Sharing Nicely

I was invited to a WIPO workshop at the Cape Peninsula University of Technology (CPUT) tomorrow and decided to spend a few minutes of this mother day compiling my notes and references.

Judging from the titles of the sessions, the workshop will provide some background on patents and innovation (not the same thing of course), and strategies for for “obtaining commercial returns from research”. I fully support efforts that will lead to “commercialisation” of research outputs – in cases where this is needed to turn the results of research into useful products and services, but I am skeptical that patents are always the best way to achieve this. It will be interesting to see how the speakers strike a balance between preserving the benefits of public access on one side, and enabling commercial returns through appropriation that might lead to prices that are out of reach for the majority of South Africans.

The sessions tomorrow include:

• “The PCT at the Center of the International Patent System, Including an Outline of the General Principles of the Patent System” – for researchers, students and postdocs in fields involving technology and science
• “Using Patents and the PCT to Obtain Commercial Returns from Research” – for academics and administration staff in institutions which have, or are developing, technology commercialization policies or programs”
• Further discussions on “Using Patents and the PCT to Obtain Commercial Returns from Research”

There seem to be a number of implicit assumptions, which are worth exploring in the literature before talking about the ways how university policies and strategies can promote patents as a prerequisite for commercialisation.

Are patents the same as innovation? Are patents effective tools to increase research, inventions and commercialisation of research outputs?

Patents are not driving innovation that meets important needs. While the exorbitant costs of brining new medicines onto the market are often cited as the key reason why we need strong patent, protection to ensure continuing development of new and better drugs – the net effects are sobering. Only 1-5 – 3% of drug sales is spent on research that eventually leads to treatments that are better than existing treatments because “only about 10% of drug sales go towards R&D on new products. Only about one-quarter of new drug approvals are rated by the United States Food and Drug Administration (FDA) to have therapeutic benefit over existing treatments” (Hubbard & Love, 2004). Where does all the rest of the money go? It is wasted in the inefficiencies enabled by a monopoly-driven business model.

Innovation in steam-engines makes an interesting example. As Nuvolari (2005) shows the “the practice of information sharing resulted in a marked acceleration in the rate of technical advance” after the patent had expired. Furthermore, it was the rights holders (Watt and his business partner Boulton who lobbied for an extension of patent protection during their monopoly, providing a blueprint for future corporate lobbying strategies in this field. (See Ghosh & Soete 2006)

In countries that have promoted university patenting, have the results met the expectations of increased returns to fund more research, and increased value to the economy as a whole?

University patenting in other countries have not had the desired results of higher returns (to fund more research). A recent study of university patenting in the US as a result of the Bayh-Dole Act, indicates that patents do not significantly increase knowledge flows from the university to the private sector, but that many other factors (inventor entrepreneurship, consulting with private sector, etc.) are equally or more important (Mowery et. al, 2001).

If patents are not useful, why are there more and more of them?

There are more and more of them, because for some organisations patents are good – however, that does not allow the conclusion that they are good for all organisations or all countries. In the U.S. Lerner and Jaffe (2004) show that two changes to the way patents were administered provide at least some explanation for the “patent explosion” from the mid 1980s: the establishment of a special court of appeals to deal with all IPR issues, and a change in the fee system of the patent office, which meant that it would only get paid for issued patents, not for review and decline of non-valid applications.

Secondly international patenting activities show increased patenting by developed country corporations in developing country patent offices. That is an indication that these corporations see profit opportunities from off-shore patenting, not that developing countries benefit from stronger IPR.

Are strong intellectual property regimes really good for countries at a lower level of a developmental trajectorys?

Using a historical approach, Ha-Joon Chang’s “Kicking away the ladder” shows that today’s developed countries (Examples include the UK and the US) needed access to knowledge in order to achieve their current developmental levels. Throughout their development, these countries frequently blocked, circumvented, broke, or simply ignored others IPR.

More recent evidence is inconclusive, but as cited in a recent WIPO report on Patents stronger patent protection “by itself do[es] not promptly stimulate domestic innovation”. However, “implementation of patent laws will stimulate innovation in countries with high level of economic development, education and economic freedom (Qian, 2007)”.

Theory aside – In terms of costs, is it feasible for an entrepreneur in South Africa to defend herself against a litigation by an international corporation; is it feasible for her to litigate against such a company that might be infringing her patent? The cost of litigation against an existing patent granted outside the scope of patentable subject matter (in other words, the patent should never have been granted) will require a budget of at least 1,000,000 ZAR. Very few small and medium sized companies in South Africa can take such a risk.

Strong international IPR allows pharmaceutical companies to target many of their products at a very small income band at the top of the economy, preventing access to life-saving and life-prolonging innovations for large parts of developing societies. Example: Thailand, South Africa, etc.

References

H. Chang. Kicking away the ladder. Anthem London, 2002.

R. Ghosh and L. Soete. Information and Intellectual Property: The Global Challenges. Industrial and Corporate Change, Vol. 15, Issue 6, pp. 919-935, 2006, 2006. Working paper available here

Hubbard T, Love J (2004) A New Trade Framework for Global Healthcare R&D. PLoS Biol 2(2): e52 doi:10.1371/journal.pbio.0020052

A. Jaffe and J. Lerner. Innovation and its Discontents (2004) Princeton. Princeton University Press.

David C. Mowery, Richard R. Nelson, Bhaven N. Sampat and Arvids A. Ziedonis, The growth of patenting and licensing by U.S. universities: an assessment of the effects of the Bayh-Dole act of 1980, Research Policy, Volume 30, Issue 1, January 2001, Pages 99-119.

Qian, Y. (2007), “Do national patent laws stimulate domestic innovation in a global patenting environment? a cross-country analysis of pharmaceutical patent protection, 1978–2002.”, Review of Economics and Statistics, 89(3), pp. 436-453.

WIPO, Report on the International Patent System, Standing Committee on the Law of Patents, Prepared for 12th Session, Geneva June 23 – 27 2008. Available here