Intellectual Property Protection
and the Free Trade Area of the Americas
A Statement submitted to the Fifth Business Forum of the Americas
Toronto, Canada, November 1, 1999
| Executive Summary As researchers and scholars who study the Western Hemisphere and who seek to promote and advance the Free Trade Area of the Americas, we hereby submit the following statement regarding the critical importance of intellectual property protection to the hemisphere?s economy. Strong intellectual property protection in the Americas is crucial to fostering trade and achieving the goals and benefits of hemispheric integration. There is clear proof that countries characterized by high standards of protection attract more investment, foment more innovation, and experience rapid and more extensive development than those countries with limited protection. Countries with inadequate protection also suffer from patent, copyright and trademark infringement that hinder commerce and harm local and regional economies. We ask the Ministers to pursue an immediate course of action to strengthen regional intellectual property protection. The Ministers should urge each FTAA country to fully implement the TRIPs accord by the year 2000 and also ratify the WIPO Performances and Phonograms Treaty and the WIPO Copyright Treaty. The Ministers must also expedite the development of hemispheric intellectual property standards which offer protections above and beyond the minimum standards mandated by TRIPs. Each FTAA member country should also be encouraged to improve its institutional capacity to provide effective intellectual property mechanisms (such as efficient trademark, copyright and patent offices), increase enforcement capabilities and ensure the ability of judicial systems to handle intellectual property matters. Ultimately, all of the Americas will benefit from such measures. |
| As researchers and scholars who study the Western Hemisphere and who seek to promote and advance the Free Trade Area of the Americas, we respectfully submit for your consideration the following statement regarding the value of intellectual property protection. Intellectual property protection has long been acknowledged as a key element of the modern state. The formulas, concepts, and ideas which are the basis of the medicines, software and entertainment that affect our everyday lives require the same set of standard protections guaranteed physical property. It is only within that assurance of protection and recognition that most inventors -- be they scientists, industrial engineers, software writers or musical composers -- find the courage and inspiration to freely innovate and take risks. Indeed, the very ideas of property protection and right of ownership fundamentally underlie the concept of a free market, and work as the essential incentives to spur creation and commerce. Patent, copyright and trademark infringement stemming from a lack of intellectual property protection act as non-tariff trade barriers that seriously hinder commerce in the Americas. There is clear proof that countries characterized by strong intellectual property protection attract more investment, foment more innovation, and experience rapid and more extensive development than those countries which offer limited protection. With the number of new technologies, pharmaceuticals, and forms of artistic expression increasing exponentially as we move into the 21st century, the need for effective intellectual property protection in individual countries and the implementation of a harmonized set of strengthened regional standards is even more pressing. Unfortunately, those who would argue that developing countries require a lower standard of protection and a greater need for ?borrowed technology? consistently stifle attempts to improve intellectual property regimes. The antiquated norms they prescribe work against economic development, promote imitation while discouraging innovation, and stanch home-grown industry while simultaneously harming international industry. Research and experience have convincingly debunked the argument that limiting intellectual property protection (while allowing compulsory licensing and similar measures) promotes technology transfer in developing countries. Local innovators and foreign companies are simply unlikely to transfer technology when they fear piracy. Indeed, the minimal protection and high rates of piracy in Latin America?s comparatively small software industry keep local code writers from producing applications vulnerable to theft and reduces the willingness of foreign companies to invest in regional industry. Latin American countries that upgraded their standards of protection, such as Brazil and Mexico, experienced nearly immediate increases in foreign investment. In their study, ?Benefits and Costs of Intellectual Property Protection in Developing Countries,? Richard Rozek and Robert Rapp clearly substantiated the close correlation between foreign investment and intellectual property protection. Rozek and Rapp reported that in 1987, U.S. pharmaceutical investment in Western Europe, Japan, Australia and New Zealand -- regions characterized by strong intellectual property protection -- represented nearly 90% of total expenditures abroad. However, only 2% of expenditures went to Latin America. In another classic study, Edwin Mansfield found that 61% of German, Japanese and U.S. chemical and drug firms, and 53% of machinery and electrical equipment firms surveyed reported that the strength or weakness of intellectual property protection in any given country was an important aspect of their decision to make direct investments there. Arguments against vigorous patent protection which rely on the false assumption that patents grant a market monopoly are similarly misguided. Patent exclusivity merely offers a limited time frame in which an inventor is justly recognized as the sole creator and owner of a particular product or process. Patents do not inhibit the production of close substitutes or alternatives. In the pharmaceutical industry, for example, patents actually spur chemical and therapeutic competition--the research efforts to develop different drugs and procedures that combat similar problems. Therapeutic competition, generic drugs developed after patents have expired, and the dynamic market forces that drive competition in any industry all help keep prices in check. Moreover, a lack of patent protection serves as a serious disincentive to innovators. Mansfield found that without patent protection, nearly 65% of pharmaceutical innovations would not have been marketed and 60% would not have been developed. Additionally, many local and national pharmaceutical companies in Latin America argue for limited patent protection on the misleading assertion that their copies of patented drugs offer the consumer substantial savings. However, these companies charge roughly the same price or more than the original drug manufacturer even though they have not invested in the research and development costs. Factor in the questionable health and regulation processes under which the copies are produced, distributed and marketed (many pharmaceuticals sold to Latin American customers by local firms are actually produced outside the region in countries with even less patent protection and unverifiable bioequivalency standards), and their blatant piracy becomes even more alarming. Since none of the profits from the copies contribute to the estimated $500 million price tag of every new drug released, these companies actually inhibit the production of new, potentially life saving drugs. Despite much progress in Latin American intellectual property regimes, serious obstacles still hinder the active enforcement of laws in place and also weaken new legislative efforts. For example, though Paraguay has made strides towards improving its intellectual property laws, its enforcement efforts are stymied by corruption and poor judicial practices. Moreover, when piracy is not stopped at the source, it tends to penetrate other markets; Paraguayan counterfeit recordings, software and merchandise flow across borders, threatening local industry in Argentina, Brazil, and other countries. Though the January 2000 TRIPs (Trade Related Aspects of Intellectual Property) implementation deadline is rapidly approaching, few FTAA members have actually met the global intellectual property standards it establishes. Some countries that have fulfilled their obligations face proposed rollbacks or lack sufficient enforcement. Others, though technically compliant, manage to circumvent their commitments by exploiting gray areas in ways that prove contrary to both the letter and spirit of the law. Adhering to the minimum standards set out in TRIPs is a crucial step on the path towards integration. The proper implementation of TRIPs will allow FTAA member countries to work from a common starting point and move quickly towards an even stronger hemispheric approach to intellectual property protection. We ask the Ministers to pursue an immediate course of action to strengthen regional intellectual property protection. The Ministers should urge each FTAA country to fully implement the TRIPs accord by the year 2000 and also ratify the WIPO Performances and Phonograms Treaty and the WIPO Copyright Treaty. In order to foster growth and investment in the next millennium, the Ministers must also expedite the development of hemispheric intellectual property standards which offer protections above and beyond the TRIPs minimums. Additionally, each country must improve its political will and muscle to promote and provide for adequate intellectual property protection. The institutional capacity to enforce current laws and to enact these treaties and future hemispheric legislation will be bolstered by expanding efforts to develop or improve existing infrastructure. To this end, governments must modernize trademark, copyright and patent offices, increase investigative and enforcement capabilities, and ensure the ability of transparent judicial systems to handle intellectual property matters. Ultimately, all of the Americas will benefit from such measures. Signed September 3, 1999 by:
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