OPI NIO N

Trade-Offs and Transparency

Susy Frankel

Published online: 19 November 2013

� Max Planck Institute for Intellectual Property and Competition Law, Munich 2013

This opinion discusses and expands on some aspects of The Max Planck Institute for

Intellectual Property and Competition Law’s ‘‘Principles for Intellectual Property

Provisions in Bilateral and Regional Agreements’’ (MPI Principles).

In trade negotiations, intellectual property has too often been used as a trade-off

for other benefits. The MPI Principles highlight this trade-related function of

intellectual property as a matter of concern; particularly because the ‘‘gain’’ for the

intellectual property trade-offs (the losses) are often outside of intellectual property

law.1 These losses are often in the form of TRIPS-plus commitments. What

happened at the time of the TRIPS Agreement2 is an important background to

understanding aspects of the TRIPS-plus agreements which have evolved since

TRIPS came into force. One ‘‘narrative’’3 is that many developing countries signed

up to TRIPS in order to gain other benefits, such as market access gains4 or even

being part of the World Trade Organization (WTO). The WTO is a single

undertaking, meaning that its key agreements bind all members. In other words,

S. Frankel (&)

Professor of Law (Victoria University of Wellington)

PO Box 600, Wellington 6140, New Zealand

e-mail: susy.frankel@vuw.ac.nz

1 See MPI Principles Part 1.2 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), 15 April 1994,

Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, Legal Instruments –

Results of the Uruguay Round, Vol. 31, 33 I.L.M. 81 (1994).3 Daniel Gervais describes this as the ‘‘coercion narrative’’; see ‘‘TRIPS and Development’’, in Gervais

(2007), see also Gervais (2012), at 11–15.4 These would be the lowering of tariffs and removal of quotas under the GATT Agreement in particular.

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IIC (2013) 44:913–919

DOI 10.1007/s40319-013-0124-4

members cannot pick and choose between agreements.5 The ‘‘choice’’ to join TRIPS

was therefore arguably no real choice at all.

Since the formation of the WTO bilateral and now plurilateral trade agreements,

known as free trade agreements (FTAs), often involving either the European Union

or the United States demanding increases in intellectual property protection, have

proliferated. These FTAs usually include several chapters, including an intellectual

property chapter and are analogous to a single undertaking. Consequently a new era

of trade-offs has arisen. These trade-offs are different from the TRIPS Agreement

trade-offs because they are often more extreme, not only because they involve

extensive TRIPS-plus provisions, but also because the nature of a bilateral

arrangement often has a power imbalance. Trade-offs of this nature are problematic

because they result in countries adopting intellectual property laws that are not

correlative to their stage of development and may even inhibit development where

those laws prevent follow-on uses of existing intellectual property, including uses

which could themselves be new and innovative. Preventing new developments is

problematic when the reasons that justify intellectual property rights are examined.

The oft-stated rationale and purpose of intellectual property law is frequently

broadly expressed as to incentivise innovation and creativity.6 If the effect of

intellectual property law is the opposite, then it is unsurprising that these

justifications are brought into question. While all intellectual property rights in

varying degrees prevent third-party uses of the intellectual property, that is not an

answer to the restrictions that TRIPS-plus agreements place on developing

countries, in particular, which depend on using foreign intellectual property for

development.

Trade-offs can result in intellectual property law, which is unsuitable for the

stage of development of the nation that commits to enacting it. There may be a

positive side to trade-offs. In the Trans-Pacific Partnership (TPP) negotiations, for

example, there at least appears to be intense discussion about the intellectual

property chapter. The leaked text of that chapter has sparked some considerable

concern that a TPP agreement would mark a very high level of intellectual property

protection, surpassing the protections found in other FTAs and removing altogether

or placing stringent limits on using flexibilities.7 Although the negotiations are not

public, what can be surmised from the multiple rounds of negotiations is that the

intellectual property chapter is being discussed and may result in a negotiated

chapter rather than being a template chapter (as was the case in some of the earlier

USA FTAs). Whether the outcome of the negotiations will be an intellectual

property chapter with more balanced standards than the leaked draft remains to be

seen.

5 There are a limited number of exceptions to this in the form of plurilateral agreements the detail of

which could not be agreed upon in the Uruguay round. An example is the agreement on Government

Procurement.6 There is much literature on these justifications; a summary of which is beyond the scope of this

comment.7 The United States negotiating position, the ‘‘leaked text’’ can be found at http://keionline.org/sites/

default/files/tpp-10feb2011-us-text-ipr-chapter.pdf.

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The cost of intellectual property trade-offs is now at least better known. Armed

with this knowledge, some of the negotiations around intellectual property may be

much harder fought involving more detailed discussion. Additionally, the TPP

negotiation is taking place at a time when there has been a call for evidence-based

policy before intellectual property law is changed.8 Although evidence can be

varied and even created to suit a purpose, the use of evidence to oppose demands

and possibly to support counter-demands, may change the nature of FTA

negotiations.

Detailed negotiations, however, should mean that countries are much more aware

that intellectual property trade-offs are not necessarily desirable and that making

such trade-offs is not a simple solution to a complex problem. Additionally, the

post-TRIPS experience has also shown that although intellectual property trade-offs

can sometimes look tolerable in the short-term, they are often problematic in the

long-term. The result of the bad deals of the past may be that such agreements are

not entered into; although, that does not seem to be the case. The TPP negotiations,

for example, include many developing countries which have previously entered into

problematic trade-offs. Such countries now could be said to enter FTA negotiations

with ‘‘eyes wide open’’. Peru, which is part of the TPP, for example, is well aware of

the difficulties of FTAs with high standards as reportedly experienced after its FTA

with the United States.9 This phenomenon, however, is not confined to developing

countries. Australia, for example, already has an extensive TRIPS-plus FTA with

the United States.10 Following that agreement, the Australian Productivity

Commission recommended that Australia not enter into another intellectual

property chapter via an agreement with a similar framework. It stated that Australia

should:11

[a]void the inclusion of IP matters as an ordinary matter of course in future

[trade agreements]. IP provisions should only be included in cases where a

rigorous economic analysis shows that the provisions would likely generate

overall net benefits for the agreement partners.

Singapore also has an existing FTA with the United States. New Zealand does

not have an existing FTA with the United States, but it has experienced negotiators

some of whom understand the trade-off and have proposed a text (also leaked),

8 An example is the report of the United Kingdom Intellectual Property Office, Ian Hargreaves ‘‘Digital

Opportunity: A review of Intellectual Property and Growth’’ available at http://www.ipo.gov.uk/ipreview.

htm.9 United States–Peru Trade Promotion Agreement, signed on 12 April 2006 available at http://www.ustr.

gov/trade-agreements/free-trade-agreements/peru-tpa/final-text. For a summary of the opposition to the

FTA see ‘‘Peru-U.S. NAFTA Expansion: Overview’’ at http://www.citizen.org/Page.aspx?pid=521.10 Australia United States Free Trade Agreement, signed on 18 May 2004, available at http://www.dfat.

gov.au/fta/ausfta/.11 Australian Productivity Commission ‘‘Bilateral and Regional Trade Agreements Research Report’’, 13

December 2010, Recommendation 4, Chapter 14 see http://www.pc.gov.au/projects/study/trade-

agreements (last accessed 17 September 2011). Also the Productivity Commission did not comment

on the detail of the increased standard directly, but rather opposes the framework of the FTA as a top-

down model and recommended that intellectual property standards be negotiated in more detail through a

bottom-up integration model. For further discussion see Frankel et al. (2013).

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which maintain flexibilities. Also, in New Zealand there are government policy

reports, which have rejected some of the laws that appear to be on the TPP table. On

example is patent term extension.12 It also seems that a planned wholesale review of

copyright law has either been put on hold or cancelled because of the TPP process.13

Like almost all FTAs, the TPP is a trade agreement of which the intellectual

property chapter is one of many. A positive spin on the apparent length of the TPP

negotiations is that the United States, which is the main demander of high

intellectual property standards in the TPP, may actually have to give something

substantive in return in other chapters. Some kind of a trade-off seems likely, but

will it be worth it?

There are, however, added difficulties. Neither TRIPS nor FTAs are compre-

hensive intellectual property and related rights codes. They do not cover all aspects

of intellectual protection or new forms of protection that some countries, and in

some instances indigenous peoples seek, such as the protection of traditional

knowledge.14 This has resulted in ‘‘regime shifting’’,15 which although it cuts both

ways has largely favoured those countries seeking increased protection through

FTAs. Countries seeking protection of traditional knowledge or greater flexibilities

in intellectual property have not been successful at the multilateral level at the WTO

or in FTAs16 and so have for the most part moved the debate to other multilateral

organisations. Those seeking protection of biodiversity and traditional knowledge

have negotiated some protection through the Convention on Biological Diversity

(CBD) and the Nagoya Protocol.17 The problem, however, is that unlike TRIPS the

CBD is unenforceable and the United States is not a member.18 One difficulty of

regime shifting is the obvious problem of multiple and not always overlapping

commitments. A greater difficulty is that the factors, including flexibilities, which

can balance intellectual property, are in different places. So, for example, to the

extent that the protection of traditional knowledge might benefit the kind of

intellectual property more readily found in developing countries, that protection, if

it exists, does not work to balance TRIPS-plus FTA commitments. The achievement

of balance or enacting intellectual property flexibilities to suit domestic needs is

more likely to be achieved through the balancing mechanisms being present ideally

12 Ministry of Economic Development ‘‘Review of the Patents Act 1953; The Pharmaceutical Patent

Term in New Zealand Discussion Paper’’ (June 2003). In this report the government recommends that

New Zealand not enact patent term extension because of the cost. See also Frankel et al. (2013).13 ‘‘Government copyright review delay confirms fears about TPPA’’, 19 July 2013, Press Release: Green

Party, at http://www.scoop.co.nz/stories/PA1307/S00315/government-copyright-review-delay-confirms-

fears-about-tppa.htm.14 The predecessor to the TPP, an open accession FTA known as P4, expressly provided that countries

retain the policy space to protect traditional knowledge. See Trans-Pacific Strategic Economic Partnership

(P4) Agreement, available at http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-

Relationships-and-Agreements/Trans-Pacific/2-P4.php.15 Helfer (2004), p. 1.16 For a discussion of protection traditional knowledge in FTAs see Frankel (2012).17 Convention on Biological Diversity, available at http://www.cbd.int/.18 The United States signed but did not ratify the CBD.

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in the same instrument as the intellectual property rights. In any event, many FTAs

have restricted these flexibilities, so even regime shifting won’t necessarily help.

Those seeking increased protection have used bilaterals with great success.

Bilaterals by their nature involve often the same demander negotiating similar deals

with different countries. Those different countries therefore do not pool their

resources or expertise where there are common interests.19 But that is not

necessarily the same in the TPP where there are several rounds of negotiations

involving the same parties. Staffing such negotiations is undoubtedly expensive and

difficult for countries without bureaucratic resources focused on intellectual

property issues. Nevertheless, a plurilateral has the potential, even if not certainty,

of alliances between those with less power than the TRIPS-plus demander. Such

alliances might enable the negotiation of more flexibility than might exist in a

bilateral. A plurilateral is not, however, the same as a multilateral and such

agreements can neither solve the power imbalance nor make trade-offs a good idea

from an intellectual property policy perspective. Consequently the MPI principles

provide a mechanism to minimise the damage of trade-offs. The Principles in effect

support those who need it because they are not the powerbrokers of the deal.

In the case of an all intellectual property treaty, such as ACTA,20 the trade-off

analogy is less direct, but still very present. Some countries almost certainly

participated in ACTA because of bigger strategic alliances and ‘‘keeping-in’’ with

existing trading partners. Participation in ACTA may even be a show of good faith

towards making progress in other trade talks. Thus, the topic of a treaty is too

narrow a lens through which to examine trade-offs. Rather wider trade and strategic

alliances can also lie behind trade-offs.

In addition to the problems of particular TRIPS-plus rules, such as increasing the

cost of pharmaceuticals through mechanisms such as term extension and data

exclusivity, the problem is that trading intellectual property is not a short-term

game. Such trade-offs can have detrimental consequences in the medium to long

term. This is because intellectual property touches on so many areas that are key to

our lives, most obviously healthcare and arts and culture. It is also a significant part

of the law that regulates access to knowledge and innovation.

Many new FTAs include a lot of trade-plus measures. The TPP includes an

environmental chapter, a pharmaceutical chapter and a regulatory coherence chapter,

for example. These chapters, in common with intellectual property, are focussed on

coordination and sometimes harmonisation of regulation that is made behind the

border. Regulating behind the border by way of an international agreement raises

many difficulties because it is seen as interfering with national autonomy on a much

greater scale than traditional trade topics such as tariff setting. FTAs have also given

rise to calls for transparency so that all of those with an interest in intellectual property,

which includes much more than governments, policy makers and right holders, can

contribute to the debate. This call for transparency of intellectual property in FTAs was

very strong when ACTA was underway and is also strong with regard to the TPP. It is

19 The demanders of TRIPS-plus intellectual property do not face the same difficulties both because they

have expertise and resources but also because they are not negotiating the deal for the first time.20 Anti-Counterfeiting Trade Agreement, May 2011, available at http://www.ustr.gov/acta.

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well-known that some participants in the TPP have discussed the drafts with selective

stakeholders (mostly large intellectual property owning interests), but that other

stakeholders have not had the opportunity to see drafts. This call for transparency is,

however, more than just asking to see the negotiating texts. Many groups seek at least

consultation if not representative participation in the process. Participation in the

process is much more likely to be demanded because of the nature of international

agreements addressing behind the border regulation, which is a direct limitation on

national autonomy. The public in democratic countries are used to at least having the

option of a participatory lawmaking process. Public participation in legislative

processes vary from country to country. Accordingly the MPI Principles call for

meaningful opportunities for participation.21 These opportunities could include

submissions on policy papers, public forums, citizen juries, submission in legislative

processes and the like.22 One difficulty is the capacity of interest groups to participate.

These issues are hardly new to intellectual property.23 In the area of technical

regulation (which one could say intellectual property is), there are models of funding

public participation in the process.24 How this could be utilised in intellectual property

would need careful consideration. Additionally, some aspects of intellectual property

are very technical and developing countries, in areas such as pharmaceuticals, have to

rely on experts elsewhere for assistance. Copyright, by contrast has, as Professor

Gervais points out, become ‘‘everyone’s business’’.25

The MPI principles also speak to ensuring the mechanism of balance (flexibilities

and exceptions) and there should not be derogation from the object and purpose of

TRIPS, in particular the objectives and principles articulated in Arts. 7 and 8. I have

previously argued that FTAs with TRIPS-plus provisions can derogate from the

objectives and principles and that this raises questions about the legitimacy of such

intellectual property chapters in FTAs.26

An additional problem is not just the lack of balance in some TRIPS-plus

standards, but also the framing of the standards which move away from a minimum

standard approach to a more prescriptive approach. Minimum standards can often be

enacted in domestic laws in a variety of ways. Indeed, Art. 1.1 of the TRIPS

Agreement provides for this possibility. In contrast, the more prescriptive approach

determines the exact content of the obligation and also the method of application in

domestic law. An overly prescriptive approach is not consistent with the structural

framework of TRIPS and is a mechanism by which there is an increasing ‘‘invasion

of policy space’’.27

21 MPI Principle, 15.22 For a discussion of public participation models and democratic legitimacy see Bennett and Colon-Rıos

(2013).23 See for example Shapiro (2005), p. 341.24 For example this has been done in the electricity industry, see Bennett and Colon-Rıos, supra note 22.25 Statement of Professor Daniel Gervais, Vanderbilt University Law School before the Subcommittee on

Courts, Intellectual Property and the Internet Committee on the Judiciary, United States House of

Representatives, 113th Congress, 1st Session, ‘‘A Case Study for Consensus Building: The Copyright

Principles Project’’ 16 May 2013.26 Frankel (2008, 2009, p. 1023).27 MPI Principles, Part 3.

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This policy space is where flexibilities can be used to address particular issues

which may be of concern to one country more than another. One of the biggest

difficulties with FTAs has been the clawing back of limitations and exceptions. We

have seen that the TRIPS system can find exceptions non-compliant,28 but that there

is no gatekeeper on TRIPS-plus, which even if wrongly therefore obtains a de facto

legitimacy. Therefore, there are now attempts to claw back flexibilities by

entrenching them multilaterally.29

In the negotiated outcomes part of the MPI principles it is stated:30

If parties agree on IP provisions containing stronger intellectual property

protection or enforcement obligations, these provisions should nevertheless be

sufficiently flexible to take into account the socio-economic situation and

needs of both parties.

I do not disagree with this statement, but if TRIPS-plus FTAs continue on their

current course flexibilities may become close to impossible or meaningless in some

situations. An example is provided in the leaked text of the TTP and the detailed

provisions relating to technological protection mechanisms.

If the MPI Principles are adhered to, balance in international intellectual property

law maybe an achievable goal.

References

Bennett M, Colon-Rıos J (2013) Public participation in New Zealand’s regulatory context. In: Frankel S,

Ryder D (eds) Recalibrating behaviour: smarter regulation in a global world, LexisNexis

Frankel S (2008) The legitimacy and purpose of intellectual property chapters in FTAs. In: Buckley R, Lo

VI, Boulle L (eds) Challenges to multilateral trade the impact of bilateral, preferential and regional

agreements. Wolters Kluwer, The Netherlands, pp 185–199

Frankel S (2009) Challenging trips-plus agreements: the potential utility of non-violation disputes. J Int

Econ Law 12(4):1023

Frankel S (2012) Attempts to protect indigenous culture through free trade agreements. In: Graber C,

Kuprecht K, Lai J (eds) International trade in indigenous cultural heritage: legal and policy issues.

Edward Elgar, pp 118–143

Frankel S, Lewis MK, Nixon C, Yeabsley J (2013) The web of trade agreements and alliances, and

impacts on regulatory autonomy. In: Frankel S, Ryder D (eds) Recalibrating behaviour: smarter

regulation in a global world. LexisNexis

Gervais D (ed) (2007) Intellectual property, trade and development. Oxford University Press, Oxford

Gervais D (2012) The TRIPS Agreement: drafting history and analysis, 4th edn. Sweet & Maxwell

Helfer L (2004) Regime shifting: the TRIPS agreement and new dynamics of international intellectual

property lawmaking. Yale J Int Law 29:1

Shapiro M (2005) ‘Deliberative,’ ‘Independent’ technocracy v. democratic politics: will the globe echo

the E.U.? Law Contemp Prob 68:341

28 WTO Panel Report, US-Section 110(5) of the US Copyright Act, WT/DS160/R, adopted 27 July 2000.29 Marrakesh Treaty to Facilitate Access to Published Works for Persons who are Blind, Visually

Impaired, or Otherwise Print Disabled, adopted by the Diplomatic Conference, 27 June 2013, available at

http://www.wipo.int/edocs/mdocs/diplconf/en/vip_dc/vip_dc_8.pdf.30 MPI Principles, 18.

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