Restrictive business practices in relation to patents and trademarks

Abusive exercise of intellectual property rights

Nature

The licensor can, through the bargaining process, place restrictions on the licensee which limit his competitive impact. In addition, the licensor is assured of specific territorial protection from the competition of the licensee by the system of national patent and trademark laws.

A significant number of foreign collaboration agreements, most of which presumably involve some sort of a licensing arrangement, have been entered into with firms in developing countries. These have involved independent firms, or firms in which the foreign licensor has a minority participation, or firms which are subsidiaries of a foreign firm. Regardless of these explicit contractual restrictions and implicit restrictions on export through equity control, certain restrictions on export are inherent in the present system of protection of industrial property (mainly patents and trade marks).

Patent law generally confers, as a means of encouraging inventions and their exploitation, the right to preclude third parties from making and selling the patented production, and in the case of a process patent, from applying the patented process without the agreement of the patent owner. This right may give the patent owner a monopoly position to the extent that there are no competing products (substitutes) but it is rare that a single patent gives its owner a monopoly position with regard to a specific product. Where, however, a large number of related patents are owned by one firm or where the patents of the leading firms in an industry are pooled, patents are likely to result in monopoly positions in a market. Unpatented know-how has been defined as technical knowledge of industrial significance which has been built up in one organization and is not in the public domain. By contrast to the case of patents, there is at present no generally accepted view as to the scope of legal protection of unpatented know-how. But it is clear that the protection of know-how does not include a right to exclude others from utilizing the know-how concerned and from selling the resultant products. Rather, it is limited to safeguarding against unlawful communication to others or disclosure to the public, and against 'stealing'. The protection of unpatented know-how does not therefore involve inherent restrictions on exports. Such restrictions may, however, be stipulated in licensing agreements under which such know-how is made available. Licences frequently cover both patents and unpatented know-how since, in many cases, the licensee would be unable to make use of the patent without having access to the related unpatented know-how. In such cases it is often the possession of the unpatented know-how rather than the patent itself which confers upon the licensor his strong bargaining position vis-à-vis the licensee. This situation may force the licensee to accept wider restrictions on his activities, in particular with regard to exports, than might be the case if only a patent were involved.

A trademark is any visible sign serving to distinguish the goods of one enterprise from those of other enterprises. Trademark laws generally give the owner of a trademark the right to preclude others from using that trade mark in commerce for goods or services in respect of which the mark is registered. Like a patent, a trademark thus involves inherent restrictions on the sale of products, but the exclusive right applies only to the use of the particular mark in association with the goods or services concerned. The reputation of a trademark may, however, in particular cases, be so strong that other enterprises may have difficulties in selling the same or similar products without that mark or with a different mark. In consequence, they may be forced to enter into a licence agreement with the trademark owner. In such cases the trademark owner is often in a similar strong bargaining position as the licensor of important unpatented know-how and may be able to impose substantial restrictions, such as export restrictions, on the licensee.

The fact that in the case of agreements involving patents and trademarks, not only do contractual restrictions exist, but also certain inherent restrictions resulting from these two forms of industrial property as to the production and or marketing of goods, is of vital importance in considering possible ways and means of removing export restrictions.

Background

The Trade Related Intellectual Property Rights Agreement (TRIPS) states that all WTO member governments "shall provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof." (Sui generis is Latin for "of their own kind.") This clause was so controversial that the text decrees it must be reviewed in 1999. Already, the U.S. government has informally indicated its preference for deleting the sui generis option. But many nations including Thailand, India, and much of Africa, have proceeded to develop sui generis systems that recognize the rights of farmers to save seed and of traditional peoples to regulate outsider access to their knowledge of medicinal plants.

Incidence

The Trade Related Intellectual Property Rights (TRIPS) measures promote the patenting of germplasm, micro-organisms and biological processes under the aegis of "plant breeders" rights. Using indigenous germplasm from southern countries to develop new strains, the major TNCs will be able to patent the seed to sell it back with a royalty charge to the original country.

In 2000, developing countries are scheduled to bring their national laws into conformity with TRIPS rules; least developed countries have until 2005 to do so. Every two years from 2000 on, the entire TRIPS agreement will be reviewed. Meanwhile, Washington is exercising intense diplomatic pressure to force developing countries to comply with or even to surpass TRIPS requirements ahead of schedule.

Claim

Patents mean only exclusion.

Patented drugs are far more expensive than their generic counterparts, generating windfall profits well beyond the actual costs of development.

Researchers are increasingly reluctant to publish early discoveries in order to increase the likelihood that they (or, more often, their companies or universities) will be the first to patent a commercial result.

In conjunction with other trade and investment policies, the global marketing of expensive patented medicines and seeds limits many communities' access to food and health. Furthermore, there are profound ethical and moral questions about trade policies that convert seeds, plants, and other forms of life into private property.

The recognition of the sui generis clause as a human right is fully consistent with TRIPS as well as with: the Convention on Biological Diversity; Convention 169 of the International Labour Organization; the International Undertaking on Plant Genetic Resources of the United Nations Food and Agriculture Organization; several United Nations covenants on economic, social, and cultural rights; and perhaps most significantly, customary law as exercised by local communities since time immemorial.

The USA should therefore cease its campaign to outlaw the priori rights of communities to the resources that sustain them. The USA should also cease utilizing bullying tactics and instead join the world community of nations in finding multilateral solutions to the struggle over valuable natural resources. High on the agenda of any credible multilateral regime must be the regulation of transnational corporations to enable local and regional resource management and governance systems to evolve. In fact, the Convention on Biological Diversity provides a framework for the development of such systems, if the USA would choose to respect perhaps even ratify this otherwise universally adopted body of international law.

Counter-claim

Intellectual Property Rights (IPR) are essential for research and development. Without royalties guaranteed through IPR, one could not afford to invest in the search for plants whose active ingredients may be the source of new life saving drugs. Nor could they conduct research in genetic engineering, with which one will be able to "feed the world.

The patent system is the cornerstone of research and development. Until the World Intellectual Property Organisation (WIPO) introduced the Patent Cooperation Treaty (PCT) international registration system, each patent application had to be registered individually in each country in which protection was sought. In 1998, WIPO received 67,007 international patent applications, a 23 per cent increase over the figure for 1997, which had a total equivalent effect of 3,463,147 national applications. The saving in time and costs for the applicant is truly vast, and the success of the system is evident in the growth of its use - from only 2,625 applications in 1979. In accordance with its goal of ever-enhanced facilitation of the work of the creator, WIPO continues to move towards increased harmonization of patent registration formalities. A major step in this direction will be the diplomatic conference convened in summer of 2000 for the adoption of a Patent Law Treaty.