INTERNATIONAL ANNUAL WTO FORUM KALININGRAD 25 – 27th of March 2015

1. INTERNATIONAL ANNUAL WTO FORUM KALININGRAD25 – 27th of March 2015 The TRIPS Agreement and technology transfer Anna Caroline Müller,Legal Affairs Officer Intellectual Property Division, WTO

2. Part I Technology Transfer & the TRIPS Agreement

3. What is technology transfer? • Transfer of technology mainly refers to any process by which the technical information of one party is acquired or learned by another and successfully incorporated into the latter’s production structure. • This information may be embodied in products and inputs or disembodied as knowledge codified in blueprints and formulas or know-how. Or TT may simply involve purchasing an input or service and placing it into production without acquiring know-how. • Full TT generally requires absorbing knowledge about how a process works. • No formal transaction in cases where a technology is easily imitated or copied, such as software and pharmaceuticals. Complex machinery, processes and financial services may not be so easy to copy without the co-operation of the right owner. • Absorption of knowledge presumes an initial level of knowledge – the higher the initial level the quicker and more effective the absorption. (This section adapted from SCP Document and Maskus2012)

4. How does technology flow across borders? • Trade in goods and services • Foreign direct investment (FDI) through multinational enterprises (MNEs) – mergers and acquisitions – acquiring tangible and intangible assets, technology spillovers (but not automatic). • Technology licensing, either within firms (where MNE retains proprietary control of the intellectual property and know-how) or between unrelated firms at arm's-length – permission to use the technology in a specific way within specific jurisdictions. • Mixed form of licensing and FDI - joint ventures • Technology services -cross-border movement of technical and managerial personnel – formal- through contracts , informal -through technology spillovers of tacit knowledge • Non-market channels such as imitation, where technology is in the public domain • through product inspection, reverse engineering, de-compilation of software, and even simple trial and error • studying patent applications, technical publications, documents • temporary migration of students and scientists to universities, laboratories, and conferences

5. Trade, the TRIPS Agreement and Technology Transfer • Weak IPRs constitute significant barriers to manufacturing trade • Strengthening IPRs leads to more imports of IP-sensitive goods (Maskus and Penubarti, 1997; Smith, 1999) • Effects more in countries with effective imitation threats, weak imitation countries suffer negative market power effects (Maskus, 2000). • Ivus (2010): high-tech exports to reforming countries (GP-index wise) higher than low-tech exports post-1994. • Addition of $34 billion in OECD countries = 8.6% higher quantitative imports in non-colonial developing countries • Maskus, Yang 2012: patent reform has significant impact on exports in both developed and developing countries, esp. post-1995 and in high tech areas

6. Patents and global inventive activity • Lerner 2002: Foreign patent applications, especially from high income countries and large populations, increase with strengthened patent protection: • Not so much from countries with already high levels of protection • Thus, countries with large populations and growing incomes and initial weak patent protection could benefit in the long run • Moser 2005: historically, countries with patents produced more innovation in certain sectors such as machinery but not so in food processing, textiles • Branstetter et al, 2006: significant increase in foreign applications • Skeptic: Yi Qian, 2007: No significant impact of drug patents on innovation even 10 years after introduction but interaction with income, education levels and economic freedom

7. TRIPS and inventive activity Arora et al, 2011: Indian pharmaceutical firms increased R&D/sales ratio from 0.23 in 1990 to 8.5 in 2005, largest growth after 2000; patents in US also increased 10 fold to 600 in 2005. Hu and Jefferson, 2009: Inter alia, Chinese firms significantly increased propensity to patent in 2000-1, patent revisions, WTO? Earlier studies of La Croix et al showed this for Japan but not for Korea.

8. IP and technology transfer - some prevailing ideas on solutions • A legal view: legislate to directly access patented technology, e.g. technology transfer regulations, patent exclusion, revocation, compulsory licensing or government use orders • An administrative view: construct mechanisms to facilitate technology pooling or placing in the public domain • all proprietary technologies/ just publicly funded/just public domain • voluntary/compulsory • non-exclusive/exclusive • royalty-free/reasonable royalties • Facilitate patenting and licensing • Patent fast track; • licences of right • An information view: improve the flow of information about public domain/patented technologies (patent landscapes) and about licensing interests and opportunities • An economic view: work on market incentives for both innovation and technology diffusion; real barriers are poor trade and investment policies, inadequate infrastructure and skill levels to absorb technologies. • Need more than IPRs e.g. public investment to incentivise more innovation.

9. How much technology transfer is taking place? Hard to quantify how much generated and how much transferred – patent counts and RLF one common proxy – problematic Not like any other commodity – depends on many factors, for instance, the size of the market, anticipated growth of the relevant market, geographical location of the market (such as proximity to a large market), competition in the market, available labour skills and costs, physical and telecommunication infrastructure, availability of financial services, political and economic stability and transparent governance structure. absorptive capacity.. International RLF receipts for IP increased from USD 2.8 billion in 1970 to USD 27 billion in 1990 (almost 10-fold in 20 years),and to approximately USD 180 billion in 2009 (six-fold more in next 20 years).

10. Where is the technology transfer taking place? The global flow of RLF payments largely occurs among the industrially more advanced countries of North America, Europe and East Asia. In 2009, high-income countries accounted for around 98% of the global RLF receipts, which was unchanged from ten years earlier. Picture changing – With respect to RLF payments, however, the share of high-income countries decreased from 91% in 1999 to 83% in 2009, while the share of middle income countries increased from 9% in 1999 to17% in 2009. Globalisation – global value chains – MIWI

11. Do IPRs help or hinder technology transfer? What is clear is that stronger IPRs lead to more trade (imports), more FDI and through this to more technology transfer Intra-firm data shows royalty payments for technology transferred to affiliates increase at the time of patent reforms, as do affiliate R&D expenditures and total levels of foreign patent applications - Branstetter et al (2006. 2011) – not clear if applicable to small countries. Some say stronger IPRs blocks learning by imitation – anecdotal evidence Difference between sectors – debate about green technologies

12. Article 66.2 Developed country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Membersin order to enable them to create a sound and viable technological base.

13. IMPLEMENTATION OF ARTICLE 66.2 OF THE TRIPS AGREEMENTDecision of 19 February 2003 Developed country Members shall submit annual reports on actions taken or planned They shall provide new detailed reports every third year and, In the intervening years, provide updates These reports shall be submitted prior to the last Council meeting scheduled for the year in question.

14. Reports to contain the following information: • an overview of the incentives regime put in place to fulfil the obligations of Article 66.2, including any specific legislative, policy and regulatory framework; • identification of the type of incentive and the government agency or other entity making it available; • eligible enterprises and other institutions in the territory of the Member providing the incentives; and • any information available on the functioning in practice of these incentives • These arrangements shall be subject to review, with a view to improving them, after three years by the Council in the light of the experience. • LDC delegations have not engaged in a dialogue with developed countries so far.

15. Differences of view on definition of technology transfer LDC view: Physical capital and goods; skills and know-how; information and data i.e. the supply of hardware, such plant machinery, and the supply of software, such as research, training and education. Developed countries: This broad definition of technology transfer is very similar to the one provided by New Zealand (IP/C/W/594/Add.1) and Switzerland (IP/C/W/594/Add.5), which is based on a UN definition. It includes four key modes of technology transfer: (i) physical objects or equipment; (ii) skills and human aspects of technology management and learning; (iii) designs and blueprints which constitute the document-embodied knowledge on information and technology; (iv) and production arrangement linkages within which technology is operated.

16. Part 2 Some comparative Data

24. Concluding remarks Link between trade, IP protection and technology transfer. What measures are needed to increase transfer of technology? Importance of investment in R&D, functioning IP system to increase inflow of technology, export of technology-intensive goods and services.