Part III - Intellectual Property and Global Inequality

11 Inequality and Intellectual Property Equity, Innovation, and Creative Imitation

Thomas Cottier

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Introduction

Justice in the distribution of income and wealth among nations has been at the heart of the development debate since decolonization began after World War II. The right to development and recourse to global equity has been informed by massive gaps in the distribution of wealth and income. International economic law and the World Trade Organization (WTO) have been strongly criticized for producing adverse effects.¹ In contrast, supporters of the system have drawn attention to the fact that the WTO has contributed to reducing such gaps.² Statistically, much of it is owed to the impressive growth of China due to global value chains. But all emerging economies and developing countries benefited from the multilateral system, except for the numerous least-developed countries. They amount to 2 percent of the world economy, and their share in world trade has not exceeded 1 percent since 2008.³ Overall, however, it is recognized that the multilateral trading system, due to its principles of nondiscrimination and market access, contributes significantly to more equal conditions of competition in the world economy.⁴ Trade shares of developing countries in world trade in goods and services in 2018 amounted to 44 and 34 percent, respectively.⁵

Today, the debate has shifted to the problem of intergenerational equity, given environmental challenges of climate change and exhaustion of natural resources – in particular, the loss of biodiversity caused by unprecedented growth and agricultural soil exploitation.⁶ While still shaped in terms of North–South relations, these issues amount to common concerns of humankind.⁷ They affect all countries but expose poorer and more vulnerable ones, further increasing inequalities. The COVID-19 pandemic is likely to improve them further. These issues call for enhanced international cooperation beyond existing levels.

After the financial crisis and the Great Recession of 2007–2012, preoccupation and focus shifted to inequality within states, impairing much-needed international cooperation. The process of globalization, the increase of global value chains, and the relocation of industries away from industrialized countries fueled populist political movements. They resulted in an isolationist U.S. government in 2018 and the United Kingdom leaving the European Union in 2020. In both cases, the onslaught on multilateral institutions was caused by increasing domestic inequality and dissatisfaction with national government policies. The European Union (in the case of Britain) and the WTO (in the case of the United States) were blamed for inherently domestic failures to secure social coherence and distributive justice. Previous governments largely ignored that free markets require adequate safety nets in social policy. For too long and tragically, free traders have often combated social policy, and adherents to the welfare state tended to support protectionism and mercantilism for ideological reasons.⁸ Countries adequately combining the two areas were able to avoid populists taking power. As an overall result, international cooperation within multilateral organizations has suffered. The setback today delays effective cooperation in addressing common concerns of humankind, including inequality among nations.

Increasing income and wealth distribution gaps set in with neoliberal policies in the 1980s.⁹ Income from capital increasingly exceeded income from labor. Property today again plays a significant role in increasing gaps and inequality of wealth in income.¹⁰ The 2018 World Inequality Report documents that income inequality has increased globally since 1980 – rapidly in North America, China, and Russia, but only moderately in Europe, ending postwar egalitarian regimes.¹¹ Statistics consistently show that inequalities were much less prominent after World War II with the advent of the welfare state.¹² Historians show that mass mobilization warfare, transformative revolution, state collapse, and plague – the four horsemen – have been the great levelers of income and wealth allocation. They tend to decline upon overcoming a major crisis.¹³ Importantly, it was shown that massive income and wealth inequality throughout history triggered international conflict and civil strife. It may do so in the future. It is a threat to international peace and security, and it is argued elsewhere that gross domestic inequalities amount to a common concern of humankind.¹⁴ Likewise, Goal 10 of the 2030 Sustainable Development Goals seeks to reduce inequalities, addressing all policy and regulatory areas.¹⁵ The matter, therefore, is also of importance for intellectual property. It forms part of capital and wealth and thus potentially contributes to inequality.¹⁶

The advent of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) in 1995 coincided with the heydays of trade liberalization in the wake of dominating neoliberal policies. While not an agenda of deregulation but rather a reinforcement of worldwide disciplines for the protection of intellectual property, we are confronted with the issue of to what extent higher standards of protection and commitments to enforcing such rights have contributed to wealth and income inequality. To what extent have monopoly rights contributed to or reduced equal conditions of competition and opportunities?

Property and property rights are major factors in income and wealth distribution. Most of it traditionally relates to movable capital (shares, assets, and savings) and real estate. Between 1970 and 2016, the share of private capital significantly increased in industrialized countries at the expense of publicly owned capital.¹⁷ The role of intellectual property is more difficult to assess. In the same period, the value of intangible property surpassed that of tangible property and became essential for global value chains.¹⁸ The number of registered titles constantly increased.¹⁹ While numbers are not conclusive for the value of such titles and thus wealth, the importance and impact of intellectual property increased in the process of globalization. In political and ideological debates, it is generally assumed that higher levels of protection increase income and wealth inequality. The view has fueled long-standing resistance to effective protection prior to the TRIPS Agreement. It informs much of the debate on TRIPS-plus standards in bilateral and plurilateral cooperation agreements.²⁰ Upon expounding in detail recent developments in international intellectual property treaty-making, Carlos Correa assumes that they contribute to inequality: “[intellectual property] provisions contained in [free trade agreements] are likely to aggravate current inequalities among and within countries, particularly low- and middle-income countries.”²¹ This argument is supported by the general importance of property for income and wealth allocation. The more it is concentrated, the greater is the inequality between different percentiles of society. Yet no econometric studies or models are available showing conclusively that intellectual property protection causes or contributes to international and domestic income and wealth inequality.²² Capital shares increased due to increased investment in intangible assets in corporate expenditure.²³ According to Carsten Fink, one possible explanation is the effect of reduced competition due to concentration, which may be caused, among other things, by intellectual property rights generating economic rents.²⁴ Causality is difficult to demonstrate, and a counterfactual under nonexistent intellectual property protection does not exist. Even the impact of increased levels of protection is difficult to assess. Conclusions may be drawn from findings of increased concentration in intellectual property–related industries and their push for high levels of protection, but there are many factors contributing to this effect. It is difficult to isolate the impact of intellectual property rights.

Given the empirical uncertainty of the impact of intellectual property on increasing income and wealth inequality internationally and domestically, this chapter addresses the issue from the angle of law and legal methodology. Thomas Piketty, while an economist, stresses in his recent work the important impact of constitutionalism and the importance of property notions and of law for the allocation of income and wealth. Much depends upon the shape of the legal order and its directions.²⁵ The scope of intellectual property rights is critical, so is the importance of competition and the avoidance of undeserved economic rents. Government policy and thus the law cannot possibly support such rents, as they are not in the public interest and do not foster general welfare. This chapter examines the potential of taking into account considerations of income and wealth distribution in the process of interpreting existing rules (see Section 11.2). It turns to the overall balance of rights and obligations from an angle of fostering investment in innovation and creative imitation. It also suggests recalibrating rules on the duration of patents, copyright, trademarks, and trade secret protection. The latter is not subject to limitation and time and may thus contribute to unjustified economic rents detrimental to human investment (see Section 11.3). The following section first turns to setting the scene and background of international intellectual property protection.

11.1 The Impact of Intellectual Property Protection

At the outset of the TRIPS negotiations, developing countries believed that enhanced levels of intellectual property protection undermine import substitution policies and should therefore be avoided. Efforts at reinforcing the Paris Convention for the Protection of Industrial Property (Paris Convention) and the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) had failed for such reasons, and industrialized countries tabled the matter at the General Agreement on Tariffs and Trade (GATT) during the Uruguay Round.²⁶ These countries were increasingly dependent upon high levels of protection due to the increasing division of labor and global value chains in globalization. Attitudes of developing countries altered after the fall of the Soviet Union and the shift to market economies and dependence upon foreign direct investment. China joined the WTO in 2001 and was committed to the TRIPS standards and their implementation. Upon completion of the Uruguay Round, negotiation fora shifted to bilateral and regional free trade agreements on comprehensive economic cooperation, adding TRIPS-plus protection subject to most-favored-nation (MFN) obligations under the TRIPS Agreement and increasingly lifting international minimum standards of protection across the board.²⁷ Developing countries were willing to accept such obligations in return for enhanced market access rights, particularly on the part of the United States and the European Union. In the long run, such concessions will inform the reform of the TRIPS Agreement and other multilateral treaties.²⁸ The main focus of reform under the TRIPS Agreement was the effort to improve access to essential drugs under the Doha Declaration on TRIPS and Public Health. It eventually led to the only revision of the TRIPS Agreement so far.²⁹

There is no need to discuss the strategic value of enhanced levels of protection for industrialized countries. Substantial differences showed in detail, and most disputes in the WTO concerned relations among industrialized countries with high trading volumes and strong interests.³⁰ Except for Brazil, India, and China, developing countries were spared and benefited from what can be called a philosophy of benign neglect because insufficient levels of protection and enforcement did not substantially harm international trade flows and foreign direct investment. It is interesting to observe that recent WTO TRIPS-related disputes also brought challenges to developing countries, albeit driven by the interests of multinational corporations.³¹

For developing countries, the TRIPS Agreement brought about short-term costs but long-term advantages and investment in the rule of law. The transition to higher standards has been costly – and mainly benefited foreign companies at first. The obligation to protect property rights, however, substantially reinforces the rule of law and prospects of domestic and foreign direct investment, with collateral benefits to other regulatory sectors. Property protection was found to be one of the pillars of successful development, and intellectual property protection is part of it.³² Recent studies indicate that higher levels of patent protection enhance exports of high-tech products and components to developing countries.³³ Keith Maskus and Lei Yang show that there is evidence, based on trade data, that higher levels of patent protection introduced by the TRIPS Agreement have stimulated the production and export of high-value products from developed countries and developing and emerging economies, albeit to a lesser extent for the latter group.³⁴ Enhanced levels of protection sought by industrialized countries thus are not merely benefiting the domestic industry. Still, they may contribute to dislocations of jobs abroad in the process of globalization to benefit emerging and developing economies.

The problem is no longer whether there should be protection or not, but how much and at what levels. The devil is in the details in defining appropriate levels of commitment in international law and appropriate space for policies that may be affected by intellectual property protection and enforcement, such as health, education, or culture. Articles 7 and 8 of the TRIPS Agreement are of basic importance in expressing an appropriate balance. The commitment to transfer of technology and benefits to rights holders and users and the reservation of essential policy interests, including competition policy, informs the interpretation of intellectual property rights and their scope, albeit these commitments are subject to the detailed provisions of the agreement and thus of limited practical effect.

Since the TRIPS Agreement was adopted, there has been a basic consensus that intellectual property is a necessary component of domestic and international trade. All countries are interested in protecting trademarks and related forms of protection. All countries share an interest in protecting copyright and patents but vary on the proper scope of protection. Voices arguing that the TRIPS Agreement does not belong to the WTO since the Agreement juxtaposes free trade by creating monopoly rights are largely a matter of the past.³⁵ Both the absence of protection and the excessive protection of intellectual property rights cause restrictions and distortions to trade. Today’s debate is much more about the adequacy of TRIPS-plus standards in bilateral and plurilateral agreements. While some of these provisions necessarily fill lacunae of the TRIPS Agreement (such as test data), others reflect predominant economic interests undermining the overall balance and putting the authority of intellectual property protection and enforcement of standards at risk. Foremost, these additional standards mainly reflect the interests of industrialized countries and fail to consider the interest of developing countries with much larger rural areas and thus an interest in protecting traditional knowledge, grassroots innovation, and geographical indications (GIs). Overall, we assume the following effects.

An enhanced level of intellectual property protection certainly secures income in operating global value chains. Such chains, and decentralized production, have benefited millions of workers, albeit often under dire conditions. These developments, in return, triggered efforts to improve corporate social responsibility and transparency while increasing liability of multinational corporations. Trade volume increased, and income inequality on national levels reduced in the process of globalization between nations. Much of these effects are due to the rise of China, while other countries benefited much less or even lost trading shares and income. Moreover, these results do not discuss domestic distributive effects, which strongly depend upon constitutional and political arrangements and power relations.

In a domestic context, property protection raises fundamental income and wealth distribution questions. Private property rights were the main target of communism, which led to expropriation, state capitalism, and power concentration, which is predominant today in China. Intellectual property was a nonissue in these systems and only became relevant with the turn to allowing and developing product markets under state capitalism. In the West and market economies, it would seem that intellectual property offers an important foundation for competing industries, many of which are comprised of small- and medium-sized companies. The same holds for the cultural and communications sectors. They depend upon the patent, copyright, and trademark protection under price competition. Intellectual property thus is an instrument of horizontal balancing and power-sharing. This does not exclude strong differences among sectors and depends upon the size of the corporations. Many of the richest companies in the world depend upon intellectual property protection.

While intellectual property partly provides the foundation of the legal protection of such wealth, income distribution would seem to be equally, if not predominantly, determined by competition, fiscal, and monetary policies. Taxation of intellectual property rights and licenses forms an important part of corporate tax, and the recent introduction of patent boxes significantly reduces tax burdens in a competitive environment. Exchange rates deploy an important effect on trade flows of intellectual property–protected goods and services. Much, therefore, depends upon the interaction with other policy areas and the ability to harness excessive accumulation of wealth due to intellectual property protection. It is a matter of achieving an overall fair balance between property rights and the interests of information users. In doing so, it is important to consider intellectual property not in isolation but in combination with other parts of international law – in particular, trade rules, human rights, and competition policy.³⁶ If properly embedded in international and domestic law, excessive imbalances in wealth and income distribution can be avoided and properly harnessed by recourse to such policies and related rules. But this does not exempt us from revisiting existing intellectual property protection. The question is to what extent potential effects of unequal distribution can be potentially mitigated within the intellectual property system itself. We see an enhanced role for equity here.

11.2 The Potential Role of Equity in Case Law

Equity in international law emerged as a topical methodology that requires taking all facts, considerations, and interests into account in a balancing process.³⁷ This could also entail considerations of wealth and income distribution under the specific facts of a particular problem and case.

By its classical functions, equity in international law always addresses particular cases and configurations; it does not amount to abstract rules that may, in reality, need adjustment to serve justice and fairness. Equity may influence the interpretation, complete the law, or even rule against existing norms – particularly in the case of an abuse of rights or unjust enrichment, as discussed later. Apart from specific rules developed in English law,³⁸ equity allows taking the particular facts of a case into account, avoiding rigid applications of the law that produce summa jus summa injuria.³⁹ Equity entails a balancing process and dialogue with existing rules, employing judicial discretion while respecting, at the same time, the need for legal security.

In intellectual property, equity has not played much of an explicit role. This is certainly true for international law. Implicitly, it informs the scope of rights and exceptions such as fair use. Yet, in international law, the pursuit of legitimate public policies remains subject to specific rules of the TRIPS Agreement.⁴⁰ The field is largely dominated by positive technical rules, leaving ample room to maneuver in their application. Human rights partly assumed the role of equity, such as the rights to health and life, in shaping the rules on access to essential drugs. It will likely play an important role in the equitable distribution of vaccines against COVID-19, but fairness and equitable principles can only be explicitly found in general rules relating to enforcement in the TRIPS Agreement.⁴¹

Potential doors of entry for equitable considerations in TRIPS interpretation were elaborated elsewhere, so they are not repeated here in detail.⁴² The point is that equity can also be invoked in the interpretation and application of rules when equality or inequality is at stake in reading a particular provision. For example, provisions relating to patenting pharmaceuticals may be assessed in light of potential effects on distributive justice and income inequality and wealth. Considerations of income and wealth distribution can thus be considered under equity when assessing fair use exemptions. It may, for instance, lead to a new assessment of stockpiling in assessing the point when generic products can be produced, taking into account a cost–benefit analysis for the health system, patients, and health insurance.⁴³ The advantage of recourse to equity is that under the facts of particular configurations, all pertinent interests are taken into account beyond the wording of a specific provision. The same holds in defining the scope of rights, fair use exemptions, and compulsory licensing. Last, explicit reference to equity even mandates taking these interests into account when enforcing intellectual property rights.

A related issue here is the problem of parallel importations. Article 6 of the TRIPS Agreement is an agreement to disagree, and it leaves the matter to WTO member states. Conventional wisdom allows countries to apply the principle of national exhaustion, resulting in market segmentation, price differentiation, and potentially rent-seeking. This is particularly widespread in pharmaceuticals and, therefore, directly relevant to the issue of inequality, particularly in countries not operating price controls. A detailed examination of the WTO questions such findings. The ban on parallel importation of original products marketed abroad is contrary to Articles III(4) and XI of GATT.⁴⁴ It cannot be generally justified under Article XX, which requires meeting a necessity test. This test balances the different interests at stake and calls for well-calibrated solutions. Again, considerations of income inequality and wealth distribution in healthcare may be entertained here, implicitly engaging the topical methodology of WTO law. In this respect, this is very similar to the functions of equity in domestic and international law.⁴⁵ Equity supports the view that parallel importation is primarily dealt with by GATT rules and trumps the policy space under Article 6 of the TRIPS Agreement, where national exhaustion contributes to income inequality due to market segmentation and price differentiation, to the detriment of consumer welfare.

Equity is confined here to the existing regulatory system and a particular case. Global equity has been elusive and without much impact in reshaping the rules in the first place.⁴⁶ To assess from the point of view of inequality, we need to reconsider basic components of the overall intellectual property system.

11.3 Innovation and Creative Imitation

Perhaps the most important issue in the present context is a discussion of innovation and imitation in shaping intellectual property law. It is key to achieving an overall fair balance within the legal system and thus potentially contributes to lessening income and wealth inequality.

11.3.1 The Conceptual Neglect of Creative Imitation

The focus and raison d’être of intellectual property has been innovation and its promotion and protection. In conventional thought, innovation is at the heart and center of the field, particularly in patent and copyright. Although other functions are served – particularly product identification, consumer protection in trademarks and GIs, or the protection of existing information in trade secrets or data collection protection – innovation amounts to the main motivation and justification for granting exclusive monopoly rights.⁴⁷

On the other hand, imitation is not equally recognized as a part of the equation. It is prohibited as counterfeiting and piracy and may amount to unfair competition. The scope of creative and lawful imitation indirectly enters through the door of the scope and duration of rights to define exceptions and finds expression in the goal of disseminating technology to the benefit of rights holders and users, as expressed in Article 7 of the TRIPS Agreement. However, there is no formal place in the legal system for imitation driving economic evolution. Creative imitation is tolerated because legal provisions allow freedom to reproduce and imitate. The scope of creative imitation is defined by what is left to the information market, by what government intervention to correct market failures does not assign to exclusivity or no longer does so. Imitation lawfully takes place to the extent that information is in the public domain and has become a public good. Imitation, in other words, takes place by default to the extent that information is not protected by private intellectual property rights. Creative imitation is not a recognized goal or feature of the intellectual property system itself. It does not have a place of its own in the canon of values but is a gray area looked upon with suspicion. We do not know a natural right to creative imitation. Developing countries have taken the matter up indirectly, first by refusing to renegotiate the Paris and Berne Conventions and, after the TRIPS Agreement, by stressing the need for domestic policy space. TRIPS-plus developments discussed earlier further reduce such policy space and, thus, the potential for creative imitation.⁴⁸ This may contribute to income inequality and wealth distribution by further reinforcing private property rights and concentration of economic power.

Upon reflection, the conceptual lack of recognition of creative imitation and the reduction of tolerance within the overall system is somewhat astonishing. Much of our life is based upon imitation, from which new ideas, features, and things evolve. Education and schooling of children and students are built upon it. We mainly learn by imitating. The acquisition of social skills and interaction is learned from looking at the behavior and conduct of others. Societies require a large amount of imitation, repetition, and reproduction in daily life to work and function properly. It is, in many respects, a prerequisite of innovation. Without imitation, innovation cannot occur.

These facts are also indirectly reflected in the evolution of nations in terms of social and economic development. The Netherlands and Switzerland, today’s champions of strong intellectual property protection, heavily depended upon imitation in the nineteenth century and were reluctant to adopt protection of mainly imported products.⁴⁹ The evolution of the Paris Convention of 1883 and the Berne Convention of 1886 was based upon national legislation and a set of bilateral agreements imposed by then-dominant economies, France and Germany in particular, with a view to include neighboring jurisdictions on equal terms of protection and conditions of competition.⁵⁰ Japan strongly depended upon imitation after World War II and increased its higher-quality reproductions of Western inventions such as cameras, TV sets, and recording equipment.⁵¹ China followed suit, and much of the present trade war with the United States is rooted in this social and economic development stage. The claim of insufficient enforcement and even of “theft” of intellectual property within and by companies controlled by the state is mainly related to the phasing of economic and social development at a juncture where Chinese technology competes with Western technology. Much of this “theft” is based upon agreed contractual arrangements of value chains and is lawful, while only espionage of trade secrets held by unrelated companies is illegal. The same holds for developing countries in general, albeit the impact of imitation has been felt less in international markets and thus allows for benign neglect, as discussed earlier.

The same holds domestically. Start-ups and new ventures depend upon ample space for creative imitation, which existing monopoly rights may curb. Many tensions arise because the relationship between creative innovation and creative imitation has not been properly addressed in intellectual property law and the legal order at large. It is submitted that both innovation and creative imitation should be recognized, and the case for exclusive rights fostering innovation needs particular attention and justification. It is submitted that focusing on incentives for investment plays a crucial role in balancing the two.

11.3.2 Focusing on Investment

One way to approach and reconsider the equation is to put less emphasis on innovation and focus on stimulating and rewarding investment. The very reason to grant monopolies on and exclusive rights to information is to foster and honor investment in creating such information, even though it may not always be original and new. The latter holds true for the fields of intellectual property, which rely on product distinction (trademarks and GIs), the protection of existing information (undisclosed information and data collections, big data in particular), and the protection of traditional knowledge. From an economic point of view, the protection of trademarks and GIs does not focus only on product distinction. It also entails protection of massive investment, advertisement, and the promotion of such products. Protection of data collections, particularly big data and traditional knowledge, primarily protects the investment made in collecting, cultivating, arranging, and using preexisting information. So far, investment and investment protection have provided the foundation of sui generis data protection beyond copyright in EU law.⁵² It has not yet been recognized in law as a general underpinning and justification for traditional intellectual property rights.

If we look at investment and what is needed to stimulate new information, creative imitation can be recognized next to innovation on equal footing. We recognize a right to creative imitation and leave a concept behind that treats creative imitation merely as an exception to innovation, balancing the two in regard to the scope of protection, legal and compulsory licensing, and duration of rights. It remains necessary to draw a line between lawful and unlawful imitation for reasons of legal and business security. However, the overall equation may change upon recognizing creative imitation as a proper goal of the overall system of fostering investment in creating new information and applications. It offers a check on monopoly rights. Conceptually, it will put an end to pressing for ever-increasing levels of protection of innovation without due regard to the implications for creative imitation in the process of social and economic development, both domestically and internationally. We argue later that creating exclusive rights warrants special justification and reasoning that market conditions and government funding supporting innovation are insufficient and intellectual property rights are necessary.

11.3.2.1 Investment in Information as a Public Good

Human investment in capital, natural resources, time, and human resources serves the production of goods and services. It also serves the needs of society at large by shaping general framework conditions, including statehood and the legal order, the economy, culture, and other fields of human life. The investment is based upon existing information and knowledge. We reiterate that people build upon experience. Much of it is dedicated to reproducing existing goods and services essential in daily life. Out of this, incremental innovation and change result in new ideas and information contributing to evolution. New information falls into the public domain and is treated as a public good. Everybody can use it, and such use does not diminish the information.⁵³ It is submitted that reproduction and incremental creation of information is the normal state of play in human investment. It takes place under the umbrella of the general legal order and policies of open-source access. In market economies, the framework is defined by the laws of contracts, torts, and unfair competition and is bounded by penal law prohibitions. It is supported by government policies, education, and research funding. The risks involved in such investments are reasonable, as they deal with known information and experience. They take place in corresponding information markets.

11.3.2.2 Investment in Information as a Private Good and Property

Beyond the normal acts of reproduction, imitation, and incremental innovation in society, deliberate efforts at innovation are made in the process of human investment. They venture into new territory based on existing information. These efforts are financially risky as they cannot rely upon existing patterns and needs. Research and development beyond incremental change thus call for a particular legal framework. For the private sector, this is where intellectual property protection enters the stage. Exclusive rights are necessary to incentivize the production of products and ideas and to secure a fair return on the investment, without which private operators would not make an effort in the first place. In the public sector, basic research funded by taxpayers or charities, and by applied research and development, parallels the intellectual property system. Sometimes the two are combined by means of private–public partnerships.

Intellectual property protection thus amounts to a lex specialis for promoting and protecting financially risky investments in innovation. Exclusive rights, deviating from open access and use of information otherwise in the public domain, call for a particular justification in terms of state intervention and restrictions of freedom of commerce, whatever the form of law is. It is not a given, and rules should respect the principle of proportionality. Generally speaking, measures need to be suitable, necessary (not in excess of what is necessary to achieve a policy goal), and appropriate, taking into account all the interests at stake.⁵⁴ That also informs the shaping of intellectual property law. Throughout history, there has been a debate on using intellectual property as an expression of utilitarian philosophy. Some elevated it to the status of human rights. The European Convention on Human Rights includes intellectual property as a right to property in Protocol I.⁵⁵ There is no need to question the fundamentals here. The principles of intellectual property are deeply enshrined in legal orders and the world economy. However, attention is drawn to the scope of protection of rights, and the relationship to public information requires particular and constant attention. The equation changes with changing technologies. Yet, additional standards, pressed for by vested interests, are not necessarily in the public interest. Ceilings on standards need to be considered in domestic and international law to establish a proper balance between investment in public goods and investment in private goods to foster general welfare and the reduction of overall inequality in income and wealth, both influenced by property rights.⁵⁶ The conventional approach of setting minimum standards in international law and the federalist approach focusing on national policy space do not sufficiently reflect the need to harness domestic law.⁵⁷ It is not simply a matter of granting policy space to domestic legislation but equally containing it on the international level, commensurate with the doctrine of multilevel governance and vertical checks and balances.⁵⁸ Intellectual property as a matter of nontariff barriers is not different from other policy fields, such as the promotion and facilitation of renewable energy or effective human rights protection.⁵⁹

It would be wrong to assume that human investment in imitation, reproduction, and innovation can be neatly separated. Problems delineating protection and public domain exist through all forms of existing intellectual property protections. Disputes on the patentability of inventions make the point. One may flow out of the other, as penicillin was discovered from a reproduction process. It was not designed and intended as such in the first place. Yet, as investment turns to new territory and thus risks, the net of intellectual property rights offers adequate prospects of return if and only if the effort is successful. A substantial risk remains uncovered in case of failure and leaves little else than costs. It entails the option of bankruptcy under both public and private information models.

11.3.3 Appropriate Return of Capital and Reasonable Profits

The fundamental question is how far society, government, and the law should enable return on capital in intellectual property protection beyond market rules and freedom of commerce – and to what extent and for how long this includes profits. In the present context of increasing inequality of wealth and income, this is a crucial issue. From the point of view of the public interest and thus intellectual property policy, it follows from the purpose of having exclusive rights in the first place that the investment made should be recovered with a fair share of profits to shareholders and stakeholders alike. It also follows that the privilege of exclusivity should not include excessive profits to the detriment of ordinary investment in reproduction and incremental innovation. Of course, defining reasonable, nonexcessive profits remain a matter of debate and uncertainty. But in principle, there is no justification for granting exclusive rights to information beyond this point from the point of view of the public interest. The scope of rights and the duration of exclusive rights are crucial.

11.3.3.1 The Scope of Rights

In defining the scope of intellectual property rights, the importance of creative imitation in and through the public domain must be considered. History shows a long record of gradually building levels of protection and exemptions thereof. These levels are outcomes of fierce political battles of different vested interests, prospects of private profits often prevailing over public welfare concerns. The international intellectual property law protection today does not offer an effective balance. As indicated, it is essentially limited to minimal standards that countries can exceed, either unilaterally or using international agreements. Due to MFN obligations, higher standards are applied across the board and not limited to the parties of a preferential agreement. They lift all yachts with the tide. This open-ended approach raises problems of flexibility, and limitations, on the scope of protection.

The proper balance of creative imitation and innovation, however, depends much upon the state and process of social and economic development of a particular country. The need for intellectual property protection varies, and uniform minimum standards are not always suitable. While the TRIPS Agreement allows for flexibilities and is far from harmonized, there is a need for more variable geometry on essential regulations. It could be realized by the graduation approach as it can be found more recently in the WTO Agreement on Trade Facilitation.⁶⁰ While international law defines standards of protection, the phasing-in of such standards over time is made dependent upon the attainment of economic factors and indicators to be negotiated in advance. The approach, replacing traditional and rigid special and differential treatment, offers predictability as to when a country, due to its share in world trade in a particular sector, will be obliged to assume specific additional obligations of intellectual property protection.⁶¹

Except for rules on enforcement and a few areas, the TRIPS Agreement and TRIPS-plus obligations in preferential trade agreements do not know ceilings of protection. Such ceilings are essentially left to domestic law, including competition law, which is absent in international law.

The focus on promotion and protection of investment asks to what extent ceilings on levels of protection are required to protect creative imitation and to what extent investment necessarily depends upon sui generis intellectual property protection. A case needs to be made that protection is required to recuperate investment and to make a reasonable profit. The burden of persuasion lies with those seeking intellectual property protection. Answers vary and depend upon technological advances. For example, the legal treatment of big data and artificial intelligence depends on whether sufficient incentives exist to develop and collect data and write algorithms under market conditions and using open-source information. Appropriation of information should only be made if incentives for investment, adequate returns, and reasonable profits otherwise cannot sufficiently materialize. The same holds, for example, in assessing the exclusivity of test data for pharmaceutical products or qualification of essential interconnection standards.⁶² The law should consider the investment made and define reasonable profits up to which protection exists and elapses after that. The topical method of equity described earlier can be put to use by taking into account all relevant economic and financial factors in assessing such prospects. It can build upon the general principle of unjust enrichment, which is based on equity and recognized in domestic and international law.⁶³ Ceilings in law should thus be formulated to the effect that the main purpose of protection is the promotion and recovery of investment, including the generation of a reasonable, nonexcessive profit. The law should not exceed such bounds in formulating and applying for intellectual property protection.

11.3.3.2 The Duration of Rights

An important and often neglected issue in the present context relates to the duration of rights, particularly rights unlimited in time and thus a foundation of long-term income and wealth allocation.

The current duration of patent protection of at least twenty years as of filing (set out in Article 31 of the TRIPS Agreement), plus supplementary protection for regulated sectors, and at least ten years for industrial designs (Article 26(3)), contrasts with a much longer period in copyright law of at least fifty years postmortem (Article 12). The latter period has been further extended to seventy years postmortem in domestic law – in particular, in the European Union and the United States.⁶⁴ While the law provides for minimal standards – which domestic law or other agreements can extend – there is an implied understanding that in domestic law, the duration of these rights is conceptually limited in time. Information should, at some point, fall into the public domain as a public good. In patent law, limitations in time were the great bargain. Next to transparency, fair use, and compulsory licensing, a major compromise was reached between advocates and opponents of patent law in the nineteenth century.⁶⁵

The proper duration of rights limited in time is controversial, and the determination thereof, to some extent, necessarily arbitrary. This is particularly apparent in the identical treatment of all inventions and fields of technology, irrespective of complexity and investment required.⁶⁶ Countries can unilaterally or by agreement further extend the duration of protection, fostering monopoly rights and curbing competition, or extend unending entitlement to royalty payments.⁶⁷ Theoretically, all rights could be extended without time limits under international law. Competing interests in competition law may counterbalance such efforts but not prevent them, depending upon the political clout of vested interests. Excessive periods bear the potential of economic rents and distortion of competition. They foster patent trolls and rents. They may unreasonably contribute to income inequality and wealth. The duration of rights, therefore, should be addressed by ceilings in international law. Domestic policy space should be limited by international economic law. From the point of view of investment, the multilateral agreements should limit the extension of such rights and define a range within which members may settle patent and copyright terms. These ranges should be informed by considerations of recovery of investment, balancing reasonable profits against the competition, and the public interest in fostering information as a public good.

The even more striking contrast is with trademarks (Article 18 of the TRIPS Agreement: renewable protection), GIs, and undisclosed information, which are not subject to the limitation in time. While criticism today mainly and perhaps unjustifiably focuses on patent law and research-based pharmaceutical companies, a major problem lies with the rights of unlimited duration as these rights bear the potential of substantial rents enhancing inequality without the support of the public interest. Insufficient attention has been paid to this angle. Conventional wisdom considers the absence of time limitation in trademarks and GIs to be logical due to the distinctions of products. And the protection of undisclosed information is timeless due to its very nature as a secret outside the public domain.

Again, from the perception of intellectual property as part of investment law, rights subject to unlimited time bore the potential of return on investment and continued profits turning into rents, which may contribute to income inequality and wealth in the long run. They exclude information from entering the public domain. Such rights, therefore, need a particular justification, which can be found as long as the product that they denominate exists on the market and needs to be distinguished from other products. However, trademarks are sold or licensed as a financial asset for good money and independently of a particular product. Independent and famous trademarks claim protection independently of a product to be distinguished. Internet domain names are registered and may be sold and traded for unwarranted windfall profits. None of this is limited in time. The requirement to use a trademark does not protect from such activities but instead supports them. The law treats trademarks as independent private assets, separate from the original function to promote and protect investment and distinguish products on the market for the benefit of consumers. Licensing or selling such trademarks amounts to a rent that cannot be justified by the investment made in the first place. A trademark no longer used in relation to a particular product (whether goods or services) should fall back into the public domain, open for creative imitation. The monopoly granted by the government should not lend itself to realizing unwarranted rents and thus increasing inequalities. Again, international law should set ceilings on trademark and GI protection based upon the principle of unjust enrichment, avoiding such effects that cannot be justified by the very function of these rights.

The same holds for protecting undisclosed information, which is unlimited in time. It is not a coincidence that trade secret protection is increasingly important under current rules, substituting for patent protection. This may also share the responsibility for increasing concentrations and inequality of income and wealth. Trade secrets should be protected in law only to the extent they relate to a particular product or process. At what point should they lapse and fall into the public domain from the point of view of the public interest in fostering reproduction and competition among products? It seems that trade secret protection can be justified only by an investment made. Once a reasonable profit has been generated, it should no longer be protected by law. Under this standard, for example, Coca-Cola’s undisclosed information would no longer be protected. Of course, the company can make continued efforts to keep its trade secrets. Yet, if leaked to competitors at this stage, it would not give rise to tort or penal sanctions beyond employees’ contractual obligations but would be considered a contribution to enhanced competition to the benefit of consumers. Otherwise, the restrictions in time imposed on patent law are being undermined. International economic law should set ceilings accordingly.

11.3.3.3 The Defense of Unjust Enrichment

Beyond temporal limitations, it is conceivable to contemplate a defense and objection to alleged violations of intellectual property rights and exclusivity on the ground of excessive profits due to the dominant position granted. We recall the principle that lawful recourse to existing information and reliance upon it in the process of creative imitation would depend upon whether or not the costs of investment incurred to produce the information in the first place have been appropriately recovered. This entails an appropriate and reasonable margin of profit on return, which would be limited. Intellectual property protection, however, should stop here and not give rise to economic rents for which a public interest does not exist. Foundations to this effect can be found in the principle of unjust enrichment.⁶⁸ The application of the principle is generally subject to positive law and thus of limited use unless negotiators and legislators take it into account in shaping the scope of intellectual property protection.

Based on equity and topical jurisprudence discussed earlier, the principle of unjust enrichment would grant objections and defenses to exclusivity, on a case-by-case basis, during the term of protection. The law would need to state the principle of preventing economic rents and the prohibitions of abuse of rights and unjust enrichment. Again, the burden of persuasion and proof lies with the rights holder claiming monopoly rights, demonstrating that investment has not yet been recovered and reasonable profits have not yet been made. Alternatively, those profits could be made subject to stringent discovery rules. Examples are the protection of a successful and highly profitable high-priced blockbuster patent – that of a famous trademark generating income and wealth independently of the products for which it is used, and the protection of a trade secret sold or licensed depending on the issue of whether the initial investment and effort made has been sufficiently recovered and thus no longer requires exclusive marketing rights. The intellectual asset, therefore, may subsequently be open to imitation and generic production in ordinary channels of the market economy even during the term of protection. Noneconomic aspects of intellectual property rights – in particular, moral rights or the protection of personality under human rights standards – would not be affected. Authors and successors in title would remain entitled to defend the integrity of a work.

11.3.4 Fostering Competition

This kind of thinking – based upon investment, appropriate return, and reasonable profit – entails a fundamental shift in conceptualizing patent and copyright law, particularly the unending extension of trademark and trade secret protection. It would require rights holders to make new efforts at innovation as existing information falls into the public domain once the costs of creating the information and an appropriate profit (allowing the development of new information in research and development) are fully recuperated. Particular functions of intellectual property rights in product differentiation and securing safe products remain in place. As long as products are produced, trademarks must be attached, and consumers protected from false and dangerous imitations. The regime, however, may at some point limit the sale and exclusive licensing of independent rights used to make profits into the intellectual property portfolio. Information falls into the public domain and thus can be used for ordinary processes of creative imitation. International economic law should set appropriate parameters for this effect.

These effects foster competition, stimulate innovation, and reduce dominant positions and concentration. They likely could contribute to even more distributions of income and wealth. Defenses to intellectual property protection will mainly affect large corporations that are able to substantially profit from existing rights beyond an appropriate return on investment and profits. Problems caused by excessive power, wealth, and income based on intellectual property rights would no longer need to be remedied ex post by means of often ineffective competition policy, combating the abuse of dominant positions.⁶⁹ Intellectual property law would contribute to curbing such positions in the first place.

Many objections will be raised. The approach allegedly violates the minimum standards of the TRIPS Agreement and TRIPS-plus obligations. It lacks sufficient legal security and may entail excessive litigation in assessing the existence of exclusive rights. More importantly, rights holders can no longer make unlimited profits, and a fundamental principle of capitalism and entrepreneurship is thus at stake. Furthermore, the approach will require full financial transparency of companies beyond listed companies and impair the confidentiality of business relations. Finally, the approach entails strong state intervention in potentially curtailing existing rights.

In reply, it may be argued that the law would define the parameters of return on investment and appropriate profit, which would be served by granting a monopoly right. Ideally, these parameters are introduced when revising international agreements, as such revision offers new foundations. But the approach may also be adopted unilaterally, challenging international law in the process of claims and response. Whether the approach is compatible with the current TRIPS Agreement depends on the detailed drafting of instruments, considering the goals of Article 7 of the Agreement. If framed in terms of competition law, it falls under Article 40 of the TRIPS Agreement and currently cannot be challenged by recourse to nonviolation complaints.⁷⁰

Conclusion

Squaring inequality and intellectual property rights is a difficult topic. There is a lack of empirical data demonstrating the relationship. It forms part of the larger debate on distributive justice among and within nations. It is at the heart of international economic law. This topic thus includes intellectual property protection, which has substantially increased contrary to the general trend of deregulation and trade liberalization under WTO rules.

We know that enhanced property rights support the concentration process, which favors economic rents at the expense of competition. In line with general property theory, it can be assumed that enhanced property rights contribute at least indirectly to increasing income inequality and wealth. Recourse to equity, as developed in international law as a topical methodology, allows taking into account wealth and income distribution aspects in applying and interpreting existing intellectual property rights. Equity informs the interpretation of existing rules and may even deny applications to do justice in a particular case. Moreover, it is important to apply intellectual property in the context of all international economic law, in particular GATT rules. This is particularly important in assessing bans on parallel importation and thus price discrimination.

The topic, however, encourages reconsidering the relationship between innovation and imitation. An attempt is made to approach the issue by conceptualizing human investment in capital, natural resources, time, and human resources in terms of imitation, reproduction, and innovation, all three based upon existing information. The legal order seeks to allow for appropriate returns on investment and fair profits for all activities. In areas of innovation, public funding or intellectual property rights absorb particular risks to create incentives to invest in human capital. Exclusive rights are justified only as long as, and to the extent that, they secure such returns and reasonable profits. International economic law should thus set ceilings and adopt a timeframe, including maximum periods of duration of patents, industrial designs, and copyright. Rights unlimited in time, particularly trademarks and GIs, should only be protected as long as they serve the purpose of distinguishing products and until an investment is recuperated with a reasonable profit. The latter should also apply to trade secret protection. Recourse to unjust enrichment should be encouraged. The law must prevent exclusivity from being used for rent-seeking, which contributes to wealth and income inequality and does not respond to the public interest in fostering human investment in reproduction, creative imitation, and innovation.

12 Managed Trade and Technology Protectionism A Formula for Perpetuating Inequality?

Frederick M. Abbott

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12.1 Developing Economies and Technology Capacity

12.1.1 Technology and Disparity

There are a variety of factors that perpetuate economic disparity. Among these is a disparity in levels of technological development. Successful industrial policy is not only a matter of access to technology. Access to capital, infrastructure development, education and training, design of social welfare systems, and other factors are important to economic development and welfare. Whether a particular form of government is a strong determinant of successful economic development is an open question. In recent years, some autocratically governed countries employing substantial state intervention in economic activity have performed well in economic development metrics. The Western liberal idea that democracy and economic progress are necessarily linked has been challenged.

While technology is not the sole determinant of economic development, it is an important determinant because the efficiency of national industry and the international competitiveness of economies are dependent on the capacity to develop and implement technical solutions. The question addressed in this chapter is how the recent trend toward “economic nationalism” that employs managed trade relations to pursue strategic interests may affect the ability of low- and middle-income countries (LMICs) to develop and implement new technologies, potentially resulting in a deterioration of the relative economic performance of LMICs vis-à-vis the dominant national or regional economies. If deterioration is a realistic prospect, are there policy measures LMICs may take to protect against that?

In some areas, the possibility is present for LMICs to keep pace with the leading economic powers in terms of innovation. For example, the barriers to entry in software development and digital platform creation are relatively low. India has exploited this opening in the development of its digital sector. But in areas such as the development of new microprocessors, electric and autonomous vehicles, biotechnology, and aerospace, the barriers to entry remain high. Innovation expenditures in these fields are typically in the billions of U.S. dollars. To compete in these areas, LMICs likely need technology policies that attract foreign investment and cooperation.

Patent databases show that the vast preponderance of new technologies is being developed in a relative handful of countries.¹ The list has a new major entrant – China – but China is the exception, not the rule. Otherwise, the United States, Japan, the European Union, South Korea, and Taiwan dominate.² The United States continues to lead in the number of patents filed abroad.³

12.1.2 The Continuing Vulnerability of Developing Economies

The past decade has seen a narrowing of the gap in GDP per capita between developed and developing economies. However, much of that narrowing has been accounted for by GDP growth in China and other countries of East Asia.⁴ Yet there remains a wide disparity in average income levels among countries.

In its 2019 Handbook of Statistics, the U.N. Conference on Trade and Development (UNCTAD) summarizes:

Over the last 10 years, the global distribution of nominal GDP per capita between economies has become more equal. For example, in 2008, the poorest economies, accounting for 80 per cent of the world’s population, contributed 23 per cent to world GDP. By 2018, their share in GDP rose to 33 per cent. Between 2013 and 2018, however, inequalities in GDP per capita reduced mainly among economies with moderately high income. The relative distance between the richest and poorest economies in the world remained almost unchanged.⁵

Recognizing this progress, it nonetheless remains that LMICs are far more vulnerable to economic shock than developed economies.⁶ One of the principal reasons for this is the buffer of financial capital available to these economies. As the manager of the world’s reserve currency, the United States maintains extensive power to “print money” in times of crisis.⁷ The European Union, through the European Central Bank and the euro, has a similar, even if less extensive, capacity to create capital.⁸ Such observations can also be made about the Bank of Japan and, to a lesser extent, the People’s Bank of China.⁹ In addition, with well-functioning securities markets, the United States and the European Union tend to be less vulnerable to equity shocks.

While developing country central banks can undertake operations in the same way as the U.S. Federal Reserve, they face significant challenges in printing money to meet obligations because they must pay their external debts in one of the major reserve currencies (such as U.S. dollars).¹⁰ Moreover, as evidenced throughout the COVID-19 pandemic, the policies of LMIC central banks and treasuries depend on policies determined by the U.S. Federal Reserve that place U.S. interests first while taking into account the impact on the broader global economy.

The International Monetary Fund and other major international financial institutions recognized that the COVID-19 pandemic would have a more significant impact from a relative standpoint on developing economies than developed ones, acknowledging that the impact on developed economies was severe.¹¹

12.2 The Move to Managed Trade

12.2.1 The Resurgence of Economic Nationalism and “Reshoring”

Recent global developments do not portend an economic shift in favor of LMICs. Beginning in 2016, the United States led a sharp turn away from multilateral cooperation under the umbrella of the “Make America Great Again” agenda pursued by then-president Trump. The United States withdrew from the Paris Agreement on climate change, imposed trade barriers inconsistent with World Trade Organization (WTO) norms while blocking the appointment of WTO Appellate Body members, threatened withdrawal from the World Health Organization, and so on.¹² With the election of President Biden, U.S. policy began shifting back toward cooperation (including rejoining the Paris Agreement). Still, the return to its traditional multilateralist approach has been gradual and incomplete (such as in relation to the WTO), reflecting continued wariness regarding the strategic interests of other countries. The United States is not alone. The United Kingdom has withdrawn from the European Union. India is pursuing a “Make in India” agenda. Before the most recent deterioration, China adopted its Made in China 2025 program, which focused on making China the world leader in important technologies, including biotechnology, electric vehicles, robotics, and aerospace.¹³ High-income countries (HICs) and more economically advanced middle-income countries (MICs) are turning inward with policies intended to redirect capital to domestic investment, including by boosting the role of automated production processes to reduce reliance on lower-cost foreign sources of labor.

The COVID-19 pandemic has exacerbated deterioration in international relations as the United States accused China of aggravating the impact of the virus. It has also, perhaps more important for present purposes, strengthened the resolve of governments to assure self-sufficiency in the production of important products, especially in the pharmaceutical and health arena. The United States encourages “reshoring” manufacturing, particularly from China.¹⁴ In a similar vein, the Japanese government is encouraging reshoring from China. The European Union has been looking for regional industrial champions to counter the scale of Chinese penetration of its markets and to better compete with China in external markets.¹⁵

Many countries historically emphasized the importance of “food security.” Concern for food security played an important role in the special situation of agriculture (including agricultural subsidies) in international trade relations. It will not be surprising if the concept enjoys a rebirth in the aftermath of the pandemic.¹⁶

12.2.2 Diversification

Countervailing the reshoring trend is a diversity trend, in which multinational corporations (MNCs) seek to diversify sources of supply for their supply chains. While this interest in supply-chain diversification may appear inherently contradictory with interest in reshoring, it reflects a practical recognition by the MNC business community that reshoring to the United States (and pari passu in the cases of the European Union and Japan)¹⁷ is structurally limited. The U.S. labor force, for example, will resist the transition to repetitive assembly jobs (e.g., sewing jeans or assembling computer monitors) and would demand substantially higher wages than those paid in East Asia. Moreover, the pool of technically skilled labor “sitting on the sidelines” in the United States, Europe, and Japan is limited. Even considering that MNCs are deploying automated production processes as part of reshoring efforts, diversification creates opportunities for LMICs outside China to attract relocating foreign direct investment (FDI). So far, major beneficiaries of that diversification trend have been countries of East Asia, such as Vietnam, Malaysia, and Thailand.¹⁸

The possibilities for individuals and businesses to use technologically advanced products have expanded dramatically, mainly due to the Internet, electronic commerce, and other digital technologies. However, while access to products embodying new technologies improves the quality of life, that may not translate into enhancing the domestic innovation infrastructure in LMICs. Suppose South Korea and China offer low-price cellular telephones that individuals in LMICs can afford. In that case, the possibilities for LMIC local industries to develop handsets that compete with those offerings – given the capital intensity of the R&D – are quite limited. The incentives for undertaking such efforts are not so clear. Though there are openings in some higher value-added points of the global supply chain, LMICs may find it difficult to escape from the trap of serving as low-labor-cost assembly platforms. Even that position could be threatened as robotics manufacturing technologies advance.

12.2.3 De-Legalization

We are moving away from the “legalized” international trading structure embodied in the WTO.¹⁹ One reason for this move to “de-legalization” is frustration among U.S. trade officials with what is perceived as an abuse of the rule-based system by China. The U.S. frustration is not without some cause, even though China’s policies, from a developmental standpoint, have helped it transform its economy and transition many millions of individuals into the middle-income class. The United States has spent decades negotiating bilateral agreements with China intended to improve the protection of U.S.-origin intellectual property²⁰ and to address matters such as cyberpiracy (including state-sponsored cyberpiracy).²¹

Following the imposition of WTO-inconsistent trade sanctions on China, the United States negotiated the Economic and Trade Agreement between the Government of the United States of America and the Government of the People’s Republic of China, which incorporated the U.S. negotiating objectives of precluding so-called “forced technology transfer,” whether express or tacit and strengthening rules regarding electronic intrusion (i.e., cyberpiracy).²² There is no more assurance that China will change its behavior through effective implementation of this Agreement as compared with any other of the arrangements China has made with the United States previously, particularly as China accepted the terms of this arrangement “under duress” in the form of WTO-inconsistent tariff sanctions. Perhaps the most interesting element of the agreement is the complete eschewing of legalized dispute settlement, which has been replaced with the judgment and “untethered” discretion of diplomats. If either side is dissatisfied with the judgments and discretion, they walk away from the Agreement. There is no attempt to disguise this Agreement as anything other than implementing a balance-of-power diplomacy.

12.3 Foreign Direct Investment and Its Limits

12.3.1 TRIPS Constraints

The point of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) was to foreclose developing countries from “appropriating” developed countries’ technology.²³ For MICs, the obligation to provide patents across all subject matters that became fully operational in 2005 should prevent locally based companies from using foreign-owned, patented technology without the consent of the patent owners. As is well known, this foreclosure is subject to some exceptions or “flexibilities,” but those flexibilities are not like an innovation pathway. (For least developed countries (LDCs), the obligation to provide patent protection generally can be avoided until 2034,²⁴ yet many LDCs have not indicated an intention to take advantage of this flexibility and continue to grant and enforce patents.)

The question of whether LMICs have the flexibility to make use of foreign-owned technology is only important if the other elements necessary to create successful business enterprises are present. These include adequate capital, infrastructure, and technically trained staff to successfully implement innovative technologies.²⁵

Because of limitations concerning these elements, the path for moving up the innovation curve has been encouraging FDI. Although large privately owned MNCs may prefer to invest in geographic areas with adequate infrastructure, if the opportunity is substantial enough, even electricity generation can be addressed through small power generation stations. Of course, the MNC brings with it capital and trained personnel.²⁶

In this regard, there is a well-worn path – hosting FDI – for LMICs to develop manufacturing industries that use more advanced technologies. The question is whether this well-worn path leads to indigenous capacity for innovation and the creation of locally owned advanced technology industries or merely creates a perpetual situation of inequality between the technology “haves” and “have-nots.” Can LMICs influence the arc of technological progress through policy options?

12.3.2 Technology Transfer Obligations

Through legislation and/or regulatory measures, governments can improve the terms of trade for local businesses by setting ground rules that improve the capacity, that is, bargaining power, of local enterprises in negotiating the terms of FDI.²⁷ One mechanism for accomplishing this objective is to establish requirements that foreign direct investors enter into joint venture arrangements with local enterprises to pursue their objectives and share technology with those joint venture partners as part of such arrangements.

There are myriad potential configurations for joint venture arrangements and other technology-sharing arrangements. The business and legal questions that must be addressed include the relative percentages of ownership and control over the business, the composition of management, how the capital of the business will be contributed and/or raised, how funds will be repatriated, and so forth. The technology-sharing questions include the defined subject matter of the relevant technology (including such matters as identification of relevant patent portfolios), potential geographic limitations on the sale of products incorporating the technology, ownership and control of technologies newly developed by the joint venture, contributions of trade secrets and other information, residual interests in technology upon dissolution or sale of the joint venture or party interest, and so forth.

Just as there are myriad potential configurations for joint venture and technology sharing, there are many ways that host governments may go about creating and implementing the requirements that may be established. Principally, this would involve choices between macro- and micro-management. The government might establish macro-benchmarks such as requirements regarding percentages of ownership and control and largely leave to the parties the negotiation of the specific terms and conditions of the arrangement, including for technology transfer. Alternatively, the government might more precisely establish expected terms and conditions – for example, concerning technology licensing conditions. There is also a question of whether the government would seek to maintain a review and approval mechanism before the commencement of business operations. Alternatively, it might be left to the parties to assure compliance with the preestablished rules, with the possibility of ex post facto regulatory intervention.

A substantive objection by the United States to China’s policies and practices concerning joint ventures and technology sharing was, and still is, that demands by Chinese authorities were conveyed informally and “off the record” as a condition to FDI approval. The maintenance of nontransparent regulatory requirements creates a risk of discriminatory treatment of investors that could be based on various factors (e.g., national origin) and should not be recommended. This is of particular concern if public securities markets and investors are involved in a venture, as the investors will not have an adequate basis to evaluate the business without transparency.

Recent economic research strongly supports the conclusion that China’s joint venture requirements for foreign investors have resulted in more robust technology transfer to Chinese enterprises (including downstream enterprises) than wholly foreign-owned investments.²⁸ In the case of China, the available evidence suggests that “forced technology transfer” in the context of investment approvals has exerted a positive internal impact.

12.3.3 Limitations in Preferential Trade and Investment Agreements

12.3.3.1 Transfer of Technology

There is a trend of incorporating provisions precluding technology transfer conditions in preferential trade and investment agreements (TIAs). This is not a new phenomenon. The United States secured commitments from developing countries, at least as early as its bilateral free trade agreement (FTA) with Chile in 2004, that approval of investments would not be conditioned on a performance requirement: “to transfer a particular technology, a production process, or other proprietary knowledge to a person in its territory.”²⁹ This provision, in a substantially similar format, has become a “staple” of U.S.-negotiated TIAs and is found in the text of the Trans-Pacific Partnership Agreement (TPP),³⁰ preserved in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The United States is not alone in demanding restrictions on technology transfer obligations. The recently concluded Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union includes a restriction on technology transfer requirements.³¹

The Regional Comprehensive Economic Partnership Agreement (RCEP) includes a performance requirement similar to that in the TPP regarding technology transfer.³² Of some interest, the RCEP has a carveout in its investment chapter of the prohibition on technology transfer requirements in favor of Cambodia, Lao PDR, and Myanmar. India pushed back against including such a provision during the RCEP negotiations, and its unwillingness to accept a provision of that type may have partly been why India did not join the RCEP.³³

12.3.3.2 Competition

Transfer of technology, and economic growth more generally, may be stymied by anticompetitive practices engaged in by market actors. Commercial arrangements that might otherwise improve the position of locally based businesses and entrepreneurs may be frustrated through licensing and other conditions that make it difficult for technology transferees to employ the relevant technologies or that impose oppressive conditions otherwise. In addition, assuming that locally based businesses emerge to compete with more established foreign-owned enterprises, their evolution into effective competitors may be hampered by anticompetitive practices of dominant actors.

In recent years, competition authorities in LMICs have begun to assert themselves more vigorously and are actively prosecuting cases involving anticompetitive behaviors, including those concerning licensing agreements.³⁴ One potential risk that LMICs face is the trend toward incorporating competition chapters in TIAs that establish rules for conducting competition investigations. Most of these chapters are directed toward procedural protections, though some involve substantive rules.

While, in principle, the assurance of fair process in governmental investigations, including competition law investigations, is important, the historical assertion of TIA rules by HICs has a blemished record. Seemingly benign procedural rules regarding the conduct of competition investigations may provide the basis for threats of trade sanctions that, in turn, may have a chilling effect on the willingness of competition authorities to pursue such actions. LMICs should very cautiously approach the negotiation of competition chapters in TIAs. Competition authorities worldwide may enter into cooperative arrangements for conducting investigations, sharing information, and so forth without codifying these rules in TIAs. Though it is important to assure fairness in investigation processes, this can be accomplished under national law in LMICs without embedding the possibility that the investigation targets will have recourse to threats from their home governments to obstruct those investigations.

12.3.3.3 Investor–State Dispute Settlement

Until recently, there was a distinct trend in TIAs to incorporate an investor–state dispute settlement (ISDS) mechanism for disputes between nationals of the parties and the host country of investment.³⁵ Typically, recourse might be had by the private investor to third-party arbitration under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID) and/or pursuant to United Nations Commission on International Trade Law (UNCITRAL) rules. However, ISDS has fallen out of favor for several reasons. First, defining limitations on the types of disputes that could be initiated proved challenging. Private investors brought claims concerning alleged regulatory or judicial takings that went well beyond traditional concepts of nationalization or expropriation. These included claims regarding government regulation of tobacco advertisement and ordinary judicial patent invalidation processes.³⁶ Second, the establishment of ISDS implies a lack of sovereign capacity to fairly administer judicial proceedings within a host state. More recent TIAs have made efforts to limit the scope of the claims that may be brought and/or the characteristics of the arbitral tribunal that will decide ISDS disputes.³⁷ The United States–Mexico–Canada Agreement (USMCA) nearly eliminates ISDS. Several countries have announced their intention to move away from including ISDS provisions in their TIAs.³⁸ Innovation in the area of ISDS is taking place to limit efforts to redress abuse to the traditional concepts of expropriation and nationalization.

From the standpoint of LMICs, ISDS presents special difficulties. Such proceedings are very costly to defend and are likely to absorb significant government legal and financial resources that could be better deployed elsewhere.³⁹ Because claims will arise under customary international law, there is no need to specially incorporate a state-to-state investment dispute settlement mechanism in a TIA. It is within the customary international legal practice for a state that obtains compensation on behalf of a private investor to return that compensation to the investor.⁴⁰

12.3.3.4 Tread Cautiously with TIAs

LMICs need to be on guard in the negotiation of TIAs to avoid the surrender of important policy options with respect to technology transfer and economic development. There is no good reason from an LMIC perspective to accept a provision precluding governmental measures requiring joint venturing and/or technology transfer obligations in the context of FDI. Nor is there a good reason to include a competition chapter in a TIA that can be used as the basis for HIC threats to withdraw trade concessions as a reaction to competition enforcement actions. Whether LMICs have the bargaining power to avoid these types of obligations is a different question. It is worth bearing in mind that ISDS obligations seemed to be an inevitability only a few years ago, and public perceptions about ISDS obligations shifted.

12.4 Options for LMICs

12.4.1 Revitalizing Multilateralism?

The idea that LMICs will climb the technology curve through some voluntary technology transfer programs adopted by HICs does not appear to be a particularly viable development solution. The multilateral system is largely broken down; even when it was “working,” there was very little in the nature of HIC government support for technology transfer. This is at least substantially explainable by the fact that technology is predominantly owned and controlled by private enterprises. Even if the will was present, HIC governments would face substantial obstacles in mandating that businesses make their technology available through some type of institutional program.

With the world economy shifting to a “beggar thy neighbor” approach in which the major technology powers seek to undermine each other’s progress, LMICs need to fend for themselves. We may be reverting to a late nineteenth-century model, where preferential alliances replace the mid-twentieth-century most-favored-nation model. In this devolved scenario, LMICs may find themselves with some technology acquisition bargaining power if they can successfully trade access to their markets for better terms of trade. It is hard to have confidence in such a model, given the disparities in economic strength. But it may be where we are headed.

12.4.2 Leapfrog Technologies

As noted earlier, there may be some subject-matter areas where the barriers to entry for advanced technology industries are lower than others. Some of these are areas that countries such as India have exploited. The Internet has made available vast libraries of technical know-how at negligible cost.⁴¹ When there are gaps in knowledge and skills, there are consultants to help LMICs fill those gaps and train local individuals.⁴² Information, including patent databases, is far more readily available worldwide than at any time in human history.

It is not only the possibility for creating new, locally developed technical solutions that may be enhanced through bypassing steps in the technology chain but also for deploying infrastructure that previously required large-scale investments of capital but which now can be accomplished with much more modest investment. The build-out of telecommunications infrastructure relying on satellite relays in contrast to wires and cables is one illustration.

Given the expansion of available information, building capacity for technology absorption may be the priority task for most developing countries. The benefits that can be obtained by piggybacking on externally created innovation will depend on the level of expertise within the recipient country. This depends on education – which historically required the physical presence of trained educators and hard-copy instructional materials. Access to online educational resources that were previously the province of a few select educational institutions mainly located in HICs represents another change that opens up new possibilities for LMICs.⁴³

Developments in smartphone technology and associated financial payment systems have made it possible for countries to upgrade their transaction processing in ways that enable low-income individuals to transact business without the build-out of expensive technological infrastructure.⁴⁴ The major beneficiaries of mobile payment system innovation may be the micro-scale operators – proprietors of street stalls and so forth. In addition, the evolution of payment systems is dramatically lowering the costs of repatriating foreign-earned income for expatriate workers, all to the potential benefit of LMICs. Mobile Internet technology has facilitated possibilities for efficient communication, planning, and execution in business.

Small-scale solar energy generation stations and other sustainable energy generation technologies have created opportunities for more remote areas to electrify without large infrastructure expenditure.⁴⁵ This is perhaps a more challenging area than education or payment systems in the sense that sustainable energy systems require building physical energy storage capacity for continuous use.⁴⁶ Similarly, much work is being done to reduce the costs of water purification systems, including developing small-scale water purification units. This type of technology is extremely important to many LMIC environments.

The foregoing references are just a few of the areas where recent advances in technology are creating new possibilities for LMICs.⁴⁷ It is not simply that it may be cheaper and easier to improve quality of life, such as through improved telecommunications and electronic payments, but that as technical solutions increase connectivity to a larger innovative community, local innovators are likely to adapt and advance that technology. This is not intended to suggest an over-optimistic portrayal of current conditions or the future, but some building blocks are present for advancing an economy by leapfrogging stages of technological development.

12.4.3 Attracting Capital Investment

The scarce resource for LMICs is the investment capital necessary to implement concepts. This perhaps states an obvious, if not a circular, proposition. That is, LMIC economies would do better with more money.⁴⁸ From a global perspective, ample capital is available for investment, and that investment is seeking returns.⁴⁹ The question for LMICs is how to “package” their national economies to attract that investment capital.⁵⁰

12.4.3.1 Sound Governance

One approach to attracting investment involves establishing a reputation for “sound governance,” which refers to a sound legal system⁵¹ and the absence of corruption in regulatory institutions.⁵² For the investor, the enforceability of contractual arrangements and consistency in implementing regulatory norms is important to executing business plans. The absence of sound governance is a risk factor that necessarily increases the cost of capital and creates a drag on the economy. Achieving sound governance is a long-term project for any country, especially for LMICs.⁵³

12.4.3.2 Autonomous Investor Agreements

In addition to trying to assure the neutrality of courts and regulators, an LMIC and its private-sector enterprises may also support and negotiate contractual arrangements that entail defining with some specificity the terms of investment, including the potential for third-party arbitration. Given that LMICs have arguably faced difficulties with some existing international arbitration institutions, carefully defined self-standing agreements might be an alternative.⁵⁴

The subject of international commercial arbitration is dealt with in detailed literature in which the potential issues have been laid out.⁵⁵ Alternative dispute settlement arrangements may be important to establish a secure environment for investors in LMICs.⁵⁶ At the same time, it is important that LMICs can negotiate third-party arbitration mechanisms that do not tilt against their interests.

12.4.3.3 Support for Private-Sector Initiative

Because many small- and medium-sized enterprises (SMEs) in LMICs do not have the experience and expertise to negotiate sophisticated investment and licensing agreements with foreign investors, it is important that governments try to make available consulting resources for assisting SMEs with their transactions.

12.4.4 Balancing Protective Measures

A key question for any developing or emerging market government is how much of the national economy to “protect” through tariff, trade, or tax measures to provide local development space. Consumers bear the cost of protectionism, which can and should be tolerated at a certain level, but blanket protectionism simply makes the functioning economy too expensive.

As the United States has moved away from a low-tariff approach to international trade relations toward strategic targeting of its trading partners, the idea that growth can be promoted by granting preferences to local companies is likely to gain traction. The net effect will be a reduction in global output, but this does not mean that the strategic use of tariffs will not benefit a particular country in individual cases. For an LMIC, it may be necessary to provide at least transitory tariff and/or quota protection for an “infant industry.” But it is important to limit the use of tariffs and quotas because they otherwise have the effect of raising prices for consumers and may harm general welfare.⁵⁷

12.5 Perpetuating Inequality?

LMICs are confronted with a new world order in which the major economic powers that promoted multilateralism have moved toward nationalism, localization of production, and de-legalization of dispute settlement in favor of balance of power diplomacy. A counterpart to this trend is declining interest in developmental assistance, whether actual or rhetorical.

There is a military overlay, so this new world may also be dangerous. It remains to be determined how countries that are not part of the new great power dynamic will acclimate to this new world. During the Cold War that lasted from 1946 to 1989, a bit more than four decades, countries of the so-called Third World sought to play the First and Second World countries off against each other, seeking economic and military alliances with one side or another. It may be that we are moving into a new technological world order in which the less powerful countries must choose to ally themselves in a technological sense with one or another of the dominant technology powers. This should not be taken as a proposal but rather an identification of one potential new reality.

Regrettably, as part of the “exercise of power” equation, there is a trend among the capital-exporting countries to negotiate bilateral and plurilateral agreements with LMICs that preclude regulatory measures requiring a transfer of technology as a condition of FDI, including within joint venture arrangements. Because individual private investors within LMICs may lack substantial bargaining power, this diminishes the capacity of LMICs to secure favorable terms for the transfer of technology. There is no obvious solution to this problem other than seeking to avoid commitments of this nature.

At the same time, based largely on the evolution of digital technologies, LMICs have the opportunity to leapfrog in the current technological environment. There remains the requirement of securing adequate capital investment, including through the private sector. Attracting that capital entails creating conditions in which investors are reasonably secure.

Sound governance and transparency may be important elements. National self-interest should move a country in that direction, regardless of its effect on the perception of prospective investors. Developing mechanisms for fair third-party arbitration of private commercial disputes may help foster an attractive investment climate.

LMICs have seen their relative economic circumstances deteriorate vis-à-vis the HICs due to the COVID-19 pandemic.⁵⁸ All economies were hit hard, but the HICs had more capacity to absorb the shock and are recovering reasonably well. LMICs confront terms of trade that favor the HICs, including provisions in TIAs that preclude requirements for the transfer of technology, as well as the ascendance more broadly of managed trade policy among economically powerful states. These factors portend the perpetuation of the marked disparity in the distribution of global income and wealth. There are no “magic bullet” solutions on the horizon.

13 Sharing Pathogen Sequence Data for Global Scientific Research under the Nagoya Protocol to the Convention on Biological Diversity

Jerome H. Reichman , Carolina dos S. Ribeiro , George B. Haringhuizen , and Paul F. Uhlir

13.1 Tensions Concerning the Coverage of Genetic Sequence Data under the Convention on Biological Diversity

The Convention on Biological Diversity (CBD)¹ may be characterized as a response by low- and middle-income countries (LMICs) to a preexisting state of inequality with regard to the development and commercialization of products deriving from the access to and use of biological diversity in nation states. Historically, scientists from the more economically developed countries, while exploring the genetic resources in LMICs, would help themselves both to physical specimens from plants, animals, and microbiological materials and to traditional knowledge (TK) of indigenous populations about how to make economical use of such resources and knowledge. One needs to recognize that the CBD was a concerted effort to invalidate such practices and, instead, to assert sovereign ownership over both local genetic resources and TK as well as a fair share of any economic benefits arising from their commercial applications. The adopted Nagoya Protocol² to the CBD then supplied strong enforcement measures to implement new remedies to the old inequalities that the CBD sought to rectify.

This chapter does not question the policy decisions embodied in the CBD and its Nagoya Protocol to eliminate practices rooted in the preexisting state of inequality. By the same token, we emphasize the importance of scientific research and TK as a potential source of major benefits to all humanity. In this context, the current debate about access to genetic sequence data (GSD) must be considered. There is no going back on the foundational obligations of the CBD concerning negotiated access to genetic resources and the data resulting from their study and applications, including the relevant TK of indigenous populations. Nevertheless, it must be made clear that neither the CBD nor the Nagoya Protocol will be allowed to interfere with basic scientific research so long as the relevant genetic resources were obtained in the first instance by modalities sanctioned under the treaties in question. These modalities, in turn, support basic scientific research without undermining the rights of provider countries to a fair share of any benefits resulting from commercial applications of such scientific research based on specific genetic resources and TK obtained from those countries. The rest of this chapter explains how to reconcile these tensions in the specific case of GSD, using pathogen research data as an example.

Preserving the Earth’s biodiversity is essential to human survival and a major factor in global economic development (Kolbert, 2014). Research on the components of biodiversity, especially genetic resources, not only enables scientists to discover and understand their characteristics and promote needed conservation but also contributes to the development of innovative products and applications while bolstering efforts to strengthen public health, among other goals (Halewood et al., 2012; Ribeiro et al., 2018b).

Conservation and management of the Earth’s biodiversity include manifold stakeholders that range from LMICs to the most developed countries, along with not-for-profit organizations, industries, scientists, and local indigenous communities (Access and Benefit-Sharing Clearing-House, n.d.; Aoki, 2008; Jeffery, 2004). The divergent views of these stakeholders with respect to the proper treatment of genetic resources and GSD – now designated as “digital sequence information” (DSI) for purposes of current negotiations (Morgera et al., 2019) – typically depend on whether they regard themselves primarily as potential providers or users of genetic resources (AHTEG, 2019).

These views reflect different approaches to rights and obligations concerning the management of such resources. More economically developed nations, the primary users and exploiters of resources for for-profit and nonprofit goals, mostly promote open exchanges of data, materials, and knowledge to achieve public benefits. LMICs, which often possess the most diverse and rich biodiversity resources, position themselves as provider countries seeking to restrict access in order to effectively claim a fair share of revenues and overall commercial benefits (Morgera et al., 2019). It is important, however, to point out that in accessing and using genetic resources, today’s providers might, and in many cases will, become users in time, just as some users may eventually become providers (Rohden and Scholz, 2021).³

To support sustainability and fairness in the management of biodiversity, the CBD expresses the following objectives: (1) the conservation of biological diversity, (2) the sustainable use of its important components, and (3) the fair and equitable sharing of benefits arising from the utilization of genetic resources (preamble, arts. 2, 8, 15–16). The Conference of the Parties to the CBD (COP) later developed the Nagoya Protocol in 2010 to further regulate access to genetic resources regarding the sharing of benefits. This legal framework subjects all users of plant, microbial, and animal genetic resources to national legal requirements of prior informed consent (PIC), mutually agreed terms (MAT), and access and benefit-sharing (ABS) agreements. A primary objective of the Nagoya Protocol is to enable member states as providers of genetic resources to share monetary and nonmonetary benefits derived from using such resources (arts. 3–5; Curci, 2010).

What seems clear in recent years is that the CBD, as bolstered by its Protocol on enforcement measures, can undermine scientific research on planetary biodiversity. A clear impediment to science that merits particular attention is the growing difficulty of complying with varying national ABS measures for conducting both in situ and ex situ not-for-profit research that requires access to, or some uses of, genetic resources (Sett et al., 2022). This impediment can affect ethically conducted bioprospecting as well as the collection of fundamental research data that serve primary societal needs, including critical health interventions, whether focused on human, animal, or plant life that require scientifically valid evidence to determine the best course of action (Bhatti et al., 2009; Scutchfield and Lamberth, 2010).

In the specific domain of public health, restrictions on access to and use of GSD can have serious adverse effects on not only upstream public health measures but also follow-on research for innovation and applications, such as the development of diagnostics, therapeutics, and vaccines, which are essential for the containment of cross-border epidemics and the spread of disease generally (National Research Council, 2009; WHO, 2005).⁴ The role of GSD in public health surveillance and response continues to grow in importance (WHO, 2019), yet the willingness of countries to share such resources and, especially, related data has palpably diminished, despite the emphasis on the equitable sharing of benefits under the Nagoya Protocol. Epidemics – such as MERS, Ebola, ZIKA, and most recently COVID-19 – have emerged since the Protocol was adopted, during which countries refused to rapidly share pathogen materials or sequences owing to countervailing concerns about the need to defend ownership and the sovereign rights of provider states (Halabi, 2019; Peeling et al., 2020; Pisani et al., 2018; Sett et al., 2022).

The CBD and its Nagoya Protocol have further contributed to this tension. PIC, MAT, and ABS conditions can conflict with international guidelines or other sharing obligations, such as those of the International Health Regulations of the World Health Organization (WHO), the International Covenant on Economic, Social and Cultural Rights (Aarestrup and Koopmans, 2016),⁵ or even the Declaration on the TRIPS Agreement and Public Health (Abbott and Reichman, 2007). For example, the impetus given to parties to the CBD under Article 8(b) of the Nagoya Protocol with respect to the rapid sharing of genetic resources in health emergencies insufficiently recognizes the constraints on related ABS obligations otherwise imposed from two directions. First, other treaties, such as the International Health Regulations, demand that each country promptly share critical information, including scientific data – and arguably GSD – which is now crucial in determining public health risks and possible countermeasures to address infectious disease outbreaks. Second, global efforts to address serious health threats will, in many cases, entail research on the nature of pathogens and on the collective international sharing of critical data derived from pathogen genetic resources that domestic ABS laws may now regulate.

It thus seems a complex task to develop a one-size-fits-all solution to this problem of conflicting interests that would address the concerns and needs of all stakeholders, all subject matter fields, and all disciplines involved. The complexity of managing tangible or intangible assets, such as GSD, constitutes additional challenges to the evolving task of reconciling the legal obligations under the CBD with the needs of global public health (Buck and Hamilton, 2011). Nonetheless, the COP needs a coherent approach to scientific information in general and GSD in particular to avoid potential barriers to research and burdensome (re)negotiation of legal texts to cover major new scientific tools, discoveries, and their implications.

Public health interventions during outbreaks and epidemics are time-sensitive, and delays in access to pathogenic materials and GSD can conflict with the moral imperative to save lives through the prevention of and response to public health threats (Ribeiro et al., 2018a; WHO, 2019).⁶ Because pathogens and, to a still unknown extent, related data are considered genetic resources within the CBD, they are potentially subject to the Nagoya Protocol’s robust enforcement measures and the resulting legal problems (Bagley, 2016).

Although the CBD and the Nagoya Protocol have as one of their core goals to enhance fairness in the sharing of benefits arising from the use of genetic resources, their negative impact on public health research and response can reinforce inequalities in outbreak preparedness and response capacity. Epidemics commonly emerge in many LMICs through zoonotic spillovers due to the proximity of humans, livestock, and wildlife. Because of weaker public health systems and a lack of sufficient response capacity, these countries are usually the ones most affected and take longer to recover from the devastating impact of epidemics (WHO, 2018b). The global and rapid sharing of pathogen materials and data and international collaboration for developing pharmaceutical and nonpharmaceutical countermeasures help affected countries to control and mitigate disease within their borders and the rest of the world to prevent and control the spread of the epidemic. As the world faces increasing infectious disease threats with global impacts, solidarity and collaboration are more important than ever to address critical policy, operational, and capacity barriers ahead of an emergency.

Accordingly, this chapter focuses on how to conform ABS practices to pathogens and related GSD, independently of how coverage is ultimately defined under the CBD. In so doing, the authors draw attention to the obstacles that compliance with the CBD might otherwise have on biodiversity research in general and on pathogens and infectious diseases in particular. The authors further examine the real-world consequences of their proposal for global public health initiatives, with particular attention to sharing practices already adopted in the public health field that enable the free exchange of genetic materials and, increasingly, of related data for research purposes.⁷

13.2 The Disruptive Complexity of Genetic Sequence Data

The COP must recognize and suitably resolve the rapidly evolving tensions that scientific research and technologies continue to generate for implementing the Nagoya Protocol’s legal framework. Complex legal problems also arise from the growing importance of GSD in scientific research generally and public health in particular, and especially from mounting pressures on originators to make such data freely available for follow-on research and development (Morgera et al., 2019; National Academies of Sciences, Engineering, and Medicine, 2021; Reichman and Uhlir, 2003).

On the one hand, when GSD are traceable to specific genetic resources and their providers, a case for coverage by the CBD can more readily be made. On the other hand, to the extent that open access to GSD enables scientists to recreate, say, viruses and enhance their functions, it could make the need to access and use biological samples (physical materials) less acute or eventually even obsolete, to the detriment of those otherwise entitled to benefit-sharing obligations under the Nagoya Protocol.⁸

Article 2 of the CBD expressly applies to genetic resources and “other elements of heredity” (Schei and Tvedt, 2010). The question of whether this clause implicitly covers GSD or not depends, in the first instance, on how the term is defined, as well as on the scope of the textual language adopted by the Nagoya Protocol. There is, however, no agreed definition of GSD for this purpose, nor was there any agreement on the status of the current replacement descriptor, that is, DSI, apart from thornier questions about the extent to which the CBD covers GSD at all (COP, 2016: preamble; Houssen et al., 2020).

By the time of the fourteenth CBD-COP meeting in 2018, the term DSI had been adopted as a placeholder for GSD, and a study on the concept and scope of DSI, including its then-current usage, was formally requested in the absence of any consensus.⁹ Against this background, major decisions were made in March 2020, when the Ad Hoc Technical Expert Group on Digital Sequence Information on Genetic Resources (AHTEG) adopted a surprisingly broad and coherent set of definitions in its report (AHTEG, 2020b). The experts successfully classified relevant “genetic and biochemical information” into three broad categories that are conceptually cumulative – namely (1) Group 1, covering “DNA and RNA”; (2) Group 2, covering “proteins and epigenetic modifications” plus the contents of Group 1; and Group 3, covering “metabolites and other macromolecules” plus the combined contents of Groups 1 and 2 (AHTEG, 2020b: annex 1, 9 tbl.1).

The avowed object of this report was to advise the Open-Ended Working Group on the Post-2020 Global Biodiversity Framework.¹⁰ The AHTEG accordingly concluded with the recognition that measures governing ABS in compliance with the CBD might need to vary within the three main groupings of DSI. In so doing, AHTEG deliberately avoids recommendations about how DSI should ultimately be governed for purposes of compliance with the CBD, which was not its mission.¹¹ What it has clarified is the definitional confusion surrounding DSI/GSD in previous discussions so that the COP should better understand what it is dealing with.

Meanwhile, the term DSI is perceived as comprising a broad range of matter subject to interpretation (i.e., DNA sequences and derivatives, but not subsidiary information). In contrast, GSD had acquired a narrower scope in CBD discussions, typically limited to nucleotide sequence data (DNA and RNA) in closer proximity to material genetic resources (Houssen et al., 2020; WHO, 2011).¹² That proximity, in turn, makes it easier to accurately identify or infer the genetic resource from which the relevant data in question were derived for purposes of ABS applications. Because the term GSD thus lends itself to a narrower, more workable subject matter concept for legal interpretation, GSD throughout this chapter is used as a counterweight to the possibly broader notion of DSI.

Enforcing ABS obligations under the CBD, however, depends largely on the ability or inability to monitor the uses of any specific genetic resources and on maintaining control over the chain of custody. Because the authors assume that GSD/DSI will likely become reachable under the CBD in many, if not most, cases, the deeper substantive issues will depend on the consequences of such coverage.

Meanwhile, context and comparison give GSD their actual value through comparing sequences on a large scale combined with the application of knowledge gained from scientific research in an iterative fashion (Rohden and Scholz, 2021). This process is made possible through comprehensive virtual libraries, such as the open-access databases of the International Nucleotide Sequence Database Collaboration (INSDC).¹³ At the same time, the huge volume and constant growth of publicly available genetic sequences constitute a clear obstacle to any attempt to monitor all transactions involved in accessing and using any given set of GSD. Once GSD are shared in open-access repositories, it is not always clear – and therefore very hard – to monitor how they will be used in the future (Laird and Wynberg, 2018).

For example, genetic sequences accessed for academic research purposes that are subsequently uploaded onto public databases may eventually be used commercially by many different actors without the original providers becoming even aware of or involved in the process. Other potential loopholes in the ABS framework could arise when commercial firms only use specified GSD for full product development, whether by bioengineering or for testing products. While even legitimate bioprospecting could trigger some ABS obligations under the CBD, the firms in question might partner with academic institutes or laboratories to test the resulting products under a “noncommercial” umbrella, thus delaying if not concealing legal liability.¹⁴ Moreover, once private-sector entities acquire GSD from open-access repositories, they might have little incentive to disclose potential benefits to distant providers (Gostin et al., 2017).

While further work on tracking and tracing genetic sequences may help engender trust, another complicating factor is that GSD acquires an intermediate scientific status over time, in the sense that component sequences may be used in an ever-expanding variety of scientific research projects. As a result, questions of ownership and property rights – if not unknown or unknowable – may inhibit further basic research projects and commercial innovations (Flach et al., 2019; Rohden and Scholz, 2021).¹⁵

Consider, for example, that networks of researchers from diverse institutional or sectoral affiliations – industry, government, academia, and the laboratories of all sectors – may span the globe in the process of collaborative innovation. In such cases, users may add incremental value by providing data and knowledge along a chain that involves “swift compilation, comparison and reanalysis of genetic information from a variety of sources, across multiple databases and gene sequences.”¹⁶ Genetic materials from diverse organisms originating from different habitats around the world are thus often combined in developing new products, processes, and technologies. The result may well depend on a derivative sequence that reflects an “average” of all the various input sequences, thus making it virtually impossible to determine the relative value of each component sequence as part of the ultimate ensemble (Laird and Wynberg, 2018).

Synthetic or modified GSD may also be created from long-standing, publicly available sequences, many of which may not have recorded links to the original genetic resource or country of origin. This factor complicates how benefit-sharing should attach to GSD/DSI over time under the CBD. One study asks “whether there is ever a point where the original genetic material has passed through so many stages of transformation that ABS requirements attached to the original material no longer apply?” (Reichman et al., 2015).

Commercial applications of GSD are thus so varied and so rapidly evolving that it becomes extremely difficult, if not impossible, to characterize with any certainty the utilization of specific sequences or estimate their commercial value. Even when GSD contribute to developing a given commercial product, they may also be used to develop other industrial processes, research tools, or improved technologies that are not sold and may be freely shared (Laird and Wynberg, 2018; Rohden and Scholz, 2021). These complex arrangements cast further doubt on the ability to attribute shared benefits to any single country or provider, especially when relevant data are easily accessed or processed for further utilization irrespective of the territorial boundaries where genetic resources may have originated.

Given the added value of open-access databases and the fact that there is no way to predict whether any specific genetic sequence components may prove useful in research and product development, broader availability ought to be favored whenever feasible, especially in view of their widening use to support many important societal needs (Ribeiro et al., 2018a). Impeding the flow and use of such information would significantly undermine research projects in diverse fields, including those that contribute to the specific objectives of the CBD and the Nagoya Protocol. The importance of GSD for global public health as an essential tool for disease surveillance, investigation, source-tracing, and the development of medical countermeasures further supports the case for the free availability of such a socially beneficial resource.

13.3 Codifying Multilateral Compliance Measures for Upstream GSD

This chapter contends that a relatively acceptable solution is attainable once the parties shift the focus of attention away from the “coverage” issues and directly address the consequences of potential ABS coverage of GSD. If a satisfactory compromise concerning the scope of protection and the modality of implementation can thus be found, it would help diffuse the pressure hitherto concentrated on definitions and eligibility.

13.3.1 The Basic Proposal

The freedom to access and use genetic resources for global public health purposes, once confirmed by the COP, must accordingly be coupled with a corresponding duty to share proceeds from the results with the country or countries providing genetic materials – in this case, any pathogens at issue. An obligation to this effect must thus be embodied in any waiver for research purposes adopted by the parties to the CBD. Such a waiver should free scientific researchers from negotiating access and usage at the upstream, noncommercial research stage but not from the duty to report and share proceeds from all downstream commercial applications.

Ideally, any solution to the problems of conforming potential uses of pathogen GSD to the CBD requirements would ultimately be embodied in a multilateral agreement applicable to all the member states. Such a regime should incorporate a waiver of PIC and MAT for noncommercial scientific access and uses. Benefit-sharing terms would nonetheless be triggered when, and only if, commercial applications are envisioned using a “change of intent” clause that expressly guarantees compliance with the CBD’s benefit-sharing obligations.

From a purely legal perspective, the legitimacy of such an initiative would follow from Articles 4 and 8 of the Nagoya Protocol. Article 4 validates multilateral arrangements for facilitated access to genetic resources for research and applications, which would override the need to bargain directly with national governments in every case, as otherwise required under Article 8 (Reichman et al., 2015). A multilateral framework adopted to facilitate scientific research would thus be necessary to bring any given project within the scope of Article 4. Once codified by the COP, any standard-form waiver favoring pathogen research that covered specific projects should thereafter suffice (Reichman, 2018).

To implement such a waiver, Standard Material Transfer Agreements (SMTAs) authorizing noncommercial research under the CBD should likewise embody a “change of intent” clause and define how that clause should apply to specific collaborative ventures (Reichman, 2018; Ribeiro et al., 2018a). In principle, parties to these SMTAs would not need to expressly prohibit commercial use of public-research results, whether by private-sector or public-research entities. Instead, when applicable, drafters of both bioprospecting contracts and SMTAs to be covered by the proposed waiver should consider expressly allowing eventual commercial applications with some built-in equitable sharing of revenues if and when they are generated. Correctly devised and implemented “change of intent” clauses could thus help to stimulate both research and commercial applications.

Compliance measures of this kind could thus be validated a priori under either an amendment to the CBD or a waiver embodied in a multilateral Memorandum of Understanding (MoU) to be devised expressly for pathogen genetic resources with the collaboration and endorsement of relevant international organizations. If the global public health community were to take the lead, the proposed waiver for GSD would logically be developed by the WHO, with inputs from the microbiological community as represented by the World Federation of Culture Collections (WFCC).¹⁷ Such an MoU would necessarily impose its waiver for noncommercial research purposes allowing unrestricted access to both pathogen materials and related data, including GSD. By the same token, the WFCC and the INSDC could conform to their standard sharing practices (Rohden and Scholz, 2021), through SMTAs, notification of terms and conditions, or other access agreements. Additionally, they could provide links between the available resources and the legal (ABS) conditions of use for commercial applications, thereby acknowledging the proposed waiver for noncommercial research purposes.

In the long run, however, an MoU regulating pathogen sharing should serve as a steppingstone to a broader, more comprehensive waiver favoring noncommercial research access and use of all GSD and potentially other genetic resources – plant, animal, and microbial – under the CBD as a whole. Such a general waiver would have to be adopted by the COP. Once adopted, the resulting “change of intent” clauses to be embodied in SMTAs should enable local researchers to freely engage in international collaborations, as long as they are covered by the terms and conditions in the standard agreements.

The efficacy of such a regime would depend in part on the successful development of the tracking system under consideration at the World Intellectual Property Organization (WIPO), the WFCC, and INSDC (Bagley, 2016).¹⁸ It is worth noticing, moreover, that microbes already cannot legally be exchanged for any research purposes without bearing unique identifiers that must be cited in all relevant publications (Reichman et al., 2015). The eventual ability of researchers to file SMTAs with the ABS Clearing House to be established under Article 14 of the Nagoya Protocol could then make it unnecessary for researchers engaged in international collaborations to notify their respective governments, so long as binding standard PIC, MAT, and ABS terms were embodied in the relevant SMTAs.

If the CBD’s COP or the WHO eventually decided to establish a consortium for purposes of exploiting pathogens and GSD on a globally regulated basis, they could also adopt a liability rule – that is, a “take and pay” rule – for commercial applications of GSD taken from the commons (or semi-commons, as the case may be) (Calabresi and Melamed, 2018; Reichman and Lewis, 2005). In assessing payment options, moreover, it seems worthwhile to consider the methods already adopted for such a purpose by the multilateral regime governing the Crop Commons, as established under the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA) in 2001 (Reichman et al., 2015). This approach entails a built-in “take and pay” rule for plant cultivars taken from the Crop Commons by commercial plant breeders. Suppose a similar scheme were to be adopted by the proposed multilateral regime to cover GSD under the CBD. In such a case, a liability rule could then require payment of a small percentage of any future commercial revenues back to the CBD’s commons to support the costs of the sharing enterprise.

Under this approach, a percentage of any commercial revenues stipulated ex ante must be paid either to the provider country when known or to the General Fund of the CBD under Article 10 of the Nagoya Protocol, if undetermined. Smaller access charges could also be required to support the costs of any global public repositories to be devised for GSD under pending proposals. As matters stand, the CBD already requires firms undertaking commercial applications to engage in prior benefit-sharing negotiations (bilaterally) with countries that provide relevant genetic resources or with other designated authorities covered by the treaty in certain cases. Under the aforementioned proposal, the obligation to share benefits with provider countries would instead be expressly incorporated into the waiver to be adopted by the multilateral regime for this purpose.

13.3.2 Further Implications of the Proposed Waiver

One persuasive argument for a codified waiver allowing research access and uses of pathogen GSD is that the concomitant obligation to share any proceeds from commercial applications would likely yield more monetary benefits for CBD countries that possess relevant genetic resources over time than any policy that otherwise restricted upstream scientific research. That realization should, in turn, make provider countries more willing to allow bioprospecting under the proposed waiver for research uses than at present. A case can also be made that such a waiver should lead to more nonmonetary societal benefits for all CBD member states in the form of better public health outcomes and more innovation. So, in the spirit of the CBD enhancing fairness in the utilization of genetic resources, such a multilateral system can also raise more funds to address inequalities in research capacity and strengthen public health response efforts.

Transnational collaborations to support responses to outbreaks also illustrate how the timely sharing of pathogen genetic resources benefits society, irrespective of whether they originated from provider or user countries. Experience with regard to the 2013–16 Ebola outbreak in West Africa supports this thesis. During that crisis, gaps in the sharing of viral samples and (meta)data, coupled with delays in the public release of GSD, led to speculation about the sources of infection, the possibilities of diagnosing the infection with available assays, and possible mutations over time that increased transmissibility (Dudas et al., 2017; Ribeiro et al., 2018b). Although at later stages of that outbreak, the near real-time sequencing of strains did finally provide essential information directly to public health officials, the suboptimal sharing of data throughout the outbreak eventually allowed the virus to spread to other countries in the region and evolve into a global health crisis.

It is also worth noting that the measures proposed in this chapter would not necessarily exclude other ancillary approaches. For example, even if global repositories for sharing pathogen GSD were eventually established, the contractual waiver proposed earlier in this chapter would remain viable and important in keeping with the goals of the CBD. Consider, for example, that the mere existence of publicly available repositories would not ensure that all relevant data would end up in such repositories (apart from the definitional issues concerning the scope of GSD/DSI discussed earlier) (Ribeiro et al., 2018a). A globally adopted waiver under the auspices of the CBD would, instead, apply to all relevant uses of pathogen data and materials, whether or not stored in public repositories, and the implementing instrument should expressly prohibit SMTAs from overriding the proposed waiver by contract.

In other words, once embodied within the CBD and its Nagoya Protocol, the waiver would become useful in every case. At the same time, any pooling of relevant repositories under the CBD, if successful, would further enhance the global scientific infrastructure. However, the willingness of biodiversity-rich countries to accept such a built-in waiver cannot be taken for granted. Besides concerns about enforceability, their participation may depend on estimates of the nonmonetary benefits likely to flow from open-data sharing and on the misconception that all genetic resources are likely to generate revenues for benefit-sharing purposes (Reichman et al., 2015).

In this context, the prospect of greater access to public databases (and possibly related technology) may seem to be an insufficient incentive to potential providers, especially if biodiversity-rich countries lack adequate molecular research capacity or biotechnology infrastructure to make domestic use of any resulting global repositories. The prospect of shipping samples abroad for sequencing is also an enduring concern for local governments that fear losing control over genetic resources whose data could easily be loaded into public databases. There have been cases, for instance, where samples initially shared for purposes of analysis were later presented at international meetings without advance notification or attribution to providers as authors (Sedyaningsih et al., 2008).

To address these remaining inequalities, rather than restricting access based on bilateral benefit sharing, a situation that is likely to be technically and logistically infeasible and would only benefit a few, a multilateral system for GSD would generate more access, use, and therefore benefits. These monetary and nonmonetary benefits could be directed to capacity-building initiatives in developing countries, such as bioinformatics training, building data infrastructures, and developing and providing data-analytical tools.

Still, it remains true that big companies and well-endowed research institutions may sometimes profit more from open-access policies and an expanding public domain than smaller competitors. For example, big players may find it easier to file patent applications on genetic markers, targets, specific genotypes, and the like (disregarding variations by country in what qualifies as patentable subject matter) (Bagley, 2016). Meanwhile, smaller enterprises that lack such capacity may be locked out.¹⁹ Nevertheless, since such unequal opportunities are built into any competitive economic system, they constitute a fact of life that the COP cannot fully resolve.

One way around this problem is through the formation of a patent-holding consortium, whereby each contributor to the knowledge valorization process, including providers of genetic resources, researchers, and both large and small enterprises, are rewarded with a share of any funds arising from the resulting property rights (Simon et al., 2005). Such a de facto patent pool could become a recognized component of ABS obligations under the CBD as a form of monetary benefit sharing. Moreover, properly devised “change of intent” clauses would further enable provider countries to benefit from foreign patents by means of built-in sharing conditions applicable to patents, patent pools, or other monetary sources.

To date, very few examples exist of patent pools during epidemics (Simon et al., 2005). In May 2020, the WHO launched the COVID-19 Technology Access Pool (C-TAP) for developers of COVID-19 therapeutics, diagnostics, vaccines, and other health products to share their intellectual property through nonexclusive licenses in a patent pool. Nevertheless, the C-TAP failed to engage the major vaccine developers, which resulted in inequality in access to vaccines in developing countries (Van de Pas et al., 2022). This means that for such mechanisms to work during a crisis, they need to be embedded in a structured, democratic, multilateral governance framework and not dependent on political willingness and pressure during a crisis, guided mainly by narrow national interests.

In any event, steps should be taken to ensure that commercial entities identifiable by their Internet URLs are not excluded a priori from accessing and using pathogen GSD covered by the proposed waiver. A treaty-based waiver for pathogen genetic resources, including GSD, must recognize that “noncommercial” refers to the nature of the use and not the users. Commercial entities, not-for-profit organizations, and academic institutes should be allowed to use GSD for noncommercial research purposes. In contrast, their actual undertaking of commercial applications should always trigger the duty to pay reasonable royalties under the GSD waiver and the corresponding “change of intent” clause.

As regards the modality of implementing monetary obligations for both the commercial use of pathogen resources and funding for the multilateral system, as noted earlier, we endorse a built-in “take and pay” rule (i.e., “liability rule”) under which a small percentage of any commercial revenues stipulated ex ante must be paid either to the provider country or to a General Fund when that country remains unknown. In so doing, the COP might well consider that a simple set of standardized royalty obligations, like those of the ITPGRFA, would engender more upstream uses of GSD, which in the long run might create more likelihood for commercial revenues to be shared under the CBD.

One must recognize that some stakeholders may still cling to the notion that all uses of GSD should require prior negotiation on ABS. The fallacy of such a position is that neither side can accurately predict which products or revenues, if any, would ever result from upstream scientific research (Reichman et al., 2015). Moreover, an ex ante liability rule would significantly lower transaction costs for all relevant parties and clarify potential risks and costs for commercial entities when engaging in product development.

Will the CBD countries insist on some advance payment even for noncommercial or potentially commercial research using pathogenic resources? As previously noted, a relatively small “user’s fee” might become tenable when pathogen GSD are taken from a global commons or semi-commons, as the case may be, because such fees would help defray the costs of upkeep for the repositories in question (Reichman et al., 2015). Absent such an approach, the idea of charging substantial amounts for upstream research would almost certainly foster a needless barrier to both science and global public health, one that scientists will resist, disregarding any difficulties of implementation and enforcement.

As matters stand, any researcher wishing to publish internationally must lodge data with the open-access system, including researchers from biodiversity-rich countries working on domestic species (Rohden and Scholz, 2021). However, if governments restrict this practice over time, it will become hard for local researchers to collaborate and publish internationally. Ironically, if publication or GSD use becomes restricted by governments, or if the industry cannot acquire legal certainty to use these resources, research may shift (and already has in some cases) to countries that do not have ABS measures or to nonparties to the Nagoya Protocol. This can not only limit the understanding of Earth’s biodiversity but also bias global scientific and public health research and development, such as in the case of the annual development of globally comprehensive seasonal influenza vaccines.²⁰

Although many scientific journals still impose restricted (paid) access on their publications, after the genomic revolution – with the Human Genome Project and the adoption of the Bermuda Principles (Collins et al., 2003)²¹ – there has been a strong trend toward the Open Science movement, with free sharing of GSD and related scientific data. Restricting this previously achieved freedom in data access, use, and sharing would constitute a regrettable step backward.

13.4 Other Factors Bearing on Collaborative Research under the CBD

Assuming that the prior proposal merits serious attention, there is a further need to consider how existing policies governing the production, storage, and distribution of pathogens and related GSD would need to be adapted in conformity with such a global multilateral arrangement. In what follows, the authors describe some current and innovative practices already being adopted for the management of both genetic resources and GSD. Also assessed are some remaining challenges to conforming the sharing of pathogen GSD to the overall ABS infrastructure.

13.4.1 The Key Role of Open and Semi-Open Repositories for GSD

The use of sequencing technologies revolutionized the scientific community’s understanding and management of plant, animal, environmental, and human health. However, their optimal use has been dependent on the willingness and ability of countries to share relevant GSD. In this context, GSD function as inputs and outputs of the research process that should be made widely available for further research and public health purposes. This dual functionality has, in turn, elicited growing demands to place GSD in public repositories (WHO, 2017). Such repositories can be open to all legitimate users in the form of what is often labeled as a “commons” (Ostrom, 1990). In appropriate cases, access and use may be limited to specified communities that have collectively contributed to and managed the repositories in question, as would occur under a “semi-commons” (Reichman et al., 2015).

The most prominent open-access approach to sharing pathogen GSD is the INSDC in which 95 percent (705 out of 743 at the time of writing) of all relevant databases directly link to or download their sequence data (Rohden and Scholz, 2021).²² The INSDC has adopted a policy that rejects conditions that impose any restrictions on accessing its stored data, thereby enabling every person and institution, regardless of their background and intended use, to access these resources (Brunak et al., 2002). This data-access model is the most prominent example of an existing repository completely compatible with the Open Science movement. At this time, however, its very openness also poses the biggest challenges for monitoring ABS compliance. Efforts to make the INSDC open-access policies consistent with the multilateral approach proposed in this chapter could facilitate ABS implementation for pathogen resources generally. This follows because the GSD could be freely shared for noncommercial uses in keeping with the recognition of the nonmonetary benefits of Open Science. By the same token, a “change of intent” clause with regard to monetary benefit sharing could later be imposed through binding SMTAs as needed.

In contrast, a good example of a semi-commons model for sharing pathogen GSD was established by the Global Initiative on Sharing All Influenza Data (GISAID EpiFlu) (n.d.) as the global database for sharing influenza gene sequences and related metadata. GISAID plays an essential role in sharing influenza sequences among the WHO Collaborating Centers and National Influenza Centers under the WHO’s Pandemic Influenza Preparedness Framework for biannual influenza vaccine virus recommendations (WHO, 2014). The GISAID (2011) data-access policy is based on a legally binding agreement that every user must sign before being granted access. Users are not allowed to share GISAID’s sequence data with other nonsignatories to the agreement. GISAID thus provides an alternative to public domain databases in which data providers and users are not identified. Through its access agreement, GISAID could likewise provide a basis for monitoring and enforcing compliance with ABS obligations under the CBD. The GISAID model also addresses some of the inequality issues in open-access systems through the binding conditions in its data-access agreement, which stipulate that users acknowledge data providers in future publications and, when possible, engage them in research efforts.

Another recent initiative of interest was the Collaborative Management Platform for Detection and Analyses of (Re-)Emerging, and Foodborne Outbreaks in Europe (COMPARE) (2015), a major European Commission research project to which some of the authors of this chapter were external advisors and others were Consortium members. This project addressed the need to make sequence data broadly available to support rapid containment, identification, and mitigation of emerging infectious diseases and foodborne outbreaks. To accomplish this goal, COMPARE developed a database and sharing platform for GSD from diverse pathogens, enabling stakeholders in the human health, animal health, and food safety domains to readily access and use these same resources under a One Health approach (Gibbs, 2014).²³ To address inequalities in bioinformatics and data-analytics capacity, COMPARE (2015) also offered free online analytical tools that could help scientists and other users from ill-equipped institutions and countries to analyze and interpret the available data without having to mobilize large amounts of resources in computer memory and data storage.

Within its broad investigation of barriers to data sharing, the COMPARE project identified specific stakeholder groups with different interests to be taken into account when devising their roles as potential users of the COMPARE platform (Ribeiro et al., 2018b). The project nonetheless recognized that even these legitimate concerns should not block the timely and open sharing of data, which would compromise the project’s primary objectives. In addressing this quandary, COMPARE established separate data hubs in which sensitive data could be shared only among an agreed group of stakeholders under confidentiality terms, on the condition that after a reasonable period (six to twelve months, in general), that same data could ultimately be placed in the public domain. By means of this temporary embargo, which could be deemed a semi-commons arrangement, a delay in public sharing became acceptable when necessary. This model also addressed other key barriers to data sharing, including the need to allow a priority of use for analyzing the data by local researchers in provider countries while also enabling long-term access and use of the same data for legal research purposes. The model thus established a trusted environment for the prepublication of data with relevant stakeholders who might otherwise have been reluctant to deposit the data directly in the open-access site.

13.4.2 Further Policy Considerations

Looking beyond the question of access to pathogen GSD via either public or more restricted repositories, the sharing process under the CBD still requires attention to other important policy issues. First, the nature of the benefits at stake has evolved, with research collaborations, capacity building, and technology transfer modalities taking on new forms through the sharing of software, analytical tools, and other technologies, as well as increased sharing of GSD (and components thereof). As previously discussed, promising new research arrangements in the form of “global commons” or “semi-commons” (Reichman and Okediji, 2012, Reichman et al., 2015) both retain attribution and coauthorship as benefits and, in some cases, authorize more complex research collaborations in lieu of monetary rewards. These approaches are especially useful in precompetitive phases, when commercial applications for the resources or knowledge at issue are not yet, or may never be, established.

In addition, distinctions between “commercial” and “noncommercial” research should yield different implications for benefit sharing under the CBD. Yet, the lines between these two categories have become blurred in recent decades, as academic and government researchers increasingly partner with industry or otherwise act commercially (Overmann and Scholz, 2017), and as the industry itself also contributes noncommercial findings and research to upstream research projects. In the public health field, this distinction becomes even more complex, given that the development of pharmaceutical products to respond to epidemics and other disease outbreaks sometimes generate low-profit margins (if any) and are increasingly subsidized by governments and health agencies in public–private partnerships (Van de Burgwal et al., 2018).

Although a multilateral system could authorize noncommercial research under SMTAs, while a “change of intent” clause would still cover subsequent decisions to use research results in commercial applications (art. 8(a) of the Nagoya Protocol), the practical distinctions concerning when and in which specific cases commercial use is to be triggered would need to be defined. In practice, the authors acknowledge that there are limits to the technical legal device of “change of intent” clauses, especially in cases where GSD are shared in the public domain. Because such sequences move fluidly between commercial and noncommercial institutions, once uploaded to open-access databases, they become available for all to use, regardless of the distinction between the two types of use.

Tracking and tracing GSD to monitor their access, use, and sharing are also essential steps to the enforcement of ABS compliance and, at the same time, constitute a major challenge for the inclusion of GSD within the scope of the Nagoya Protocol. From a purely technical perspective, these issues depend on the implementation of technologies that enable the tracking, tracing, and monitoring of genetic resources (Rohden and Scholz, 2021). But even when tracking becomes technically more reliable, it may not fully resolve some managerial problems. For example, with or without tracking, questions could remain as to who did the work that led to commercialization; what GSD they employed; who the owners of the sequences in question are; and what rights they should have, if any, against those who solved the problem that produced a commercial application (Butler, 2013).²⁴ Moreover, monetary benefits flowing from the use of GSD remain inherently speculative due to challenges in identifying both the provenance and value of any given sequence or its components in complex applications.

Another fundamental issue to be addressed under a multilateral framework is ensuring that benefits are shared with legitimate providers and that they otherwise contribute to the original objectives of the CBD and its Nagoya Protocol. Grantors that fund research projects likely to involve pathogens and other related sequence data should expressly require grantees to comply with the CBD and Nagoya Protocol and, in particular, their ABS obligations. This approach would thus resemble the typical requirements of grantees to respect intellectual property rights under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). In appropriate cases, funders could also require that GSD resulting from a grantee’s project be deposited in designated and certified repositories.

Concluding Observations

A primary goal in writing this chapter was to help avoid the risk that intellectual property treaties and related administrative initiatives might disrupt the use of pathogens for public health research purposes. Consistent with the CBD and the Nagoya Protocol’s legal framework, we propose a narrow but workable approach that aims to remove the “coverage” issue as the focus of attention from discussions of the COP, specifically concerning pathogen material and including GSD, however ultimately defined. Under this approach, those who legally access pathogen resources covered in an MoU should officially be granted a legal right of use under the CBD for noncommercial purposes in lieu of bilateral access and benefit-sharing agreements.

All such uses would, however, become subject to a built-in “change of intent” clause recognizing the respective users’ liability for specified benefit-sharing royalties from any eventual commercial applications of the initially exempted materials or data. The codified multilateral solution for pathogens in this chapter could alleviate the need for agreement on more complex issues. It could also provide a flexible means of facilitating scientific research on pathogen GSD without compromising the interests of diverse stakeholders under the CBD while rebuilding trust among the parties.

The history of the Nagoya Protocol is marked by polarization between provider and user countries (Muzaka and Serrano, 2020). Because these groups perceive their interests as conflicting, they tend to focus their arguments on the protection of national interests rather than on the achievement of a common goal. Discussions concerning proper access to and use of genetic resources were already somewhat compromised by the adoption of the TRIPS Agreement in 1994, when international intellectual property law began to limit access to and the availability of such resources generally, with a resulting deficit in trust (Reichman, 2018; Six et al., 2015). From this perspective, the CBD itself may be perceived as a developing-country response to the TRIPS Agreement negotiations, one that protects inputs to innovations from developing countries and not just outputs from developed countries (Dreyfuss and Ng, 2018).

Meanwhile, the variety of stakeholders involved in managing genetic resources, with their diverse and often conflicting interests, tends to engender growing mistrust. The politicized nature of the decision-making environment within the CBD may sometimes prevent stakeholders from fully evaluating the practical implications of the enforcement measures embodied in the Nagoya Protocol. It also seems advisable that contributors to scientific research and public health should be better represented within the governing apparatus of the CBD itself.

To rebuild trust in the process of sharing genetic resources, including GSD, the concerns of all stakeholders should be taken into consideration and translated into common goals. To this end, realistic expectations must be built into an improved governance system that will not hamper the freedom to access, use, and share essential inputs for research and public health that generate societal benefits. The objective should be to support fair and equitable collaborations and the sharing of benefits in innovative ways that conform to the needs of technological and infrastructural developments and resulting applications.

Instead of expecting stakeholders to surrender secrecy, control, and exclusivity due to extrinsic monetary incentives, a trustworthy system of collective action should focus on alternative values rendering the discussion more practical and fruitful. These additional values would reflect both common informal norms and codes of conduct arising from the exploration of biodiversity and from scientific and public health practices that embrace principles of reciprocity, openness, and collaboration (Six et al., 2015).

As discussed throughout this chapter, inequalities exist in terms of public health capacity, bioinformatics, and data-analytics capacity. A bilateral ABS mechanism, however, is unlikely to address these inequalities, as there are no guarantees that the funds will be invested in capacity-building initiatives. The countries with more data collection and sequencing capacity will share more GSD and therefore receive most of the benefits, reinforcing the existing gaps. In a truly multilateral system, benefit-sharing funds can instead be invested in countries with the biggest needs – for example, in data-analytics capacity building or epidemic response during a public health crisis. This represents a more sustainable approach to ABS when, in the future, developing countries can more equally profit from open science and open-data structures and policies.

A number of collective networks and sharing platforms are already experimenting with innovative governance arrangements, and their lessons and experiences should constitute valuable inputs for future CBD discussions. Any proposal for a feasible and sustainable solution should move away from burdensome, costly, and time-consuming bilateral negotiations to ensure globally harmonized governance rules covering the rights and obligations of all the parties that are unambiguous and universally applicable.

The ultimate goal should be to ensure that research on pathogens proceeds under fair precepts of global cooperation while enforcing ABS obligations under the CBD in the least intrusive manner possible. The proposals set out in this chapter strive to promote these objectives. The authors thus urge the COP to simplify their negotiations in this respect, with a view to better promoting both science and the larger social welfare interests at stake while updating the objectives of the CBD to better reflect the evolution of scientific research methods, technological developments, and global health over time.

14 Distributive Justice beyond Intellectual Property Laws An International Perspective

Shlomit Yanisky-Ravid

^*

Introduction

The United Nations recently adopted seventeen global Sustainable Development Goals (SDGs) to ensure that by 2030 all people enjoy peace and prosperity, with no one left behind. Among the SDGs that countries have committed to are the following: no poverty, zero hunger, good health and well-being, quality education, gender equality, affordable and clean energy, decent work, peace and justice, industry, innovation, and infrastructure.¹ The SDGs are more powerful tools than U.N. declarations since they target specific goals within time limits, have quantifiable outcomes, and involve the responsibility and commitments of countries around the globe, especially developed countries.² However, in the digital era, where rapid technological development captures the spheres we live in, intellectual property (IP) assets have become essential for progress and sustainability and may contribute to achieving other SDGs.³ Although the SDGs mention innovation, they focus on tangible rather than intangible needs and IP goals.⁴ The SDGs also missed the major role played by international professional organizations, such as the World Intellectual Property Organization (WIPO), one of the main international players in this arena. Nonetheless, SDGs reveal the interrelation between the different goals and, hence, raise the need to rethink and redefine the concept of IP – that is, beyond the current IP laws and their traditional viewpoint to include new global values and goals, including equality, accessibility, and fairness between developing and developed countries. To reach a new understanding of the IP regime, it is crucial to develop and adopt necessary support mechanisms for IP as well as new theoretical justifications.⁵

For example, when artificial intelligence (AI) systems create works of art or when blockchain-based nonfungible tokens (NFTs) provide global peer-to-peer distribution of IP assets, we have to ask ourselves: Should we rethink how we look at IP assets in general? Are they accessible? Can all creators and inventors in developing countries access these developments, and are they in a competitive position within the IP arena to access their outcomes?⁶

In the face of the current “digital 3A” era of automated, autonomous, and advanced technologies,⁷ this chapter issues a call to rethink IP norms to ensure that all players and stakeholders – from creators and inventors to end-users worldwide – can access and make the most of existing IP. Broader opportunities should be extended to industries being disrupted by advanced technologies.⁸ Without access to IP, inequality may occur, creating destructive effects on social stability, the economy, and democracy. It is therefore worthwhile to ask who is excluded from access to IP through both the vertical and horizontal perspectives.⁹

As “rapid technological developments continue to transform the way works and other IP subject matter are created, produced, distributed and exploited,”¹⁰ this chapter calls for a new and broader understanding of the scope of IP rights, particularly in light of the SDGs that enhance more equality and equal access within an international perspective. IP shall be redefined to address legal and practical uncertainties for both rights holders and users of works.

Furthermore, living in the digital era, we cannot refer to IP regimes without considering an international perspective. Seeing the current global society through this lens illuminates the need to shift from traditional theoretical perspectives – namely, law and economics, personality, and Lockean labor theory – to a more open and equal global approach, such as the distributive justice approach that will be discussed in this chapter. The latter approach is crucial when focusing globally. International procedures should occur through an independent, objective entity recognized and trusted by the nations. This chapter suggests that international professional organizations, such as WIPO in the IP field, are the best players to administer these challenges.

The challenges that IP regimes face when the discourse on IP is altered beyond its traditional boundaries are the focus of this chapter.

14.1 Traditional Justifications of Intellectual Property Laws

Intellectual property laws were created to achieve ideals that policymakers believed were important for society.¹¹ However, since the IP arena is constantly evolving and facing new challenges, such as the Internet and digital developments (e.g., AI systems, blockchain, and NFTs), policymakers must consider how IP regimes might adequately address these ideals and any other new goals.

Traditionally, the discourse concerning the theoretical justifications of IP has been focused on three main substantive theories: law and economics, personality theory, and Lockean labor theory.

The law-and-economics theory aims to maximize the total socio-economic welfare of the public.¹² It examines IP products and processes according to their efficiency and their contribution to promoting science and useful arts.¹³ The law-and-economics approach to IP focuses on the incentives of players and stakeholders within the industry to develop and distribute IP goods. By granting exclusive rights that exclude others from using the legally protected goods, the invention is economically incentivized.¹⁴ Preventing free riders and ensuring an economic return for the most efficient stakeholders are just a few goals this approach targets. Once the exclusivity period expires, the goods become part of the public domain.¹⁵

Although the law-and-economics approach to IP is dominant, especially in the United States, some scholars have found its prevailing influence troublesome.¹⁶ Further, there has been much criticism regarding developing countries.¹⁷

Personality theory and Lockean labor theory focus on creators and inventors as humans. Based on the philosophy of Hegel, the personality justification focuses on representing the creators’ personalities in their works.¹⁸ An individual’s right to control his property relates to his personhood; property developed by an individual is seen as an extension of his personality, justifying his ownership.¹⁹ An IP regime premised on this view would protect personal assets more vigorously than fungible assets and would incorporate strict restrictions on transfer.²⁰

Under Lockean labor theory, one’s interest in her property is justified because the property is the fruit of her labor.²¹ Intellectual property ownership of her creations is based on the same entitlements as one’s rights over her own body and soul. In other words, the outcomes of people’s efforts must become their possessions.²²

In sum, the traditional approaches to IP define, interpret, create, and recreate IP laws according to these three theoretical justifications. However, this chapter argues that, when addressing the digital 3A era, personality and labor theories are less applicable than law and economics. When sophisticated systems, such as AI, are involved in the creative process, and when the involvement of users in creating and disseminating IP assets is significant, concepts such as “incentive,” “personality,” and “labor” may lose their meaning. Furthermore, law and economics addresses a broader range of players and stakeholders in the IP industry, including investors and users. At the same time, the personality and labor theories focus solely on flesh-and-blood creators. By looking at economic justifications beyond IP, we can discover different international institutional approaches to scientific and cultural production that are no less efficient. These prevailing approaches conflict with the values of distributive justice, discussed in more detail in the next section, because reliance upon one feature (incentive, labor, or personality) may yield the unjust distribution of existing information and other resources and the unjust production of future information and resources.²³ These theories fail to explain the collective feature of IP assets.

The traditional justifications for IP almost entirely mishandle IP in the digital 3A era and the supportive and necessary tools that have become crucial to fulfilling the goals of the IP regime. The following section will present and address the approach that this chapter suggests as more germane to our era: the distributive justice approach.

14.2 Distributive Justice

14.2.1 The Principles of Distributive Justice

The principles of distributive justice are not necessarily consistent with economic-utilitarian considerations,²⁴ personhood considerations, or possession of assets (as the fruits of someone’s work).²⁵ Instead, distributive justice is concerned with the allocation and reallocation of social resources, including capital and other goods and tools as well as power and rights, in their broadest sense.²⁶ Although discussed by some scholars, distributive justice is considered neither a substance nor a major justification of IP; it is seen as an exception or postscript to the mainstream theoretical justifications.²⁷

This chapter contends that the theory of distributive justice is an integral and essential part of understanding the IP regime and the need for international IP supportive tools.²⁸

“Distributive justice” is a general title coined by Homans in 1961.²⁹ The term is broad and varies according to the different moral perspectives of what is the desired “fairness.”³⁰ The theory determines the appropriate principles of resource allocation by which distribution will be made.³¹

Karen Cook and Karen Hegtvedt offered one of the best overarching descriptions: “All social systems evolve mechanisms for distributing valued resources and for allocating rights, responsibilities, costs, and burdens. Theories of distributive justice specify the conditions under which particular distributions (and, more recently, distributional procedures) are perceived to be ‘just’ or ‘fair’.”³²

Allocation occurs when an allocator distributes valued rewards, resources, rights, or obligations to an array of recipients.³³ In his books, Gerald Allen Cohen argues that equality, freedom, and accessibility are major features of the distributive justice approach.³⁴

Using norms of justice to regulate exchange and allocation processes has important social structural consequences.³⁵ This analysis of distributive justice provides a general framework in relation to commercial transactions, the emergence of markets, and the evolution of agreements regulating exchange and allocation activity in various social systems, among participants of varying degree of interdependence.³⁶ Whereas libertarians’ concerns focus on the government misusing its power, distributive justice advocates are more concerned about the concentration of resources and power in the hands of a small number of groups or individuals.³⁷

One of the most desirable concepts underlying the establishment of distributive justice rules is the principle of equality.³⁸ Products and services, including IP assets in the current digital era, would be distributed in ways that provide individuals a share based on merit. Distribution may be based on rights, power, goods, capital, benefits, needs, efforts, and achievements. From a legal standpoint, a decision regarding which of these criteria is most important has not been made.³⁹ Under a distributive justice approach, all would be considered, and an asset would be shared if “fair” under all these factors.

Distributive justice principles are strongly affiliated with John Rawls’s theory of justice.⁴⁰ These principles can be applied to IP tools, primarily and most effectively within an international environment. Under Rawls’s theory of justice, distribution rules serve as the basis for allocating rights to promote social justice.⁴¹ Rawls sought to establish the principles of justice used by policymakers. When setting rules, especially about property and possession, policymakers should ensure equality and fairness for all, rather than favoring and promoting their interests or the interests of the stronger party.⁴²

Rawls proposed an imaginary assembly of people acting under a “veil of ignorance” to ensure that decision-makers have no actual knowledge regarding their interests, guaranteeing equality, freedom, and fairness in their decisions.⁴³ Rawls suggested two principles of justice: The first principle is that all people have an equal right to a broad range of basic freedoms; the second principle espouses equal opportunity for all. These principles support the weaker parties and result in a more egalitarian and fair distribution of goods (including IP assets in the broadest sense).⁴⁴

IP regimes are traditionally applied firstly within a single territorial state. This national approach seems to limit the sharing of advanced technologies arbitrarily. This hurdle is particularly stark in the distributive justice of IP assets. Local governments tend to prefer local IP industries. This traditional perception of IP needs to change, particularly in the digital era. Building on the author’s other work, this chapter calls for abandoning the focus on national IP and adopting an international vision of distributive justice.⁴⁵ As one commentator observed:

Global development goals are important because they create consensus norms. They define priority objectives and ethical standards that are considered legitimate and influence the behavior of diverse stakeholders. Though global goals are international agreements without enforcement mechanisms, they exert influence in large part by creating narratives and framing debates about how development challenges should be conceptualized. At face value, the 2030 Agenda would appear to contain a strong norm for reducing inequality.⁴⁶

14.2.2 Intellectual Property Regime through a Distributive Justice Lens

This chapter contends that the distributive justice approach is relevant to the IP regime. Although scholars differ from one another in their approaches to this question, this chapter argues that distributive justice is crucial to understanding IP laws, especially in the digital era, when it is difficult to imagine the process of creation and invention without significantly relying on input from many sources, including technological systems.⁴⁷

Scholars tend to fall under two prevailing theories, the “externalist” and the “internalist” perspectives, as was described in other works of the author. Some “externalist” scholars see law and economics as the sole or the main approach to IP,⁴⁸ with the IP regime being detached from any distributive justice goals.⁴⁹ Under this perspective, IP focuses on entities that develop and distribute their assets and ignore values such as inequality and accessibility.⁵⁰ The second approach, dubbed by the author as the “internalist approach,” sees distributive justice as a source only of potential exceptions and limitations to IP, incorporated through concepts such as “fair use.”⁵¹

In contrast to the approaches described earlier, this chapter proposes a third concept that ties distributive justice to a broader assessment of IP laws recognizing the digital era. This approach claims that IP laws reflected distributive justice principles from the beginning, as both were “born” together and can “get along” in harmony and synergy.⁵² The now-prevalent understanding of IP, which essentially adopts the law-and-economics interpretation of IP laws, emerged only later, influenced by certain groups with specific interests.⁵³

In his article, Lior Zemer supports this third approach, which can be coined the collective approach.⁵⁴ He claims that generations of scholars have struggled to redefine copyright to afford users public comprehensive access rights and privileges. Zemer suggests a new theoretical justification for copyright features in translating inter-human relations into the language of creative properties and defining copyright as a dialogue between authors and others, especially in the digital environment.⁵⁵ This approach interprets IP assets as being created through the contribution of many personas, entities, and institutions, as well as the general public, rather than focusing on the author as the sole creator. Consequently, authorship may be distributed among all contributors.

This chapter expands this argument and states that the IP arena has experienced major changes in light of the digital revolution and that the traditional theories that explained the regime in the past should be reconsidered to justify collective intellectual assets – currently and, most probably, also in the near future. Adopting a new approach to IP is crucial, especially in the digital era; otherwise, we may end up limiting the scope of the IP regime by expanding its exceptions and limitations or even invalidating IP laws when technological tools, such as AI systems, dominate the creative process. In other words, as more and more IP assets are being created by using digital tools, and as the volume of creative art that can be generated with one click becomes almost unlimited, the value of IP laws may first be challenged. Then, when digital tools capture the market, IP laws may become incapable of coping with the digital creation of IP assets and of being enforced – and, therefore, invalid.

This concern has already come true in the wake of Naruto v. Slater (the monkey selfie case),⁵⁶ when the U.S. Copyright Office declared that the copyright regime does not include nonhuman creations.⁵⁷

IP laws have changed over the years.⁵⁸ Thus, embracing distributive justice as a dominant approach to the IP regime may be integral to its natural evolution. This chapter states that the international arena may play a major role in pursuing the distributive justice approach to IP. The next section discusses the important role of international organizations, while also focusing on WIPO and its tools to exemplify this approach.

14.3 Distributive Justice in International Tools for All

14.3.1 The Benefits of International Distribute Justice: Harmony, Certainty, and Trust

The modern digital era has elevated tension between collective and individualistic interests, as well as between national and international interests. Companies will inevitably make choices in favor of their interests, maximizing income and avoiding the sharing of information regarding their business to maintain their advantage over competitors. This incentive for companies to focus on their individualistic interests is driven by financial rewards, which have further bolstered IP laws. In contrast, the global society may profit from strategies incorporating worldwide collective efforts, distributing information and assets, including IP, to achieve progress in the fastest and most efficient ways. An effective distribution system of shared data can be achieved by cross-country exchange systems that allow everyone who wants to share valuable information with others to do so. Collaboration benefits societies worldwide, and many companies can provide important information and intellectual resources in return for their participation.⁵⁹ To gain the trust (and participation) of dominant players, such systems should be universal, transparent, reliable, and impartial.

Companies can protect their assets and interests by using self-help tools. Some examples of self-help are calling out copycats and advocating openly against copying.⁶⁰ However, these self-help measures are limited in providing reasonable means of protection and their ability to follow the IP regime worldwide. They also serve a company’s specific interest, rather than the public’s.⁶¹

Distributive justice enhances two sets of value-distribution activities: (1) sharing and distributing knowledge, and (2) helping humanity promote human rights values or preserve cultural artifacts and historical data. Under this view, open access to books, art, music, and even medicine has become a fundamental right in our world. International tools can enhance accessibility and better distribution of tangible and intangible assets to millions of users around the globe, especially in developing countries.⁶²

One of the goals international organizations target while adopting global distributive justice approaches is to achieve a better balance between developed and developing countries in the flow of capital, access to knowledge, economic growth, workforce quality, and many other important factors.⁶³ These goals can be achieved through international tools that grant exemptions and limitations in favor of developing countries according to their special needs. Important treaties have been designed to serve as a means to achieve these goals. Examples include the Agreement on Trade-Related Aspects of Intellectual Property Rights, the Marrakesh Treaty to Facilitate Access to Published Works for Persons who are Blind, Visually Impaired or Otherwise Print Disabled (regarding exceptions and limitations to traditional IP laws aimed at assisting visually impaired persons and supporting higher percentages of these individuals in developing countries), and the Kyoto Protocol to the United Nations Framework Convention on Climate Change (regarding the reduction of gas emissions). These all impose lower levels of obligations on developing countries. The Anti-Counterfeiting Trade Agreement and the Doha Declaration on the TRIPS Agreement and Public Health further take a flexible stance concerning balancing private IP rights and public interests to promote access to essential medicines for all.⁶⁴

The international view reveals a different reality. Interestingly and surprisingly, WIPO has changed its policy in recent years by adopting a new approach that considers distributive justice as part of its agenda. Contemporary international IP tools being developed by the organization adopt distributive justice as their main goal, even though their implementation at the international level may require further adjustments for developing countries.⁶⁵

Research analyzing patent provisions in bilateral, regional, and plurilateral agreements, compared to international tools, reveals that the latter are more efficient in attaining their IP goals.⁶⁶ This conclusion is especially true when we address WIPO’s involvement. First, the involvement of an international entity such as WIPO, unlike local and even bilateral or regional treaties, may have a greater impact on the laws of member states. Second, WIPO can not only provide impactful tools but also create an objective and professional dispute resolution mechanism.⁶⁷ Finally, national legislation may be too narrow or may fail to address the important feature of IP tools as still evolving.

The next section maintains that distributive justice principles should not only govern an international IP regime but should also extend to affiliated tools that have become essential to executing IP laws globally. This chapter focuses on three such tools: (1) WIPO Proof, (2) WIPO Match, and (3) WIPO Re:Search.

14.4 WIPO’s International IP Tools

WIPO has recently launched several services exemplifying a distributive justice approach to IP, expanding its frontiers to new digital services and making them accessible to all. Provided by the leading international organization in the field, these services demonstrate a transition to a new understanding of the industry, incorporating distributive justice values and international perspectives as an integral part of IP. The next subsections are based on information provided by WIPO.

14.4.1 New Business Service Providing Evidence of the Existence of an Intellectual Asset: WIPO Proof

Intellectual property regimes consistently struggle to reduce the number of counterfeits at both the national and international levels. Despite the efforts and the capital invested in the war against counterfeits, it is indisputable that counterfeit rates have continuously grown.⁶⁸ “As exemplified by the statistics, counterfeiting in today’s globalized environment is a global problem that can only be combated on an international scale.”⁶⁹ Fighting counterfeits in the digital era has also been a significant legal challenge.⁷⁰ The current era is confronted with a growing array of data files containing valuable and often IP-protected information. This data can easily fall prey to misuse or misappropriation. Endangered digital files vary from musical scores, research results, large data sets, and business information to highly sophisticated software. Moreover, digital files are common in creative works and design, such as audio-visual works, textile designs, software, industrial design sketches, books, and scripts.⁷¹

A few solutions to address these challenges have been suggested and tested. Fingerprint digital stamps are available on the market. The use of blockchain technology and smart contracts, including NFTs, exemplifies digital tools that try to certify original authors and make IP regimes more accessible and open to all. Blockchain features such as distributed, shared, and encrypted databases that serve as irreversible and incorruptible public repositories of information⁷² can be especially attractive to IP industries that suffer in the digital era from a lack of protection, face hurdles in proof of originality and proof of copying, experience rampant counterfeiting, have to rely on third parties as distributors with high cuts of sales, and have trouble collecting fees.⁷³ Because blockchain is decentralized, it may be an attractive platform to smaller creators with fewer resources. By eliminating the third party, the platform promotes efficiency created in a peer-to-peer economy. Notwithstanding all of their benefits, these tools have been criticized on several grounds, including the economic interest of their distributors.⁷⁴

This section argues that for IP validation services to be trustworthy, they should rely on the existing agreed-upon and accepted concepts of global IP law. In addition, for the authentication process to be effective, it should be equally available and accessible to anyone worldwide.

Consistent with distributive justice and the rising need for international tools, WIPO suggested a new online business service called WIPO Proof. This service provided proof of the existence of a digital file at any point in time.⁷⁵ WIPO Proof provided an easy-to-use global online service that rapidly generated tamper-proof evidence proving that a digital file existed at a specific time and had not been altered since. In other words, it produced a unique fingerprint of your digital file, dated and timestamped the second it is created.⁷⁶

Proof of originality includes the date of creation, which has become particularly difficult to validate in digital works. The goal of this tool was to create verifiable actions to guard the different digital outputs of creators and innovators in their work. It can also be useful to prove counterfeits and prevent future misuse. Social networks can also rely on a system like this to avoid liability when displaying online copyrightable content. The fact that WIPO Proof was an efficient tool for creating evidence of an asset’s digital files at each point in time allowed it to solve and prevent potential future legal disputes. It laid a foundation for the registration of a formal IP right. The service was open to everyone and could have efficiently helped young or emerging creators and innovators.⁷⁷ WIPO Proof tokens were purchased for a small fee. After a token had been purchased, one individual received a copy with the other being stored securely on WIPO’s servers.⁷⁸

Distributive justice principles are reflected in the open access of the tool. Anyone could access WIPO Proof’s secure online website to request a token for a digital file.⁷⁹ It was available online to every user in the world.⁸⁰ WIPO used industry-leading security technology to generate a globally recognized digital fingerprint of each habitant’s intellectual asset.⁸¹

This service, along with other services discussed later, included complimentary tools to WIPO’s existing IP systems that provided another way for the strategic global management of intellectual assets necessary to maintain IP laws.

14.4.2 The New International Digital IP Match-Maker: WIPO Match

A company’s ability to develop IP assets depends on many variables. One critical variable is the company’s ability to obtain and use financial and human resources. Many small businesses face difficulties getting investments; government assistance may be limited by local interests such as tax reduction, a desire to employ residents, locating a business in rural areas, and preventing a business from moving to other countries. Finding funding is a challenge that small and medium enterprises struggle with. It is even more challenging for businesses positioned for the international arena.

Surprisingly, despite the global nature of the current investment market, due to “home country bias,” a significant percentage of people and companies still prefer to invest in familiar surroundings – in their home or regional markets or in familiar markets they believe they can trust.⁸² Businesses in developing countries face major hurdles in attracting huge investments. Possibly, and regretfully, a lack of stable legal systems, or even the difference in language and culture, may create mistrust among potential international investors. Further, local investors face fewer tax hurdles when buying domestic shares and lower foreign currency risks.⁸³ The governmental policy also tends to encourage local investment.⁸⁴ The average American with a stock portfolio invests 79 percent of it in U.S.-listed stocks. Similarly, investors in Australia have an average of two-thirds of their portfolio in local shares.⁸⁵

Establishing a reliable, unbiased system for international investment can help overcome these hurdles, encourage investments worldwide, and consequently stimulate global progress and equality.⁸⁶ Such an approach would enhance collaboration between investors and developers and help businesses in developing countries attract funding despite the hurdles described earlier, especially in the digital era.

Using its international role to globally amplify principles of distributive justice and equality, WIPO has recently launched a new service supporting developing countries with IP developments. It aims to overcome the challenge that companies in developing countries face in attracting financial investments to enhance their economic growth. WIPO Match is a free online tool to match seekers of specific IP-related developmental needs with potential providers of resources.⁸⁷ WIPO acts as an international facilitator and publicizes successful matches. The service amplifies WIPO’s resources and multiplies existing partnerships within the international IP arena. WIPO Match aims to harness the power of industry and the private sector to promote economic, social, and cultural development in developing countries and countries in transition. WIPO tries to empower the innovation and creativity of smaller IP stakeholders.⁸⁸ WIPO Match invites seekers and providers to engage in this project. Seekers must come from developing countries, countries in transition, or least developed countries.⁸⁹ While WIPO provides a clear definition of potential seekers, it does not limit potential providers.⁹⁰ WIPO’s goal is to allow small businesses with limited resources to access IP-protected information, turning IP into a tool for collaboration, rather than an obstacle to growth.

14.4.3 Global Collaboration with Bio Venture for Global Health: WIPO Re:Search Project

The traditional IP regime, particularly in the United States and other developed countries, is based on granting exclusive rights – which allows, for instance, the pharmaceutical industry to dictate its licensing terms and conditions. This leads to high prices for patented drugs. These costs result in many people, particularly in developing countries, unable to afford these drugs. As a practical matter, this represents an oft-insurmountable hurdle, depriving millions of people from full access to necessary medications and better health.⁹¹ WIPO identified this hurdle and launched WIPO Re:Search. This project aims to improve the collaboration between pharmaceutical firms and large corporations by harnessing the power of public and private partnerships to help make IP available to the scientists who need it. Re:Search specifically targets the fight against neglected tropical diseases such as malaria and tuberculosis.⁹²

Historically, WIPO has taken a stance in supporting traditional IP policy and encouraging developed countries to adopt an IP regime.⁹³ However, there has been an interesting shift in WIPO policy, reflected in a broader definition of the goals of IP systems and global distributive justice concepts, as previously discussed in this chapter. WIPO’s Re:Search project emphasizes data sharing and access to health.⁹⁴ WIPO established this project to address the essential need for new and better drugs, diagnostics and vaccines.⁹⁵ Through WIPO Re:Search, organizations share without royalty IP, compounds, expertise, know-how, and facilities. The open environment promotes cooperation and collaboration among researchers from leading pharmaceutical firms.⁹⁶ It enables them to develop medical solutions for diseases that will affect developing countries.⁹⁷ The collaborative and open-access policy exemplifies several basic distributive justice values, such as enabling open access, promoting equality by supporting developing countries, and sharing data rather than prioritizing exclusive rights.⁹⁸

Conclusion

The example of WIPO Re:Search is one of many that reflect distributive justice principles; the tools benefit developing countries by providing certain favorable conditions, such as improving access to medicines to the benefit of the poor and needy, enhancing access to knowledge and technology for developing countries, and encouraging developed countries to share knowledge and technology. According to WIPO, more than a hundred countries have agreed to the model, and leading pharmaceutical firms, such as Novartis, and leading universities have joined the project.⁹⁹

The phenomenon of giving IP laws a new and different meaning by adopting the distributive justice approach, which enhances access to IP assets, stands in contrast to the traditional perspective on the IP regime. WIPO Re:Search provides the necessary incentive for research and development by providing exclusive rights for a limited time to owners that solely control their IP products and processes.

This chapter contends that, in the face of the digital era, this one-sided, narrow, local, and traditional perspective should and can be expanded beyond IP by adopting new tools and distributive justice from an international perspective.¹⁰⁰