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-Ã -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.
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.
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.