In response to the Intellectual Property waiver proposal submitted to the WTO TRIPS Council by India and South Africa in October 2020 (revised in May 2021), the Ministerial Decision on the TRIPS Agreement, adopted at the 12th WTO Ministerial Conference (12-17 June 2022, Geneva), has clarified and simplified the authorisation procedure of compulsory licensing. This would allow low-income countries to have equitable access to life-saving Covid-19 vaccines, hopefully halting the spread of the epidemic. As far as Covid-19 vaccine manufacturing and supply are concerned, a few prerequisites, such as ‘predominantly for domestic market supply’, are waived for five years.
Some labelled the Decision as ‘the most devastating outcome’ of the MC12 and “a technocratic fudge aimed at saving reputations, not lives”. Yet, this outcome addresses those concerns, raised by India and South Africa, about developing countries facing ‘institutional and legal difficulties’ when using policy flexibilities provided by the TRIPS Agreement, such as compulsory licensing. The latter is a TRIPS flexibility that can provide affordable generic versions of patented pharmaceutical products. In the absence of a voluntary licence and with a simplified procedure to authorise a compulsory licence, developing countries will have a prompter and affordable access to Covid-19 vaccines.
The issue of equitable access to vaccines has brought intellectual property (IP), especially patents, in the spotlight, questioning their legitimacy. The interplays between trade and IP go beyond vaccines and the philosophy of how IP stimulates trade is well established. In the following, IP’s three lesser-known functions vis-à-vis trade will be explained. The Sino-US tech dispute that we have witnessed in recent years has also added new dynamics between trade and IP. Therefore, the issues of forced technology transfer and national security will be equally discussed below.
Promote public good and the needs of developing countries
IP, including patents, is monopolistic in nature. When it comes to the health sector, it appears to conflict with public good. However, they are not necessarily in opposition to each other. The TRIPS Agreement strikes a fair balance between IP (a private property) and public health (a public good). Article 7 calls for IP protection and enforcement to be conducive to social and economic welfare. On the other hand, Article 8 sanctions WTO members to adopt necessary measures to protect public health and promote public interest (as long as their measures are consistent with TRIPS). This also indicates that a patent holder’s rights and legitimate interests, as those of third parties, must not be unreasonably harmed when pursuing a public health objective. Indeed, a patent holder’s exclusive rights of exploitation (for a limited time) in trade must be considered as a guarantee to incentivise and promote innovation – which is, after all, the premise of patent rights protection.
In the spirit of promoting public goods, TRIPS provides developing countries and least developed countries (LDCs) with two special and differential treatments. Article 66 provides them with a longer transitional period to implement the TRIPS Agreement and encourages technology transfer. As for LDCs, their obligations related to pharmaceutical patents and undisclosed information will not be enforced until
Moreover, Article 67 compels developed countries to provide, upon request, technical and financial cooperation in favour of developing and LDCs, including capacity-building on IPs protection and enforcement.
Summarising, the TRIPS agreement provides (theoretically) enough tools to promote public health, while also protecting the holder’s rights. Whether to use them or not is a decision that falls to the member states’ assembly.
(Forced) Technology transfer
Moreover, IP has a direct influence over technology transfers, a legitimate component of trade. Article 66.2 of the TRIPS Agreement obliges developed countries to provide incentives to their enterprises and institutions for promoting and encouraging technology transfer to the LDCs. The goal is to create a sound and viable technological base.
Technology transfer can bring about public goods, too. In the course of the Covid-19 pandemic, many technology transfer activities took place to tackle it more effectively. The most obvious achievement was that the crop of approved Covid-19 vaccines were developed within 12 months, instead of 10 years, as is usually the case.
On the other hand, forced technology transfer distorts trade and investment. In the context of the EU’s complaint against China, submitted to the WTO Dispute Settlement Body (DSB) (DS549), forced technology transfer regarded both barriers to market access as well as weak IP protection. The US also accused China of forced technology transfer (DS542), though this complaint lapsed in June 2021.
Such complaints are based on some Chinese industrial policies, practices and acts that follow the mantra of ‘market for technology’. The Chinese government allegedly incentivises technology transfer at different administrative levels, by offering foreign investors privileges and opportunities in return. After joining the WTO, China pledged to eliminate what could be considered essentially a barter treatment. In relation to weak IP protection, foreign IP holders are allegedly often subject to mandatory, non-market-based contractual terms, when transferring technology to Chinese local enterprises. Consequently, foreign IP holders’ exclusive rights to exploit their IP are not guaranteed – and this is a breach of the TRIPS Agreement.
In the same breath, it is noticed that some foreign investors have incorporated technology transfer into their business strategy in China. This suggests that certain foreign-local technology transfer activities conducted in China are not necessarily forced – although they are still being subject to the same ‘barter treatment’. For example, after winning its first railway project in China in 1958, the French rolling stock manufacturing company Alstom established 11 joint ventures and seven wholly foreign-owned enterprises in the country, with the aim of facilitating ‘localisation’ – a practice often conditional to Foreign Direct Investment (FDI) – and to deliver a 'made in China' solution’. It will be interesting to see where the DSB draws a line between forced technology transfer and exchange of monopolies, in such cases of ‘market for technology’.
In recent years, another oft-heard, IP-related issue regards ‘national security’, especially amidst an all-out . Some core technologies, such as space and semiconductors, involve highly sensitive data. Access through licensing is therefore prohibited on the grounds of national security. Nonetheless, a ‘national security’ label has also been conveniently applied across many other technologies (as in many trade areas), bordering on paranoia.
Again, technology transfer is a legitimate component of international trade. Although national security concern may be justifiable in certain cases (even for foreign policy purposes), it should not be instrumentalised as a trade protectionist tactic, to the extent of disrupting international trade.
Indeed, many countries have incorporated ‘confidentiality reviews’ in their respective patent legislation. Under this clause, a ‘home-made’ invention must be submitted to the national patent authority for confidentiality clearance before applying for patent protection abroad, or for an international patent. Based on objectivity,
China and the US are both at the cutting edges of innovative technologies. They have their own tech specialisations, but none of them can claim to be an all-round global leader in innovation. Their competition, based on TRIPS or other international rules, should be welcomed as it stimulates technological advancement of our society as a whole. Innovation should be safeguarded through IP protection and exploited through trade for reward. What is uncalled for is abusing ‘national security’ and distorting trade.
In conclusion, IPs stimulates trade, but the search for a balance between IPs and public good is expected to continue; so is its battle against market abuse and politicisation.