In order to increase the understanding about the TRIPs Agreement, it is useful to briefly consider the history of its negotiation.
Before the Uruguay Round, about 50 countries did not grant patent protection for pharmaceutical products; this included a number of developed countries, such as Portugal and Spain, as well as many developing countries, for instance Brazil, India, Mexico and Egypt. TRIPs Article 27, which states that patents should be granted in all fields of technology without exclusion, therefore meant a significant change for the pharmaceutical industry; suddenly patenting of pharmaceutical products was made almost universal, since all WTO member states were obliged to grant it.
Industrialized countries argued that patent protection in all fields of technology, as stated now in TRIPs Article 27, would have three main effects in developing countries:
• there would be more foreign direct investment (FDI),
• it would promote the transfer of technology,
• patent protection would promote local R&D.
Developing countries were reluctant to extend patent protection to pharmaceuticals. They realized that pharmaceutical production was highly concentrated in developed countries. More importantly, innovation - the development of NCEs - was almost exclusively undertaken in industrialized countries. At that time, 96% of worldwide R&D expenditures took place in developed countries and only 4%, in all areas of science and technology, in developing countries. This is perhaps the most dramatic asymmetry in contemporary North-South relations, since it relates to the ability to create and apply new scientific and technologic knowledge.
In addition, even before the adoption of TRIPs, a number of economic studies5 showed that patent protection for pharmaceuticals in developing countries would lead to an increase in prices for medicines, to an increase in royalty and profit payments abroad and to a greater market penetration by foreign firms. Finally, the experience even of developed countries, such as Italy, which had recently adopted patents for pharmaceutical products, raised further doubt whether there would be any benefits (see paragraph 2.5.1).
5 For instance by the World Bank.
For almost 3 years, from 1986 until May 1989, developing countries refused to negotiate an agreement on intellectual property. But finally it was not possible, politically, to avoid the discussion and the drafting of the Agreement started. For developing countries, there were two potential benefits in negotiating the TRIPs. First, the trade-offs; the possibility that in other areas of the Uruguay Round negotiations, developing countries could obtain benefits, for instance access to markets for textiles and agricultural products. Unfortunately, for most developing countries it seems there have been less benefits than expected. Second, under the agreement there is a multilateral system for dispute settlement; the expectation was that, by having such a system, unilateral action by the US - on the basis of “Special” section 301 of their Trade Act - would cease. The US applies the 301 or super 301 section in order to threaten or retaliate with trade sanctions against countries on the basis of what they consider to be ‘non-compliance with adequate standards of intellectual property’. Unfortunately this expectation has not been fulfilled either; the US has continued to use section 301.
The views of Japan and the EU during the negotiations are interesting too. Their main interest was that, while an Agreement should establish a certain level of protection, it should not amount to a restriction to trade. For instance, the TRIPs position on parallel import - countries are free to decide whether or not they allow this - should be looked at from this perspective. Moreover, Japan was concerned about potential abuses of the system, since rights on intangible property may be properly used but also can be abused; in fact the US has quite a long tradition of anti-trust cases related to the abuse of IPR, which have led to the granting of a number of compulsory licenses.
All these positions and concerns are reflected to some extend in Articles 7 and 8 of the Agreement, in which the objectives and the principles of the Agreement are stated. Particularly Article 7 refers to the balance that needs to be achieved between producers and users of technology; this is an important aspect which should be taken into account when developing the national legislation in order to implement the Agreement.