Problems of the patent system are home-made

Experts published a declaration according to 20 years TRIPS agreement

April 14, 2014

Patent law is omnipresent in the business news of today. One record number of patents issued follows the next. At the same time, the public consciousness is occupied by ‘patent wars’ between Smartphone manufacturers, massive demonstrations against the perceived greed of pharmaceutical companies or the patenting of tomatoes, animals and even parts of the human body. At the time of its introduction, the patent system was not without controversy either. However, is it now at the brink of collapse? What are the problematic issues – are they to be found in international law? 40 patent law experts from 25 countries under the auspices of the Max Planck Institute for Innovation and Competition deliver answers. In the ‘Declaration on Patent Protection’, published in connection with the 20th anniversary of the WTO, they demonstrate the manner in which the international legal order leaves ample space for differing designs of national patent systems and how this flexibility promotes eco-nomic growth and social welfare.

On April 15, 1994, the community of states entered into an historic agreement of international law. With the establishment of the World Trade Organization (WTO) they responded to the globalization which had been rapidly progressing since the 80s. The WTO is based on three pillars, the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). By incorporating the major international treaties on intellectual property at the time, the TRIPS Agreement became the benchmark for national IP systems practically overnight. Today, the WTO has 159 member states, including all industrial nations and upcoming economies such as China and Russia, in addition to a number of developing and emerging countries.

Change in function of patent law

In the two decades since, the perception of intellectual property’s importance and function has changed substantially. It did not take long for the Internet to reveal the darker sides of copyright law. In contrast, the drawbacks of the patent system have only recently come to light. Nowadays, the patent system makes headlines for the disputes it generates instead of for the innovation it promotes. Smartphone manufacturers like Apple, Microsoft and Samsung engage in litigation wars and try to drive each other out of the market. Pharmaceutical companies are accused of blocking, or at least delaying, the market entry of generics in order to maintain high prices for their blockbuster drugs. So called ‘patent trolls’ have come into the spotlight for buying up entire patent portfolios – not to manufacture their own products but to extract licensing profits by blackmailing alleged infringers. Not all industries are equally affected by these phenomena, but there is a general perception that patents are increasingly used for strategic purposes rather than to protect innovation.

Public is calling for transparency

Disappointment awaits those who expect to find the potential damage of such dysfunctional patent uses reflected in the debates about international law. Most developed countries vehemently advocate strengthening patent protection even more. However, these efforts are now met with considerable resistance. Roughly two years ago, the Anti-Counterfeiting Trade Agreement (ACTA) raised the level of public awareness in this regard. This secretly negotiated agreement led to a global outcry and resulted in a wave of public demonstrations across the globe.

The success of such resistance was remarkable. Several legislators, including the European Parliament, have rejected ACTA. However, this victory was rather limited in scope. The world’s attention has now been turned to the Trans-Pacific Partnership (TPP), which is cur-rently being negotiated – still secretly, but this time without the participation of the EU – between the Unites States and a number of other countries. In addition, there are several other, often equally intransparent, bilateral negotiations going on. Patent law is often a subject matter of these negotiations. In exchange for trade concessions in other areas like textiles or agriculture, developing countries are being persuaded to implement high standards of patent protection which are often not in their interest. Such standards may even prove detrimental to the long-term development of national innovation capacities and may therefore ultimately only serve export interests of trading partners.

A sense of proportion is necessary

Intellectual property is not merely a third-world problem. It is a global challenge. As important as the legal certainty resulting from exclusive rights may be in maintaining investment incentives, the very same rights can cause immense harm if protection becomes excessive and thereby compromises effective competition or other public interests. Thus, it is vital to achieve the appropriate scope of legal protection. More protection does not necessarily lead to more innovation. Patent law does not merely function to serve the interests of inventors and right holders. It is a regulatory institution.

Using existing freedom

It is often claimed that international law requires a high level of patent protection and leaves little policy space for pursuing national public interest goals. In a ‘Declaration on Patent Protection” a renown group of patent and international law experts prove this assertion to be inaccurate. In particular, the experts declare that international law permits many measures which are essential to a sustainable patent system. The hostility shown to the TRIPS Agreement by many developing and emerging economies is often owed to a failure to rec-ognize the actual flexibility afforded by the Agreement with regard to the design and applica-tion of national law.

The Declaration on Patent Protection was drafted under the auspices of the Max Planck Institute for Innovation and Competition in Munich. It is the result of two decades of intensive research. In brief and clear manner, the Declaration indicates the interpretive scope of TRIPS norms. Overall, the Declaration remains neutral – it is neither directed at states with a specific level of development nor does it aspire to provide recommendations for legal action. It only points out the regulatory discretion that national legislators enjoy when it comes to implementing their own patent systems. In the end it is up to the individual state to choose the option that best suits its national socio-economic situation.


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