TRIP’s Biotechnology and Global Competition 1998

February 1998, Number 2

 

TRIPs,
Biotechnology and Global Competition 

Introduction  

Main Features of TRIPs  

IPR in Agriculture  

Plant Breeders’ Rights  

Patents in Agriculture  

Agricultural Biotechnology
and Global Competition  

IPR and Technology Acquisition  

Impact of PBRs on Local
Breeding Activities  

Development of Agricultural
Biotechnology  

Diffusion of Agricultural Biotechnology  

Conclusions  

Recommendations 

Main Features of TRIPs 

Until recently, most developing countries (and some developed countries)
had comparatively weak IPR regimes. This meant that in these countries
the protection of intellectual properties was limited, both in terms of
coverage and duration of the protection. For example, in the case of pharmaceuticals
and agro-chemicals, only processes could be patented in these countries.
As products could not be patented, local researchers and firms were free
to produce products which were patented in other countries through alternative
processes. Similarly,  IPRs for life forms (plants, animals and cells)
were not recognized by a number of countries. The main objective of the
TRIPs is to strengthen IPR laws. 

 In simple words, the main features of TRIPs are as follows: 

• A large increase in the items eligible for IPR protection. Manufacturing
  processes, microorganisms and plant varieties which are not eligible for
  IPR protection in many countries, will become eligible. While processes
  and microorganisms will be eligible for patent protection, plant varieties
  will be protected either through patents or a sui generis system;
• The duration of patent protection will be increased to 20 years; and
• A product will be eligible for IPR protection whether it is being made
  locally or being imported. Non- working of a patent (meaning not manufacturing
  the product in question locally) will not be a sufficient reason for the
  grant of compulsory license or for revoking a patent.

IPR in Agriculture 

Plant Breeders’ Rights 

 

In recent past, the use of IPR in agriculture was restricted to Plant
Breeders’ Rights (PBRs), which were especially devised for the protection
of plant varieties. Most countries which grant these rights are members
of an international convention called UPOV (International Union For the
Protection of New Varieties of Plants). Although some developing countries
have joined the UPOV Convention, most of its members are developed countries. 

Out of the 32 members in May 1997, only five were developing countries.
These were Argentina, Chile, Colombia, Paraguay and Uruguay. Incidentally,
all of them are traditional agricultural exporters, and members of a coalition,
called the Cairns Group (except Paraguay). The convention, first signed
in 1961, came into force in 1968. Since then it has been revised in 1972,
1978 and 1991. 

Compared to patents, the protection provided by the PBR is weak. For
example, PBRs based on the 1971 UPOV provides two important exemptions
to the breeders’ rights. These are breeders’ exemption and farmers’ privilege
(see Box 1). 

 

Similarly, the scope of the farmers’ privilege has been restricted in
the 1991 version. The privilege, which was automatic in the 1978 Convention,
has been made optional in the 1991 Convention. According to the 1978 convention,
the farmers’ privilege came into existence when a state adopted the 1978
convention. On the other hand, in the case of the 1991 convention the member
states are required to make special provision in their national legislation
to include farmers’ privilege. Furthermore, it is required that these privileges
are “within reasonable limits and subject to the safeguarding of the legitimate
interests of the  breeders”. 

Although, the  1991 Convention is not yet in force, a number of
member countries have already introduced national laws in accordance with
it. According to the latest published information, by March 1997 26 states
were granting plant variety protection on the basis of the 1991 Convention.
This trend is expected to continue and, according to the UPOV, the 1991
Act must now be regarded by all countries as the new international plant
variety protection standard. 

Following the TRIPs agreement, many developing countries are also in
the process of enacting plant breeders’ rights. The Indian government,
for example, has prepared a Draft Legislation on Plant Varieties,
which has been under consideration for some time. Following the 1991 versions
of the UPOV convention, the Act has restricted the breeders’ privileges.
However, it has provisions for farmers’ privileges and farmers’ rights. 

Patents in Agriculture 

Although, following the 1991 version of UPOV, many countries have strengthened
their PBR legislation, the agricultural biotechnology industry still considers
them to be too weak. The industry prefers to rely on industrial patents
for the protection of its intellectual property. This trend, which began
in the late 1980s has seen a sharp increase in the 1990s. For example,
in the USA, more than 100 patents for agricultural technologies/products
based on biotechnology have been granted since 1980. 

Biotechnology has emerged as a major source of new technologies for
agriculture. There have been major developments in agricultural biotechnology
in the 1990s, particularly in the development of improved varieties of
crops. It has dramatically increased the ability of researchers to 
introduce new traits to commercially important crops. 

As a result, many crops have been genetically altered. The number of
genetically altered plants (often referred to as transgenic plants) is
already large. For example,  in the US alone, more than 2700 field
trials involving transgenic plants took place between 1987 and 1996 (based
on USDA data provided by Dr. Sivaramaiah Santhanam, USDA). While 15 transgenic
plants had received approval for sale in the USA by November 1996, another
13 transgenic plants were waiting to receive marketing permission in the
US at that time (“What is Coming To Market? An Update on Commercialization”,
Gene Exchange, Vol. 7, No. 1, December 1996,  Pgs. 4-5). 

Agricultural
Biotechnology and Global Competition 

Biotechnology offers technical solutions which can contribute to increased 
agricultural production with reduced reliance on chemical inputs. However,
the ability of developing countries to benefit from the new technology
will be limited by two emerging trends. 

 The first is that of a decline in the importance of the public
sector agricultural research centres. In the past, the public sector institutions
(both national and international) have played a central role in the improvement
of agricultural biotechnology and increasing production in  developing
countries. Even in crops where private sector seed firms are major players
(such as hybrids), these institutions have acted as major sources of technology
and breeding material. 

This situation has now changed. With the emergence of biotechnology,
private sector firms have emerged as technological leaders in a number
of important areas. On the other hand, international agricultural research
centres, which provided the bulk of the technical inputs to developing
countries in the past, are comparatively minor players in biotechnology.
This has affected their ability to provide technological support to developing
countries. 

Today, research in biotechnology and the development of biotechnology
based products (such as transgenic plants and their seeds) is largely concentrated
in private firms in developed countries. A handful of these firms, such
as Calgene, Mycogen, Biosem, Agracetus, Escagenetics etc. account for much
of the R&D (see Box 2). These firms also account for most transgenic
plants and other biotechnology based agricultural products. For example,
of the 28 transgenic plants approved for sale or in the pipeline in the
US by November 1996, only one was developed by a public sector institution.
The rest were developed by private sector firms. 

The domination of agricultural biotechnology by a handful of large firms
has increased in recent years. A number of mergers and acquisitions between
the leading players have resulted in a highly concentrated industry (see
Box 3). 

 

Similar collaborations have taken place between Monsanto and Pioneer
(for the development and marketing of insect-resistant maize), between
Mogen International and Asgrow Co. (to develop nematode-resistant varieties
of horticultural crops), and between Mycogen and Pioneer (for the development
of insect-resistant plants and seeds). 

Secondly, the importance of IPR in agriculture has increased many-fold.
As mentioned earlier, in the past the use of IPR in agriculture was comparatively
limited. With greater awareness of the economic importance of biotechnology
and genetic resources, and the expanded role of private firms in agricultural
research, the use of IPR to protect new developments has become common
practice. The techniques used in genetic engineering and new products (such
as genes with desirable traits and genetically engineered plants) are now
patented as a matter of routine. 

Since the early 1980s the US government has awarded more than a hundred
patents for techniques used in genetic engineering, and genetically engineered
plants. These patents cover most of  the techniques and commercially
important genes used in genetic engineering. For example, almost all the
techniques used in the development of genetically engineered plants with
pest resistance have been patented. Furthermore, most of these patents
are owned by leading private firms. 

Mycogen, for example, has a near complete control of the technology
used for the development of genetically engineered plants with pest resistance.
Similarly, another firm, Calgene, has an unchallengable position in the
field of Canola transgenics. 

Furthermore, following the trend set by the industry, the public sector
institutions in developed countries, such as universities, are also increasingly
relying  on patents. 

The control of technology through IPR has been further strengthened
by the fact that some of the biotechnology patents  have a very broad
scope. Their coverage is not restricted to a specific crop or a technique.
In many cases they cover any method for the development of a product (such
as a genetically modified plant) in any crop. 

One of the most widely discussed (and criticised) broad patents was
a patent granted to Agracetus, a leading biotechnology firm. The patent
gave it rights to all genetically engineered cotton plants and seeds, regardless
of the method used to engineer the plant. Similar patents with wide coverage
have been awarded to a number of firms. 

 

Clearly,  patent  protection with such a broad scope provides
the patent holders with extreme control of a technology. The impact of
such patents on the ability of competitors to carry out research is particularly
restrictive. Furthermore, broad patents have encouraged the leading
companies to cross license patented technologies to each other (i.e.
a closed-loop system), further consolidating the position of the large
players. 

 

This has disadvantaged both small companies and developing countries.
Their ability to undertake research and development is impaired as the
broad patents close most routes to independent technology development.
Moreover, they will find it difficult to get licenses as they do not have
the patents necessary for swapping arrangements in cross licensing deals. 

 

In short, the use of IPR  is becoming increasingly common in agriculture.
This is particularly true in the case of techniques and products based
on biotechnology, a number of which have been protected through patents.
As can be expected, the monopoly provided by the patents is being used
by the patent holders (most of whom are leading biotechnology, agrochemical
and seed companies), to exclude competitors from both business and research
activities. In fact, patent holdings have emerged as one of the most critical
business assets. 

 

It must also be emphasised that as proprietary technologies grow in
importance, firms are becoming more determined to protect their monopoly
positions. According to a senior executive of Pioneer Seed Co.: “Security
for proprietary genetics is at the heart of any good seed company’s ability
to offer cutting edge products to the world’s farmers and to maintain a
research budget. We intend to aggressively protect our intellectual property
rights and we have the tools to do it.”  (“Pioneer Strengthens Protection
of Intellectual Property Rights”, Seed World, July 1995, Pg. 12). 

  These tools include molecular markers technology or DNA finger
printing. It is used by Pioneer and other seed companies regularly to determine
if their proprietary seed lines have been used by competitors in product
development. 

IPR and Technology Acquisition 

  

Impact of PBRs
on Local Breeding Activities 

There is widespread feeling that the formulation of national PBR laws
based on the 1991 UPOV (an increasingly common practice) will impinge upon
the breeding activities in and for developing countries. As mentioned earlier,
the 1991 version of the UPOV convention seriously limits the breeders’
privileges. In theory, this can restrict the breeding work needed to increase
agricultural production in developing countries. 

However, in practice, the impact of PBR on food crops in developing
countries will be moderated by the fact that most of the breeding work
relevant to developing countries is carried out at International Agricultural
Research Centres (IARCs) and national agricultural research institutes
and universities in developing countries. 

These institutions are still the major sources of new varieties and
breeding material used in developing countries. Therefore,  the impact
of the PBR on developing countries will depend on a) the ability of these
institutions to continue as major centres of breeding activities and b)
their IPR policy. 

 

Unfortunately, there has been a recent tendency, in many developing
countries, to neglect public sector agricultural research in general and
breeding activities in particular. This trend needs to be reversed. However,
considering the current anti-public sector sentiment, this will require
strong political will. 

 

The pressure on public sector institutions to generate financial resources
is  pushing them to protect their technologies, breeding material
and new varieties. This could lead to a situation where most new varieties
in developing countries are controlled by these institutions through PBRs.
As long as they continue to provide breeding material and varieties to
breeders and farmers at a nominal fee, the impact (for example, on availability,
prices and diffusion of new seeds) will not be significant. 

 

However, considering its importance, the policy adopted by the public
sector research institutions must be decided at national level. Furthermore,
the chief concern of the policy should be the availability of breeding
material and seeds at a reasonable price, and not the short term earnings
of an individual public sector research institute. 

Development of Agricultural
Biotechnology 

Will a strong patent regime encourage the development of agricultural
biotechnology in developing countries? A number of them are undertaking
the development of biotechnology based agricultural technologies locally.
These include the development of genetically engineered plants with pest
resistance and other desirable characteristics. Our research suggests that
the impact of IPR on local development of agricultural biotechnology is
likely to be strongly negative. This is mainly because firms in developed
countries maintain tight control, through patents, a large number of useful
technologies. 

Once the IPR laws in developing countries are tightened, these firms
will be able to extend their patent rights. This will restrict the freedom
of researchers in developing countries to develop/use these technologies
locally. The impact will be particularly strong in countries such as India,
which have a strong agricultural technology base. 

 

The example of Bt cotton and rice research in India shows how the new
IPR regime can damage these activities. Indian researchers are engaged
in projects aimed at the development of genetically engineered cotton and
rice with resistance to pests. Almost all the components of these technologies
are directly or indirectly patented. Indian researchers are able to use
these techniques as Indian law does not recognises these patents. 

 

The situation will change once Indian patent laws are amended to meet
the requirements of TRIPs. As the  patent holders will be able to
extend their rights to India, the ability of Indian researchers to carry
out this (and similar) research will be handicapped. The research efforts
of other developing countries will also suffer. 

Diffusion of Agricultural
Biotechnology 

Will a strong IPR regime benefit developing countries by encouraging
transfer of planting material and agricultural biotechnology from developed
countries? 

 

As far as the impact of PBR on the availability of planting material
and local breeding activities is concerned, the impact is likely to be
mixed. Recent research in five Latin American countries (Argentina, Chile,
Uruguay, Columbia and Mexico) shows that in the case of hybrids and high
quality propagating material for ornamentals and fruit varieties, effective
PBR is likely to increase the transfer of breeding lines and propagating
material from developed countries. 

 

However, the freedom of local farmers to use  imported germ plasma
is constrained by the supplier’s business interests, particularly in the
case of export oriented crops. For example, in 1994 Argentinean strawberry
producers were denied permission to export strawberry plants to Europe
by the American breeders and European licensees, because the Argentinean
exports competed with European production directly. 

 

What is the likely impact of strong patents on the diffusion of biotechnology?
It is possible to argue that strong protection of their intellectual properties
will encourage foreign firms to transfer technologies to developing countries.
In general, there is no empirical evidence to suggest that the IPR regime
has any direct bearing on the level of foreign investment and transfer
of technology to a country (“The TRIPs Agreement and Developing Countries”,
United Nations Conference on Trade and Development, Geneva, 1996, Pg. 17). 

 

However, certain provisions of the TRIPs have the potential of restricting
transfer of technology to developing countries. The TRIPs Agreement equates
the working of a patent with imports. In other words, a country cannot
revoke a patent even if a patent holder refuses to produce it locally. 

 

Thus, TRIPs will have two important effects on the transfer of technology
to developing countries. Firstly, the patent holders will be tempted to
export products rather than manufacture them in developing countries. Secondly,
TRIPs will increase the bargaining power of the technology owners and they
will be able to demand (and get) a higher price for technology (ibid,
Pg. 18). 

Conclusions 

As signatories to GATT, developing countries are committed to strengthening
their IPR laws. One of the important changes to be introduced is the extension
of the role of IPR to agricultural technologies and products. They are
expected to adopt a sui generis system for the protection of new
plant varieties and extend the patent system to cover microorganisms. 

 

The proposed changes in the IPR policies of developing countries have
raised a number of important issues. One of the most important  is
the likely impact of these changes on a developing country’s ability 
to undertake agricultural research. 

 

As shown above, provisions of TRIPs can have serious impact on agricultural
research by developing countries. Furthermore, the impact will be felt
on both conventional breeding research and biotechnology based research. 

The impact on breeding activities will be serious if the PBRs based
on the 1991 Convention of UPOV are adopted.  However, it must be pointed
out that the presence of a strong public sector in conventional breeding
is likely to lessen some of the negative impact of PBR. 

The situation is more grim in the case of agricultural biotechnology
research. The research in this area is completely dominated by firms in
developed countries, while public sector research institutions (both international
and national) are very weak. The adoption of an IPR system which includes
patents for biotechnology-based techniques and products will be extremely
detrimental to local research. Further, given the increasing number of
mergers, acquisitions and collaborations by leading biotechnology (and
seed) firms, the issue has to be approached from the viewpoint of global 
competition. 

 

The effect of the TRIPs Agreement on transfer of technology is also
likely to be negative. The Agreement limits the ability of developing countries
to force the working of a patent. In the circumstances, a foreign firm
may prefer to import a product rather than produce it locally. This could
impede the diffusion of technology to developing countries. 

 

To conclude, the TRIPs-related changes in IPR are likely to have a
negative impact on agricultural research in developing countries. They
will particularly restrict the freedom of biotechnology researchers to
use commercially important techniques and genetic material. Furthermore,
commercialisation of locally developed products will become extremely difficult.
It is, therefore, vitally important that the new IPR laws exclude (or dilute)
those provisions of a TRIPs Agreement which are excessively restrictive
in nature. An important objective of these laws should be to minimise curbs
on research (and its commercialisation) by persons other than the patent
holders. Furthermore, developing countries should try to have the TRIPs
agreement modified so as to limit its detrimental effect on local technological
development. 

 

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