Professor John Barton Speaks about Patent Law in Developing Countries

Professor John Barton is the George E. Osborne Professor of Law, Emeritus, at Stanford. 

LST@Stanford: Prof. Barton, let’s start with the question of how the paper that you presented in Paris fits within the context of your scholarship. With specific regard to the U.K. Commission Report on Intellectual Propery Rights and Development that you coauthored (as chair of the commission) back in 2002, how does your most recent work on technology transfer relate to your previous findings?

Prof. Barton: In the UK commission report, we were really concentrating on the poorest countries, and in this one I’m trying to look at the middle-income countries. That’s the big difference. So for that earlier one, we focused on countries where there was essentially no chance of industries evolving, countries where the primary impact of intellectual property was on the costs of products. For this one, I’m dealing with industrial structure in places like Brazil and China, and I’m delving into the global industrial system.

What’s the per capita income in the countries you’re looking at in this report?

Prof. Barton: Well, the $8,000 amount is where countries begin to really want to have their own IP system.

So for the poorest developing countries, the primary effects of IP rights are seen in the increase of prices for pharmaceutical and other products ... whereas for countries above a certain income level, an intellectual property rights (IPR) system can start to foster innovation and produce other positive effects. What are some of these other effects?

Prof. Barton: A strong IPR system may encourage foreign direct investment (FDI).

 

Professor John Barton, George E. Osborne Professor of Law, Emeritus, and Codirector, Stanford Program in Law, Science & Technology, Stanford Law School, presented his paper, “Patents and the Transfer of Technology to Developing Countries,” at the Organisation for Economic Co-operation and Development [OECD] Conference on Intellectual Property Rights, Innovation and Economic Performance, in Paris on August 29, 2003. In the following interview, he discusses his reasons for writing this paper and his hopes for what it will achieve in the field of patent development.

How have other studies grappled with this question of the correlation between strong IPR systems and increased foreign direct investment?

Prof. Barton: It’s really hard to draw any conclusions from these other studies. They’re all over the place, and that was one of the real problems. I draw the conclusion that IP rights are much less important than many other factors, and that their role varies from industry to industry. For instance, patent systems tend to be more important in chemical and pharmaceutical industries, and less significant in semiconductor and transportation equipment industries.

In general, a strong IPR regime is helpful, but it is neither a sufficient nor even a necessary condition for attracting foreign investment.

I was reading your thoughts on trade secret protection and was wondering why companies are much more inclined to seek patent protection rather than trade secret protection.

Prof. Barton: I think it’s because trade secrecy didn’t get the focus in the TRIPS [trade-related aspects of intellectual property rights] Agreement. Certainly one thing that’s going on in the pharmaceutical cases is that the industry’s been demonized, with respect to Africa and patents. And it is easier to demonize the pharmaceutical industry and to look just at patents … than it is to ask whether or not trade secrecy law encourages people to establish new subsidiaries in their countries. In trade secrecy, we haven’t had the kinds of negotiations we had on patents. The U.S. government hasn’t pushed as strongly for the same kinds of protections.

What is the role of the U.S. government in the issues you’ve discussed in your paper? What governmental agencies might be reading your work?

Prof. Barton: Most haven’t really faced this set of questions yet, or at least I don’t think they have. What the U.S. government clearly has faced are the questions and concerns of the pharmaceutical industry, and the movie content industry, and, of course, trademark concerns. I’m not sure they have really thought about the issue as it applies to other industries, industries where patents have traditionally been less important but where I think they are becoming more important, given current technological trends. However, the Federal Trade Commission has recently released a report in which it is raising serious questions about the impact of intellectual property on industrial research.

What are the major changes you’ve seen in the last twenty or thirty years in the sphere of technology transfer, as we’ve gone from a nation-specific to a more global system?

Prof. Barton: The first thing is that there are now more scientists in the developing world. The second is the emergence of China and Brazil. Another major change is the need for technology to be used for global export products, rather than for domestic production to substitute for imports.

Do you see multinational companies still using the old scheme to justify the construction of a strong IPR system?

Prof. Barton: No. I think some multinational companies have persuaded the U.S. government that strong IP encourages foreign direct investment, and that’s more what’s happening. I think this might be true of pharmaceuticals as well.

What’s the role of international institutions such as the World Intellectual Property Association in all of this? Do you see them opening up to a more reflective approach towards, say, IP enforcement in developing countries?

Prof. Barton: Certainly the World Trade Organization is opening up to a more reflective approach, and this currently is a result of pressures at Doha. Who knows what happens after Cancun, though.

WIPO I’m less confident of, because it’s much more an institution of intellectual property people. But both of them are getting significant pressure from the United States; and the U.S. position is in essence that stronger intellectual property protection is always better.

What are your thoughts, then, on the upcoming WIPO@Stanford conference, and how do you expect it to contribute to this discussion?

Prof. Barton: This set of issues may be part of it. The topics at the conference will include venture capital, harmonization, biotechnology and health, software, and WIPO activities including the Patent Cooperation Treaty (PCT). What will hopefully emerge from WIPO@Stanford is a better understanding of the issues surrounding the use of patents in science and technology.

Who else reads your paper, and what sort of influence will it have?

Prof. Barton: That’s another question. The OECD is doing a study on this set of issues, and my paper will be published in a volume that they’re putting together. Now, the difficulty is to put pressure on U.S. trade representatives and the U.S. patent office, who rarely listen to these kinds of academic criticisms.

These criticisms, of course, have been growing over the last five to ten years. And even though we might disagree as to where the peak of the curve is, I think that almost all critics would say that although some intellectual property protection is good, more is not necessarily better. The patent office and the U.S. trade representative, who has the responsibility to be a global lobbyist, don’t necessarily agree that there’s a peak to the curve.

Is there a way for the global market itself to resolve these issues? How could you convince a multinational corporation that it would be able to benefit by accepting less strict patent systems in developing countries?

Prof. Barton: Some international corporations are very unhappy with the patent system. Consider, for example, Cisco, which sees the patent system as more a way that it is ‘held up’ than as a way that actually encourages its own research. And it is my understanding that a number of high-tech information technology companies feel the same way.

With the pharmaceutical companies, I don’t think they necessarily will be benefited. On the other hand, society will benefit. So there are two sorts of questions; one is, how much income should the companies be getting? To what extent should they be entitled to protect their product prices with patents and intellectual property restrictions?

The second question regards the extent to which, in any industry, developing countries should be entitled to develop their own new companies, and to get into the process and enter the industry themselves. Japanese and Korean companies did this years ago, and before that, the U.S. companies entered into competition with the European ones. Certainly the existing multinationals want to defend their positions against insurgents, but whether or not that’s in the broader social interest is another question.

So who should put into effect this larger societal interest?

Prof. Barton: Currently, the government is doing what one group of multinationals wants them to do. Coalitions in developing countries have been the groups that have pushed in the opposite direction.

Do you see any places in the world where a successful balance of IP rights is currently being forged?

Prof. Barton: I think the balance prior to TRIPS was not too bad. The balance with TRIPS is not too bad itself. I think the United States effort to push beyond the TRIPS standard is not good. The United States, for one, has strong intellectual property rights, possibly too strong for the good of its own economy. You probably want to look at a place like Korea or Taiwan, or possibly Brazil for a place where the balance is a little more reasonable.

Do you discuss these sorts of issues in your class “Technology as a Business Asset”?

Prof. Barton: I try to fit in one session on developing countries, and there are usually one or two sessions on international issues. Most of the course is focused on domestic questions, but in some sense these are questions of a U.S.-Eastern style of invention versus a U.S.-California style of invention. In the Californian version of trade secret law, for example, employee mobility is much higher. That has a negative meaning, insofar as it means that employers are less likely to invest in training for their employees. But the strongly positive side of it is that you’ll get much more cross-fertilization, which you don’t get back on the East Coast. The agreement not to pass on trade secrets is certainly properly enforceable. But you aren’t going to be asked in California—at least you aren’t going to be successfully asked—to sign an agreement that says you won’t go to work for a competitor. Back East you will.

How do you see the intellectual environment within the various centers housed by the LST Program contributing to your research?

Prof. Barton: Well I think it’s very helpful. We have a critical mass of people working in technology law and technology economics, and I would say, frankly, it’s between here and Berkeley that you have the best group in the world. I’ve worked with some people at both institutions. They tend to have more economists, we tend to have more lawyers, but I think the combination is very productive.

What are you working on next, now that you’ve spent so much time looking into global IPR and development?

Prof. Barton: I want to do some case studies, to find out what’s really happening. I’m currently looking at domestic patent questions, specifically, those to do with diagnostic devices. Certainly I think you should not be able to patent a scientific conclusion, such as the idea that blood pressure is related to particular diseases. I would certainly allow a patent on a particular method of appraising blood pressure. Thus I have questions about a patent on the fact that a particular gene sequence indicates susceptibility to a particular disease. On the other hand, it isn’t clear how the diagnostic industry can benefit from its research if it doesn’t have such a patent. So I want to understand the economics of this industry. [See “Stanford Biolaw Tackles Property in a Biotech Era” on pp. 2-3—specifically, the section describing Dr. David Magnus’s presentation—for more information on gene patenting.]

So I’m working on that, and I want to do some case studies in developing countries. The first two will probably be the global vaccine industry and the global steel industry. I’ll take a look at the role that intellectual property and other kinds of procedures are playing. The steel industry certainly has its economic problems, and during some periods this technological innovation has been very slow. But what I don’t know is whether or not the developing country technology is significantly behind the developed world technology either in efficiency terms or in environmental terms. That’s one of the things I want to look at, and see if I can understand better what’s going on. It’s all hypersubsidized; that’s the one thing I’ve discovered.

Could you expand on what you think the relationship will be between the U.S. steel industry and the steel industries of developing countries?

Prof. Barton: Certainly the U.S. steel industry is hyperprotectionist. One of the traditional debates has been that, say, the Brazilian steel industry is subsidized by the World Bank and is therefore not a fair competitor with the U.S. steel industry. And I don’t see stronger use of patents as a solution, although those patents were certainly used in the old days. We had the Bessemer patent pool (in 1872), but that’s the really old days. So I’m trying to learn more about the way things are playing out today.

Thank you for this interview, Professor Barton.

Prof. Barton: You’re very welcome.