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Intellectual Property Rights, Plant Genetic Resources and Traditional Knowledge

Intellectual Property Rights, Plant Genetic Resources and Traditional Knowledge

International Environmental Research Centre

INTELLECTUAL RIGHTS, GENETIC AND TRADITIONAL KNOWLEDGE

Philippe Cullet, Christophe Germann, Andrea Nascimento & Gloria Pasadilla

Published in: S. Biber-Klemm & T. Cottier eds, Rights to and Traditional Knowledge: Basic Issues and Perspectives (Wallingford: CABI, 2006) p. 112-154.

This paper can be downloaded in PDF format from IELRC’s website at http://www.ielrc.org/content/a0610.pdf

International Research Centre [email protected] www.ielrc.org 3 Rights, Plant Genetic Resources and Traditional Knowledge1

Philippe Cullet,a Christophe Germann,b Andrea Nascimento Müllerc and Gloria Pasadillad aSchool of Law, School of Oriental and African Studies, University of London, Thorn- haugh Street, Russell Square, London WC1 0XG, UK; bInstitute of European and International Economic Law, University of Berne, Hallerstrasse 6, CH 3012 Berne, Switzerland; cLegal Advisor, Rue de Lyon 48, CH 1203 Geneva, Switzerland; dPhilippine Institute for Development Studies, NEDA Building, Amorsolo Street, Makati City, Philippines

3.1 Introduction2 mergers and acquisitions) that can reduce competition. It also includes a case 3.1.1 Overview study pertaining to the seed sector to illus- trate consequences of concentrations This chapter addresses in its first part the among economic players that are detrimen- economic rationale of forms of protection tal to public policies such as the promotion that are granted under intellectual property of and . This analysis is and policies. In its second part, this relevant for our purposes as favourable chapter will discuss protection, impacts of intellectual property rights on plant breeders’ rights (PBR) and sui generis biodiversity may be jeopardized by anti- forms of protection. It shall in particular competitive behaviours without appropri- explore the impact of these forms of protec- ate safeguards. tion on traditional knowledge related to The question of intellectual property plant genetic resources and, more broadly, rights is relevant both to promote TK on biodiversity and equity (benefit sharing). related to plant genetic resources (their This assessment under existing laws (de function as ‘positive rights’), and to prevent lege lata) shall be completed by brief case of these intangible values studies to illustrate the legal issues at stake by third parties to the disadvantage of local and shall propose solutions. The last part of communities and individuals (their func- this chapter outlines the impact of intellec- tion as ‘defensive rights’). As positive tual property rights on competition laws rights, IPR may be used as complementary and policies. It describes certain contrac- or alternative instruments with respect to tual practices (licensing, patent pools, subsidies in order to promote the sustain-

1 The authors would like to thank Martin Girsberger and Marie Wollheim for their comments on this chapter. 2 Author: Christophe Germann.

112 © The Swiss Agency for Development and Cooperation 2006. Rights to Plant Genetic Resources and Traditional Knowledge (eds S. Biber-Klemm and T. Cottier, assoc. ed. D. Szymura Berglas) IPR, PGR and Traditional Knowledge 113 able maintenance and further development property has been essential since the begin- of TK. As defensive rights, IPRs, as adapted ning. This component to the needs of TK holders and in line with was originally based upon reciprocity con- applicable public policy goals, may serve to siderations, and more recently has obeyed prevent abusive use of classical IPR in the the rationale underlying international trade context of TK related to plant genetic rules. It is materialized by way of bilateral resources. Both approaches require an as well as multilateral agreements such as understanding of the rationale underlying the Berne, Paris and Madrid conventions the grant of IPR and a stocktaking of the and, since 1995, the Agreement on Trade- scope of existing forms of protection. The Related Aspects of Intellectual Property purpose of this chapter shall therefore con- Rights (TRIPS) that forms Annex 1c of the sist of the provision of a basis in order to Agreement Establishing the World Trade elaborate ideas and concepts that would Organization (WTO).4 allow the use of IPR for the benefit of the Intellectual property laws provide so- sustainable promotion of TK related to called exclusive or erga omnes rights, i.e. a plant genetic resources. bundle of legally enforceable interests vested with their owner, who can oppose them against any third party. Based on law, 3.1.2 Forms of intellectual property the holder of intellectual property rights protection has the to authorize or prevent others from acting in certain ways with The term ‘intellectual property’ refers to a respect to these specific rights. As regards set of intangible products of activity the economic aspects, the holder has the that are legally defined. right to perform activities enabling him or addressing intellectual property can be her to commercially exploit the results of located on the national, regional and global their research and development efforts on levels of .3 The legal compe- an exclusive (‘erga omnes’) basis that pro- tence among national, regional and interna- vides for a competitive advantage. In addi- tional to define, grant and tion, the holder may be granted enforce intellectual property rights consti- non-economic rights in certain jurisdic- tutes the international component of intel- tions, such as inalienable to lectual . One of the main oppose mutilations of the work under characteristic features of this system in author’s rights laws (e.g. Article 6bis of the the principle of territoriality: the geograph- Berne Convention) or, more generally, the ical scope of application of intellectual right to be named as author or inventor property laws is the territory of the state or under the or patent laws of most community of states that has generated the European countries (see for example Article corresponding rights and obligations. How- 62 of the European Patent Convention ever, because the protection granted under ‘EPC’). intellectual property laws intrinsically Intellectual property laws usually con- requires a cross-border extension, the inter- tain provisions concerning their scope of national law component of intellectual protection, the exclusive rights granted, the

3 Plant variety protection for example is addressed nationally by plant variety such as the Swiss Act on Plant Variety Protection of 20 March 1975, regionally by supra-national rules such as the Council EC No 2100/94 of 27 July 1994 on Community Plant Variety Rights, and globally by the UPOV Convention and Article 27.3(b) TRIPS. See also infra-sections II. C. and D. on Plant Breeders’ Rights and sui generis protection systems. 4 See the TRIPS Agreement under http://www.wto.org/english/docs_e/legal_e/legal_e.htm. For a detailed commentary on the TRIPS Agreement, see Cottier (2004). For the texts of international administered by the World Intellectual Property Organization (WIPO), see http://www.wipo.int/treaties/index.html; national on intellectual property in English may be downloaded from the Collection of Laws for Electronic Access (CLEA) under http://clea.wipo.int/clea/lpext.dll?f=templates&fn=main-h.htm&2.0 114 P. Cullet et al. limitations to such rights, the duration of individual efforts is to be encouraged for protection, the enforcement mechanisms the benefit of in a market economy, and the sanctions for infringement. Once private actors typically need incentives to the period of protection has expired, intel- invest material resources in such efforts. lectual property falls into the so-called These incentives may take the form of sub- . Intellectual property is sidies, or other advantages such as private ubiquitous as opposed to property on tangi- property titles. In the latter case, the state ble property (real , movables). This grants intellectual property rights (IPR) to means that this form of property cannot be creators or innovators upon the fulfilment limited to a particular physical body incor- of certain conditions. These competitive porating the right: it is attached to all mate- privileges are usually limited in time, i.e. rial or virtual occurrences of the protected they last for the duration of the statutory work. Major forms of intellectual property terms of protection. They may take the form protection include: of for technical innovation or copy- right for creative achievements related to ● Patent and related industrial design. content (such as text, music, films and, ● Copyright and related neighbouring more recently, software, etc). The owner of rights. a patent or a copyright has, subject to cer- ● Integrated circuit layout. tain exceptions (e.g. compulsory licensing ● Geographical indications of origin. or ), the to use, repro- ● . duce, disseminate, market, etc., the pro- ● Plant variety. tected invention and content, respectively, ● Trade secrets (confidential information). for a given period of time. These terms of Within these main forms there are var- protection can vary from one jurisdiction to ious sub-forms.5 The relationship between another, so long as they comply with the these forms and sub-forms may vary over minimum duration set forth in interna- time, and different forms of protection may tional agreements such as the TRIPS agree- be available for the same intangible value. ment at the global or the EU directive at the In this sense, protection can be assured by regional level. sequentially using different forms. For The World Intellectual Property Orga- example, a pharmaceutical product may nization (WIPO) summarizes the rationale first be protected by patent and, after the underlying the grant of IPR as follows: 6 expiration of the statutory protection term, The primary purpose of most branches of enjoy protection for an indefinite the IP system (excluding trademarks and duration of time, since the terms of trade- geographical indications) is to promote and mark protection can be renewed indefi- protect human intellectual creativity and nitely. innovation. IP law and policy does so by striking a careful balance between the rights and interests of innovators and cre- 3.1.3 The functions of intellectual property ators, on the one hand, and of the public at large, on the other. Thus, by granting exclu- rights sive rights in an invention, for example, the IP system encourages further innovation, The various forms of protection are gener- rewards creative effort, and protects the ally tailored to fulfil various legal, eco- (often substantial) investment necessary to nomic and social functions. While make and commercialise the invention. creativity or innovation requiring qualified The patent system also encourages people

5 For an introduction to these various forms of protection, see WIPO, Intellectual Property Reading Material (: August 2003), on http://www.wipo.org/news/en/index.html?wipo_content_frame=/news/en/ documents.html 6 The minimum duration of patent protection for Members of the WTO is 20 years according to Article 33 TRIPS. IPR, PGR and Traditional Knowledge 115

to disclose inventions, rather than retain research, but can be copied easily, there is them as trade secrets, thus enriching the unlikely to be a sufficient financial incen- store of publicly available knowledge and tive from society’s point of view to devote promoting further innovation by other resources to invention (CIPR, 2002, pp. inventors. Thus, public dissemination is an 11–14). important IP objective. Copyright and other In short, IPR are thus entitlements IP brands work in a similar way. The progress and well-being of humanity rests granted under law to reward creative or on its capacity for new creations in areas of innovative intellectual efforts. IPR protect technology and culture. The promotion and intangible wealth, which can often be easily protection of IP can also spur economic appropriated and reproduced. One of the growth, create new jobs and industries, and characteristics of intellectual creativity is enhance the quality and enjoyment of . that it can be used and reproduced without However, the IP system also responds to depriving the creator of , as the needs of the public at large. Most IP opposed to tangible wealth, which is usu- rights are of limited duration, after which ally subject to finite limitations of owner- the protected creations falls into the public ship and/or use. Furthermore, the products domain (only trademarks may be renewed indefinitely, and geographical indications of intellectual creativity can often be repro- can subsist indefinitely).7 duced at very limited marginal costs. Inno- vators and investors in innovation have Intellectual property is a form of therefore called for the development of a knowledge that have decided can mechanism to protect the intangible wealth be assigned specific property rights. They associated with intellectual creativity. have some resemblance to rights over physical property and . Intellec- tual property creates a legal mean to appro- 3.2 The Protection of TK Related to priate knowledge. A characteristic of Plant Genetic Resources8 knowledge is that one person’s use does not diminish another’s use of it (e.g. reading a 3.2.1 Definitions9 text). Moreover, the extra cost of extending use to another person is often very low or During the second half of the 19th century, nil (e.g. copying an electronic file). From the first modern patent laws were adopted the point of view of society, the more in several European countries – in Britain people who use knowledge the better, in 1874, Germany in 1877 and Switzerland because each user gains something from it in 1887, whereas The Netherlands only at low or no cost, and society is in some reintroduced a patent system in 1910, sense better off. Economists therefore say which became effective in 1912; as well as that knowledge has the character of a non- in the USA (the initial Act of 1793 was rival public good. The other relevant fea- revised in 1836, 1870 and 1874) and in ture of knowledge, or product embodying Japan (1885).10 At that time patent legisla- knowledge, is the difficulty of preventing tion was essentially designed to protect others from using or copying it. Most prod- mechanical and conventional chemical ucts can be copied at a fraction of the cost it inventions within industrialized countries. took to invent and market them. Econo- With the passage of time a number of new mists refer to this characteristic as con- technologies emerged for which patentabil- tributing to market failure. If a product ity was affirmed, most recently for biotech- takes considerable effort, ingenuity and nology and, at least in certain jurisdictions,

7 WIPO, Intellectual Property Reading Material, see note 5. http://www.wipo.org/news/en/index. html?wipo_content_frame=/news/en/documents.html 8 Author: Christophe Germann. 9 See also Chapter 1. 10 For an historical survey, see Machlup (1999, p. 224 ff.). 116 P. Cullet et al. for computer programs. Genetic engineer- erations. Furthermore, the results of infor- ing is part of , which gener- mal plan breeding are generally freely ally addresses the technical use of accessible to others, for example other biological processes. Modern genetic tech- informal plant breeders, collectors of nology is considered to have started in PGRFA, or the of the community 1973, when scientists were first able to bind (Girsberger, 1998, p. 1022). genetic material in vitro and to plant it into Accordingly, the analysis will encom- bacteria as well as to reproduce it for the pass traditional knowledge related to PGR first time. Biotechnology includes in general and to traditional PGRFA, and to in vitro culture, rhizobium technology, traditional PGRFA themselves, subsumed fermentation and more advanced tech- under the term ‘traditional knowledge niques that involve genetic engineering.11 related to PGR’. We shall confine our analysis to the protection of plant genetic resources (PGR) and their related know-how. Article 2 CBD 3.2.2 Patent protection defines ‘genetic resources’ as ‘genetic mate- rial of actual or potential value’. The Con- Introduction vention does not further clarify the meaning of value. According to this same In this section we shall outline the scope of article, ‘genetic material’ includes ‘any patent protection in general, and specifi- material of plant, animal, microbial or other cally explore the extent to which patent origin containing functional units of hered- protection is suitable for traditional knowl- ity’. Genetic resources therefore comprise edge related to plant genetic resources. genetic material of actual or potential value There is little doubt that patents are appro- of plant, animal, microbial or another priate for formal plant breeders’ innova- origin. One can distinguish between genetic tions. However, the advancement of resources of wild species, cultivated or biotechnology has focused attention on the domesticated species and their relatives, intellectual property situation of holders of and man-made genetic resources.12 traditional knowledge and traditional Girsberger proposes the making of an PGRFA. As a matter of fact, certain biotech- additional distinction between PGR and nological innovations draw substantial PGR used in the production of and value from these sources. It is therefore agricultural products (PGRFA), and offers a useful to assess the scope of patent protec- definition for a ‘traditional’ PGRFA, i.e. the tion for innovations related to traditional result of informal plant breeding activities. knowledge and traditional PGRFA in order He further defines ‘formal’ and ‘informal’ to better understand the various issues at plant breeding, the former type meaning stake and discuss the corresponding solu- plant breeding performed by private seed tions in later chapters. Relevant questions companies and public research institutions, include: What are the problems at the inter- and the latter type meaning plant breeding face between IPR and TK related to plant performed by individual farmers and genetic resources (see Chapter 7)? What indigenous and other rural communities, solution can patent protection provide to involving their traditional knowledge and traditional knowledge holders and holders know-how. A distinctive characteristic of of traditional PGRFA? What are alternative informal plant breeding is that the breeding forms of protection that could contribute to process usually proceeds over a long time reaching the relevant policy goals? How period, sometimes over several human gen- must patent protection be better adapted to

11 For detailed definitions of ‘genetic engineering’ and ‘biotechnology’ and further relevant terms, see Girs- berger (1998, p. 1023); and Girsberger (1999, p. 329 ff.) quoting ‘Legal Environment’. 12 Man-made genetic elements are the genetic resources of cultivated species that are characterized by a high degree of human intervention; see Heitz, Buenos Aires, November 1991, pp. 114 and 118. IPR, PGR and Traditional Knowledge 117

fit with the interests of traditional knowl- by patent registration-related administra- edge holders? tive practices and , mainly focused With the advancement of biotechnol- on the balance pertaining to the appropriate ogy, the question of patenting life forms level required for the criterion of inventive- became a central topic in the intellectual ness to be fulfilled. If the required inventive property law and policy agenda of industri- step is insufficient, there is concern for effi- alized countries. In turn, this agenda had, ciency induced by competition. In contrast, and still has, a significant impact on devel- if the required inventive step is prohibitive, oping countries, where arguably most valu- patent protection no longer works as an able sources of traditional knowledge incentive for research and development. In related to plant genetic resources reside. new technological fields, patent offices This discussion can be characterized by commonly tend to adopt a lax registration three main issues. First, there is the practice during the first stage, by requiring dichotomy of discovery versus invention; a relatively low inventive step. At a second secondly, the question of novelty and the stage, this practice is usually challenged by assessment of prior art and of the inventive competitors through . Even- step related thereto; and last, but not least, tually, the resulting case law typically leads the debate on and morality of patent- patent offices to be stricter and, thus, ing life forms. The track chosen in this area request a higher degree of inventiveness. by the USA was quite straightforward. It This and error approach means that the was driven by strong business interests, and initial broad scope of protection is subse- comparably weak opposition from other quently fine-tuned in order to reduce it to a concerned parties. In contrast, the legisla- level where ideally the incentive function tive process in the EU tended to consider that is underlying the grant of the exclusive non-business concerns, such as morality rights preserves sound competition among and equity, with more emphasis, most market actors. recently in the context of the elaboration The main concern of developing coun- and adoption of the Biotech Directive.13 tries resides in opposing their prior art With respect to the qualification of achievements against foreign corporations patentable ‘invention’ as opposed to non- that take undue advantage of them. This is patentable ‘discovery’, the landmark US generally the case when companies want to Supreme case Diamond vs register patents for inventions that draw Chakrabarty in 1980 stated that the relevant from traditional knowledge related to plant criterion is human involvement in nature genetic resources.15 Concurrent to this con- and not the distinction between inanimate cern is the legitimate aspiration of certain and living material. In a nutshell, if an traditional knowledge holders to take achievement can be shown to be human advantage of the intellectual property rather than natural, it should be open to system for equity as well as other policy patent protection, since human ingenuity considerations. In this context, the criterion should receive encouragement. A compara- of novelty can preclude protection for such ble approach also eventually prevailed in knowledge that is by definition traditional Europe and other industrialized regions or incremental. The insufficiencies of the and countries.14 current system, which is based upon The assessment of novelty remains a national and regional legislations, may lead highly sensitive ongoing issue, both in the to a situation where certain parties can North and in the South. In industrialized obtain patent protection for elements of tra- countries the trial and error process, driven ditional knowledge as inventions in their

13 See Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protec- tion of biotechnological inventions, OJ L 213, 30 July 1998, pp. 13–21. 14 For more detailed references, see text accompanying note 30. 15 See the case studies below, in particular the turmeric case study, p. 135. 118 P. Cullet et al. jurisdiction because of an insufficient prior According to Dunleavy and Vinnola (1999, art search, although these parties did not p. C11), the morality-based provisions in generate the knowledge, whereas the tradi- Article 6 of the EU Biotech Directive could tional holders of such knowledge may not arguably be considered to represent the be granted exclusive rights in other juris- most significant difference between future dictions because of the lack of novelty that European practice and established US prac- is inherent in this type of intellectual value tice. However, these authors perceive that achieved over generations. Although this is the USA appears to be moving towards an primarily an issue with respect to the US approach that is similar to that of the EU patent law and its definition of prior art, it regarding the patentability of these types of may inspire legislators in other jurisdic- inventions. In addition to the ‘morality’ or tions, and therefore cause a run to the ethical questions that specifically refer to bottom. Additionally, the difficulty to intellectual property rights in connection accede to existing TK when carrying out with living things, the very concept of pri- prior art search may be prohibitive if this vate ownership, as opposed to public TK is not documented in writing or in lan- domain or with guages the patent authorities are familiar respect to intellectual achievements, lacks with. Therefore, even though such searches legitimacy in certain Southern cultures. are carried out correctly, access to TK may The intellectual property system itself is not be possible in practice along the classi- largely accepted in industrialized coun- cal route. As of today, existing laws do not tries, and divergences of opinion mainly sufficiently address this issue, either on the focus upon the appropriate standards of national level, or on the international level. protection. In contrast, the ability to grant Some major industrialized countries are private rights to individuals or collectives reluctant to introduce anti-biopiracy mech- for works of mind remains contested, or anisms to oblige patent applicants to pro- even rejected, by many local communities vide relevant information pertaining to the in developing countries for moral or ethical use and sources of traditional knowledge or reasons. genetic material for their invention. These To summarize, the debate concerning mechanisms could take the form of more the patentability of TK related to PGR efficient novelty-destroying international addresses not merely technical issues, but prior art searches and procedures to assess presents a remarkable conceptual complex- prior informed (‘defensive rights’). ity: it is about the legal meaning of ‘inven- Switzerland, for example, proposed several tion’, ‘novelty’ and ‘property’, and beyond measures to combat ‘biopiracy’, e.g. to that, about the legitimacy and acceptance of establish an international gateway (or inter- the entire system. net portal) for traditional knowledge that The following section aims to provide a would link local and national databases, brief stock take of the patentability of life improving access to existing traditional forms in general, and specifically focus on knowledge by patent authorities and thus legal aspects that are relevant to traditional facilitating prior art searches. Switzerland knowledge related to plant genetic furthermore recommended amending the resources. It will furthermore outline the PCT abbreviation to explicitly enable the issues at stake in order to prepare the national legislator to require patent appli- ground for reflection throughout later sec- cants to disclose the source of genetic tions of this book concerning the resources/traditional knowledge in patent approaches that can be utilized to adapt the applications. current intellectual property system, and in Finally, the ethical and moral ques- particular patent protection, for the pur- tions respectively divide proponents and poses of maintaining and further develop- opponents of patent protection for living ing traditional knowledge related to plant forms, both in the North and in the South. genetic resources. IPR, PGR and Traditional Knowledge 119

The rationale of patent protection terms of protection. Thus, technological progress is promoted through a legal incen- Patents offer protection for inventions, i.e. tive, the patent, to diffuse the knowledge for solutions to specific problems in the relevant to the invention that the inventor field of technology. Patents define their could otherwise keep secret. By this line of owners’ exclusive rights pertaining to reasoning, the competitive privileges inventions. They are statutory privileges granted to the inventor may also be consid- that take the form of competitive advan- ered as an award for the investment in qual- tages that are granted by to ified inventive efforts that were already inventors for a specified period of time. performed, and as an incentive to proceed Patents provide, at least in certain respects, to future inventive efforts. As a matter the most extensive exclusive rights amongst of fact, it allows the patent owner to derive the major forms of intellectual property a material benefit that compensates him protection. Patents have gained increased or her for the research and develop- prominence with the development of ment cost the invention has entailed genetic engineering, which is reliant on (Machlup, 1999, p. 231 ff.). In the case of PGR to some extent. As a result of the violation of this exclusive rights by another increased activity by individuals and the person, who exploits the protected private sector in this field, the scope of invention without authorization, the patent patentability has steadily increased over owner can require the to order the past couple of decades. Calls for further that the infringement ceases as well as expansion of the scope of patentability have awarding civil, administrative and criminal been countered in recent years by counter- remedies. claims that patenting elements which are The balance that patent laws try to commonly used by researchers for further achieve is, on the one hand, to encourage innovations, such as those used in gene inventive and innovating efforts on an indi- technology, may end up hindering rather vidual basis and, on the other hand, to dis- than promoting innovation. seminate knowledge and the resulting The rationale underlying the grant of technological achievements for the general patents is based on equity as well as on economic and social welfare of society as a pragmatic considerations. Equity consider- whole. When investing in research and ations materialize the concepts of ‘’ development, companies usually face what or ‘natural rights’, whereas the pragmatic economists have labelled the ‘incomplete justifications refer to the promotion of the appropriability of knowledge’ (Arrow, 1962, public interest. The so-called ‘natural-law’ p. 609). According to this concept, the thesis assumes that have a natural investment in the production of knowledge property right to their own ideas. Under the will be difficult, if not impossible, to protect ‘exchange-for-secrets’ or the ‘- completely, since part of the newly gener- profit-incentive’ concepts, an inventor dis- ated knowledge will diffuse to competitors closes the results of his or her efforts to the and into the public domain. For firms public. In exchange, the inventor is granted investing in the production of knowledge, a monopoly-like for a limited patent protection provides only a partial period of time, with respect to the commer- solution. It allows the investing firm to cial use of the invention. In this way, the appropriate a return on its investment in state provides the inventor with a competi- research and development by protecting its tive advantage in of the dis- invention against unauthorized duplication. closure of the inventor’s intellectual However, since the patentee must disclose achievement. This disclosure allows third her/his new knowledge, this enables com- parties to perform further research and peting firms to build upon such knowledge development based on the invention. It fur- to create other inventions that can be simi- ther enables them to work freely and use lar, but not identical, to the protected one. It the invention after the expiration of its may require costly litigation to determine 120 P. Cullet et al. infringement in such circumstances. The fields was put onto the legislative agenda of cost of substantially imitating an existing industrialized countries and regions. Pri- product, with or without improvement, vate actors argued that effective protection is usually lower and less risky than the was required in order to secure a return on originator’s cost of creating, developing large private investments performed for and marketing the new product. Such research and development into biotechno- a competitor can act in a shorter time logical innovations. Patents and other than was needed by the patentee, and forms of protection grant an advantage over undercut the return to the patentee. competitors who did not make the same Because of the diminished risk-weighted investments into innovation. Furthermore, incentive to the originator, some authors the industry required that this competitive have concluded that ‘total welfare, but not advantage was to be extended vis-à-vis the the welfare of consumers, would be users, because the relevant inventions were increased by making it more difficult to typically life forms that could reproduce produce close substitutes for existing naturally, and consequently, they did not products’.16 need repeated purchases by farmers. In the It may be argued that the grant of a case of genetically modified rape, for exam- patent encourages investment in the pro- ple, the results of this law-making process duction and distribution of an invention, in the USA eventually raised a polemic, since the patent monopoly assists the when farmers became aware of their investor in penetration and defence of the increased dependency upon major produc- market. On the other hand, the neutral- ers and distributors. Since biotechnology ization of competition during the terms allows the transformation of genes across of protection may trigger a rent in form species boundaries, the genetic modifica- of a high rate of return in favour of the tion of organisms raises not only merely inventor, inhibiting him from further economic questions, but also substantial innovation. ethical, environmental and social issues In the seed sector, for example, that the relevant laws also have to address research and development initially were as part of an ongoing process. mainly performed by state-owned entities Whereas certain cultures oppose the such as agencies and universi- concept of granting exclusive rights over ties. These efforts were thus funded by living forms, other cultures accept this public money. For this reason, there was no approach under clearly defined conditions demand for IPR protection until the private in order to fulfil certain policy goals that are sector started to gain an interest in this in the public interest. The latter cultures business. As described later under Section argue that intellectual property rights are a 3.2.3, this development began with legisla- cost-efficient alternative to publicly funded tive action in the field of plant variety pro- innovation because they function as incen- tection in the USA. In contrast to the legal tives for privately performed research and solutions eventually adopted in Europe, development. innovators in the USA may claim protec- Even if one accepts that the intellectual tion both under plant variety and patent property system should be extended to law. Subsequently, with the further growth apply to life forms, one can question the of biotechnology, the private industry appropriate levels of protection. The incen- required intellectual protection for life tive rationale primarily covers investments forms and microorganisms. Once this sector into research and development by granting began to attract private industry, the protec- legally secured competitive advantages tion of intellectual property rights in these during the marketing phase. However, too

16 See Hilton Davis Chemicals Co. vs Warner-Jenkinson Company, Inc., Court of Appeals for the Federal Circuit, 62 F.3d 1512; 1995 U.S. App. LEXIS 21069, 8 August 1995, quoting Besen and Raskind (1991). IPR, PGR and Traditional Knowledge 121 much protection can cause a situation where instrument addressing substantive patent major producers and distributors are able to protection. This agreement, that is part of control the market. In this case, undertakings the WTO body of rules resulting from the having a dominant position can drive their Uruguay round, entered into force in Janu- smaller and, as the case may be, more inno- ary 1996 for industrialized countries, and, vative competitors out of business. Eventu- subject to the transitional arrangements in ally, in the worst-case scenario, the Articles 65 and 66 TRIPS, 4 years after- consumers’ choice becomes restricted to the wards for developing countries and, if cer- products and services that are most power- tain additional conditions are fulfilled, to fully marketed to the exclusion of the most previously centrally planned economies. In innovative ones. This development under- the area of patent protection, section 5 of mines the incentive effect of intellectual the second part of the TRIPS agreement property rights in contributing to the techno- refers to, and further completes, the Paris logical progress for general welfare.17 Convention in the Stockholm version of 14 The allocation of IPR is premised on July 1967. From the perspective of industri- the notion that innovation is driven by alized countries, the Paris Convention profit. From a societal point of view, IPR needed updating and the addition of extra, strive to balance the private interests of cre- as well as more detailed, rules concerning ators, by ensuring that they still have an many aspects of patent protection. In par- incentive to create, against those of society ticular, the scope of patent protection was at large to have the information available highly controversial during the TRIPS for its use. Even though information does negotiations (Cottier, 2004). Article 27 not diminish once it is shared, the role of TRIPS provides that patents shall, subject IPR is to ensure that information providers to certain conditions, be available for any do not lose rights to the information by dis- invention, whether a product or process, in it, since such information can be all fields of technology, provided that they used by an infinite number of persons are new, involve an inventive step and are simultaneously (Landes and Posner, 1989; capable of industrial application. The Baer, 1995). Indeed, one of the perceived TRIPS Agreement does not define the term philosophic underpinnings of IPR is to ‘invention’. ensure disclosure of the information while Article 53(b) of the European Patent maintaining exclusive rights for the creator. Convention of 5 October 1973 (EPC)18 It is significant, however, that there is still excludes plant and animal varieties or no consensus, even in developed countries, processes that are essentially biological for concerning the social or economic utility of the production of or animals from granting intellectual property rights. In fact, patent protection, while not extending this there have not been any significant empiri- exclusion to microbiological processes or cal studies demonstrating the beneficial the products thereof. In contrast, Article impact of the grant of patents on economic 27(3)(b) TRIPS provides that Members may or social development (Abbott, 1989). exclude plants and animals other than microorganisms from patentability, as well The concepts of invention and the protection as essentially biological processes for the of plant varieties production of plants or animals other than non-biological and microbiological pro- On the global level, the TRIPS agreement is cesses. This latter exception serves as crite- currently the most detailed international rion that enables a more concrete

17 Compare Germann (2003), on the detrimental effect of excessive copyright and trade mark protection on cultural diversity in the audiovisual sector. 18 Version as amended by the Act revising Article 63 EPC of 17 December 1991 and by the decisions of the Administrative Council of the European Patent Organisation of 21 December 1978, 13 December 1994, 20 October 1995, 5 December 1996 and 10 December 1998. 122 P. Cullet et al. distinction between discoveries and inven- defined by the UPOV Convention, are to tions. Members must provide legal tools for promote plant-breeding activities, i.e. the the protection of plant varieties, either by creation of new and improved plant vari- patents or by an effective sui generis eties. Another rationale behind plant vari- system, or by any combination thereof. In ety protection is the promotion of the seed other words, the TRIPS agreement distin- trade (Girsberger, 1998, p. 1024, with indi- guishes between the protection of plants cation of further sources). As Girsberger and animals on the one hand, and the pro- stresses, the general perception was deci- tection of plant varieties on the other. sive for concluding the UPOV Convention Whereas plant varieties must be protected that protecting plant varieties by patents by way of patents or through equivalent did not provide effective incentives for means, plants may be excluded from patent investment in plant breeding activities protection. At the European level, the EPC (Girsberger, 1998, p. 1027). This explains excludes plant varieties from patent protec- the reason why the form of protection of tion. The TRIPS agreement contains neither plant varieties is left open in Article a definition of a ‘plant variety’ nor of a 27(3)(b) TRIPS, and why a sui generis form ‘plant’. This term is defined in Article 1(vi) of protection for plant varieties was consid- of the UPOV Convention 1991: ered to be more appropriate under the EPC. In the USA, patent protection for asex- ‘variety’ means a plant grouping within a ually reproduced plant varieties was pro- single botanical taxon of the lowest known vided as early as 1930 under the Plant rank, which grouping, irrespective of whether the conditions for the grant of a Patent Act. In 1970, the US Congress breeder’s right are fully met, can be enacted the Plant Variety Protection Act • defined by the expression of the charac- (PVPA), which provided protection to new teristics resulting from a given genotype varieties of ‘sexually’ reproduced plants in or combination of genotypes; addition to the Act of 1930. Under this leg- • distinguished from any other plant islation, the developer of a novel variety of grouping by the expression of at least plant can apply for protection, based on one of the said characteristics; and which he or she can exclude others from • considered as a unit with regard to its selling, reproducing, exporting and import- suitability for being propagated ing the protected variety for a period of 18 unchanged. years. The EPO Board of Appeal discussed The case law pertaining to the EPC that the definition of ‘plant variety’ as set forth addresses the concepts of ‘invention’, ‘nov- under Article 53(b) EPC in the decisions T elty’ and ‘morality’ in relation to plant 49/83,19 T 320/87,20 and, with reference to genetic resources provides an insight into the above-quoted definition contained in the current state of patent practice regard- the UPOV Convention 1991, in T 356/93,21 ing patentability and scope of protection as well as in T 1054/96.22 According to the into the area of biotechnology in Europe. approach adopted under the EPC, plant According to decision T 49/83 (OJ 1984, varieties shall be protected under plant 112) that referred to Article 52(1), Article breeders’ rights, which are specifically 53(b), R. 28 and R. 28a, no general exclu- designed for this purpose. This form of pro- sion of inventions in the sphere of animate tection can therefore be considered as a lex nature can be inferred from the EPC. The specialis vis-à-vis patent protection. The landmark T 356/93 defined the concepts of purpose and objective of these rights, as ‘ordre public’, ‘morality’, ‘plant varieties’,

19 OJ 1984, 112. 20 OJ 1990, 71. 21 OJ 1995, 545. 22 See summary of these cases at http://www.european-patent-office.org/legal/case_law/e/I_B_3.htm (status: August 2003). IPR, PGR and Traditional Knowledge 123

‘essentially biological processes for the pro- ties who do not have their consent from duction of plants’, ‘microorganisms’, performing the acts of making, using, offer- ‘microbiological processes’ and ‘the prod- ing for sale, selling or importing for these ucts thereof’.23 The meaning of the term purposes, the protected product. The same ‘plant varieties’ was discussed in T 49/83 rights are granted for process patents that (OJ 1984, 112) and held to mean a multi- the process itself and the product plicity of plants, which were largely the obtained directly by such process.25 This same in their characteristics and remained obviously extends the breadth of patent the same within specific tolerances after protection, since one may obtain a for every propagation cycle. The board added a new process that leads to a product that is that plant varieties in this sense were all itself already protected or in the public cultivated varieties, clones, lines, strains domain. Furthermore, patent owners shall and hybrids, which could be grown in such also have the right to assign, or transfer by a way as to be clearly distinguishable from succession, the patent and to conclude other varieties, sufficiently homogeneous, licensing . and stable in their essential characteristics. Pursuant to Article 64 EPC, the Euro- The legislator did not wish to afford patent pean patent confers the same rights as protection under the EPC to plant varieties would be conferred by a national patent of this kind, whether in the form of propa- granted in that state on its proprietor in gating material or of the plant itself. The each Contracting State in respect of which board further observed that Article 53(b) it is granted. This provision therefore refers only prohibited the patenting of plants or to the exclusive rights as defined in the sub- their propagating material in the genetically stantial patent laws of the Contracting Par- fixed form of the plant variety. Following T ties, except that it specifies within its 320/87, the board addressed the meaning of second paragraph that the protection con- a process that, as a whole, was not ‘essen- ferred by a patent on a process shall extend tially biological’ within the meaning of to the products directly obtained by such Article 53(b). It highlighted that the trans- process. In comparison, under breeders’ formation step at stake in this case, re- rights such as those provided by Article 14 gardless of whether or not its perform- of the UPOV Convention 1991, the produc- ance depended on chance, was an ‘essential tion or reproduction (multiplication), con- technical step’ (i.e. as opposed to an ditioning for the purpose of propagation, ‘essentially biological’ one), which had a offering for sale, selling or other marketing, decisive impact on the desired final result exporting, importing, and stocking for the and could not occur without human inter- purposes of the previously listed acts, of the vention.24 propagating material of the protected vari- Article 28 TRIPS determines the exclu- ety can only be performed with the right sive rights conferred by a patent. This pro- holder’s authorization.26 vision distinguishes between patents for Whereas breeders’ rights address plant products and patents for processes. Where varieties, rights conferred by patent protec- the subject matter of a patent is a product, tion cover inventions. Article 52(2) EPC the owner is entitled to prevent third par- gives a negative definition of the latter term,

23 This decision analysed Article 53 by taking into account the historical documentation (‘travaux prépara- toires’) relating to the EPC, and substantially confirmed the findings of T 49/83, T 320/87 and T 19/90. 24 See note 22. Case law summaries by the EPO may be found under http://www.european-patent- office.org/legal/case_law/e/I_B.htm 25 Article 28.1(b) TRIPS sets forth: ‘A patent shall confer on its owner the following exclusive rights 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’. Article 34 TRIPS contains a special rule addressing the burden of of process patent containing presumptions that are in favour of the process patent owner. 26 For a more detailed analysis of the UPOV Convention, see Chapter 2, Section 2.3.4. 124 P. Cullet et al. according to which discoveries, scientific workers … The finding out – the contriv- theories and mathematical methods, aes- ing, the creating of something which did thetic creations, schemes, rules and meth- not exist, and was not known before, and ods for performing mental acts, playing which can be made useful and advanta- games or doing business, and programs for geous in the pursuits of life, or which can add to the enjoyment of mankind. Not computers, as well as presentations of every improvement is invention; but to information, shall not be considered as entitle a thing to protection it must be the inventions. The items on this list, which is product of some exercise of the inventive not exhaustive, are commented upon in the faculties and it must involve something EPO Guidelines27 and are further clarified more than what is obvious to persons through case law.28 The exclusions on this skilled in the art to which it relates.29 list are either abstract (e.g. discoveries, sci- In the light of this definition of an entific theories, etc.) or non-technical (e.g. invention and for the purposes of assess- aesthetic creations or presentations of ing the patentability of PGR, it is interest- information). Article 52(4) provides that ing to note that under US patent law methods for treatment of the human the relevant distinction is not made or animal body by surgery or therapy, between living and inanimate things, but and diagnostic methods practised on the rather it is between natural products, human or animal body, shall not be whether living or not, and human-made regarded as inventions which are suscepti- inventions. As mentioned above, the US ble to industrial application. In contrast to Supreme Court decision Diamond vs the EPC, the TRIPS agreement does not con- Chakrabarty of 1980 addressed the question tain a definition of invention. Although of whether an artificially created life form – Article 27(3)(a) TRIPS allows Members to a new form of bacterium obtained by exclude diagnostic, therapeutic and surgi- genetic alteration – is a patentable subject cal methods for the treatment of humans or matter. The Court quoted excerpts from the animals from patentability, this provision Congress report issued in the course of the does not state that these methods are not enactment of the Plant Patent Act of 1930 as inventions. Pursuant to Black’s Law Dictio- follows: nary, the term ‘invention’ can be defined as: There is a clear and logical distinction between the discovery of a new variety of … the act or operation of finding out some- plant and of certain inanimate things, such, thing new; the process of contriving and for example, as a new and useful . producing something not previously The mineral is created wholly by nature known or existing, by the exercise or inde- unassisted by man … On the other hand, a pendent investigation and experiment. plant discovery resulting from cultivation Also the article or contrivance or composi- is unique, isolated, and is not repeated by tion so invented … Invention is … not a nature, nor can it be reproduced by nature revelation of something which exists and unaided by man.30 was unknown, but is creation of something which did not exist before, possessing ele- According to this approach, the rele- ments of novelty and utility in kind and vant criterion centres around the human measure different from and greater than involvement in nature: if an achievement is what the art might expect from skilled not nature’s but human handiwork, it

27 See Guidelines for Examination in the European Patent Office, Part C, Chapter IV on Patentability, version of October 2001, p. 50 ff. 28 For an overview of the relevant case law, see http://www.european-patent-office.org/legal/ case_law/e/I_A_1.htm. 29 Black’s Law Dictionary (1990), p. 824. 30 S. Rep. No. 315, 71st Cong., 2d Sess., at 6 (1930); H.R. Rep. No. 1129, 71st Cong., 2d Sess., at 7 (1930); quoted in: Diamond, Commissioner of Patents and Trademark vs Chakrabarty, Supreme Court of the United States 447 U.S. 303; 1980 U.S. LEXIS 112 (1980) relevant excerpts in: Abbott et al. (1999, p. 36). IPR, PGR and Traditional Knowledge 125 should be open to patent protection since for a determined period of time.31 The human ingenuity should receive encourage- owner of the patent thus has the right to ment. In the case at stake, the Supreme prevent third parties from manufacturing Court considered that the patentee had pro- and commercially exploiting the invention duced a new bacterium with markedly dif- without his authorization. The invention ferent characteristics from any found in may relate either to a product or to a nature and one having the potential for sig- process. Patent laws generally rely upon nificant utility. four essential criteria for the grant of exclu- The distinction between ‘discovery’ sive rights. and ‘invention’ led, in particular, to detailed case law under the EPC with respect to the interpretation of ‘essentially NOVELTY biological’ within the meaning of Article According to the first criterion, the inven- 53(b). According to decision T 320/87 (OJ tion must be new or novel. This means that 1990, 71), whether or not a (non-microbio- the invention has not been disclosed or logical) process was to be considered as described before the date of filling in the ‘essentially biological’ within the meaning patent application. For the purpose of of Article 53(b) had to be judged on the assessing the novelty condition, the patent basis of the essence of the invention, taking examiner will perform a so-called ‘prior art into account the totality of human inter- search’. A patent application will generally vention and its impact on the result be defeated by an anticipating disclosure. achieved. The for human in- There may be a controversy between an tervention alone was not a sufficient inventor and a patent examiner over criterion for its not being ‘essentially bio- whether a particular prior art disclosure logical’. Human interference might only does in fact anticipate an invention, for mean that the process was not a ‘purely bio- instance if a prior inventor described a logical’ process, without contributing any- device that is similar, but not identical, to thing beyond a trivial level. Furthermore, it the subsequent inventor’s device. was not simply a matter of whether such intervention was of a quantitative or quali- tative character. In this particular case, it UTILITY was concluded that the claimed processes Pursuant to the second criterion, the inven- for the preparation of hybrid plants did not tion must be useful or capable of industrial constitute an exception to patentability, application. This condition is particularly because they represented an essential relevant within the fields of biotechnology modification of known biological and and chemistry, where it is possible for classical breeders’ processes, and the effi- researchers to develop new compounds ciency and high yield associated with the with relative ease, yet without, at least ini- product showed important technological tially, any immediate practical application character. in mind. The criterion of utility again became critical in the evaluation of claims Protective criteria for inventions in the area of biotechnology, in order to prevent ‘speculative booking’ of As mentioned, in order to enjoy legal pro- exclusive rights. tection, an invention must fulfil certain conditions as set forth by national, regional or international rules. Based on the patent, INVENTIVE STEP both the inventor and subsequent assignee As a third condition, the invention must or licensee are entitled to produce and involve an inventive step or, in other market the invention on an exclusive basis words, it should not be obvious. This

31 See note 6. 126 P. Cullet et al. means that the invention must not simply TRIPS, patents shall be available for any be novel, but must result from a qualified inventions, whether products or processes, intellectual effort that makes it non-obvi- in all fields of technology, provided that ous. This criterion thus requires a higher they are new, involve an inventive step and standard of novelty through an inventive are capable of industrial application. A step. Strong protection leading to a compet- footnote to this paragraph states that the itive advantage shall only be granted to WTO Members may interpret the terms inventions that would be an apparent ‘inventive step’ and ‘capable of industrial improvement to prior art to a person who is application’ as being synonymous with the reasonably skilled in the art practised by terms ‘non-obvious’ and ‘useful’, respec- the invention. This requirement is justified tively. However, the TRIPS agreement by the ‘monopoly-profit-incentive’ ration- does not further define any of these protec- ale, according to which strong protection tive criteria. For the time being, there is no shall only be granted to substantial contri- WTO case law about the meaning of these butions to the technological progress. criteria either. The Members thus have con- siderable discretion when implement- ing Article 27(1) TRIPS in their national ENABLING DISCLOSURE laws. Finally, the fourth criterion obliges the In comparison, Article 52(1) EPC inventor to disclose in the patent applica- addresses patentable inventions, and pro- tion either a means for enabling the practice vides that European patents shall be of the invention (generally for Europe), or granted for any inventions which are sus- the best known means for practising the ceptible to industrial application, which invention (for the USA). One of the reasons are new and which involve an inventive for this condition is based on the exchange step. As regards the criteria of novelty, theory of the award of the patent: the patent Article 54(1) EPC states that an invention applicant is awarded exclusive rights in shall be considered to be new if it does not return for the disclosure to society of a new, form part of the state of the Article. Thus, useful and non-obvious invention. Without the reference to the state of the art is pivotal a disclosure that enables other persons to in the determination of whether the criter- benefit from the invention for their own ion of novelty is fulfilled or not. Paragraph research and development work, this 2 of this provision clarifies that the state of exchange between the inventor and the the art shall be held to comprise everything society would not make sense. This condi- made available to the public by means of a tion also performs the function of filtering written or oral description, by use, or in any out speculative applications, since it con- other way, before the filing date of the stitutes a reliable assessment of the useful- European patent application. In compari- ness of the invention for the purpose of its son, for the purposes of Article 15.1 of PCT, industrial application. The applicant will relevant prior art includes everything typically try to disclose to his competitors that has been made available to the public as little as possible about the secrets of his anywhere in the world by means of invention, and obtain as much protection as written disclosure, and which can be of possible in return. This behaviour, which assistance in determining that a claimed often leads to tensions between patent invention is novel or non-obvious. Under examiners and inventors, is obviously not US patent law it is fairly easy to obtain in the public interest since healthy compe- patent protection for inventions that are tition promotes innovation to the benefit of based on traditional knowledge, because it society. does not consider that the ‘novelty’ require- ment has been lost if the knowledge is divulged outside the USA by means of PROTECTIVE CRITERIA ACCORDING TO TRIPS AND EPC public use and sale. The essential require- As mentioned, pursuant to Article 27(1) of ment of ‘novelty’ can be destroyed only IPR, PGR and Traditional Knowledge 127 through publication.32 Unlike US patent substance or composition that contains law, in Europe and most countries in the plant genetic resources the composition of world, novelty is lost by any type of divul- which is part of the state of the art, while the gation in a foreign country, whether it is healing method is not, patent protection oral or written. In the USA, indigenous arguably should be granted to such a combi- communities in developing countries have nation of method and substance or composi- little opportunity to bring attention to tion. This interpretation is relevant for unwritten knowledge, practices and inno- patent protection of plant genetic resources vations that demonstrate lack of novelty or in connection with traditional knowledge in non-obviousness. To illustrate this issue, the absence of the ability to protect such one can quote the neem case as an example resources. This may be because of the of a patent that was allegedly based upon absence of genetic engineering, or because it misappropriation of non-published tradi- is already part of the state of the art, since tional knowledge (see p. 136). traditional knowledge alone may not be patentable pursuant to Article 52 paragraph 2, letters c and d, which excludes schemes, PROTECTION OF TRADITIONAL KNOWLEDGE UNDER rules and methods for performing mental THE EPC acts, as well as presentations of information, In the specific context pertaining to the pro- respectively, from patent protection. Thus, tection of plant genetic resources and tradi- the novel aspect would essentially be vested tional knowledge referring thereto, it is with the combination of traditional knowl- interesting to analyse the meaning of para- edge and plant-related genetic resources. graph 5 of Article 54 EPC, which states that its previous paragraphs shall not exclude Scope and limitations of patent protection the patentability of any substance or com- position comprised in the state of the art, The scope of protection for patents is deter- for use in a method referred to in Article mined by the terms of so-called ‘claims’ in 52(4) EPC, provided that its use for any the patent application that are eventually method referred to in that paragraph is not accepted by the patent office. The technical comprised in the state of the Article. Article description of the process or product in the 52(4) EPC requires that methods for treat- patent application usually serves to con- ment of the human or animal body by sur- strue the claims. The scope of protection is gery or therapy and diagnostic methods limited by statutory provisions such as com- practised on the human or animal body, pulsory licensing and exhaustion rules.33 shall not be considered as inventions that Rules limiting protection aim to ensure are susceptible to industrial application that the public interest remains preserved within the meaning of paragraph 1, i.e. they when granting exclusive rights over a given are not patentable. However, this latter period of time. Public health (e.g. to pro- restriction shall not apply to products, and vide access to essential medicine to poorer specifically to substances or compositions, parts of the population) or education (fair for use in any of these methods. For exam- use limitations) are typical grounds on ple, if a traditional healing method uses a which to restrain protection.34

32 Section 102 of the Patent Act, 35 U.S.C. § 102: ‘A person shall be entitled to a patent unless (a) the inven- tion was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States’. 33 See, for example, Articles 6, 7, 8 and 40 of TRIPS for general limitations and Articles 30 and 31of TRIPS specifically for patents. 34 For the discussion on patents for pharmaceuticals and non-trade concerns, see http://www.wto.org/ english/tratop_e/TRIPS_e/pharmpatent_e.htm and http://www.cptech.org/ 128 P. Cullet et al.

More fundamentally, the scope of protec- Thus, patent policy is not an optimal tion is conditioned upon the quest of the solution, but rather a second-best solution intellectual to find a balance that addresses to a market failure problem in innovation both ’s influential ‘tragedy of production. The market failure stems from the ’ and also the ‘tragedy of the the fact that knowledge is a public good, anti-commons’. According to the theory of the which, once available, has zero marginal (or ‘the tragedy of cost if used by others. From the economic ’), the absence of property rights perspective, innovations are non-rival in or access over resources will lead consumption, which means that the use of to their depletion. While individuals accrue the knowledge by others does not affect the benefits as they exploit resources, the costs of amount that is available to the inventor. everybody’s exploitation of the resources at Conversely, if knowledge were a public unsustainable levels will have to be met by good, then its producer who bore the cost of the community as a whole. In economic innovation would lose out from ‘free terms, depletion is a negative exter- riders’, thus providing no incentive to pro- nality that results from the absence of indi- duce the knowledge in the first place. The vidual property rights. As an example, result would be an underproduction of Dutfield (2001) quotes the of knowledge or dearth in innovation. high seas fishing stocks. On the other hand, To summarize, patents that provide the the tragedy of the anti-commons is the result legal means of affecting the of excessive intellectual property protection attributes of an otherwise public good, that hinders further innovation and creativity. solve the market failure problem of the non- As mentioned above, patents are appropriability of knowledge. Society pays granted in order to provide an incentive for for this by the economic inefficiency associ- innovations and for the diffusion (disclo- ated with . That is, the ‘static sure) of these innovations. Without the pro- inefficiency’ (from a monopoly) is the trade- tection provided by the patent system, off for the ‘dynamic efficiency’ resulting inventors would have no incentive to dis- from greater innovation. close their inventions, and to keep them secret in order to preserve their economic Preliminary conclusions on patent protection benefits. With disclosure, patents help for holders of traditional knowledge avoid the wasteful duplication of innova- tion efforts, and instead channel resources The progress in the biotechnology field towards unexplored areas of technology. caused the meaning of fundamental notions Furthermore, patents are instrumental for of patent protection to be questioned. The the commercialization of innovative prod- concepts of ‘invention’, ‘novelty’, ‘inven- ucts and processes. tive step/non-obviousness’ and, last but not However, patents impose a short-run least, ‘morality’, are at the heart of the dis- efficiency cost, because of the deadweight cussion about patenting life forms. Critical loss corresponding to the grant of quasi- observers argue that accommodating the monopoly rights. In standard economic wishes of certain biotechnology sectors has parlance, anything that is not perfect com- seriously blurred the distinction between petition pays an inefficiency trade-off, in ‘discovery’ and ‘invention’ in patent law. that the use of the innovation is less than They focus on many instances where the optimal. Moreover, just as patents can help actual substance resides mainly in nature or to promote innovations, they can also traditional practice, to which biotechnology adversely affect the flow of future inven- adds only minor changes (Nijar, 1996, p. 4). tions, by stunting incentives for related The question of an inventive step or non- innovation or further improvements, espe- obviousness is closely connected to this cially where the patents have broad scope issue. Granting property titles for little and the licensing arrangements for the added intellectual value lacks legitimacy innovation are prohibitive. and runs counter to the public policy goals IPR, PGR and Traditional Knowledge 129 underlying the whole system. Once one property system on a fair basis, this could accepts that there is an invention, the ques- contribute to the depletion of this knowl- tions concerning novelty, and more particu- edge within this system. In this case, hold- larly the inventive step, are dealt with in ers of traditional knowledge will miss the course of the examination procedure, as incentives to maintain and develop the well as through subsequent judicial review intellectual achievements of their commu- mechanisms. Current systemic insufficien- nities that may be misappropriated by other cies of law and practice pertaining to inter- parties in stronger positions. When local national prior art searches are causing a communities cannot enjoy returns from, or shift from prior ex officio patent examina- are even precluded from free access to, tion to subsequent party-initiated judicial inventions based on their traditional review procedures. From the perspective of knowledge because third parties have holders of traditional knowledge related to become right holders, the rationale of plant genetic resources, challenging a equity underlying the grant of intellectual patent because it does not fulfil the novelty property rights does no longer work. More- or non-obviousness requirements may turn over, it leads to a perverse result of the out to be a very costly undertaking, which system when excessive standards of protec- is beyond the means of most individuals or tion start to hinder innovation because they local communities. Traditional knowledge mainly serve to attract capital for marketing holders are usually at a disadvantage in efforts that eventually drive competitors cases where patent offices are lax during the out of business, even if they are more inno- international prior art check and when, in vative.35 This negative occurrence typically practice, the effective test only takes place strikes marginal players such as traditional after examination through judicial review knowledge holders first, and at the end on the initiative of a concerned party. often leads to heavy concentrations among As a matter of fact, for the time being, major producers and distributors that are the patent system is mainly tailored detrimental to welfare. The term ‘morality’ towards those corporations that enjoy sub- can be used to express the third main issue stantial human and financial resources that to be addressed in this context. In the enable them to register their own inven- public debate within industrialized coun- tions, to administer the rights and, as the tries it covers the question of patenting life case may be, to challenge the registration of forms.36 We extend the meaning of ‘moral- their competitors’ inventions. Without ity’ in order to encompass the complex appropriate institutional infrastructures, interface between various legal orders, such as adapted rights management sys- where one order rejects a body of rules that tems including databases, or collecting another tries to bring to application across societies as flanking measures (see Chapter the formal limits of its own jurisdiction. 7), today’s patent system will remain a There are several legal cultures that reject for bigger corporations, and one that the very idea of private ownership for intel- hardly provides any genuine level playing lectual works that are based upon philo- field for individuals and local communities sophical or religious traditions. How are holding traditional knowledge related to clashes of legal cultures to be settled? On plant genetic resources. These flanking the one hand, the intellectual property measures cannot be of a merely technical system needs to overcome national barriers nature, but also need to address com- in order to be effective. On the other hand, plex interactions between different legal there is no legitimacy behind the imposi- cultures. tion of this system upon people who do not If traditional knowledge holders are accept it because it runs contrary to their not able to participate in the intellectual basic principles. Both ‘morality’ issues

35 See Germann (2003). 36 See text accompanying note 52. 130 P. Cullet et al. exhibit at least one common feature: Background they challenge the intellectual property system for philosophical or religious Traditionally, patents did not cover natural reasons rather than for practical ones. products. Over time, the scope of the excep- The qualities and disadvantages of the tion relating to nature has been significantly system can no longer be discussed in a reduced, but international intellectual purely rational way. As is the case concern- property rights treaties have never yet gone ing questions about the death penalty so far as imposing patent protection for or , one could even contest the plant varieties. An alternative form of intel- democratic decision-making process that lectual right protection for plant varieties leads to the adoption of an intellectual has developed progressively. property system in which the opponents to Various factors have contributed to the the system are defeated simply because difficulties of providing IP protection for they are in the minority. The task to find a plant varieties. One of these is that the notion consensus concerning ‘morality’ considera- of inventiveness, which characterized tions on the international level is more dif- patents, would be diluted if plant varieties ficult by far than the reaching of a were brought on board, because a new plant cross-border understanding over the more variety was seen more as an improvement of technical concepts of ‘invention’ and an existing natural product rather than as a ‘inventive step’. Nevertheless, these two ‘scientific’ invention (Rangnekar, 2000). Fur- latter concepts also pose substantial diffi- thermore, seeds had always been deemed to culties in their adaptation for the purposes be part of the common heritage of of holders of traditional knowledge. These humankind and were freely exchanged tasks include the determination of appro- among farmers and farming communities priate forms of protection, specific protec- (Shiva, 1994).39 However, it was increasingly tive criteria, ownership, transfer of rights recognised that a form of intellectual prop- modalities, prior informed consent safe- erty rights was necessary in the seed sector in guards and efficient international imple- order to encourage private investment. mentation mechanisms. We will explore Partly as a result of the progressive the corresponding solutions in the chapters commercialization of the agricultural sector, below. and partly because of the push for the intro- duction of some form of IPR protection, plant breeders’ rights (PBRs) evolved. These 3.2.3 Plant breeders’ rights37 gave breeders specific legal rights to the varieties they developed, in a bid to foster Patents are not the only form of protection the development of varieties that could, oth- to encourage innovation. Several additional erwise, easily be reproduced by other farm- forms of IPR are available, such as trade ers or competing breeders. Because the secrets,38 plant breeders’ rights and sui impetus behind this measure came from generis protection for plant varieties. large commercialized farming systems, PBRs, as they exist today, have been devel- oped for the specific contexts and needs of

37 Author: Philippe Cullet. 38 The rationale behind trade secrets, in contrast to patents, is based upon property theory or the doctrines of , and trust, rather than being motivated by providing an incentive for innovation or creativity (Besen and Raskind, 1991). Its subject matter can be any formula, pattern, etc., which provides a business advantage over others who do not possess the information. protection is not limited in time. 39 The different positions expressed with regard to the introduction of plant breeders’ rights have taken on added significance in the wake of the adoption of the TRIPS Agreement. Indeed, while a number of OECD countries had progressively adopted a form of PBR before 1994 to foster the development of their private seed industries, most developing countries had not introduced any form of intellectual property right pro- tection in the agricultural sector. IPR, PGR and Traditional Knowledge 131 developed countries. The legal regime for vines). The criterion of distinctness PBRs is quite uniform; thanks to the fact that requires that the protected variety should most countries that have introduced PBRs be clearly distinguishable from any other have either joined the International Union variety whose existence is a matter of for the Protection of New Varieties of Plants common knowledge at the time of the filing (UPOV) regime, or have modelled their leg- of the application.41 The requirement of sta- islation on the UPOV regime (on UPOV, see bility is satisfied if the variety remains true Section 2.3.4). The following paragraphs to its description after repeated reproduc- consequently analyse PBRs as they have tion or propagation.42 Finally, uniformity developed in the UPOV context. implies that the variety remains true to the original in its relevant characteristics when 43 What are PBRs? propagated. Over time, the definition of protected PBRs can generally be described as patent variety has evolved, insofar as so-called rights with some missing attributes. PBRs ‘essentially derived varieties’ were not pro- share a number of characteristics with tected during the early days of plant variety patent rights: they provide exclusive com- protection. The latest revision of UPOV has mercial rights to the holder, reward an introduced protection for such varieties.44 inventive process and are granted for a lim- Protection as an ‘essentially derived vari- ited period of time. ety’ is obtained if the variety is predomi- To be more specific, PBRs protect plant nantly derived from the initial variety and varieties. Plant varieties can only be pro- retains its essential characteristics. tected by PBRs if they fulfil the four basic criteria of: novelty, distinctness, stability Content and limitation of PBRs and uniformity or homogeneity. Each of these characteristics is given further con- The rights conferred upon plant breeders tent by the UPOV Convention. The concept differ from patent rights insofar as they pro- of novelty requires further elaboration vide much more extensive exceptions to the because it differs from its acceptance under rights they confer than patents. Breeders patent law. Under UPOV, a variety is novel have exclusive rights to produce or repro- if it has not been sold or otherwise disposed duce protected varieties, to condition them of to others, by or with the consent of the for the purposes of propagation, to offer breeder, for the purposes of exploitation of them for sale, to commercialize them, the variety.40 Novelty is thus entirely including exporting and importing them, defined by the issue of commercialization and to stock them in view of production or and not by the fact that the variety did not commercialization.45 These rights are exist previously. UPOV gives a specific restricted by a number of exceptions that time frame for the application of novelty. In are compulsory in the UPOV context. The order to fulfil the requirement for novelty, a rights of breeders do not extend to acts done variety must not have been commercialized privately and for non-commercial purposes; in the country where the application is filed to acts done for experimental purposes; to for more than a year before the application, the use of the protected variety for the pur- or for more than 4 years in other member pose of breeding other varieties; or to the countries (6 years in the case of trees and right to commercialize such other varieties

40 Article 6 of the International Convention for the Protection of New Varieties of Plants, Paris, 2 December 1961, as revised in Geneva on 10 November 1972, 23 October 1978 and 19 March 1991 (Geneva, UPOV, Doc. 221(E), 1996) [hereafter UPOV-1991]. 41 Article 7 UPOV-1991, see note 40. 42 Article 9 UPOV-1991, see note 40. 43 Article 8 UPOV-1991, see note 40. 44 Article 14.5 UPOV-1991, see note 40. 45 Article 14 UPOV-1991, see note 40. 132 P. Cullet et al. as long as they are not essentially derived 3.2.4 Sui generis protection systems49 from the protected variety. While the previ- ous exceptions are compulsory, a set of fur- Rationale of sui generis protection ther exceptions exists that has been progressively reduced over time. The so- The question of sui generis intellectual called ‘farmer’s privilege’ falls into this cat- property right protection for plant varieties egory. Under UPOV-1978 the rights of has become a matter of great importance breeders were circumscribed in such a way following the adoption of the TRIPS Agree- that PBR did not interfere with farmers’ use ment. As a result of a negotiating compro- of the legally obtained protected variety for mise, TRIPS requires the introduction of propagating purposes on their own hold- plant variety protection in all member ings. Under UPOV-1991, the rights of states, but it does not impose the introduc- breeders have been extended to the har- tion of patents. Article 27.3.b specifically vested material of the protected variety and requires all member states to ‘provide for the farmer’s privilege has been made the protection of plant varieties either by patents or by an effective sui generis system optional. 50 With regard to the duration of PBR, or by any combination thereof’. The intro- their first characteristic is that they are lim- duction of the sui generis concept reflects ited in time. The period of protection has two broad elements. First, a number of evolved over time, but always with the idea countries in the North and the South have in mind that the rights conferred expire at rejected the compulsory introduction of the end of a specific period of protection. plant patents. Second, negotiators did not Under UPOV-1978, the period of protection manage to agree on one specific alternative is for a minimum of 15 years. For vines, to patents. As a result, TRIPS gives member trees, fruit trees and ornamental trees, states a wide margin of appreciation in the minimum is 18 years.46 UPOV-1991 determining how to implement their obliga- extends the minimum period from 15 to 20 tion to introduce plant variety protection. years. For trees and vines, the minimum is The question of the introduction of of 25 years.47 plant variety protection is one that mostly At first, PBRs were conceived as an concerns developing countries. Indeed, alternative to patent rights, and it was most developed countries had already accepted that the two kinds of intellectual introduced either plant patents or PBRs property rights should be kept separate. before the adoption of TRIPS. Developing Thus, under UPOV-1978, member states countries that are members of the WTO can only offer protection through one form were left with the choice of either adopting of intellectual property rights.48 The grant the existing regime proposed in UPOV or of of a PBR pertaining to a given variety devising their own plant variety protection implies that no other intellectual property system adapted to their specific situation. A right can be granted to the same variety. few countries have joined UPOV since Under UPOV-1991 this restriction has been 1994, but the majority have decided to eliminated and double protection is now adopt their own plant variety protection allowed. laws. In a number of cases, these laws draw directly and significantly from the UPOV regime and generally most existing propos- als introduce PBRs. In cases where PBRs are

46 Article 8 of the International Convention for the Protection of New Varieties of Plants, Paris, 23 October 1978 [hereafter UPOV-1978]. 47 Article 19 UPOV-1991, see note 40. 48 Article 2 UPOV-1978, see note 46. 49 Author: Philippe Cullet. 50 Agreement on Trade-Related Aspects of Intellectual Property Rights, Marrakesh, 15 April 1994, reprinted in 33 I.L.M. 1125 (1994) [hereafter TRIPS Agreement]. IPR, PGR and Traditional Knowledge 133 adopted only as one part of the regime, the cal resources or related knowledge cannot regime is completed by the introduction of apply for any intellectual property right of a form of farmers’ rights. In fact, existing sui exclusionary nature. The model legislation generis options can be generally defined as mainly focuses on the definition of the regimes introducing PBRs and farmers’ rights of communities, farmers and breed- rights. ers. The community rights that were recog- nized include rights over their biological Country examples of sui generis protection resources, and rights to their innovations, practices, knowledge and technology, and The prominence of the UPOV Convention the right to benefit collectively from their in the debates concerning sui generis plant utilization. In practice, these allow commu- variety protection is partly linked to the fact nities the right to prohibit access to their that the interpretation of the concept of an resources and knowledge, but only in cases ‘effective’ sui generis system in Article where access would be detrimental to the 27.3.b TRIPS remains problematic. The integrity of their natural or cultural her- only generally agreed-upon interpretation itage.53 Furthermore, the state must ensure is that UPOV is an effective sui generis pro- that at least 50% of the benefits derived tection regime under TRIPS. This has led to from the utilization of their resources or some countries, such as the member states knowledge are channelled back into the of the African Intellectual Property Organi- communities. zation, simply adopting a regime modelled In this legislation, the rights of farmers after UPOV-1991 and at the same time com- are slightly more precisely defined. They mitting themselves to joining the UPOV include the protection of their traditional Convention.51 knowledge that is relevant to plant and Some countries, such as, India have animal genetic resources, the right to an decided to implement plant variety protec- equitable share in the benefits arising from tion regimes that seek to provide protection the use of plant and animal genetic to commercial plant breeders and to farm- resources, the right to participate in making ers. Thus, the Indian plant variety protec- decisions on matters related to the conser- tion regime introduces both PBRs and vation and sustainable use of plant and farmers’ rights. While a number of coun- animal genetic resources, the right to save, tries have attempted to draw up their own use, exchange and sell farm-saved seed or sui generis plant variety protection regimes, propagating materials, and the right to use a African states have taken a unique initiative commercial breeder’s variety to develop in adopting a Model Legislation for the Pro- other varieties. The breeders’ rights defined tection of the Rights of Local Communities, under the model legislation generally Farmers and Breeders, and for the Regula- follow the definition given in the UPOV tion of Access to Biological Resources at the convention and the duration of the rights is, level of the Organization of African Unity for instance, modelled after UPOV-1991. (OAU).52 One specific feature of the plant breed- The African Model Legislation is ers’ rights regime under the model legisla- premised on the rejection of patents on life tion is the rather broad scope of the or the exclusive appropriation of any life exemptions granted. Exemptions to the form, including derivatives. Its provisions rights of breeders include the right to use a relating to access to biological resources protected variety for purposes other than make it clear that the recipients of biologi- commerce, the right to sell plant or propa-

51 See Agreement to Revise the Bangui Agreement on the Creation of an African Intellectual Property Orga- nization of 2 March 1977, Bangui, 24 February 1999. 52 African Model Legislation for the Protection of the Rights of Local Communities, Farmers and Breeders, and for the Regulation of Access to Biological Resources (2000). 53 Article 20 of the African Model Legislation, see note 52. 134 P. Cullet et al. gating material as food, the right to sell appropriation of PGRFA and/or knowledge within the place where the variety is grown without compensation. These unidirec- and the use of the variety as an initial tional flows of plant resources and knowl- source of variation for developing another edge are today often referred to as variety.54 ‘biopiracy’, a concept that does not have In summary, the development of sui recognition in international law, but con- generis plant variety protection is still in its veys the sense of frustration of a number of infancy. Until now, efforts have been made developing countries with reference by developing countries to balance their to existing legal arrangements (Odek, obligations under Article 27.3.b of TRIPS 1994). with their specific needs and conditions. The cases of appropriation without Since UPOV is the only model that is gen- compensation must be understood within erally recognized as fulfilling the criteria of the context of the evolving international an ‘effective’ sui generis plant variety pro- legal framework in the field of PGR. First, tection regime, a number of states that have the appropriation of biological resources is not had the time or resources to devise a governed by the principle of state completely separate sui generis protection sovereignty. The case of PGR is slightly regime have decided to take this as a basis more complicated: for several decades, for a plant variety protection regime. On top PGR were considered as a common herit- of the PBR system, there seems to be a age of humankind and were therefore growing trend towards recognizing farmers’ freely shared and distributed to all rights and providing for different compen- actors seeking access. At the interna- sation mechanisms (benefit-sharing). Other tional level, the CGIAR and its Centres sui generis protection regimes will probably constituted the vehicles for the imple- be developed in future years, particularly mentation of this principle, and in by least developed countries, who have had particular with a view to fostering food until 2005 to implement their plant variety security at all levels within developing protection regimes. Furthermore, even countries. Over time, there has been countries that are classified as developing increasing recognition of countries’ rights countries may amend their legislation over over their PGR, and the ITPGRFA now time, as further sui generis models evolve. sanctions states’ sovereign rights over the Sui generis protection is evolving and sig- PGRFA (ITPGRFA, preamble, 2001; see nificant innovations can be expected in Section 2.3.2). years to come. Secondly, the TRIPS Agreement now provides the minimum standards of intel- lectual property right protection that all 3.3 Impacts on Existing PGR, Landraces WTO member states must introduce. How- and TK55 ever, TRIPS is implemented in each WTO member country through domestic intellec- The progressive strengthening of intellec- tual property laws, which may differ signif- tual property rights has already had signifi- icantly between countries. Divergences may cant repercussions in a number of countries stem from the different use of flexibility on the management of existing PGR and TK. clauses provided in TRIPS. They may also A number of ‘problems’ have surfaced be linked to the fact that countries can between developed and developing coun- decide to provide standards of protection tries, mostly linked to the different levels of that go beyond the minimum levels intellectual property protection in these required in TRIPS. There is therefore ample countries. These different levels of protec- scope for divergences in levels of protection tion have led to a number of instances of between different WTO member countries.

54 Article 43 of the African Model Legislation, see note 52. 55 Author: Philippe Cullet. IPR, PGR and Traditional Knowledge 135

Further, there remain a number of countries tially of administering a wound-healing that are not members of the WTO and are agent consisting of an effective amount of therefore not bound by the TRIPS Agree- turmeric powder to said patient. ment. The differences in levels of intellec- 2. The method according to claim 1, tual property rights protection and other wherein said turmeric is orally adminis- differences between domestic intellectual tered to said patient. property laws provide the background to 3. The method according to claim 1, some of the problem cases highlighted in wherein said turmeric is topically adminis- this section. tered to said patient. Thirdly, as noted above, the interna- 4. The method according to claim 1, tional legal system has already reacted to wherein said turmeric is both orally and the problem of uncompensated appropria- topically administered to said patient. tion by progressively developing the con- 5. The method according to claim 1, cept of benefit-sharing. Benefit-sharing is wherein said wound is a surgical wound. clearly a response to the existence of differ- 6. The method according to claim 1, ent levels of intellectual property protec- wherein said wound is a body ulcer. tion in different countries and the fact that PGR-rich countries lost control over the Turmeric is one of the most basic ingre- germplasm they contributed to the CGIAR dients found in Indian households and, system. besides its use in cooking, its anti- septic are widely known. The Indian Council of Scientific and Indus- 3.3.1 Case studies trial Research (CSIR) therefore challenged the patent on the ground that the alleged The turmeric patent invention was actually part of public domain knowledge in India. The patent In this case, Suman K. Das and Hari Har P. was re-examined and all the claims Cohly, two researchers based at the cancelled. University of Mississippi Medical Center The turmeric patent is noteworthy for in Jackson, Mississippi, USA, applied two reasons. First, the turmeric patent high- for a US patent on the use of turmeric in lighted one specific limitation of US patent wound healing (US Patent No. 5,401,504). law, in an era where inventions patented in More specifically, the application related the US can originate in any of the five con- to the use of turmeric to augment the tinents. This relates to the interpretation of healing process of chronic and acute prior art in US law. 35 USC § 102 makes a wounds. The inventors claimed to ‘have distinction between anticipation in the US found that the use of turmeric at the site of and in other countries. Thus, traditionally, an injury by topical application and/or oral prior art in foreign countries has only been intake of turmeric will promote healing of recognized if it is described in a printed wounds’. This was based on experimental publication (Hurlbut vs Schillinger). In this that showed that turmeric causes case, printed materials were available but endothelial cells to proliferate, indicating may not have been presented to the patents that this molecule can be used to augment officer. Secondly, the turmeric patent pro- wound healing. The patent application vides important lessons in the context of acknowledged that ‘turmeric has long been the development of access regulations and used in India as a traditional medicine for TK documentation. This case provided a the treatment of various sprains and inflam- clear example of how difficult it can be to matory conditions’. contest a patent abroad even for a large The specific claims of the inventors institution like the CSIR. As a result, there were: has been increased awareness of the need to 1. A method of promoting healing of a document knowledge that is in the public wound in a patient, which consists essen- domain and make it sufficiently available 136 P. Cullet et al. so that patent offices around the world Neemix (Wolfgang, 1995). W.R. Grace also check claimed inventions against existing filed a patent for neem for its use as an anti- sources of information. fungal product with the EPO (European Patent 0436 257). This patent claimed The neem patents the invention of a novel insecticide and foliar fungicide derived from a neem The neem tree, which is a widely planted seed extract and the processes used to tree in India, has various uses in Indian obtain the neem oil. This pesticide was households and in . In particu- alleged to have the ability to repel insects lar, farmers have long used leaves from the from plant surfaces, prevent fungal growth, neem tree to make effective pesticides. In and kill insect and fungal pests at various recent decades, the properties of the neem life stages. This patent was challenged by tree have been the object of substantial Indian NGOs and the Indian Government. attention and large-scale research has been Eventually, in 2000, the Opposition Divi- carried out to turn some of the neem’s sion of the EPO revoked the patents after it properties into commercially viable was shown conclusively that the claims products (National Research Council, did not fulfil the requirement for novelty 1992). in view of their prior public use in Attention has focused specifically on India. the uses of neem as a biopesticide, because A number of interesting lessons can be of the commercial potential in this area. learnt from the neem patent cases. First, The challenge has generally been for manu- while one specific patent was revoked in facturers to extract the active properties of Europe, this has not affected the standing of the neem and to find a way to increase the other similar patents, since each and every shelf life of the product. Indeed, one of the patent must be opposed separately. Sec- characteristics of the natural formulation is ondly, the neem patents constitute much that the preparation lasts only a few days, less direct cases of appropriation of knowl- thus making commercialization of the leaf edge than do the turmeric patent. This is extract an . due to the fact that it is impossible to com- A number of neem-related patents have mercialize the solution that has tradition- been filed in the US and in Europe by ally been used as a pesticide in India. Indian and foreign companies and inven- Drawing a line between appropriation of tors. Their common characteristic is that TK and novelty in the context of existing the patents generally claim novel processes patent laws becomes a very difficult exer- for making a neem-based or neem-derived cise. Thirdly, some of the neem patents pesticide and the resulting product (e.g. US may have practical implications in India, Patents 5,827,521 and 5,885,600). Even since the patented solutions require neem though a number of patents have been filed, tree seeds as their primary material. The one patent claiming a method for long-term need for vast quantities of neem seeds storage of the active pesticidal ingredient may constitute a positive commercial (azadirachtin) became the centre of vigor- opportunity for some people. Fourthly, ous debates. In the early 1990s, the United it is striking that a number of neem- States Patent and Trademark Office issued a related patents have been filed by Indian patent to W.R. Grace, which covers a citizens or companies. This clearly shows method of creating a stabilized azadi- that the question of the appropriation of TK rachtin in solution and the stabilized through patents is not exclusively a azadirachtin solution itself (US Patent North–South issue nor one determined by 5,124,349). Subsequently, the US Environ- political boundaries. From the point of mental Protection Agency registered view of TK, it is in fact immaterial whether Grace’s stabilized azadirachtin solution for the application is filed by an Indian or a use on food crops under the name of foreign company. IPR, PGR and Traditional Knowledge 137

The kava case56 granted to some companies in order to explore kava. An example in the USA is the Kava (Piper methysticum) is an indigenous patent granted to Natrol, Inc., a US-based plant from islands in the South Pacific, company that obtained a US patent for where it is commonly used to prepare a tra- ‘Kavatrol’, a dietary supplement that serves ditional drink for both ceremonial and as a general relaxant, composed of kava, medicinal purposes. chamomile, hops and schizandra. (Downes The kava plant is a large shrub that can and Laird, 1999). In Europe, two German reach heights of up to 15 feet. It has green, companies, William Schwabe and Krewel- heart-shaped leaves with stems that can be Werke, have patented kava as a prescription green, red-and-black striped or spotted. drug for treating strokes, insomnia, Kava is cultivated in the South Pacific, Alzheimer’s disease, and so on. In France, including the Federal States of Micronesia L’Oreal has patented the use of kava for hair (Lebot and Lévesque, 1989). loss and to stimulate hair growth. People started to use a wild form (P. The existence of patents based on kava wichmanii) of the kava plant about 3000 raises concerns about the conservation and years ago, which was later domesticated in protection of traditional knowledge related the Pacific Islands of Vanuatu. Later on, the to kava. First, the commercialization of plant spread to other islands in the Pacific. kava-based products has had a negative Traditionally kava has been used in impact on its conservation. In particular, two different ways, one of which is related the increasing exploitation of the plant has to a ritual that uses kava as a relaxant. Sev- led to the harvesting of immature kava, thus eral nations in the Pacific islands follow a jeopardizing the quality of the medicinal ritual in which kava is used as a ceremonial product and reducing its resource base and social drink (WIPO, 1998–99). Kava has (Puri, 2002). Secondly, patents granted also been used traditionally as a medicinal which exploit medicine that has already plant in the region (Lebot et al., 1992). It has been developed and used for generations by been used to treat stress, anxiety, insomnia, local communities constitute a case of muscle and back pain, tension headaches, appropriation of traditional knowledge. menstrual pain, asthma, the common cold, In the kava case, patents cannot pro- urinary infections, stomach problems and vide protection for traditional knowledge. other maladies. Once planted, the cultiva- In this regard, the need remains to examine tion of kava requires little labour or capital other potential instruments of intellectual investment. The kava roots continue to property rights as tools to protect tradi- grow perennially, and gardens and planta- tional knowledge, such as geographical tions are usually passed down through the indications and trademarks. generations. The protection of kava has not been achieved through patents. Kava does not 3.3.2 Proposed solutions57 have the inventive character required by patents. Furthermore, it cannot be consid- Biodiversity registers ered patentable if it is already well known to the public. Presently, no Pacific island coun- The progressive appropriation of TK try has plant patent laws, but even if such through patents has fostered concerns in laws were to become available, no variety of source countries over their possible loss kava could be patented (Clark, 1999). of control over plant genetic resources Despite patents not being sufficient for and related knowledge. One of the reac- the protection of the kava plant and related tions to cases like the turmeric, neem traditional knowledge, patents have been and kava cases has been the development

56 Author: Andrea Nascimento Müller. 57 Author: Philippe Cullet. 138 P. Cullet et al. of biodiversity registers. Such registers Benefit-sharing generally seek to document existing knowl- edge in order to prevent unwarranted The notion of benefit-sharing has largely patent claims from being accepted by been developed as a consequence of the patent offices around the world because development of genetic engineering and its they do not have access to TK databases. increasingly frequent use of TK for the The registers also provide a tool for assert- development of other products. In fact, ing benefit-sharing claims in situations there is increasing recognition that the com- where a patented invention is directly mercial use of TK in a direct or derived derived from TK (Rangachari and Subbarav, form should be compensated in one form or 1998). another. In practice, benefit-sharing can Most biodiversity registers have been give rise to a number of important ques- conceived as open documents that are tions, as illustrated in the case of Jeevani meant to foster better access to existing TK. medicine. This may encourage the sharing of knowl- Jeevani was developed after the Kani edge amongst different unrelated communi- people of southern Kerala were persuaded ties, which may be beneficial from the point by biologists from the Tropical Botanic of view of the sustainable management of Garden and Research Institute (TBGRI) to local resources. In cases where knowledge share some of their knowledge concerning a is directly attributable to an individual or plant called Aarogyappacha (Anuradha, community, the registers provide a tool to 1998). The biologists were intrigued by the establish claims of original ownership. The strong anti-fatigue properties of the plant’s registers also indirectly constitute an attrac- leaves. Though widely used by local tive source of information for researchers people, the plant itself seems to have been seeking to build on TK. They therefore pro- unknown to outsiders until 1987. The vide an incentive for commercial research TBGRI carried out research on the plant into TK and at the same time a means to and, after identifying the active ingredients ascertain public domain knowledge and a of the plant, developed a drug with anti- tool for holders of TK wanting to claim ben- fatigue properties. The rights to manufac- efit-sharing (Gadgil, 1997). ture Jeevani were transferred to a private The approach that seeks to make biodi- manufacturer for a licence fee of about versity registers open to all and to foster US$21,000 (at today’s exchange rate) for 7 outsiders’ use of the registered knowledge years and a 2% royalty on for 10 years is not always accepted. In some situations, (TBGRI – Arya Vaidya, 1995). TBGRI individuals or communities may either decided to give 50% of the fee and royalty decide not to register their knowledge in a to the Kanis (Ministry of Environment and written form, or may register it but not give , 1998). It is significant that while access to outsiders. The village of Pattuvam patent applications were made by TBGRI, in the south-west state of Kerala in India no patent was granted in India, because the took the latter approach when it decided to Indian Patents Act did not allow such document all its biological resources and patents at the time. TK but decided not to make the results This benefit-sharing arrangement is available to outsiders. In this case, the pro- very progressive from a financial point of moters of the register wanted to provide view. However, it has not been immune to documentation of public domain knowl- criticism. First, while the section of the edge but did not consider that this knowl- Kani tribe that had had significant interac- edge should be freely offered to the outside tions with the outsiders – including the world for further use. Interestingly, the reg- specific individuals who passed on the ister is closed so as to avoid appropriation information to the scientists and were by outsiders, but the possibility of sharing rewarded with special financial rewards – knowledge with other local communities is were generally happy with the benefit-shar- recognized. ing arrangement, other segments opposed IPR, PGR and Traditional Knowledge 139 it. This is partly due to the fact that some Honey Bee Network in the state of Gujarat, factions of the tribe felt that they were not India (Gupta, 2001b). Honey Bee seeks to involved in the negotiating process and foster knowledge dissemination among were handed down a decision without local communities and in the wider world. proper consultation. This raises an issue The specific approach behind this experi- concerning the prior informed consent of ment is that rather than putting shared the providers of knowledge. Secondly, ben- knowledge into the public domain, the efit-sharing in the form of money may not information is clearly titled to the individ- be the most desirable form of contribution ual holder or inventor. In other words, to the local economy. This aspect is high- Honey Bee seeks to provide incentives and lighted in this case, because the Jeevani benefits to innovators to foster information medicine can only be produced from leaves dissemination. Institutionally, this has been of the tree if it is grown in the area where achieved through the Society for Research the Kanis live, and not elsewhere. The and Initiatives for Sustainable Technologies Kanis could therefore have been given a and Institutions (SRISTI; for general infor- stake in the production of the raw material mation on SRISTI, see http://www. for the medicine, a much more stable and sristi.org). substantial form of benefit-sharing (Gupta, Honey Bee’s work comprises a variety 2001a). of different components. An important part The Jeevani case study highlights issues of its work is the documentation of innova- of broader for benefit-sharing. First, tions, either of contemporary origin or benefit-sharing is not limited to transfers of based on traditional knowledge. The data- knowledge between different countries. Sec- bases now include about 10,000 innova- ondly, the trigger for benefit-sharing is not tions. Since 1997, Honey Bee databases necessarily the appropriation of knowledge have also formed the basis for the commer- through intellectual property rights, but is cial use of documented innovations. The generally the commercialization of TK prod- Gujarat Grassroots Innovation Augmenta- ucts or products derived from TK. Thirdly, tion Network (GIAN) has been set up specif- monetary compensation, however attractive ically to provide an interface between it may be as a form of compensation, may nei- innovations, investment and entrepreneur- ther be the most effective nor the most appro- ship. The GIAN has helped to file patents priate way to reward the contribution of on behalf of grassroots innovators and specific knowledge to the commercialization helped with the transformation of innova- of a new product. tions into products that can be commercial- ized. Local innovation More recently, the Honey Bee model has been expanded and a National Innova- The increasing appropriation of knowledge tion (NIF) has been set up by – whether based on TK or not – through the Department of Science and Technology intellectual property rights has often led to of the Government of India (for general to preserve existing rights and to information on NIF, see http://www. avoid or regulate transfers. In some cases, nifindia.org). The main goal of the NIF is to however, there have been initiatives aimed provide institutional support in the scout- at using the existing intellectual property ing, spawning, sustaining and scaling up of right system for the benefit of TK holders. grassroots innovations and to assist in their The basic idea behind this is to provide a transition to self-supporting activities. Fur- form of recognition for inventions and cre- thermore, the NIF seeks to strengthen R&D ativity that may not qualify for patent pro- linkages between excellence in formal and tection, but which constitute advances in informal knowledge systems in a bid to the specific field of activity. help India become a global leader in sus- One such experiment is that of the tainable technologies. 140 P. Cullet et al.

3.3.3 Problem analysis slowly reduce over time as the number of registers of TK increases around the world The progressive interest in the exploitation and as an increasing number of registers are of PGR and related changes in intellectual uploaded onto the Internet. property laws have important practical and The patentability of products derived policy implications in a number of devel- from TK raises complicated policy issues at oping countries. The development of com- the international level. One of the problems mercial products based on TK can have is that appropriation does not follow a beneficial impacts for different actors in dif- single path. In fact, as is illustrated in the ferent countries depending on the specific case of the neem patents, while a majority situation and the legal framework in place. of patents in Europe and the USA on TK- The Jeevani case illustrates a situation derived products may be owned by compa- where TK is appropriated by a governmen- nies from the North, applications from the tal body and then sold on to a private com- countries of origin are also prominent. In pany of the same country. In this case, the other words, the problem of ‘biopiracy’ is commercialization of the medicine has the not limited to a North–South issue, but is potential to benefit the national economy also replicated at the national level or in without any international implications. relations between different developing Concerns related to the control of TK and countries. The international community benefit-sharing are, however, similar, has started to address two specific problems whether the situation is one where all the linked to the appropriation of TK through transactions happen within a given country intellectual property rights. The question of or involves an international element. In prior informed consent (PIC) comes first in both cases, there is a need for a legal and line. Article 15.5 CBD and the guidelines policy framework to regulate the appropria- adopted at COP 6 clearly recognize the need tion and use of TK outside its area of origin. for PIC, but this has not yet been imple- The use of TK in commercial applica- mented, either at the international level or tions by outsiders raises even more compli- within the national legislation of donor cated issues when intellectual property countries. The second issue is that of protection is sought for products derived benefit-sharing, which is addressed in from TK. In this situation, a number of spe- the CBD guidelines and in the ITPGRFA; cific problems arise. Even in the TRIPS era, however, both at the international and different countries have different levels of national levels, the scope and impact of intellectual property protection and, for the these provisions is yet to be established in foreseeable future, it is likely that the level practice. of patent protection in recipient countries One of the most common reactions to such as the USA and Western European TK appropriation in developing countries countries will remain much higher than in has been the fostering of the development of most developing countries. This implies biodiversity registers comprising records of that it will remain ‘easier’ to apply for some PGR, PGRFA and knowledge related to these types of patents in the USA than in India, resources. This remains on the whole a reac- even when the latter introduces product tion to international trends, which seeks to patents on biotechnological inventions in prove the existence of knowledge already in all fields of technology. One of the conse- existence, but does not provide an avenue quences of this asymmetry is that an oppo- for asserting claims of ownership over the sition to such a patent can be filed only resources or knowledge. Some initiatives, from outside the country of origin, as in the such as the one taken by the Honey Bee case of the turmeric patent outlined above. Nework, indicate that there can be other Further, in the case of the US patent system, ways for developing countries to react to the there is the added difficulty concerning the expanding scope of intellectual property proof of prior Article. This difficulty will rights at the international level. IPR, PGR and Traditional Knowledge 141

3.3.4 Impacts on PGR diversity nessed significant yield increases (in the case of India see, for example, Sharma and The direct impacts of intellectual property Poleman, 1994). However, despite these rights on PGR diversity are difficult to esti- gains, the Green Revolution package has mate since in most cases there is no direct come under increasing criticism since the impact. At the outset, the distinction beginning of the 1990s. First, over the long between the impacts on PGR diversity and term, the Green Revolution has come to be the impacts on TK must be clearly delin- associated with significant environmental eated. The latter relates to the impacts of costs. These include falling tables intellectual property rights on the use of due to the overuse of tubewells (Bavadam, PGR and ownership of TK, while the former 2000), waterlogged and saline from focuses on PGR conservation and manage- many large schemes, declining ment. fertility with excessive chemical fertil- Intellectual property rights do not have izer use and with pesticides direct impacts on PGR conservation and (Dhaliwal and Dilawari, 1991; Agarwal, management because they do not directly 1995). The Green Revolution has also been deal with the issue of biodiversity conser- associated with the spread of monoculture, vation and do not address the question of which leads to a homogenization of species, the ownership of biological resources them- greater vulnerability to insect pests and dis- selves. However, they are relevant in PGR eases, and to a loss of agro-biodiversity management because the introduction of (Thrupp, 2000). Secondly, the sustainabil- patents in agricultural biotechnology has, ity of yield increases has been questioned for instance, important impacts for agricul- in view of evidence of diminishing returns tural management, and hence agro-biodi- in intensive production with new varieties versity conservation. (Conway and Barbier, 1990). Thirdly, the The experience of developed countries application of the new technique necessi- that introduced plant breeders’ rights tates important investments in seeds, fertil- and/or plant patents earlier does not pro- izers, pesticides and irrigation, which are vide many useful analogies, insofar as their beyond the reach of all but the largest farm- socio-economic conditions were vastly dif- ers (Joshi, 1992). Indeed, new varieties per- ferent from the conditions under which a form well only when all the necessary vast majority of developing countries oper- inputs are available in sufficient quantities ate today. However, it is possible to get a (Conway and Barbier, 1990). Thus, irriga- general idea of some of the possible impacts tion is often necessary, given that crops of the introduction of intellectual property may fail if water is not provided in suffi- rights in agricultural biotechnology by cient quantity at the opportune time. Uni- looking at the experience of the Green Rev- formly produced seeds may also not be as olution in Asian countries. well adapted to local conditions as farm- In effect, the practical impacts of produced seeds. Furthermore, new seeds hybrid varieties of the past and the geneti- tend to be much more expensive than farm- cally modified seeds of the present are saved seeds (Kahama, 1995). largely similar if one excludes the specific The long-term implications of the biosafety concerns linked to the latter. Both Green Revolution for PGR diversity have seek to provide yield increases and both only been moderately positive, since uni- often require agricultural management tech- formity or monoculture generally leads to a niques that largely differ from traditional loss of agricultural biodiversity. It is likely practices by necessitating a number of that this situation will be repeated with external inputs, such as irrigation or chem- genetically modified varieties, with the ical fertilizers. added concerns about unwanted dissemi- A general assessment of the Green nation and contamination of biodiversity Revolution indicates that areas where high- by the latter varieties. In both cases, a yielding varieties were introduced wit- broader assessment of the impacts of the 142 P. Cullet et al. introduction of new varieties must take into noteworthy that the practical consequences account not only the increased yields, but of the turmeric or neem patents for original also the sustainability of the increases and TK holders are likely to be insignificant, at the negative impacts on diversity. The main least in some cases. Thus, in the case of the distinction is that in the case of the GMOs, turmeric patent, the existence of a patent in the legal incentive for their development is the USA would not have had any practical provided in large part by IPRs. consequences for everyday users of turmeric as a healing agent throughout India, where it was not recognized. 3.3.5 Impacts on TK

Intellectual property rights undeniably 3.3.6 Tension between IPR and competition have important impacts on TK. First, they foster a more commercial approach to the This section shall introduce the interrela- question of TK use. In other words, they tionship between IPR and competition laws foster a new outlook on TK that mainly and policies. This interaction is relevant focuses on the uses of TK that have com- when it comes to assessing the scope of pro- mercial potential. Secondly, intellectual tection of IPR in the light of public policies property rights provide an incentive for reg- aimed at promoting economic efficiency istering TK. This is becoming increasingly and the diversity of supply of protected necessary in view of broader economic goods and services. Intellectual property changes at the national and international forms of protection grant exclusive rights levels which lead to the progressive erosion that come close to monopoly rights. This of TK. Thirdly, the direct and indirect can trigger tensions with competition laws appropriation of TK has increasingly led to and policies. The interactions between com- the realization that procedures for access petition and IPR become even more com- are imperative, given the important com- plex on the international level. As mercial stakes. As a result, there has been illustrated in the case studies above, legal increasing pressure at the international and issues concerning TK related to PGR present national levels for the development of a in general strong cross-border characteris- legal regime to regulate access to TK and to tics. It is therefore necessary to deal with allocate the benefits accruing from products these issues not only at the national but derived from TK. also at the regional and global levels. There The progressive appropriation of TK are a variety of different legal approaches through intellectual property rights also has towards competition, ranging from an an impact on the ownership of TK. In fact, absence of specific legislation via lax law to this is probably the most crucial aspect from very strict and incisive rules with effective a legal point of view. The main impact of the sanction mechanisms. In comparison to introduction of IPR over TK-related inven- competition laws and policies, the interna- tions is that TK itself cannot be protected tional intellectual property system appears through IPR and is therefore in the public to be much more harmonized, in particular domain. Further, TK generally does not through the set of TRIPS rules that ensures qualify for patent protection because TK minimum standards of protection. This itself is not deemed to be ‘state-of-the-art’. In higher degree of harmonization of intellec- general, intellectual property rights over tual property rights does not only concern TK-related inventions foster a shift in con- procedural and substantive rules, but also trol from TK holders towards intellectual the institutional design that serves to imple- property rights holders. In fact, it is this shift ment them such as public registries, special- in property rights in favour of new holders ized courts and collecting societies. In that has led individuals, organizations and contrast, procedural and substantive compe- governments to challenge patents, such as tition rules are mainly national or, as in the the turmeric patent (Anuradha, 2001). It is case of the European Community, IPR, PGR and Traditional Knowledge 143 regional.58 The same applies for the institu- business purposes, but can be problematic tional framework.59 There are initiatives to for the achievement of policy goals in the promote multilateral cooperation in the field public interest. Concretely, there are con- of competition in the OECD, the UNCTAD tractual practices that are necessary to cope (United Nations Commission for Trade and with constraints induced by IPR that can Development), and more recently in the qualify as anti-competitive behaviours. In World Trade Organization (WTO).60 A strong the case of sequential inventions, for exam- link between international competition and ple, patent licence agreements help to over- international trade laws and policies is obvi- come certain deadlock situations by ous when anti-competitive private business structuring the relationship between pri- practices have the effect of replacing tradi- mary and secondary innovators. The follow- tional tariff and other non-tariff barriers to ing section will discuss the questions of foreign markets after they have been removed contractual arrangements that are based on by international trade rules (Kennedy, 2001). IPR and their impacts on competition.62 The Possible approaches in the WTO consist of last section will illustrate in further detail elaborating harmonized minimum competi- the issues at stake in the light of the exam- tion policy standards (e.g. the TRIPS ple of the seed industry, where the intro- approach) or an agreement on core competi- duction of IPR to promote private invest- tion principles.61 However, for the time ments eventually contributed to building being, there is no consensus on the question up a highly concentrated industrial sector of whether the WTO should deal with this dominated by a few big players. This exam- matter, and, if so, in what manner. ple outlines how the instrument of intellec- As described above, in the long term the tual property forms of protection may fail to Green Revolution has been detrimental to reach public policy goals in the absence of PGR diversity, as it has, in many instances, appropriate competition laws and policies. caused uniformity and monoculture and, thus, a loss of agricultural biodiversity. This Contract arrangement among sequential development was partly caused by the innovators63 absence of appropriate competition laws and policies. To address this risk, the Overly broad patent protection can stunt or impact on the competitive environment slow the pace of future innovation. The must be carefully taken into consideration scope of patent protection refers to both when new forms of IPR are introduced. breadth and height. The breadth of a patent Lawmakers are therefore well advised to defines the range of products that are adapt also the competition laws when using encompassed by the patent claims, which intellectual property to achieve policy goals. protect the patent holder against potential Patent laws, for example, trigger contractual imitators or closely similar inventions. The practices among the concerned economic height of the patent confers protection players. These contractual arrangements against improvements or applications that may be reasonable and legitimate for private are easy or trivial. The broader the scope of

58 For a summary on different national and regional approaches in the area of and policy, see Kennedy (2001, p. 22 ff.). 59 With respect to the institutional design of US competition institutions and the complexities of their inter- actions, see Peters (1999, pp. 40–67). 60 See Kennedy (2001) at p. 97 (overview of OECD guidelines); p. 110 (Draft International Antitrust Code); p. 118 (UNCTAD principles on restrictive business practices). This author outlines the arguments in favour of and against the integration of competition rules into WTO law, and comes to the conclusion that the WTO is not the appropriate forum to deal with this matter, in view of the very different legal approaches that exist between the countries in this field, for the time being. 61 For further references, see the WTO website: http://www.wto.org/english/tratop_e/comp_e/comp_e.htm 62 For an overview on policies that may be pursued by antitrust legislation, see First (2002, pp. 175–194). 63 Author: Gloria Pasadilla. 144 P. Cullet et al. the patent protection, the higher the degree application, then the broad patent that of monopoly power; but conversely, the excludes better research companies implies narrower the patent, the lower the incentive an efficiency loss to society. for the innovator. The question is, what is Obtaining a licence from the original the optimal level of scope for society? The innovator is one option for secondary inno- issue is how to balance the incentives, par- vators. The question arises as to when is the ticularly in the case of sequential innova- best time to negotiate. If ex-post, that is, tions, between the primary innovator and after the secondary innovator has already secondary inventor (those who introduce invested in research, then his bargaining improvements that may have better indus- position is weak, because all his invest- trial applications). The same issue applies ments are already sunk (i.e. non-recover- to related inventions that somehow infringe able), while the original innovator has the upon an initial discovery. Clearly, both option of refusing to grant any licence. This deserve some rewards because, for ‘hold-up’ problem, where all of the bargain- instance, without the initial invention, ing is on the side of the original innovator, without its disclosure and knowledge can be solved through the imposition of spillover, the secondary innovation would compulsory licensing, perhaps invoking the not come about. Conversely, there are pri- ‘essential facility doctrine’.64 mary innovations that initially do not have If negotiations instead occur ex-ante, significant applications, and whose value that is, before the secondary innovator has actually derives from the values of the sec- incurred sunk investment costs, then there is ondary innovations built upon them. The greater scope for a more balanced outcome. problem concerns how to design an optimal The secondary innovator’s bargaining power contract that provides incentives for both. is improved, making him less susceptible to This is an important issue because all a hold-up problem. But the nature of these technological advancement is the result of a contracts remains subject to possible compe- combination of both primary and subsequent tition challenges, as will be discussed below. improvements of initial discoveries: hence The joint venture agreement helps in all innovations require some form of encour- the pooling and sharing of risks. Through agement and incentive at different stages. joint ventures, researchers are allowed to Having too broad or too narrow a protection proceed, and (if successful), rents are can therefore stunt the growth of knowledge, shared and divided up accordingly amongst either at subsequent stages or at the very font the inventors. However, there is also the of discoveries itself. Consider a very broad danger that joint ventures can function protection of primary inventions. Barton much like a cartel, deterring the entry of (1997a) takes the example of a biological third-party innovators. receptor, a research tool that is important for A ‘dependency licence’ for follow-on the study of schizophrenia, but may not be inventors is another possible arrangement marketable in itself. If given a broad patent, (Barton, 1997b). This is akin to the situation the inventor of the receptor will have a pertaining to cross-licensing and grant-backs, monopoly over the entire research area, even whereby the follow-on inventor patent without necessarily defining any marketable requires the authorization of the holder of the product that is of benefit to the public. From prior patent, and the original holder may not an economic efficiency standpoint, society apply the same improvement without author- does not lose out if the initial innovator also ization by the holder of the follow-on inven- has a comparative advantage in the develop- tor patent. This dependency licence ment of all related applications. However, if essentially gives the follow-on innovator the other innovators exist who have a better right to obtain licences from the holder of the capacity to bring about the perfection of its initial patent. It might require that a royalty is

64 For an overview on the ‘essential facility’ doctrine under US and EC law, see Meinhardt (1996, pp. 137–160). IPR, PGR and Traditional Knowledge 145 paid, but at least it significantly improves the further innovation. A patentee may refuse secondary inventor’s bargaining power and to , but if the IPR satisfies the ‘essen- incentive. The royalties can either be deter- tial facility doctrine’, or if competition is mined in court or through negotiation. severely threatened (for instance as is the case with mergers or abuse of dominant Some basic principles for IPR and position), the patentee can be forced to competition policy grant a compulsory licence. In most cases the terms of the licence agreement depend Considering the number of possible contrac- upon the relative bargaining positions of tual arrangements related to IPRs, not only the licensor and licensee. In general, licens- between primary and secondary innovators, ing poses a greater competition risk if licen- it is worthwhile gaining an overview of sors and licensees are actual or potential competition or antitrust aspects of these competitors, or are in a horizontal relation- arrangements.65 IPR can be viewed as con- ship. Vertical relationships, on the other ferring monopoly rights, whereas competi- hand, or when a patent is an input to the tion policy is concerned with the promotion production of another product, normally of competition in the market; or it can be receive a more tolerant treatment by the seen that competition policy is about short- competition authorities. However, some run allocative efficiency and IPR about long- related agreements tied to licensing agree- run dynamic efficiency. This fact appears to ments have often fallen under competition create an inherent conflict between govern- scrutiny. Examples include licensee price ments’ IPR and competition policies. It is restrictions, exclusive territories, exclusive true that competition policies may at times dealing, grant-backs, reach-through royal- impose limits on market power of IPRs, but ties and tying arrangements.66 this conflict seems to be more apparent than In most jurisdictions, the treatment of real. In fact, the two instruments reinforce many licensing agreements has changed each other, because innovation is a spur to from being per se unlawful to one that competition, and competition also acts as a merits a rule of reason approach. For spur to innovation. instance, exclusive territories – where the Several market arrangements, includ- licensor grants the licensee a monopoly over ing a variety of licensing techniques, help a particular territory by agreeing not to sell defray the short-run misallocations, e.g. in the same territory, nor license anyone from less than optimal use of the innova- else who would operate in the same geo- tion, derived from exclusive IPR rights. graphical market – may at times be anti- They play an important role in further dis- competitive, because this carves out markets semination and utilization of the innova- among competitors. Yet often it may not be tion. However, these arrangements can also necessary for there to be any production of be made into a front for anti-market activi- the licensed product at all. For example, in ties, i.e. cartel activities. Such activities are the Maize Seed case, the European court examined briefly in the following section. ruled that such an agreement between the INRA research institute in France and the Nungesser company in Germany was indis- LICENSING pensable in order for the investment by the The granting of a licence allows the utiliza- German firm to introduce the seed variety tion of IPR by a non-patentee and promotes in Germany to be economically viable.67

65 See OECD (1998) and Anderson and Gallini (1998). 66 See OECD (1989) for more detailed discussion on the different IPR and competition policy interaction. 67 The contract was between Kurt Eisele, a German citizen, and INRA, but he transferred his rights under the agreement to his firm, Nungesser. Eisele agreed to register the varieties and arrange for their marketing in Germany. To encourage his investment, INRA promised Eisele that it would endeavour to prevent exports to West Germany from France (Korah, 1983). 146 P. Cullet et al.

Otherwise, their investment into the intro- secure. But this again is scrutinized on a duction and development of the seed vari- case-by-case basis, because not all licensing ety would not have been worthwhile, if with price restriction is better than no others could free ride on those initial costs licensing at all. In some cases, the negative by competing in the same market. allocative effects of price restriction may Exclusive dealing provides another impose a greater economic cost than the example. This licensing agreement either positive benefits of diffusion.69 prevents the innovator from transferring the Grant-backs provide a method by innovation to the licensee’s competitors, or which licensors seek to protect them- prevents the licensee from purchasing its selves against the possibility that licensing supplies from the licensor’s competitors. will foster the emergence and growth of The first can create a problem if the licence future competitors. They allow the patentee is transferred exclusively to a horizontal some rights over improvements made by competitor in a concentrated market, par- others upon his innovation. The economic ticularly if this eliminates competition. justification behind allowing bounded Exclusive transfer to a firm that is vertically grant backs, i.e. where the original licensor related to the innovator,68 however, may is not given an exclusive licence for any create less of a competition problem. The improvements to his innovation, is to give second scenario has the effect of denying the original innovator an incentive to rivals sufficient outlets for exploiting their license. Bounded grant backs strike a technologies, and thus has an adverse effect middle course that ensures that the original on competition. However, at the same time, licensor is not displaced from the this type of exclusive dealing may be the market, while still leaving licensees with a only way for the licensor to have control significant motivation to innovate (OECD, over the licensees, especially where it is 1998). difficult to determine how much a licensee Reach-through royalties are royalties uses up the technology vis-à-vis rival tech- based on total sales. This is administra- nologies. Noting that competition problems tively simple, but is effectively similar to can arise on a case-by-case basis, exclusive exclusive dealing arrangements in that it dealing, like exclusive territories, is acts as a disincentive for using competing analysed under a rule of reason approach, technology. Just like exclusive dealing, it is rather than being considered to be a viola- approached on a rule of reason basis. Tying, tion per se. or linking the sale of patented products to In an ordinary competition policy the purchase of other goods (including sense, price restriction tends to be viewed goods whose patent protection may have per se as being unlawful. Yet, in the context lapsed), also has both pro- and anti-compet- of IPR, licensee price restrictions may pro- itive effects. Tying has pro-competitive vide the incentive necessary for the innova- effects if it is necessary to secure the overall tor to license and thus permit the diffusion quality of the product, in the same way that of the technology. The idea is that if the car maintenance services tied to car sales profit made through licensing would be less can ensure a certain level of quality prom- than the innovator’s profit if he were to pro- ised by the manufacturer. Hence, normal duce the product alone, then he would have competition law applies a rule of reason no incentive to license. Hence, price restric- standard in analysing such cases, but this tions may be considered to be one of the may be prohibited if tying unnecessarily allowable restrictions that reasonably give raises barriers to entry (similar to exclusive the patentee the reward he is entitled to dealing agreements).

68 A relationship is vertical when the IPR are complementary inputs (even if the licensor and licensee are oth- erwise competitors in manufacturing products covered by the IPR). 69 See Gallini and Trebilcock (1998, p. 43). IPR, PGR and Traditional Knowledge 147

MERGERS, ACQUISITIONS, PATENT POOL efficiency enhancing is whether cross- Analysis of mergers of firms with signifi- licensing implicit in patent-pooling is nec- cant IPR is carried out using standard essary to compete at maximum efficiency merger analysis, i.e. the competition (i.e. one firm cannot use its own technology authorities consider dominant market posi- unless it has a licence to use another IPR in tions and the potential impact on competi- combination with his own). Otherwise, the tion in the product market. But, in addition, negative effects of patent pool may out- they use the innovation market approach, weigh its positive effects. which means that if mergers threaten to sig- nificantly reduce competition in the R&D market itself, then the mergers are in danger IPR AND COMPETITION: THE CASE OF THE SEED of being disapproved. This is the case, for INDUSTRY instance, if the merged entities have less This case study shall illustrate how intel- incentive to proceed quickly with innova- lectual property protection plays a role in tion and R&D than is the case if they were affecting the market structure of an industry separate entities. Some solutions can and derives competition implications from include compulsory licensing of one or the the changed competitive structure. other of the IPRs, or the forcible spin-off of one R&D group in order to maintain compe- The seed industry market structure. There are tition in innovation. about 1500 seed companies (Rabobank Patent acquisitions are sometimes used International, 2001); however, power is to avoid costly licensing transactions. But if concentrated in only a few, with the top ten used to accumulate a ‘killer patent portfolio’ seed firms accounting for more than 30% of to preclude any innovation around the main the roughly US$30 billion dollar commer- product, then there is scope for competition cial seed market. These seed companies authorities to intervene. This is particularly specialize in the breeding and production true when firms monopolize a technology of hybrid and improved crop seeds. Tradi- by not only obtaining patents on products tionally they have mostly been ‘stand- and process which they intend to use and alone’ or independent firms, but with the sell, but also patents which they intend to advent of biotechnology, seed sales have leave idle, thereby amassing a portfolio that become a crucial direct link for biotech it is difficult for competitors to innovate firms, as they embody the input of genetic around. The usual solution for this type of material into the agricultural production acquisition is compulsory licensing. process. This is a fundamental reason Patent pooling is another useful behind biotech firms’ vertical integration arrangement, particularly if it puts into the with the seed industry, as discussed below. same pool blocking patents. It helps in the Prior to the merger frenzy in the mid- efficient utilization of IPR and avoids costly 1990s, there was a wave of acquisitions infringement litigations. However, it can approximately a decade earlier. The also function as a cartel-like arrangement 1978–1980 period of mergers coincided with for existing IPR holders, making it difficult the strengthening of amendments to the US for new entrants to innovate around any Plant Variety Protection Act. At that time, a one existing patent in the pool. Per-use roy- number of observers identified a direct alty of an IPR package from a patent pool causal relationship between the strengthen- can also increase the marginal cost of pro- ing of intellectual property rights and merger duction. Patent pools can also act as a dis- activity, as the IPR triggered expectations of incentive to future research, especially if increased earnings in the seed sector. How- any improvements to the existing IPR pack- ever, whereas many of the acquiring firms in age are automatically shared between all of the 1980s’ merger round were new entrants the patent pool members, thus giving rise to to the sector, the 1990s’ round involved a free-riding problem. The useful rule of existing participants and high-profile multi- thumb to check whether patent pooling is national firms (Lesser, 1998). 148 P. Cullet et al.

Table 3.1. Key global players and their positioning in the seed market (Rabobank International, 2001).

Big league Minor league Niche players

DuPont (Pioneer) Limagrain Cebeco, Pau Euralis Pharmacia (Monsanto) Grupo Pulsar Ball, Pennington Novartis (Syngenta) Sakata DLF, Svalof Weibul Advanta (AstraZeneca) Saaten Union, Sigma KWS Ragt, DSV, Maisadour Delta & Pine Land Barenbrug Dow Agro Aventis

This wave of consolidation has been ture in existence during the 1980s, the thoroughly discussed elsewhere,70 but what emergent industry structure now consists we shall provide here is a summary of the of a relatively small number of tightly results of this series of acquisitions. It woven alliances among pharmaceutical should be noted, however, that some of firms, biotech research firms and the seed those acquisitions have been spun off a few industry. The life sciences industry has years afterwards for a variety of reasons: (i) solidified to five–seven major firms that are anticipated synergies might have failed to highly vertically integrated and organized materialize; (ii) concerns over consumer around a major life science firm (Table 3.1). acceptance of genetically modified organ- These five major gene giants that dominate isms and thus, the underperformance of the the life science industry are: Du Pont, Phar- biotech firms relative to pharmaceuticals, macia (Monsanto), Syngenta, Aventis, and may have led to an increase in pressure Dow. Together, they account for 60% of from shareholders; and (iii) antitrust global pesticide market, 23% of commercial scrutiny of mergers might have had a deter- seed market and virtually 100% of the rent effect. transgenic seed market (RAFI, September Some of the basic features of the 1990s’ 1999). merger round can, however, be highlighted. As the seed industry became more con- First, several large chemical and pharmaceu- centrated, the share of biotechnology tical firms moved into plant biotechnology, patents likewise consolidated on the few making huge investments in life sciences, major companies. As a result of the wave of and acquiring all of the large national seed buyouts, the purchased firms’ intellectual firms (e.g. Pioneer, DeKalb, Agracetus, property rights came to be held by its Mycogen, etc.). Some chemical and pharma- ‘mother firm’. Graff et al. (2001) found that ceutical firms merged horizontally (e.g. the top seven seed firms own more than Rhône-Poulenc and Hoechst to form Aven- 80% of the total patents in agricultural tis), then integrated vertically to seed breed- biotechnology, whilst the three major ones ing and marketing. The impact of this upon held 55% of the total patents. DuPont and the seed industry is that the large set of small Pharmacia own a majority of all major types start-up firms which appeared in the 1980s of patents: 38% of transformation technol- had, by the end of the 1990s, either folded or ogy patents, 31% of gene patents and 81% been acquired by the new agronomic of germplasm patents, the latter merely system’s giants (Graff et al., 2001). reflecting the aggressive buyout strategies of Thus, in contrast to the diffuse struc- these two firms in the seed industry. This

70 See for instance, Barton (1998), Hayenga and Kalaitzandonakes (1999), Fulton and Giannakas (2001). IPR, PGR and Traditional Knowledge 149 pattern raises concerns regarding potential the early phase of innovation – the fluid entry difficulties for new firms in the agri- phase – that new entrants gain access, the cultural biotechnology industry, as anyone total number of firms increases, and all of trying to get in runs the risk of being them engage in innovation and experimen- blocked or considered to be infringing upon tation with product designs and operational any of the biotech patents held by the major characteristics. Over time, a specific prod- firms. uct becomes the standard, and product Thus, in both the product and innova- innovation subsides, while process innova- tion markets, the major firms have cornered tion may continue at lower cost. Finally, a majority share, raising concerns of possi- the rate of both product and process inno- ble anti-competitive behaviour in the seed vation dwindles. At each stage of the inno- market and potential slowdown in the rate vation life cycle, there is a corresponding of agricultural biotechnology innovations. change in the market structure. The number of firms peaks during the fluid phase and Reasons for industry restructuring and the role then eventually drops off to a few central of IPR. Noting that industry consolidation players as the dominant design becomes has led not only to concentration in the established. The remaining firms emulate product market share (i.e. seeds) but also to the features of the dominant product con- concentration in the patents and specialized cept and compete on efficiency. assets used for research and development in When applied to the agricultural biotech, what was the motivation of giant biotechnology industry, Kalaitzandonakes firms in moving into the seed business? and Hayenga (2000) note that the number of What role did intellectual property rights firms peaked in the early 1980s, as they play in the seed industry transformation? competed in product innovation and vari- There are several competing reasons ous product forms, including transgenic that may explain the restructuring of the plants and genetically engineered microor- industry. Some are unrelated (or only mar- ganisms. The dominant design emerged in ginally related) to IPR, while others are cen- the early 1990s – transgenic plants with a tred on the intellectual property issue. pesticide action – and consolidation began shortly thereafter. Non-IPR reasons. Strong demand comple- Yet while the innovation life cycle mentarily between chemical and biotechnol- appears to explain horizontal integration ogy products is one reason that might have among firms engaged in biotechnology motivated the amalgamation of seed and R&D, it does not sufficiently explain the chemical companies. Consider a single firm vertical integration of pharmaceutical/ producing both insecticides and pesticides chemical firms with seed companies. and transgenic crops. Such a firm will be more profitable because it can price its prod- IPR-related reasons. While non-IPR-related ucts so that the use of the complementary reasons may provide a partial explanation product is encouraged. For instance, Mon- for the restructuring of the agricultural santo tried a product-tying strategy when biotechnology industry, they raise suffi- selling Roundup™ (a dominant herbicide cient questions to prompt a search for with glyphosate as an active ingredient), answers elsewhere. For instance, even as with Roundup Ready™ crops which are the innovation life cycle can explain hori- glyphosate tolerant, to maintain their con- zontal mergers of R&D firms, it falls short of siderable market power in the glyphosate explaining the vertical integration in the market (Hennessy and Hayes, 2000). life science industry. Thus, others have Innovation life cycle is another possi- offered other explanations for the emergent ble explanation for the consolidation exhib- market structure, which are directly related ited by the agricultural biotechnology to intellectual property rights. industry (Kalaitzandonakes and Hayenga, First, since IPR create monopoly power 2000). The idea is that it is typical that at to its owner, a firm may want to erect barri- 150 P. Cullet et al. ers to entry for potential competitors. This genes; or if the firm owns a large array of can be done by leveraging control over key elite germplasm into which those genes can intellectual properties to block potential be inserted. This explains the vertical inte- imitation or minor innovation improve- gration of many biotechnology firms into ments (Lesser, 1998). By accumulating such the seed sector, as superior germplasm were blocking patents, the patent owner main- essential complementary assets for agro- tains its monopoly rents within a specific biotechnology. market and for a specific period of time. The question is: why were so many Thus, industry concentration can be moti- mergers necessary for the exploitation of vated by the desire to control IPR, which complementarities, when other possible results in the maintenance of a firm’s contractual arrangements, such as licensing monopoly power, and therefore provides an or joint ventures with the seed companies, explanation for the industry consolidation. exist? The fourth IP-related explanation Another reason why firms may want to relies upon the low appropriability of intel- accumulate patents by buying companies lectual property rights in biotechnology with IPR is to be able to use them as - and high transaction costs in contractual gaining chips in negotiations with other arrangements to provide an explanation for firms. That is, knowing the high propensity industrial consolidation in the agro- of in the biotechnology biotechnology industry. industry, having a number of patents give The high transaction costs in licensing firms the necessary leverage or threat to sue arrangements are due to the value alloca- back if they, in turn, are sued for infringe- tion problem from these arrangements. ment. Patent ownership then protects firms Since firms do not know completely the full from rival patents or enables them to nego- potential utilization of the resulting innova- tiate for the utilization of certain key tech- tion, it is difficult to establish the correct nologies on an equitable basis (Joly and de cost and benefit sharing arrangement. Looze, 1996). Thus, what happens in a con- Because of the difficulty of arriving at opti- centrated market structure where a few mal licensing contracts, an acquisition firms own most of the patents is an implicit alternative is thus often preferred. cross-licensing among the firms (Barton, Low appropriability of intellectual 1998). Without a sufficient number of property rights and significant patent over- potentially infringeable patents, a firm is lap comes about when firms have similar more vulnerable to being sued for infringe- technology profiles. The weak differentia- ment by other companies. tion of profiles is, in turn, due to the large A third IPR-related explanation for size of a common knowledge base from aca- industry consolidation is the economies of demic research and publicly funded scope in research or the desire to exploit research programmes. Thus, it happens complementarities in the use of specialized many times that different patents are assets in biotech R&D. Graff et al. (2001) merely based upon different procedures argue that the mere desire to accumulate that are aimed at the same applications, e.g. patents to block entry would have led to an gene insertion on different crops using gene increase in the sheer number of owned gun technology or microprojectile methods. patents, rather than in an increased diver- Consequently, in the face of similar patents, sity of patents. Since the increased industry the probability of litigation is strong, and so concentration shows that major firms have is the incentive to merge or enter into cross- accumulated not only a greater number of licensing agreements. patents but also a more diverse one, an But why integrate vertically into the explanation can be found in the mutual seed sector? Since crop complementarities of these assets. For demonstrate a significant degree of techni- example, the isolation of a gene leading to a cal imitation and high-quality proprietary gene patent will have a greater value if there germplasm, being a key complementary are enabling technologies to use these asset for commercialization, this facilitates IPR, PGR and Traditional Knowledge 151 a stronger market position than biotechnol- countries. Arguably, most forms of protec- ogy know-how and IPR on specific genes. tion are not adapted to the needs of TK This strategy of vertical integration into the holders. This is particularly true for patent seed business and ownership of germplasm protection, which constitutes a complex has become an almost necessary strategy for and costly legal tool, especially with technology firms in the face of contested respect to its international component. It intellectual property rights (Joly and de requires considerable expertise and finan- Looze, 1996; Hayenga and Kalaitzandon- cial resources to acquire and manage these akes, 1999). intellectual property rights, as well as the To summarize, demand complemen- will and capacity to commercialize the pro- tary between chemicals and seed, as well as tected products and processes. Appropriate the innovation life cycle, offers possible corporate, institutional and contractual explanations for the trend of consolidation structures are necessary to take full advan- in the agrochemical/agrobiotech industry. tage of this system. Furthermore, when But the existence of intellectual property patent protection shall contribute to reach rights appears to have had much to do with certain policy goals such as biodiversity the vertical integration. In particular, firms and equity, it needs the implementation of have had incentives to buy firms with IPR: corresponding competition laws and poli- (i) to block entry of potential competitors; cies. This type of IPR must therefore be rad- (ii) as a bargaining chip for an equitable use ically adapted in order to satisfy the of rival technologies; (iii) because of com- aspirations of TK holders that go beyond plementarities of key intellectual assets like the grant of mere ‘defensive rights’ to pre- transformation technologies, genes and vent the most visible dysfunctions of the germplasm; or (iv) because of high transac- system. The same is true, however to a tion costs in licensing agreements along lesser degree, for Plant Breeders’ Rights and with low level of technology differentiation sui generis protection systems. It is there- and intellectual property appropriability. fore questionable whether classical forms of IPR are appropriate for the purposes of TK holders in the light of the economic and 3.4 Conclusions71 non-economic concerns at stake. One may rather explore new concepts such as the The intellectual property system as it is ‘domaine public payant’ to address both the reflected in the TRIPS agreement has been demand from TK holders and from society developed over centuries, predominantly at large in order to fulfil policies that are by, and for the purposes of, industrialized able to balance private and public interests.

71 Author: Christophe Germann.

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