Does TRIPS Raise Problems for Innovation in Developing Countries?

1. Does TRIPS Raise Problems for Innovation in Developing Countries? Keith Maskus University of Colorado, Boulder Oxford Conference: Bridging the Gap in Global Health Innovation 9-13 September 2007

2. TRIPS is Supposed to Improve Innovation and Tech Transfer • TRIPS (and other global IPR reforms) are sold with this theory. • TRIPS suggests such improvements: • Article 7: IPR should contribute to the promotion of innovation and transfer of technology. • Article 8.2: freedom to prevent IPR abuses that interfere with ITT. • Article 66.2: positive obligation of developed countries to provide incentives for enterprises to promote ITT to LDCs.

3. But IPR Reforms Could Raise Problems • Limit policy space in patent eligibility, compulsory licensing, etc. • Support market power in presence of weak competition. • Block follow-on innovation and restrict imitative competition. • Raise costs of inputs, medicines, agricultural technologies. • Restrict fair-use access to educational, scientific, and cultural materials. • Quasi-permanent shift in terms of trade.

4. What Systematic Evidence? • No studies of TRIPS per se; • Evidence is scarce in developing countries: -Studies tend to use aggregate data (need more micro surveys). - Most IPR reforms are recent or ongoing (including TRIPS). - IPR are only one factor in technical change and competition processes. - Significant causality problems.

5. Patent Reforms and Innovation • Weak prospects for promoting local invention from stronger patents: • Lerner’s historical study; • Branstetter’s work on Japan; • Yi Qian’s study of 26 countries and pharmaceutical patent laws, 1978-2002; • Rise in Korea’s patenting after lag. • Inward technology transactions seem to be improved: • Sensitivity of FDI in patent-sensitive industries; • Licensing and markets for technology services. • But there is no evidence for poorest countries.

6. Patents and Medicine Prices • Best econometric evidence predicts substantial price increases: Counterfactual Estimates of Drug Price Changes (%) after Indian Patents Introduced, 1999-2000 Base (Chaudhuri, Goldberg, Jia, AER 2006)

7. Must Patents Raise Medicine Prices? • Depends on structure of competition, insurance markets, etc. • Studies fail to account for patent standards that may limit market power. • Price studies are static and only speculate about induced R&D or technology transfer.

8. Has TRIPS Failed to Achieve More Innovation and ITT? • Hard to tell as an economic matter based on evidence and it is still early. • Arguably IPR reforms have improved prospects for collaborative IP management and contracts. • Progress on price differentiation in commercial markets has been slow.

9. A TRIPS Backlash? • WIPO Development Agenda ; • Compulsory licensing cases in Thailand and Brazil; • A “kinder and gentler” USTR may be coming. • Concerns limited to industrial policy in middle-income economies; • Focus shifted to enforcement and technology transfer.