IP and innovation: the societal value of IP in the new economy – IP and new business

Part of a series of TRIPS Council discussions on IP and innovation launched in 2012, this item was put on the agenda at the request of Australia, the European Union, Japan, Switzerland, Chinese Taipei and the United States, and was co-sponsored by Brazil. Their communication (see IP/C/W/648 and IP/C/W/648/Add.1) introduced the topic.

The proponents stressed that a balanced regime to protect IP rights (IPRs) can play a central role from the onset of a young enterprise and facilitate new ideas coming to life and turning into a commercial success. As an incentive mechanism for innovation, the IPR system has proved to be essential in supporting the entry of entrepreneurial companies into the market and has created a critical and profound nexus with business development and economic growth that results in improving lives and society as a whole, these members said. Some also reported on the importance of IP-intensive industries for their economy.

The proponents highlighted the need to create the necessary conditions for small and medium sized enterprises (SMEs), including start-ups, to thrive by protecting trade secrets, patents, trademarks, designs and other IPRs. SMEs can use the yields of IP as an essential asset-building instrument; however, small companies may know about the potential value of IP rights but shy away from the administrative work and financial costs associated with seeking IP protection, or falsely assume they can secure IP rights at a later stage. This is where governmental institutions, academia and the private sector can provide new firms with assistance as temporary partners, training coaches and intermediaries.

The proponents also cited greater legal certainty, both domestically and internationally, as a crucial element in encouraging innovation and investment, particularly where the knowledge-based part of the economy is made up of business that mostly rely on intangible valuable assets. Therefore, innovative and creative start-ups need to be aware of the advantage of using IP and the dangers of neglecting these assets, the proponents said. 

Whilerecognizing the role innovation plays in cultivating new businesses, some members stressed that IPRs are neither necessary nor a sufficient condition for innovation; on the contrary, unlimited power to IP rightsholders can adversely affect innovation, they said. These members asked for a discussion on IP and innovation that places emphasis on the existing barriers to the use of the IP system by innovative companies. For instance, these companies may have limited financial resources to pay for legal advice or consider patent search as an excessively costly investment. In addition, enforcement measures and the need for surveillance of possible infringement of their IP assets require resources.

These members called for a broad discussion that does not overlook these obstacles, while noting that infrastructure, collaboration and research are the fundamental ingredients for innovation to thrive. This includes not only appropriate and effective IP protection but also other mechanisms, such as capital and human resources, adequate funding, tax incentives and free trade agreements that enhance integration in global value chains.

IP and the public interest: promoting public health through competition law and policy

As a follow-up to the discussion of the same topic at the Council's meeting last June, South Africa asked that this item be added to the agenda. It was co-sponsored by Brazil and India. The co-sponsors also submitted a communication on this topic (see IP/C/W/649,IP/C/W/649/Add.1 and IP/C/W/649/Add.2). They said that IP protection per se cannot be presumed to confer market power or to allow for anti-competitive behaviour. For this reason, and as a general rule, IPR holders are not prevented from exercising their exclusive rights but at the same time they are not automatically exempted from competition rules because they own IPRs.

The co-sponsors noted that different approaches are taken by various jurisdictions regarding the interface of competition policy and IP rights. Many WTO members already use competition law to address various anti-competitive practices that affect access to medicines and medical technologies. Several practices have been identified as detrimental. These include: abuses of IPRs due to a refusal to deal with, or imposition of, overly restrictive conditions on medical technology licensing; preventing generic competition through anti-competitive patent settlement agreements; mergers between pharmaceutical companies that lead to the undesirable concentration of both research and development, and IPRs; cartel agreements between pharmaceutical companies, including manufacturers of generics; anti-competitive behaviour in the medical retail and other related sectors; and bid-rigging in public procurement.

Proponents recalled that for a long time, IP and anti-trust law were considered incompatible but are now seen as complementary, despite the existing tension. Therefore, they should be considered simultaneously when trying to achieve common goals, particularly in the context of the new economy in which innovation knowledge and IPRs are a central part of the competition dynamics. This was confirmed by the inclusion of competition-related provisions in the TRIPS Agreement.

The proponents reiterated that the TRIPS Council is therefore the appropriate forum to discuss intellectual property and competition issue in an open and inclusive manner. The co-sponsors were joined by the World Health Organization (WHO), which sees competition law as an important tool in promoting innovation and access to new health technologies.

However, some other members argued that the TRIPS Council is not the ideal venue to have this discussion, given the fact that relatively few delegates can be expected to have deep expertise in both IP and competition policy. Since work by non-experts could easily lead to a misapplication of competition law in the context of IPRs, the focus of the discussions should be on how to facilitate the task of anti-trust enforcers that strive to eliminate unnecessary uncertainties faced by innovators and creators when utilizing their IPRs, they said. Other international fora, such as the International Competition Network (ICE), are a better venue for this discussion. While the TRIPS Agreement is obviously compatible with the application of competition policy measures, it clearly does not allow for "absolute policy space" and the relevant provisions should not be interpreted too broadly, these members cautioned.

Non-violation and situation complaints

This item – mandated by successive WTO Ministerial Conferences - concerns the longstanding issue of whether members should have the right to bring cases if they consider that another member's action or a specific situation has deprived them of an expected benefit under the TRIPS Agreement, even if no TRIPS obligation has been violated.  

Several delegations showed readiness to engage in a discussion of the scope and modalities for non-violation and situation complaints should they be initiated under the TRIPS Agreement, building on the substantive discussions at the Council's June meeting. Some delegations maintained their view that the current moratorium should expire and that such complaints be allowed but indicated that they were ready to discuss the matter. Some other members reiterated their position that non-violation and situation complaints should not apply to TRIPS at all.

With the 12th Ministerial Conference 19 months away, the chair called for intensified work regarding a possible way forward that would permit the Council to examine scope and modalities in order to prepare recommendations for adoption by ministers.  

GCC, granted permanent observer status

Following last year's significant development, when the Council agreed to grant permanent observer status to the African Regional Intellectual Property Organization (ARIPO) and the African Intellectual Property Organization (OAPI), members agreed to grant the same status to the Cooperation Council of the Arab States of the Gulf (GCC). The Council also agreed to renew an invitation to the European Free Trade Association (EFTA) to attend the Council's next meeting as ad hoc observer.

Currently, there are 13 pending requests for observer status in the TRIPS Council by intergovernmental organizations (IGOs). The list of observers can be found here.

Incentives to transfer technology to least developed country members

The Council initiated the sixteenth annual review of the incentives that developed country members are required to provide to their enterprises for the purposes of promoting and encouraging the transfer of technology to least developed countries. Developed countries (United States, Switzerland, Australia, Japan, Canada, Norway, New Zealand as well as the European Union and some of its member states) gave an overview of the information contained in their new detailed reports submitted to the Council (IP/C/W/646 and addenda) and called for a robust discussion. Least developed countries provided some initial feedback.

The WTO Secretariat is planning to hold a workshop back-to-back with the Council's next meeting in February to facilitate the exchange of views between cooperation partners and to deepen the dialogue on incentives for transfer of technology to respond to the needs identified by least developed countries.

Next meetings

The TRIPS Council agreed to the following tentative meeting dates in 2019:

13-14 February
4-5 June
17-18 October