of WTO members are developing countries and
countries in transition to market economies. During the seven and a half years of the
Uruguay Round, over 60 of these countries implemented trade liberalization programmes
autonomously. At the same time, developing countries and transition economies were
much more active and influential in the Uruguay Round negotiations than in any previous
round, and they are even more so in the current Doha Development Agenda.
The Uruguay Round increased bindings Percentages of tariffs bound before and after the
198694 talks Before After
Developed countries 78 99
Developing countries 21 73
Transition economies 73 98

11

(These are tariff lines, so percentages are not weighted according to trade volume or
value) At the end of the Uruguay Round, developing countries were prepared to take on
most of the obligations that are required of developed countries. But the agreements did
give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO
provisions particularly so for the poorest, least-developed countries. A ministerial
decision adopted at the end of the round says better-off countries should accelerate
implementing market access commitments on goods exported by the least-developed
countries, and it seeks increased technical assistance for them. More recently, developed
countries have started to allow duty-free and quota-free imports for almost all products
from least-developed countries. On all of this, the WTO and its members are still going
through a learning process. The current Doha Development Agenda includes developing
countries concerns about the difficulties they face in implementing the Uruguay Round
agreements.

12

TRIPS

INTRODUCTION
One of the most significant developments of the Uruguay Round of Trade Negotiations
(1986-94) was the inclusion of intellectual property rights (IPRs) issues on the agenda of
the multilateral trading system. The resulting Agreement on Trade-Related Intellectual
Property Rights (TRIPS) is one of three pillar agreements, setting out the legal
framework in which the World Trade Organization (WTO) has operated since the end of
the Uruguay Round. (The other two pillar agreements are the Multilateral Agreement on
Trade in Goods and the General Agreement on Trade in Services (GATS).

For the multilateral trading system, TRIPS marked the departure from narrow
negotiations on border measures such as tariffs and quotas toward the establishment of
multilateral rules for trade-affecting measures beyond borders. This move reflected
underlying trends in international commerce. Due to the growth of trade in knowledge
and information-intensive goods, the economic implications of imitation, copying, and
counterfeiting had in many industries become at least as relevant for international
commerce as conventional border restrictions to trade.
Yet the TRIPS negotiations on intellectual property were marked by significant NorthSouth differences. Developed countries, which host the worlds largest intellectual
property-producing industries, were the key advocates for comprehensive minimum
standards of protection and enforcement of IPRs. By contrast, many developing
countries, which see themselves mostly as a consumer of intellectual property, felt that
stronger standards of protection would serve to limit access to new technologies and
products, thereby undermining poor countries development prospects. Not surprisingly,
the TRIPS Agreement remains one of the most controversial agreements of the WTO.

13

This short paper seeks to provide an introduction to the main instruments used to protect
intellectual property (Section II), the key economic trade-offs of stronger IPRs (Section
III), the basic provisions of the TRIPS Agreement (Section IV), and recent TRIPS
developments affecting access to medicines in developing countries (Section V). The
paper draws heavily from Primo Braga, Fink, and Sepulveda (2000), Fink and Primo
Braga (2001), and Fink (2003). A more extensive treatment of many issues raised here
can be found in these papers, as well as in Maskus (2000) and World Bank (2001).

What are intellectual property rights?

Intellectual property broadly refers to creations which result from intellectual activity in
the industrial, scientific, literary, and artistic fields. Over the course of history, different
legal instruments for protecting intellectual property have emerged. These instruments
differ in their subject matter, extent of protection, and field of application, reflecting
societys objective to balance the interests of creators and consumers for different types
of intellectual works. Table 1 provides an overview of the different IPRs instruments.
Patents are legal titles granting the owner the exclusive right to make commercial use of
an invention. To qualify for patent protection, inventions must be new, non-obvious, and
commercially applicable. The term of protection is usually limited to 20 years, after
which the invention moves into public domain. The patent system is one of the oldest
and most traditional forms of IPRs protection. Almost all manufacturing industries make
use of the patent system to protect inventions from being copied by competing firms.
Since the early 1980s, patents have also been granted for agricultural biotechnology
products and processes and for certain aspects of computer software.
As an adjunct to the patent system, some countries have introduced utility models (or
petty patents). The novelty criteria for utility models are less stringent and are typically
granted for small, incremental innovations. Their term of protection is far shorter than
for regular invention patents (typically four to seven years). Similarly, industrial
designs protect the ornamental features of consumer goods such as shoes or cars. To be

14

eligible for protection, designs must be original or new. They are generally conferred for
a period of five to fifteen years.
Trademarks are words, signs, or symbols that identify a certain product or company.
They seek to offer consumers the assurance of purchasing what they intend to purchase.
Trademarks can endure virtually indefinitely provided they remain in use. Almost all
industries use trademarks to identify their goods and services. The use of trademarks has
turned out to be of high significance in certain consumer goods industries, such as
clothing and watches. Similar to trademarks, geographical indications identify a product
(e.g., wine or olive oil) with a certain city or region.
Copyright protects original works of authorship. Copyright protection differs from patent
protection in that copyright solely protects the expression of an intellectual creation,
whereas the ideas or methods advanced in the title can be freely copied. Copyright
protection typically lasts for the life of the author plus 50 to 70 years. It is applicable to
literary, artistic, and scientific works. During the past decade, copyright protection has
also developed as the main form of protection for computer software. Rights related to
copyrightoften referred to as neighboring rightsare accorded to phonogram
producers, performers, and broadcasting organizations. Limits to exclusive copyrights
and neighboring rights exist in certain fair use exemptions, such as educational or
library use or for purposes of criticism and scholarship.
Besides these traditional forms of IPRs, ongoing technological change and the unique
characteristics of certain industries and products have led to additional, so-called sui
generis forms of protection. Layout designs for integrated circuits protect producers of
semiconductors. Protection is limited to the design of an integrated circuit and does not
restrict reverse engineering of a semiconductor. In this regard, protection of layout
designs is similar to copyright. However, the term of protection is shorter than under
copyrighttypically ten years. Title holders have the right to prevent unauthorized
reproduction, importation, sale or other distribution of the layout design for commercial
purposes. Exclusive rights to test data submitted to regulatory agencies have been

15

granted in the pharmaceutical and chemical industries. Companies that first submit these
data can prevent competing firms from using the same data to obtain own marketing
approval.
Plant breeders rights (PBRs) protect new plant varieties that are distinct from existing
varieties, uniform, and stable. Exclusive rights, in principle, include the sale and
distribution of the propagating materials for a minimum of 15 years. Exclusive rights are
typically subject to two general exemptions: the research exemption, which permits the
use of a protected variety as a basis for the development of a new variety; and the
farmers privilege, which gives farmers the right to re-use seeds obtained from their
own harvests. With the advent of biotechnology, however, many breeders in industrial
countries are increasingly using the regular patent system for protecting agricultural
products and processes. Breeders enjoying patent protection can not only prevent their
competitors from using their protected material for breeding purposes, but also prevent
farmers from reusing harvested seed.
Finally, the protection of trade secrets is part of many countries IPRs systems. Tradesecret protection differs from other forms of protection in that it does not grant an explicit
title to the creator of an original work. Instead, it protects businesses from the
unauthorized disclosure or use of confidential information. Such confidential
information includes inventions not yet at the patenting stage, ways of organizing
business, client lists, purchasing specifications, and so on. In agriculture, breeders rely
on trade secrets to protect hybrid plant varieties, if they can be kept secret. Copying
through reverse-engineering does not infringe trade-secret laws. In essence, all industries
possessing secret business information rely on trade-secret protection to safeguard their
intangible assets.
These legal instruments are just one of the pieces that form a national system of
intellectual property protection. Also crucial to the systems overall effectiveness are the
institutions administering these instruments, the mechanisms available for enforcing
IPRs, and the rules regarding the treatment of non-nationals.

16

The administration of IPRs is most significant in the area of patents, industrial designs,
trademarks, and plant breeders rights. To obtain protection for these types of intellectual
property, applicants have to submit their intellectual creations to a national IPRs office,
which examines their eligibility for protection. Copyright and neighboring rights
protection typically applies automatically upon creation of the intellectual work, although
for evidentiary purposes authors may choose to register their works at copyright offices.
The enforcement of intellectual property rights relies on a countrys judicial system. Title
holders fight infringement of their exclusive rights in front of courts. To immediately
stop infringing activities, they can request seizures or preliminary injunctions. If the
claim of infringement is verified by trial, courts can demand the payment of punitive
charges to the infringed title holder (or secret holder in the case of trade secrets).
IPRs are created by national laws and therefore apply at the level of each jurisdiction,
independent of such rights granted elsewhere. Accordingly, nations must reach
accommodation as their residents seek protection for their intellectual works abroad.
Numerous international treaties to promote cooperation among states in the protection of
intellectual property have been negotiated over the last 100 years (see Table 1). These
treaties are administered by a specialized agency of the United Nationsthe World
Intellectual Property Organization (WIPO). They typically require their signatories to
follow national treatment in the protection of IPRs (equal treatment of nationals and nonnationals) and facilitate the registration of intellectual property titles in foreign
jurisdictions. But for the most part they do not promote harmonized standards of
protection.

Literature Review
US-China intellectual property disputeA comment on the interpretation of the
TRIPS enforcement provisions,
17

Watal Jayashree, the Journal of World Intellectual Property, 13 (5) (2010) 605-619.
This article focuses on the significance of the US China intellectual property panel report
in terms of the light it shed on the interpretation of certain provisions on domestic
enforcement contained in part III of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS). The panel made several important observations in
respect of certain TRIPS domestic enforcement provisions either reinforcing views
previously held, adding further meaning or shedding new light on these provisions,
explaining its reasoning, and including, on several occasions, an examination of the
negotiating history of TRIPS. This article picks out certain key points of interpretation by
way of illustrating the significant contribution made by the panel to TRIPS jurisprudence.

Intellectual property:
Starkey Louise, Corbett Susan, Bondy Ann and Davidson Susan, International
Journal of Technology and Design Education, 20 (3) (2010) 333-344.
As society changes from an industrial to a knowledge era, increasing importance and
value is being placed on intellectual property rights. Technology teachers need to have
pedagogical content knowledge of intellectual property if they are to incorporate it into
their learning programmes to enable students to consider how to respect others
intellectual property rights, how to protect their own ideas and how they can legitimately
make use of others intellectual property. A survey of technology teachers and a small
sample of students was undertaken to ascertain their knowledge of intellectual property
and any misconceptions which may exist. The findings reflect an awareness of relevant
concepts but confusion between key terms such as patent, copyright and registered
design.

Patent reform in the US: What's at stake for Pharmaceutical Innovation?

Yancey Amy and Stewart Charles Neal Jr, Expert Opinion on Therapeutic Patents, 20 (5)
(2010) 603-608.

18

The current patent landscape in the US has not undergone major legislative reform since
1952. The US Senate version of the most recently proposed patent reform legislation puts
forward a number of rule changes that could impact the pharmaceutical industry. Among
the bills major provisions are moving to a first-to-file system, changes to post-grant
review and reexamination procedures, and damages reform. Various industries with a
stake in patent reform have responded to the proposed changes. The need for balanced
reform makes the stakes particularly high for the pharmaceutical industry which must
invest a significant amount of time and money in the research and development process
in exchange for already abbreviated patent lifetimes due
to the lengthy clinical trial process.

Are patents with multiple inventors from different countries a good indicator of
international R&D collaboration?
The case of ABB, Anna Bergek and Maria Bruzelius, Research Policy, 39 (10) (2010),
1321-1334.
Based on the critical case of ABB, this paper questions the relevance of using patents
with multiple inventors from different countries (cross-country patents) as an indicator
of international R&D collaboration. The study shows that less than half of ABB's crosscountry patents are the result of international R&D collaboration as described by one
of the more inclusive definitions found in previous literature. Only a third of the patents
are the result of joint R&D activities between different MNC subsidiaries or firms. The
implications of the study for the assignment of patents to countries based on inventor
addresses are also discussed.

The economics of intellectual property protection

Why do governments extend legal protection to intellectual property? One can broadly
classify the various forms of IPRs into two categories: IPRs that stimulate inventive and
19

creative activities (patents, utility models, industrial designs, copyright, plant breeders
rights and layout designs for integrated circuits) and IPRs that offer information to
consumers (trademarks and geographical indications).

IPRs in both categories seek to

address certain failures of private markets to provide for an efficient allocation of

resources.

20

21

Standards Concerning the Availability, Scope and Use of Intellectual

Property Rights
1. PATENTS, COPYRIGHT AND RELATED RIGHTS
IPRs in the first category resolve inefficiencies in markets for information and
knowledge. As opposed to, say, an automobile, information and knowledge can be
copied easily once it has been put on the market. This characteristic is inherent in what
economists refer to as public goods. As the name suggests, public goods are usually not
provided by private markets. Profit-oriented firms have little incentive to invest in the
production of public goods, as third parties can free ride on the good once it is first
produced. In the specific case of information and knowledge, if creators of intellectual
works cannot protect themselves against imitation and copying, they do not have an
incentive to engage in inventive or creative activities, as they cannot recoup any
expenditure incurred in the process of creating new information and knowledge.
Patents and copyrights offer a solution around this dilemma, as they prevent free-riding
on intellectual assets by third parties and thereby create an incentive to invest in research
and development (R&D) and related activities. Because the fruits of inventive and
creative activitiesin the form of new technologies and new productspush the
productivity frontiers of firms in an economy, patents and related instruments are often
seen as important policy tools to promote economic growth.
At the same time, IPRs in this first category are considered as only second best
instruments of economic policy. This is because the exclusive rights of patents and
copyrights confer market power in the supply of the protected good to the title holder,
which poses a cost to society in that firms can charge prices above marginal production
costs. In theory, governments can adjust the length and breadth of protection such as to
maximize the net benefit that accrues to society from new knowledge and literary and
artistic creations, while taking into account the distortion that arises from imperfectly
competitive markets. In practice, such a welfare maximization exercise is complicated by
22

the fact that the societal value of new intellectual creations is typically not known in
advance and different sectors may require different levels of protection. Actual patent
and copyright regimes are typically the outcome of history, rules of thumb, and the
influence of vested interests.
Even though patents and copyright are only considered second-best, policymakers see
these instruments as superior to government-funded research and artistic creation, as
decisions about inventive and creative activities are decentralized and market driven.
Government bureaucrats are only imperfectly informed about societys technology needs,
whereas such information is conveyed by market signals. Notwithstanding these
considerations, the public sector in middle and high income countries does finance and
conduct R&D in areas ignored or neglected by private markets. In particular, this is the
case for basic scientific research and areas of technology to which societies attach special
importance despite the lack of private demand (for example, aerospace, defense, or
neglected diseases).
Patents and copyrights also impact on the diffusion of new knowledge and information.
On the one hand, patent and copyright protection has a negative effect on diffusion to the
extent that third parties are prevented from using proprietary knowledge. For example,
some commentators argue that companies with strong intellectual property portfolios in
the electronics and biotechnology industry may stifle follow-on research, as competing
innovators cannotor only at a high costaccess key technologies and fundamental
research tools.
At the same time, IPRs can play a positive role in diffusion. Patents are granted in
exchange for the publication of the patent claim. In return for temporary exclusive rights,
inventors have an incentive to disclose knowledge to the public that might otherwise
remain secret. Although other agents may not directly copy the original claim until the
patent expires, they can use the information in the patent to further develop innovations
and to apply for patents on their own. Moreover, an IPRs title defines a legal tool on
which the trade and licensing of a technology can be based. Protection can facilitate

23

technology disclosure in anticipation of outsourcing, licensing, and joint-venture

arrangements. The IPRs system can thus reduce transaction costs and help create markets
for information and knowledge.
Governments and academics have long thought to assess how effective the patent system
really is in promoting industrial innovation and technology diffusion. In 1958, an
economist named Fritz Machlup conducted an investigation on behalf of the United
States Congress into the functioning of Americas patent system and concluded:
If we did not have a patent system, it would be irresponsible, on the basis of our
present knowledge of its economic consequences, to recommend instituting one.
But since we have had a patent system for a long time, it would be irresponsible,
on the basis of our present knowledge, to recommend abolishing it.
The effectiveness of the patent system remains a controversial topic to date. Few
academics would disagree that the patent system has been a stimulus to innovation over
the past decade. At the same time, few academics would say with confidence that todays
patent system strikes the optimum balance between innovation incentives and
competitive access to new products and technologies.
2. TRADEMARKS AND GEOGRAPHIC INDICATIONS
Trademarks and geographic indications resolve inefficiencies that result from a mismatch
of information between buyers and sellers on certain attributes of goods and services.
Nobel prize-winning economist George Akerl of first pointed out that markets may fail
when consumers have less information about the quality of goods than producers.
Uncertainty about quality will make consumers reluctant to pay for high quality goods,
eroding incentives for companies to invest in quality. Trademarks can help reduce
though not completely eliminatethis uncertainty. They identify a product with its
producer and his reputation for quality, generated through repeat purchases and word of
mouth. Trademarks thus create an incentive for firms to invest in maintaining and

24

improving the quality of their products. Trademarks can be considered as first-best tools
of economic policy, in the sense that they do not confer any direct market power and can
co-exist with competitive markets. The presence of a trademark does not restrict
imitation or copying of protected goods as long as they are sold under a different brand
name.
Advertising-intensive consumer products, or so called status goods, constitute a special
group within products bearing trademarks. For these types of goods, the mere use or
display of a particular branded product confers prestige on their owners, apart from any
utility derived from their function and physical characteristic. Since in this case the
brand name plays a central role in firms product differentiation strategies, it is no
surprise to find that owners of well-known brands often register up to 40 or more
different trademarks to deter competing firms from entering their brand space. Market
research reports regularly put the value of well-known brands at billions of dollars. For
instance, the Mercedes brand is estimated to be worth about 22 billion dollars. Status
value is also associated with certain agricultural products protected by geographic
indications, such as sparkling wine from the French Champagne region or ham from the
Italian city of Parma.
In the case of status goods, brands can confer substantial market power to producers. In
contrast to patents and copyrights, however, market power is not created by trademark
ownership per se, but rather by heavy investments in marketing and sales promotion. In
addition, firms with valuable brands may not necessarily generate supernormal profits.
Even though prices may be above marginal production costs, firms have to bear the costs
of fixed market investments. Typically, the resulting market structure for many status
goods industries can be characterized as monopolistically competitive: firms have a
monopoly within their brand space, but have to compete with the brands of close
substitute products.
The welfare consequences of status value associated with certain goods are complex and
few generalizations can be made. For example, status value may stem from exclusive

25

consumption, or, in other words, from the fact that only a selected group of consumers
enjoys them. This interdependency between consumers inside and outside the exclusive
group suggests that firms marketing activities can make some consumers better off and
others worse off (Grossman and Shapiro, 1988).
3. INDUSTRIAL DESIGN
The Australian Design Act grants protection to the visual appearance or design of a
manufactured article, if it is new or original. In this context, design refers to the
ornamental aspect of an article that is produced in quantity. This ornamental aspect may
be constituted by elements that are three-dimensional (the shape of the article) or twodimensional (lines, designs, colours) but must not be dictated solely or essentially by
technical or functional considerations. Protection of an industrial design means that third
parties not having the consent of the owner may not make, sell, or import articles bearing
or embodying a design that is a copy, or substantially a copy, of the protected design,
when such acts are undertaken for commercial purposes. The purpose of design
protection is to provide an economic incentive for improving the visual appearance of
manufactured products.
Protection is based on a system of registrations and can last for up to 16 years.
Applications for registration must be accompanied by photographs and other graphics if
necessary, and describe the product on which the design is applied. Approval for
registration depends on satisfying the criteria of novelty or originality (but not necessarily
both).
Novelty means that the same or very similar design must be not known or previously
registered in Australia.
Originality means that the design has never been applied to the particular product
specified in the claim, although it may have been applied to another type of product.

26

The protection is only for the appearance of the article and not how it works. As for
patents, detailed examination guidelines are based partly on common law (that is,
previous decisions by the courts). In the absence of relevant legal precedents, the
guidelines are determined by the Registrar of Designs. Design protection excludes nonvisible internal parts, but does not exclude visible spare parts such as exterior panels,
bumpers or wheel trims. Removing the design protection on currently protected spare
parts was recommended in the IC (1995) report on vehicle and recreational marine craft
repair. The BIE (1995) report noted that there is a degree of uncertainty about the
protection provided to spare parts by the current legislation. Design registration is
intended to protect designs that are applied industrially, rather than a single artistic work,
where copyright protection would automatically apply. When artistic work can be applied
on or to commercial articles, protection under both the Copyright Act or the Design Act
may be available (AGD 1997). However, the Copyright Act will not provide protection to
a design that, when applied to an article, results in a reproduction in three-dimensions of
that design (so called corresponding design). In most cases where dual protection is
available, registered design provides a stronger legal protection than copyright, by virtue
of having satisfied for registration the screening criteria regarding novelty or originality.
4. PATENTS
A patent confers the right to secure the enforcement power of the State to exclude
unauthorized persons from making commercial use of a clearly identified, novel and
useful invention. This protection enables patentees to stop others from manufacturing,
using or selling the invention without their consent. The Australian system of granting
patents to inventors is based upon British law, which can be traced back to the English
Statute of Monopolies of 1624. In fact, the granting of monopoly rights in exchange for
new technologies started in England in the 14th century, initially for the purpose of
attracting skilled craftsmen from abroad. Knowledge of the flourishing patent systems in
Venice and Antwerp led England to adopt the practice of patents for inventions in the
16th century (David 1993; AIPO 1993).

27

The granting of monopoly rights appeared an attractive option to rulers in the

Renaissance period for importing new crafts and skills and for stimulating new
inventions, at the time that scarce public revenue was used mainly to finance the military
and the elite. Whether this ancient instrument is well suited to foster innovation in
modern times is a subject that is taken up in chapter 3. The fact that early patents were
used mainly to attract technology transfer from abroad highlights the fact that from the
very start, the patent system had a strong international dimension, a subject that is the
main focus of attention in this paper.
Under the Australian Patent Act, a patented invention must satisfy a number of criteria.

It must be a clearly defined product or process, rather than just an idea or

concept.

The invention must be novel. The Australian patent law requires universal test of
novelty, that is, the invention must be novel compared with previous patents filed
in other countries and not just in Australia.

The criterion of obviousness is applied to test the inventiveness of the patent. If

the solution to the problem answered by the patent is deemed to be obvious to
technical experts in the field, then the invention is not patentable.

The invention must be useful for what it purports to do. Only inventions are
patentable scientific discoveries and works of art are not patentable.

The patent application must present a clear description of the invention.

Patent examination is to a large extent a bibliographic search of prior art, using patent
disclosures and the technical literature, to assess novelty and no obviousness. The
examination does not involve testing whether the invention works the way the inventor
claims it does. That issue would be examined during litigation about alleged patent
infringements. The examination of novelty and inventiveness is carried out using
technology-specific public guidelines based partly on common law (that is, previous
28

decisions by the courts). In the absence of relevant legal precedents, the guidelines are
determined by the Commissioner of Patents. Currently the maximum duration of patent
protection is 20 years. Patents are subject to annual renewal fees starting from the third
anniversary. If the invention is not commercially successful, the patentee can terminate
protection any time after three years by not paying the renewal fee.
A standard application must provide a complete description defining the invention,
including the principles and methods used by the inventor to carry out the invention. The
original element(s) in the invention represent the claim(s). The date of application for the
patent is used as the priority date of the claim. Put simply, the priority date of a claim is
the date on which the novelty of the claim in assessed by the Patent Office (currently a
division of IP Australia). It is the date on which patent protection comes into effect if the
application is accepted.
It is possible to establish an earlier priority date by filing a provisional application, which
describes the nature of the invention in broad terms. The date of the provisional
application will be accepted as the priority date, provided a standard application with full
specifications is filed within 12 months after the provisional application.
The Patent Office publishes all complete applications for standard patents 18 months
after the priority date, which means that the patent application becomes open for public
inspection. The public is informed about the new application through a notification in the
Official Journal of the Patent Offic1e .The crucial point to note from an economic
perspective is that patents are granted in exchange for the public disclosure of
information by the patentee about the nature and working of the invention. Australia has a
two-tiered system of standard and petty patents. The term of a petty patent is 6 years
less than a third that for standard patents. Petty patents are restricted to a single claim
whereas standard patents can combine a number of claims. The processing of petty patent
applications is usually much quicker than for standard patents. Although the inventive
threshold for petty patents is determined against the base of domestically registered prior
art, it is broadly equivalent to the inventive height of the standard patent, since prior art
registered in Australia parallels the international prior art (BIE 1995). Given similar

29

screening criteria and much shorter length of protection, petty patents are not much used
in Australia. Some reform options currently under consideration by the Government are
reviewed later.
The Australian patent law resembles not only the British patent law on which it is
founded, but also the patent laws in most other developed countries. While strictly
speaking the Paris Convention and TRIPS do not require harmonisation of patent
legislation, the similarity in broad patenting concepts across countries has been partly
driven by international contacts and partly by the universal nature of technology.
PATENTS AND TRIPS
The introduction of TRIPS has made a significant contribution to patent law
harmonization, by setting the standard patent terms to at least 20 years. TRIPS also
require all products and processes to be patentable (including pharmaceuticals, food and
agricultural chemicals). Exceptions include medical and surgical methods and inventions
that can be dangerous to life and therefore should be prohibited from commercial
exploitation. The most significant exception to patentability is new life forms above the
micro-organism level.
By and large, TRIPS does not deal with procedural details, but an unusual operational
clause requires that in the context of civil litigation, the reversal of the burden of proof
should be available under certain circumstances. For example, it should be upon the
defendant to prove that the process to obtain a chemical product is different from the
patented process. This clause was included in recognition of difficulties experienced in
many places in prosecuting infringements against process patents, given that
manufacturing processes are usually not observable by outsiders. Apart from extending
patent terms and standardizing the coverage of patentable subject matter, TRIPS also sets
new guidelines in respect to compulsory licensing and government use without
authorization. While these measures are still allowed, TRIPS tightens the respective
provisions in the Paris Convention by requiring adequate remuneration be paid according

30

to the circumstances of each case, taking into account the economic value of the license.
Moreover, the decision about compulsory licensing should be subject to judicial or other
independent review by a distinct higher authority. Australia could not be a member of the
WTO without agreeing to TRIPS. Some amendments had to be made to the Australian
patent law in order to bring it into conformity with TRIPS. These amendments were
included in the Patent (World Trade Organization Amendment) Act 1994.

The standard patent term was increased from 16 to 20 years.

Pharmaceuticals were already protected for up to 20 years, in recognition of
the long time lags involved in obtaining approval from drug safety authorities.

In certain infringement proceedings, it is upon defendants to prove that their

product was obtained by a process other than the patented process.

The conditions for compulsory licensing have been tightened in line with the
requirements of TRIPS.

The extension of the standard patent term from 16 to 20 years was a significant change in
economic terms. Its economic impact on Australia has been analyzed by Gruen, Bruce
and Prior (1996).

5. LAYOUT DESIGN OF INTREGATED CIRCUITS

A new form of IPR protection is represented by the legislation protecting the layout
design (topographies) of integrated circuits (commonly known as semiconductor chips).
Integrated circuit layouts are usually highly complex and may be of considerable value.
An integrated circuit made by photolithographic or similar electrochemical techniques,
using masks based on visible layout designs, is the key for all kinds of electronic devices,
ranging from heart pacemakers to personal computers.

31

Circuit layout rights automatically protect original layout designs for integrated circuits
and computer chips. While these rights are based on copyright law, they are a separate,
unique form of protection. Like the plant variety rights discussed earlier, this legislation
provides a specially designed (sui generis) form of IPR protection for the layout design
and the chips manufactured from it. As with copyrights, there is no requirement for
registration. The owner has the exclusive right to duplicate the layout design,
manufacture integrated circuits from it and/or exploit it commercially in Australia.
The need to provide special protection to integrated circuit layouts has arisen partly from
the availability of new peeling-off reverse engineering techniques that can be used to
reveal layer-by-layer the circuit layout(s) used to produce the chip. The original sui
generis legislation in this field was introduced in the United States in 1984. In 1989, an
international treaty was formulated under the auspices of the WIPO the Washington
Treaty in Respect to Integrated Circuits. The Washington Treaty never actually entered
into force, because the minimum number of five countries did not ratify it or accede to it.
Nevertheless, the Washington Treaty has been incorporated by reference in the
TRIPS agreement subject to the following modifications: the term of protection is
10 years rather than eight years and the exclusive rights also extend to articles
incorporating integrated circuits based on the protected layout design.
The Australian Circuit Layout Act (1989) is based largely on the Washington Treaty.
Under the Australian Act, rights in an original layout subsist for 10 years from the first
commercial exploitation, provided this occurs within 10 years from the creation of the
layout. The accession to TRIPS did not require modifications to the circuit layout
legislation that was already in force.
6. PROTECTION OF UNDISCLOSED INFORMATION
One of the novel features of TRIPS compared with earlier international IPR agreements is
the explicit requirement to protect undisclosed information. This protection must apply to
information that is secret that has commercial value because it is secret and has been

32

subject to reasonable steps to keep it secret. In broad terms, a trade secret (a term not
used in the TRIPS agreement) can be characterized as any technological, marketing or
other business information that is controlled as a secret, and that provides a competitive
advantage to its owner. In technical fields, a large proportion of secretive undisclosed
information is in the form of unmodified know-how. As discussed in section 3.3, in many
industries keeping new knowledge and know-how secret is a more effective way to reap
commercial benefits from inventions than by taking out patent protection
Countries protect trade secrets in different ways: as legal property (United States); under
contract law (Switzerland); or in the context of ethical business practices (France,
Germany). In Australia, confidential information disclosed by one person to another may
be protected legally through contract, or by the equitable action known as breach of
confidence. This protection is based on common law, that is, judgment dictated by legal
precedents. Needless to say, there are inherent difficulties in proving the unethical
disclosure of confidential information, which is usually carried out in unrecorded
personal conversations. Moreover, some widely used techniques for acquiring
undisclosed information, such as the hiring of a person possessing secret
knowledge/know-how, are difficult to prevent legally in a democratic society.
Despite the availability of some protection for confidential information in most
developed countries, this item did not enter explicitly into WIPO agreements. Its
incorporation into TRIPS has led to heated debates, with developing countries opposing
the treatment of trade secrets as an IPR. This opposition relied in part on the argument
that disclosure is a necessary counterpart of the social bargain associated with the
granting of IPR protection. Moreover, it is difficult to protect legally something that has a
secret content (Primo Braga 1995).
The approach adopted in TRIPS was to identify undisclosed information as something to
be protected (not necessarily as a property) and to link its protection to practices against
unfair competition identified in the Paris Convention. No exclusive rights are given to the
holder of the trade secret by TRIPS. Confidential information that is voluntarily revealed,

33

insufficiently guarded or has been reverse-engineered loses all protection. Only the
acquisition of confidential information in a manner contrary to honest commercial
practices can lead to action against the infringer. TRIPS also requires that test data
submitted to public agencies for the purpose of drug and chemical tests should be treated
as confidential information.
The common law coverage in Australia of confidential information, while representing a
rather weak form of protection, is sufficient to satisfy the requirement of TRIPS to
provide some (unspecified) legal protection for secretive information and know-how. The
government has introduced specific forms of protection for test data, essentially for
reasons of domestic policy but also to eliminate any doubt about our compliance with
TRIPS. In some developing countries, legal protection of confidential technical and
commercial information did not exist in the past.

34

THE TRIPS AGREEMENT

The TRIPS Agreement is a multilateral WTO agreement and, as such, applicable to all
147 members of the WTO. It is also binding for every country that accedes to the WTO.
The Agreements general obligations require countries to apply the principles of national
treatment (same treatment of foreign title holders and domestic title holders) and most
favored nation treatment (same treatment of foreign title holders regardless of their
country of origin).
Unlike most other international agreements on intellectual property, TRIPS sets minimum
standards of protection with respect to all forms of intellectual property: copyright,
trademarks and service marks, geographical indications, industrial designs, patents,
layout designs of integrated circuits, and trade secrets. In respect of each of these areas of
intellectual property, the Agreement defines the main elements of protection, namely, the
subject-matter to be protected, the rights to be conferred, and permissible exception to
those rights.
For the first time in an international agreement on intellectual property, TRIPS addresses
the enforcement of IPRs by establishing basic measures designed to ensure that legal
remedies will be available to title holders to defend their rights. The approach taken by
the Agreement is to set general standards on, among other things, enforcement
procedures, the treatment of evidence, injunctive relief, damages, and provisional and
border measures.
In principle, the provisions of TRIPS became applicable to all signatories by the
beginning of 1996 and are binding to each WTO member. However, developing
countries and economies in transition were entitled to a four-year transition period except
for obligations pertaining to national and MFN treatment. Developing countries were
also entitled to an additional five-year transitional period for product patents in fields of
technology that were not protected at the date of application of the Agreement. For
pharmaceuticals and agricultural chemicals, however, developing countries have had to
35

accept applications for product patents and grant exclusive marketing rights for five years
or until the patent is granted or rejected, whichever is shorter. Least-developed countries
were entitled to a 10-year transitional period to comply with the obligations of the
Agreement (again, except for national and MFN treatment), which can be extended upon
request.
Many developing countries (e.g., Mexico, South Korea) strengthened their intellectual
property regimes before the coming into force of the TRIPS Agreement, such that no or
only few adjustments were necessary to comply with its provisions. For others (e.g.,
Brazil, India) certain changes to intellectual property laws have been made since 1996, as
these countries have faced the end of the transition periods outlined above.
TRIPS has made disputes between WTO members with respect to the Agreements
obligations subject to the WTOs integrated dispute settlement procedures. WTO
disputes are always state-to-state disputes. In other words, disputes are not about
individual IPRs infringement cases, but are about disagreements between governments on
whether a countrys laws and regulations meet the TRIPS requirements. In case a WTO
member is found to violate its obligations, complaining governments obtain the right to
impose trade sanctions in the form of punitive tariffs. Since 1996, there have indeed been
more than 20 TRIPS-related disputes between WTO members. Interestingly, only a
minority share of these disputes involved a defendant from a developing country. Most
disputes are between developed country members, specifically between the United States
and countries of the European Union.
Finally, negotiations during the Uruguay Round left several issues unresolved. For
example, the Agreement calls for the establishment of a multilateral system of
notification and registration of geographical indications for wines and spirits. Moreover,
some members would like to see the higher level of protection for geographic indications
currently granted to wines and spirits applied to other products as well. Little progress
has been made on both these issues, however. This reflects to a large degree divisions
between the European Communities, the trading block that hosts the largest number of

36

geographical indications, and so-called new world producers (e.g., Argentina, Australia,
Chile, the United States), which prefer relatively weaker levels of protection. During the
TRIPS negotiations, this focused mostly on wines and spirits, most developing countries
showed little interest in establishing strong provisions on geographical indications. Since
then, a few developing countries (e.g., Bulgaria, Hungary, Sri Lanka) have taken a more
pro-active stance, supporting the demands of the European Union.
A second area of unresolved rule-making concerns the patentability of biotechnology
inventions. Currently, TRIPS foresees patent protection for microorganisms and nonbiological and microbiological processes, but allows for the exclusion of patent coverage
for plants and animals as well as essentially biological processes for the production of
plants and animals. The Agreement calls for a review of these provisions. Moreover,
some WTO members have linked discussions in this area to clarifying the relationship
between TRIPS and the Convention on Biodiversity, as well as to establishing disciplines
on the protection of traditional knowledge and folklore. However, little progress has
been made on any of these issues.

Economic benefits and costs of TRIPS

As mentioned at the outset, the signing of TRIPS has generated much controversy about
its economic implications for developing countries. Proponents of the Agreement have
argued that stronger IPRs will stimulate creative industries in developing countries and
promote foreign direct investment, with an overall positive development outcome.
Opponents of TRIPS have claimed that the Agreement will forestall developing
countries access to new technologies, lead to higher prices and rent transfers from poor
to rich countries, and impose high implementation costs in resource-constrained
environments. As always, the truth lies somewhere in between these two polar views.
Developing countries indeed host inventive and creative industries that stand to benefit
from stronger IPRs. However, these industries can mostly be found in middle income
countries, rather than low income countries. The empirical evidence discussed above on
37

the link between FDI and IPRs, suggests that the mere strengthening of an intellectual
property regime is unlikely to result in a dramatic increase in inflows of foreign
investment. At the same time, past reform experiences suggest that stronger IPRs can
positively impact on domestic enterprise development and foreign investment, if they are
complemented by improvements in other aspects of the investment climate. By signaling
a countrys commitment to internationally binding rules, TRIPS can make a positive
contribution in this regardthough it is difficult to assess the quantitative importance of
this contribution.
Turning to the costs of TRIPS, it is first important to point out that the Agreement did not
require to extend IPRs protection to products and technologies already invented.
Information and knowledge that were in the public domain at the time the Agreement
came into force will continue to be in the public domain. The implementation of the
Agreement will therefore not lead to actual prices rises of existing products and related
rent transfers, because IPRs protection will only apply to new products and technologies
entering the market. Still, as the market share of newly protected products and
technologies increases over time, prices above marginal production costs and associated
rent transfer are a cause for concernespecially in the case of pharmaceutical products,
as will be further explained in the next section.
As for the implementation of the Agreement, a number of commentators have argued that
TRIPS poses significant institutional and financial challenges for developing countries.
For example, based on figures from World Bank assistance projects, Finger and Schuler
(1999) put the cost of upgrading intellectual property laws and enforcement in Mexico at
$30 million. For many resource constrained governments in poor countries,
implementation costs of this magnitude would likely impose a significant burden on
public sector budgets and draw away resources available for other development priorities.
At the same time, it can be questioned whether the $30 million figure from Mexico is a
realistic estimate of TRIPS-related implementation costs. The underlying World Bank
project in Mexico was not aimed at implementing the TRIPS Agreement (the project was

38

completed before the coming into force of TRIPS) and mostly consisted of activities not
directly mandate by TRIPS, such as staff training, computerization of the patent and
trademark office, and the creation of a specialized intellectual property court. Indeed, it
is important to point out that the institutional obligations of TRIPS accommodate the
weaker institutional capacities of developing countries. For example, while TRIPS does
set certain principles on rights enforcement, it does not require members to make
available more resources to the enforcement of IPRs than the enforcement of law in
general. Similarly, in the area of rights administration, TRIPS only requires that IPRs are
administered such as to avoid unwarranted delays in the grant or registration of an IPR.
More burdensome institutional obligations are more likely to emerge from other sources.
The United States has in recent years negotiated bilateral free trade agreements (FTAs)
with a number of developing countries that include intellectual property obligations
beyond what is required under TRIPS. In particular, these FTAs require governments to
put in place more stringent measures for the enforcement of IPRs and remove some of
the institutional flexibility embedded in TRIPS. Similar obligations may be placed on
countries that are currently negotiating accession to the WTO (e.g., Ukraine and Russia).
Even though TRIPS is the primary WTO benchmark on IPRs, existing members of the
WTO have demanded in the past so-called WTO-plus commitments as a condition of
entry into the WTO. These WTO-plus commitments can take the form of additional
obligations on IPRs enforcement.

39

Enforcement of Industrial Property Rights, Copyright and Related

Rights
GENERAL
Accessible, sufficient and adequately funded arrangements for the protection of rights are
crucial in any worthwhile intellectual property system. There is no point in establishing a
detailed and comprehensive system for protecting intellectual property rights and
disseminating information concerning them, if it is not possible for the right-owners to
enforce their rights effectively in a world where expanding technologies have facilitated
infringement of protected rights to a hitherto unprecedented extent. They must be able to
take action against infringers in order to prevent further infringement and recover the
losses incurred from any actual infringement. They must also be able to call on the state
authorities to deal with counterfeits.
All intellectual property systems need to be underpinned by a strong judicial system for
dealing with both civil and criminal offenses, staffed by an adequate number of judges
with suitable background and experience. Intellectual property disputes are in the main
matters to be decided under civil law and the judicial system should make every effort to
deal with them not only fairly but also expeditiously. Without a proper system for both
enforcing rights and also enabling the grant of rights to others to be resisted, an
intellectual property system will have no value. Avoiding Litigation
A competitor whose operations are obstructed by earlier rights will usually seek to avoid
or overcome the problem in a legitimate way, e.g. by inventing around the protected area
in the case of an earlier patent. Another approach is to seek a license or to negotiate some
other agreement in a friendly way. In coming to agreements with competitors, of course,
companies must be careful not to contravene competition policy rules aimed at avoiding
distortion of competition. This normally means that the terms of any license must not
contain anti-competitive or unreasonable provisions.

40

A company affected by anothers right will carefully assess what its scope is and whether
or not it is valid. This highlights a point of particular importance to the owners of patents,
namely that claims must be well drafted and properly supported by the disclosure of the
invention. They must clearly distinguish the protected subject matter from the prior art
and must be neither over covetous nor too modest. A well drafted patent will often be
enough in itself to deter potential infringers. Similar arguments can apply to other rights
such as trademarks and designs.
It is up to a right-owner to act as his own policeman. He must keep an eye on the
industrial and commercial markets in which he sells his products, or provides his
services, or in which his processes might be used. He must keep abreast of his
competitors activities. If he becomes aware of an apparent infringement he should not
necessarily assume that the infringement is deliberate (though if the infringing item is an
exact copy or counterfeit, infringement will almost certainly have been deliberate). He
should first contact the competitor to point out the existence of his right. Laws in a
number of countries concerning patents, designs and trademarks, provide that a right
owner may not make groundless threats against competitors or their distributors, for
example threatening a court action when there is no ground for alleging infringement or
when the right relied upon has expired, but he can send a simple letter drawing attention
to the right so that the infringer cannot subsequently argue ignorance.
Negotiation is an important aspect of protecting and enforcing rights. In negotiation, an
infringer might well be persuaded to change what he is doing. During the attempts to
negotiate, the supposed infringer may claim that he is not infringing; or he may allege
that the right is of little value and does not justify significant royalties; or he may argue
against the proposed license terms. It may well be worth suggesting that the services of a
mediator be used or that the issue should be decided by arbitration. Of course, both sides
need to agree to accept an arbitrators decision and a contract to that effect may be
needed.

41

Enforcement of Industrial Property Rights in General

Action Before an Industrial Property Office
Industrial property offices frequently have quasi-judicial functions in the administration
of industrial property systems, and provide a forum for procedures for contesting rights
under consideration or granted by the office. Those procedures are often referred to as
opposition procedures.
The expression opposition may be construed widely, as referring to all possibilities
open to third parties to intervene before the industrial property office both in proceedings
leading to the grant of a right and in proceedings for contesting the grant after it has
occurred. The possibilities for opposition arise particularly in relation to registrable rights
such as patents and trademarks, because the registration can be disputed. The possibility
of opposition rarely arises in relation to copyright and related rights, since these rights in
the great majority of jurisdictions arise automatically on the creation of the protected
work.
Why do States provide for opposition? With even the most rigorous examination system,
the State cannot guarantee that the rights which it grants are valid there is always the
possibility that a prior right has been overlooked or a specification misunderstood. Many
systems are not particularly rigorous, which makes it all the more likely that rights might
be granted in conflict with earlier rights. Thus the owners of earlier rights must be able to
object at some stage. This could of course be before a court. However, in everyones
interests, opposition should be a relatively straightforward, speedy and inexpensive
matter, handled as early as possible in the life of the right. Thus many systems provide
that opposition can be considered by the national industrial property office acting in a
quasi-judicial role, as well as by courts. Pre-grant opposition is invariably before the
office.

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The first opportunity that others, for example competitor enterprises producing goods of
the same character as those covered by the patent application, have to become aware than
a patent which could affect their business is being applied for, is at the first publication
stage, 18 months after the priority date. Enterprises, particularly those which own patents,
should keep their eye on the activities of competitors and what is happening in the
marketplace, and in particular on patent applications made in their areas of interest, for
instance by scrutinizing patent office journals and published applications. Not only is it
important to know if competitors are seeking to protect developments which come within
the scope of ones own patents, but it is also important to be warned if they are seeking to
protect known technology or technology patented by others. One can also learn from the
search report, published with the application, of the prior art which will be considered at
the examination stage.
Some systems allow for formal opposition before the grant of the patent or an opportunity
for third parties to become a party in arguments about whether or not the patent should or
should not be granted. The problem with such pre-grant opposition is that there is often
very considerable delay in achieving a grant. Delay means that a patentee who needs a
granted patent in order to pursue an infringement could not settle an action against the
infringer quickly.
It can be important to bring post-grant opposition proceedings in good time. If too long a
delay occurs, the user of the later patent might argue that the owner of the earlier one has
acquiesced in the grant of the later one and as a result should not be allowed to take
action. This might make it difficult to enforce the earlier patent against products or
processes covered by the later one.
In some countries, such as the United States, there is no provision for opposition.
However, third parties concerned about a granted patent can ask for it to be re-examined
by the patent office. Such parties do not become direct parties to the procedure, but may
draw prior art, which may have been overlooked in the first examination, to the attention
of the examiner. Reexamination may result in refusal or in a more tightly drafted patent.

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In many countries there is no provision at all for opposition because the industrial
property office lacks the expertise. This can be the case in those countries, such as
France, where no substantive examination is carried out. In such situations, revocation
before the courts is the only possibility for securing cancellation or amendment of a
competitors patent.
Many countries provide for pre-registration opposition to trademark registration.
Trademarks are published in the form in which they are to be registered, and a short
period is allowed for opposition. In general, considerations are much more
straightforward than those for patents and procedures can be much more rapid. In the
United Kingdom, there are little opposition of trademarks, probably because there is a
rigorous examination involving search of earlier rights. In other countries, for example
Germany, there are more opposition because there is no official search against prior rights
during examination; so opposition is the only way in which the owner of an earlier
trademark can induce the industrial property office to take account of this earlier right.
After registration of a trademark, in many countries it is possible for an aggrieved party
to apply to the office for removal of the mark from the register, or to seek its
modification. One of the main grounds for this would be non-use of the mark. As for
registered designs, where there is no provision for pre-registration opposition, interested
parties may seek cancellation of registrations by the office.
Civil Court Procedures
Despite efforts to achieve friendly settlement, circumstances can and do arise where the
owner of a right feels that he must take action against an infringer in order to protect his
markets, present or future. In most jurisdictions this will be handled in the civil courts. In
most situations, there will be considerable dispute as to whether for example the claims in
a patent to be enforced should be of the scope claimed, and as to whether the alleged
infringement actually falls within the valid scope. With trademarks, arguments also

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concern the scope of the registration and whether the allegedly infringing mark is
confusingly similar to the earlier mark. Infringers may genuinely believe that they have a
plausible case on such aspects. Most patent infringements are not slavish imitations but,
arguably, take advantage of the protected inventive concepts of the patent and will have
to be resolved on the basis of expert opinion.
In an action for patent infringement in common-law countries (the procedure and
terminology in civil-law countries differs to some extent), the patent owner, acting
through his immediate lawyers (solicitors), arranges for a writ or complaint to be served
on the alleged infringer. In the writ the patent owner, as plaintiff, will specify the nature
of the alleged infringement and the remedy sought. Almost always, an injunction
restraining the alleged infringer, the defendant, from continuing with what he has been
doing, will be requested, as well as damages. The defendant will usually acknowledge the
writ and give notice that he intends to defend. If he does not, the plaintiff may be entitled
to a final or interlocutory ruling (one which decides the issue but leaves open the question
of damages, etc.) forthwith. If the defendant does defend, and the issue is not settled out
of court or dealt with summarily, pleadings will be exchanged, on the one hand stating
the material facts of the claim and on the other the defenses or counterclaims. The
purpose of pleadings is to define precisely the issues in dispute and eliminate agreed or
irrelevant matters. They go back and forth and can take several months. A counterclaim
may be an allegation that the patent is invalid; this will have to be defended by the patent
owner. Once the pleadings have been completed the plaintiff will issue a summons for
directions. Such directions, given by the judge, will deal with discovery and inspection of
documents and in general with the trial preparations. Notice to inspect documents may be
served on the other side by leave of the court. So may interrogatories, which take the
form of written questions which the other side must answer under oath, e.g. by sworn
affidavit, before the trial. It is noteworthy that only a small minority of cases actually get
to the trial stage, and the rest are settled along the way, for reasons of time, effort and
expense.
Cases involving complex technology can take a very long time in court with expert
witnesses being called and subjected to examination and cross-examination by both sides.

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In issuing his reasoned decision, the judge can make various awards. In addition to
injunctions, the court may also award damages in respect of the infringement, namely
compensation for sales and markets lost as a result of the infringing activity. As an
alternative to damages, the owner of the patent can be awarded an account of profits. All
the profits derived by the defendant as a result of the infringement may be surrendered to
the patent owner. An order requiring the defendant to deliver up to the patent owner, or to
destroy, any products or articles incorporating the patented invention can also be made.
Finally, the patent owner can secure a declaration that the patent is valid and infringed.
Criminal Actions: Counterfeiting
As already mentioned, patent actions are essentially civil actions for infringement. In the
case of trademarks and copyright, much of what has been explained about procedures in
relation to civil actions applies to ordinary actions for infringement, but the serious
criminal offenses of counterfeiting and piracy can also arise. A trader may knowingly
manufacture, distribute or sell goods marked with a trademark where the marking has
been done without the permission of the owner or where the goods have been illicitly
copied.
There are several ways that counterfeits can come to the attention of the authorities. Right
owners themselves may become aware of distributors or retailers trading in counterfeit
goods and bring the trade to the attention of the police. Also counterfeits may be detected
by law enforcement officers who are specifically empowered under trademark legislation
to take action against traders in counterfeit goods. Their powers may be extended to
enable them to deal with copyright offenses. On conviction, traders in counterfeit goods
can face stiff penalties, and seizure of all offending products is normal. In respect of
items protected by copyright, such as sound recordings on tape or compact disk, the
police are the normal enforcement authority and will take action on the basis of a
complaint by the lawful right-owner. They often need little more than 24 hours warning
in order to secure warrants and make checks.

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Another way in which action against counterfeit goods can be taken occurs at ports of
entry of imports. If a mark owner becomes aware that consignments of counterfeit goods
are on their way to the country, he can alert the customs authorities, who will keep watch
for the goods and impound them when they arrive. Action can then be taken against the
importer.

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CRITICISM FOR TRIPS

Since TRIPS came into force it has received a growing level of criticism from developing
countries, academics, and non-governmental organizations. Some of this criticism is
against the WTO as a whole, but many advocates of trade liberalization also regard
TRIPS as bad policy. TRIPS's wealth redistribution effects (moving money from people
in developing countries to copyright and patent owners in developed countries) and its
imposition of artificial scarcity on the citizens of countries that would otherwise have had
weaker intellectual property laws, are common bases for such criticisms.
Peter Drahos writes that "It was an accepted part of international commercial morality
that states would design domestic intellectual property law to suit their own economic
circumstances. States made sure that existing international intellectual property
agreements gave them plenty of latitude to do so.
Danielle Archibugi and Andrea Filippetti argue that the importance of TRIPS in the
process of generation and diffusion of knowledge and innovation has been overestimated
by both their supporters and their detractors. Claude Henry and Joseph E. Stiglitz argue
that the current intellectual property global regime may impede both innovation and
dissemination, and suggest reforms to foster the global dissemination of innovation
and sustainable development.

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BIBLOGRAPHY

http://www.wto.org/english/thewto_e/whatis_e/tif_e/utw_chap1_e.pdf

Fifth edition
Previously published as Trading into the Future
Written and published by the World Trade Organization
Information and External Relations Division 2011 WTO
(http://www.wto.org,)

Revesz .John, (May 1999), Trade-Related Aspects of Intellectual Property

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Alston, R. and Williams, D. 1998, Government delivers cheaper CDs, Joint
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Economy and the Arts and the Attorney General, Canberra, 12 July 1998.
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Waller stein, M.B., Mogee, M.E. and Schoen, R.A. (eds),Global
Dimensions of Intellectual Property Rights in Science and Technology,
National Academy Press, Washington.
Griliches, Z. 1990, Patent statistics as economic indicators: a survey,
Journal of Economic Literature, vol. 28.
Hoekman, B. and Kostecki, M. 1995, The Political Economy of the World
Trading System, Oxford University Press, Oxford.

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