'The US, China and the G-77 in the Era of Responsive Patentability' (Queen Mary School of Law Legal Studies Research Paper No. 105/2012) by Peter Drahos
notes that
China is building capacity to grant, use and enforce patents. Its interests in the patent system are different to many G77 countries. The paper considers three questions. Can China make the patent system work for it? If so, how will the US respond? What should the weaker members of the G77 do in light of the fact that the leaders of the G77 are no longer interested in dealing with the structural disadvantages that the patent system perpetuates?
Drahos is always worth reading, irrespective of whether you agree with him. He comments that -
As an institution the patent system has spread its wings and flown from the European countries of its origin to the four quarters of the globe. Contrary to what genuine neo- liberals such as von Hayek might have hoped, a highly regulatory and interventionist system has flourished, even through the decades of deregulatory zeal inspired by Reagan and Thatcher. In fact the 1980s was one of the best decades for the patent system since it was the decade in which the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was forged, an agreement made binding on all members of the World Trade Organization.
The patent system still has its critics, but they are largely confined to university corridors of the powerless. As this paper will show, the developing states such as Brazil and India that led the charge against the system have in practice converted to using the system. Today’s developing states still mount objections to the patent system, but these seem to operate more at the level of rhetorical negotiating strategies than at the level of regulatory praxis. The bold experimentalism of the nineteenth century with the patent system has gone, to be replaced by an acceptance of the system and narcoleptic discussions over matters such as the right level of inventive step, the merits of post-grant opposition and the scope of an experimental use defence. Whatever the fate of Pax Americana this century, the patent system appears to be a globally entrenched system of rules by which all those who would be kings in the global economy will have to play.
If the claim that the lead developing countries have largely abandoned any significant opposition to the patent system is right then it does raise other questions. How will developing country powers such as China and India make the patent system work for them? The patent system, it needs to be remembered, is the visible boot of monopoly in the competitive market. It is generally inadvisable for governments to sit back and let these patent boots march through their economies without some restrictions. The patent system like the tax system demands constant monitoring and adjustment. Another question is what might happen if China, in particular, is too successful in making the patent system work? What if China is able to obtain patent ownership of many more lucrative technologies than it currently has and is able to extract much more in the way of patent rents from the global economy?
A third issue faces developing countries that have very little prospect of being able to make gains from the system. The Group of 77 (G-77) countries, which was formed in 1964 and now has a membership of 131, has many of the poorest countries of the world as members. Fidel Castro in a speech at a G-77 Summit in Havana in 2000 claimed that developed countries “control 97% of the patents the world over and receive over 90% of the international licenses' rights”. He went on to observe that the “new medications, the best seeds and, in general, the best technologies have become commodities whose prices only the rich countries can afford.” Castro finished with a strong appeal for unity and cooperation amongst the G-77. A politician of his longevity and survival skills must have known that something like an inverse unity rule applies in political life - the stronger the appeal for unity by a politician the less actual unity is present. And so it is in the case of the G-77 and patents. Brazil and India have for all practical purposes abandoned their historical leadership of the G-77 in fighting the neo-regulatory expansion of monopoly privileges in the world trading order. Of course Brazil and India’s eloquent diplomats do not announce this in Geneva meetings. They keep up the rhetoric about the injustice of the system, the need for technology transfer, their exclusion from scientific knowledge etc., etc., etc. But these countries have, as the next section will show, joined the ranks of the patent faithful. What then should the weaker members of the G-77 do when it comes fighting the kinds of price and access problems mentioned by Castro? In a world of isolated bilateral trade dealing the answer is far from obvious.
Summing up, the paper argues that the leaders of the G-77 have abandoned their attempts at deep reform of the patent system to meet the development objectives of all G-77 countries. The next section briefly describes the rise and rise of responsive patentability and the high water mark of opposition to it by developing countries and their subsequent surrender. This in turn raises three questions to each of which the paper sketches an answer. Can China, which has probably has the best chance, make the system work for it? If China can do so, what is likely to be the response of the US? What should the weaker members of the G-77 do in light of the fact that the leaders of the G-77 are no longer interested in dealing with the structural disadvantages the system perpetuates?
After an incisive analysis of potential developments in Sino-US relationships he concludes that -
The structural role of the patent system in making knowledge a scarce resource so that the rich can get richer will from time to time come in for some angry denunciation and some economists will from time to time repeat the not-so-startling conclusion that global monopoly privileges are globally inefficient. However, the patent system, like the poor, will stay with us. Political elites everywhere have become convinced that this winner-take-all system best serves their techno-nationalist and wealth-maximizing ambitions. That is true of elites in China as much as it is elites in the US. China’s market socialism may yet evolve into a close variant of US knowledge monopoly capitalism. This ending to China’s development story would not surprise readers of Animal Farm.
In the face of this kind of consensus about the virtues of the patent system there is not much that poor countries can do. An individual country can perhaps pray that an alms- giving network coalesces around its problem rather than that of its neighbour.
The evidence suggests that China has well and truly embraced the patent system as part of its development journey. The same can be said of Brazil and India. These leaders of the G-77 can no longer be said to represent the interests of poorer members of the G-77 when it comes to dealing with the problem of global knowledge monopolies in the world trading order. Charity networks are evolving to ameliorate some of the effects of this trading order for some countries.
China is making the kind of investments in R&D funding and the development of scientific human capital that are needed to make the patent system perform its function of wealth maximization. China’s rapid build up of a patent bureaucracy appears to be part of a strategy to fast track the experience of its enterprises in working in patent intense business environments. Whether encouraging the saturation of its domestic market with patents will produce the desired selection effects is an open question. No other country has, to borrow Den Xiaoping’s metaphor, crossed the stream in this way. If it works we can expect that some time this century Pax Sinica will chug past Pax Americana on the back of global technology monopolies. The US will, in forging a response, draw heavily on antitrust principles and remedies, much as it did in the last century when international cartels threatened its economic interests.
