The Consequences of Intellectual Property Rights

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WTO, GATT, TRIPS, BRICS, IMF, IBRD, ILB – global economic governance has a penchant for acronyms. It seems also to be a governance system that increasingly benefits the private sector, and especially global corporations, at the cost of the public good. Taking the World Trade Organisation as an example, this short exposition will hope to demonstrate that economic governance increasingly prevents the free flow of information, with dire consequences to follow.

Let us set the scene: the General Agreement on Tariffs and Trade (the GATT) was formed following the Second World War to regulate international trade and prevent protectionism. The GATT turned into the World Trade Organisation in 1995, which also added further governing tools (and acronyms), including: the General Agreement on Trade in Services (GATS), the Trade Policy Review Mechanism (TPRM), and trade-related issues of intellectual property rights (TRIPS). [1] The World Trade Organisation is massive. It has swelled to such a degree that some (myself included) have claimed that it has begun to cause a legitimacy deficit, particularly because it lacks any proper accountability mechanism and fair decision-making process. [2] Nobody asked for the WTO, nor have the public any influence over its decisions. It was created by national governments and a permanent body of civil servant-type people. One of the most concerning consequences of its creation is that it is distinctly western (both in origin and in practice). The WTO over-represents the views of the economically advanced countries without corresponding representation to the BRIC countries (amongst others). This is because major policy decisions are taken in so-called ‘green room meetings’ between the USA, the member states of the EU, Canada and Japan. Once they’ve made their mind up, the other countries are expected to follow through bullying tactics and peer pressure. This is one of the numerous negative side-effects of ‘consensus politics’.

The establishment of the global settlement of intellectual property rights is a particularly useful case study, because it shows how the WTO is creating a global regime of intellectual property rights (IPRs) without the involvement of the vast majority of stakeholders, instead representing the views and wishes of a small elite. [3] Through TRIPS, advanced economies are monopolising knowledge over developing countries. This is because intellectual property rights are dependent on intensive R&D, which most developing countries cannot afford (either through state funding or through private investment). This has two major consequences. First, it stifles growth in the medium- to long-term because scientists, businesses and entrepreneurs are not able to innovate and use ideas creatively. Second, it could lead to catastrophes in the public domain. One example of this is the HIV/AIDS crisis.

In the late 1990s and early 2000s, Indian and Brazilian companies were involved in the creation of cheap, generic drugs that could limit the damage caused by HIV/AIDS to some extent. This has met huge resistance by the US Trade Representative (USTR), who claimed that intellectual property rights of pharmaceutical companies (who invented the drugs in the first place) must be protected. Apparently, this argument stands even if the cost are millions of lives. This came to a head in 2001, when the South African government was met by a 39-strong company alliance that sought to remove the Health Minister’s power to distribute drugs that originated from the BRIC countries. It was alleged that South Africa broke the TRIPS agreement through its distribution of drugs in an attempt to halt the HIV/AIDS pandemic. The WTO’s dispute settlement procedure weighed in, and begun to take the side of the corporations. Public health seemingly did not account for a great deal when it comes to the profit of pharmaceutical companies. A number of non-governmental organisations – among them Medecins Sans Frontiers (MSF) – begun to wage a public, global campaign against ‘Big Pharma’. They demonstrated that the drug research protected under IPR agreements was funded by the American government. In other words, the drug research was public, and therefore in the public domain. The pharmaceutical companies’ claim to have invested heavily in R&D subsided, and the companies very quickly (and quietly) backed down. It was only through the NGO campaign that made it possible for the millions of lives to be saved, contra trade liberalisation and the protectionism of ‘Big Pharma’. What does this tell us? The WTO is not an impartial organisation. Its aims are clearly neo-liberal, stating that trade liberalisation is its main goal. This is despite the huge costs that this will have on developing countries, especially as the process is not gradually introduced. The TRIPS agreement in particular shows that it was designed to protect western supremacy of knowledge-intensive industries.

However, the problem of the TRIPS agreement goes further than this. The agreement does not secure economic growth. Protecting intellectual property, in its basic form, does make sense (without its protection, there is no incentive to innovate). The problem is that if such protective regimes become too inflexible, as the WTO agreement is in danger of doing, then it will (paradoxically) prevent incentives to innovate. Moreover, no other companies are allowed to use technologies or drugs, even if it is purely for the public good (such as generic HIV/AIDS drugs). Imagine if Sir Tim Berners-Lee had prevented the spread of the Internet because of IPR? Or Motorola had imposed restrictions on its invention (the mobile)? Evidence has also shown that, despite IPR protection, economic growth is still slowing down. If anything, TRIPS helps monopolise power for corporations, at the cost of economic growth and the public good. [4]

The broader implication is this: the privatisation of information – regardless of whether at national or global level – will prevent the fruitful spread of knowledge. TRIPS needs to be substantially reformed. It must, at least, allow room for public health and public safety to come before private profit. Intellectual property wars are ongoing throughout the world at the moment, whether it is Apple, Samsung, Google, or others. The danger of tightening intellectual property is that it will stop creativity to flow freely. It prevents competition amongst companies, acting instead as a defence mechanism to stop innovation. It could lead to a preposterous situation where a company has attempted to patent electronic devices that are rectangular with rounded corners [5].

Further Reading

[1] B. Hoekman and M. Kostecki (2001) The Political Economy of the World Trading System: The WTO and Beyond (second ed.), Oxford: Oxford University Press, p.51.

[2] http://gedmar.wordpress.com/2012/10/07/understanding-the-world-trade-organisation/

[3] D. Archibugi and A. Filippetti (2010) ‘The Globalisation of Intellectual Property Rights’, Global Policy 1:2, p.143.

[4] Ibid., p.145.

[5] http://www.forbes.com/sites/connieguglielmo/2012/08/23/apple-samsung-patent-war-puts-future-of-innovation-at-risk/