Table of Contents
A. Introduction 4
B. Comments on IP Reforms, Innovation, and Economic Growth 7
C. New Research in IP Protection and International Trade 15
I. TRIPS, PTAs, and IP Reforms Increase High-Technology Exports in High-Income and Middle-Income Countries 16
II. IP Protection Correlates with Export Quality and Sophistication 19
III. High-Technology Exports from Developing Countries May Be Impeded by IP Rights in Rich Countries 20
IV. IP Protection Shrinks Effective Distance within Production Networks 21
V. The Specifics of Patent Protection Matter for Trade Flows 22
VI. Patent Rights and Global Innovation Networks 23
D. Concluding Remarks 24
A. Introduction
The modern international intellectual property (IP) system has been under continuous construction since the inception, in 1995, of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) at the World Trade Organization (WTO). As one of the foundational accords establishing the WTO, TRIPS requires all member countries to meet its minimum IP standards, which are considerably more comprehensive and prescriptive than those involved in prior international agreements. TRIPS obligations are enforceable under the WTO system of settling disputes. In essence, the agreement set a policy benchmark that greatly internationalized the protection of IP rights (IPRs) as its requirements were implemented over the succeeding years.Footnote 1
Twenty-seven years later, the IP system has achieved even greater globalization through additional norm-setting in treaties of the World Intellectual Property Organization (WIPO); bilateral investment treaties among nations; and – especially – the many bilateral, regional, and “mega-regional” preferential trade agreements (PTAs) that feature elevated “TRIPS-Plus” protective standards. Prominent among the last category are the recently renegotiated North American Free Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Comprehensive Economic and Trade Agreement between the European Union and Canada. Together, such initiatives have considerably extended the scope of international IP protection, both in terms of coverage and substantive standards as well as with regard to enforcement requirements. They have also established a complex system of rules that are simultaneously overlapping and potentially fragmented across countries. Broadly put, the majority of poor countries are bound minimally by TRIPS, with which they sometimes struggle to comply, but remain outside the elevated system constructed via PTAs among developed and key emerging countries.
Policy reforms on this vast scale must inevitably have important economic impacts, and searching for those impacts through extensive data analysis has become a large sub-specialization within economics. Research in this area is challenging for several reasons.
First, IPRs – including patents, copyrights, trademarks, trade secrets, and numerous variations on those themes – are themselves complex policy interventions that may generate cross-cutting incentive and disincentive effects. Their purpose is to address information problems and market failures that operate both statically and dynamically. In this inherently distorted environment, policies that may enhance innovation in one set of socioeconomic circumstances can diminish competition in another. Consequently, even the manner in which a research question is framed depends on specific national and temporal conditions.
Second, IPRs are (usually) national regulations facing all forms of economic activities and sectors, unlike product-specific or sectoral taxes, subsidies, and tariffs. Cutting specific taxes directly reduces costs and would almost inevitably expand the taxed activity – such as output, trade, and investment. In contrast, increased patent scope or copyright duration has differential effects across countries and industries, with those effects being highly dependent on local conditions such as the endowments of skills, depth of financial markets, and efficacy of the judicial system. In that context, it is challenging to make theory-based accurate predictions about how national, let alone global, IP reforms may affect measurable economic activity.
Third, data limitations are endemic in this area, particularly across countries at different levels of economic development. For example, we would like to know how IP reforms affect innovation incentives and outcomes. Patent statistics offer an obvious outcome measure, but simply counting patent applications or grants fails to recognize their considerable heterogeneity, while much innovation in poor countries is not patented. Investments in research and development (R&D) are the corresponding input measure, but such data rarely exist beyond the developed and key emerging economies. Moreover, innovation should be measured at the microeconomic or firm level, and such datasets remain scarce, although they are gradually increasing in scope and availability. Little wonder, then, that much of the empirical research on incentive effects has centered on international trade, for which data are comprehensive and reasonably consistent internationally. But even that solution runs into its own research problems, such as the technical difficulty of detecting microeconomic impacts from national reforms that happen sporadically. Beyond that, the data limitations become severe: how do we consistently and appropriately measure competition, prices, and markups, as well as entry and exit across countries?
Most challenging, however, is the essential difficulty of assigning causality from IP reforms to, first, these microeconomic factors and, second, macroeconomic concepts such as economic growth, sectoral reallocation, and inequality. All of these are critical issues about which we have little solid information and need more research. The primary reason causality is so difficult to detect is that there are many complex confounding factors that must be accounted for, not least the fact that IP policy may be endogenous to those changes. It is evident that IP policy exists and evolves in a milieu of other conditions that affect technological and cultural change and which is itself often path-dependent.Footnote 2
Despite these problems, economists have made progress in studying particular questions and improving our understanding of how the evolving IP system influences economic outcomes, particularly at the microeconomic and sectoral levels. Research also has shed light on the ways in which such effects are conditional upon other economic factors. This chapter is a progress report on this research, with an emphasis on the most recent and current studies in international trade, investment, and strategic IP use. The international focus reflects my comparative advantage in studying trade, foreign investment, and technology transfer, the areas of my own inquiry. In fact, however, these areas have attracted the most research attention by empirical economists largely because of the relatively thick data sets and the likelihood that IP will leave detectable traces in trade flows. For completeness, I supplement the review with comments on important recent findings in the areas of innovation and pricing. The final portion of the chapter sets out useful directions in which this research agenda should move.
Readers may wonder about the suitability of a chapter that reviews economic analyses of the effects of IP reforms and related policies in a volume centered on the theme of public international law of IPR. One reason for this inclusion is that legal scholars in this area sometimes make strong claims based largely on intuition or common sense, without reference to available evidence. It is important, therefore, to bring to the attention of those scholars the many complex factors that matter for the economic outcomes of international IP reforms. A second reason is to alert policymakers to the impacts, both wanted and unwanted, of changing the global IP system. Sometimes the consequences are as intended, but often they are not; furthermore, indirect effects can be dominant. The studies analyzed here should therefore inform future deliberations about IP regulation and international IP treaties.
B. Comments on IP Reforms, Innovation, and Economic Growth
Implicit in the discussion above is the idea that it is next to impossible to make credible claims that global IP reforms in the post-TRIPS era have materially affected international investments in R&D, invention, or literary and artistic creativity. The investment variables, if measured (poorly) at the national or broad sectoral levels, are macroeconomic; they vary primarily with the business cycle, expectations, taxes and subsidies, education, competition, and a host of other socioeconomic conditions. For example, real business expenditure on R&D among OECD countries showed no clear upward trend break after TRIPS implementation and only recently returned to shares of gross domestic product (GDP) that existed prior to the 2009–2010 financial crisis.Footnote 3 Neither can strong assertions about effects on aggregate economic growth be supported by rigorous empirical research in the presence of compounding factors across countries. Moreover, IP standards and enforcement, even in this time of effective harmonization, remain sufficiently endogenous to economic conditions that identifying aggregate causal effects is challenging. The protection of IP is a regulatory incentive that is presumably important in some contexts. However, finding its traces in aggregate data has not been achieved satisfactorily, in my view.
I. Growth Regressions
Despite these limitations, it is worth reviewing a few recent studies in order to highlight some conclusions that are intriguing and could support further debate and research. Consider first how patent laws interact with real GDP growth. Falvey et al. (Reference Falvey, Foster and Greenaway2006) studied this question using a panel of eighty countries over discrete five-year periods between 1975 and 1994, the pre-TRIPS period. The authors noted the standard arguments that the innovation gains from stronger patent rights – in terms of both new products and technology diffusion – could be offset by higher imitation costs and reduced static competition. These impacts should vary among countries at different levels of economic development and technological capabilities. The authors estimated a standard growth equation in which average real growth in GDP per capita, for each country and within each period, was regressed on several variables: initial GDP per capita, gross domestic investment, population growth, degree of secondary education in the economy, ratio of exports to GDP, average inflation rates, a measure of IP protection, and country- and time-specific fixed effects. The IP variable was the widely used Ginarte–Park (GP) index, which essentially counts the number of patent provisions in each country’s national laws (Ginarte and Park, Reference Ginarte and Park1997).
In their basic estimation, Falvey et al. (Reference Falvey, Foster and Greenaway2006) found no impact of IP protection on economic growth, which is unsurprising in light of the problems discussed above. Instead, they argued that if there were such a relationship, it would likely depend on threshold effects in how IP protection interacts with initial GDP per capita. In fact, they found evidence of two thresholds. In countries with real per-capita incomes below $671 (in 2005 prices) and those with incomes above $10,289, a rise in patent rights significantly increased GDP per capita across the time periods. Countries in the middle-income ranges experienced no effect, positive or negative. It should be noted that the estimated effects, while significant, were economically small. The authors interpreted their findings to mean that poor countries can achieve income growth through the ability of IPRs to attract foreign investment and new products from abroad, whereas rich countries gain from increased technological innovation. In contrast, the middle economies see any inward diffusion benefits offset by lower domestic imitation and competition.Footnote 4
While these results are intriguing, as is the absence of any negative effect of IP on growth, the study exemplifies the econometric difficulties in aggregate growth estimation. No attempt was made to control for endogenous changes in the GP index, while simple fixed effects were insufficient to control for other factors that could drive these results. In short, the paper does not reliably demonstrate a causal effect. Moreover, the approach sheds no light on what precise economic mechanisms could drive the varying growth impacts, if in fact they exist.Footnote 5
Hu and Png (Reference Hu and Png2013) offered a better design by studying panels of about fifty manufacturing industries across about seventy countries, in five-year periods from 1981 to 2000, thereby bringing in a disaggregated sectoral focus and a period overlapping the early TRIPS era. Their basic specification regressed the growth in real value added at the sector–country level on several variables: initial value added, an interaction between sectoral patent intensity and national patent rights, and country and industry fixed effects. Their measure of “effective patent rights” was the product of the GP index and a national measure of contract enforcement, the Fraser Institute’s index of legal systems and property rights. The logic is that GP fails to incorporate IP enforcement and interacting it with the Fraser index – assuming it applies mutatis mutandis to patents – should better capture the effective scope of protection. Industry-level measures of patent intensity were taken from US data and assumed to be constant across countries. The variable of interest was the interaction term: it should be that manufacturing industries with higher patent intensity grow faster than other industries in countries with strong patent rights.Footnote 6
This expectation was born out in the study. The coefficient of the interaction variable was positive for all periods but statistically significant only for 1991–1995 and 1996–2000. Moreover, the size of this coefficient grew over time, offering some suggestion that in the TRIPS era, we may be seeing stronger manufacturing growth effects. Using 1990 figures, Hu and Png (Reference Hu and Png2013) computed that a one-standard-deviation increase in effective patent rights (roughly, the difference between the regimes in Turkey and Singapore) would raise value-added growth by 0.75 percentage points, a large effect in the context of an average growth rate of around three percentage points. This effect was strongest for the most economically advanced countries. The results withstood a battery of robustness tests.
The study is noteworthy largely for its focus on detailed industries and the finding that if patent rights matter for output growth, that is true mainly for high-patent sectors and developed economies. However, the paper can be criticized for not dealing adequately with endogeneity, and it does not permit inferences about overall economic growth effects beyond manufacturing.
A more nuanced approach was taken by Kim et al. (Reference Kim, Lee, Park and Choo2012). They studied the thorny question of whether different forms of technology protection, specifically invention patents versus utility models, have different effects on innovation and economic growth in developed and developing economies. For this purpose, they specified a “knowledge production function” in which the stock of knowledge (cumulated ideas) depends on the number of patents registered at the US Patent and Trademark Office (USPTO), which in turn depends on legal rights to protect the patents. The production function was specified as a growth equation, in which increases in per-capita income in each nation depend on lagged knowledge and IP applications, along with physical and human capital stocks, population growth, and fixed effects. This function was estimated together with an equation for patenting – itself a function of lagged patents, R&D spending, and a productivity term. The latter equation was augmented by a dummy variable indicating which countries had a utility model law in place, which enabled investigating whether the existence of such laws spurred patenting; that is, whether protecting utility models encouraged patentable invention. The authors demonstrated that the existence of a utility model regime was due primarily to each country’s colonial origins rather than current economic factors that would generate sample selection bias, so that inclusion of the binary variable would not suffer from endogeneity problems. This careful relation between theory and estimation marks the study by Kim et al. (Reference Kim, Lee, Park and Choo2012) as particularly credible.
Using their preferred estimation approach, the authors found evidence for the idea that different forms of patent rights are “appropriate” for varying development levels. First, the strength of patent rights (the GP index) had a positive and significant effect on patenting, but only for developed high-income (HI) countries. It had no evident effect on USPTO patent applications from lower-income and middle-income economies. Second, the coefficient for the existence of a utility model law increased future USPTO patent applications, but only in middle-income and lower-income economies. The effect in HI countries was negative but insignificant. In brief, protection of utility models can be an important determinant of the flow of internationally patentable inventions, a novel finding in the literature.
The next question is whether patenting activity raised the per-capita economic growth. Again, Kim et al. (Reference Kim, Lee, Park and Choo2012) found that the propensity to patent in the USPTO positively affected per-capita growth, but only for HI countries. There was no effect in low-income and middle-income nations. The authors argued that this result reflected the relatively high costs of technology inputs in these countries from increased patenting, which offsets any growth benefit from stronger protection. In contrast, the existence of utility model laws had a positive and significant relationship with economic growth rates in these locations. Thus, policies protecting incremental innovations seem to correlate positively with economic growth in lagging economies. While many observers have argued for this form of tailoring IP policies to suit development needs, this study was the first credible demonstration of the empirical effects on invention and, perhaps, on growth rates.
II. Innovation
If stronger patent rights correlate with economic growth, presumably it is because they encourage innovation and technology diffusion. It remains difficult to find such causal links empirically, for reasons discussed above. Again, however, it is useful to review selected recent studies to elicit certain conclusions that seem robust.Footnote 7
Branstetter et al. (2006) analyzed the responses of affiliates of US multinational enterprises (MNEs) to major reforms of patent laws in sixteen countries, most of them developing or emerging, between 1982 and 1999. Their event analysis considered changes in aggregate resident and non-resident patent filings in a six-year window surrounding the dates of reforms. In their econometric model, the patent reforms showed no impact on domestic applications. However, the reforms had a significant and positive impact on foreign patent applications, both in the short and long run, raising non-resident filings in the average nation by more than 50 percent. These findings reinforced the conventional wisdom, analyzed further in Lerner (Reference Lerner2009), that multinational firms are more responsive to increases in patent rights in developing countries than are domestic firms. This point is unsurprising, particularly when one considers that the greatest short-term beneficiaries of domestic patent strengthening are likely to be global firms seeking to deploy their technologies locally.
In an important contribution, Qian (Reference Qian2007) analyzed twenty-six countries that, between 1978 and 2002, implemented laws establishing patent protection for pharmaceutical products; the study examined how that move influenced innovation in the industry. Her primary innovation measure was citation-weighted drug patent applications registered in the USPTO, and the analysis compared matched country pairs that differed in whether they adopted reforms. Various national and industry control variables were included in the regressions. Qian found no significant direct impacts of legal changes on US drug patent applications, even up to ten years later. However, there were important interaction effects: countries with higher educational attainment and per-capita income as well as greater measured market freedom significantly increased such applications post-IP reforms. Qian’s results suggest that the innovation impact of IPRs depends heavily on complementary socioeconomic factors. Low-income economies with limited educational attainment and technical skills as well as restricted markets are less likely to motivate more internationally protectable inventions simply by improving their IP regimes. This result is likely relevant to other patent-sensitive sectors as well, but to my knowledge, this question has not yet been studied.
Kyle and McGahan (Reference Kyle and McGahan2012) studied global pharmaceutical innovation in the periods just before and after TRIPS was negotiated. That this new regime would expand innovation incentives, especially in treatments for diseases endemic to poor countries, was a key promise by TRIPS advocates. The authors exploited the fact that TRIPS compliance occurred at different times and across countries with different relative disease burdens. This diversity enabled them to study how global disease-specific R&D investments (measured as Phase I clinical trials) were changed after TRIPS, controlling for the global market in each medicine. They distinguished global diseases (experienced in most countries) from neglected diseases (also experienced in most countries, but of greatest interest in poor regions). In this difference-in-difference (DID) setup, the authors found increases in clinical trials for drugs aimed at both types of disease after TRIPS compliance, but significantly more for drugs aimed at global diseases. They next broke down these impacts into country groups classified by income levels. Here they found no indications of an increase in clinical trials for drugs aimed at neglected diseases after TRIPS compliance was achieved within developing countries. Rather, there were significant increases in R&D spending on illnesses with a large presence in HI countries. Such findings reinforce the fact that pharmaceutical companies are profit-seeking entities and that stronger global patent regimes are unlikely to induce more private spending on drugs that offer limited market potential.Footnote 8
Two final papers are of interest, in that they demonstrate the reliance of innovation effects of IPRs on other factors. Aghion et al. (Reference Aghion, Howitt and Susanne Prantl2015) investigated whether the innovation responses of firms to competition-raising product market reforms in the European Union varied according to the strength of national patent rights. They presented a model in which competition enhancements are complementary to patent strength in driving innovation, particularly in industries that are patent-intensive. The product market reform they analyzed was the formulation in 1992 of the Single Market Program, which worked over several years to remove regulatory barriers to trade across the European Union. This initiative resulted in considerable increases in product market integration and competition in the years before national patent laws became harmonized. The authors studied innovation responses in two groups of countries, those with stronger patent rights and those with weaker rights, in the period 1987 to 2003.
At first blush, the idea of complementarity in patents and product competition seems odd. Patents limit static competition in order to generate temporary monopoly rents, leading – in theory – to faster and deeper dynamic competition. Product competition, in contrast, should reduce market rents statically, potentially diminishing innovation incentives. However, the model of similar firms showed that a company could escape the competition through successful innovation, an incentive enhanced by patent protection. Aghion et al. (Reference Aghion, Howitt and Susanne Prantl2015) were the first researchers to identify that complementarity empirically. They regressed measures of innovation (such as R&D over value added, and patents granted at the USPTO) on a product–reform variable, which was zero before 1992 and between zero and one post-1992, with the value depending on how much each industry was expected to be affected by reforms. This variable was interacted with a dummy variable over the two country groups, indicating strong and weak patents. Also included were control variables and country-year and industry-year fixed effects.
Their data included a panel of two-digit manufacturing industries, characterized as more or less patent-reliant on the basis of US data. In this DID setup, the findings showed that product market reforms did not directly raise R&D intensities, but the interaction of such reforms with patent rights was significant and positive in industries with high or medium patent relevance and located in countries with strong patent rights. However, in countries with weaker patent rights, there were no R&D impacts in either patent-relevant or other industries. These results also held true when the dependent variable was USPTO patent grants.
The paper has empirical weaknesses, particularly concerning its measures of patent strength and its limited disaggregation of industries. But it does suggest that incentives to invest in innovation are spurred by product market competition in countries with strong patent regimes. One lesson is that as developing nations strengthen their IP regimes in the hope of encouraging technological activity, they should also consider relaxing their barriers to domestic competition.
A final point to recognize is that the scope of patent rights may have differential impacts on R&D, depending on the availability and structure of financial resources to fund R&D. Maskus et al. (Reference Maskus, Depoorter and Menell2019) set out a straightforward theoretical model in which costly R&D must be financed through external channels. Further, the outcome of R&D is uncertain, and investments are therefore vulnerable to shirking in a principal–agent relationship. Hence, firms could – for example – borrow in the domestic bond market, which is an arm’s-length relationship and involves little or no monitoring by creditors (the principals) of research managers at the inventor firms (the agents). Such investments are liable to carry a risk premium and to be relatively costly. Alternatively, R&D investments could be financed through bank loans and issuing equity, both of which offer greater scope for the lenders or investors to oversee the innovator’s efforts. A third possibility is that domestic innovators could arrange financing through inward foreign direct investment (FDI), becoming affiliated with international firms as a source of funding. The authors argued that patent protection can offset some of the R&D disincentives arising from limited financial development, for several reasons. Primarily, poorly developed financial systems are inefficient at allocating resources to promising investment projects with uncertain returns, particularly where intangible assets (e.g., the potential for future profits garnered through patents) cannot be collateralized. Put briefly, patents permit potential innovators to reveal more details about the nature of their R&D programs to lenders. All this suggests that the responsiveness of R&D to IP protection should be stronger in countries with limited financial development in general and with deficient equity and bank-lending markets in particular.
These questions were studied using panel data on R&D intensity in twenty-two industries across twenty OECD countries from 1990 to 2009. To implement their DID approach, Maskus et al. (Reference Maskus, Milani and Neumann2019) noted that two industry characteristics could be used to identify the interrelationships between financial development and IPRs. First, industries differ considerably in the intensity with which they register patents. Second, they vary in their dependence on external sources of finance as opposed to internal sources (retained earnings). Controlling for these two elements, the authors hypothesized that industries with higher patent intensity should be more responsive to patent protection, as in the conventional wisdom. In addition, this sensitivity should be higher in countries with limited lending and ownership markets (bank financing and equity). In contrast, the elasticity of R&D to patent strength should be higher in countries with highly developed bond markets, where enforceable patents effectively reduce the monitoring costs.
These hypotheses were clearly born out in the econometric model, in which private business enterprise R&D intensity, by industry, was regressed on multiple variables: country-level measures of financial development; patent enforcement (the product of GP and the Fraser Index); interaction terms between the variables of interest; industry patent intensity; external financial dependence; asset tangibility; and country, industry, and year fixed effects. The results showed that the patent index itself had little effect on R&D shares. However, there was a significant and positive coefficient for the interaction between patent intensity and IP protection in countries with below-median private credit and below-median stock market capitalization (both relative to GDP). In contrast, this interaction was significant and positive for countries with above-median private bond market size. Interestingly, the same interaction was highly significant and positive for all countries when financial development was measured as the stock of inward FDI.
The authors interpreted these results to mean that patent protection effectively substitutes for inadequate direct monitoring possibilities (that is, where bank lending and stock markets are weak) and expands the access of inventors to bond financing in relatively developed economies. Most powerfully, increased availability of foreign finance through FDI works together with patents to increase local R&D incentives, at least within these OECD economies. This last result is important for it sheds light on the common finding that FDI reacts positively to patent reforms among middle-income and emerging economies.Footnote 9
III. Summary
Before proceeding, it is worth taking stock of the messages the recent research seems to be offering. In my view these conclusions remain tentative and in need of further validation but do offer food for thought.
First, economic growth may be positively influenced by a strong patent scope, but this conclusion must be heavily qualified. Aggregate national-level growth regressions remain highly suspect for their inability to establish causality. In particular, the mechanisms for such a relationship remain understudied. Moreover, such growth impacts seem conditional in that they may exist for upper-income emerging countries and developed countries with threshold levels of education, market competition, adequate governance, and other factors. To date, there is virtually no evidence of a growth effect – positive or negative – from IP protection in poor developing economies.
Second, studies done with industry- or enterprise-level data are considerably more informative than those aggregate data. It remains technically challenging to find such data, especially for the enterprise level, and to devise appropriate hypotheses and testing techniques. However, the findings of various DID approaches support the view that R&D and patenting within high-technology goods are sensitive to domestic patent rights at the microeconomic level – again when attention is limited to HI and emerging countries.
Third, types of knowledge protection, such as patents versus utility models, may matter differentially for innovation as economic development proceeds, at least beyond certain thresholds. There is empirical merit in thinking of such devices as “appropriate” or “inappropriate” IP protection.
Fourth, the ability of strong patent rights to encourage innovative activity depends on other economic factors, such as product market competition and financial development. There is a long list of such factors, including simple trade liberalization, that could alter this elasticity, which itself would vary across industries and countries. This possibility calls for more research that combines micro data with measurable policy and economic variables through models that identify such interactions. This remains a large research agenda.
Fifth, readers who pay attention to the details of this review will have seen that little of the extant research, even in recent papers, directly asks whether innovation incentives have changed in the post-TRIPS era. There are hints that they might have, again heavily conditioned by additional factors. But additional research aimed at this question is sorely needed.
Finally, there are other important research questions that have yet to be asked. I will mention just two of many. We have yet to introduce meaningfully other elements of IP protection – such as copyrights, trademarks, and trade secrets – into consistent innovation analysis. This task will necessarily be more difficult, both for reasons of limited data and conceptual ambiguities, but it should be undertaken. And economists have not yet studied systematically what has happened to competition processes in emerging and developing countries after the implementation of patent reforms. Do domestic firms leave the market, and to what extent? Are they more likely to become acquired by foreign enterprises, particularly in high-technology sectors? On what other factors do such decisions depend?
C. New Research in IP Protection and International Trade
It is fair to say that international trade economists have devoted considerable effort to understanding how IP reforms in the post-TRIPS era may be influencing international trade, FDI, and licensing, all forms of both purposeful technology transfer and learning spillovers. In some ways this focus is natural, because, for all the difficulty in isolating the innovation effects of patents, it is straightforward to argue that IPRs should encourage technology transactions across borders. After all, patents encourage innovation only indirectly by safeguarding the rights of rights holders to use, sell, and license their technologies and new products. Thus, incentive or disincentive effects of IP reforms should be most easily detectable in international technology flows. It also helps that trade data are easily available, highly detailed, and consistently organized across countries. Finally, increases in trade and investment may, in many circumstances, be interpreted as a major form of innovation.
The role of IPRs in international trade, FDI, and licensing is the subject of many empirical studies, dating back to Maskus and Penubarti (Reference Maskus and Penubarti1995). Doing justice to that literature would take up far too much space in this chapter and there are numerous published reviews available.Footnote 10 In this section, I wish to highlight important new results that extend international trade research in novel directions and expand our framework for thinking about global IP. For completeness, however, I briefly summarize what might be called a consensus position among trade specialists from earlier research, including a major reference or two for each result. In much simplified form, that consensus would involve the following claims, among others.
First, significant patent reforms, including those associated with TRIPS, increase flows of high-technology exports and FDI to emerging countries that possess an existing base of human capital and some R&D capacity (Ivus, Reference Ivus2010). Second, these increases include positive investments in new technological activities by local affiliates of MNEs in high-technology sectors, including R&D, licensing, new product development, exports, and employment. There is also evidence of positive spillover effects for local firms (Branstetter et al., Reference Branstetter, Fisman, Fritz Foley and Saggi2011). Third, MNEs are a source of considerable knowledge spillovers for upstream suppliers, and the extent of those spillovers is positively affected by IP protection (Javorcik, Reference Javorcik2004). Fourth, international licensing responds positively to both affiliated and unaffiliated local firms, but particularly the latter (Yang and Maskus, Reference Yang and Maskus2001; Nagaoka, Reference Nagaoka2009). Finally, these impacts generally do not carry through to the poor developing countries. I turn next to seven important new areas of research linking IP protection to trade in crucial ways.
I. TRIPS, PTAs, and IP Reforms Increase High-Technology Exports in High-Income and Middle-Income Countries
It is intuitive that the strong IP standards imposed by TRIPS would increase high-technology exports from advanced economies to emerging and developing countries. Less expected is the robust finding in recent papers that the standards also are pro-export in emerging nations with at least moderate technological capacity. This was first noted by Delgado et al. (Reference Delgado, Kyle and McGahan2013), who estimated the determinants of both imports and exports across countries in a DID framework. Specifically, they regressed sectoral imports or exports across countries on a dummy variable for the years following TRIPS compliance, along with interactions of that variable with indicators for high-IP goods and three-way interactions (also involving dummies) for HI countries and for developing countries. Traded goods in manufacturing were allocated to either IP-sensitive sectors (the treatment group) or sectors that are not sensitive to IP use (the control group) for 158 countries over the period 1993–2009. The definition of high-IP goods varied across specifications, including high-IP clusters such as biopharmaceutical products, medical devices, and information-communication technologies.
The initial regressions showed that in the years after TRIPS implementation, there were large increases in high-IP exports, and this finding held true for both HI countries and developing countries (DCs). Moreover, the coefficients grew in magnitude as the years elapsed, suggesting both a significant and a time-distributed effect. Total imports of high-IP goods were also sensitive to TRIPS, but with lower coefficients. Interestingly, exports of nearly all the high-IP clusters were highly elastic to TRIPS in both the HI and DC groups. The DC imports remained relatively insensitive to this breakdown, although there were significant effects on imports from innovative countries in chemicals and information technologies. In brief, the findings suggest that TRIPS is strongly expanding the export of high-technology goods (relative to low-technology goods) from both HI and DC markets.
Maskus and Ridley (Reference Maskus and Saggi2020) extended this analysis to the trade impacts of PTAs that embody elevated TRIPS-Plus standards at the request of either the United States or the EU – the major demandeurs of highly protective IP standards. The researchers labeled such accords “IP-related trade agreements” (IPAs), and these have proliferated greatly in the last twenty years. Their econometric specification departed from that in Delgado et al. (Reference Delgado, Kyle and McGahan2013) by, first, including both IPAs and TRIPS in the interactions; and second, setting up the control group as low-IP goods in countries that do not join an IPA, and the treatment group as high-IP goods in countries that do. Moreover, they estimated a version of the gravity trade model using highly detailed bilateral trade statistics, accounting for IPA membership of both exporters and importers. Trade flows to the major partner country were excluded in order to avoid that source of endogeneity in agreement formation. Country groups were broken down into low-income (LI), lower-middle income, upper-middle income, and HI. There were 187 countries included over the period 1995–2014, covering much of the post-TRIPS era.
Among many results in the paper, two are most novel. First, both TRIPS and IPAs have significant impacts on bilateral trade, but often these effects are more pronounced for IPAs. Both policy interventions significantly raise exports of most high-IP clusters from all country groups except LI. The effects on bilateral imports are generally insignificant, except in biopharmaceuticals and medical devices, where imports are stimulated by IPAs that involve developing and emerging countries. Second, there is a marked “comparative advantage” effect, in that IPAs tend to reduce exports of low-IP goods and raise exports of high-IP goods – at least relative to the control group of other countries.
These studies are interesting in shedding light on how trade patterns may evolve in the wake of major international IP agreements. However, they leave unanswered some fundamental questions that require considerably more research. For example, what are the channels through which trade agreements may (relatively) expand exports of high-IP products? The results in Maskus and Ridley (Reference Maskus and Saggi2020) suggest that IPAs may encourage multinational firms to increase production and exports from local affiliates, but that is only a surmise. How do local firms become competent exporters within such agreements? Does this happen because they acquire and adapt new technologies and products of higher quality? Is the export expansion the result of greater entry into exports by firms that had not been exporting?
Such questions occupy the authors of two other studies that I highlight here. Maskus and Yang (Reference Maskus and Yang2018) estimated models, based on trade theory, of how exports of patent-intensive goods respond to national effective patent rights rather than membership in TRIPS or IPAs. The authors used trade data concorded to the standard industrial classification across 102 countries in five-year increments over the period 1995–2010, along with several industry characteristics interacted with country factor endowments and policy measures. The results showed that exports of patent-intensive goods were significantly higher in countries with stronger domestic patent rights, with some evidence of higher coefficients over time. Interestingly, the export effects in developing and emerging countries were also positive, although significantly lower than those for developed nations. In their final specification, they included additional interactions with three variables commonly thought to embody technology transfer: the inward stock of non-resident applications by technology class, within-firm imports of intermediate inputs from the United States (aggregated to industries), and industry employment in affiliates of US MNEs. All three variables increased the elasticity of exports with respect to patent rights in patent-intensive sectors. This finding suggests that all the examined variables were sources of technology transfer and quality upgrading.
The second study was by Lai et al. (Reference Lai, Maskus and Yang2020). Their question was whether stronger IP enforcement would encourage innovation and export growth among Chinese firms during the period just after China joined the WTO. They developed a theoretical model of heterogeneous firms, in which the dividing lines separating firms that are productive enough to export, import new capital goods, and invest in new products depended both on tariff cuts and IPRs. IP protection was measured as the ratio of judicial cases in each province in which the IP owner, as plaintiff, prevailed. These figures for the early 2000s and 2006 were compiled from legal reporting sources and combined with firm-level data on exports, capital and intermediate-goods imports, and new product development. The findings supported the theory: more productive firms export and invest in capital and new products.
The model predicted that stronger IPRs would encourage more of all three activities – exports, capital importation, and new goods – among highly productive firms, while forcing less productive Chinese firms out of the market. Moreover, most of the positive impacts should occur at the “extensive margin,” meaning new entry into those activities by firms that were not previously active in those areas. Careful estimation found results supporting these hypotheses, although there were also positive effects along the intensive margins. In brief, the combined effect of trade liberalization and patent enforcement tended to push surviving Chinese firms into higher-productivity activities and to both export and innovate more. These findings point to induced innovation as a primary channel for export growth at the micro level.Footnote 11
II. IP Protection Correlates with Export Quality and Sophistication
I noted earlier the evidence that exports of high-technology and high-IP goods to emerging economies rise significantly after IP reforms. This broad insight has been refined with more detailed trade figures and firm-level data to understand the sources of these increases. Is there a simple intensive margin effect, where existing exporters simply sell more to the same markets? Is it an extensive margin effect, where firms enter exporting and may export to new markets? Or is it the result of higher export quality, which finds more international markets and permits higher export-price markups? All of these scenarios are possible, and all contribute, as noted by Lai et al. (Reference Lai, Maskus and Yang2020) in their paper on China.
Three recent papers have studied the characteristics of high-IP exports that increase in the wake of IP reforms. Ivus (Reference Ivus2015) studied detailed product-level US exports to foreign destinations from 1990 to 2000. She estimated how such exports reacted to changes in patent laws abroad, measured by the GP index, which was instrumented to control for policy endogeneity. Her identifying factor was that countries that were not former colonies of European powers were required by TRIPS to strengthen their patent rights significantly more than those that were. Her statistical analysis found a significantly higher entry of new varieties of products into emerging markets with relatively stronger expansion of patent rights in the 1990s. Nearly all of this relative increase in trade came through the introduction of new products, implying that extensive margin effects dominated export growth. Put in simpler terms, developing economies with relatively greater expansion of patent rights in this period gained access to significantly more new product varieties, implying a gain from trade through enhanced choice.
Lin and Lincoln (Reference Lin and Lincoln2017) took this analysis further by analyzing confidential export data of US firms to different locations, matching those figures to firm-level data on US patents owned and industry characteristics from the Census of Manufactures. Using 1997 data, they found that just 9 percent of US manufacturing firms owned at least one patent at the USPTO. However, these firms were quite large and accounted for 89 percent of US manufacturing exports, demonstrating the joint concentration of size, innovation, and exporting. They estimated a simple DID model to see if firms owning patents were more likely to export to countries with stronger patent rights, measured by the GP index, than to other countries. They included several other interactions between firm characteristics and the GP index, plus additional controls and fixed effects, in the 1997 cross-section. The authors discovered that a substantial rise in a foreign country’s GP index would raise the probability by 2.9 percent that a firm owning a US patent would begin exporting to that country; this increase was statistically significant. Similar results were found for patent-owning firms with relatively high average wages and skills in their employment mix. The authors extended this analysis by tracking how US enterprises chose to serve six emerging markets that engaged in substantial IP reforms, as identified in Branstetter et al. (Reference Branstetter, Fisman, Fritz Foley and Saggi2011). Using matched pairs analysis, with the treatment firms being those that owned a US patent, Lin and Lincoln (Reference Lin and Lincoln2017) found significantly larger increases in exports by the treatment firms, compared to other firms, to five of six reforming economies. These findings suggest that at least part of the reason for the positive export response of high-technology goods to patent reforms is that patent-owning firms choose to enter new markets. In turn, the reforming economies benefit from access to newer technologies and new products.
A third paper, by Sweet and Maggio (Reference Sweet and Maggio2015), studied the characteristics of manufactured exports from developing economies with differing levels of IPRs. The authors equated innovation with the sophistication of exports, measured by an index of product complexity at the national level. This index (ECI) measured the diversity of exports across industry classes, in comparison with a global or development-consistent standard across countries. It was computed from detailed trade data. The authors regressed ECI on the GP index, a vector of national controls, and country and year fixed effects every five years between 1965 and 2005. They found robust evidence that patent protection was positively correlated with export sophistication. In this context, emerging economies may benefit from higher export earnings after patent reforms. Again, however, this result pertained only to countries above a threshold level of initial GDP per capita. This finding supports a common theme: simply adopting stronger patent in poor countries is unlikely to generate many innovation or export benefits – as reviewed in this chapter.
III. High-Technology Exports from Developing Countries May Be Impeded by IP Rights in Rich Countries
Shin et al. (Reference Shin, Lee and Park2016) studied an important question: is the composition of exports from developing countries (the Global South) affected by IP protection in developed economies (the Global North)? They noted that developed economies – such as the United States and the EU – have laws in place protecting their IP-owning firms from infringing imports through bans or anti-dumping actions. Thus, the possibility exists that higher IP protection in the North could diminish imports from the South through such actions.
The authors constructed a measure of each country’s level of technology (LT), defined as either the total number of foreign patents or US patents its residents own. They estimated a basic gravity model of the determinants of bilateral exports, augmented by the importer’s IP protection, the exporter’s LT, an interaction between those variables, and various fixed effects. IP protection was measured by the annual survey of global technology managers by the World Economic Forum.
The primary results reported by Shin et al. (Reference Shin, Lee and Park2016) were intriguing. First, the importer’s IP level positively affected bilateral exports, consistent with prior findings. However, the interaction term was significant and negative, suggesting that in countries with high levels of IP protection, an increase in the exporter’s LT level would be met with marginal reductions in trade. When the estimation was broken into income groups, this result existed for South to North exports, but not the reverse flows. In summary, as the exports of emerging countries expanded in technological intensity, those countries found it increasingly difficult to penetrate Northern markets.
This analysis can be criticized for its use of qualitative survey data and inadequate attempts to deal with endogeneity and measurement. However, it does point to the possibility that importer patent rights and exporter technology trade may not go hand in hand. Rather, there may be other impediments to trade that assert themselves to diminish this form of competition at the margin.
IV. IP Protection Shrinks Effective Distance within Production Networks
In an insightful analysis, Keller and Yeaple (Reference Keller and Yeaple2013) studied the behavior of MNEs to illuminate the spatial barriers to transferring knowledge from headquarters to affiliates. Firms can transfer technical information either via exports of intermediate inputs (embodied knowledge) or through direct communication (disembodied). Physical distance raises costs and reduces the amount of both forms of trade. It may seem counterintuitive that costs of communication rise with distance, but there are mistakes in transmitting knowledge directly, and the severity increases with remoteness. This is one explanation for the continued prominence of within-firm business travel by engineers and skilled managers. The authors modeled these processes and, under reasonable assumptions, showed that the costs of shipping inputs fell relative to communication costs the farther away was the affiliate. As a result, the technological content of intra-firm exports among US multinationals increased significantly as the distance increased, because firms chose to ship their high-technology inputs rather than relying on disembodied means of diffusion. The prediction was born out in this empirical work with confidential US data on the operations of such enterprises.
One interesting finding that the authors did not discuss is that this substitution proposition was considerably attenuated by the strength of patent rights. Other things being equal, countries with stronger IP protection received a smaller share of embodied technology and a larger share of information transmission, raising relative affiliate sales. From this result it seems that stronger IPRs reduce the severity of the consequences of miscommunication, making firms more willing to share their technological information in disembodied form. At this point, the inference remains speculative but intriguing and further research is needed to understand why this might be.
In a complementary analysis, Piermartini and Rubinova (Reference Piermartini and Rubinova2018) found evidence of an important technology spillover within production networks or global value chains (GVCs). They hypothesized that new ideas flow to a country as a function of how closely that country is linked to other countries in which knowledge is generated. Their econometric model regressed patents registered through the Patent Cooperation Treaty (PCT), disaggregated into industries, among residents of one country, on several variables: domestic R&D spending, the weighted average of foreign R&D spending, national control variables, and country and industry fixed effects. The novelty is that the bilateral weights depend on various measures of networked trade linkages through vertical supply chains. These weights were computed from the World Input–Output Database, which links countries through these flows of intermediate inputs and outputs.
The authors found significant and positive spillover coefficients from weighted foreign R&D to domestic patent applications. In their main specification, they computed that a one-standard-deviation increase in GVC linkages raised PCT patenting by 5 percent, which held for both developed and emerging countries. Thus, countries that have firms linked closely to GVCs have higher innovation profiles. It is also noteworthy that the regressions showed a significant and positive effect of domestic patent protection on patenting.
V. The Specifics of Patent Protection Matter for Trade Flows
A final novel and important paper is Palangkarya et al. (Reference Palangkarya, Jensen and Webster2017). These economists, reviewing the literature on patent rights and trade, wondered what specific features of patent regimes affect microeconomic trade flows. Rather than using a national patent-law index such as the GP measure, they studied patent examination records in many countries and developed two measures of the difficulty of achieving patent protection in various destination jurisdictions. These measures included (i) bias at examination offices against foreign applicants who propose to export if they receive protection and (ii) the existence of patents owned by others that might block imports even if new patents are granted. These measures were included as “trade costs” in a gravity trade model of bilateral imports at the detailed industry level, estimated from 1976 to 1999 across 189 exporters to several locations where examination records and extant patents could be accessed. The authors distinguished industries as being high-tech, medium-technology, or low-technology, and they hypothesized higher impacts in the first two groups.
Their regressions found significant and negative coefficients for both examiner bias and the likelihood of patent blockage on bilateral trade. This was true for all types of goods, but the coefficients were considerably larger for high-technology and medium-technology goods than for low-technology. From this evidence, it appears that specific elements of patent policy have strong effects on bilateral trade. Exporters of high-technology and medium-technology goods are particularly concerned about encountering lawsuits from blocking-patent owners if they export to countries where that action is a threat. Examination bias against foreign inventors similarly deters exports, suggesting that firms are aware of this problem. Their study was, to my knowledge, the first to combine trade data with patenting processes to achieve a microeconomic explanation for the correlation between exports and patent standards. It should stimulate an extended literature going forward.
VI. Patent Rights and Global Innovation Networks
One of the most significant, yet so far understudied, global trends in information diffusion is the growth of international networks across which R&D investments are made, whether to achieve local innovation or to collaborate on global technology solutions by specializing R&D resources. These global innovation networks (GINs) arose in good part within multinational enterprises seeking to maximize their innovation profits, but today they may involve collaboration across private firms, universities, public research laboratories, and charitable foundations (Maskus and Saggi, Reference Maskus and Ridley2013). In these contexts, GINs may be uniquely poised to address critical public-goods issues requiring extensive international cooperation and skill specialization, ranging from vaccines to environmentally sensitive technologies.
Of greatest interest for this chapter are the roles played by MNEs in this globalization of research efforts. The traditional conception is that such firms have engaged in so-called headquarter services, most prominently R&D and marketing, the fruits of which could be spread at low cost among producing facilities in different countries. This insight cast MNEs as the core of the knowledge-capital model of FDI (Markusen, Reference Markusen2002). In brief, such firms concentrated R&D in their home location but transferred their knowledge-based advantages to reduce costs or introduce new products in foreign markets. The resulting FDI could either be horizontal, designed to sell similar products in local markets, or vertical, seeking lower factor costs, such as low-wage labor. Over time, as the costs of transferring technologies fell due to better information and communication technologies and the gains to producing abroad rose due to tariff cuts, this process evolved into extensive offshoring through complex production networks (Baldwin, Reference Baldwin2016).
The emergence of R&D networks within MNEs was perhaps natural in this context (Branstetter et al., Reference Branstetter, Glennon and Jensen2018). Early investments in R&D-based affiliates focused on developing capacity for local adaptations of international technologies, complementing horizontal FDI. While this process transferred considerable knowledge abroad, it was not aimed at building deep local research capacities, although to some degree such capabilities emerged endogenously.
More recently, however, many MNEs have built major R&D centers in large emerging markets, primarily China and India, for more complex reasons, four of which stand out. First, these countries are producing large volumes of skilled workers with sufficient research and engineering proficiency to sustain large facilities with global inventive potential. Moreover, the governments have invested in complementary research infrastructures, including technologically advanced universities and public research facilities. Second, increasingly restrictive limitations on bringing technical workers to the United States and other technology hubs have encouraged firms to seek and employ talented inventors and scientists in the home locations of those employees.
Third, the process of invention itself is now so complex, with knowledge combined across multiple scientific and engineering disciplines, that the specialization of tasks within international R&D networks is considerably more efficient for firms than is using generalists situated within concentrated innovation centers in a headquarter location. Finally, the increasing application of modular software to technical problems has made it easier to split research tasks among specialized locations, raising the productivity of R&D (Branstetter et al., Reference Branstetter, Glennon, Jensen, Lerner and Stern2019). Indeed, the abundance of software engineers in China, India, and Israel explains why these countries have become major sources of global innovation mediated through MNEs, as indicated by the rapid growth of co-invention measured by international patent statistics listing multiple inventors across facilities within such firms.
I am unaware of formal econometric studies that establish a clear role for IP protection in encouraging R&D networks, a question that deserves careful analysis. After all, China is the source of considerable irritation among Western policymakers regarding its selective enforcement of the IPRs of foreign investors. In contrast, Israel has strong IP protection, and India is noted for its copyright strength. Making firm conclusions about these linkages is, again, problematic. However, given the evidence reviewed earlier regarding a positive association between patent laws and the FDI of high-technology MNEs, it seems likely that IP is a contributing factor in decisions about where to locate R&D facilities and how MNEs try to safeguard the outcomes of local R&D programs.
D. Concluding Remarks
In this chapter, I have reviewed recent statistical studies of the roles that the global IP system seems to play in encouraging innovation and shaping international trade and investment flows. This complex literature may fairly be summarized as follows. First, it remains challenging to demonstrate rigorously that the strength of IP protection, itself difficult to measure, is a strong causal determinant of innovation. However, recent work points in that direction, with the important caveat that any such impacts depend on threshold levels of economic development, human capital availability, and market demands in a country. They depend as well on the surrounding economic framework, including competition, product regulation, financial development, and other factors. At the most basic level, IPRs do not have detectable influences on innovation or creativity in poor countries. Their incentive effects are the preserve of emerging and higher income countries.
Second, IPRs correlate positively with high-technology trade regarding both imports into developing and emerging countries and exports from those countries. In my view, there is sufficient evidence to claim that these effects are causal in important ways. Policy reforms associated with both TRIPS and membership in IP-related PTAs favor the growth of high-IP exports compared to other products and countries. Such reforms also encourage trade growth at the extensive margins, generating greater variety gains in importing countries that implement them. At the same time, IPRs can deter trade in important ways, a factor that is only beginning to be understood through careful statistical analysis. Finally, IP protection facilitates technology transfer through FDI and production networks, with recent evidence suggesting these dynamics complement the development of R&D sharing across borders. These various results support an earlier claim of mine that the global IP system improves the “plumbing” of the global architecture for formal technology transfer (Maskus, Reference Maskus2012).
While interesting, such findings are not yet definitive and require further study. And there are many additional questions that should be analyzed as data become available. For example, what are the precise mechanisms through which these IP policies may create high-technology exports and new products aimed at additional markets? At present, that question remains largely a black box. Opening the box will require combining microeconometric data of firms across countries, linking their trade and investment flows with measures of technological inputs and outputs. A large research agenda remains.
Tables of Contents
A. Introduction
An ancient Indian proverb says that “[i]t is because lions are lazy, snakes are scared, and intellectuals have difference of opinions, that there is happiness on the planet.” This proverb highlights the importance of diversityFootnote 1 in opinions, approaches, interpretations, and perspectives – whether it be in economic, social, political, regulatory, or scientific discourse. Diversity is not only critical for the growth and development of any democracy but also for the evolution of social, economic, legal, and scientific thought. Needless to say, diversity is also critically important for innovation.
The central relevance of diversity for innovation is particularly obvious in the agricultural seeds sector.Footnote 2 Yet, international intellectual property (IP) regulations in this sector have long assumed that “uniformity” and “homogeneity”Footnote 3 rather than “diversity” and “heterogeneity,” are of central relevance for the protection and incentivization of innovation. With this assumption, several other assumptions have followed, particularly the assumption that only plant breeders in the formal sectorFootnote 4 – but not farmers in the informal sector – can innovate and create new plant varieties that are capable, inter alia, of ensuring food security.Footnote 5
Yet, this assumption and the focus on “uniform” and “stable” seeds has led to an alarming loss in crop biodiversity (and associated diversity in human nutrition) over the past century. According to estimates from the United Nations Food and Agriculture Organization (UN FAO), more than 75 percent of crop genetic diversity has been lost since the widespread adoption of conventional agriculture based on a very few crop varieties.Footnote 6 Today, 75 percent of the world’s food derives from only twelve plants; world nutrition is primarily based on ten crops, of which three – rice, corn and wheat – contribute nearly 60 percent of the calories and proteins obtained by humans from plants.Footnote 7
Further, international IP regulations, particularly the UPOV Plant Breeders’ Rights (PBR) regime, also assume that managing the genetic makeup of seeds (i.e., ensuring genetic purity, uniformity, and stability) and protecting the resulting varieties with PBRs, patents, or a combination of the two, is adequate to optimally protect, and thereby incentivize, seed innovations; notably, seed innovations by the formal sector. What is emphasized by the UPOV and PBR regime, therefore, is the “internal environment” of a seed. In practical reality, however, to manifest the goodness (or the best) of the uniform and stable internal seed environment, the external environment has to be carefully managed and maintained by those who buy and use the seeds. If this is not done, the internal genetic environment of the seed fails to deliver on its promised goodness (e.g. in the form of high yields). In other words, uniform and stable seeds only perform ceteris paribus.
The UPOV–PBR regime therefore also presumes that it is possible, in all or most circumstances, to meticulously manage the external environment a seed is faced with (e.g. in terms of optimal irrigation, fertilizer and pesticide usage, and soil quality). This assumption is a rather hefty one, largely divorced from the realities of marginal environments and subsistence farms, which include over 40 percent of the Earth’s drylands, particularly in Africa (13×l06 km2) and Asia (11×l06 km2).Footnote 8 Even within the European Union, 29 percent of the agricultural area is farmed in marginal environments.Footnote 9
Further, the existing system that mandates a focus on uniformity and stability to incentivize and protect innovations excludes farmers in the informal sector from the seed innovation landscape in two ways. First, the system fails to recognize the fact of farmers’ innovations (i.e., farmer-selection-based in-situ improvements in seeds from generation to generation).Footnote 10 Second, by regulatory or policy-driven insistence on the cultivation of “uniform” seeds, which by definition have narrow genetic makeups, the possibility of (downstream) innovations by farmers is severely restricted.Footnote 11 Yet, perhaps ironically, the possibility of both (upstream) informal and (downstream) formal innovations increases if the starting point is genetically variable, indigenous and heterogenous seeds.
Assumptions that underlie international treaties are expected to reflect, as well as impact upon, realities. This is equally true for international IP treaties and various international agreements that set minimum standards aimed at harmonizing and coordinating norm-setting among and within states. These assumptions, as well as the (minimum) legal standards they result in, are of a scientific, socio-economic, political or mixed nature, depending on the subject matter of the treaty or agreement. Therefore, international treaties and agreements frequently codify the underlying assumptions about the social, economic, cultural and/or environmental utility of the standards they aim to globalize.
These assumptions may be correct in particular territorial, historical, scientific or socio-economic contexts. However, once they are engrained in international standards that are cast into the stones of international treaty law, they become global norms that are at best difficult, and at times even factually impossible to implement, amend or adapt to suit local realities. In worst case scenarios, the habitual implementation of such laws can lead to significant socio-economic, cultural, as well as environmental deterioration. Empirical research has revealed, for example, that innovations in the agricultural seed sector, supported by IP laws and associated seed replacement policies, have gradually eroded the culture of farmer-to-farmer seed sharing and seed exchange.Footnote 12 This culture was crucial for in-situ seed conservation and farmer improvement of seeds from location to location and generation to generation. Habitual implementation of such laws can also distort and artificially limit scientific research endeavors and reduce, rather than optimize, equitable and inclusive innovations by all potential innovators.Footnote 13 At the same time, whenever the implementation of such standards does not lead to the materialization or manifestation of the underlying assumptions, the global norms may ultimately become redundant, more broadly challenging their legitimacy.
Using the international protection of plant varieties as an example, this contribution critically reviews the assumptions built into the UPOV treaty regime. It examines whether those assumptions are supported by current science and empirical research on the importance of (agro)biodiversity for sustainable agriculture, food security, and nutrition. The article also highlights recent regulations and policies that embrace emerging scientific findings and empirical trends and indicate a possible future trend toward the redundancy of norms. Contrary to expectations, this redundancy may extend beyond the context of biodiversity-rich countries of the Global South into countries of the Global North that are also (and perhaps more severely) struggling with (agro)biodiversity losses and climate change.Footnote 14
I. Research Questions
This contribution was guided by the following research questions:
1. What scientific presumptions underlie the UPOV treaty and the PBR regime it establishes?
2. What scientific presumptions underlie the Convention on Biological Diversity (CBD) and the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA)?
3. What is the scientific and historical basis of the regulatory focus on uniformity or homogeneity and stability? Does this focus correspond with current and emerging scientific understanding of how sustainability can be ensured in agricultural production and innovation?
4. In what way, if at all, does agricultural biodiversity support food security and seed-related innovations?
These questions are explored in this paper with a relatively long-term perspective. The aim is to determine whether a fundamental rethinking of international IP regulations is called for to promote and incentivize what has been previously referred to as “sustainable innovations” in plant varieties.Footnote 15
II. Arrangement of the Paper
The paper is arranged as follows. Following this introduction, Section B briefly explores the assumptions that underlie the UPOV agreement and the PBR regime it establishes. Specifically, Section B discusses the meaning and scope of the key terms under PBR regimes, giving special attention to the historical scope of the term “variety” and the scientific and commercial basis of the focus on “uniformity” (or homogeneity) and “stability.” Section C explores the assumptions underlying the CBD and the International Treaty on Plant Genetic Resources for Food and Agriculture (the ITPGRFA, also known as the Seed Treaty). Section C specifically discusses the scientific basis of the importance given to “diversity” (contained in landraces and farmers’ varieties) and “traditional knowledge” in the CBD and the Seed Treaty. Section C also looks into current scientific research that highlights the importance of and the inter-relationship between seed and soil (microbial) diversity for the performance of indigenous or heterogenous seeds in marginal environments. A related point is the limited utility of “uniform” seeds in such environments and in the face of climate change.
In Section D, the value of traditional (ecological) knowledge vis-à-vis protection and enhancement of agrobiodiversity (i.e., seed and soil microbial diversity) is explored in the context of the natural farming (NF) movement in India. Section E concludes with exploring recent legislation in Europe that indicates a sort of “return to innocence,” focusing, once again, on the importance of local seed and food diversity in the face of climate change and the ongoing global pandemic. Section E also makes recommendations for further research and highlights the need to urgently redirect international effort toward more diversity, supporting “minimum standards” in IP and associated regulations.
B. Assumptions Underlying UPOV
I. (Botanical) Varieties versus (Legal) Varieties
The International Union for the Protection of New Varieties of Plants (UPOV) was established by the International Convention for the Protection of New Varieties of Plants (UPOV Convention). The Convention itself was adopted in Paris in 1961 and was revised in 1972, 1978 and 1991. According to the UPOV website, “UPOV’s mission is to provide and promote an effective system of plant variety protection, with the aim of encouraging the development of new varieties of plants, for the benefit of society.”Footnote 16
The UPOV focuses on promoting and protecting new “plant varieties.” The term “plant variety” is considered to have neither a scientific nor a botanical origin.Footnote 17 Its origin as well as rise to popular usage are usually traced to the UPOV Convention of 1962. However, the term “variety” has a legal as well as a botanical origin. In the legal context, the term “variety” was indeed defined, perhaps for the first time, by UPOV,Footnote 18 under Article 2.2 of its 1962 Act, which states:Footnote 19 “For the purposes of this Convention, the word ‘variety’ applies to any cultivar, clone, line, stock or hybrid which is capable of cultivation and which satisfies the provisions of subparagraphs (1)(c) and (d) of Article 6.” Article 6(1)(c) and (d) go on to describe the “homogeneity” and “stability” requirement that every “cultivar, clone, line, stock or hybrid” must fulfill to be deemed a “new variety” and to qualify for protection:
(c) The new variety must be sufficiently homogeneous, having regard to the particular features of its sexual reproduction or vegetative propagation.
(d) The new variety must be stable in its essential characteristics, that is to say, it must remain true to its description after repeated reproduction or propagation or, where the breeder has defined a particular cycle of reproduction or multiplication, at the end of each cycle.
In the European Union, the Biotechnology DirectiveFootnote 20 clarifies the meaning of (plant) varieties by stating that “a variety is defined by its whole genome and therefore possesses individuality and is clearly distinguishable from other varieties.”Footnote 21 Recital 31 adds that “a plant grouping which is characterized by a particular gene (and not its whole genome) is not a plant variety.”Footnote 22 The 1991 Act of UPOV substantially modified the definition of “variety” and replaced the “homogeneity” requirement with the “uniformity” requirement. UPOV 1991 states:
(vi) “variety” means a plant grouping within a single botanical taxon of the lowest known rank, which grouping, irrespective of whether the conditions for the grant of a breeder’s right are fully met, can be
– defined by the expression of the characteristics resulting from a given genotype or combination of genotypes,
– distinguished from any other plant grouping by the expression of at least one of the said characteristics and
– considered as a unit with regard to its suitability for being propagated unchanged;
Thus, under the legal definition, in order to be deemed a “variety,” (i) the plant grouping must exhibit specific characteristics that result from a given genotype, that is, from the “internal environment” of the seed as a whole, or in other words, from its entire genome and not due to the expression of a particular gene; (ii) these characteristics (or at least one of them) should help distinguish it from any other plant grouping; and (iii) the plant grouping must be capable of propagating itself unchanged.
It is in the context of botanical taxons and ranks mentioned in the above legal definition of “variety,” that one can also find the botanical meaning of the term. The International Code of Nomenclature for Algae, Fungi and PlantsFootnote 23 places the term “variety (varietas)” as the category in the botanical nomenclatural hierarchy that comes between species and form (forma).Footnote 24
This botanical usage of the term “variety” pre-dates the adoption of UPOV and has been defined differently by various notable botanists. The emergence of the term was highly influenced by Darwin’s work on the evolution of species.Footnote 25 One of the earliest definitions of “variety” was by Linnaeus, who in 1753, in the Species Plantarum, defined “variety” as “a plant changed by accidental cause due to the climate, soil, heat, wind, etc. It is consequently reduced to its original form by a change of soil. Further, the kinds of varieties are size, abundance, crispation, colour, taste, smell. Species and genera are regarded as always the work of nature, but varieties are more usually owing to culture.”Footnote 26
The reference to “culture” in the botanical definition of “variety” is significant as it indicates the very localized nature of a “variety” and that various cultural contexts can lead to the evolution, in various geographies, of diverse varieties belonging to the same species (or sub-species). The interpretation of Linnaeus’ work by Fernald (1940) confirms this understanding. Fernald opined that Linnaeus “generally designated as varieties indigenous plants which he considered to be natural (often geographic) variations within the broad limits of his specific concept.” Footnote 27 In later works, botanists have distinguished between “sub-species” and “varieties,” with the former term used to indicate “major morphological variations” or “variations of greater value,” while the latter indicates “minor ones [variations].”Footnote 28
Asa Gray, a leading botanist in nineteenth-century America, however, said in 1836 that “any considerable change in the ordinary state or appearance of a species is termed a variety. These arise for the most part from two causes, viz.: the influence of external circumstances,Footnote 29 and the crossing of races.”Footnote 30 Here we see, therefore, that before the era of genetic engineering rose to prominence, varieties were known to result not just from “crossing” (i.e. breeding activities that seek to change the “internal environment” of the seed) but also by natural environmental factors (i.e. the “external environment” to which a seed is subjected). In other words, it is not just the “internal atmosphere” of a seed, but also its external environment that determines its characteristics.
Indeed, today geneticists confirm that the seed’s external environment – which contributes specific nourishment, inter alia, through soil and manure quality as well as biotic and abiotic stressors – determines which genes will express themselves and which will remain dormant.Footnote 31 This principle is particularly relevant when the seed’s internal genetic environment has not been artificially narrowed with the aim of ensuring “uniformity” and “stability” in specific external conditions.
Undoubtedly, the term “variety” is now less frequently used in the field of botany,Footnote 32 with preference given to the more important differences reflected under the taxonomic ranks of “species” and “sub-species”. However, it is important to note that the botanical term “variety,” which reflects “minor” differences, does not presuppose “uniformity” or “stability” either within the same farmland (due to shifting environmental circumstances) or across various geographic, environmental, soil type and other factors. In fact, within specific species and sub-species, a variety (in the botanical sense) can be expected to naturally display different characteristics depending on various external factors and influences. Further, the changes seen in any such botanical “variety” can originate from the work not just of plant breeders but also of farmers, inter alia, based on cultural preferences and environmental expediencies.
It is, therefore, quite interesting that some countries, while following a definition of variety that is very close to the above UPOV definition,Footnote 33 also recognize a different category – called “farmers’ varieties.” In India, for example, “farmers’ varieties” are defined to include landraces and wild relatives of a variety. To this extent, the Indian law seems to include both the legal and botanical understanding of “variety” within its scope. Section 2(l) of the Indian law states:
2(l) “farmers’ variety” means a variety which
(i) has been traditionally cultivated and evolved by the farmers in their fields; or
(ii) is a wild relative or land race of a variety about which the farmers possess the common knowledge;
Wild relatives and landracesFootnote 34 differ significantly from UPOV’s “varieties” because they can and do change during the course of repeated cycles of propagation. This change occurs as a result of the genetic variability inherent in heterogenous (as opposed to homogenous) propagation materials (such as seeds), and is triggered, inter alia, by external circumstances such as climate change, pest attacks, drought or flood conditions. While genetic variability makes landraces and farmers’ varieties more robust in the face of biotic and abiotic stresses, it is antithetical to “uniformity” and “stability” requirements, which are pre-conditions for the grant of PBR certificates under UPOV.
II. The Scientific (Ir)rationale of the DUS Requirement
The test of distinctness, uniformity, and stability (DUS) is referred to as the “DUS requirement.” The legal concept of uniformity can be traced back to the “homogeneity” requirement under the 1962 UPOV Act, which became “uniformity” in the later Acts. Hence, UPOV 1991 (Article 8) defines a “uniform” variety rather generally: ‘A variety shall be deemed to be uniform if, subject to the variation that may be expected from the particular features of its propagation, it is sufficiently uniform in its relevant characteristics.’
The regulatory focus on uniformity can be traced back to the (re)discovery of Mendelian genetics in the early 1900sFootnote 35 Gregor Johann Mendel published his understanding of the laws of heredity in 1865. However, the dissemination of the findings in the scientific and political community followed only in 1900, rediscovered by K. E. Correns, E. von Tschermak and H. de Vries.Footnote 36 They rejected “breeding methods inspired by Darwin’s evolutionary theory” as “scientifically unsound” and not feasible for practical breedingFootnote 37 and focused instead on Mendel’s theory of heredity based on the stability of genes.Footnote 38
Johannsen emphasized the purity of genetic material;Footnote 39 he considered “the genotype as a whole as the elementary species and the pure line, as the key permanent biological type.”Footnote 40 In the early 1900s, with the expanding practice of plant breeding, the understanding that genetic purity is rare and actually leads to instability was increasingly overtaken by the understanding that genetic purity and stability are indicative of quality and replicability.Footnote 41 Early geneticists considered genetic identity to be independent of environmental influence; that is, gene expression is not influenced by the plant’s environment but is primarily or exclusively influenced by the internal genetic makeup of the plant (i.e. the plant genome).Footnote 42 This idea led to a sort of obsession with genetic purity and stability that continues in the plant breeding community to date.Footnote 43 According to Provine (1971), “the climate of biological opinion was favorable to the pure line theory.”Footnote 44 Opposing ideas tying genetics closely to its context (e.g. environment) were led by Raphael Weldon but ended prematurely with his death in 1906.Footnote 45 When Johannsen presented his pure line theory at a symposium in 1910, most geneticists accepted the theories without adequate proofFootnote 46 and Mendelism’s legacy “boomed its way into biology.”Footnote 47
There are, indeed, also more economically driven reasons for the continuing importance given to pure and stable genetic materials: pure and stable genetic material leads to uniform and stable plant varieties that can be easily protected by PBR and patents. The existence of property rights permits the charging of monopoly rents and recoupment of the (allegedly) high costs involved in the creation, certification and marketing of new uniform varieties.Footnote 48 Further, industrial standardization and quality control regulations have allowed and supported the emergence of the breeding industryFootnote 49 and effectively limited competition from the informal seed sector (in Europe). Industrial breeders, therefore, can be said to have considerably contributed to the success of Mendel’s and Johannsen’s theories.Footnote 50
Pure (parental) lines, purified for specific traits, are also a prerequisite for the creation of F1 hybrids.Footnote 51 These F1 hybrids, in turn, help industrial breeders maintain their market monopolies in two ways: (i) once two (or more) parental lines are crossed to create an F1 hybrid, it is difficult to identify (or recreate) the parents. This is because the resulting hybrid out-performs both parents due to a phenomenon known as hybrid vigor or heterosis;Footnote 52 (ii) F1 hybrids do not reproduce true to type. This means that farmers who attempt to save seeds from the harvest of their F1 seeds for sowing the next season’s crop are likely to experience lowering of yields due to the segregation of genetic materials in the second generation.Footnote 53
Experts argue that it was perhaps no coincidence that the dissemination of Mendelian theory in the early 1900s coincided with the industry push for property rights for new inventions and discoveries in agriculture.Footnote 54 To ensure “quality control,” the purity and stability criteria of plant material became the norm not only for industrial seed production but also in experimental biology, and as a means of ensuring “fairness in social and economic relations.”Footnote 55
The standardization of plant breeding and its focus on uniformity and purity caused a divide between landraces, which are preserved and improved over time by farmers in situ, versus cultivars, which result from plant breeders’ labs or from highly regulated and carefully managed agricultural testing lands.Footnote 56 Landraces were considered “not suitable for anything,” obsolete, unproductive and were reduced to a mere gene storeFootnote 57 – as indicated in the popular term “plant genetic resources”. A resolution in 1907 on conserving landracesFootnote 58 by a locally oriented public initiator “soon came under private breeders’ fire” leading to its decline.Footnote 59 However, as a paradox of modern breeding, the breeder Baur (1914) warned of their disappearance and the urgent need to preserve landraces.Footnote 60
What has resulted since the widespread acceptance of Mendelian genetics and the “pure line” theory is a systematic exclusion of farmers (as seed sellers) from the agricultural seed market, especially in Europe.Footnote 61 This resulted in a whole array of undesirable consequences, including the erosion of agricultural biodiversity and the rapid conversion to conventional farming, heavily reliant on expensive chemical inputs.Footnote 62
Arguably, therefore, the requirements of “uniformity” and “stability” have been introduced into the legal definition of “plant variety” through a legal fiction because genetic purity, uniformity and stability are important primarily from a legal (and industrial) standpoint, and not from scientific or (marginal) farm-environment perspectives. An expert has stated that “the scientific notion does not necessarily coincide with the legal concept. The law may require certain characteristics for a protected variety that may not be essential for a scientific definition.”Footnote 63
In fact, as stated previously, pure, uniform and stable lines are able to perform well only in carefully managed environments because, contrary to the claims of early geneticists, a plant’s genetic identity is not independent of its environment but is highly influenced by it.Footnote 64 More recently, historians of science have attempted to emphasize again the importance of taking environmental influences into account, together with the inherent genetic makeup of seeds, to avoid the “determinism” that results from a focus exclusively on a seed’s “internal” environment.Footnote 65 In this context, the following explanation is helpful:Footnote 66
This observation can be better understood by the following scientific facts: the physical properties (including shape, size, yield, pest resistance etc.) of a plant are dependent on its environment as well as on its genotype (i.e. genes and genetic structure).Footnote 67 Environmental variations as well as genetic variations will therefore affect the phenotype of a crop.Footnote 68 Environmental variations cannot be built into the genetic makeup of a crop. However, formal crop improvement (plant breeding) programs can manage the genetic makeup of a crop…. In order to ensure that a formally bred seed or plant is selected on the basis of its “nature” (i.e. genetic makeup) and not its “nurture” (i.e. the environment in which it is grown), formal plant breeders breed plants in as uniform an environment as possible.Footnote 69 It is expected (or presumed) that these uniform environments will also be reproducible in commercial or actual farmers’ fields. It is for this reason that formally bred cultivars often fail in natural environments that are not engineered to mimic the breeders’ ideal environments. Landraces and traditional varieties that have high genetic variability, on the other hand, are able to perform even in the most adverse of natural farm conditions because of their inherent genetic variability….Footnote 70 In developing countries where a large percentage of farmers do not have the means to simulate artificial perfect farm conditions, the importance of landraces becomes even more apparent. [Footnotes are renumbered here.]
This is where we can start to understand the relevance of agrobiodiversity contained in farmers’ varieties and landraces. We discuss this in further detail in the following section.
C. Assumption Underlying the Convention on Biological Diversity (CBD) and the Seed Treaty
I. The Scope and Importance of ‘Diversity’ and ‘Traditional Knowledge’
We saw above that UPOV assumes and emphasizes the central importance of “uniformity”, “stability” and related “genetic homogeniety” or “purity”. The CBD and the Seed Treaty, on the other hand, assume and emphasize the importance of (agro)biodiversity. Since its inception, the CBD has underscored the importance of biodiversity within the soil (i.e. the soil microbiome) and on the soil (i.e. seed or plant biodiversity). Equally relevant is the recognition and high status given within the CBD to the valuable role played by traditional knowledge and associated systems, practices, and innovations in maintaining this biodiversity and using it in a sustainable manner (CBD, Articles 8(j), 17). The CBD also mandates the sharing of social and economic benefits (“benefit sharing”) with the people preserving and using this knowledge in situ.Footnote 71
Equitable benefit sharing is presumed necessary not only to ensure fair compensation for sharing biodiversity and associated know-how, but also to ensure that communities engaged in its protection and in-situ conservation have monetary incentives to continue their important work.Footnote 72 Similar to the CBD’s focus on biodiversity generally, the Seed Treaty focuses on agrobiodiversity, especially agricultural seed diversity and mechanisms to conserve, preserve and protect this diversity, while facilitating its equitable use through benefit sharing.
“Conservation” and “preservation,” however, are unfortunate terms in the context of agrobiodiversity.Footnote 73 This is not least because farmers and farmer communities not only conserve this diversity but constantly improve it and innovate with it, with the help of traditional and indigenous know-how and technologies. Indeed, the CBD encourages international “cooperation for the development and use of technologies, including indigenous and traditional technologies, in pursuance of the objectives of the Convention.”Footnote 74 The relevance of traditional technologies and associated traditional ecological knowledge (TEK), is, however, context-dependent. To understand the context, it is useful to revisit the development of “high yielding varieties” (HYVs) during the “Green Revolution.” Prior to the development of HYVs by Norman Borlaug, “lodging” was witnessed when traditional (indigenous) wheat seeds were treated with mineral fertilizers: they would grow rapidly and prematurely fill up with grain, the weight of which made them “lodge” and die before they were ready for harvest.Footnote 75
The breeding of semi-dwarf “high yielding” wheat and rice seed varieties (HYVs) under the Green Revolution resolved a twofold problem: the problem of traditional varieties being non-responsive to fertilizer-treated soilsFootnote 76 and the problem of lodging.Footnote 77 The new development paved the way for bumper crops and the promise of economic and social prosperity for all farmers. Indeed, the notion that scientific intervention for the creation of “new varieties” is necessary for high yield and food security was also propelled in the Global South, at least in part, by the demonstrated success of Norman Borlaug’s HYVs.Footnote 78
What is not discussed in the success story of the Green Revolution is its impact on indigenous seeds and landraces that were not engineered to withstand the application of mineral fertilizers. The claim that the cultivation of indigenous seeds that incorporate agrobiodiversity and genetic variability is not adequate for food security needs to be considered in this context. Studies that compare the productivity of landraces with that of improved varieties on fertilizer-treated soils can, therefore, be expected to show lower yields for landraces and farmers’ varieties than for seeds whose genetic environment is engineered to perform in such soils.Footnote 79 Therefore, the rapid expansion of conventional agriculture involving the regular use of mineral fertilizers and chemical pesticides with “improved” seeds (and the corresponding disappearance of TEK-based farming systems) is also one of the main threats to landraces and in-situ agrobiodiversity conservation.Footnote 80
Yet, landraces and indigenous or farmers’ varieties, when cultivated in TEK-based farming systems, have been found to outcompete hybrid varieties in highly variable environments,Footnote 81 offering a robust local strategy for food security, including coping with climate change.Footnote 82 They may also economically benefit (marginal) smallholder farmers by granting them independence from cost-intensive inputs such as breeders’ seeds, mineral fertilizers and pesticides while helping to revive and conserve local traditional knowledge.
In the following sub-sections, we look closer into the current scientific understanding of the importance of diversity and variability contained in landraces and the impact of plant genetic diversity on soil health and the nutrition contained in food.
II. The Relevance of Landraces and Genetic Variability
We saw in the previous section that modern genetics and the science of plant breeding developed under the aegis of Mendel’s theory of heredity, supported by pure line theories proposed by scientists such as Johanssen.Footnote 83 However, as early as 1972, the US report “Genetic Vulnerability of Major Crops” attracted attention in science:Footnote 84 it found genetic uniformity to be the source of vulnerability to plant diseases and abiotic or biotic stresses. The report challenged dominant scientific thought and the national policies that relied on it.
However, although scientists take the blame for the focus on uniformity, notably, the markets (and consumers) also demand uniformity (e.g. in the form size, shape, color, texture of vegetables and grains).Footnote 85
Not surprisingly, therefore, today the legal fictions and assumptions underlying UPOV continue to unchangeably favor Mendel’s theory of heredity and the pure line theory. Empirical and scientific evidence opposing these theories is, however, accumulating. Various studies find higher variety and variability of plant genetic resources to be more efficient than pure lines. For example, increased within-crop genetic diversity has been found to enhance yield stability and yield reliability while permitting rapid and dynamic response to change (e.g. changes in climatic or biotic stresses).Footnote 86
Unlike pure lines and hybrids created in artificial or carefully managed environments, landraces are, by definition, unique to the region where they evolve.Footnote 87 Undoubtedly, farming – including farming with landraces or farmers’ varieties – reduces the overall plant or natural biodiversity. However, cultivation with indigenous landraces, rather than with uniform and stable seeds, helps to increase, or at least maintain, agrobiodiversity. In this context, it is useful to revisit the distinction between genetic variation and genetic variability, as discussed in significant detail elsewhere:Footnote 88
Genetic variation is synonymous with genetic diversity or biodiversity….Footnote 89 Genetic variability, on the other hand, refers to the ability of the genetic make-up of a specific crop variety [sic] (or landrace) to transform or adapt itself to varying biotic and abiotic stresses.Footnote 90 The process of creating a landrace in a region leads to the reduction of the genetic pool or genetic variation seen within that region prior to the commencement of agriculture there in. However, individual landraces, although displaying a certain genetic integrity, have a high level of genetic variability that equips them to withstand specific biotic and abiotic stresses within the local area where they were developed.Footnote 91 This genetic variability therefore confers on landraces, their peculiar suitability to local climatic and soil conditions and their superior ability to resist pests and diseases, particularly those endemic to a specific geographic and climatic region. [Footnotes are renumbered here but are shown as they appear in the original.]
In other words, the genes of landraces are highly variable due to continuous evolution in the face of unpredictable phenological events. This variability helps landraces adapt to varying biotic and abiotic stresses, such as weather extremes or pest attacks, making them more climate-resilient than improved and uniform varieties.Footnote 92 For example, lucerne landraces from five countries learned to cope differently with environmental stress situations, such as drought (Italian landraces) or salt-stress environments (Moroccan landraces).Footnote 93 Lima bean landraces showed high adaptability to drought, temperature stress and competitiveness under such conditions, compared to commercial cultivars.Footnote 94 In unfavorable areas of MoroccoFootnote 95 and China,Footnote 96 landraces are preferably cultivated due to their better adaptability and better yields. Farmers planting a higher diversity of corn in Mexico are better able to mitigate the weather extremes caused by climate change.Footnote 97 In Turkey, farmers prefer a local wheat landrace that can be sown twice per year, minimizing the risk of harvest losses.Footnote 98 As observed by Kochupillai,Footnote 99
it is due to this genetic variability that landraces (in association with traditional farming practices) are often found by empirical and scientific research to outperform modern “improved” varieties in various environments, notably marginal environments.Footnote 100 Landraces are therefore also crucial for long-term food security, especially in developing countries where a large percentage of farmers cultivate crops in marginal environments where improved varieties do not perform. [Footnote is renumbered here.]
However, it is also this genetic variability inherent in landraces and farmers’ varieties that make them heterogenous (rather than homogenous or “uniform”). Landraces and farmers’ varieties are, therefore, unsuitable for protection by PBR, even when a landrace is significantly distinctive from other landraces or farmers’ varieties.
III. Seed–Soil Interactions, Nutrition and Environmental Sustainability
Plant genetic materials co-evolve with their surrounding microorganisms, forming a holobiont.Footnote 101 Plant root secretions and associated soil microorganisms together constitute the root microbiome. The soil surrounding the plant root, which is particularly rich in beneficial microbiological activity, is called the rhizosphere.Footnote 102 The more diverse the microbial population in the rhizosphere, the better the symbiotic exchange between plants and microorganisms, supporting nutrient exchangeFootnote 103 and resulting in higher nutrient content in the plant, vegetable, or crop.Footnote 104 Intimate associations between the plant root and soil microbes are also critical for the establishment and maintenance of stable relations between plant hosts and rhizobial microorganisms (host-microbial homeostasis),Footnote 105 which is crucial for plant disease suppression.Footnote 106
Interestingly, it is not just the quality of the soil that impacts seeds and crops, but the plant genotype, in turn, influences the root microbiomeFootnote 107 and, consequently, plant–microbe interactions. Evolutionary changes in host genotypes influence the bacterial selection process, determining the richness, diversity, and relative abundances of taxa.Footnote 108 For example, for barley, the community composition at the root–soil interface significantly declined from wild genetic resources to landraces to uniform plant varieties.Footnote 109
Plants also co-evolve with microorganisms that are hosted in their cell walls (endophytes).Footnote 110 These microorganisms offer various advantages to host plants, such as the production of phytohormonesFootnote 111 or the solubilization of nutrients such as phosphorus.Footnote 112 These microorganisms are also crucial for the germination of seedsFootnote 113 and for fighting seed-borne diseases.Footnote 114 While a part of these microorganisms (bacteria) are vertically transmitted from parent to progeny seedlings,Footnote 115 at around 45 percent,Footnote 116 other parts are horizontally transmitted and are impacted by environmental characteristics such as the soil microbiome,Footnote 117 climatic conditions, and human practices.Footnote 118
Further, research comparing older landraces of wheat,Footnote 119 breadfruit,Footnote 120 soybeans,Footnote 121 and cornFootnote 122 with more modern varieties found the older ancestors benefited more from symbiotic associations with mycorrhizal fungi (mycorrhiza root colonization).Footnote 123 The mycorrhiza root colonization of landraces exceeded that of modern hybrid cultivars by 149 percent, doubling sorghum yields – and also correlating with higher mineral nutrients in sorghum.Footnote 124 Heirloom bean landraces have similarly been found to contain higher nutrient contents than modern varieties.Footnote 125
Symbiotic associations also result in more resistant plants, particularly in low-fertility soils. For example, heirloom bean landraces from Spain were found to adapt well to dry conditions,Footnote 126 and native corn outcompeted hybrid variants in taking up symbiotic and direct phosphorus.Footnote 127 However, plant varieties react very individually.Footnote 128 Due to mycorrhiza symbiosis, the productivity and sensual quality of in-situ cultivated landraces can be addressed more efficiently and inclusively by agricultural practices that are beneficial for arbuscular mycorrhiza fungi, such as omitting pesticide usage, avoiding soil mechanization, and inoculating the plants with arbuscular mycorrhiza fungi. Interestingly, landraces have been found to react more positively to the inoculation of arbuscular mycorrhizal fungi than genetically modified hybrid corn, which responded negatively.Footnote 129
Higher nutrient availability in soils results in less plant–microbial symbiosis.Footnote 130 For example, in nutrient-rich environments under the usage of mineral fertilizers, plants downregulate their symbiosisFootnote 131 and stop interacting with arbuscular mycorrhiza fungi.Footnote 132 Over the last centuries, this phenomenon has been found to result in plants losing their ability to form symbioses with beneficial fungi.Footnote 133
To maintain and promote plants forming symbiotic ties with beneficial microorganisms and to enhance plants’ resistance, yields and nutritive values, it is essential to revive TEK-based farming systems and the indigenous heterogenous seeds applied in such systems. In the next section, we look at one such TEK-based farming system, namely, “natural farming” (NF), which conserves both seed and soil (microbial) diversity, leading to enhanced farmers’ profits, improved soil health, and an increase in agrobiodiversity. The rapid adoption of these farming systems and the associated adoption of heterogenous seeds across India (and beyond) calls into question the rationale and assumptions underlying the DUS criteria that have been employed to incentivize the creation of uniform plant varieties.
D. Traditional Ecological Knowledge and Agrobiodiversity: Lessons from the Natural Farming Movement in India
I. Traditional Ecological Knowledge and Agrobiodiversity
Traditional Ecological Knowledge (TEK) has been defined as a “cumulative body of knowledge, practices, and beliefs, evolving by adaptive processes and handed down through generations by cultural transmission, about the relationship of living beings (including humans) with one another and with their environment.”Footnote 134 In TEK-based farming systems, plant genetic material and human knowledge co-evolve in close adaptation to climatic and cultural changes. This essentially means that various TEK-based farming systems have emerged independently across various parts of the globe.Footnote 135 Nonetheless, TEK systems do follow certain basic principles, giving significant importance to the autonomy of farmersFootnote 136 (local inputs only, on-farm nutrient recycling, saving seeds)Footnote 137 and their knowledge, which is verified season after season.Footnote 138 Since TEK-based farming systems presuppose and preserve the functioning of self-sustaining ecosystems, they are also described as agroecological farming systems.Footnote 139 Unlike conventional farming systems that rely heavily on uniformity and stability, diversity (in seeds, crops, soil microbes etc.) is the lifeblood of agroecological and TEK-based farming systems.
Locally selecting, multiplying, saving, improving and exchanging seeds with desirable traits – such as stress resilience, hardiness, taste and yieldFootnote 140 – has returned an astounding heterogeneity of planting materials that are genetically non-uniform, variable and diverse.Footnote 141 Such planting materials are characterized by a particularly high within-variety diversity (intra-varietal genetic diversity).Footnote 142 They adapt year by year to local climatic conditions and soil properties. Saved heterogenous seeds, therefore, lead to more robust plants.Footnote 143
Apart from yielding diverse plant genetic material, agroecological practices contribute to stable ecosystems.Footnote 144 The more diverse the in-soil living organisms, the better functioning are ecosystem services such as the cycling of vital nutrients for plant growth, regulation of water supply and food webs controlling pests.Footnote 145 Together, seed and soil biodiversity constitute the backbone of TEK-based farming systems. We explore this further in the context of the NF movement in India.
II. TEK and the Natural Farming Movement in India
Natural farming is an agroecological farming system based on the TEK of India.Footnote 146 Like most TEK-based farming systems, NF considers seed diversity and healthy soil as being fundamental prerequisites for efficient and sustainable crop cultivation.Footnote 147 Over the last decade, NF methods in India have rapidly gained popularity and momentum due to their positive impact on overall farm resilience, particularly by rehabilitating degraded soilsFootnote 148 and increasing farmer profits.
As an aftermath of the Green Revolution in India, in the late twentieth century, vast soil resources were significantly degraded from the intensive usage of pesticides, mineral fertilizers and soil mechanization.Footnote 149 The NF practices support the ecological recovery of soil functions by using farming principles that revive, enhance, and protect the soil’s ecosystem functions, such as better nutrient provision.Footnote 150 These functions are supported by farmer-made biostimulant preparationsFootnote 151 using local materials and agricultural waste.Footnote 152 Healthy soils allow farmers to cut dependencies on expensive inputs (e.g. mineral fertilizers, seeds, and pesticides),Footnote 153 thereby reducing costs and increasing farmer profits. This scenario inspired the name “zero budget natural farming” (ZBNF).Footnote 154
Due to their success, NF practices have spread rapidly throughout India and are recognized as the “largest ‘experiment’ in agro-ecology in the world.”Footnote 155 The UN Food and Agriculture Organization (UN FAO) has defined ZBNF as simultaneously a set of farming methods and as a grassroots peasant movement.Footnote 156 Natural farming has been adopted by several Indian states such as Andhra Pradesh, Himachal Pradesh, Gujarat, Haryana, Karnataka, and Kerala, with Andhra Pradesh implementing its NF program at a mass scale. According to the Andhra Pradesh government, as of March 2020, roughly 620,000 farmers (10.5 percent of all farmers) were enrolled in the program.Footnote 157 Himachal Pradesh aimed to convert the entire state to NF by 2022.Footnote 158 Civil society and several NF movements led by non-government organizations (NGOs) have also spread to states such as Karnataka, Tamil Nadu, and Maharashtra.Footnote 159
Several NGOs, including the International Association for Human Values (IAHV) and the Art of Living Foundation (AOLF), are also actively engaged in imparting education in NF under the government’s Paramparagat Krishi Vikas Yojna (PKVY) (translated as “scheme for the promotion of traditional agriculture”). In March 2020, the Indian government declared a new sub-mission to specifically promote the adoption of NF under the name Bhartiya Prakritik Krishi Padhati (BPKP) (translated as “Indian natural farming method”’).Footnote 160 These schemes are sub-components of India’s “Soil Health Management Scheme” under the “National Mission of Sustainable Agriculture,” which “aims to develop sustainable models of organic farming through a mix of traditional wisdom and modern science.”
Although research on the impact of NF on farm yields has not been consistent across states, the overall success and rising popularity of NF results from a combination of factors. These include widespread efforts by various individuals (notably, Subhash Palekar) and NGOs such as the AOLF, the Sri Sri Institute for Agricultural Sciences and Technology Trust (SSIAST), Kheti Virasat Mission, BAIF, IAHV, LiBird, and others to educate – or reeducate – farmers on the benefits of TEK and agrobiodiversity, thus raising farmers’ profits and reducing costs while improving the soil health and the personal health of farming families that have adopted NF in recent years.Footnote 161 Proponents of NF also emphasize its ability to revive and improve local agrobiodiversity, not only in the form of indigenous seeds but also by helping to revive indigenous cattle breeds and preventing their extinction, while enhancing soil microbial diversity.
III. Seed Biodiversity in TEK and Natural Farming
The cultivation of local varieties of indigenous and heterogeneous seeds lies at the heart of NF, serving as the prerequisite for food security and sustainability vis-à-vis the triple bottom line: people, planet and profits. The high adaptability and hardiness exhibited by landraces to their environment over an extended period allow for low-cost and low-input farming.Footnote 162 Migrating to NF gradually reduces farmers’ dependence on market-purchased “uniform” and “stable” seeds, as farmers rely on (and prefer) indigenous heterogenous seeds that perform better and can also be saved and exchanged without cost. The social practices of seed sharing and exchange further support the diversification of seed material over time,Footnote 163 facilitating agrobiodiversity conservation as well as informal (farmer-led) seed innovations.
In addition to conserving knowledge on diversities and traits, NF in India also includes knowledge of how to enhance the germination rate of indigenous seeds for better plant vitality and stress resistance.Footnote 164 For example, the seed stimulant preparation called Angara or Bheej-Amrut (or Beejamrut) is derived from Indian TEK texts.Footnote 165 Composed of cow manure, water, limestone and local soil,Footnote 166 the preparation stimulates plant growth. Farmers report negligible seed mortality rate, improved seedling length and vigor as well as enhanced seed germination rates.Footnote 167 Bheej-Amrut has been found to contain N-fixing, P-solubilizing bacteria, actinomycetes and beneficial fungi.Footnote 168
IV. Soil Biodiversity in TEK and Natural Farming
The revival of seed biodiversity in TEK systems is dependent on the diversity of soil organisms, which are protected and promoted by a plethora of farming practices. For example, applying plant residues as mulch provides a nutritious carbon source for soil organisms.Footnote 169 Particularly under dry conditions, mulching can significantly increase the grain yieldFootnote 170 and reduce the amount of irrigation needed, thereby also minimizing the risk of high salinity in soils connected to irrigation.Footnote 171 Similarly, low tillage is an effective practice to maintain soil health in TEK-based farming systems.Footnote 172
Farm waste-based preparations that act like microbial plant biostimulants are also an integral part of NF. Most plant biostimulant formulations under NF are based on local (cow) manure. Specific fermentation methods transform the manure into a potent biofertilizerFootnote 173 that significantly enhances the soil’s biological, physical and chemical properties.Footnote 174 For example, the formulation called Jeev-Amrut is based on (cow) manure, sugar (e.g. ripe fruits), proteins (e.g. pea flour), minerals (e.g. mineral flour), and local soil. The mix has been found to significantly increase yields,Footnote 175 effectively control various plant pathogensFootnote 176 and increase the availability of nutrients, while decreasing the concentration of contaminants such as chloride and sulfate.Footnote 177
The TEK-based farming systems are growing in popularity partly because of the need to recover degraded soils and to meet the growing demand for healthy, nutritious, and organic food. They are also growing out of social movements seeking to move away from high-input farming, which is considered expensive and highly vulnerable. Recent studies and developments are helping people to better understand, interpret, and improve upon ancient practices for modern application.Footnote 178 These studies point to the importance of TEK-based farming and formulations in promoting sustainable agriculture that can support the cause of enhanced food and nutritional security.
Despite its recent boom in India, TEK systems are globally endangered.Footnote 179 They are mostly used by smallholder farmers, who are outcompeted by intensive agricultural systems, or by the loss of habitats, altered lifestyles,Footnote 180 negative attitudes toward the word “traditional,”Footnote 181 and aggressive introduction of new (“improved”) seed varieties, even though they do not perform consistently in marginal environments.Footnote 182 Legal and regulatory changes are urgently needed to help revive a diversity of TEK-based farming systems as possible and beneficial substitutes for conventional farming systems, particularly for marginal environments. Corresponding shifts are also needed in the educational curriculums of universities and the training of regional agricultural extension officers.
E. Conclusions and Recommendations
Aano bhadra krtavo yantu vishwatahFootnote 183
In this paper, we have seen how the UPOV definition of variety, together with the insistence on uniformity and stability as prerequisites for the acquisition of PBRs, are grounded in legal fiction, industrial, or economic expediencies and a narrow focus on Mendelian genetics. The mainstream approach deemphasizes the influence of external factors (soil health, climate change and biotic and abiotic stresses) on seed health, performance and productivity. These “minimum standards” set up by UPOV (as well as European and national regulations that follow UPOV) assume that seeds and plant varieties that meet the DUS criteria are also better equipped to ensure high yields, meet climate challenges and enhance food security while promoting optimal innovation. Yet, emerging scientific understanding, as well as ground realities, particularly (but not exclusively) in the context of marginal farm environments and rapid climate change, suggest otherwise. They suggest that diversity and heterogeneity, rather than uniformity and homogeneity, are necessary for climate-smart, sustainable agriculture that protects seed and soil biodiversity while enhancing yields and (small) farmer incomes. Here, the presumptions underlying the CBD and the Seed Treaty – namely, that (agro)biodiversity and benefit sharing are of fundamental relevance for environmental protection and sustainable agriculture – gain fresh relevance.
Further, empirical research and several recent case studies and farmer stories suggest that not just plant breeders but also small and subsistence farmers are innovators.Footnote 184 Yet, under current IP protection regimes, their innovations (whether it be in relation to the improvement of indigenous seeds or improvements and local adaptation of TEK-based farming systems) remain without recognition or reward. This further propogates the false notion that plant breeders, and not (small) farmers, can innovate in the face of climate change. The revival as well as governmental support of TEK-based farming systems can encourage farmers, especially small and subsistence farmers, to adopt sustainable farming systems that both enhance agrobiodiversity and increase their profits. This can also help bring back dignity to the farming profession, preventing further and rapid rural–urban migration.
History has witnessed the dangers associated with discarding diversity and accepting only one line of thinking, know-how, or source of (planting) materials as being effective, efficient, or correct. The UPOV’s DUS criteria have undoubtedly served their purpose of promoting industrial and formal plant breeding efforts and continue to directly contribute to farming in large landholdings. However, they have increasingly led to the rejection and discrediting of innovations emerging from farmers’ fields and from agrobiodiversity that protects TEK-based farming systems. Global scientific communities cannot afford to lose this rich source of time-tested practical knowledge. In keeping with the findings of modern science, international legal regulations need to embrace, acknowledge, incentivize and reward the conservation and in-situ improvement of knowledge and materials from diverse sources to ensure sustainable innovations in seeds and plant varieties in the long run. A step in this direction can already be seen in India, and to a limited extent, also in Europe. However, a lot more needs to be done at the national as well as international levels. We highlight some trends and recommendations in the next section.
I. Trends in Europe
The relevance of agrobiodiversity is widely acknowledged, not only in countries of the Global South but also within Europe. In 2018, the European Union adopted Regulation (EU) 2018/848 of 30 May 2018 on organic production and the labeling of organic products (published on June 14, 2018). The regulation, for the first time, permits and encourages, inter alia, the marketing for organic agriculture of “plant reproductive material of organic heterogeneous material.” It defines “organic heterogeneous material” as
a plant grouping within a single botanical taxon of the lowest known rank which:
(a) presents common phenotypic characteristics;
(b) is characterized by a high level of genetic and phenotypic diversity between individual reproductive units, so that plant grouping is represented by the material as a whole, and not by a small number of units;
(c) is not a variety within the meaning of Article 5(2) of Council Regulation (EC) No 2100/94 (33);
(d) is not a mixture of varieties; and
(e) has been produced in accordance with this Regulation.
Such heterogeneous materials do not need to fulfil the registration and certification requirements under various EU laws.Footnote 185 The regulation clarifies that “heterogeneous materials,” unlike current proprietary seeds, need not be uniform or stable, and notes that based on “Research in the Union on plant reproductive material that does not fulfil the variety definition… that there could be benefits of using such diverse material… to reduce the spread of diseases, to improve resilience and to increase biodiversity.”
Accordingly, the regulation removes the legal bar on the marketing of “heterogeneous materials” and encourages their sale for organic agriculture, thus clearing the way for the more expansive use of indigenous non-uniform seeds in agriculture. It is expected that “once the delegated [A]cts under the EU regulation are formulated, they will support the creation of markets and marketplaces facilitating trade in heterogeneous seeds, including by small farmers who have, thus far, been left out of the competition in seed markets.”Footnote 186
Further, in the context of nutrient recycling and organic fertilizers for organic agriculture, the amended recital 5a of the proposed EU regulation (which is a part of the EU Circular Economy (CE) Package) of “CE marked fertilizers” is very relevant. The recital as proposed by the EU Parliament reads: “(5a) To ensure effective use of animal manure and on-farm compost, farmers should use those products which follow the spirit of ‘responsible agriculture’, favoring local distribution channels, good agronomic and environmental practice and in compliance with union environmental law …. The preferential use of fertilizers produced on-site and in neighbouring agricultural undertakings should be encouraged.”Footnote 187 Despite the crucial role this provision could have played in the revival of TEK-based farming that teaches farmers how to produce biostimulants and organic fertilizers on-farm, the fertilizer regulation (EU 2019/1009) dropped the proposal.Footnote 188
The importance of locally adapted seeds has, nevertheless, been further emphasized in the Farm to Fork Strategy (2020), which states that “the Commission will take measures to facilitate the registration of seed varieties, including for organic farming, and to ensure easier market access for indigenous and locally-adapted varieties.”Footnote 189 The strategy also emphasizes the need for more agroecological farming practices in the European Union.
These legal and regulatory trends suggest a small but decisive step in the direction of diversifying the marketplace for agricultural seeds. They are also in line with the emerging scientific understanding of the urgent need to revive seed and soil microbial diversity for the sake of sustainable farming and food security. However, based on past scientific understanding, the European Union has, for decades, strictly regulated the agricultural seeds and inputs sector, outlawing active participation by farmers in the creation of agricultural seeds and associated organic fertilizers produced on-farm. These regulations have resulted in the development of specific practices and mindsets in agriculture, including among small and marginal farmers. Changing laws at the high level of the European Union will not lead immediately to a shift in local practices and mindsets.
In accordance with the principles of translational ethics and order ethics, to ensure compliance with ethically appropriate behavior (including environmentally sustainable behavior), it is necessary to ensure that legal, regulatory and governance structures incentivize the appropriate action. This can be done by, inter alia, removing perverse incentives and ensuring the necessary structural changes within existing institutional frameworks (e.g. by imparting balanced and updated education to farmers, rural agricultural extension officers and university students). This will facilitate the steering of human choices toward accomplishing more sustainable outcomes. Here, the European Union can learn from the NF movement in India, which was steered by NGOs and civil society groups but is now receiving support from the central and state governments.
II. Reviving Agrobiodiversity and Local Food Cultures
The revival of traditional agriculture based on indigenous and heterogenous seeds can also support the revival and nourishment of local agro-food systems (LAFS). These LAFS comprise local identity-based foods emerging from specific “territorial dynamics of agriculture, food and consumption networks.”Footnote 190 By mobilizing territorial dynamics based on collective action, LAFS revive and encourage local food identity and add value to local resources, including agricultural landscapes and ecosystems, local knowledge, local social networks, food traditions and cultures, and native vegetable varieties and animal breeds.Footnote 191 While recognizing that many of the LAFS in Europe have been lost following the widespread adoption of conventional agriculture,Footnote 192 LAFS research currently focuses on studying remaining local systems or on using the concept as an approach for analyzing local agriculture and food-specific resources. Researchers are also studying its close connection with and impact on (agro)biodiversity.Footnote 193
The ongoing COVID-19 pandemic is a reminder of the urgent need to ensure local self-sustainable food production. Given the vast and diverse agro-climatic zones present in various regions of the world, farmers in all countries can benefit socioeconomically as well as environmentally by adopting farming systems and regulatory policies that encourage the use of local biodiversity in agriculture and incentivize farmer-level innovations with this diversity.
III. Rethinking the DUS Test
In the light of mounting evidence in the form of scientific research as well as on-farm experiences of small and marginal farmers, it is necessary to rethink the DUS test and identify approaches that can incentivize and promote sustainable seed innovations, not in isolation of environmental and soil interactions, but in combination with sustainable farming practices. Such innovations can include seed improvements that go hand in hand with innovative and sustainable soil management practices, manure and farm waste (nutrient) recycling methods, and/or seed storage techniques that are cost-effective and implementable in rural, low income and low-tech environments.
Beyond regulatory efforts, recent research based on extensive consultations with natural farmers in India has also recommended the adoption of technological means such as blockchain or distributed ledger technology to support the transparent and traceable sourcing of materials and know-how from farmer-innovators and ensure benefit sharing with the help of smart contracts.Footnote 194 Further research as well as funding for research and development, together with concerted international efforts, are needed to conduct more in-depth farmer interviews, build necessary prototypes and test the prototypes in real conditions to determine their acceptability, suitability and sustainability.
This is not to say that uniform varieties and the DUS test need to be done away with altogether. However, it is necessary to recognize that the unidirectional focus under current IP laws and associated regulations that incentivize and protect innovations only by the formal seed sector, or that permit the marketing only of certified uniform materials, is both inequitable and non-sustainable. Diversity in regulatory approaches is necessary to ensure that all potential innovators – in both the formal and informal sectors – can equitably participate in the landscape of seed innovations, while also protecting and enhancing agrobiodiversity for present and future generations.
Table of Contents
A. Introduction
The long-standing battle between economic nationalism and globalism has again taken center stage in geopolitics. In broad strokes, the two camps can be characterized as follows: the globalist worldview conceives of globalization as a positive-sum game, whereas economic nationalists consider international trade a zero-sum game in which a gain in trade by one nation must be accompanied by a corresponding loss for another nation.Footnote 1 Accordingly, efforts to create and consolidate a unified world economyFootnote 2 clash with protectionist policies that discriminate in favor of the local economy.Footnote 3 In the area of international law, the antagonism plays out in the dispute between supporters of global multilateral treaties and organizations, on the one hand, and proponents of equal sovereignty to be used in pursuit of national interests on the other.Footnote 4 In the course of these debates, the globalist worldview tends to refer to humankind as the primary polity and to global welfare as the ultimate end of politics.Footnote 5 Nationalists, in contrast, champion self-determination and independence as ends in themselves and strive to promote an idealized unity, identity, and autonomy of a distinct community.Footnote 6 In International Relations theory, the two opposite worldviews are associated with liberalism and realism, respectively, and their underlying assumptions about human nature. The one is more optimistic and idealistic – and thus progressive in terms of greater cooperation; the other is rather pessimistic in view of seemingly unavoidable conflicts.Footnote 7
In this article, I apply the above distinctions to the law and policy of international intellectual property (IP). The prevailing view sees this field as a prime example of globalization. The Paris IP Union and Berne IP Union of 1883 and 1886, respectively, were among the first permanent multilateral organizations to react to ever-increasing global communication and commerce.Footnote 8 Over the past 140 years, the international IP system has consistently expanded in territorial and regulatory scope. Today, it provides for a practically worldwide level playing field for IP producers and users in all major areas of innovation and branding.Footnote 9 Economists embrace this status quo because it avoids non-cooperative bilateralism and trade diversion and thereby expands world welfare.Footnote 10 Leading international IP scholars observe “progress,”Footnote 11 which ought to continue via the ever “unfinished business”Footnote 12 of negotiating new IP treaties, preferably at the multilateral fora of WIPO and the WTO.Footnote 13 From this perspective, the current stalemate of multilateralism, events like Brexit, and other efforts to (re-)instate the national interest as the guiding principle of economic policy are perceived as a challenge; they indicate a pendulum that is swinging back from a relatively long phase of globalization.Footnote 14
This article challenges that widespread view on several levels. In a nutshell, it claims that economic nationalist concerns about domestic industries and economic development lie at the root of the global IP system.Footnote 15 To support this argument, I summarize and categorize various IP policies adopted by Germany, selected other European countries, the European Union,Footnote 16 and the USA. Section B presents three types of inbound IP policies that aim to foster local economic development and innovation. Section C adds three versions of outbound IP policies that, in contrast, target foreign countries and markets. In the area of IP, inward-looking policies have typically been pursued by IP importers and the outward-looking policy by IP exporters. The significance of the distinction between inbound-import and outbound-export is acknowledged both in the economic literature and most recently in the preamble of the IP chapter in the 2020 US–China Economic & Trade Agreement, according to which “China recognizes the importance of establishing and implementing a comprehensive legal system of IP protection and enforcement as it transforms from a major IP consumer to a major IP producer.”Footnote 17
The overview demonstrates that the dialectic of nationalist motives producing global regulatory structures has been at work throughout the history of modern IP, and that the past five years (2017–2022) are no exception.Footnote 18 I furthermore show that current EU and US international IP policies very much resemble each other, casting doubt on the two players’ seemingly opposing attitudes toward globalization.Footnote 19 The article thus provides a much more nuanced description than the simplistic nationalist–globalist dichotomy presented in the beginning.Footnote 20
The concluding Section D draws the previous findings together. It first explains the dialectic virtuous circle of economic nationalist motives and global legal structures. Second, it identifies the basic function and legal structure of IP as the reason for the resilience and even dominance of economic nationalist motives in international IP politics. Intellectual property concerns exclusive private rights that are territorially limited creatures of (supra-)national statutes. These elements make up the economic nationalist “DNA” of IP.
B. Inbound IP Policies
Inbound IP policies aim at fostering innovation and economic growth within an IP jurisdiction. This regulatory perspective is prone to nationalist motives and measures.
I. IP First Movers
When globalization gained momentum, economic policies logically mainly looked inward – that is, they were aimed at fostering domestic growth. The history of IP teaches that this general assumption also holds true for first movers in IP, namely Venice and England. Interestingly, both jurisdictions were very active and even dominant in international trade when they first adopted IP laws.Footnote 21 By the time the city of Venice enacted, in 1474, what is considered to be the first patent Act in history,Footnote 22 Venice had – over the course of several centuries – achieved the status of being the “cradle of dawning capitalism,”Footnote 23 the “chief trading city in the West,”Footnote 24 and a manufacturing hub.Footnote 25 When the Statute of Monopolies of 1624 established the basis for the British patent system,Footnote 26 the commercial center of gravity in Europe has already shifted from the Mediterranean to the ports facing the Atlantic, in particular to Amsterdam and London as the dominant cities.Footnote 27 Before the seventeenth-century civil war, England had experienced 150 years of significant annual output growth in agriculture, industry, and services, as well as population growth,Footnote 28 and the country was about to become the greatest naval and economic power on earth.Footnote 29 England would later also adopt the first modern copyright Act.Footnote 30
Ranking high among the many reasons for the rise of Venice and England before the era of modern IP are policies that were specifically aimed at introducing foreign technologies through the immigration of skilled artisans.Footnote 31 One important regulatory tool to attract and establish certain high-tech industries of the time was the privilege awarded to people who introduced a new manufacture to the jurisdiction.Footnote 32 The first IP statutes were derivatives of these early modern privileges, both in terms of their legal-doctrinal structureFootnote 33 and regarding their purpose. Just like the privilege regime, the new patent and copyright laws implemented an inward-looking economic policy. The Venice Patent Act expressly refers to the “utility and benefit to our State” of granting exclusive rights to “men in this city, and also … other persons … from different places” in their “ingenious contrivances.”Footnote 34 The Statute of Monopolies was intended to further the interests of industry “within this Realme,” without, however, unjustifiably raising prices of commodities “at home.”Footnote 35 And the Statute of Anne was meant to encourage learned men to compose and write useful books for the British public.Footnote 36 Although Venice and England operated within a highly internationalized trade context, none of their early IP statutes specifically targeted foreign markets and the export of new contrivances, manufactures, and books. Their main – if not sole – purpose was to foster domestic growth and innovation.Footnote 37
II. Discrimination against Foreigners
This inbound perspective becomes even more apparent in the practice of many jurisdictions until the late nineteenth century to grant IP protection only to local people. Examples are numerous and well documented. They were observed in particular in middle-income countries that, at a given point in time, had established a certain level of industrialization and the capacity to absorb new technologies but still lagged behind the economic and technological leading countries.Footnote 38
One of these purposefully discriminatory measures was the granting of privileges or patents for the introduction – that is, the first domestic practice – of inventions that were made and implemented abroad. What would today be considered an unfair incentive for piracy was long-standing practice in many European countries, such as in Renaissance “Italy,” during the late French Ancien Regime, and even as late as the early nineteenth century in Prussia and Wuerttemberg.Footnote 39 Another way to foster local industry was to declare that only citizens or residents of the respective state were eligible for IP protection. This strict discrimination against foreigners was applied by, for example, the 1815 Prussian Patent ActFootnote 40 and the US patent and copyright laws from their first enactment until 1836 and 1891, respectively.Footnote 41 Even when foreigners were in principle granted access to the local IP regime, they had to fulfill additional requirements such as paying significantly higher patent fees than did locals.Footnote 42 Local working requirements like the famous manufacturing clause in US copyright law had the purpose of promoting the national publishing and paper industries.Footnote 43
The effect of discriminating against foreign inventors and authors was that foreign patenting and copyrighting remained infrequent. Nations that imported IP thereby prevented IP-export nations from taking advantage of the protection available in their territories. In this way they avoided paying license fees, which would have increased the costs of absorbing knowledge and burdened the balance of trade.
The first prominent renunciation of this inbound nationalist IP policy was a French law of 1852, which for “reasons of universal justice” also granted protection to authors of works published abroadFootnote 44 – and at the same time targeted unauthorized foreign copying; this new law thus adopted an outbound perspective.Footnote 45 Whether that law was an expression of a genuinely globalist attitude or was still driven by the nationalist motive to improve the legal position of French right holders is considered below.Footnote 46
The formerly popular strategy of discriminating against foreign right holders in order to allow domestic industries to free-ride on foreign innovations – and at the same time, protect their own – is nowadays prohibited for most IP markets, on the ground of national treatment obligations under the global IP acquis. In particular, it is not permissible to wholly exclude foreigners or certain areas of technology, such as pharmaceuticals, from industrial property protection or to provide that formalities must be fulfilled in order to secure a copyright.Footnote 47 In practice, patent offices and courts may favor domestic inventors and litigants,Footnote 48 but such practices must not become official policy. The globalization of IP law thus limits the leeway for economic nationalist approaches significantly and thereby complements the deep integration of national economies in intercontinental value chains.
Discriminatory measures have not, however, vanished completely. An interesting example is the “press publishers right” in the 2019 EU Directive on copyright and related rights in the Digital Single Market (DSMD).Footnote 49 According to Art. 15 DSMD, EU Member States must provide publishers of press publications with the exclusive rights of reproduction and making available “for the online use of their press publications by information society service providers,” in particular by news aggregators like Google News. This two-year related right in press publications is independent of any rights in respect of works and other subject matter incorporated in a press publication. Whereas this content is already subject to international copyright treaties,Footnote 50 its “publication” is not.Footnote 51 There is thus no applicable national treatment obligation.
The German press publishers’ right of 2013, which served as a model for the DSMD, had not addressed the status of non-German, non-EU, and non-European Economic Area press publishers explicitly.Footnote 52 The DSMD, however, is clear on the issue. Art. 15(1) DSMD only applies to – and thus benefits – press publishers “established in a Member State,” that is, those legal persons that have their registered office, central administration, or principal place of business within the Union.Footnote 53 There is no reference to applicable international treaties (which do not exist anyhow) or to other exceptional avenues to protection, such as via simultaneous first publication in the European Union or reciprocal protection of EU publishers in the third country. The DSMD thus completely excludes the publishers of Neue Zürcher Zeitung, The New York Times, and all other third-country journalistic publications from the press publishers’ right, despite the fact that many of those websites are indexed by news aggregators for a significant EU readership.Footnote 54
In the past, such strict discrimination against foreigners had the purpose of fostering economic catch-up through cheap access to foreign works and lawful free-riding on foreign innovations. This, however, is not what the press publishers’ right is meant to achieve. Its purpose is to ensure the sustainability of EU news publishers and news agencies by providing them with additional licensing revenues. The respective royalties are to be paid by news aggregators and similar online services, for whom the reuse of press publications is said to constitute an important part of their business models and a source of revenue.Footnote 55 In line with this telos, the German and Spanish precursor laws had indeed been asserted by local mainstream press publishers against Google.Footnote 56 The new IP right is thus not meant to foster dynamic catch-up and innovation but to support media companies that were established in analog times during their transition to digital journalism.Footnote 57 It nevertheless represents an inward-looking protectionist measure that discriminates in favor of the local economy.
III. Weak IP Catch-up Policies
Since early modern times, the economic and technological ranking of countries has corresponded to a pyramidal form. Few countries take a leading position, some follow as emerging economies, and most belong to the bottom group – with low levels of specialization, innovation, and export orientation. Although this structure is surprisingly stable, individual countries have moved up and (less frequently) down the ladder.Footnote 58 Countries like Germany, Switzerland, and the USA, whose economies nowadays are among the most technologically advanced and export-oriented, lagged behind the UK economy throughout most of the nineteenth century. In so far as those follower countries adopted IP during the nineteenth century at all, they pursued – well into the twentieth century – a weak IP catch-up strategy. They either forewent patents and copyrights altogether or limited these rights in a way that allowed local enterprises to copy or imitate on a massive scale, in full compliance with applicable local laws, in order to absorb foreign innovation and establish a highly industrialized formal economy.
Again, examples are plentiful and well documented.Footnote 59 In the area of copyright law, until the late nineteenth century there existed several European “copying hubs” that did not provide any protection to authors or publishers; among them is again the German state of Wuerttemberg.Footnote 60 In patent law, the Prussian patent office rejected up to 90 percent of patent applications and thus strictly controlled and effectively minimized the practical relevance of the patent system.Footnote 61 The German Patent Act of 1877 exempted precisely those two branches from patent protection – medicines and chemical products – in which German companies were particularly active and successful.Footnote 62
Switzerland introduced a Patent Act only in 1888, under massive international pressure, but granted no protection for methods or for chemical products until 1907. This allowed the Swiss chemical and pharmaceutical industries to copy products that were patented in France and other places without hindrance; at the same time, the late nineteenth and early twentieth century are seen as the golden age of the Swiss pharmaceutical and chemical industry. In 1869, the Netherlands completely revoked their patent law, which up until that point had been used predominantly by foreign registrants, and did not reinstate it until 1912. In the meantime, the Lever Brothers (Unilever) were able to lawfully produce margarine in disregard of the patent protection that existed in several European countries, and Philips manufactured light bulbs without paying license fees to Edison. Again, that period marked the high point of industrialization in the Netherlands.Footnote 63
India pursued a similar strategy in doing away with product patents in the pharmaceutical and food sectors in 1972. This gap in protection, which under the maximum transition period for TRIPS was valid until 2005, is said to have contributed to the creation of the Indian generic sector.Footnote 64 Japan, to name one last example, has had a patent law since as far back as 1885. But until the late 1990s, the scope of protection of a patent was construed so narrowly that Japanese companies had an easy time in circumventing this protection by means of slight changes in the drafting of the claims.Footnote 65
All these policies purposefully discriminated against foreign right holders, to the benefit of local industries. They can therefore be characterized as economic nationalist strategies of IP importers. This weak IP catch-up strategy is still considered to be an effective strategy in developing countries in order to adapt to, replicate, and distribute innovations along the international productive chain, with the long-term aim of inducing domestic economic complexity and productivity.Footnote 66 As with the discrimination of foreigners, however, weak IP catch-up policies are largely ruled out by international IP treaties, in this case by obligatory minimum levels of protection.Footnote 67 The remaining room to maneuver concerns some “residual policy space” allowing for “IP calibration.”Footnote 68
It is doubtful whether this remaining leeway is sufficient to account for the vastly different levels of absorptive capacity and innovativeness among national economies. The most prominent test case is China, which the United Nations still counts among the developing economiesFootnote 69 but which has risen to become the second-largest economy in the world in terms of gross domestic product.Footnote 70 In 2019, the patent office of China received nearly half of all patent applications in the world and had the second highest number of international patent applications via the Patent Cooperation Treaty, just behind US-based applicants.Footnote 71 Being bound to the TRIPS Agreement since 2001 has apparently not hampered but potentially fostered this impressive performance of the Chinese economy.
The seemingly happy relationship between strong IP and Chinese economic development has been tarnished, however, by long-standing complaints of the USA and the European Union about insufficient IP enforcement, and, more recently, about so-called forced technology transfers.Footnote 72 Both practices support the local acquisition of knowledge and the building of innovative capacity and thus, eventually, technological and economic catch-up. The significance of these informal, weak IP policies is confirmed by the fact that the 2020 US–China Economic and Trade Agreement specifically addresses these issues; it obliges China firstly to stop the manufacture and block the distribution of pirated and counterfeit products, and secondly to not require or pressure persons of the other party to transfer technology to its persons in relation to acquisitions, joint ventures, or other investment transactions.Footnote 73 The agreement thus documents and at the same time aims to contain a conflict between Chinese inbound and US outbound nationalist IP policies.
Like the USA, the European Union generally also pursues an outward-looking, pro-IP policy.Footnote 74 In the already mentioned 2019 DSMD, the EU legislature has, however, adopted yet another version of an inward-looking IP regulation. As explained, Art. 15 DSMD strengthens IP to the benefit of EU press publishers. Art. 8 DSMD, in contrast, weakens EU copyright by permitting the non-commercial mass digitization of out-of-commerce works. It also reverses the discrimination. Whereas Art. 15 DSMD discriminates against third-country press publishers, Art. 8 DSMD discriminates against EU right holders and leaves exclusive rights in third-country out-of-commerce works intact. Under Art. 8 DSMD, only out-of-commerce-works of EU origin may be digitized and made available online.Footnote 75 Recital 39 DSMD explains this discrimination against EU works and right holders with “reasons of international comity.” And indeed, this rarely adopted measure eliminates any concerns that the limitation of copyrights in out-of-commerce works might go too far and run afoul of the international acquis of minimum copyrights, which does not apply to the internal copyright regulations of a country for works of that origin.Footnote 76 It thus seems that Art. 8 DSMD expresses a concern for foreign right holders and international law. The European Union’s globalist attitude is so strong that the Union is even prepared to discriminate against its own citizens.
From an historical perspective, however, Art. 8 DSMD appears in a very different light. According to this view, Art. 8 DSMD is a late reaction to events that took place in the USA between 2004 and 2015, namely the Google Books Project, the Google Books Settlement, and the Second Circuit Court decision – which eventually held that Google’s unauthorized digitizing of more than twelve million copyright-protected works, the creation of a search functionality, and the display of snippets from those works were non-infringing fair uses under US copyright law.Footnote 77 Many non-US copyright holders, as well as the German and French governments, had actively intervened in these developments. They successfully argued that a settlement reached between Google and certain US authors and publishers would violate international copyright law, although the settlement only covered works of US, Canadian, UK, and Australian origin plus foreign works registered with the US copyright office.Footnote 78 In Germany and other European countries, the Google Books Project and settlement were portrayed as an impertinent global misappropriation of the rights of European authors and publishers by the same US internet giant that, by the way, is the primary target of the new press publishers’ right.Footnote 79
At the same time, the unavailability of millions of orphan and out-of-commerce works in the digital age was generally acknowledged to pose a real problem. The first response in line with European copyright values, the 2012 EU Orphan Works Directive, unfortunately proved unfit for the purpose because of its requirement of a prior diligent search in every single case.Footnote 80 In 2016, a French effort to allow for the mass digitization of out-of-commerce works was struck down by the Court of Justice of the European Union because of its incompatibility with the EU copyright acquis.Footnote 81 In order to finally allow for mass digitization projects, Art. 8 DSMD now adopts the “digitize first and opt out later” mechanism that had infuriated European right holders and governments against the Google Book settlement ten years earlier. The EU legislature therefore took great pains to avoid international law-related complaints by US or other third-country right holders.
It is finally worth noting that not only US works are beyond the scope of Art. 8 DSMD. Google and other private internet companies also cannot rely on the provision, which only permits non-commercial digitization projects. In sum, Art. 8 DSMD is not only an inward-looking but also a hermetical EU measure: it benefits EU cultural heritage institutions in their taxpayer-funded efforts to preserve and make available their collections of EU works, for future generations of EU citizens.Footnote 82 With this cultural, etatist focus, and considering its historical background, the provision represents a (supra-)nationalist approach to IP. Together with the new press publishers’ right, it forms part of the overall EU digital policy that strives for a European version of digital sovereignty, independent from and often opposed to US and Chinese approaches.Footnote 83
C. Outbound IP Policies
The growth of global trade during the long nineteenth century concerned high-tech products, books, and trademarked goods, which increasingly enjoyed IP protection in their country of origin. The more important cross-border exchange became for original producers, the more they became interested in IP protection abroad.Footnote 84 And along with the significance of these IP industries grew the readiness of governments to switch from inbound to outbound IP policies.
In view of today’s levels of global economic and legal integration, no country can afford to ignore the international consequences of its IP policies. Even self-contained measures like Arts. 8 and 15 DSMD are embedded in, and reflect upon, the international economic context. Economic globalization has thus clearly induced a change of perspective from local to global markets. It has not, however, eliminated the focus on the interests of domestic industries and thus the essentially economic nationalist motive of IP-export countries’ policies.
I. Sanction Foreign Pirates
An interesting example in IP history is the already mentioned French International Copyright Act of 1852.Footnote 85 That law did not merely extend the French droit d’auteur to works published abroad and thus, in practice, to foreign authors for “reasons of universal justice.” It also made counterfeiting and piracy within France a criminal offense – in fact, this is the only substantive content of the law.Footnote 86 The immediate purpose of this criminalization was to curb the influx of cheap copies of works by French authors from Belgium and the Netherlands, where this activity was perfectly legal.Footnote 87 The indirect effect was that after the “pirates” lost their biggest market, their governments were more inclined to enter into bilateral treaties with France – and finally to protect French authors in Belgium and the Netherlands.Footnote 88 Thus, a law that according to its preamble pursued a noble universalist aim turns out to be an outbound nationalist policy move.
The US trade policy in the late twentieth century provides a more straightforward example of efforts to fight unauthorized foreign copying and imitation. The US Trade and Tariff Act of 1984 made the adequate and effective protection of foreign IP a principal US negotiating objective, and it declared inadequate or ineffective protection of IP in third countries a trade practice that could lead to trade retaliation by the USA.Footnote 89 The Reagan Administration used this tool intensively, for example vis-à-vis South Korea and Brazil.Footnote 90 In 1988, the US Congress amended the Trade Act “to provide for the development of an overall strategy to ensure adequate and effective protection of intellectual property rights and fair and equitable market access for US persons that rely on protection of intellectual property rights.”Footnote 91 As part of this overall strategy, the Office of the US Trade Representative has since then published an annual “Special 301 Report” in which it identifies foreign countries where IP protection and enforcement have deteriorated or remained at “inadequate” levels, which may result in actions under US trade law or in dispute settlement proceedings pursuant to WTO or other trade agreements.Footnote 92 More than thirty countries find themselves on the 2020 watch and priority watch lists, among them well-known targets like China, but also Canada and Romania.Footnote 93
Some thirty years after the USA, the European Union adopted very similar measures. As part of a comprehensive “[s]trategy for the protection and enforcement of intellectual property rights in third countries,”Footnote 94 the European Commission has since 2006 carried out biannual surveys among EU stakeholders and Member States in order to identify third countries in which the state of IPR protection and enforcement gives rise to concern, so that the Commission can focus its efforts and resources on those countries. The most recent report lists twenty countries in four priority categories, with China as the only country in Category One, and, somewhat ironically, the USA listed among the problem countries in Category Three.Footnote 95
On an abstract level, one can thus observe a convergence of EU and US policy aims and measures. In practice, however, the two actors apparently regard each other with suspicion. Each tries to extract as much revenue from foreign IP markets as possible.
II. Unilateral Reciprocity Requirements
Another way to induce other countries to adopt or strengthen their IP laws is to demand some form of reciprocity. It was common practice in nineteenth-century Europe for governments to make eligibility for their IPRs dependent on a corresponding treatment of their own citizens in the other country.Footnote 96 Reciprocity is a particularly promising tool if the domestic market is of a significant size and there is some corresponding demand for international protection. Accordingly, the 1838 UK International Copyright Act made the protection within Her Majesty’s vast dominions of literary works that were published abroad conditional upon the reciprocal protection of British books in those foreign countries.Footnote 97 Within a few years, this carrot-and-stick strategy had led to copyright treaties with German states in 1846 and 1847 and with France in 1851.Footnote 98
Whereas France initially adopted, as explained, a different tactic to internationalize copyright law, it successfully implemented reciprocity in trademark law. The decisive move here was the law of 1857, according to which protection of foreign trademarks in France was not simply dependent upon reciprocal protection but also upon a diplomatic agreement with the home country of the foreign trademark owner. Countries that sought protection for their citizens’ marks in France therefore had to negotiate and usually to legislate. Within a few years, France concluded several treaties on the matter, starting with its great rival, Britain.Footnote 99 Thus, the targeting of foreign pirates and the discrimination of foreign right holders contributed to the emergence of international IP treaties, first in the form of numerous bilateralFootnote 100 and eventually in the form of the permanent multilateral IP Unions of the 1880s, with their guarantee of automatic national treatment.Footnote 101
Beyond this emerging international IP acquis, however, reciprocity requirements have remained an attractive tool for export-oriented countries. One example concerns layout designs (topographies) of integrated circuits. The 1984 US Semiconductor Chip Protection Act only applies to nationals and domiciliaries of the USA and of countries with which the USA has concluded a respective IP treaty.Footnote 102 The 1986 European Economic Community Directive on the legal protection of topographies of semiconductor products is equally restricted to nationals and residents of a Member State, with a proviso that Member States may conclude agreements with third countries concerning that subject matter.Footnote 103 Whereas such bilaterals did not occur, and the 1989 WIPO Washington Treaty on Intellectual Property in Respect of Integrated Circuits remained dead letter law,Footnote 104 Arts. 35–38 TRIPS eventually made this new form of IP obligatory for all WTO Members.
The protection of geographical indications (GIs) by the European Union provides an example of where the use of reciprocity to globalize new types of IPR partially failed. The original 1992 Regulation made GI protection for agricultural products and foodstuffs coming from a third country dependent upon equivalent GI protection for EU products in that country, “without prejudice to international agreements.”Footnote 105 Arts. 22–24 TRIPS indeed address this issue but only set out very limited obligatory GI protection levels. Also within WIPO, the European Union has thus far failed to establish its preferred high standard as the global norm, mainly because of US opposition.Footnote 106 The inclusion of GI protection in the TRIPS Agreement even backfired when in 2005 a WTO panel found that excluding WTO nationals from the EU system for GIs violates the national treatment obligation owed to them.Footnote 107 As a result, the European Union has to accept third-country GIs within its market, but only a handful of other countries have committed to offer EU GI producers comparable levels of protection.Footnote 108
Just like the discrimination against foreigners, unilateral reciprocity requirements have also largely been ruled out and replaced by mutual national treatment provisions in IP treaties. Nowadays, reciprocity is thus useful only beyond the international acquis. At these edges of the international IP system, however, reciprocity is still popular – and it has retained its purpose, namely, to provide a country’s own nationals or residents with protection abroad.
The first example concerns German copyright law vis-à-vis “non-ressortissants,” that is, nationals of non-members of the international copyright system. In a move that somewhat contradicts the rhetoric of purportedly universal authors’ rights (Urheberrecht),Footnote 109 generally only nationals of Germany, the European Union, and the European Economic Area are eligible for exploitation rights in works, performances, and other subject matter.Footnote 110 Third-country (“foreign”) nationals qualify for German copyright protection only according to international treaties, because of first publication in Germany, or on condition of reciprocity.Footnote 111 In a case that went all the way up to the German Federal Constitutional Court in the 1980s, Bob Dylan fell prey to these restrictions. The civil courts dismissed his claim for an injunction against the distribution of an Italian bootleg in Germany based on his rights as a performer because of his US nationality and the lack of applicable international treaties. The Federal Constitutional Court also denied a violation of the principle of equality before the law, because Dylan’s exclusion from property protection was justified by the purpose of inducing the USA either to join the Rome ConventionFootnote 112 or to enter into a bilateral treaty with Germany.Footnote 113 In the former alternative, reciprocity helps to expand the international IP system and thus the level global playing field in IP. But the latter alternative, a reciprocal bilateral treaty, still situates reciprocity in a nationalist setting of individual countries that pursue separate interests. In any case, the ultimate purpose is to guarantee German performers reciprocal protection in the USA and that remains an outbound nationalist policy aim.
The second recent example of IP reciprocity concerns the protection of non-original databases, for which no multilateral treaties exist.Footnote 114 Consequently, states are generally free to decide whether and under which conditions foreign producers of such databases are eligible for protection. In the case of the EU sui generis right in databases, only those persons qualify who are nationals of a Member State or have their habitual residence, central administration, principal place of business – or at least their actively operating, registered office – in the European Union.Footnote 115 In contrast to Art. 15 DSMD, the Database Directive refers to the possibility that the EU Council may extend the sui generis right to third-country database producers on the basis of an international agreement.Footnote 116 Reciprocity is not expressly mentioned in this context, but it was discussed in the course of the legislative proceedings and is not ruled out under the terms of the directive.Footnote 117 In any case, the sui generis right in databases has not been an export hit. There is neither clear evidence for an investment stimulus,Footnote 118 nor has the European Union concluded treaties on reciprocal database protection with third countries. An endeavor to globalize the Database Directive via a WIPO treaty equally failed.Footnote 119 If that was a cooperative effort to advance a global public good (that is, more databases), then why did the European Union not adopt a universal approach in the first place? It is therefore more plausible to again interpret these moves as attempts to provide EU database makers with the benefit of transplanting the EU acquis to foreign markets – an instance of outbound IP (supra-)nationalism.Footnote 120
III. International IP Treaties
1. General Function of IP Treaties
Since the mid-nineteenth century, international IP policy has mostly taken the form of treaty negotiations among states with the aim of guaranteeing all nationals or residents of the contracting parties a minimum level of protection. At first sight, it seems odd to interpret these treaties as expressions of economic nationalism. Indeed, bilateral IP treaties and even more so the permanent multilateral IP Unions and later WIPO all establish a certain and ever more comprehensive level playing field for the global exchange of IP-protected goods and services. One of WIPO’s aims is “to contribute to better understanding and co-operation among States for their mutual benefit on the basis of respect for their sovereignty and equality.”Footnote 121 That intention is, on the one hand, precisely what characterizes globalist rather than self-interested or conflict-oriented nationalist attitudes and policies.
On the other hand, it is crucial to distinguish between the structural effects of the international IP system and its distributive consequences and underlying dynamics. What emerged in the nineteenth century indeed grew into a regulatory cornerstone of the global knowledge economy. It is difficult to imagine the numerous global IP-intensive industries of today without at least some basic form of protection in most markets. I accept, in other words, that the international IP system is a result of – and at the same time, a driver of – globalization.
But that observation does not respond to the realist concern raised by Alexander Hamilton and Friedrich List as the two classical proponents of economic nationalism, namely: Who pushed for and benefits from these treaties?Footnote 122 If one only looks at the largely homogenous interests of IP proponents, one tends to interpret the history of the global IP system as a kind of logical, linear, and largely apolitical development (“progress”).Footnote 123 From the outset, such an analysis cannot account for the power struggles that also define the history of international IP.Footnote 124
If one takes, instead, a more realist approach and focuses on the conflicts surrounding the globalization of IP, international treaties in this area turn out to be essentially economic nationalist policy tools of net IP exporters.Footnote 125 These countries gain protection for their domestic IP industries in foreign markets, and they can expect the private beneficiaries’ and their own total revenues to more than offset the royalties they have to send to the foreign companies or countries to whom they accord national treatment.Footnote 126 Silke von Lewinski consequently calls copyright provisions in trade agreements “money making machines” for major exporters of copyright-protected products.Footnote 127 In addition, multinational firms have proven to be more responsive to treaty-induced increases in patent protection in developing countries than firms established there. Whereas foreign applications in developing countries grew significantly after their accession to the WTO, the number of domestic patents increased much less, if at all.Footnote 128
No-one seriously disputes that the benefits of international IP treaties come with a cost, namely increased prices for access to innovation, innovative products, and follow-on innovation.Footnote 129 These costs are particularly problematic for net IP-import states because they impede their economic catch-up.Footnote 130 Not surprisingly, therefore, low-income developing states have repeatedly criticized and opposed the globalization of IP. Until now, however, IP proponents and exporters have successfully overcome any resistance.
2. The Berne and Paris IP Unions
The establishment of the Berne and Paris Unions did not cause much trouble. It occurred among a coalition of the willing, among them all major colonial powers. Beginning in the early nineteenth century, these European states had already extended their national IP laws internally to their dependent territories.Footnote 131 When they created the IP Unions to establish a world IP market, it was only logical to incorporate the colonial markets. To this end, Art. 19 Berne Convention 1886 provided that “[c]ountries acceding to the present Convention shall also have the right to accede thereto at any time for their Colonies or foreign possessions.” A functional equivalent rule was added to the Paris Convention in 1911.Footnote 132 All colonial powers made extensive use of this option, ensuring that, at the dawn of the twentieth century, the scope of application of the IP conventions covered practically the entire planet.Footnote 133
And yet this was only true in geographical terms, for the sole purpose of including the colonies was to protect the citizens of the colonial powers, for instance book publishers based in London or Paris. They were to enjoy the same protection of their rights in the conquered territories as in the home metropole.Footnote 134 The colonized peoples, on the other hand, were barred from obtaining copyrights or patents, whether de jure – as in the case of “natives” in the German colonial law – or de facto, through requirements such as first publication in the UK or restrictions on access to the courts.Footnote 135 If the age of IP colonialism was about progress, then it was only with regard to the metropoles and the enterprises established there.
3. Decolonization
This finding is confirmed by the coinciding of the collapse of colonial empires and the first true crisis of the international IP system in the 1950s and 60s. When colonies became independent states and “developing countries,” they finally gained a voice in treaty negotiations. This triggered the fear within the BIRPI,Footnote 136 the predecessor of WIPO, of an exodus of newly independent states and consequently a drastic shrinking of the global IP territory.Footnote 137 In the 1960s, India in fact raised the claim that the Berne Convention’s high level of protection stood in opposition to the developing countries’ primary interest in gaining access to available knowledge in order to promote education and technological progress.Footnote 138
And yet the system did not implode. The reasons for this resilience are complex but are again rooted in post-colonial, asymmetric power relations between economically and technologically advanced IP exporters in the Global North and low-income IP importers in the Global South. In particular, the lower the IP capacity of a country, the more vulnerable it is to a pro-IP agenda running against its interests as a knowledge importer.Footnote 139 Furthermore, accession to the key conventions, of which both the Western and the Eastern blocs were a part, held out the promise of international recognition. After all, this was the only way to ensure that the citizens of the developing countries would be granted legal protection in the former metropoles.Footnote 140
4. The TRIPS Agreement
Specific private and state interests finally also spurred the last apex of the international IP system, namely the TRIPS Agreement, which achieved an “unprecedented level of substantive harmonization of IP law.”Footnote 141 On the face of it, this treaty too is the result of globalist motives and aims. According to its preamble, WTO Members desire to reduce distortions and impediments to international trade; recognize the need for a multilateral framework of principles, rules, and disciplines; and emphasize the importance of reducing tensions through multilateral procedures. All of this resonates well with the ideological mainstream after the fall of the Eastern bloc, when the Washington Consensus propagated a universally valid version of the open market economy in tandem with unequivocally defined and effectively protected titles of property.Footnote 142
Yet the well documented history of the TRIPS Agreement again supports a realist interpretation of the agreement.Footnote 143 According to Adrian Otten, then Director of the Intellectual Property Division of WTO and thus a neutral representative of the multilateral forum,
[t]he driver behind the inclusion of IP in the Uruguay Round was the United States. The background was that, in the years following the end of the Tokyo Round, large parts of US industry as well as the US Government became increasingly of the view that what they saw as inadequate or ineffective protection of US IP abroad was unfairly undermining the competiveness of US industry and damaging US trade interests. These concerns went beyond the issue of border controls to prevent the importation of counterfeit goods, to the substantive standards of IP protection in other countries and the effectiveness of means for their enforcement, internally as well as at the border. This, in turn, was part of a wider perception of many in the United States that the GATT system, while doing quite a good job in regard to standard technology manufactured goods where the United States was losing international competitiveness, was doing a bad job, or none at all, in the areas of agriculture, services and IP[,] where US competitiveness increasingly lay. It should also be remembered that this was a period when the international value of the US dollar increased enormously, almost doubling between its low point in 1978 and high point in 1985 according to the DXY index (US dollar relative to a basket of foreign currencies); this greatly exacerbated concerns in the United States about the country’s international competitiveness.Footnote 144
The change in the IP policy of the USA from an inward- to an outward-looking perspective went hand-in-hand with the move from a net IP-import to a net IP-export economy and becoming a global superpower after World War II.Footnote 145 This shift in perspective, however, left the concern for the interests of US industries unaffected. Worried about foreign counterfeits and piracy, the USA, supported by the European Community, in 1978 put forward a proposal for a respective GATT agreement, but to no avail.Footnote 146 After corresponding efforts to close two major loopholes in the international IP system (concerning the patentability of pharmaceutical products and copyright protection for computer programs) had failed in WIPO because of opposition by developing countries,Footnote 147 the USA shifted the forum back to the GATT, where “trade preferences were now used as a bargaining chip for higher levels of IP protection.”Footnote 148 The main push for that move came from a group composed of twelve top executives from the US pharmaceutical, software, and entertainment industries.Footnote 149
In June 1988, European, Japanese, and US business communities joined lobbying forces and published a “Basic Framework of GATT Provisions on Intellectual Property,” which significantly influenced the positions of their respective home governments.Footnote 150 As early as 1991, the main content of TRIPS was settled.Footnote 151 Inter alia, the agreement obliges all WTO Member States to protect computer programs as literary works under the Berne Convention (Art. 10(1)) and to grant patents for any inventions, whether products or processes, in all fields of technology (Art. 27(1)). It thus satisfied the core demands of IP demandeurs.
5. IP Treaty Making in the Twenty-First Century
Multilateralism lost traction as early as the turn of the millennium. The Washington Consensus in general and the TRIPS Agreement in particular became the target of heavy criticism for their perceived failure to foster global development and innovation.Footnote 152 This backlash has, however, not brought IP treaty making to a standstill. On all levels, IP exporters continue to push for their outbound IP (supra-)nationalist policy aim to strengthen IP across the globe, and successfully so.Footnote 153
This also includes already widely adopted multilateral treaties, namely the 2006 Singapore Treaty on the Law of Trademarks, which further harmonizes administrative trademark registration procedures,Footnote 154 and the 2012 Beijing Treaty on Audiovisual Performances, which closes loopholes in the international copyright acquis.Footnote 155 The USA and the European Union furthermore actively rely upon the WTO dispute settlement procedure to enforce TRIPS obligations. On March 23, 2018, the USA requested consultations with China concerning certain measures that the USA claims to be inconsistent with Art. 3 (national treatment) and Art. 28 (rights conferred by a patent), which the European Union requested to join.Footnote 156 On June 1, 2018, the European Union initiated its own WTO procedure against China, referring to the very same Arts. 3 and 28 TRIPS, which the USA requested to join in turn.Footnote 157
Bilateral and plurilateral treaty negotiations complement these efforts. This flexible, multilevel, forum-shifting approach also appears to be the norm rather than the exception. Bilateral pressure by IP exporters prepared the ground for the IP Unions in the late nineteenth century and the TRIPS Agreement in the late twentieth century.Footnote 158 That acquis then served as a platform for the Berne, Paris, and TRIPS-plus bilateral treaties after multilateralism in WIPO and the WTO had largely come to a halt.Footnote 159 Although the European Union and the USA act independently, their IP bilaterals even support each other in that the industries of both IP exporters benefit from the IP provisions in all TRIPS-plus free trade agreements (FTAs) via the most-favored-nation treatment of Art. 4 TRIPS.Footnote 160
At present, the European Union is actively negotiating FTAs that include comprehensive IP chapters with numerous countries.Footnote 161 In its early days, the Trump Administration withdrew from the Trans-Pacific Partnership (TPP) and thereby surrendered significant IP benefits for various US industries, including longer patent terms for drugs, additional protections for biological medicines, and longer copyright protection.Footnote 162 It would, however, come as a surprise if “Trump had turned away from innovation nationalism.”Footnote 163 And indeed, the agreements the USA concluded in late 2019 and early 2020 with Mexico, Canada, and China prove the contrary. Chapter 20 of the United-States–Mexico–Canada Agreement (USMCA) is “virtually identical to the TPP” in terms of the IP provisions negotiated by the Obama Administration.Footnote 164 China has committed itself to very precise measures to improve IP protection and enforcement to the benefit of US pharmaceutical and tech companies that are active in China, whereas the USA mostly only “affirms that existing US measures afford treatment equivalent to that provided for” in the agreement.Footnote 165
6. Art. 31bis TRIPS and the Marrakesh VIP Treaty
In my view, only two twenty-first century IP treaties truly live up to the narrative of cooperation for the global public good, namely Art. 31bis TRIPS, which entered into force in 2017,Footnote 166 and the 2013 Marrakesh VIP Treaty.Footnote 167 Neither of these multilateral agreements establishes private exclusive rights, but they do facilitate access to and use of knowledge primarily for humanitarian and social developmental reasons.
Moreover, the beneficiaries of the access rules are located partially if not exclusively outside of the territories in which the patents or copyrights concerned are in force. The only formal amendment of WTO law provides the legal basis for WTO Members to grant special compulsory licenses exclusively for the production and export of affordable generic medicines to other members that cannot domestically produce the needed medicines in sufficient quantities for their patients.Footnote 168 Similarly, the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled permits the exchange of these works across borders by organizations that serve those beneficiaries.Footnote 169 Thus, and in contrast to the rest of the international IP acquis, these agreements specifically tackle and partially overcome the territorial fragmentation of IP markets, to the benefit of foreign IP users. It must be noted, however, that Art. 31bis TRIPS and the Marrakesh VIP Treaty address very specific access problems of marginal economic significance. They do not disturb the functioning of the global IP money-making machine.
D. Conclusion
I. A Dialectic Virtuous Circle
This article has demonstrated the complex and indeed dialectic relationship between economic nationalism and globalism in the area of IP. On the one hand, outward-looking policy perspectives have largely taken precedence over inbound IP nationalism. Even self-contained measures like Arts. 8 and 15 of the EU DSMD are embedded in and reflect upon the deep levels of global economic integration. Moreover, today’s international IP acquis establishes an effectively global and substantively comprehensive level playing field for IP producers and users alike. The leeway for inbound IP nationalist catch-up policies, whether in the form of no or weak IP or as discrimination against foreigners, has shrunk considerably – and in certain core areas of patent, copyright, and trademark law has shrunk to effectively being nothing at all. In those regards, IP nationalism has clearly lost ground.
On the other hand, the overview of past and present IP policies confirms that economic nationalist motives were, and remain, the main driver of international IP policy and law.Footnote 170 This is also true as regards the international IP treaty acquis. This poster-child of universal cooperation is indeed merely a side effect of outbound IP nationalist policies of powerful net IP exporters. These players adopt unilateral, bilateral, plurilateral, and multilateral measures as functional equivalents to pursue one and the same immediate goal, namely, to support domestic industries in an interconnected world market.
At this point, a dialectic virtuous circle emerges. The more that private parties depend upon foreign sales, the more they lobby their home governments for IP protection abroad. The deeper global economic integration, the greater the demand for global IP. Global economic integration thus turns selfish or nationalist short-term aims and benefits into drivers of an ever more comprehensive body of international IP law. This is the realist answer to the question of why IPRs and IP laws have continuously grown in number and expanded in scope, territorial reach, and duration – while at the same time having been contested far more than other branches of property law.Footnote 171
II. The Economic Nationalist DNA of IP
The resilience and dynamic of this virtuous circle vest in two universally accepted basic legal structures of IP. First, IPRs are private rights.Footnote 172 They are granted to private parties who acquire and enforce them at their will.Footnote 173 While it is true that these property rights have to serve the public good,Footnote 174 their immediate benefit is private. Accordingly, the political economy of IP differs greatly from branches of international law and policy that directly aim at global public goods, such as biological diversity. Whereas the latter require a global perspective of all stakeholders involved and equally global solutions, international IP protection is demanded by individual private parties who have strong vested interests. If governments respond to their demands, they can easily present themselves as putting local industries first and thus boost their domestic legitimacy.Footnote 175
Secondly, the private IP privilege is “territorial in nature.”Footnote 176 The principle of territoriality has been accepted by all states ever since the early call by France for universal cross-border protection was defeated by the pragmatic demands of greater national control during the negotiations of the Paris and Berne Conventions in the 1880s.Footnote 177 Global trade and communication are still not governed by one world IPR but by a mosaic of more than 190 national IP territories or jurisdictions.Footnote 178 In other words, fragmentation and particularism are the only truly universal aspects of IP. It is the nation state that ultimately guarantees IP protection. And those states that call for increasing levels of IP protection do so in the vested private interest of their local IP constituency.
The ensuing system could be considered universal only if it provided for a full harmonization or even unification of all existing national IP laws, which would logically rule out any IP nationalism. Such a level of integration has, however, not been achieved within the European Union, and it remains utopian on a global level.Footnote 179 Even if a global IP code were adopted,Footnote 180 it would not be normatively neutral, and jurisdictions on a lower regulatory level might, in addition, still pursue self-serving aims by turning their attention to non-IP mechanisms – such as prizes, grants, tax credits, or in-house government research – to foster local innovation.Footnote 181 In other words, the end of history and politics has not yet arrived.Footnote 182 And it requires strong visionary skills to imagine its realization.Footnote 183
In conclusion, I want to stress the descriptive character of this analysis. It demonstrates how, in which forms, and why economic nationalism manifests itself so strongly in IP. The more important IP becomes, the more likely it is that its nationalist DNA will impact other policy areas. Such tendencies can only be successfully counteracted if “scholars … speak the same nationalistic language that the government understands.”Footnote 184
Table of Contents
A. Introduction 98
B. Mapping a Hybrid World of International Agreements on IP 98
C. Dealing with Complexity 103
I. Coherence and Effectivity 104
II. The Governance Dimension 108
III. Balancing 112
1. Balancing in IP: How It Works at National Level 112
2. Balancing as an Objective of the TRIPS Agreement 113
3. The Protection of IP Rights as an International Concern 113
4. The Public Interest: Primarily a National Concern 114
5. Policy Spaces and Treaty-making 114
6. Public Interest: Support by Other International Law Rules 115
D. Conclusion 116
A. Introduction
The law of the international protection of intellectual property (IP) rights emerged as a very early element of what later became the International Economic Legal Order. Based on universal agreements dating back to the end of the nineteenth century and administered by the United Nations special agency, this branch of the law had its own culture. At the end of the twentieth century, IP rights became closely connected to the emerging multilateral trade order and to the World Trade Organization (WTO). Soon after, trade agreements on a regional and bilateral basis were concluded in large numbers, and IP rights were addressed in many cases.
We may call this new state of affairs a “hybrid” system. The increasing roles that international investment law and human rights play in this area add to the complexity. In addition, the system has met with a number of challenges: among others, the failed attempts to set up the Anti-Counterfeiting Trade Agreement, the Trade-Related Aspects of Intellectual Property Rights (TRIPS), and public health debate must be mentioned here. These developments have been accompanied by heated debates in public as well as in academia.
As early as the TRIPS negotiations, there were concerns about what was understood to be the exclusive competence of the World Intellectual Property Organization (WIPO). Later, IP chapters in trade agreements were feared to be “ratcheting up” IP protection at the expense of public policy objectives in access and use. In these debates, many different points were made. Along with the more general issue of the fragmentation of international law, issues of interpretation and treaty conflict were considered. In addition, concerns about bargaining power in multilateral and bilateral settings were voiced, and the appropriateness of the levels of protection in different countries was questioned.
A three-pronged approach is proposed here to assess the impact that the “trade turn” (and the subsequent “bilateral turn”) has on the system of the international protection of IP rights. Accordingly, firstly it will be seen whether these developments have affected the coherence of the system with its diverse agreements and its dispute settlement activities, using a rather “technical” perspective in order to assess whether the system represents a “healthy” state of affairs, in line with the questions and findings of the discussion of the fragmentation of international law. Secondly, it will be seen whether all these agreements along with their rules, procedures, and institutions represent an appropriate form of governance, in a manner that offers a regulatory system that achieves its goals. Thirdly, it will be seen whether this system – in a substantive dimension – does appropriately balance the diverse objective and interests involved.
B. Mapping a Hybrid World of International Agreements on IP
Internationally, IP protection is taken care of by multilateral and regional or bilateral agreements. The field has seen important developments in terms of content and structure over the last twenty years.
I. The International Core of IP Protection and Its Multilateral and Regional Levels
The international protection of IP rights rests on numerous international agreements, called “conventions.” The most basic ones originated in the nineteenth century. They set out the basic elements of international protection in terms of national treatment and minimum standards, and they address specific details for those rights that depend on grants by authorities and applications. These conventions have been subject to revisions and amendments over time. Institutionally, the conventions are hosted by the WIPO, a specialized agency of the United Nations that was founded in 1964.
This array of conventions and the WIPO as an administering institution are open to all members of the United Nations and indeed, WIPO and most of the basic instruments enjoy almost universal membership. A number of other instruments, while also being negotiated and adopted within WIPO and open for any member state, have a less comprehensive membership. Nevertheless, the system altogether always has been and still is seen as a “universal” system, as its instruments – the WIPO conventions – as well as the institutions are open to all states. It should be noted that beyond this formal dimension, the term “universality” in international law is also seen to carry a substantive dimensionFootnote 1 In this way, it might be seen as referring to an existing or “pre-positive” system of common values.Footnote 2 More recently, universalism in this sense is contrasted with legal pluralism.Footnote 3
Nowadays, the term “multilateral,” which appears to have been borrowed from international trade terminology, is often used. The term in our sense, has different meanings. It first of all indicates that the organization and the agreements are open to all UN members and are not limited to a regional or even a bilateral set of members. In this way, multilateralism contrasts with bilateralism or unilateralism.Footnote 4 Second, “multilateral” signifies that the discussion, negotiation, conclusion, and the later administration of instruments are taken care of by a forum with UN-like membership, where all states have a voice. It is important at this point to recall that “multilateral” in this sense signifies the organizational frame and design of the conventions and does not necessarily imply that all WIPO conventions actually enjoy “universal” or “multilateral” membership. Furthermore, it should be noted, the notion of multilateralism probably lacks any substantive dimension, which as mentioned above would be inherent in the term “universalism.”
This “multilateral core” of international protection of IP is accompanied by a number of agreements – or regimes – which set up regional institutions, procedures, and rules, often relating to specific rights. The European and African patent organizations must be mentioned here as well as the regional trademark systems. Institutional links exist between the regional and the multilateral institutions. In addition, a relatively small number of bilateral agreements have been concluded over time, which specifically address the protection of IP.
II. The “Trade Turn”
The classic WIPO system of international protection of IP rights met with growing criticism in the 1980s. The standards of protection were believed to be too low and experts feared they would be further watered down by initiatives of developing countries in WIPO bodies. In addition, compliance and enforcement were at issue, as the WIPO conventions did not address the enforcement of IP rights in substance and barely contained any means to secure the compliance of state parties and to settle disputes among them.
To remedy these shortcomings and concerns, the protection of IP rights was tabled in negotiations on a new trade regime. The hope was that linking IP rights with trade would allow for improvements in the protection of IP by offering trade advantages. In this vein, IP rights became part of a larger package, which resulted in the establishment of the WTO with its various agreements. The TRIPS Agreement extensively refers to existing WIPO agreements, often envisages a higher standard of protection, and for the first time adds enforcement provisions. In addition, as part of the WTO legal system, the agreement is subject to the WTO’s proper dispute settlement system.
Hence, a link has been established between matters of international trade and the international protection of IP rights. This link is well established and hardly questioned today. It is largely forgotten that at the time of the negotiation of the TRIPS Agreement, there was a clear controversy as to whether a trade body, the General Agreement on Tariffs and Trade (GATT) at the Uruguay Round, had any competence at all to negotiate on IP issues – which are after all part of the remit of WIPO.Footnote 5 The sheer existence of the TRIPS Agreement indicates these concerns did not prevail in the end. Indeed, the jurisdictional boundaries of international organizations and regimes are not very strict. Moreover, the proponents of an agreement on IP in the context of the nascent WTO argued that the agreement would confine itself to the trade-related aspects of IP rights protection, which were not addressed at all in the WIPO conventions. Even today, the frequent use of the term “trade-related aspects” testifies to the effort to relativize a potential conflict between WIPO and the international trading system.Footnote 6
In addition to the question of jurisdiction, the parallel regulation of the international protection of IP rights in WIPO and the WTO raises questions of international treaty law. At first glance, it is hard to overlook the fact that both systems deal with the international protection of IP rights. The differences between the two systems lie not so much in the substantive standards as in the enforcement, for which the TRIPS Agreement provides for private mechanisms and WTO dispute settlement, while the WIPO conventions merely refer to the International Court of Justice.
The question of whether this situation raises issues in view of the international law of treaties depends on how one interprets the lack of further enforcement mechanisms in the WIPO conventions. If one believes that relevant WIPO conventions expressly and conclusively exclude additional mechanisms for enforcement, the inclusion of private means of enforcement and trade dispute settlement in the TRIPS Agreement could be seen as a successive treaty among parties relating to the same subject matter, Art. 30 of the Vienna Convention on the Law of Treaties, or even as an amendment of a multilateral treaty. Moreover, the specific provisions on amendment as contained in various WIPO conventions would come into play. However, there is no indication that WIPO bodies or WTO committees or states have further considered the issue. Likewise, the issue has hardly ever been discussed in public or in academia.
III. The Bilateral Turn: Preferential Trade Agreements
However, much more relevant for this paper are the rules and regulations on IP rights that have been adopted and provided for in a different context. Regional integration is a particularly relevant issue in this regard and indeed, in addition to the regional IP systems already mentioned, some developments took place in the EU, for instance, and in the Andean Pact. In addition, the 1994 North American Free Trade Agreement explicitly addressed IP issues.Footnote 7
In addition to arrangements in a regional context and a focus on regional integration, a different type of agreement emerged in the 1990s – and in particular after the establishment of the WTO. They are often called “free trade agreements” (FTAs) and they reflect the desire of particular WTO members to establish better market access and closer cooperation in trade matters on a bilateral level. Today, such bilateral agreements make up the majority of preferential trade agreements. The WTO members initiate and conclude such agreements for various reasons. A number of agreements have been concluded by parties that are in a specific geographical situation, as is true for Chile or Singapore, which sometimes have been called “hubs.” In addition, big players such as the USA have established a network of such agreements. The USA maintains such agreements with quite a few partners.
The EU had originally been hesitant to conclude such agreements for fear that doing so might undermine the multilateral system. However, in 2006, a paper by the European Commission called “Global Europe” paper made a turnaround and advocated the conclusion of a whole set of FTAs. Indeed, from that point onwards, the EU started several negotiations to partner with a large number of countries around the world, including but not limited to the USA, Canada, Japan, Korea, Vietnam, Singapore, Mexico, and India. Obviously, the proliferation of such agreements also reflects the view that the WTO has not been able to achieve progress in the Doha round.Footnote 8
In substance, all these agreements contain provisions or chapters on IP. They recall the TRIPS Agreement and related obligations. In addition, in many cases, they contain a list of additional WIPO conventions that the parties shall ratify or maintain. Furthermore, they contain a number of additional standards of protection in view of substance and enforcement, and sometimes they envisage a kind of institutionalized cooperation on these topics.
IV. A Hybrid System
As already explained, the international protection of IP rights has been traditionally understood to rest on WIPO and its conventions. On closer examination, however, it becomes clear however that even in earlier times, other international institutions became involved. A second pillar was added by the establishment of the TRIPS Agreement, and ever since then a sort of a bipolar system has existed. The merits and challenges of this bipolar system have been widely discussed. Indeed, one could say that the TRIPS Agreement added a dispute settlement and enforcement dimension, whereas WIPO focused on substantive issues – and its work can even be seen to have been revitalized, whereas further negotiations in the WTO were stalled.
The bilateral and regional turn as seen above added an additional level of complexity. In addition to the bipolar universal – or multilateral – regimes, several regimes emerged that were focused at the bilateral, regional, or even “megaregional” levels, and the result could be described as a hybrid system.Footnote 9
C. Dealing with Complexity
These developments have been widely discussed in academia and by the general public. A number of critical points have been made, and quite some statements and voices conclude that the developments resulted in a considerable increase in the standards of protection. To many, they have an inherent tendency to further “ratchet up” protection, while the public interest is marginalized.Footnote 10 In more detail, a potential erosion of the TRIPS Agreement, the effect of most-favored nation (MFN) clauses, and the bilateral setting of negotiations have been criticized. A number of issues have been raised, including treaty interpretation and conflict, the legitimacy of bilateral undertakings, and the proper balancing of individual and public interest. Aside from doctrinal perspectives, some analyses have drawn on critical theory, international relations, and the established reasoning in the law of IP. In some cases, more general discourses –for instance, the debate on the fragmentation of international law – have been taken into account.
The debate on regionalism and bilateralism in international economic relations is still ongoing and has not yielded much progress, given the specialist area of IP rights and its potential specifics. As this may indicate, there is need for a more encompassing theoretical background to understand the complexities in the field of the international protection of IP, in the context of international economic law and international law more generally, and to set the stage for a more sound and nuanced judgment. As one contribution to such endeavor to understand the international protection of IP more comprehensively, this paper addresses the coexistence of multilateral and regional or bilateral levels. In doing so, it considers three main dimensions:
(1) the coherence of the ensemble of rules in legal terms from a “technical” perspective (subsection I);
(2) the question of how governance is organized in such a context (subsection II); and
(3) how, in terms of substance, the different interests at hand – basically, individual property rights versus public interest – are balanced (subsection III).
I. Coherence and Effectivity
The escalation of a huge number of preferential trade agreements in recent times coincides with a general trend in international law. The “diversification and expansion of international law” has met with quite some concern, and in 2006 the trend prompted a well-received study by the International Law Commission.Footnote 11 In its assessment, the Commission rightly understood that this trend is accompanied by the proliferation of international courts and tribunals, and that the growing number of both international agreements and of those dispute settlement institutions and procedures have to be seen in context. The Commission has addressed the overlap and the potential for conflict resulting from these developments in view of the proper functioning of the international legal order.
The key concern in this regard has been the coherence of this order and the potential for conflicts arising from inconsistencies in both the agreements and dispute settlement. Hence, coherence is a valid starting point for exploring the array of multilateral and regional and bilateral agreements in the area of the international protection of IP rights. Indeed, the question is whether this number of agreements fit together well.
1. Coherence After an Unfriendly Takeover: The WIPO–WTO Relationship
The establishment of the WTO TRIPS Agreement alongside the established WIPO system was initially seen as an unfriendly takeover, provoking a number of critical questions. Now, after twenty-five years, this dual structure has become more routine. In view of the rules, hardly any inconsistency has surfaced. This may be due to the fact that the TRIPS Agreement makes several references to established WIPO conventions, which promote consistency. However, there seems to be a division of labor, where the WIPO system is more concerned with the substantive standards, whereas the TRIPS Agreement and the WTO institutions particularly address the enforcement side. This uncontroversial state of affairs continued even in times of quite some treaty-making activity within WIPO, which was probably sparked due to some kind of institutional rivalry or competition. Members, when drafting new WIPO agreements, were obviously careful not to create any conflicting provisions. On the other hand, the potential for conflict in rulemaking has been limited, as the WTO has not developed much activity in this direction with the exception of the changes made due to the “TRIPS and Public Health” debate. Some other changes have been proposed to the TRIPS Agreement, which, however, only address very specific points and overall have stalled along with the general impasse in WTO Doha Round negotiations.
However, there has been a particular issue with dispute settlement. In general, WTO dispute settlement has worked well in promoting compliance with international standards of the protection of IP and has contributed to the clarification of the rules. While primarily applying WTO law and thus the TRIPS Agreement, panels and the appellate body have also looked into WIPO rules. Because the WIPO system contains hardly any efficient state-to-state dispute settlement mechanisms, the activities of the WTO dispute settlement process have been helpful and have not resulted in duplication and possibly divergent decisions.
However, there is a particular inconsistency in regard to retaliation in cases where a TRIPS obligation is paralleled by a similar obligation under one of the WIPO conventions. Such inconsistency arises – and indeed has already arisen – where the Dispute Settlement Body has authorized the suspension of obligations under the TRIPS Agreement, while a respective WIPO commitment would still stand.Footnote 12
2. The Multilateral TRIPS Agreement and Patent Term Adjustment: Conflict or Harmony?
More recent are concerns about the consistency between the many IP-related provisions of patent term adjustments (PTAs) and the TRIPS Agreement.Footnote 13 Obviously, the former aim at a higher standard of protection and differ considerably from the TRIPS Agreement. In regard to their underlying policies and the intentions and strategies of the parties, one might in some cases even speak of a conflict between the multilateral TRIPS Agreement and PTAs. Doing so, however, would imply a sense of harmony of intentions and policies, which does not match the current reality of the international legal order and its purposes and needs.Footnote 14
This was why the International Law Commission (ILC), while being fully aware of potentially conflicting policies and intentions of international agreements, introduced a distinction by pointing to a narrower notion of conflict, which entails incompatibility in the rules of two agreements in a given case. However, in most cases, PTAs contain TRIPS- “plus” standards, and Art. 1:1 2nd sentence of the TRIPS Agreement largely permits such a higher protection by stating that “[m]embers may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement.’
It goes without saying that by allowing the “implementation” of “more extensive protection,” the provision also allows for committing to such protection in an international agreement. It is equally clear from a reading of the last part of the provision that it does not allow for raising the standard of protection indefinitely.”.Footnote 15 Thus, a conflict in the narrower sense could arise where a PTA would contain a “TRIPS plus” standard that would contravene a provision of the TRIPS Agreement.
However, it is difficult to identify the limits of the provision alluded to by referring to a contravention “to the provisions of this agreement.” Art. 7 on the objectives of the TRIPS Agreement and Art. 8 on public health are relevant in this regard. Both are drafted in rather general terms, however, and it would be difficult to establish a clear-cut “contravention.” Seen from a dispute settlement perspective, which is quite common in trade law discourse, the question would arise how the contravention issue could come to bear. This is certainly the case where, after concluding a PTA with TRIPS-plus standards, one party would refuse to abide by such standard later on. In such a case, the other party (or parties) to the agreement could initiate a complaint in the respective PTA dispute settlement system. As practically all PTAs fully endorse the TRIPS Agreement, the defending party could rely on Art. 1:1 TRIPS and base its defense on a “contravention.” A PTA dispute settlement panel would then be tasked to adjudicate on the contravention issue. In doing so, it would have to engage in an interpretation and application of Art. 1:1 TRIPS, which has been made part of the PTA by reference.
When the panel engages in a detailed examination of the meaning on Art. 1:1, 2nd sentence TRIPS and the words “such protection does not contravene the provisions of this Agreement” it would have to keep in mind that “this Agreement” clearly relates to the TRIPS Agreement, even though the provision now has been “transplanted” to a PTA by way of reference. Nevertheless, such panel would very likely also have to consider the wider context, which is the PTA, and this might add a special flavor to its interpretation, which might differ slightly from what a panel in a WTO dispute settlement would conclude when looking only at the context of the TRIPS Agreement.
In addition, because the TRIPS Agreement does not include an exemption from the MFN standard in the case of PTAs, a third party C might reflect on bringing a claim in WTO dispute settlement to enjoy the protection that Party A committed to in relation to Party B. The proper basis of such claim would be the MFN standard under Art. 4 TRIPS. Again here, Party A would very likely defend itself by raising Art. 1:1, 2nd sentence. In this case, it would be for the WTO panel to apply and interpret that provision. It is obvious that the views of a PTA panel and a WTO panel might differ slightly and that fragmentation might occur here, which is true more generally as well as in a situation of parallel dispute settlement in PTAs and the WTO.
3. Potential Conflicts among Different PTAs
It is far more complex to assess the potential conflicts that may arise in case of multiple regional or bilateral agreements. It is highly likely that a TRIPS-plus commitment in one agreement can coexist with an even stricter commitment in another agreement, on the understanding that these standards generally set a minimum standard but seldom a maximum standard. For example, if Party A were to agree with Party B on an extended duration of patent protection, and Party A then commits to an even longer prolongation in an agreement with C, both these commitments can stand side-by-side, in a simplistic linear understanding of the “more extensive protection” envisaged by Art. 1.1 TRIPS. However, the linear logic may turn out to be overly simplistic where different and conflicting concepts of protection are at stake. Geographical indicators are a case at hand, because conceptually, diverse – and divergent – approaches exist, and they are increasingly being written into PTAs. In addition, an extension of protection in terms of coverage, duration, or enforceability might be related to stricter limitations. In all these cases, a conflict of obligations might arise between different PTAs.
4. Conclusion
In summary, this preliminary assessment has yielded an ambivalent finding. Through the increasing number of regional and bilateral agreements on IP rights, states knowingly foster fragmentation and complexity. This certainly impacts the clarity and consistency of this body of law and ultimately its effectiveness.
However, so far, the probability for norm conflicts has been modest. Thus, the system may be deemed healthy and coherent from a technical point of view. This is particularly due to the fact that the agreements are based on the logic of minimum standards of protection and largely allow for other agreements to increase standards.
II. The Governance Dimension
Beyond the existing rules and their coherence, the array of multilateral, bilateral, and regional agreements may also be seen as part of a system of regulation of the international protection of IP. Rather than looking only at existing rules and agreements, this perspective would suggest seeing the protection of IP as a continuing process of reflection, discourse, and regulation, where agreements and laws are newly concluded and enacted and amended to respond to relevant – and changing – circumstances, and they reflect the potentially changing views of relevant actors and stakeholders. Such a system can be assessed by looking at its ability to achieve certain objectives and to do so in a way that is legitimate.
Altogether what is at stake here may be said to be the governance dimension of the international protection of IP rights. While a comprehensive understanding of such governance has yet to be developed, some particularly relevant aspects can be discussed here.
1. The Trade Turn as a Governance Problem
One noteworthy issue, as explained above, is the trade turn in international protection of IP rights that was introduced with the WTO TRIPS Agreement.
a. The Trade Linkage: A Strange Additional “Ratchet” Effect
In this case, as well as in the many subsequent trade agreements of a regional or bilateral nature, the linkage between the protection of IP rights and trade topics turned out to be effective in improving the standards of protection and enforcement. The “trade turn” made it possible to arrange for trade-offs in a way that trade advantages were offered in return for commitments in view of the protection of IP rights. This kind of mechanism worked out well with the WTO TRIPS Agreement as well as in case of the PTAs. The introduction of this linkage created an expectation whereby commitments regarding IP rights are tied to similar commitments in the area of trade. Agreements concluded in this way are seen to reflect a quid pro quo in this way.
A particular relevant issue in this regard is the potential later amendment of the rules once established by means of this linkage. As explained, the agreements once concluded will very likely be seen as embodying some sort of a quid pro quo and there will be a general expectation that IP issues will be negotiated jointly with trade issues. As a consequence, there is a strong tendency to subject any amendment to the same linkage and to expect trade concessions in return for agreeing to amend respective rules.
The current WTO Doha negotiations are an example in this regard, as, according to the rules, potential amendments to the TRIPS Agreement will be adopted together with amendments of any other trade chapters of the WTO in some sort of a package deal, or more specifically through the single undertaking approach. As the whole negotiation undertaking is currently stalled, the few proposed amendments to the TRIPS Agreement have also been stalled. Although most of the bilateral or regional trade agreements lack such strict rules for amendments, it can be expected that future initiatives for the amendment of IP chapters will also raise the question as to a linkage to the amendment of other chapters of the agreements. If one party would like to raise the standards of protection, it will probably be asked to offer additional trade advantages, and the same is also true for cases where a party would like to ease its commitments.
b. Talking to Trade People
Another implication of the trade turn concerns the actors and stakeholders involved in negotiations and later on in implementation, application, and dispute settlement at the international and national levels. Certainly, economic considerations also play an important role in WIPO. However, in a trade format, the stakeholders from the trade side are officially involved and take the lead in negotiations. In addition, IP issues are subjected to the logic of trade negotiations, with their strong sense of reciprocity and the need to arrive at a package deal – or a single undertaking. This is true for the setting of international negotiations as well as for the actors involved in delegations and capitals. In all these structures, IP issues have to be framed in a way that corresponds to the logic of other issues, such as trade in services, agriculture, or trade in goods. Given the fact that the structure of IP rights and their protection at international level is probably more complex and specific, this is a challenging task for negotiators, other officials, and stakeholders in charge of IP issues.
c. The WIPO System: Regulatory Competition?
The situation is even more complex as one of the major multilateral players, namely WIPO, does not pursue this kind of a trade linkage in its work. To date, trade issues can hardly be tabled in discussions or negotiations within WIPO or be made the subject of any agreement proposal. Nevertheless, WIPO has been quite successful in its work in recent times. This success may indicate that the traditional rationale of dealing with IP separately still works. One could even see this scenario as welcome competition between two governance models: the traditional one and the trade-related one. However, the WIPO system and the multilateral and bilateral trade regimes are not entirely separate. Frequently, PTAs contain commitments as to the ratification of and compliance with WIPO conventions, and the TRIPS Agreement does the same. While probably being able to create momentum for widespread ratification on WIPO conventions, this might at the same time invite parties to wait for the ratification of WIPO conventions before they identify opportunities for a corresponding trade advantage.
In sum, the trade turn has the potential for creating strong momentum for promoting international protection of IP rights, but in the long run renders it more difficult to achieve subsequent changes, as an expectation is created to link IP change with changes in the trade area too.
2. The Bilateral Turn: Pros and Cons
Another issue is the bilateral turn, which results from the increasing number of trade agreements concluded bilaterally or within relatively small groups of parties.
a. Bargaining Power and Fairness in Negotiations
Frequently, concerns have been raised about inequalities in negotiation power and the state of economic development.Footnote 16 This point is particularly valid in view of the trade linkage, where IP issues are tabled along with market access questions. While such inequality in bargaining power exists in many areas of international relations, in IP matters, the MFN or national treatment effects give it an additional twist. While reciprocal market-access concessions, which form the core of PTAs, are exempt from MFN under Art. XXIV GATT and Art. V GATS, no such exemption exists in the TRIPS Agreement. Consequently, a TRIPS-plus standard that is agreed on in a particular PTA will benefit all members of the WTO and their inventors and creators respectively. However, as this happens “automatically,” the party committing to the “plus” standard is not able to ask the other members benefiting from the commitment for a concession in return.
b. Restricted Number of Parties: Exclusivity
A particular issue with bilateral agreements is their exclusivity in terms of the parties at hand. Choices for potential partners to negotiate and conclude a PTA are typically influenced from a trade perspective and the choices made are not necessarily in line with an appropriate setting for IP issues. At least, in many cases an opening up of the membership to such agreements could be helpful, as lately envisaged by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Such quasi-plurilateral agreements have been widely discussed recently and may also hold merit for IP issues.
c. The Lack of Transparency and Participation
Furthermore, treaty-making in regional – and even more so in bilateral – contexts lacks transparency and the forum function provided for by the multilateral institutions at hand, namely WIPO with its various bodies, and the WTO, particularly the TRIPS Council. Regional and bilateral cooperation is certainly much more of a “closed shop,” particularly at the negotiation stage. This is particularly worth noting, as actors such as the EU have made impressive steps to involve stakeholders and constituent bodies internally and to share their analytical work, such as sustainability impact assessments, and to publish early negotiation drafts. Moreover, recent PTAs envisage the involvement of stakeholders, for instance by setting up domestic advisory groups. They intend for joint meetings of such groups as a way of participation in the implementation process and in the operation of the agreements.
However, transparency and participation at the international level and among different states and international organizations are rather limited. PTAs envisage an involvement of parties with international forums, or with third states, only in particular circumstances. As far as international organizations are concerned, the WTO is relevant, as PTAs are primarily related to trade and WTO rules. However, even though the Committee on Regional Trade Agreements is notified about any PTAs concluded, it has never engaged in a more substantive discussion on the merits. The issues at hand might also be tabled in other WTO bodies or procedures. However, these options have hardly ever been explored further.Footnote 17
Further, the prominent “forum function” of the WTO is explicitly related to the “multilateral trade relations” among members under Art. III:2 WTO Agreement. The WIPO is a bit more open in this regard, as the WIPO Convention envisages in Art. 7 (2)(i) that the WIPO conference may “(i) discuss matters of general interest in the field of IP and may adopt recommendations relating to such matters, having regard for the competence and autonomy of the Unions ….”.”Footnote 18
It is evident that much has been done to improve the transparency, participation, and ultimately legitimacy with regard to PTAs internally and within the respective bilateral relations. However, neither the parties to such agreements nor the competent international organizations have done much to discuss the manifold direct and indirect implications that PTAs in particular, and the bilateral turn more generally, entail for particular third states or the world trade order. The implications for the international system of IP governance more broadly have also not been addressed.Footnote 19
d. A Pioneering Function
However, from a more general perspective on the international system of governance of IP protection, some positive effects of regionalism and bilateralism must also be mentioned. Parties to such agreements might pioneer more ambitious and progressive rules for IP, which can later on be taken up by multilateral forums. In a bilateral setting, agreement can be achieved relatively speedily, as only a small number of parties take part in the negotiation process.
e. Conclusion
In sum, it becomes clear that the “bilateral turn” in international trade relations has important implications for the global governance of international economic relations and the international protection of IP rights. It allows “coalitions of the willing” to move forward and sometimes even to act as pioneers. At the same time, it fuels fragmentation both in terms of the rules and regarding global consensus and legitimacy.
III. Balancing
Yet another way to look at the system of international protection of IP rights and the related array of multilateral, bilateral, and regional agreements is to examine how this system achieves a balance between a number of potentially conflicting objectives and purposes. Such a view adds to the governance dimension as discussed before, in a more substantive perspective.Footnote 20 This assessment would have to identify the different objectives and interests and study how they are taken into account and balanced in a rational way.
1. Balancing in IP: How It Works at National Level
Very basically, IP law and policy is about the balancing of interest of inventors and creators in exclusionary protection and the interest of the public in access. While the former interest is secured by IP rights, public interests in access are less clearly defined. They are reflected by the limits of protection regarding protectable subject matter, the duration of protection, and limits to exclusionary uses, as taken care of by legislators, patent examiners, and courts, as the case may be. In rare cases only is this public interest reflected in individual rights or claims, as might be true for a competitor’s right to claim a compulsory license, for instance. All this takes place at national levels, with a long tradition and in a consistent and homogeneous legal environment, which offers a rich orientation including constitutional provisions, fundamental rights, rule of law principles, and jurisprudence.
2. Balancing as an Objective of the TRIPS Agreement
The TRIPS Agreement reflects this understanding of balancing in its Art. 7 on objectives, which reads, “[t]he protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”
In its explicit wording, the provision has a clear bias in favor of technology, while ignoring the creativity reflected by copyright and other IP rights.Footnote 21 However, it correctly recalls the general conceptual basis of IP law as also reflected by IP doctrine. In more general words, it shall promote innovation, but also its transfer and dissemination. It shall do so to the “mutual advantage” of “producers” but also “users,” having in mind economic but also “social” welfare, and shall “balance” the rights and obligations. This scenario corresponds to an understanding in which the system of IP rights takes care of the interests of “users” more generally and society by the proper limitation of the rights limitations in terms of subject matter, eligibility, duration, and the scope of protected uses.
Article 7 may come to bear in the context of Art. 1:1 TRIPS. As mentioned earlier, the provision allows for a “more extensive protection … provided that such protection does not contravene the provisions of this Agreement.” Art. 7 is one of the “provisions of the Agreement” and therefore limits the extent to which members may raise the standards of protection unilaterally or in context with an international agreement. However, the language of Art. 7 is rather vague, and it would be difficult to see how it can effectively curb the ratcheting up of standards.
3. The Protection of IP Rights as an International Concern
In more detail, the question of how balancing can be achieved relates to how the diverse interests at stake are defined and assigned to actors. The international protection of IP through WIPO conventions and the TRIPS Agreement roughly aim at the coordination of national systems by way of non-discrimination and minimum standards. Participating states thus opened up their IP systems to foreigners on a non-discriminatory basis, and the right holders enjoy a quasi-international protection. Altogether, one could consider this to be an internationalization of the rights and interests of the right holders.
In this system, any stepping up in the standards of protection, be it undertaken unilaterally or resulting from bilateral or other agreements, will benefit any inventor or creator across the world. This can be seen as a ratcheting-up mechanism, but it should be noted that arguably this is nothing new but happened even under traditional WIPO conventions. The internationalization of rights rests on the obligations of parties under international treaties, which can be enforced in dispute settlement in the WTO or PTAs.
4. The Public Interest: Primarily a National Concern
The situation is quite different in view of public interest in access. In part, the public interest is taken care of by the limits set by international minimum standards of protection in view of eligible subject matter, exclusionary uses, and duration. In addition, Art. 8 TRIPS must be mentioned, as it explicitly refers to the public interest and lists various issues and policy areas in this regard.Footnote 22
In detail, such public interest considerations may be implemented by way of fair use and compulsory or non-voluntary licenses or even by implementation periods. The options to raise or not to raise standards beyond the international minimum standard of protection, to fully use implementation periods, to make use of fair use restrictions, and to grant compulsory licenses are all called “flexibilities,” which secures policy space for parties of agreements. Overall, however, the public interest in access is primarily seen as an issue to be taken care of by the parties individually and internally. They are seen as the ones to define and secure such public interest. What is more is that also in substantive terms, this public interest is understood to arise in the confines of the territory of a party and to lie in its own responsibility.Footnote 23
In sum, while the international rules on IP altogether acknowledge the protection of IP as a common interest and responsibility of the parties, they see the public interest in access as something to be taken care of by parties in their own responsibility.
5. Policy Spaces and Treaty-making
It is understood generally that parties may use such flexibilities, or policy spaces, unilaterally as well as through committing themselves in an international agreement. This is in line with international law reasoning more generally, according to which any matter not subjected to international commitments falls within the sovereignty of a state. As sovereignty essentially includes the power to conclude agreements, states would appear to be fit to freely make binding concessions.Footnote 24 However, the realities of negotiations have sometimes been characterized as an “illusion of sovereignty.”Footnote 25 In this context, the concept of “democratic property rights”Footnote 26 has been developed, which can be understood to imply that the policy spaces at hand in view of IP rights have not only a substantive but also a procedural dimension. In this vein, one might see the use of the policy spaces by way of national regulations as a matter of self-determination and democracy, which should not be subjected to any international obligation.
In a way, these ideas come close to the concept of absolute sovereignty. With concepts such as jus cogens, lack of capacity, or proper consent, a fundamental change of circumstances or a state of emergency in international law accommodates some of the concerns at hand. However, it is difficult to see how the TRIPS Agreement and its Art. 1:1, 7, and 8 could go beyond such established concepts in requiring a special standard of internal decision-making as a precondition for the validity of an international obligation in the area of IP rights.Footnote 27 Having said this, a number of options exist and have been recommendedFootnote 28 to strengthen the legitimacy of obligations and to allow for the adaptation of commitments to new developments. Such options relate to the transparency and participation in respective negotiations and include treaty provisions such as a sunset-clause and emergency exceptions.
6. Public Interest: Support by Other International Law Rules
The array of agreements on the international protection of IP is not to be seen in isolation. The medicines controversy has made it clear that such agreements have to be seen in the context of other areas of international law.Footnote 29 The human right to health has been a starting point for reflecting on the impact that other rules of international law may have. The right to health also was at stake in a later case regarding clean packaging. Other human rights, such as the freedom to speech, the right to privacy, and the rights of persons with disabilities, also became relevant in the application and further development of international IP rights rules.
Outside the area of human rights, a number of norms on sustainable development, particularly the climate change and biodiversity regimes, but also some provisions contained in sustainable development chapters of PTAs themselves, may also become relevant. Some of these norms can even be said to relate to what has recently been described as fundamental values in international law.Footnote 30 They may all be understood to protect what has been framed here as the public interest.
It is obvious that states are obliged to observe all their international commitments, and this implies to employ, what the ILC calls a “systematic” interpretation.Footnote 31 This is true for existing commitments as well as for negotiating and concluding new international agreements. Furthermore, particular human rights play a role in the emerging concept of a “duty to protect.” According to this concept, states enjoy sovereignty not only as an end in itself, but – at least partially – also in a functional way to protect the human rights of their citizens. Seen in this light, the duty to protect could require states to balance their IP regimes and related international commitments with the public interest as determined by human rights.
D. Conclusion
The law on the international protection of IP rights has seen vivid development over the last thirty years. It has seen a “trade turn” with the entry into force of the TRIPS Agreement and a subsequent “bilateral turn” when a vast number of regional and bilateral trade agreements with IP chapters were concluded. The resulting complex array of international agreements and rules can be characterized as hybrid, where layers of multilateral and regional and bilateral agreements are interrelated.
These developments have met with quite some criticism concerning their coherence, effectiveness, and balance. There is an urgent need to elaborate an analytical framework to properly assess the various implications and impacts of this hybrid system. This paper has focused on the interrelationship between multilateral and regional or bilateral agreements. In so doing, three dimensions, namely coherence and effectivity, governance, and balance, were analyzed. As it turned out, the considerable fragmentation – while possibly affecting overall effectivity – did not call into question its coherence in technical terms. This is mainly due to the fact that most of the agreements are construed in a way that sets minimum standards and welcomes a further increase in protection agreed upon elsewhere, which has been described as a “ratcheting up” effect.
The strong and lasting trend to promote and increase protection has also driven the “trade turn.” Seen from a governance perspective, linking trade to IP has been a strong momentum, which brought about the TRIPS Agreement. However, in the long run, such linkage may hamper the further development of IP, as it would make progress in the IP area dependent on progress in various other trade issues. The new bilateralism, while bearing some potential in view of pioneering new developments, raises a number of questions. These concern bargaining power, exclusivity, and the lack of transparency and a forum function. Moreover, in contrast to trade issues, MFN cannot be excluded for IP issues in preferential trade agreements. As a result, TRIPS-plus standards “automatically” benefit all WTO members, without giving parties a right to ask other members for a concession in return for such benefits.
Balancing rights and public interest is an essential function of national IP systems and is acknowledged explicitly by the TRIPS Agreement. However, while agreements envisage an international responsibility for protection, the definition and implementation of the public interest is left to the parties. Parties may, at times, have difficulty withstanding the demands from others to commit to stronger protection. While Art. 1.1, 7, and 8 of the TRIPS Agreement are of limited relevance in this regard, other international norms and particularly human rights might help, as has been seen in the medicines case.
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