Colombia Makes the Case for Rethinking Patent Exclusivity (and for Considering Prizes)
In mid-July, Colombia submitted a communication for discussion in the TRIPS Council entitled "A Better Trip: Autonomous Examination of TRIPS Prerogatives, and Existing Examples." The communication includes some interesting and provocative ideas related to policies for encouraging innovation. Colombia is trying to trigger an international discussion of these policies, although it is likely to face strong headwinds.
First up, Colombia explains how the TRIPS Agreement uses intellectual property rights to reward, and therefore encourage, innovation, focusing on the example of patents. A key point of the submission is that there are two separate elements (which it refers to as "prerogatives") – exclusivity and remuneration – of the patent reward system:
1. Colombia notes that the TRIPS Agreement establishes two main mechanisms to reward innovation through the protection of intellectual property rights (IPRs): i) exclusivity and ii) profit potential. Indeed, in the example of patents, Article 28 of the TRIPS Agreement states:
Article 28 – Rights Conferred
1. A patent shall confer on its owner the following exclusive rights:
(a) where the subject matter of a patent is a product, to prevent third parties not having the owner's consent from the acts of: making, using, offering for sale, selling, or importing for these purposes that product;
(b) where the subject matter of a patent is a process, to prevent third parties not having the owner's consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.
2. Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.
2. According to the aforementioned article, a patent holder has two distinct prerogatives. The first is a prerogative of exclusivity, which prevents third parties from performing certain acts with respect to the patented product or process without their consent. The second is a prerogative of remuneration, under which a given use generates an entitlement to compensation. In the ordinary patent bargain, the two are bundled. However, as discussed below, the multilateral IP framework already recognizes configurations in which a right to remuneration is preserved independently of any power to prohibit use. Because the two prerogatives differ in scope and serve different functions, they do have distinct effects on innovation, access, market competition, technological diffusion, industrial learning and development.
(footnote omitted)
Colombia then notes the downsides to the exclusivity element:
4. Regarding the possibility of excluding third parties from using a technology, this prerogative can generate tensions with technology users, limit cumulative innovation, hinder interoperability, restrict competition, or increase barriers to entry, both for companies in industrialized and developing countries. Among countries, this exclusivity often serves as an industry protection, as it creates a "moat" in a specific market, with potential significant effects on other countries and its technological upscaling and development strategies.
On the other hand, Colombia sees the remuneration element as more positive and talks about the possibility of applying it independently of exclusivity:
5. By contrast, the remuneration prerogative – the possibility of receiving remuneration for a technological contribution – is in many cases sufficient on its own as a legitimate and sufficient incentive for innovation, without the negative impacts. The differentiated effects of exercising or privileging one of these two prerogatives over the other are relevant to the design of an optimal IPR reward system. In this context, the question is not whether innovators should be rewarded, but whether the reward should necessarily depend on the possibility of exclusion.
With regard to alternative approaches to remuneration that do not involve exclusivity, Colombia notes the following:
10. Other existing incentive mechanisms can inform this discussion. These include statutory licencing, related rights, pools, innovation awards, innovation inducement prices, reward funds, conditional public funding, open knowledge models, etc., under which the remuneration prerogative is kept, but the exclusivity one is not.
11. Taken together, these experiences demonstrate that the promotion of innovation could be better anchored focusing on the monetary rewards, without the potential adverse effects of granting temporary monopolies of exclusion.
(footnote omitted)
Colombia later elaborates on the point about separating out the two elements:
12. The international community could achieve significant progress on several IP discussions by independently analysing the two described prerogatives. Discussions on technology transfer, IP rights in pandemics, IP rights for environmental objectives, the role of the objectives, principles, and flexibilities of the TRIPS Agreement, VMAT for tech transfer (Voluntary and Mutually agreed terms), industrial protection and competition, etc., have proven to be almost intractable in different international fora. Exploring different models with autonomous prerogatives – for example, using different periods of protection for the two prerogatives, or providing market reward incentives by augmenting the remuneration mechanisms when a commitment to limit the right to exclude is made – could provide venues for better collective solutions. Likewise, the developmental dimension related to technology access and technology learning and technology upgrading, could be better served by treating the two prerogatives independently, and create a better scenario for trust and rule making at the WTO, even in the context of the reform of the organization.
Going forward, Colombia suggests the following discussion:
13. Consequently, Colombia, invites an exploratory thematic discussion on alternative innovation reward mechanisms currently in use, in which exclusivity has been modulated without eliminating the remuneration reward, and its effects on different types of industries and different types of countries.
In the English version of the document, the word "prizes" does not appear, but when I look at the Spanish version I think I see (using Google Translate) "innovation inducement prizes" (or maybe "awards") rather than "innovation inducement prices" (as stated in the English document), and Colombia clearly has something along these lines in mind. Prizes are arguably a better way to encourage innovation than the current patent system, so I'm glad Colombia raised this.
Colombia's communication was discussed at a meeting of the TRIPS Council on July 22-23. So far, all we have is the brief summary of the meeting put out as a WTO news item, which explains the reaction to the communication as follows:
Members also discussed a submission by Colombia entitled "Autonomous examination of TRIPS prerogatives, and existing examples" (IP/C/W/742). The submission invited members to consider thematic discussions on alternative innovation reward mechanisms, with a proposal to assess the impact of IP exclusivity as separate from a right to remuneration, and to discuss their effects across industries and regions. Some members expressed interest in continued dialogue on this topic, while others questioned the premise of the submission and emphasized the adequacy of the existing IP framework.
It's not too difficult to imagine which Members fell on each side of the debate. More details should be available soon when the minutes of the meeting are released, and I'll come back to it then if anything interesting was said.