(2000; 91 pages)
2.1.3 The importance of intellectual property rights for national development.
As mentioned above, there are several types of intellectual property rights; patents, copyrights, etc. and they are very different. Their importance varies according to the sector, the type of intellectual property rights and the level of development of the country. Therefore, it is impossible to generalize; a country and sector specific analysis would be needed.
For example in the electronics and computer industries, patents are only modestly important. Although it is a very dynamic sector, the concept of a computer has largely remained the same; there are not many real inventions. Instead, existing products are improved. In fact, in this industry, and especially in the semi-conductor sector, lead time is more important than patents: the first one to introduce a new product will have the largest market share.
However, in the pharmaceutical sector, patents are very important. In fact, the very existence of the TRIPs Agreement is due to the pressure from the big pharmaceutical companies on the US government, which in turn insisted that this issue should be on the agenda of the Uruguay Round negotiations.
There are several reasons for the importance of patents for the pharmaceutical industry:
• The costs of pharmaceutical R&D are high. While the actual amount is being disputed, it is in any case significant.
• There is a disclosure requirement, at registration,
• Usually, imitation is relatively easy; therefore the patent is important to protect the invention.
• It allows the company to make extra profits. Because of the monopoly rights the patent confers, the company can charge a higher price and earn more than would have been possible in case of free competition. Obviously, from these profits, R&D costs have to be recovered; however, the US Office of Technology Assessment has published a study3, which showed that profits in the pharmaceutical industry are considerably higher than in other industries and that the rate of return is much higher than what is needed to cover the costs.
3 Office of Technology Assessment, Pharmaceutical R&D: Costs, Risks and Rewards, 1993.
With regard to impact on development, two aspects of development can be distinguished: economic aspects and social or human aspects. Ultimately, the latter are the most important, so intellectual property rights should be looked at from this angle. Pharmaceutical patents are a clear example: the inherent effect of patents is to increase the price, which will reduce access. Therefore, in terms of social development, the impact of pharmaceutical patents is negative. On the other hand, however, patents may have positive ‘dynamic effects’ so far as they foster the development of new products that benefit society.
When contemplating the importance of patents for national development, policymakers should make a profile of their country, taking into account the level of development, and, based on that, evaluate the importance of patents.
Moreover, when designing patent laws, the limited room for manoeuvre built into the TRIPs Agreement should be used, in order to make sure that the national patent law works in the interest of the country’s social as well as economic development.