Rediscovering the Value of Intellectual Property Rights

1. Rediscovering the Value of Intellectual Property Rights By Lawrence A. Kogan

2. ITSSD 2 April 17, 2007

3. ITSSD 3 April 17, 2007 I. Why is it Important to Recognize and Respect Private Intellectual Property? Because: Like Other Private Property, IP is Rooted in the International Order. Private IP Rights Fulfill the Goal of the Established International Order Private Property ensures int’l peace & security thru trade & investment (T & I) T & I leads to economic growth, development, improved education & healthcare T & I reduces poverty & environmental degradation T & I depends on existence of property rights T & I contributes to economic as well as political freedom Private Property promotes peaceful economic competition: Eliminates destructive competition for control of economic & natural resources When well-defined and well-protected, replace ‘competition by violence’ with ‘competition by peaceful means’ Promotes further T & I Private Property provides opportunities that enable people to realize their individual potential. Private Property depends on Exclusivity & Legitimacy Exclusivity - A sufficient ability to control, possession, use, and transfer a thing, as against all others Exclusivity of rights to the choice of use of a resource Exclusivity of rights to the services of a resource Exclusivity of rights to exchange the resource at mutually agreeable terms AND Legitimacy - the grant of property rights on a thing furthers the underlying policies of the law

4. ITSSD 4 April 17, 2007 I. Why is it Important to Recognize and Respect Private Intellectual Property? Because: Like Other Private Property, IP is Rooted in the International Order. Tangible Property -- includes natural assets and resources -raw land, converted real estate, manmade structures and personal chattel Intangible Property -- infinite - includes human know-how, ideas and creativity – IP IP Laws that protect private property rights provide public benefits: Granting property status – ‘use of’ or ‘control’ over ideas and expressions provides an economic incentive for innovators and creators to develop new things Granting or withholding property status - serves to ‘regulate or manage competition’ The Roots of Private Intellectual Property (IP) English statutory and common law – Statute of Monopolies - provided a 14 year monopoly to “the true and first inventor” of new manufactures (patents) Statute of Anne – provided 14 years of exclusivity to “authors of new works” with the possibility of a fourteen year renewal (copyrights) Enlightenment principles – Natural Rights – anticipated by the U.S. Constitution De Tocqueville spoke of the ‘Liberating Power of Private Property’ in Colonial America The Federalist Papers – No.s 19 & 54; The National Gazette Private property rights are civil rights fundamental to the personal right to liberty Madison – Jefferson correspondences (1787-1789 (reflect need for a limited monopoly term of approximately 20 years to promote innovation **

5. ITSSD 5 April 17, 2007 I. Why is it Important to Recognize and Respect Private Intellectual Property? Because: Like Other Private Property, IP is Rooted in the International Order. **A series of correspondences between Thomas Jefferson and James Madison (1787-1789) reflects the framers’ justifiable concern with promoting innovation through excessive grants of copyright monopoly. Yet they seemed to agree that a limited monopoly term was necessary i.e., of approx. 20 years. This was based on Jefferson’s reference to morbidity charts OF THAT ERA. See THOMAS JEFFERSON in 12 THE PAPERS OF THOMAS JEFFERSON 438, 440 (Julian Boyd, Ed., 1950) (“I do not like... the omission of a bill of rights providing clearly…for…restriction against monopolies…” – letter dated December 20, 1787 from Thomas Jefferson to James Madison); THOMAS JEFFERSON in 13 THE PAPERS OF THOMAS JEFFERSON, 440, 442-43 (Julian Boyd, Ed., 1950) (“The saying there shall be no monopolies lessens the incitements to ingenuity, which is spurred on by the hope of a monopoly for a limited time, as of 14 years; but the benefit even of limited monopolies is too doubtful to be opposed to that of their general suppression.” – letter dated July 31, 1788 from Thomas Jefferson to James Madison); JAMES MADISON, in 14 THE PAPERS OF THOMAS JEFFERSON 14, 21 (Julian P. Boyd, Ed. 1950) (“With regard to monopolies they are justly classed among the greatest nuisances in government. But is it clear that as encouragements to literary works and ingenious discoveries, they are not too valuable to be wholly renounced? Would it not suffice to reserve in all cases a right to the public to abolish the privilege at a price to be specified in the grant of it? Is there not also infinitely less danger of this abuse in our governments than in most others?” – letter dated October 17, 1788, from James Madison to Thomas Jefferson); THOMAS JEFFERSON in 15 THE PAPERS OF THOMAS JEFFERSON 392 (Julian Boyd, Ed., 1950) (“The question Whether one generation of men has a right to bind another seems never to have been started on this or our side of the water... that no such obligation can be so transmitted I think very capable of proof. -- I set out on this ground, which I suppose to be self evident, that the earth belongs ... to the living; that the dead have neither powers nor rights over it... Take, for instance, the tables of M. de Buffon... [according to which] half of those of 21 years [of age] and upwards living at any one instant of time will be dead in 18 years 8 months, or say 19 years as the nearest integral number. Then 19 years is the term beyond which neither the representatives of a nation, nor even the whole nation itself assembled, can validly extend a debt... This principle that the earth belongs to the living, and not to the dead, is of very extensive application… Establish the principle... in the new law to be passed for protecting copyrights and new inventions, by securing the exclusive right for 19 instead of 14 years.” – letter dated September 6, 1789 from Thomas Jefferson to James Madison), (Kenton Abel and Samuel Trosow, “All That Glitters – Copyright, Censorship and the Constitution” 8/25/00) at: http://homepages.law.asu.edu/~dkarjala/OpposingCopyrightExtension/constitutionality/abelart.html#_ednref144

6. ITSSD 6 April 17, 2007 I. Why is it Important to Recognize and Respect Private Intellectual Property? Because: Like Other Private Property, IP is Rooted in the International Order. Private IP is an Internationally Recognized Economic and Legal Right The WTO TRIPS - 1995; (Extensions until 2006; then 2013 for LDCs) The WIPO Patent Law Treaty - 2005 The WIPO Copyright and Related Works Agreement - 2001 Private Property, Including IP, is an Internationally Recognized Human Right The United States Constitution – 1789 and accompanying Bill of Rights – 1791 Art. I, Sec. 8, Clause 8; 5th Amendment The Universal Declaration of Human Rights - 1948 The American Declaration on the Rights and Duties of Man - 1948 The International Covenant on Economic, Social and Cultural Rights - 1976 The Universal Declaration on the Human Genome and Human Rights - 1999 The Vienna Declaration and Programme of Action - 1993 The Constitution of the Independent and Sovereign Republic of Mongolia – 1992 It’s Time Brazil Learns There is Something Called IP (Brazzil Magazine – 9/22/06)

7. ITSSD 7 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation IP is the Global Engine of Future Scientific, Technological, and Economic Growth, Trade & Investment “Intellectual property is a crucial factor [in helping] nations attain sustainable economic and social development.” “To improve a country‘s competitiveness, it is necessary to create a business environment that provides protection to companies’ investments, [including IP,] and encourages technological creation and qualification.” “The establishment of those conditions depend[s] on the existence of a safe legal system and clear and stable trademarks, patents and copyrights rules, as well as respect for international intellectual property treaties currently in effect. (Am Cham Brazil) “The chemical and pharmaceutical industries appear especially sensible to patenting. The absence of legal protection inhibits investments in development and trade” in chemicals & pharmaceuticals (Sr. Researcher – FIOCRUZ) Protection of IPRs is one of ‘key factors’ needed to ensure the competitiveness of firms operating in Latin American regional markets Innovation is the linchpin, and innovation systems are the facilitators of, IP creation Economic benefits flow from various productive uses of IP-based innovations Obstacles faced in promoting economic value of & realizing benefits from IP in Latin America are not due to the private sector –

8. ITSSD 8 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation Government is to blame: It has failed to coordinate with and enhance the ability of (i.e., to enable) local enterprises and academic institutions to develop, convert, and commercialize their own know-how (IADB 2003) Private Patent-based IP is Economically Valuable The utility patent is the most common type of patent. It protects new machines, processes and compositions of matter. Plant patents are granted for new, asexually produced plants The economic value of patents, in ICT, pharma & biotech sectors has been rising rapidly relative to company market value Gov’t role should be restricted to removing obstacles to and facilitating/ overseeing the efficient operation of technology markets Intense competition & low profit margins requires wise company management of IPRs thru tech marketing and licensing strategies to generate revenues and profits (OECD 2005) Privately-owned Patents – Ideas must be: ‘Novel’, ‘Non-Obvious’ & ‘Useful’ In order to be patented an invention must be novel, useful, and not of an obvious nature. Such ‘utility’ patents are issued for four general types of inventions/discoveries: machines, human made products, compositions of matter, and processing methods. (35 U.S.C. Sec. 101-103 – U.S. Patent Act)

9. ITSSD 9 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation Patents must promote progress of science & the arts. In exchange, there is granted a temporary (20 Years from application) intangible personal property right – a ‘negative property right of exclusion’, (to exclude others from making, using, selling or importing the patented invention), which can be bought, sold, licensed, assigned, bartered, leveraged as collateral, etc. Patents serve multiple functions within society that can result in public as well as private benefits – (WHO 2006 CIPIH Report) Incentive function - Provides inventors with the necessary incentive to generate intellectual creations for economic and social gain. This is only a potential economic reward Transactional function – Facilitates greater inter-firm R&D collaboration capable of converting inventions into marketable products Disclosure function – Patent applications must publicly disclose all technical info about the invention, describe it clearly enough to “enable a skilled person to reproduce the invention”, which thereby benefits society as a whole by encouraging new inventions based upon the information disclosed Signaling function - Valid ownership indicates to prospective investors (incl. VC’s) “a firm’s innovative capabilities” and increases its ability to secure 3rd party financing Privately-owned Copyrights (in Original & Derivative Creative ‘Expressions’) are Economically Valuable “The essence of copyright law, like other systems of property rules, is the power to exclude.

10. ITSSD 10 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation The copyright holder is legally empowered to exclude all others from copying, distributing, and making derivative works. This right to exclude implies an equally large power to license—that is, to grant permission to do what would otherwise be forbidden.” (Prof. Eben Moglen; (17 U.S.C. Sec. 106 U.S. Copyright Act – Term generally-author life + 70 yrs; corporations 120 yrs from creation) For something to be copyrightable, it must be fixed in “any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device” (17 U.S.C. Sec. 102(a) U.S. Copyright Act) ‘Original Works of Authorship’ – “A work showing originality with at least a trace of creative input”. They may assume the form of “literary works; musical works (including any accompanying words); dramatic works (including any accompanying music); pantomimes and choreographic works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works”. (17 U.S.C. Sec. 102(a) - U.S. Copyright Act) “‘Literary works’ (17. U.S.C. Sec. 102 (a)(1)) [can be] expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects” (17. U.S.C. Sec. 101). ‘Computer programs’ fall within the definition of ‘literary works’. (Sec. 101. Pub. L. No. 96-517 § 10(a), 94 Stat. 3015, 3028 (1980)). A “‘computer program’ is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result” (17 U.S.C. Sec. 101 - U.S. Copyright Act) ‘Derivative Works’ – “Work[s] based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed or adapted.” (17 U.S.C. Sec. 101 U.S. Copyright Act)

11. ITSSD 11 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation ‘Open Source’ Non-proprietary systems General Public License (GPL) – ‘Copyleft’ – imposes contractual/licensing restrictions on users of code all the way up the ‘pyramid’ of knowledge - CANNOT claim ownership of any part of the commons or of derivative code developed from the commons, even if proprietary when donated Software authors who would otherwise possess or be entitled to exclusive private property rights (copyrights) in their expressed creations affirmatively waive those rights, including the right to profit from them, when contributing their work to the software collective. This waiver occurs as a matter of contract (or license). Contributors then leverage that resulting legal contract obligation to compel future creators of derivative works to waive also their otherwise exclusive private property rights. As a result, the software standard remains ‘open’ indefinitely, with the effect of forcing more code into the open community. This serves to remove the software from the ‘public domain.’ “[T]he GPL license essentially requires a business model centered around programming and support services to generate profit,” rather than one based on the software product itself or on its derivatives.” (Blakeslee & Ferguson 2006) Berkeley Systems Development (BSD) Model – ‘Copy-center’ – proprietary owners of copyrighted software contribute code into a ‘commons’ pool for all to use freely. But, subsequent users, are permitted to claim exclusive proprietary ownership on ALL derivate code created from the commons Businesses are permitted to “build upon free software to create proprietary software.” The BSD License allows proprietary commercial use, and the software released under the license can be incorporated into proprietary commercial products. In addition, any works based on and/or derived from the free software may be released under its own proprietary license. BSD makes even more sense than GPL for companies with non-performing IP assets (with expired patents)

12. ITSSD 12 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation Brazil Mandates Use of ‘Open Source’ Software Bill PL-2152/2003 mandates that all software used within the federal administration and public entities be OSS. (Oct 2003) “In June 2003 the financial daily Valor announced plans to migrate 80 percent of all computers in state institutions and state-owned businesses from Windows to Linux over a three-year period. The stated goals were to save money, foster the production of local software and ‘democratize access to knowledge,’ according to [Sergio] Amadeu [Director of Brazil’s National Information Technology Institute].” In the same month [t]he [Brazilian] House of Representatives announced it would not renew Microsoft Office licenses and was considering free software alternatives. (Sholto MacPherson CIO Magazine – 2005) All of Serpo’s (federal data processing agency) workstations and the federal gov’t e-procurement system (Comprasnet) will adopt OSS. The project is also serving as a test of open source. (Sept. 2003) Brazil launched PC Conectado, an attempt to sell 1 million low-cost computers. Proprietary software was excluded from the project; “we chose free software…because we believe it is a policy to spur national industry” (May 2005) President Lula studies a draft decree which, if approved, would make [OSS] compulsory for federal departments (June 2005) (“Global Policies in Open Source Software” – CSIS Report 2006) But...the GOB does NOT specify which open source model it requires &/or prefers...

13. ITSSD 13 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation Trade Secrets & Testing Data are Valuable IP in Pharma & Biotech Sectors Consists of costly confidential and proprietary clinical testing data, know-how, or other undisclosed information generated, compiled, analyzed, organized and submitted to government regulators Subsequent to or in lieu of a patent‘s issuance - in order to secure commercial marketing approval for the ultimate product Such data is granted temporary ‘exclusivity’ or treated as a ‘trade secret’ by many countries, including the U.S. – Hatch-Waxman Act – 5yr (new drug app)/3yr (new indications); (Bolar Amendment patent extensions for mkt authorization delay) Serves as an incentive & compensates the originator for the extra time and expense needed to provide safety and efficacy information Is “an attempt[] to protect the prospective investment of companies in their innovations.” A grant of temporary market exclusivity does not depend on the existence of patent protection …The length of market exclusivity is contingent on whether or not the drug is considered a ‘new’ chemical entity (NCE ) ‘Data Exclusivity’ - A temporary period during which no third party applicant can rely on original applicant data filed to obtain a marketing authorization Between 5 and 10 years from the date of drug application approval Protects from disclosure and unauthorized use information that drug originator has developed over considerable time and as a result of significant expenditure which it otherwise made a reasonable effort to keep secret (from public knowledge), and that has, in fact, remained undisclosed (‘secret’) at the time submitted to regulators

14. ITSSD 14 April 17, 2007 II. What are the Economic Impacts to a Culture that Disregards Private IP?  Answer: Loss of Economic Opportunity and Incentive for Tech Innovation Trade Secrets & Testing Data – Legal Significance Derived from common law of trade secrets and unfair competition Trade Secret - “Anything that gives a competitor an opportunity to obtain an advantage [,edge] or head-start over a competitor” that is not in the public domain Its nondisclosure is protected for a temporary period against both the acts of commercial competitors AND the acts of government officials if properly designated as such, subject to ‘public interest’ exceptions If recognized as a valid property right under state law & unauthorized disclosure, originator of information must be ‘justly’ compensated – Ruckelshaus v. Monsanto (U.S. Supreme Court – 1984) Disclosure, divulgence, or making known of commercial trade secrets or any information relating thereto by any federal employee in any manner not authorized by law can constitute a criminal offense punishable by fine and/or imprisonment (Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §331(j); 18 U.S.C. §1905) Unfair Competition – Unlawful and willful interference with “the right to prospective economic advantage” “Dishonest or fraudulent rivalry in trade & commerce” “Unfair methods of competition” No substitution of one’s goods in commerce for those of another “Misappropriation” of substantial investment of time, effort and money to create a thing

15. ITSSD 15 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Inefficient Patent Systems Discourage Domestic Innovation Developing world has much underdeveloped ‘dead’ capital, including intellectual capital that can be converted into ‘liquid’ capital (Peruvian Economist, Hernando De Soto) Exclusive title to real property, once registered, and recognized and enforced at law, can be collateralized and exchanged to produce economic and social benefits Same result for IP World Bank‘s recently released “Doing Business 2007” report “Registering property in many Brazilian states is difficult in comparison with the rest of Latin America” “Entrepreneurs spend on average 61 days and 3.5% of the property value to register property” World Bank’s recently released “Doing Business in Brazil 2007” report Brazil ranked “17[th] out of 22 countries in Latin America” Brazil ranked “121 out of 175” countries evaluated throughout the world Brazil‘s inefficient real property registration system is a negative harbinger of its IP /Patent registration system

16. ITSSD 16 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Create Critical Patent Backlogs - According to GOB’s INPI, 1 year ago there were only 40 trademark examiners and 88 patent examiners If 23,000 annual patent application deposits, then annual backlog of at least 12-13 yrs. Similar problem w/application examinations for trademark registration; 10year backlog. “The figures show the INPI is far from meeting the Brazilian society‘s needs” (Am Cham Brazil) The GOB has tried to correct this by hiring 400 new examiners (Deputy Chief of Mission of the Brazilian Embassy to the U.S. – Feb. 2006) Create “...Very Poor Operational Conditions and [contribute to] the lack of qualified personnel at the INPI [,which] also contribute to the limited use of the industrial property system in Brazil.” “The participation of Brazilian applicants in the patent filing process is very small, demonstrating a condition of technological frailty” (Brazilian FIOCRUZ scientist Claudia Ines Chamas) Encourage Ideological Bias Against Proprietary IP “The increasing use of proprietary technology in agricultural R&D requires careful case-by-case analysis. Although responding to the new IPR scenario, EMBRAPA continues to study and produce non-proprietary technologies that will be transferred to farmers and other clients without constraint. In fact, most of EMBRAPA ‘s technologies fall into this category. Maintaining trade secrets in agriculture is inappropriate in most cases, because major research projects are not impacted by the IPR ruling” (Maria Jose Amstalden Sampaio – EMBRAPA)

17. ITSSD 17 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Inefficient Patent Systems Promote Trade Protectionism & IP Nationalization; Impede Industry’s Ability to Commercialize S&T Know-how Brazil’s failure, until the mid-1990s to allow pharmaceutical or biotech product patents impeded industrial development in health biotechnology and promoted the copying of innovations from other countries. Despite existence of 1996 patent law ‘on the books’, the GOB does not seem to implement it Brazil‘s innovations have remained essentially ‘trapped’ within the nation‘s universities and government funded laboratories and research institutes “Patents are not contributing to development in Brazil as they might, not because of a lack of R&D and innovation, but due to a lack of understanding and use of patents. Industry in Brazil needs to develop their use of the patent system over time. There is not a lot of use or analysis of patent data in Brazil. Universities are not promoting technology transfer and development of basic R&D into marketable products. There is a need to enhance efforts to facilitate domestic use of the benefits of the IP system” (Roberto Jaguaribe, Brazilian Ministério do Desenvolvimento, Indústria e Comércio Exterior) “There are...difficulties in making the connection between science, technological development and the market. Intellectual property is an inseparable part of this set, constituting essential knowledge to overcome this gap. Legal instruments allowing more consistent and wider protection of research results provide the necessary basis for qualitative and quantitative technological changes. Although having a solid research structure in biotechnology with institutions all over the country, there are little results with global impact” (Brazilian FIOCRUZ scientist Claudia Ines Chamas)

18. ITSSD 18 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Inefficient Patent Systems Cause Domestic Companies to File Patent Applications Outside the Country: Uncertain Whether Gov’t Will Implement Patent Law “A properly calibrated patent framework can motivate inventors to create commercially ‘relevant’ innovations that may be exploited directly or licensed to enterprising third parties capable of exploiting the patent in the [domestic] marketplace” (Brazilian FIOCRUZ scientist Claudia Ines Chamas) Laboratorios Ache - anti-inflammatory cream ‘Acheflan’ Developed from a unique chemical compound isolated by a Univ. of Sao Paolo professor from the extract of a rainforest plant - ‘Maria-Milagrosa‘ (‘Miraculous Mary’). The particular compound had been identified and preliminary animal testing had been performed as early as 1980. But, it was not until 1998 that the company finally applied for international patent protection, which it ultimately was granted in both Europe and the U.S. Biolab-Sanus Farmacêutica, Biosintetica and União Química (group Castro Marques) Formed R&D strategic alliance to commercialize drugs based on Natural Toxins. “[I]ndependent R&D efforts have resulted in some three dozen international patents between them”, and 11 international patents collaboratively, but have yielded “NO market innovative products” (GWU Prof. Michael P. Ryan - 2006) Biosintetica already holds 30 patents in international market (Reported by BNDES 8/05)

19. ITSSD 19 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital (Cont’d) Biolab Farmaceutica Ltda and Proteogenética (formerly Hormogen Biotecnologia) 2002 Collaboration between Brazilian scientists’ Gov’t-funded start-up company* & national Brazilian pharma co. Biolab agreed to commercialize genetically-engineered human growth hormone developed in the laboratory - $2m projected cost Co. had high ROI expectations – anticipated up to 20% of domestic market w/in 1 year plus distribution throughout Latin America Collaboration ended in April 2006: Technically impossible to transform and optimize the fermenting process from the laboratory to industrial scale There was a “tremendously difficult relationship with the researchers, which led...to [the] interrupt[ion] [of] the project.” New entrants in international market created a very competitive environment with need for productivity (PIPE –Innovating Small Businesses – 1/24/07) *(Programa de Inovação Tecnológica em Pequenas Empresas (Technological Innovation in Small Business Program, PIPE), of the Fundação de Amparo à Pesquisa do Estado de São Paulo (State of São Paulo Research Foundation, Fapesp)

20. ITSSD 20 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Inefficient Patent Systems Can ‘Hold-Up’ Technology Transfers, If the National Tech Transfer Law Also Fails to Recognize Exclusive IP Biolab Sanus Farmaceutica Ltda. & Federal University of Minas Gerais (UFMG) – A collaboration to develop hypertension drug resulting in Brazil’s 1st technology transfer agreement (preceding Dec. 2004 Technology Innovation Law) “[T]he first time that a medicine with technology developed by a Brazilian university and produced by the domestic pharmaceutical industry will arrive on the foreign market as an innovation." (Dante Alário Júnior, Technical Scientific Director, Biolab) Research was financed by UFMG itself, by means of its Research Development Foundation (Fundep) Biolab reimbursed university R&D expenditures and remitted payment of royalties on the net sales proceeds of the medicine. The company purchased the right to produce and market the medicine – licensed IP owned by GOB – Company did NOT own anything but a contract right (Pesquisa FAPESP – 1/04) Biolab-Sanus Farmaceutica Ltda., Biosintética, & União Química Collaboration with GOB’s Center for Applied Toxinology (CAT), GOB-funded, resulting in tech transfer agreement - 2004 Difficulties encountered: universities lacked experience with public-private collaborations; lacked trust in private sector as partners; lacked know-how & capabilities to manage IP; lacked realistic expectations regarding risks, rewards, and royalties (SciFlow Brazil editorial re: Journal of Venomous Animals and Toxins including Tropical Diseases article - Oct/Dec 2005)

21. ITSSD 21 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital Brazil Technical Innovation Law – Dec. 2004 Promotes formation of public-private p-ships, and charges Brazil’s Science & Technology Institutes (STIs) with managing the entire national innovation system. This includes: Commercial Licensing terms, tech transfer agreement terms, allocation & management of IPRs (e.g., copyrights), allocation of G&A and R&D expenses among various collaborators, awards of financial subsidies to SMEs in private sector, etc. BUT - There are several unanswered questions: Can & will STIs relinquish more than negligible % of rights in jointly developed GOB-funded primary IP to private co.s? Can & will STIs relinquish full and clear legal title to any derivative inventions subsequently created by industry? Can & will STIs respect primary patents contributed to collaborations by industry? What is the most IP that Brazilian companies can own exclusively as the result of their investments in such collaborations? Inefficient Patent Systems Ultimately Threaten Universal Access to Health “The limited innovative capability of the Brazilian health system constitutes an obstacle to government policies for universal access to health. The dependency on imports for the maintenance of the strategic programmes is a vulnerability that may be potentially aggravated by variations in international financial markets.” (Brazilian FIOCRUZ scientist Claudia Ines Chamas)

22. ITSSD 22 April 17, 2007 III. How Important is an Efficient Patent Registration System? Answer: It Allows for Conversion of ‘Dead’ Capital into ‘Liquid’ Capital The GOB Should Unleash the Innovative Capacity of its Many IP-Rich Domestic Industries There are many well regarded industrial & technological sectors in Brazil, which are likely to develop and utilize, and/or otherwise exploit via licensing with third parties, their own advanced know-how, whether in the form of patents, trade secrets or copyrights. Life Sciences Pharmaceuticals Agro (ethanol), Medical (flora & GE) & Environmental Biotechnology (plasma recycling) Industrial Chemicals Automotive Energy Aeronautical Iron & Steel ICT Computer Software & E-commerce The GOB Should Help its Domestic Industries Attract Critically Needed Foreign Direct Investment (FDI)

23. ITSSD 23 April 17, 2007 IV. What is the Role of the State in These Matters? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI “Foreign Direct Investment (FDI) Has Become More Important than Trade for Delivering Goods and Services to Foreign Markets...” (Prof. Karl P. Sauvant, Oct.’06) “FDI involves explicit trade in technology…” (World Bank 2000) Developing countries participating in multilateral and bilateral trade & investment regimes, and domestically implementing such rules via investor property (tangible & intangible) protections, are more likely than not to receive greater FDI flows (Profs. Tim Büthe and Helen Milner 2005) U.S. and OECD bilateral investment agreements have stimulated greater FDI flows to developing countries “with a high quality of institutions and strong local property rights”. (Prof. Kim Sokchea 2006) “[W]hen technology transfer considerations are accounted for, it is not rational for governments in these countries to oppose IPR protection...” (Prof. Alireza Naghavi 2005) The level of a developing country‘s IPR protections most substantially affects the FDI decisions of high technology, research-intensive industries with products or processes that are relatively easy to imitate “The world‘s largest R&D spenders are concentrated in a few industries, notably IT hardware, the automotive industry, pharmaceuticals and biotechnology” (UNCTAD 2005)

24. ITSSD 24 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI IPR policy may also affect the mode of technology transfer (licensing, joint ventures, or establishment of wholly owned subsidiaries”) and thus the character of FDI (World Bank 2000) Where low IP protections are provided: FDI assumes the form of sales and distribution outlets or rudimentary production and assembly facilities with little or no risk of technology leakage NOT R&D facilities, and component or finished goods manufacturing plants Technology transfers are likely with older rather than newer technologies (World Bank 1994) Foreign investment may be chosen over licensing to retain control over tech assets (Profs. Prima Braga & Fink 1998) Where higher IP protections are provided: Licensing may be preferred to foreign production (Prima Braga & Fink 1998) Internalization (vertical – w/in corp. group) vs. Externalization (horizontal - outsourcing): If Internalization is decided upon, then focus on FDI Composition – the allocation & apportionment of production resources influenced by IPRs within the corporate group “[T]he direct impact of IPR protection is likely to be confined to selected FDI stocks and flows (e.g., foreign investment in pharmaceutical R&D facilities)” (Profs. Prima Braga & Fink 1998) Hollywood chooses copyright-based licensing rather than working thru production affiliates where moderate or more IPR protection is provided (Prof. Phillip McCalman 2004) Multinational firms with strong internal linkages engage in intra-firm transfers to substitute for inadequate external institutions (Prof. Minyuan Zhao 2004) There is an increasing global trend in Intra-firm IP transfers (UNCTAD 2005)

25. ITSSD 25 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI R&D-based FDI Generates Domestic Technology & Other ‘Spillover’ Effects “R&D internationalization opens the door not only for the transfer of technology created elsewhere, but also for the technology creation process itself...[It] may enable host countries to strengthen their technological and innovation capabilities… Innovative activity is essential for economic growth and development” (UNCTAD 2005) “Spillover Effects” – Observed impacts on economy, generally, and on local companies and labor, specifically Defined narrowly, includes only “pure externalities (such as the facilitation of technology adoption) that may [directly] accompany FDI” flowing from a single company Defined broadly, includes “pecuniary externalities (that result [indirectly] from the effects of FDI on market structure)…”: ‘Follow the leader’ or ‘copycat’ behavior that might and often does occur among corporate competitors who later enter and invest in developing country markets (World Bank 2000) Indirect benefits such as, greater access to institutional capital markets, bilateral governmental science & technology exchanges, industrial and scientific tourism, international treaty waivers, extension of preferential trade status, export bank financing and insurance underwriting of critical developing country firm import purchases, etc.

26. ITSSD 26 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI Governments Must Build Up Indigenous Capacities to Take Advantage of Spillover Benefits From R&D-based FDI Flows FDI policies may need to be complemented by appropriate policy changes with respect to education, R&D, and human capital accumulation (World Bank 2000) Spillover Benefits can be realized to the extent of the host economy’s absorptive capacity – i.e., the technological capabilities in the domestic enterprise sector and technology institutions. Absorptive capacity is necessary not only to attract R&D-based FDI, but also to benefit from its spillovers MNC interaction with host developing country local firms and R&D institutions, & the existence of a high quality national innovation system raises the likelihood of positive effects on a host economy (UNCTAD 2005) R&D is NOT likely to be among the primary corporate functions to be immediately relocated to Brazil (Economist/Columbia Univ. 2006) Adaptive vs. Innovative R&D: Adaptive – ranges from basic production support to modifying and upgrading of imported technologies Innovative - involves development of new products or processes for local, regional or global markets Relatively little FDI in Latin America and the Caribbean is in R&D-intensive activities And, R&D that is conducted is mostly adaptation of technology or products for local markets -‘tropicalization’ (UNCTAD 2005)

27. ITSSD 27 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI Local Knowledge Absorption Rate Depends on Institutional Capacities “The development of domestic innovative capacity...is partly influenced by the IPR regime...[T]o the extent that such a regime facilitates sharing of knowledge and learning, it can also help enhance the benefits of FDI in R&D” (UNCTAD 2005) Following IPR reforms, local affiliate output, employment levels and ‘capital stock’ expand significantly. “[T]his expansion…leads to a higher net level of production shifting to developing countries [which] more than offsets any possible decline in the imitative activity of indigenous firms.” (Profs. Lee Branstetter, Ray Fisman, Fritz Foley, and Kamal Saggi (2005) “By encouraging FDI, developing countries hope not only to import more efficient foreign technologies but also to generate technological spillovers… [i.e.,] the facilitation of technology adoption… for local firms…” (World Bank 2000) Local Knowledge Absorption Rate Depends on ‘Human Capital Stock’: Yrs of Education/Schooling & Innovative Ability A 20% increase in the average years of schooling of a population tends to increase the average annual economic growth by 0.15 percentage point “The quality of the human capital stock in Brazil is relatively low...The overall level of education in Brazil is relatively low, but the upside potential is substantial.” (Markus Jaeger, Brazil: “O país do futuro? Economic scenarios for the next 15 years”, Deutsche Bank Research (5/30/06)) Norman Gall, “Democracy 4: Brazil Needs a New Strategy - Lula and Mephistopheles”, Braudel Papers, 1, 11 (2005); Cristovam Buarque, “Brazil Agrees It Needs More Education But Nobody Wants to Foot the Bill”, Brazzil Magazine (4/20/06); Richard Lapper, “Brazil‘s Vulnerability”, Fin. Times (5/21/06) A 20 % increase in the annual # of USPTO patents granted correlates to a 3.8% increase in annual economic growth (World Bank 2004)

28. ITSSD 28 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI Governments must also improve SME innovative capabilities: by improving local firm capacity to absorb spillovers and develop linkages with MNCs Establish a business-friendly, market-based enabling environment that attracts MNC FDI Ensure the national innovation system encourages R&D investment and a stable property rights [i.e., IP/patents], regulatory, and dispute settlement (judiciary) system Develop effective ‘good governance’ (ant-corruption) mechanisms Foster MNC embeddedness and know-how exchanges thru clusters (IADB 2004) Need geographical proximity between MNCs & local companies Need appropriate soft and hard infrastructure Need entrepreneurial activities in the private and public sector MNCs must become embedded in the local relational fabric Must become familiar with local conditions and develop trusting relationships with local suppliers Must reconcile technology gaps between local and foreign firms, which can prevent tech transfers Depends on local firms’ absorptive capacity and human capital The capacity to absorb and implement external knowledge is higher for a cluster than for a firm

29. ITSSD 29 April 17, 2007 IV. What is the Role of the State in This Matter? Answer: To Create & Oversee a Market-Friendly, Rule of Law-based ‘Enabling Environment’ that Recognizes & Protects IPRs & Attracts R&D-based FDI Establishing MNC-Local Entrepreneur Clusters Generates Direct & Indirect Local Benefits Can improve “host economy[] productivity and wages generating [local] investment opportunities and production variety in both upstream [supplier] (backward linkages) and downstream [customer] (forward linkages) industries”. (IADB 2004) FDI Knowledge Spillovers: take place when local firms increase their productivity by copying or competing with the technologies, practices, activities & exports of foreign firm local affiliates (World Bank 2000; IADB 2004) Facilitates movement of labor from MNEs to existing local firms or start-ups Generates new training opportunities for local workers, e.g., from exposure to foreign affiliates’ quality control techniques – related testing and diagnostic feedback Transfers product and process technology, financial, management and marketing skills, business practices, know-how, information, and enhanced social and environmental standards

30. ITSSD 30 April 17, 2007 V. How Can We Prevent Acts of Piracy, Counterfeiting and Unauthorized Use of Artistic Expression From Becoming Commonplace?Answer: Facilitate Important Socio-Economic & Institutional Policy Changes It’s All About Incentives and Disincentives/Deterrents No Risk of Loss - IP piracy, counterfeiting and unauthorized uses occur because it costs people significantly less (or nothing at all), in terms of $$ money invested, or in terms of penalties (fines & jail time), than it does to abide by the law and pay for IP-based products Poverty Breeds Desperation & Piracy - IP piracy, counterfeiting & unauthorized uses are rampant in extremely poor countries where people are denied Private Property Rights, and thus, economic freedom/ opportunities Non-Enforcement - IP piracy, counterfeiting & unauthorized uses are also common in middle income and developed countries with inadequate legal recognition & enforcement of existing Private Property Rights Governments Must Play a General Policy Role – Generally, they should create or facilitate the development of: A market-friendly, rule of law-based ‘enabling environment’ that promotes entrepreneurship and provides strong official private property recognition of exclusive, but temporary IP rights – patents, copyrights and trade secrets

31. ITSSD 31 April 17, 2007 V. How Can We Prevent Acts of Piracy, Counterfeiting and Unauthorized Use of Artistic Expression From Becoming Commonplace?Answer: Facilitate Important Socio-Economic & Institutional Policy Changes Governments Must Pursue Specific Institutional Objectives: Strengthen the National Patent Office Hire enough qualified new examiners Ensure rigorous review of patent applications to ensure validity of claims Increase technology transfer opportunities for innovative entrepreneurs by ensuring that STIs recognize & permit transfer of exclusive IP rights in derivative patents derived from public-private collaborations Educate judges in civil & criminal IPR enforcement, so that they may enforce the IP laws already ‘on the books’ Improve international coordination and information exchanges between and among national, regional & local law enforcement agencies Increase funding to strengthen law enforcement efforts to crack-down on IP infringers in factories, at trade fairs, and at the points of exportation Educate the public about the important economic, technological and social value of private IP rights & the personal opportunities and societal benefits they provide: How IP encourages domestic invention & innovation; How IP promotes domestic economic growth and trade & foreign direct investment (FDI)

32. ITSSD 32 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened Foreign Investors Measure Implementation, Not Only Adoption of the Law Patent law Despite the 1996 enactment of Brazil’s TRIPS-compliant national Patent Law, expressly recognizing patented products & processes, the GOB has repeatedly threatened to ‘break’ the patents on foreign-owned medicines and medical devices via issuance of compulsory licenses for a ‘health emergency’ or to abrogate existing patents Brazil is believed to have reverse-engineered foreign branded patented products to develop a generic substitutes industry capable of exporting to least developed countries (ITSSD 2005) Trade secret law Despite the 2002 enactment of Brazil’s TRIPS-compliant national law protecting clinical test data and trade secrets, the GOB does not appear to be implementing it. “Unauthorized copies of pharmaceutical products continue to receive sanitary registrations that rely on undisclosed tests and other confidential data, although no unauthorized copies have been marketed yet.” (USTR Special 301 Priority Watch List – 2004) Copyright law Despite the 1998 enactment of Brazil’s TRIPS-compliant national Copyright Law and Software Law, the GOB has repeatedly mandated procurement of ‘open source’/‘copy-left’ software at all levels of government, promoted private use of such software and given away software to the poor. GOB adopted criminal legislation to address rampant piracy of US copyrighted music, film and software products, established a Council to Combat Piracy and Intellectual Property Crimes, developed a 99-point national Anti-Piracy Action Plan, and stepped up IPR enforcement and seizures of counterfeits along its Paraguay border. But, copyright piracy continues. (“US Country Commercial Guide – Brazil”, US Commercial Service (2006 & 2005)

33. ITSSD 33 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened Common Foreign Impressions: ‘Brazil Patent Seizure Threatens Global Trade and Public Health’ “Brazil’s threat to break U.S. patents on American AIDS drugs used as part of [its] government-funded treatment program...[is] a thinly veiled effort to bolster its national pharmaceutical industry...If Brazil is allowed to... contravene a major trade agreement...[the] TRIPS treaty...without penalty, it will send economic and trade repercussions throughout the world and puts the global efforts to fight the AIDS epidemic at risk...Brazil’s threatened patent theft will not only harm fundamental research but would also preclude Brazilian industry from cutting-edge innovations essential to bolstering the country's emerging markets”. (ITSSD 2005 – News-Medical.net; Brazzil Mag.) ‘Brazil Attacks the ‘Foundations of American Prosperity’’ “...Brazil’s government announced that [one US-based pharmaceutical company had agreed to reduce significantly the price of its innovative AIDS drug in the Brazilian marketplace. Brazil’s bargaining chip was nothing short of industrial blackmail... For the first time, a World Trade Organization member and signatory to the global agreement respecting intellectual-property rights is officially threatening to abrogate the patents of three new AIDS medications and manufacture its own generic versions. This historic move has little to do with the health of Brazilians but could potentially disrupt the future of the global economy.” (Fmr. US Undersecretary of Commerce, Robert Shapiro 2005 – San Francisco Chronicle) ‘Brazil is a Prominent Member of the ‘Axis of IP Evil’’ “Brazil is one of the countries that has ‘flagrantly disregard[ed] intellectual property rights’ in its efforts to produce generic versions of patented antiretroviral drugs...The Brazilian government in March [2005] threatened to break the patents on four antiretrovirals...Brazil's actions concerning the antiretroviral patents were made ‘not to save Brazilian lives, but to spur Brazilian business.’ Brazil is ‘no longer a poor country’ and is now the world's 10th largest economy, in part because of ‘this illegal seizure’ of U.S. technology and information”. (Fmr. US Ambassador to the UN, Kenneth Adelman 2005 – Miami Herald)

34. ITSSD 34 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened ‘Stealing US Drug Patents’ “...Brazil’s legislature passed a law to violate patents for many medicines developed by American-based companies. The law allows anyone to copy drugs for HIV and re-sell them anywhere at a lower price. Brazil is by far the worst abuser of intellectual property rights in the Americas... Unlike India, which has strengthened patent protection to encourage future investment, Brazil is ripping off American drug and biotech patents as part of a larger effort to expand its economy and bolster its drug industry without having to spend the billions required to bring new medicines to market.” (Robert Goldberg 2005 – Washington Times) ‘The ‘Two Faces’ of Intellectual Property in Brazil’ “[W]hen it comes to IP, Brazil has a functional private sector but a dysfunctional government. The private sector is up and running with IP but the government is saying, ‘We have to look at IP in terms of providing greater access to pharmaceuticals and other products’...So long as Brazil takes a hard line against IP in widely publicized confrontations...it discourages investment and shortchanges the private sector. Instead, Lula needs to explain to the left wing that its best interests lie in increasing the pie by applying new technology that is protected by IP, not by trying to grab a larger share of the pie that exists today. The good news is that the Brazilians have the technological capacity to expand the pie." (Dr. John Kilama 2006 – Knowledge @ Wharton) ‘Brazil’s IP Opportunism Threatens U.S. Private Property Rights’ “Brazil has assumed a leadership role in international fora by promoting a new but highly controversial global framework that calls for the current high technology, knowledge and information-based digital era to become ‘universally accessible,’ ‘open source,’ and essentially free of charge to developing countries...It has arguably done so in order to create an environment in which it may systematically and legitimately ‘take’ the exclusive private property owned by American and other OECD nation citizens for Brazilian ‘public use’ without paying ‘just compensation’...If Brazil is permitted to succeed in this endeavor, it will have accomplished that which no U.S. president or Congress is legally sanctioned to do.” (L. Kogan 2007 – Univ. of Miami Inter-American Law Review)

35. ITSSD 35 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened ‘Thailand and the Drug Patent Wars’ “What started with Brazil and continued in India has now spread to Southeast Asia. Thailand is going further than Brazil ever did and is breaking patents on a heart disease drug as well as HIV drugs. Thailand claims that this action is to support its goal of making high-quality medicines available to patients on a sustainable basis, but it has lowered its health budget, belying this claim...[B]reaking patents will harm Thai patients as the research-based industry withdraws from the country...It will also harm patients worldwide, as lower revenues for drug companies mean less funding for development of new drugs and fewer incentives to introduce new drugs in the developing world.” (Roger Bate 2007 - AEI Health Policy Outlook) ‘Thailand’s Patent Damage’ “In a shortsighted move, which will save at most $24 million dollars, Thailand’s military dictatorship is breaking patents on HIV and heart disease drugs...Already Thailand’s $700 million jewelry exports to America are being threatened by probable retaliatory action from America's trade representative. And what is more important, American and other Western business leaders are halting investment in Thailand.” (Roger Bate 2007 - New York Sun) “U.S. Files WTO Case Against China Over Deficiencies in China’s IP Rights Laws” “‘Piracy and counterfeiting levels in China remain unacceptably high...Inadequate protection of intellectual property rights in China costs U.S. firms and workers billions of dollars each year, and in the case of many products, it also poses a serious risk of harm to consumers in China, the [U.S.] and around the world.  We acknowledge that China’s leadership has made the protection of intellectual property rights a priority and has taken active steps to improve IPR protection and enforcement.  However, while the [U.S.] and China have been able to work cooperatively and pragmatically on a range of IPR issues, and China has taken numerous steps to improve its protection and enforcement of intellectual property rights, we have not been able to agree on several important changes to China’s legal regime that we believe are required by China’s WTO commitments... Because bilateral dialogue has not resolved our concerns, we are taking the next step by requesting WTO consultations. We will continue to welcome dialogue with China in an effort to resolve these issues.  We also look forward to continuing fruitful bilateral discussions with China on other important IPR matters we have been working on together, since achieving comprehensive IPR protection requires concerted efforts on many fronts.  Ultimately, it is in the best interest of all nations, including China, to protect intellectual property rights.’”(U.S Trade Representative Susan Schwab – 4/9/07)

36. ITSSD 36 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened ‘Taiwan’s Adventures With Tamiflu’ “In November 2005, Taiwan's government issued a license to allow local companies to manufacture generic versions of Tamiflu -- the only drug in the world considered effective in combatting the effects of bird flu. To date, Taiwan has recorded no cases of bird flu, but according to health authorities, it lies squarely in the path of migrating birds from China...At the time, Taiwan's health authorities stated very clearly that the purpose of the compulsory license was only to stockpile enough Tamiflu to protect against an outbreak of bird flu. But...Taiwan[] [subsequently]...amend[ed] [its] patent laws to allow the export of its generics to other nations. ...‘The new provision will relax regulations on drug exportation, so that upon the request of poorer countries, local drug companies may manufacture and export drugs to those countries without the consent of the patent holders...As such, these medicines would be available at a much cheaper price than their authorized versions...This amendment seems custom-designed to allow companies which are making generic Tamiflu for Taiwan's DOH under compulsory license conditions to make extra money from their participation in the project. And it seems to contradict the DOH's earlier statement made when it was enacting compulsory licensing conditions in November 2005, when it said that any Taiwan-made generic Tamiflu was strictly for local use only and would not be exported to any other country’... [W]hatever gains Taiwan generates with developing nations, it will lose with the developed world...” (Andrew Leonard - Salon 2006) The following compulsory licensing conditions were agreed upon between Taiwan’s DOH and the patent-holder, during negotiations: “Taiwan must use Tamiflu supplied by Roche before resorting to using any supply produced under the compulsory license” “The compulsory license could be cancelled if TDOH obtained a voluntary license from Roche during the compulsory period” “The products produced under the compulsory license would be limited to domestic prevention” “Taiwan’s Dept. of Health would provide adequate remuneration to Roche” (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP)  

37. ITSSD 37 April 17, 2007 VI. How Do Foreign Investors View Countries that Do Not Respect IP? Answer: They Believe Their Private Property Rights are Being Threatened Is the Government of Brazil’s current treatment of patents, copyrights & trade secrets based on its concerns/fears about a prior/future economic downturn? “A Brief History of the Patent Law of the United States” “[D]ifferent attitudes...have prevailed at [] different times and...have had...effects on...the...development of [] patent law...In the last two decades of the nineteenth century there was a period of economic depression and increasing concern about the power of "big business" leading to the passage of the Sherman Antitrust Act in 1890. This climate was reflected in the patent field by an increasing tendency of the courts to hold patents invalid. By the late 1890's the depression had run its course and patents came back into favor with the reviving economy. In general the twentieth century has seen a dynamic interrelationship between the patent system and the application of antitrust laws. Although the first antitrust law, the Sherman Act, was enacted in 1890, the courts did not start to give it teeth until Theodore Roosevelt’s administration (1901-1909). It was not until the 1930's that the patent system started to come under attack, being viewed as assisting in the maintenance of monopolies that were seen as being at least a contributing factor to the economic misery of the thirties. This skepticism about the patent system survived World War II and blossomed again in the depressed economic conditions of the 1970's, a period of strong anti-trust enforcement...In the early 1980's, the thinking of the Chicago School of economists came to the fore and with the election of President Reagan enthusiasm for antitrust enforcement went out of fashion.” (Ladas & Perry, LLP – 2003)

38. ITSSD 38 April 17, 2007