(2003; 40 pages)
2.1. The rationale for patents
Patent systems have a long history. They developed as a way to promote innovation, originally either by encouraging the importation of new technologies into a country or by making new inventions. Instead of keeping the invention a secret, countries learned that one effective way of getting inventors to publicly disclose their invention was to offer them limited monopoly rights in exchange for doing so. One way these patent rights were limited was in time, e.g. 7, 14 or 20 years. After this period of time the monopoly rights were lifted and everybody could use the invention freely.
If the invention was not a success, the applicant would abandon the patent application, or stop paying the annual fees to the patent office to keep the patent alive.
So, in theory, the public learned quickly about a new invention when the patent application describing the invention was published, and eventually got free access to use it. In the meantime, the patent holder profited from the patent by selling the new invention at a higher price than would have been the case without a patent since the patent monopoly prevents competition. In an ideal case, both parties benefit from this patent bargain.
Adopting a patent system is supposed to encourage investment of resources in making inventions. Research and development (R&D) for new medicines, and in particular the progress in modern Western medicine, is often given as a good example. In fact, R&D into medicines for some diseases is a good example of exactly the opposite.
For neglected diseases such as sleeping sickness, Chagas disease or leishmaniasis, which only affect poor people, a patent holder will never be able to make a profit by charging high prices, so little R&D is conducted on these diseases. The argument for a patent system encouraging R&D for medical needs in their countries falls far short.
Whether or not the patent system delivers the right R&D, the patent monopoly means that a higher price than necessary has to be paid for patented inventions. This is acceptable if this higher price is merely an inconvenience (say, if you can't afford a new patented pen, you can always still use a cheap, old-fashioned pen, or a pencil). However, if the patented invention is essential (say, if it could prevent your untimely death from a disease), then the price is more of a dilemma. To give a concrete example, the price patent holders charge for an AIDS drug cocktail remains at around US$10,000 in rich markets. But because generics companies are able to make their own version where there are no patents to prevent them, these drugs are now available to patients in some developing countries for less than US$300.
Accordingly, it is crucial that a careful decision is made to distinguish between what should be allowed to be patented and what should not. Before the WTO TRIPS Agreement was signed, states were free to determine what would or would not be patentable within the country. States didn't make one-off, long-term decisions on patents. What they allowed to be patented varied a lot over time depending on the state of development of the country. The scope of patents has not always been expanded; in fact, states have sometimes decided to deny the patentability of inventions that were previously patented, or even abandoned their patent system altogether. The patenting of essential goods such as medicines and foods was for a long time thought to be selfevidently against the public interest. Indeed, when the Uruguay Round of WTO trade negotiations was launched in 1986, more than 50 countries were not granting patents on pharmaceuticals. However, the general trend in industrialised countries has been that the "boundaries of the patent system are re-drawn (almost always by widening) as industries which are used to working with patents extend their ambit of operation. In their campaigns for novel patents, they are likely to succeed except where they meet persistent and implacable opposition from some other interest group".
In rich countries, extensive pharmaceutical patent protection and the high drug prices it entails may not produce immediate health crises since the majority of the population can pay these prices for the new inventions, either privately or though insurance schemes or other public health services - although even this model is looking increasingly stretched in Europe and the United States. In poor countries, where people pay for drugs out of their own pockets and very seldom have health insurance, excessive prices of medicines become a question of life and death.
The pro-pharmaceutical patenting lobby argues time and time again that without patents there will be no new medicines. This is a lazy argument. For example, Africa accounts for some 1% of the world's medicine market. If there were no patent protection at all in Africa, and even if Big Pharma ended up making no sales on the continent, their profits would be only negligibly impacted. Their ability to generate income to perform more R&D - and produce enormous returns for their shareholders - depends overwhelmingly on OECD markets. Patent protection in developing countries is not going to make the difference between Big Pharma developing new medicines or not.
If a developing country chooses to adopt different rules for its patent system than those used, for example, in the United States or Europe, it doesn't mean that system is of a lower standard or quality than the US or European systems. Just giving patent protection to whatever the US or Europe does is not by itself a sign of a quality system. The standard or quality of the system should be judged by how effectively the patent rules that each country has chosen are used to serve the public interest. For example, if a developing country patent law says that patents cannot be granted for new uses, and that a developing country patent office makes sure that it does not grant any patents for new uses, this can be considered a high quality system.