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CHAPTER 14:
INTELLECTUAL PROPERTY RIGHTS
Although Canada has signed the treaties, we have not yet developed domestic
policy on those treaties. It is key, before entering into ... negotiations,
for Canada to have a domestic policy on these issues rather than to have
a policy imposed on us by our trading partners. [Glen Bloom, 112:1020]
Knowledge, Intellectual Property and International Trade
Knowledge has always been understood to be one of a number of driving
forces behind economic growth. Just how the former might turn into the
latter remains somewhat elusive, but further inquiry of late by many scholars
has met with success in finding and piecing together some integral parts
of the puzzle. It is now widely acknowledged that a country's ability to
compete successfully in a globalized economy increasingly impinges on its
capacity to innovate. The accumulation of knowledge through inventions
and its diffusion across the business community allows firms to incorporate
ever-effective technologies, production processes and new products in meeting
consumer needs. That there is mounting evidence that the standard of living
of citizens of the modern economy, which is essentially a knowledge-based
one, turns on their productivity performances through the investments they
make in research and development (R&D) is seldom questioned anymore.
Indeed, competitiveness, output per head and innovation are the business
catch phrases at the turn of the millennium.
A quintessential industrial tool fostering innovation has been the creation
of the intellectual property right. Society has long recognized that information,
when held privately (and in the right hands) and not publicly, is a source
of personal wealth. On the other hand, when this information is broadly
available, it will likely be put to use by others and thus it will produce
little, if any, personal wealth, at least relatively speaking. Without
the ability to capture the wealth flowing from any novel piece of information,
the individual has little incentive to disclose it, entrepreneurs will,
therefore, not be able to make use of it and the economy will not be what
it could otherwise be. Therefore, making use of the fact that all knowledge
has characteristics of a public good, whereby one's use of it does not
affect another's productive use of same, the creation of a property right
in knowledge rewards innovative efforts commensurate with its commercial
prospects. From society's perspective, the granting of the power to exclude
others from the use of the knowledge uncovered and embodied in the property
right without compensation being paid to the individual responsible for
its discovery creates a tournament amongst rivals to innovate in return
for the public disclosure of the discovery. Private information is therefore
profitably made public; only its use thereof remains proprietary.
Intellectual rights encompass
copyright and neighbouring rights, trademarks, geographical indications,
industrial designs and models, patents, layout designs of integrated circuits,
and protection of undisclosed information (see Box 14.1). They all possess
the following attributes: eligibility for the right; the duration of the
right; the breadth of the right; the novelty requirement; and access requirements.
In short, the longer the duration, the greater the breadth, the more burdensome
the novelty requirement, or the less imposing are the access requirements
entailed in the right, the harder it will be to subsequently invent around
this discovery, the less likely there will be follow-on inventions, and
more potential competitors will be stifled. The converse is also true.
Though this does not mean the high-technology markets will be prone to
monopoly as alternative products, technologies and production processes
will remain a perennial source of competition.
A tournament of the sort created by an intellectual property right is not
without its costs to society. All incentive systems for innovation, including
the intellectual property right, suffer in varying measures from the ensuing
racing environment created. First on this list would be that the "winner-take-all"
riches of the tournament often leads to duplicative and wasteful R&D.
Second, the power to exclude others results in a less than optimal pace
of technological diffusion; but without the right to exclude, there will
often be nothing to diffuse and a small share in a big pie can often be
more rewarding than a big share of a small pie. For this reason, an effective
intellectual property rights regime is best accompanied by a strong and
effective competition policy regime.
In a modern developed economy, a knowledge-based economy, the fact that
there will be too much competition in R&D activities and too little
competition in the use of the discoveries has increasingly become irrelevant.
The simple facts are that the net benefits of an intellectual property
rights regime are now demonstrably positive. The developing economies,
however, think otherwise and the associated issues have proven to be a
source of tension when integrating both types of societies for the purpose
of trade and investment. They, in general, would prefer to "free ride"
the royalty payments embodied in the right for the simple reason that they
have historically been net importers of technologies and rights-protected
products. Before dealing with these issues in the context of the FTAA,
more information on the current state of international intellectual property
rights treaties is advisable.
The Agreement on Trade-Related Aspects of Intellectual Property (TRIPs)
International treaties on intellectual property rights have existed
since the end of the 19th century. They have dealt in turn with industrial
property, trademarks, industrials designs and models, patents, copyright,
etc. The World Intellectual Property Organization (WIPO), created under
the 1967 Convention establishing the World Intellectual Property Organization,
became the international organization responsible for
enforcing the treaties on intellectual property in effect at that time.1
Since 1970, the year the Convention came into force, the WIPO has been
the forum in which the development of existing treaties and the negotiation
of new treaties are discussed. The participants in those treaties have
long criticized the fact that the WIPO has no mechanism to force compliance.2
The application of treaties has always been voluntary.
The participants in the Uruguay Round of negotiations agreed that the
time had come to change the situation and force the application of some
of these treaties. The TRIPs agreement, described as the most comprehensive
agreement on intellectual property, came into being with the conclusion
of the Uruguay Round of multilateral trade talks. In contrast to the WIPO
treaties, the TRIPs agreement required the members to implement and meet
the minimum standards it prescribed.
The TRIPs agreement is not, strictly speaking, a trade liberalization
agreement, as it does not prescribe measures designed to open up markets
and facilitate free trade. However, it does facilitate free trade in that
it prescribes measures for protecting intellectual property rights within
the context of more open markets.
The TRIPs agreement deals with three main elements:
1. the establishment of standards in the area of intellectual property
rights;
2. the integration of the standards into the member countries' legislation
and the creation of an internal mechanism for enforcing the standards;
and
3. the application of dispute settlement procedures and rules to
disputes between members over implementation of the agreement.
Some of the provisions in the TRIPs agreement apply to all seven target
areas of intellectual property rights (national treatment, MFN treatment),
while others set standards applicable to specific areas. The seven areas
in question are: copyright and neighbouring rights; trademarks; geographical
indications; industrial designs and models; patents; layout designs of
integrated circuits; and protection of undisclosed information. The TRIPs
agreement also deals with the control of anti-competitive practices in
contractual licences.
While other WTO agreements came into effect on January 1, 1995, the
members had an extra year to apply the TRIPs agreement, that is, until
January 1, 1996. The additional time allowed many developed countries to
adapt their legislation to the prescribed standards, if they had not already
done so, and to set up the administrative structures needed to ensure that
intellectual property rights would be respected within their jurisdiction.
Developing countries and economies in transition were given 5 years to
implement the TRIPs agreement, while the least developed countries were
given 11 years.
Intellectual Property Rights Regimes and the FTAA
The Committee understands that a number of countries in the Americas
still have until 2006 to improve their intellectual property rights regime
to the TRIPs standard (i.e. Ecuador and Panama). There are still others
in the hemisphere that are laggards in terms of implementing their existing
obligations under the TRIPs (Argentina for one). Nevertheless, the Committee
accepts as a basic principle that intellectual work deserves appropriate
acknowledgement and remuneration, not unlike other types of work such as
physical effort and capital investment. The first question that must then
be answered is: Is the TRIPs agreement sufficient to Canada's needs? In
this vein, we were given an interpretation of how the TRIPs agreement came
about and what it accomplished.
[T]he nub of the [TRIPs] deal was that it was a package deal. The United
States itself would provide market access and would pressure the European
Community to grant the same in the areas of agriculture and textiles, in
exchange for many of the developing countries agreeing to an international
standard for intellectual property rights protection. The TRIPs agreement,
building on the principles of the Paris and Berne conventions - that's
on patents and copyright - obliged signatories to adhere to an international
baseline for standards of protection for all areas of intellectual property:
patents, trademarks, copyright. Second, TRIPs required effective enforcement
measures, both at the border and internally. Third, signatories must adhere
to the dispute resolution provisions of the World Trade Organization. That
was a very critical decision, to have disputes outside of the normal World
Intellectual Property Organization and in the WTO. [Owen Lippert, 112:935]
The second question to answer is: Whether Canada should side with the
Americans and advocate a position that the FTAA agreement should improve
upon the TRIPs agreement or side with most Latin American countries and
advocate the position that the TRIPs agreement standard is sufficient?
The opinions provided to the Committee, although few, were generally favourable
to the former.
There can be little doubt that intellectual property is key for the
millennium on issues of competitiveness and is key to ensure that Canadian
companies succeed not only in Canada, but in the global marketplace. There
is a strong need to ensure that Canada's intellectual property laws foster
the development of intellectual property in Canada and foster the development
of intellectual property business in Canada. In addition, there's a need
to ensure that there are adequate and effective international standards
and norms in intellectual property protection. [Glen Bloom, 112:1015]
More specifically, it was suggested that:
The FTAA IPR negotiations should move on to tackle thornier issues.
... These issues include compulsory licensing, cultural exemptions, "pipeline
protections, higher life forms, new plant varieties, information network
systems, trade secrets, geographical exhaustion of rights, and a Hemispheric
Intellectual Property Council. If these issues were addressed, the possibility
exists of devising not just a TRIPs Plus, but a NAFTA Plus agreement which
could set the international standard for much of the next century. [Owen
Lippert, Submission, p. 63]
But two caveats were also advanced. The first relates to the relatively
new issue posed by biotechnology and the surrounding environmental and
moral issues.
Canada will be seeking an intellectual property chapter in the FTAA.
... Canada has a unique role ... to do with ... [the] patentability of
life forms. ... At this time, in fact, the precedent case is moving through
the Canadian courts; it is the application by Harvard University for a
patent on its genetically engineered mouse, the Harvard "oncomouse,"
as it's called. It is genetically engineered to be predisposed to develop
cancer for the purposes of research. The fact that Canada has not yet followed
the American route in giving exclusive ownership of higher life forms is
an international precedent of quite great importance ... There are many
controversies associated with it, including whether patenting of life forms
conflicts with the obligations of countries, including Canada, under the
UN Convention on Biological Diversity. ... I would simply like to bring
to your attention the fact that the question of patenting life forms in
Canada has not been the subject of broad public debate. [Michelle Swenarchuk,
30:1630-1635]
The second caveat relates to the application of dispute settlement to
intellectual property rights associated with cultural products.
Similar concerns arise out of intellectual property rights. We have
grave concerns that the trend in trade agreements is to direct IP litigation
towards such trade panels as dispute settlement mechanisms, thereby compromising
nations and individual creators. While IP rights have a historic base in
industrial matters, the tendency is to ever-increasingly apply them to
culture, an issue that needs a great deal of public discussion. Linked
to this is the need for increasing study of international copyright, especially
in view of the vast electronic means of violating individual copyright,
again ensuring globally that such rights are enforced with [a] public,
legal dispute settlement mechanism rather than trade tribunal dispute settlement
mechanisms. [Barry Grills, 32:1555-1600]
In the end, the Committee does not want the government to rush into
these contentious issues without first completing its consultation stage
with the public. The Committee therefore recommends:
27. That the Government of Canada continue its consultations with
the parties concerned so that its position on intellectual property represents
the interests of all Canadians. That this policy be defended in the Free
Trade Area of the Americas negotiations.
1 The
WIPO replaced the international organization called the United International
Bureaux for the Protection of Intellectual Property, which included the
international administrative bureau created by the 1883 Paris Convention
for the Protection of Intellectual Property and the bureau created by the
1886 Bern Convention for the Protection of Literary and Artistic Works.
See World Intellectual Property Organization, Geneva, WIPO, July
1998.
2 B.K.
Zutshi, "Bringing TRIPS into the Multilateral Trading System,"
in Jagdish Bhagwati and Mathias Hirsch (ed.), The Uruguay Round and
Beyond: Essays in Honor of Arthur Dunkel, The University of Michigan
Press, n.d., p. 41.