Espionage Costs

The AIC Costs of Espionage report (in partnership with the Australian Security Intelligence Organisation) claims

 Espionage has become one of the most significant national security threats to Australia, impacting government, businesses and the university sector. The highly secretive nature of espionage makes it extremely difficult to measure. In this study we estimated, for the first time, the actual and prevented costs of espionage. Building on the Australian Institute of Criminology’s method for measuring the costs of serious and organised crime, we estimated the mitigation and response costs and the direct costs of espionage impacting Australia. We also estimated the preventable costs associated with a number of possible scenarios. The numbers are conservative and an underestimate of the true cost, given the challenges in identifying and measuring espionage activity and its consequences. 

 

In 2023–24, espionage cost Australia at least $12.5 billion. This includes the direct costs of the consequences of known or probable espionage activity – primarily losses due to state or state-sponsored cyber attacks, insider threats and intellectual property theft – as well as the public and private sector response, remediation and mitigation costs. There are also tens of billions in additional costs that Australia may have prevented by countering potential espionage. For example, in just one week, a single incident of espionage-enabled sabotage from a large-scale cyber attack could cost the Australian economy nearly $6 billion. These prevented costs are significant, and highlight the importance and benefit of investing in efforts to reduce the threat of espionage and minimise the harm in high-risk settings.

The report states 

The threat of espionage – the state or state-sponsored theft of Australian information or capabilities – is now at extreme levels, posing an enormous risk to Australia’s national security. This threat is expected to worsen in future. Understanding the real and potential harm from espionage to the government, private and university sectors, and to the wider community is an important step in ensuring that appropriate action is taken to build our resilience to the threat posed by state and state-sponsored actors. We relied on a review of known cases, published and unpublished research, and data on espionage and espionage-related harms, along with input from subject matter experts, to estimate the mitigation and response costs, direct costs of espionage, and the prevented costs of espionage. We limited our analysis of direct, mitigation and response costs to the 2023–24 financial year. Some calculations of espionage-related expenditure were based on sensitive and classified data, and therefore these costings are not itemised in this report. 

It is important to note at the outset that these numbers, while significant, underestimate the true cost of espionage in Australia. Espionage, by definition, is difficult to detect, and many of its most serious impacts cannot be assigned a dollar value. We have chosen to be conservative in our calculations. 

This is an important first attempt to measure the range of costs from known and suspected incidents of espionage, using a methodology that has been applied to other areas of national security. While this report highlights the importance of taking action to prevent espionage to protect Australia’s national interests, it also draws attention to the need for further work to help us better understand the impact that espionage has on government, businesses, universities and the wider community. 

Actual costs from espionage Our estimate of the actual costs from espionage includes both the direct costs of known or suspected espionage activity, and the mitigation and response costs to government, businesses and universities. 

Direct costs of known or suspected espionage activity 

We estimated the actual cost of state or state-sponsored cyber espionage, insider threats and intellectual property (IP) theft through a range of methods including:

„ Cyber security incidents impacting Australian medium and large businesses were estimated to cost up to $1,193.8 million. 

„ Cyber security incidents impacting Australian public universities were estimated to cost up to $14.5 million. 

„ Insider threats involving state or state-sponsored actors impacting Australian businesses were estimated to cost up to $324.8 million. 

„ Cyber security incidents involving state or state-sponsored actors impacting federal government agencies (not itemised here). 

„ Insider threats involving state or state-sponsored actors impacting Australian public universities were estimated to cost up to $25.0 million. 

„ Cyber-enabled theft of IP and trade secrets from businesses was estimated to cost up to $1,901.0 million. 

„ IP theft from government, the not-for-profit sector and universities was estimated to cost up to $628.0 million in 2023–24. 

These costs were incurred in a single financial year (2023–24). These represent a significant underestimate of the true cost of espionage, given the challenges in identifying, quantifying and valuing some of the consequences. 

Mitigation and response costs 

Significant resources are invested in the public and private sectors to mitigate and respond to espionage. These include the cost to federal government agencies entities related to the identification, investigation, disruption and prosecution of espionage incidents in Australia, as well as the development and enactment of policy and legislation regarding espionage in Australia. Other costs of mitigation include those associated with implementing and maintaining security measures, community outreach, and education and awareness raising. Many of these mitigation measures (particularly legislation) have been introduced in response to previous incidents of espionage or foreign interference, and thus can be considered long-term costs of espionage in Australia. We used a combination of top-down and bottom-up approaches to estimate these costs, relying on data on the operating expenditure of each agency and expert input from senior representatives from these agencies and other stakeholders. 

We also estimated the cost of cyber security to state, territory and local government agencies, businesses and universities. We determined the operating expenditure of each sector and relied on industry estimates of the proportion of total expenditure that is spent on information and communications technology (ICT) and, of that, the proportion spent on cyber security. We then estimated the proportion of these cyber security costs associated with espionage. There are also costs to businesses associated with personnel security and vetting, as well as the costs associated with applying for commercial foreign investments to the Foreign Investment Review Board (which assesses, among other things, risks to national security). 

Critical infrastructure is a major target for foreign actors seeking to undermine Australia’s national security and, in addition to the costs to the Australian Government, there have been costs to industry associated with several major reforms to the regulation of critical infrastructure to reduce the risk of espionage. Universities also incur costs associated with due diligence activity, including vetting of international students and assessing the risks associated with partnerships with foreign institutions. We used a range of methods and data sources to estimate these costs. These mitigation and response costs have not been itemised, and the full detail regarding our costing methodology has not been provided because it relies on sensitive and classified data. The mitigation and response costs are included in the total cost estimate. Several additional costs are incurred as a consequence of the action taken by government, businesses and the university sector to mitigate the risk of espionage. 

Among these are:

„ the costs of having to use more expensive technology, or technology that is less than optimal, rather than technology that may be available from a foreign adversary 

„ the costs incurred by government suppliers in certain high-risk sectors in order to meet security requirements 

„ declines in potential foreign investment due to our current national security posture „ missed opportunities for international research collaborations with leading academics and organisations. 

Although these costs are likely to be significant, they have not been estimated in the current research due to a lack of sufficient data. 

Prevented costs from espionage 

We estimate the counter-espionage efforts of governments, businesses and universities may have prevented tens of billions of dollars of additional costs to the Australian economy. While there have been many examples of espionage impacting Australia and our international partners, other harms have been avoided. 

We modelled a range of scenarios to estimate the potential costs that may have – to the best of our knowledge – been prevented, but which would be incurred in the future if efforts to prevent espionage were not successful.

„ Sabotage of critical infrastructure enabled by espionage could cost up to $1,161.2 million per incident. 

„ An economy-wide, week-long disruption to digital technology-intensive industries, enabled by sabotage, could cost the Australian economy $5,930.4 million. 

„ Theft of trade secrets from a large, publicly listed Australian company could result in share market losses of up to $887.2 million per incident. 

„ Cyber espionage attacks targeting a large, publicly listed Australian company could result in share market losses of up to $439.6 million per incident. 

„ Diminishing trust in government security due to espionage activity could result in an annual decrease in foreign direct investment inflows of up to $10,291.2 million. 

„ The potential annual losses from a decline in international student revenue because of a need to tighten controls following major espionage activity could be up to $890.7 million. 

„ A 10% decrease in annual US funding for research following espionage activity impacting Australian and US relationships could lead to potential same-year economic losses of up to $376.7 million. 

Many of these costs relate to, or would result from, single incidents of espionage. The cost from multiple repeated attacks targeting government, businesses and university sectors would be significantly higher. As such, the total prevented costs depend on the nature and scale of future espionage activity impacting Australia but are estimated to be tens of billions of dollars. 

Total actual and prevented costs from espionage 

When we combine the mitigation and response costs and the direct costs of espionage that could be measured, the total known cost to government, businesses, universities and the broader community in 2023–24 is estimated to be at least $12.5 billion. We estimate that tens of billions further in espionage costs may have been prevented through effective mitigation and counter-espionage activity. These costs are preventable – but only if appropriate action is taken to address the threat from those who seek to harm Australia’s national interests. 

Total actual costs: $12.5B Direct costs of known or suspected espionage Public and private sector mitigation and response costs 

Prevented costs: Tens of billions of dollars

AI, Trade and the WTO

The WTO 'Trading with intelligence: How AI shapes and is shaped by international trade' report comments

The widespread and transformative impact that artificial intelligence (AI) is currently having on society is being felt in all areas, from work, production and trade to health, arts and leisure activities. New applications of AI are expected to create unprecedented new economic and societal opportunities and benefits. However, significant ethical and societal risks are also associated with the development and application of AI. These risks have implications for all these areas too, including trade. AI is a global issue, and as governments increasingly move to regulate AI, global cooperation is more important than ever. 

Against this backdrop, the present report examines the intersection of AI and international trade. It begins with a discussion of why AI is a trade issue, before delving into the ways in which AI may shape the future of international trade. It discusses key trade-related policy considerations raised by this technology and provides an overview of government initiatives taken both to promote and to regulate AI. The report also highlights the looming risk of regulatory fragmentation and its impact, in particular on trade opportunities for micro, small and medium- sized businesses. Finally, the report discusses the critical role of the WTO in facilitating AI-related trade, ensuring trustworthy AI and addressing emerging trade tensions. 

Why is AI a trade issue? 

AI is distinct from other digital technologies in several key ways, and it has the potential to affect international trade significantly. It is a general-purpose technology, capable of adapting to a wide range of domains and tasks with unprecedented flexibility and efficiency. It relies on large datasets to learn and improve its performance and accuracy. AI's functions and efficiency can evolve rapidly, leading to dynamic shifts in its capabilities and autonomy. Finally, its inherent complexity and opacity, as well as its potential failures and biases, raise significant concerns related to matters such as how to understand the reasons for and basis of AI decisions and recommendations, or regarding ethics and broader societal implications. AI can be leveraged to overcome trade costs associated with trade logistics, supply chain management and regulatory compliance. By enhancing trade logistics, overcoming language barriers, and minimizing search and match costs, AI can make trade more efficient. It can help to automate and streamline customs clearance processes and border controls, navigate complex trade regulations and compliance requirements, and predict risks. AI-based tools can be used in trade finance, and can significantly enhance supply chain visibility by providing real-time data analytics, predictive insights and automated decision-making processes. All of this could lower trade costs and, as a result, level the playing field for developing economies and small businesses, helping them to overcome trade barriers, enter global markets and participate in international trade. 

AI can transform patterns of trade in services, particularly digitally delivered services. It can enhance productivity, especially in services sectors that rely on manual processes, by enabling low-skilled workers to leverage best practices of more high-skilled workers more effectively. For example, generative AI can amplify the performance of business consultants by up to 40 per cent compared to those not using it. Greater productivity gain is also observed for lower-skilled workers (Dell’Acqua et al., 2023). Research also shows that access to generative AI increases the productivity of call centre workers by an average of 14 per cent, and by 34 per cent specifically for novice and low-skilled workers (Brynjolfsson et al., 2023). AI can also foster the development of innovative services and increase demand for them. However, while AI can enhance trade in digitally delivered services significantly, it has contributed to reducing the demand for certain traditional services. AI-enabled automation can also reduce the necessity to outsource certain services. 

AI can increase demand and trade in technology-related products. Because AI systems often rely on real-time data streams and seamless connectivity, the adoption of AI is spurring demand for complementary goods related to information and communications technology (ICT) infrastructure and information technology (IT) equipment. These include computer and telecommunications services, specialized development tools and software libraries. For example, the global market for AI chips was valued at US$ 61.5 billion in 2023 and it has been projected that it could reach US$ 621 billion by 2032 (S&S Insider, 2024). As many of these goods and services are often supplied by a small number of economies, international trade serves as a major channel to foster AI development worldwide. Further upstream in the value chain, trade in the extraction and processing of critical metals and minerals, as well as trade in energy, are also likely to gain in importance. In addition, AI has substantially heightened the demand for data, fundamentally reshaping the landscape of data usage and trade. 

By affecting productivity, and through shifts in production dynamics, AI may reshape economies' comparative advantages. AI is expected to enhance productivity across all economic sectors in both developed and developing economies, and to change the composition of inputs required for production, placing greater emphasis on capital investment, rather than on labour inputs. This shift in production dynamics could reshape trade patterns. Conversely, new sources of comparative advantage may emerge from factors like educated labour, digital connectivity and favourable regulations. Because AI is energy-intensive, economies with abundant renewable energy may also gain comparative advantages. However, although AI can potentially benefit all economies, the development and control of AI technology are likely to remain concentrated in large economies and companies with advanced AI capabilities, resulting in industrial concentration. The adoption of AI can drive productivity increases across various sectors and reduce trade costs, leading to global gains in trade and GDP. Simulations using the WTO global trade model show that, under an optimistic scenario of universal AI adoption and high productivity growth up until 2040, global real trade growth could increase by almost 14 percentage points. In contrast, a cautious scenario, with uneven AI adoption and low productivity growth, projects trade growth of just under 7 percentage points. The simulation further shows that, while high-income economies are expected to see the largest productivity gains, lower-income economies have better potential to reduce trade costs. 

The global trade and GDP impact of AI varies significantly across economies and sectors, depending on choices made concerning innovation and policies. While trade growth in high-income economies remains relatively stable across projected scenarios, low-income economies could experience much higher trade growth under the scenarios of universal AI adoption and high productivity growth (18.1 percentage points) compared to those of uneven AI adoption and low productivity growth (6.5 percentage points). The simulation results suggest that if developing economies improve their AI readiness by strengthening digital infrastructure, enhancing skills and boosting innovation and regulatory capacity, they will be in a better position to adopt AI effectively. 

These simulations show that digitally delivered services1 are expected to experience the highest trade growth. In an optimistic scenario of universal AI adoption, digitally delivered services are projected to see cumulative growth of nearly 18 percentage points relative to the baseline scenario, the largest increase across all sectors. The expected impact of AI on real trade growth also differs within sectors. Potentially digitally delivered services such as education, human healthcare, and recreational and financial services, as well as manufacturing sectors such as processed food, are projected to experience significant trade growth, largely driven by trade cost reductions. Meanwhile, sectors related to natural resource extraction and manufacturing sectors such as textiles are expected to see limited growth. 

The policies of AI and trade 

The discussion on how AI might reshape international trade raises important policy questions. The risk of a growing divide resulting from applications of AI is significant, as are data governance challenges and the need to ensure that AI is trustworthy and to clarify how it relates to intellectual property (IP) rights. The implementation of AI at the domestic, regional and international levels entails both benefits and risks, and a lack of coordination could cause increasing regulatory fragmentation with regard to AI. Addressing the risk of a growing AI divide is essential to leverage the opportunities offered by this technology. Currently, the capacity to develop AI technology is concentrated in a few large economies, and this is creating a significant divide between economies that are leading research and development (R&D) in AI – in particular China and the United States – and the rest of the world. This imbalance could be further exacerbated by the use of government subsidies to develop AI. The risk of industry concentration within a few large firms could also intensify the divide between firms. These features, combined with the opacity of AI algorithms and the possibility of tacit collusion among competitor firms to maintain higher prices, present challenges for competition authorities. 

The rise of AI is raising important data governance issues that will need to be addressed to prevent further digital trade barriers. Cross-border data flows are essential to AI, as vast amounts of data are needed to train AI models, as well as minimize possible biases. Thus, restrictions on data flows can slow AI innovation and development, increase costs for firms, and negatively impact trade in AI-enabled products. A recent study (OECD and WTO, 2024) found that if all economies fully restricted their data flows, this could result in a 5 per cent reduction in global GDP and a 10 per cent decrease in exports. However, the large datasets required by AI models raise significant privacy concerns. Therefore, a reasonable trade-off between accessing large amounts of data to train AI models and protecting individual privacy must be found. 

Ensuring that AI is trustworthy without hindering trade can be challenging. “AI trustworthiness” means that it meets expectations in terms of reliability, security, privacy, safety, accountability and quality in a verifiable way. However, given the behaviour and opaque nature of AI systems, as well as the potential dual-use of some AI products (i.e., for both civilian and military applications), striking a balance between ensuring that AI is trustworthy and enabling trade to flow as smoothly as possible may prove especially challenging. The evolutionary nature of AI makes regulation a perennial moving target. “Traditional" regulations and standards for goods, which normally focus on tangible, visible and static product requirements, may not be fully capable of addressing all of the different types of potential risks, including the ethical and societal questions that may result from the integration of AI into goods and services. Regulating to address questions of public morals, human dignity and other fundamental rights, such as discrimination or fairness, is not only challenging, but is also prone to causing regulatory fragmentation because the meaning and relative importance of such values may vary across societies. 

AI also poses new conceptual challenges for the traditional, “human-centric” approach to IP rights. Issues that deserve particular attention include the protection of AI algorithms and of copyrighted material for training AI, and the protection and ownership of AI generated outputs. These questions may call for a re-evaluation of existing IP legal frameworks. 

The immense potential of AI has prompted governments around the globe to take action to promote its development and use while mitigating its potential risks. At the domestic level, more and more jurisdictions are putting in place AI strategies and policies to enhance their AI capabilities. The number of economies having implemented AI strategies increased from three in 2017 to 75 in 2023. According to Stanford University's 2024 "AI Index", 25 AI-related regulatory measures were adopted in the United States in 2023, compared to just one in 2016, while the European Union has passed almost 130 AI-related regulatory measures since 2017. However, most domestic AI policy initiatives are being implemented by developed economies, which could further deepen the existing AI divide between developed and developing economies: while around 30 per cent of developing economies have put AI policy measures in place, only one least-developed country (LDC) – Uganda – has done so according to data from the Organisation for Economic Co-operation and Development (OECD) AI Policy Observatory. Also high on governments’ policy agendas are domestic initiatives to promote access to data through open data and data-sharing initiatives, with a view to fostering domestic innovation and competition, protecting privacy and controlling the flow of data across borders. What is emerging is a landscape of fragmented measures and heterogeneous domestic initiatives, which may lead to regulatory fragmentation. 

This fragmentation extends beyond AI-specific regulations to include sector-specific legislation, such as IP and data regulations, which also impact AI. In addition, the design of some border measures imposed on the hardware components and raw materials crucial to AI systems can affect competitors in other economies, leading to trade- distorting effects and further exacerbating fragmentation. The economic costs of regulatory fragmentation, in particular for small businesses, highlight the importance of mitigating regulatory heterogeneity; according to OECD and WTO (2024), the economic costs of the fragmentation of data flow regimes along geo-economic blocks amount to a loss of more than 1 per cent of real GDP. The increasing number of bilateral and regional cooperation initiatives on AI governance, many focusing on different priorities, add to the risk of creating a multitude of fragmented approaches. 

For example, while some bilateral cooperation initiatives focus primarily on aligning AI-related terminology and taxonomy, and on monitoring and measuring AI risks, others prioritize collaboration to promote alignment in general terms or focus primarily on AI safety and governance. Likewise, some regional initiatives prioritize human rights and ethics, while others focus on economic development and growth. 

Regional trade agreements (RTAs) and digital economy agreements are important vehicles to promote and regulate AI. AI-specific provisions have started to be incorporated into such agreements, but they mainly take the form of “soft” – i.e., non-binding – provisions focusing on the importance of collaboration to promote trusted, safe and responsible use of AI. Several AI-specific provisions explicitly refer to trade. Digital trade provisions included in RTAs, such as provisions on data flows, data localization, protection of personal information, access to government data, source code,2 competition in digital markets, and customs duties on electronic transmissions, are also important for AI development and use. The number of RTAs with digital trade provisions has been growing steadily since the early 2000s, and by the end of 2022, 116 RTAs – representing 33 per cent of all existing RTAs – had incorporated provisions related to digital trade (López-González et al., 2023). However, the depth of digital trade provisions included in RTAs varies significantly, reflecting diverging approaches. Few developing economies and LDCs have negotiated digital trade provisions. Disciplines on trade in services in RTAs are also an important channel through which governments' trade policies and trade obligations can affect the policy environment for AI, but the level of commitments undertaken differs significantly across economies. 

The last few years have witnessed a wave of international initiatives related to AI. While there are elements of complementarity among such initiatives and alignment on core principles, different initiatives prioritize different aspects of AI governance. A number of initiatives also contain various common elements that have important trade and WTO angles, such as the recognition of the role of regulations and standards, the need to avoid regulatory fragmentation, the importance of IP rights, the importance of privacy, personal data protection and data governance, and the importance of international cooperation, coordination and dialogue. Several of these initiatives also address the environmental impacts of AI. 

However, there is still no global alignment on AI terminology. Differing priorities, the overlap between initiatives, and lack of global agreement on key terminology could pose challenges at the implementation stage, limiting efforts to prevent fragmentation and to put in place a coherent global AI governance framework. Nevertheless, beyond initiatives to govern AI, an increasing number of international organizations, such as the International Telecommunication Union (ITU), the United Nations Educational, Scientific and Cultural Organization (UNESCO), the United Nations Industrial Development Organization (UNIDO) and the World Bank, are developing courses on AI and integrating AI in their technical assistance activities, some of which have a trade component. The WTO, as the only rules-based global body dealing with trade policy, can contribute to promoting the benefits of AI and limiting its potential risks. It can play an important role in limiting regulatory fragmentation, promoting the development of trustworthy AI and access to it, and facilitating trade in AI-related goods and services, thereby enabling the growth of AI and promoting innovation through IP. 

What role for the WTO? 

WTO rules and processes promote global convergence. The WTO is a forum that promotes transparency, non-discrimination, discussion, the exchange of good practices, regulatory harmonization, non-mandatory policy guidance, and global alignment through the negotiation of new binding trade rules on trade. Transparency provisions included in WTO agreements allow WTO members, as well as economic operators and consumers, to be kept abreast of latest regulatory developments. One example is the enhanced transparency provisions in the Technical Barriers to Trade (TBT) Agreement. By requiring early notification of regulatory measures and allowing opportunities to provide comments on these measures at a draft stage, the TBT Agreement can help to prevent obstacles to trade, as well as promote and accelerate global convergence. WTO members are increasingly notifying a wide range of regulations on digital technologies to the TBT Committee. For instance, more than 160 notifications have been made on regulations addressing cybersecurity and the Internet of Things (IoT)/robotics, both of which are relevant for AI. More recently, the TBT Committee has started receiving notifications of AI-specific regulations. Another example is the WTO Trade Policy Review Mechanism, which contributes to transparency in members’ trade policies. Finally, in terms of possible new substantive rules, various issues negotiated under the Joint Statement Initiative on E-commerce, which currently brings together 91 WTO members, may matter for AI. 

The WTO also provides a global forum for constructive dialogue, the exchange of good practices, and cooperation. This enables discussion among members of how best to design nuanced, flexible and adaptable regulatory solutions to address the goods, services and IP-related aspects of AI in a coordinated manner. In some areas, the WTO also promotes regulatory harmonization and coherence by encouraging the use of international standards, mutual recognition and equivalence, and through various "soft law" instruments, such as voluntary committee guidelines. 

The WTO is the cornerstone of global efforts to facilitate trade in services and goods that enable or are enabled by AI. Various aspects of the WTO rulebook can contribute to promoting the development of and access to AI. For example, the General Agreement on Trade in Services (GATS) plays an important role in shaping a policy environment that facilitates the development and uptake of AI. A majority of WTO members (out of 141 schedules of commitments, 84, or 60 per cent, contain commitments on computer services) have made specific commitments on market access and national treatment related to ICT services, which play a fundamental role in enabling and promoting AI. However, commitments in other sectors remain limited, and barriers to services trade remain high in overall terms. When it comes to goods, the Information Technology Agreement (ITA) aims to increase worldwide access to high-technology goods essential to AI by eliminating tariffs on the ICT products it covers. Meanwhile, the TBT Agreement can help to ensure that, when governments adopt AI standards and regulations, these are, to the extent possible, not trade-restrictive, and are optimal for attaining policy objectives. The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement aims to foster a balanced IP system that incentivizes innovation through the enforcement and protection of IP rights, while promoting dissemination of and access to technology, to the mutual benefit of both producers and users of technological knowledge. Various WTO agreements also include provisions to promote the transfer of technology, and this can play an important role in the development of AI. Finally, the WTO Agreement on Government Procurement (GPA) 2012 promotes access to internationally available new AI technologies. Various principles, provisions and guidelines in the WTO rulebook can support trade in AI systems and AI-enabled products by minimizing international negative spillovers. Examples include the non-discrimination principle and the Agreement on Trade-Related Investment Measures (TRIMS), which recognizes that certain investment measures can restrict and distort trade and states that members may not apply investment measures that discriminate against foreign products or lead to quantitative restrictions. When it comes to technical regulations, standards and certification procedures, the TBT Agreement provides that regulatory intervention shall not be discriminatory nor any more trade-restrictive than necessary to achieve the intended policy objectives, and that it should, when justified, be subject to periodic reviews. And the Agreement on Subsidies and Countervailing Measures (SCM) can play a crucial role in navigating the dual aspects of AI development, by promoting technological innovation while preventing negative spillovers in international trade from government financial support. 

The WTO can help to prevent and settle trade tensions and frictions. The practice of raising "specific trade concerns" (STCs) allows WTO committees to serve as a venue for defusing potential trade tensions with regulatory measures in a cooperative, pragmatic and non-litigious way. In the TBT Committee, for instance, members have already been using this practice to discuss and address concerns with regulations involving a wide range of digital technologies and issues, including IoT, autonomous vehicles, 5G in robotics, industrial automation, cybersecurity, and more recently AI. The WTO also serves as a global forum to settle trade-related disputes. While there has been no dispute on AI so far, the WTO Dispute Settlement System has dealt with resolving disputes related to various aspects of the digital economy. 

The WTO promotes inclusiveness through special and differential treatment and technical assistance for developing economies. WTO agreements recognize the constraints faced by developing economies and, for this reason, include various special and differential (S&D) treatment provisions to help them to implement WTO rules and participate more effectively in international trade. Technical assistance and capacity-building are key pillars of the WTO’s work and play a fundamental role in furthering understanding of the WTO rules and agreements, as well as of other topics relevant to trade. Multi-stakeholder programmes, such as Aid for Trade and the Enhanced Integrated Framework, could, however, be leveraged further to help developing economies seize the benefits of AI for trade. 

As a forum for negotiation, discussion and rule-making, the WTO provides a multilateral framework that can help address the trade-related aspects of AI governance. Nevertheless, AI may have implications for international trade rules. Although it is a new technology, AI is developing rapidly, and is certainly already advanced enough to be a subject of discussions at the WTO. Its cross-cutting nature requires a cross-cutting policymaking approach to promote policy coherence. 

While AI governance extends beyond trade, trade remains a crucial element within AI governance. The WTO can contribute significantly to developing a robust AI governance framework. This report is a first attempt to explore some key implications of AI for trade and trade rules. As AI continues to evolve, governments should continue to discuss the intersection of AI and trade and its possible implications for the WTO rulebook.

TRIPS

'A Regulatory Governance Perspective on IP and Access to Medicines–A Fresh Look Into the TRIPS Agreement' by G Ghidini and R Piselli in (2024) GRUR International comments 

As concerns the relationship between the Global South and the developed countries, the TRIPS Agreement provides a robust protection of IP. This might result in a weaker protection of fundamental rights, such as health, in those countries that do not possess the necessary know-how and industrial capacity to manufacture essential medicines. The recent Decision adopted at the 12th WTO Ministerial Conference provides the opportunity to focus again on the topic and deal with the issue of the clash between IP and the national interests of the least developed countries. Instead of addressing the problem by looking at the well-known flexibilities/inflexibilities of the Agreement, this paper proposes a different methodological approach that builds on the flourishing literature on regulatory governance. To this end, a multi-dimensional regulatory approach is suggested that simultaneously exploits a matrix of normative, market-based and cooperative instruments. While we wait for a more structural normative reform, a similar perspective not only proves to be useful from a theoretical perspective, but could also contribute to shedding a new light on the TRIPS Agreement.

Traditional Knowledge

'Traditional Knowledge as Intellectual Property Subject Matter: Perspectives from History, Anthropology, and Diverse Economies' (Queen Mary Law Research Paper No. 418/2024) by Graham Dutfield and Uma Suthersanen comments 

In May 2024, the World Intellectual Property Organization (WIPO), the UN specialised agency for intellectual property, will hold a diplomatic conference with a view to forging a new legal instrument to prevent patents from misappropriating traditional knowledge and associated genetic resources. Thus, after more than 20 years of discussion at WIPO, there is a genuine possibility of a binding legal instrument providing substantive protection of traditional knowledge. Whatever actually transpires, that in itself is a matter of socio-legal and historical importance. Our aim is two fold. First, we enquire whether treating traditional knowledge (TK) as an intellectual property (IP) problem lending itself to an IP-related solution can actually work. In this context, we take account of the likelihood of any adopted international instrument taking the form of a one-size-fits-all text providing legal protection for knowledge deemed “traditional” on the basis of its originating from autochthonous or other groups sharing similar circumstances and related, albeit far from identical, legal and economic interests. By autochthonous, we refer to peoples so rooted psychologically, spiritually and materially to their homeland that it is if they were sprung from the land; their land. Second, we consider whether alternative framings of “the TK problem” in more pluralistic and culturally informed and culturally sensitive forms within or outside IP law may be more promising. IP law of course arises from a myriad of rationales situated within different timelines but embedded within a largely Eurocentric or American discourse and worldview that may be an ill fit for autochthonous and other groups who one presumably are to be the beneficiaries of the kinds of instrument under negotiation. 

The perspective we adopt invites a more intercultural and better informed discourse within law itself, which we feel is absolutely necessary. This perspective is then juxtaposed on the diverse economies approach which seeks to harness different practices in order to break down our dominant view of the world as being predominantly capitalist, at least in the sense of being based on waged labour, and production of commodities for exchange in markets run by capitalist businesses.By employing a multidisciplinary and pluralistic approach, we can better address the challenges facing Indigenous people and governments in the context of current and forthcoming international rules on the governance of TK. 

Cartelisation

'COVID and structural cartelisation: market-state-society ties and the political economy of Pharma' by Matthew Sparke and Owain Williams in (2024) New Political Economy comments 

At first glance, the inequities in global access to effective vaccines against SARS-CoV-2 might simply be attributed to the raw power of so-called Big Pharma. These dominant pharmaceutical firms, after all, have long exercised concentrated control across global markets which have been structured in such a way as to support highly stable and globally entrenched forms of monopoly power (Malerba and Orsenigo 2015). The firms dominate over a series of product and national markets and a world-wide industrial sector involving high levels of profit and relatively low levels of competition. And while the rapid rise of Moderna and BioNTech would seem to tell a different story with their breakthrough mRNA vaccines for COVID, the larger pandemic picture appears on initial impressions to present a familiar outline of the dominant corporations like Pfizer using their market influence to secure yet more concentrated power and super-profits (Kollewe 2021). Forecasting full-year sales figures for COVID vaccines and Paxlovid totalling $56bn in late 2022, Pfizer CEO Albert Bourla boasted to investors that: ‘[W]e believe our Covid-19 franchises will remain multibillion-dollar revenue generators for the foreseeable future’ (Smyth 2022). Such hubris has so far proven merited. More widely, dominant pharmaceutical firms make vast profits year on year, even in ‘normal times’, and exercise a huge degree of market power. But this focus on firms and their profits is only one part of the more complex picture of their power. 

We start with some important definitional grounding work. First, for the purposes of clarity about the firms in question we define dominant pharmaceutical firms as global companies that structure national and global markets and the scientific orientation and business practices of dependent life sciences sectors. These firms also use their dominance and substantial market power to stymie market entry and erect substantial barriers to would-be entrants, beyond natural barriers to entry or first mover advantages, and not least via the patent system and other strategic resources and business practices. Mergers and Acquisitions (M&As) and other formal partnership arrangements are used to further build in market power and dominance, and to structure and control a wider innovation system. These firms are large and have market power (Banares 2016), but, just as importantly, they also possess intimate connections with regulatory, legal and research infrastructures they have co-produced with states. 

Second, while there is a degree of distinction between traditional pharmaceutical firms and biopharmaceutical firms, we note that large pharmaceutical firms have adapted and integrated the potentially disruptive technologies, particularly in their M&A and joint venture strategies toward small biotech firms. They have done so not least to diversify sources of drug discovery away from chemical-led processes and secure wider micro-biological bases for product pipelines and to retain control over a wider innovations system. We also note that the market strategies of biopharmaceutical firms are doing much the same. This is observable in their dominant relations with a diverse pool of smaller firms and their structural control of networked innovations systems; including through their defensive, offensive and product-pipeline diversification uses of M&As and their strategic uses of patents and trade secrets. Both sets of dominant firms are closely involved in the overall bioeconomy and in the production of medicines, therapies and diagnostics from which they extract enormous profits. We therefore simply refer to each category together as dominant pharmaceutical firms, as is increasingly common in industry analysis which collapses the two sectors in terms of the reporting and ranking of such firms by profits, revenues and sales. 

Third, we are not concerned here with deriving a comprehensive list of which firms are leaders and those that are not. Following Banares (2016), we acknowledge the preeminence of 15 or 20 pharmaceutical firms which are large and global in reach. These firms exercise market power across core high-income country pharmaceutical markets (which constitute the vast majority of the world market in terms of value) and more widely dominate the related sectors they sit at the apex of. These firms have technological, functional and managerial advantages over would-be rivals that provide the necessary assets and capabilities for their sustained market power and dominance (see especially Banares 2016, pp. 102–143). 

However, these giant pharmaceutical firms not only have substantial market power but also possess very strong formal and informal relationships with core high income states, where many of them have deep historical links and deeply embedded institutional ties. We also view it as important that all dominant pharmaceutical firms are still predominantly headquartered in key High-Income Countries (HICs), and their histories and strong associations with their more than nominal host states constitute one of the key bureaucratic, infrastructural and political bases of their continued dominance, despite their status as global companies that operate transnationally. 

Overall, it is precisely the confluence of hybrid market and political power associated with pharmaceutical oligopoly that is central to our understanding of enduring dominance by core firms, as well as the mix of strategic resources, power and agency that cement and reproduce it over time with little variation in the top 15 or 20 firms, other than routine consolidation between them. 

Our first claim is that focusing simply on the big profits of dominant pharmaceutical firms, or recounting their market and innovation strategies, misses the still bigger picture of market-state relations and structural power involved in their stable market dominance and oligopolitical relations (Gleeson et al. 2023). At the centre of these powerful relations, we argue here, is a political economy of what can be described as multi-layered, multi-levelled and nested structural cartelisation. Indeed, the kinds of explicit structural collusion revealed by the COVID crisis and state-backed defense of monopoly rights to new vaccines went far beyond the old image of conniving corporate executives fixing prices and plotting against competitors in smoke-filled board rooms. Typically, these traditional kinds of anti-competitive collusion have been understood to be organised outside of and in opposition to the capitalist state’s vaunted interest in creating competitive markets. In the terms of Adam Smith’s early critique of cartels, the resulting monopolies came to be seen as ‘formidable to the government’ (Smith, 1776). But in the oligopolistic global pharmaceutical sector, we instead see the cartelisation of market concentration being repeatedly co-constructed over time by governments in active and explicit collusion with dominant firms. 

Cartelisation in the pharmaceutical sector today, we therefore submit, involves a permissive and enabling series of entanglements between corporations, states and prominent societal actors. These entanglements have effectively been institutionalised and interlinked with one another as a series of dense regulatory, legal, financial and institutional arrangements for enclosing life sciences innovation into intellectual property (IP) as assets. These relationships and practices are concerned with turning its health value into economic value, and, in the words of Victor Roy’s important new critique, capitalising on cures (Roy 2023). Here, what can be described as the non-market environments and socio-legal infrastructures for pharmaceutical oligopoly are a major basis of durable market power and structural cartelisation. 

Although there are corporate practices and strategies apparent that evidence more recognisable 

forms of cartel-like behaviour (such as price fixing, market rigging and tacit collusion), structural cartelisation both describes and seeks to capture how dominance is facilitated by a combination of market and socio-political, legal and regulatory arrangements which are explicit and institutionalised nationally in HICs, and internationally in the global trade regime of the World Trade Organization (WTO) and over a series of partnerships and initiatives in global health. We therefore use structural collusion here in distinction to traditional understandings of how cartels operate by means of illicit and tacit coordination between firms. The high-level strategic coordination, and the routine bureaucratic and everyday arrangements between firms, states and key societal actors in global health are structurally embedded and rarely need coordination or discussion, involving collective behaviours, practices, shared rhetoric and assumptions (as is the case with the shared language games around the need for patents for innovation), formal and informal linkages, conjoint agency and shared strategic visions of dominance, competition and the basis for state and firm comparative advantages. These agencies act together and intersect to repeatedly produce a whole series of cartel-like outcomes in global political economy. 

Despite the endlessly-argued industry defense that the monopoly-pricing based on patenting creates an economic incentive for innovation, recent research shows there is in fact little relationship between profitability and drug discovery (Işık and Orhangazi 2022, Dosi et al. 2023). What we see instead is that structural cartelisation turns state investments, public goods and the public health value of pharmaceutical innovation into the captured economic value of private corporate profits. We also agree with legal historian Graham Dutfield’s assessment that any explanation of monopoly pricing and associated limitations on access to pharmaceuticals needs to be extended far back and far beyond a narrow focus on present-day patents to take account of the historical development of interdependencies between pharma and governments (Dutfield 2020). That said, we are in new terrain today where the resulting cartel effects are supported by even wider sets of international agency. As Dutfield himself details (2020), the public-private partnerships comprising today’s complex medical-industrial complex are new players in the structurally collusive system. As with other sectors, the pharmaceutical cartel now involves multiple types of strategic partnership in the expansion of monopoly power across global production networks (Sparke et al. 2023). What are described as 'partnerships' and 'foundations' in health and medicines are often part of this broadened agency involved in creating and cementing the collusive regimes of value capture from pharmaceuticals, while supplying it with an often thin semblance of legitimacy to the political economy of medicines which continues to produce such patently inequitable outcomes for would-be consumers and those in need of access (Lexchin 2021, Rushton and Williams 2012).  

In Section 1 we turn to the web-like arrangements of corporate monopoly power and the structures of firm-firm collusion made manifest by COVID. In Section 2 we next examine the networks of firm-state collusion that the pandemic has brought to the fore, including in undermining the proposed waiver from TRIPs rules at the WTO. And in Section 3 we explore the most novel and hybrid kind of collusion represented by the firm-state-philanthropy collusion that became apparent in the philathrocapitalist COVAX initiative. To begin with, though, we offer a short detailing of how our approach to structural cartelisation contributes as an original theorisation of contemporary political-economy.

WEF

'The World Economic Forum: An unaccountable force in global health governance?' by Desmond McNeill in (2023) Policy Insights comments 

The World Economic Forum (WEF) is a major player in global health governance. From its modest beginnings as a ‘symposium’ in Switzerland in 1971, it is now a large and powerful organisation. It is financed by fees from its 1000 business members, most of them global companies with over 5 billion dollars in annual turnover. It has approximately 800 employees located at its headquarters near Geneva and in regional offices in Beijing, New York, San Francisco and Tokyo. The WEF has been variously described as ‘a private NGO’ (Friesen, 2020: 91), a think-tank (Garsten & Sörbom, 2014) and a ‘prominent private international organization’ (Sharma & Soederberg, 2020). In 2015, it was formally recognised as an international organisation, enjoying NGO consultative status with the Economic and Social Council of the United Nations, setting it on what it calls ‘the next phase of its journey as the global platform for public-private cooperation’. 

The World Economic Forum is chaired by Founder and Executive Chairman Klaus Schwab. It is ‘guided by a Board of Trustees, exceptional individuals who act as guardians of its mission and values, and oversee the Forum's work in promoting true global citizenship’. The Managing Board acts as the executive body of the Foundation, with ‘collective responsibility for the execution of the Forum's strategies and activities’. The Board's membership is ‘divided equally between Members of the business community and Members representing international organizations, academia and civil society’. As Executive Chairman, Schwab remains ‘responsible for the overall strategic development of the organization’ (World Economic Forum, 2019b). As noted below, Schwab's position has recently come under challenge. 

The WEF promotes what Bull and McNeill (2007) referred to as market multilateralism, a form of global governance in which the private sector plays a major role. In the 15 years since then, WEF has become a much stronger force, not least in the health sector. It declares its mission as ‘improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas’. 

In the following, I first summarise how WEF and its philosophy have developed over its 50 years of existence. Drawing on recent literature, I then argue that three forms of power are particularly relevant with regard to WEF: convening power, discursive power and — more recently —‘entrepreneurial power’. It exercises convening power most notably in Davos, where the most powerful representatives of the private sector meet with heads of governments and international organisations. It exercises discursive power by shaping ideas through its role as a think tank. And its engagement in the design of PPPs, for example, CEPI (Coalition for Epidemic Preparedness Innovations), may be seen as the exercise of ‘entrepreneurial power’. 

Arising out of this analysis, I address the crucial questions of legitimacy and accountability. I suggest that the WEF might claim output legitimacy, insofar as it can be quite effective in achieving its aims. But it is surely weak with regard to input legitimacy. The WEF is a novel form of international organisation; its members—the 1000 firms that finance it—are from the private sector. But it appears to lack accountability—even to its own members.

IP Infringements

'The localization of IP infringements in the online environment: From Web 2.0 to Web 3.0 and the Metaverse' (WIPO Study, 2023) by Eleonora Rosati comments 

Over time, technological advancements have resulted in novel ways both to exploit content and to infringe rights – including intellectual property rights (IPRs) – vesting in them. Legislative instruments have consistently clarified that pre-existing rights continue to apply to new media, i.e., means to disseminate intangible assets, including in digital and online contexts. In terms of rights enforcement, however, the progressive dematerialization of content and dissemination modalities has given rise to challenges, including when it comes to determining where an alleged IPR infringement has been committed. 

The importance of such an exercise cannot be overstated: it is inter alia key to determining (i) whether the right at issue (e.g., a registered IPR) is enforceable at the outset, (ii) which law applies to the dispute at hand, as well as – in accordance with certain jurisdictional criteria – (iii) which courts are competent to adjudicate it. For example, determining that the relevant infringement has been committed in country A serves in turn to determine: (i) if the right at issue is enforceable at all, given that IPRs are territorial in nature. So, if the IPR in question is a national trademark, the infringement needs to be localized in the territory of the country where the right is registered; (ii) whether, e.g., country A’s law is applicable to the dispute at hand; and (iii) if, e.g., the courts in country A have jurisdiction to adjudicate the resulting dispute. 

This said, questions of applicable law and jurisdiction should not be conflated. Answering the former serves to ensure that a court does not have to apply more than one law, but rather only focus on the initial act of infringement to identify the law applicable to the proceedings. Vice versa, such a need to ensure that only one law is applicable does not exist in the context of jurisdiction rules, which frequently provide for more than one forum. 

The localization exercise described above has proved to be particularly challenging when the infringing activity is committed in a digital or online context. For infringements occurring in Web 2.0 situations, courts around the world have nevertheless progressively developed various approaches to localize the infringing activity, by considering the place where (a) the defendant initiated the infringing conduct (causal event criterion), (b) the infringing content may be accessed (accessibility criterion), and (c) the infringing conduct is targeted (targeting criterion). While none of these criteria is devoid of shortcomings, targeting has progressively gained traction in several jurisdictions around the world. Proof of targeting depends on a variety of factors, including language, currency, possibility of ordering products or services, relevant top-level domain, customer service, availability of an app in a national app store, etc. Overall, what is required to establish targeting is a substantial connection with a given territory. 

Another development is currently underway: it is the transition from the already interactive dimension of Web 2.0 to the even better integrated and more immersive reality of Web 3.0 (if not already Web 4.0!). It is expected that such a transition will be made possible by the rise of augmented reality, blockchain, cryptocurrencies, artificial intelligence, and non-fungible tokens for digital assets. In this sense, the progressive evolution of the metaverse will be pivotal. Even though the concept of metaverse has existed for over thirty years, it has recently been revamped. Thanks to the advent of the new technologies just mentioned, it is hoped that the “new” metaverse will be characterized by four main features: interoperability across networked platforms; immersive, three-dimensional user experience; real-time network access; and the spanning of the physical and virtual worlds. In all this, different metaverses have been developed already, which fall into two main categories: centralized and decentralized. The distinction is drawn based on whether the metaverse at issue is owned and ruled by a single entity, e.g., a company, or whether it is instead characterized by a dispersed network and decentralized ownership structure, e.g., a decentralized autonomous organization. 

While, as stated, it appears reasonable to consider the treatment of Web 2.0 situations as reasonably settled, the transition from Web 2.0 to Web 3.0 has the potential to pose new challenges to the interpretation and application of the criteria discussed above. The present study is concerned precisely with the legal treatment of such a transition. Specifically, this study seeks to answer the following questions: Can the same criteria and notions developed in relation to other dissemination media find application in the context of IPR infringements carried out through and within the metaverses? Does the distinction between centralized and decentralized metaverses have substantial implications insofar as the localization of IPR infringements is concerned? 

The IPRs considered are copyright, trademarks and designs. The analysis is limited to infringements committed outside of contractual relations and adopts an international and comparative perspective, without focusing on any specific jurisdiction. While examples from different legal systems are provided and reviewed as appropriate, by choosing such an approach it is hoped that a lens is offered through which the main questions at the heart of the present study may be answered in terms that are as broad and helpful as possible to different legal systems. Also of relevance to the question of enforceability of IPRs online and on the metaverse is the consideration of the subjects against whom claims may be brought and their legal basis: in this sense, the alleged IPR infringement that requires localizing may not only trigger direct/primary liability but also the liability of subjects other than the direct infringer, including information society service providers whose services are used to infringe. 

The study is structured as follows. Sections 1 and 2 detail the background to the present analysis, as well as its relevant objectives and approach. Section 3 addresses conflicts of laws issues. It reviews the relevant framework for the localization of IPR infringements in cross-border situations, having regard to international and regional instruments, as well as selected national experiences. This section further draws a distinction between unregistered and registered IPRs. Section 4 focuses specifically on digital and online situations and reviews academic and judicial discourse on localization approaches for the purpose of determining applicable law and, where relevant, jurisdiction. A discussion of the criteria based on causal event, targeting and accessibility – including their shortcomings – is also undertaken. Section 5 subsequently considers different types of subjects against whom infringement claims may be advanced, available remedies, and the type of resulting liability. Section 6 is specifically concerned with the different kinds of metaverse and determines whether the findings of the preceding sections may find satisfactory application in relation to this new medium, at least in principle. 

Insofar as the main questions presented above are concerned, the one asking whether the same criteria and notions developed in relation to other media may find application in the context of IPR infringements carried out through and within the metaverses is answered in the affirmative. It is further submitted that the distinction between centralized and decentralized metaverses – while of substantial relevance to the determination of enforcement options – may not have significant implications insofar as the localization of IPR infringements is concerned. 

Overall, this study offers as a main conclusion (Section 7) that, as things currently stand, the existing legal framework – as interpreted by courts in several jurisdictions in relation to Web 2.0 scenarios – appears to offer sufficiently robust guidance for the localization of IPR infringements, including those committed through the metaverse(s). All this is nevertheless accompanied by the caveat that substantial challenges might arise in terms of retrieving evidence that would serve to establish a sufficiently strong connecting factor with a given territory, for the purpose of both determining applicable law and jurisdiction. Furthermore, the diversity of remedies and enforcement options currently available across different jurisdictions begs the question whether the time has come for undertaking a more extensive harmonization of both aspects at the international and/or regional levels.

Plant Breeders

'Propagating materials and harvested materials: clarifying the scope of plant variety or breeder’s rights' by Charles Lawson in (2023) 18(9) Journal of Intellectual Property Law & Practice 655–672 comments 

Plant breeding faces the inherent problem of ensuring that there are no disincentives that might hamper breeders from delivering improved plant varieties to growers and bringing superior produce to consumers. Plant variety or breeder’s rights is one means of addressing these concerns, regulating for an incentive for plant breeders to develop these improved varieties. The International Convention for the Protection of New Varieties of Plants done, most recently, at Geneva on 19 March 1991 (UPOV 1991) provides a framework agreement consistent with the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights. UPOV 1991 provides for exclusive rights (variously called a variety right or a breeder’s right) for ‘propagating material’ and then extends this to ‘harvested material’ and the products of ‘harvested material’. The key effect of these regulated exclusive rights is to facilitate a royalty on new varieties by limiting the dealings with that variety as a reward and incentive to breed improved varieties — the virtuous cycle facilitating new and better varieties into the market for the benefit of consumers. The problem addressed by this article is the extension of the exclusive rights for ‘propagating material’ to ‘harvested material’ and the products of ‘harvested material’. This is essentially an issue about the meaning of ‘harvested material’, and specifically, that ‘harvested material’ that is also ‘propagating material’ should be considered ‘propagating material’ per se for the purposes of UPOV 1991 and national implementing laws.

'Access to biodiversity for food production: Reconciling open access digital sequence information with access and benefit sharing' by Brad Sherman and Robert J Henry in (2021) 14(5) Molecular Plant comments 

Over the last 40 years or so, a complex web of international legal agreements was developed that regulate the access, transfer, and use of plant genetic resources. These include the Convention on Biological Diversity (CBD), the Nagoya Protocol, and the International Treaty on Plant Genetic Resources (Figure 1). In developing these legal regimes, policy makers struggled to balance a number of conflicting demands. These included ensuring that access providers share in the benefits that arise from the use of their genetic resources; that users who value-add to genetic resources can protect their innovations via intellectual property; and, at the same time, that scientists and breeders have ongoing access to genetic resources. While there are problems with the existing regimes, they have reached an uneasy compromise of sorts. 

[graphic omitted] 

In recent years, dramatic changes in the life sciences have threatened to undermine this complex and fragile balance (Unamba et al., 2015). These changes have been facilitated by new genomic technologies such as gene editing and synthetic biology (McDaniel and Weiss, 2005), by improved and cheaper sequencing technologies (Shaffer, 2007) that rapidly increased the availability of DNA sequence data, and advances in whole-genome sequencing (Figure 1). Genomics is now a major source of data, rivalling big data disciplines like astronomy in the pace of data acquisition, storage, and analysis (Stephens et al., 2015). Open access international data repositories, such as GenBank, the DNA Databank of Japan, and European Molecular Biological Laboratory, that house a huge amount of DNA sequence-related data (estimated at over 1.5 billion sequences) (WiLDSI, 2020) facilitate the sharing and use of digital sequence information (DSI) (Ad Hoc Technical Group on Digital Sequence Information, 2020). The scientific value of public databases largely comes from the aggregation of data that allow scientists to identify patterns across the stored sequences (WiLDSI, 2020).

Comparative IP Law

'Everything You Want: The Paradox of Customized Intellectual Property Regimes' by Derek E Bambauer in  Berkeley Technology Law Journal,(Forthcoming)  comments 

Special interest groups share a dream: enacting legislation customized for, and hopefully drafted by, their industry. Customized rules created via legislative capture, though, are the worst case scenario from a public choice perspective: they enable narrow interests to capture rents without generating sufficient societal benefits. American intellectual property law offers useful case studies in legislative capture: special interests have created their own rules three times in the past forty years with the Semiconductor Chip Protection Act, Audio Home Recording Act, and Vessel Hull Design Protection Act. Paradoxically, though, these customized IP systems have consistently disappointed their drafters: all three of these systems lie in desuetude. This result challenges the conventional wisdom about regulatory capture by special interests, suggesting there is less to fear from legislative capture than most legal scholars believe, in intellectual property and beyond. The puzzle is why, when given free rein to design the rules that govern them, interest groups have done such a poor job in seizing that advantage. 

 

This Article brings together two scholarly debates. The first is within intellectual property: should IP doctrines be tailored by industry or comprise rules of general application? The second is within public choice: how risky is regulatory capture by special interests? 

 

The Article identifies two key reasons for the ineffectiveness of customized regimes. First, industry groups are fragile, fractal-like coalitions of disparate interests that often fracture between creators and copyists. Groups must choose between narrower, more politically attainable legislation and broader, more rewarding proposals that strain the coalition. Second, interest groups embed current business models and technologies into these systems, making regulation vulnerable to disruptive innovation. It explores how these findings affect proposals for customized regimes for artificial intelligence, weather data, traditional knowledge, privacy, and fashion. The Article concludes with a cautionary tale for interest groups that is otherwise welcome news: customized regimes are often less effective, and less threatening, than previously supposed.

Licensing

'Compulsory Licensing of Intellectual Property' by Enrico Bonadio in Cristiana Sappa (ed), Research Handbook on Intellectual Property and Inclusivity (Elgar, 2024) comments 

A specific IP built-in limitation to IP rights is compulsory licencing. Compulsory licences are mostly known in patent and to a lesser extent plant variety and copyright laws, while they are extremely rare in trademark law. The essence of an IP compulsory licence is that the authorisation to exploit the protected asset (e.g., an invention, a plant variety, a copyrighted work or a brand) does not come from the right holder. It comes from the government or the judiciary instead. 

The chapter focuses on this IP flexibility and notes how this legal and policy tool re-aims at introducing elements of inclusivity into IP regimes. It argues that compulsory licences, if granted in line with the relevant requirements under international and national laws, cannot be considered a negation of IP rights. Indeed, exceptions to IP are part of the very IP regimes which grant exclusive rights in the first place: in other words, they constitute the other side of the same coin.

Games, IP and AI

'Intellectual Property Law in Gaming and Artificial Intelligence' by Enrico Bonadio and Alina Trapova in Chris Bevan (ed), Handbook on Property Law & Theory (Elgar, forthcoming 2024) comments 

This chapter focuses on copyright and patent aspects of AI in gaming. As is known, copyright law protects original creative expression, while patents safeguard new inventions capable of industrial application. On the copyright side, the central classic question is what video games are in terms of protectable subject matter. This issue of the video games’ legal nature is rather old, but still pertinent topic. By now, it has been widely accepted that video games are complex subject matter from a copyright perspective, comprising not just a software, but also graphic and sound elements that contribute to the unique creative value of the game. That said, different jurisdictions adopt varying approaches to the nature of video games with some classifying them as predominantly computer programs and others dissecting the different elements in the game or treating the game as an audio-visual work as a whole. Patents instead have historically attracted less attention. Nonetheless, these can be extremely important for some hardware, software, development tools and other middleware companies, but as it currently stands the considerable cost tied to patents renders them less utilised in the field. 

Against this background, AI has stepped in to not only disrupt classical IP models, but to also offer a wide range of immersive interactive experiences for gaming; thus, opening new avenues for exploitation. As far as copyright law is concerned, the infusion of an AI element into the game provokes questions of authorship when it comes to in-game creativity. Put differently, who is the author and owner of creative expressions when they are created by players within the context of playing the game where certain interactions are driven (and often dictated) by AI? When it comes to patents and AI in this industry, central issues revolve around whether inventions covering the video games’ mechanics constitute patentable subject matter because they have technical features (and not just an unpatentable set of rules developed to be executed by hardware including a console or computer); and in general, whether patents protecting video games are too broad so as to discourage technological progress in this field. 

This chapter starts with a brief explanation of the influence of AI in gaming (Section 2). It then moves to sketch out the copyright law authorship and in-game creativity challenges (Section 3). Next, it turns to the several patent law conundrums in the field (Section 4). The final part (Section 4) concludes the discussion by arguing that while AI in gaming has been rather recently implemented, the fast pace with which this creative industry develops will certainly quickly transform the experience of video game players, but also the manner in which one understands (intellectual) property in-game.

Productivity

The Productivity Commission's 5-year Productivity Inquiry: Key to Prosperity - Interim report proclaims 'Productivity is the key to prosperity' before commenting 

 The unevenness of productivity growth — both in its causes and effects (cost, quality and novelty) — makes it is hard to measure. But the evidence suggests that like its global peers, Australia’s productivity growth has slowed in the last two decades. 

Recapturing the productivity growth rates of the past could yield large benefits in extra income alongside a reduced working week. But productivity faces some headwinds. One is the gradual but dramatic rise of a predominantly services based economy. Ironically, productivity growth in the production of goods has seen a shift of labour and other resources into services, which have risen to make up 80 per cent of the economy. Many services are delivered in person. Many are government funded and/or delivered. Often it has proven hard to automate aspects of the service, or otherwise economise on the labour input. Hence productivity growth in most services has been slower than traditional sectors like agriculture, manufacturing and mining, where capital has replaced much labour and new technology has driven large gains in overall productivity. Moreover, globally, Australia ranks lower in service sector productivity than we do in the goods sector. 

Slower productivity growth in services is a historical pattern. It need not be our future. New approaches, such as digital technologies and the better use of data (through artificial intelligence, for example) hold great promise for broadly based productivity gains, including in services. 

This does not mean that we will ignore productivity enablers in traditional industries. Rather, the point is to broaden the policy conversation about productivity to encompass the services sectors that now employ the bulk of the workforce. 

The COVID-19 pandemic has forced the take up of technology, including online retail, telehealth and remote work. It forced new realities on the producers and consumers of services — the sector hardest hit by pandemic restrictions. The adaptations forced by the pandemic (including of government regulators) are now opening new possibilities for future productivity growth, if we can grasp them. 

But the pattern of productivity growth could look different in services. Perhaps quality improvements will be more salient than cost reductions, making it even harder to accurately measure the gains. Service innovation could be focused less on the invention of new technology and more on its use, particularly for a small open economy like Australia. Getting value from university expertise could be as much about person-to-person connections as commercialising academic IP. A focus on service sector productivity forces a rethink and subtle adjustment of many traditional policy tools. 

Global forces are creating their own productivity headwinds. The need to decarbonise the economy is one. Decarbonising represents an effort to reduce costs — specifically the cost of carbon emissions not hitherto counted in firm profits or GDP. It will require global and local innovation, strong partnerships between the public and private sector and significant new investment — partly to replace rather than add to the existing capital stock. Australia’s success in meeting this challenge efficiently will be a key determinant of our overall productivity performance in coming decades. 

Heightened geopolitical tensions and supply chain disruptions also pose a challenge. Global trade and investment have been a great benefit to Australia as a small open economy. Building supply chain resilience (and redundancy) might be attractive to some firms, but will almost certainly increase costs, and prices faced by consumers. Any fragmentation of the multilateral rules based order could crimp the benefits to Australia from trade and investment flows.

In response the Commission offers 'areas of policy focus', 'broad enablers, rather than targeted predictions'. 

The areas of policy focus are: • Innovation policy and diffusion of new processes and ideas: Policies that foster a business environment that encourages efficiency, innovation and diffusion. • Data policy, digital technology and cyber security: The economy-wide importance of data and the digital technologies that generate and use data, as general purpose technologies that could boost productivity in many areas of the economy, including services. • A productivity-friendly business environment: Limiting impediments to business investment, a flexible workforce, sound regulation and an efficient approach to decarbonising the economy. • A skilled and educated workforce: The importance of education in driving productivity growth through increasing human capital and creating settings conducive to technological breakthroughs and adoption. 

 Key points are 

 Productivity growth — producing more outputs, with the same or fewer inputs — is the only sustainable driver of increasing living standards over the long term. While economic growth based solely on physical inputs cannot go on forever, human ingenuity is inexhaustible. 

Sustained productivity growth is a relatively recent historical phenomenon. It has ensured that modern life is richer in potentially every sense compared to any time in the past.

• Over the past 200 years, productivity growth has lifted hundreds of millions of people out of poverty and has led to a dramatic increase in living standards for the vast majority of the world’s population. 

• Technological developments and inventions — including vaccines, antibiotics and statins — have driven huge increases in the quality and length of life over the past century.

 The benefits of productivity growth come in the form of:

• goods and services that cost less, in terms of number of hours employees need to work to afford them 

• goods and services whose quality improves over time 

• completely new goods and services invented to improve everyday lives. 

In practice, novel products, improved quality and reduced cost often blend together. 

As goods and services become more affordable, people can work fewer hours and consume more; over the past 120 years, the economic output of the average Australian is up 7-fold, while hours worked have consistently fallen. 

While productivity growth is an imperfect measure of rising wellbeing, lifting the rate of productivity growth is an essential element of any policy strategy aimed at increasing the collective welfare of the Australian community. Productivity growth relaxes the constraints of scarcity and opens up opportunities — for individuals, businesses and the general community. 

Australian productivity growth is at its lowest rate in 60 years. This broad-based slowdown has been observed across advanced economies.

• Australia’s productivity performance in the goods sector, including mining and agriculture, is consistently strong when compared to global peers. Australia’s services — which employs almost 90 per cent of Australian workers and accounts for about 80 per cent of economic activity — are comparatively less productive. 

• Australia has slipped down the productivity rankings recently and has instead maintained its rich country status largely through increasing the share of people in the workforce. 

The Australian economy faces challenges bouncing back from its recent poor productivity performance. These include:

• Continuing increase in the size of the services sector, where productivity growth has historically been more difficult to achieve than in the traditional goods sectors (e.g. mining, manufacturing and agriculture). 

• A fast growing, government funded and regulated, non-market services sector (e.g. aged care, schools, childcare and disability services), where a lack of competition and contestability can mask underperformance and the freedom to innovate and the sharing of new approaches can be limited. 

• Impacts of climate change and the task of decarbonising the Australian economy in line with international commitments. 

• Threats to open and flexible international markets for trade, capital and labour — which has benefited Australia enormously in the past — as some countries turn inwards in the face of increasing global tensions. 

COVID-19 prompted an acceleration in the uptake of digital technologies across the Australian economy and showed that when governments, businesses and households worked together they could adapt quickly, including to remove long standing productivity bottlenecks. 

As the economy evolves in the wake of COVID 19, increased digital capacity could lead to a productivity dividend, particular in the services sector. Taking advantage of the opportunities afforded by digital technology — such as online service delivery, artificial intelligence and data analytics — will require:

• governments and businesses continuing to adopt and adapt innovative business models. 

• a suitably skilled workforce (and training infrastructure) adept in non-routine tasks. 

• access to data, much of which is collected through businesses reliant on funding or regulation of governments, is not unduly locked down.

Productivity growth relies on the generation and spread of ideas that enable businesses and other product and service providers to deliver more (in quantity, quality or variety), from less. Institutional and policy settings play a key role in providing the frameworks and capabilities that enable and support this process. 

Considering the current context and headwinds to productivity growth, this review will focus on the broad cross sectoral enablers to productivity growth — what we must have in place to enable businesses to adapt efficiently in a rapidly changing environment. The policy areas of focus are:

• Innovation and diffusion of new technologies, processes and ideas: including openness to foreign direct investment, ideas and skills; collaborations between businesses and universities and other channels for knowledge transfer; removing unnecessary regulations that discourage the diffusion of new ideas from the global frontier; and aligning incentives for innovation and information sharing in government services. 

• Data, digital technology and cyber security: The economy wide importance of data and the digital technologies that generate and use data, as general purpose technologies that could boost productivity in many areas of the economy, including services. 

• A productivity friendly business environment: Limiting impediments to employment and investment, including through openness to trade and foreign investment, which is critical for Australia’s relatively small economy; providing policy settings that facilitate efficient emissions reductions and energy security and reliability; sound macroeconomic policy frameworks and competitive and contestable markets 

• A skilled and educated workforce: The importance of education in driving productivity growth through increasing human capital and creating settings conducive to technological breakthroughs and adoption. 

The inaugural 5 Year Productivity Inquiry released in 2017 — Shifting the Dial — provides a basis for productivity-enhancing reforms that the current Inquiry can build on. Shifting the Dial detailed a blueprint — much of which is still very relevant today — to achieve productivity growth in several sectors of the economy, including within government itself. It focussed on delivering benefits for Australian consumers.