4377014

Pharmaceutical Patents in Developing Countries: Policy Options
Author(s): Kumariah Balasubramaniam
Reviewed work(s):
Source: Economic and Political Weekly, Vol. 22, No. 19/21, Annual Number (May, 1987), pp.
AN103-AN107+AN109-AN120
Published by: Economic and Political Weekly
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PharmaceuticalPatents in Developing
Countries: Policy Options
Kumariah Balasubramaniam
TheParis Convention for theprotection of industrialproperty originally signed in 1883 has since been revised
six times. Each revision has extended the exclusive monopoly powers of the patent holders and weakened the
bargainingpowers of deveioping countries which have to purchase technology from TNCs who own the majority,
of thepatents. Most national legislations have incorporatedthe majorprovisions in theParis Convention regardless
of whether the countries are members of the Paris Union or not. A critical examination of the existing national
and internationalpatent systems reveals that these have had an adverse effect on the economic, commercial and
technological development of the pharmaceutical sector in the Asian and other developing countries.
The economic and social policy on patent legislation should be to secure the maximum possible benefits in
relation to social costs entailed. A rational patent policy should be one of the components of an integratedna-
tionalpharmaceuticalpolicy. A numberof developing countrieshave in recentyears introducedsignificant changes
in their national legislation on patents. These reforms were so designed as to make the patent system strike a
balance between the needfor economic development and social change on the one hand, and the rights granted
by the patents on the other.
I
Paris Convention for Protecti'on of
Industrial Property
THE ParisConventionis an international
agreementfor the protectionof industrial
property.Since 1967,the WorldIntelle'ctual
PropertyOrganisation(WIPO)hasprovided
the InternationalSecretariatfor the Paris
Convention.Thereareseveralformsof in-
dustrialpropertyprotectionfor inventions.
These include patents, trademarks,inven-
tors' certificates,utility models, industrial
designs,servicemarksand tradenames.Of
all these forms of industrial property,
patentsand trademarksare the two which
areof criticalimportancetothedevelopment
of t.hepharmaceuticalsectorin developing
countries. In this seminar we shall be
looking at patents only.
The internationalpatentsystem, for the
purposeof this paper,may be regardedas
a systemwhich consists of two important
components:(1) domesticor nationallaw-s
and practices and (ii) international
agreement.
A countrycan formulateits ownnational
laws on patents to suit its development
needs. However,the scope of policy and
legislationand the flexibility of administ-
rativepracticesopento a countrydependon
its commitments enteredinto through its
membershipof the ParisConvention.Not
alldevelopingcountriesaremembersof the
ParisConvention.However,manyof these
countries which are not members of the
Paris Union have enacted their national
legislationson patents.Theselawsarebased
essehtiallyon theprovisionscontainedinthe
Paris Convention. Annexures 1-5 give ex-
amplesof nationalpatentlawsof developing
countriesboth membersand non-members
of the Paris Union.
The ParisConventionfor the protection
of industrialpropertyoriginallysigned in
1883came into effect on July'7, 1884witth
fourteenmembercountries.At presentthere
are 97 members(Annexure6).
TheConventionconsistsof 30articles,of
which the first 12 deal with questions of
patents,trademarksandother formsof in-
dustrialpropertyand the remainderwith
proceduraland administrativematters,in-
cluding amendment of the Convention.
Thereis no preambleand no generalstate-
ment of the objectivesof the Convention.
Article (1), however,makes clear that the
Conventionis intendedfor the 'protection
of industrialproperty'.It is in facta charter
of rightsforpatent-holders,itsessentialcon-
cernbeingto determineandsafeguardtheir
privileges.As contrastedwiththedetailand
precision with which their privileges are
stated,thereis littleabouttherightsof coun-
tries whichgrantthese privileges.Thereis
littlerecognitionof the publicinterestthat
is expectedto be sei-vedby the systemof
patents and few provisions about the
remedialmeasuresto dealwiththepossible
abusesof the system.The keyrulesof the
Conventionaremandatoryon the member
states.Theseprovisionsdefinetherightsof
the holdersof industrialpropertyand are
statedin considerabledetail.
ARTICLES IN PARIS CONVENTION OF
IMPORTANCETO DEVELOPING COUNTRIES
The basic rules regardingthe privileges
and rightsof patent-holdersarecontained
in the provisionsin variousarticlesof the
ParisConventionincluding:
1 National treatment(Article 2)
2 Right of priority(Article 4)
3 Independenceof patents (Article4-bis)
4 Thesafeguardsagainstforfeitureforlack
of workingthe patent (Article 5 A)
5 Stipulation on imports of products
manufacturedwith a patented process
(Article 5quater)
A briefdiscussionof the provisionscon-
tainedin the abovearticleswill revealhow
drugtransnationalcorporations(TNCs)use
them to virtually hold many developing
countriesto ransomandexerta monopolistic
controlof the market.A small numberof
TNCscontrolthevastmajorityof pharma-
ceuticalpatents (Table1).
National treatment
Theprincipleof nationaltreatmentmeans
that as regardsthe protectionof industrial
property,each country,whichis a member
of theParisUnionmustgrantthesamepro-
tectionto nationalsof othermembercoun-
triesas it grantsto its ownnationals.Itwill
not bepossiblefora membercountry,how-
everunderdevelopedit is in its economyor
in its scientific and technologicalcapacity,
to discriminatein favourof its owncitizens
as a meansof inducinglocal inventiveness
andinitiatives.Itwillbeclearto anyonethat
formalequalitywill operateto the mutual
advantageonly whenthecountriesinvolved
are at approximatelythe same level of
technologicaldevelopmentand if there is
genuine exchangeof the patent protected
technologyamongthem.Whenthecountries
involved are at vastly different levels of
technologicaldevelopmentwith one party
havingno technologyto sell, this provision
intheParisConventiongivespatent-holders,
who areall TNCs in industriallyadvanced
countries,unlimitedfreedomto utilisetheir
powerat the expenseof technologybuyers
in developingcountries.
Right of priority
Accordingto this provision,any person
whohasfileda patentin one of themember
countriesof the Conventionhas a rightof
priorityin othermembercountries,a right
whichin thecase of patents,is fora period
of 12months. This provisionadverselyaf-
fectsdevelopingcountriesdueto thefollow-
ing reasons:
a) This provisionmay well constitutea
strongdisincentiveto initiateresearchand
developmentactivitiesinthethirdworld.In-
vestmentsof time and moneymaybecome
Economicand Political We~klyVolXXII,Nos 19,20and21 AN-103
Annual Number May 1987

knnual Number May 1987 ECONOMIC AND POLITICAL WEEKLY
useless because of an application made in
some other country in the world and still
unknown to nationals.
b) For the same reason, entrepreneurs in
developing countries would be discouraged
in putting new inventions into use. For nearly
a year national enterprises will not have any
certainty whether they would be asked to
ABLE 1: CONCENTRATION OF PATENTS ISSUED
TO LEADING FIRMS IN THERAPEUTIC FIEIDS,
1965-1970
rherapeutic field Number of Percentage
Companies of Patents
Obtaining Total Issued
10 or More to the Four
Patents Leading
Firms
Anti-infectives
Antibiotics 9 53
Antiparasitic 11 52
Antibacterial 15 49
Antiviral 6 46
Cardiovascular
Vasoactive 1 57
Hypotensives 7 62
Antianginal 1 78
Antiarrythmic 2 55
Blood
Coagulants and
anticoagulants 1 38
Hypolipemic 6 58
Hypoglycemic 3 59
Neurological
Tranquilisersand
sedatives 13 70
Stimulants and
antidepressants 10 56
Anticonvulsants 3 69
Analgesics 9 54
Hormones
Prostaglandins 1 94
Corticosteroids 1 50
Estrogens, androgens
and progestogens 15 48
Other
Antihistamines 1 26
Anti-inflammatory and
antipyretic 15 56
Immunosuppressants 1 48
Anticancer 2 44
Gastrointestinal 3 42
Anorexic 1 30
Diuretic 2 63
Source: D Schwartzman, "Innovation in the
Pharmaceutical Industry" (John
Hopkins University Press, London,
1976),tables6-8 and 6-9. The original
source was Dervent Central Patent
Index.Patentswerelistedthe firsttime
theyweregrantedin one of the follow-
ing countries; United States, United
Kingdom, Netherlands, Belgium,
France,Sout'i Africa, Canada, Federal
Republicof Germany,GermanDemo-
cratic Republic, Japan, Switzerland
and the SovietUnion. Patentswerefor
pharmaceutical compounds and pro-
cess primarily.
stopsuchusedueto thegrantingof a patent
in some other country.
Theconsequencesof thisprovisioncould
be moredrasticif patent-holderstakeadvan-
tageof this provisionanddeliberatelydelay
theirapplicationuntilthelast monthof the
Conventionyear,as forexamplein Canada.
Samplestatisticsfromthe Canadianpatent
office indicatethat two-thirdsof all Con-
ventionfilingsarereceivedin thelastmonth
of the Conventionyear.'Such a practiceis
connectedalso with the provisionsin Arti-
cle 4(bis) on independence of patents-
discussedbelow-to lengthenthe periodof
validityof the patent.
Itis interestingto notethatwhentheCon-
ventionwasoriginallyframedin 1883,when
means of communicationwere far slower
than today,the period of priorityallowed
wasonlysixmonths.Intheageof electron,c
communication,the Conventionhas been
revisedto increasethe period of priority!
Thisclearlyindicates,as willbeshownlater,
that all subsequentrevisionsof the Paris
Conventionsince 1883,haveincreasedthe
monopoly powersof the patent-holder.
Independenceof patents
Patentsappliedforinthevariousmember
countries shall be independentof patents
obtained for the same invention in other
countrieswhethermembersof theConven-
tionor notas regardsthegroundsfornullity
and forfeitureand as regardstheirnormal
duration.Itwouldappearthatthisprovision
is consistent with the principlethat indi-
vidual countries remainfree to decide for
themselveson matterssuchas patentability,
durationof patent, etc.
However,in reality,this provisionhas a
negative impact. In many developing couIi-
tries,thereis an acuteshortageof technical
staff requiredto engagein a thoroughex-
amination of a patent application for its
novelty,inventiveactivityandindustrialap-
plicability.Forthesecountriesthe valueof
informationon thegrantingandvalidityof
patentsapplied for in a developedcountiy
wotid be quite high.
For example in the early seventies,the
UnitedStatesjusticedepartmentaskedfor
andobtainqdcancellationof whatit regard-
edasthe"fraudulentlyprocured"ampicillin
patent and the invalidation of ampicillin
trihydratepatents.Patentsforthisampicillin
weretakenout in over60 countriesand in
1968the worldwidesales by one company
alone and its licensees were about $ 170
million.2The possible costs to developing
countrieswhich continuedto grantprotec-
tion to this "fraudulentlyprocured"patent
couldthereforebe quitehigh. Indeveloping
countrieswhena patentisacceptedandfiled,
it usuallyrunsits fulllifewithoutanylitiga-
tion regardingits validity.This is not so in
advancedindustrialisedcountries;in theUK
56 percentof invalidationsof filedpatents
by the courts had been reported for the
period1918-49;theUnitedStatesCourtsof
Appealsinvalidated62.7percentof patents
litigatedduringthe period 1948-1954.3
If therehad beena mechanismformally
establishedfortheexchangeof information
on forfeitureproceedings,developingcoun-
triesneednot continueto protectfraudulent
and useless pharmaceuticalpatentswhich
aredamagingto the nationtl economyand
people'shealth.
Safeguardsagainst forfeiture for lack of
workingand stipulation on imports of
products manufactured with patented
process
Thesetwoarticlesareof greatimportance
to the developmentof the pharmaceutical
sectorin developingcountries.One of the
arguments for the international patent
system is that it facilitates transfer of
technology to developing countries. It is
assumedthatwhenaninventionis patented
in a country,that particularinventionwill
be put to effective industrial use. Let us
examine this assumption in relation to
pharmaceuticals.
Patentprotectionforpharmaceuticalsare
of two kinds: (a) Protectionfor the phar-
maceuticalproduct;and (b) Protectionfor
the process by which the product is
manufactured.
Productpatents
When a TNC obtains patent protection
fora pharmaceuticalproductin the coun-
try,theprovisionsin Article5A of the Paris
Conventiongive it the followingprivileges:
i) An exclusiverightto manufacture,im-
portanddistributethepharmaceuticalpro-
duct in that country; howeverthere is no
obligationthatthedrugshouldbemanufac-
turedlocally.
ii) Preventothers from manufacturing,
importing and distributing the phar-
maceuticalproductin that country.
InactualpracticeTNCsusetheprovisions
in this articleto securean exclusiveimport
monopoly in developingcountries.The ef-
fective utilisation of foreign patents in
developingcountriesis negligible.'Forexam-
ple, an examinationof 2534 patentsin the
pharmaceuticalindustryinColombiareveal-
ed that only 10-or 0.3 per cent of the
total-were actuallyusedin the production
processin the countryin 1970.4
WhiletheConventiondoes not requireas
suchtheworkingof thepatentedinvention,
it authtorisesremedialaction to deal with
abuses associated with non-working,
throughthe deviseof compulsorylicensing
inArticles5A(2)to 5A(4).It hasbeenstated
that "theseprovisionshavehad a turbulent
historybecause they touch directlyon the
conflictbetweentheinterestof thenational
economyas a whole andthe interestof the
individualpatenteein obtainingthe maxi-
mumreturnfor his patent.5A studyby the
United Nations has shown that the com-
pulsorylicensing proceduresas laid down
in the Conventionhaveprovedin practice
of virtually no value whatsoeverand in-
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ECONOMIC AND POLITICAL WEEKLY Ahnual Number May 1987
dicatedthatthe provisionsfor compulsory
licencesareextremelyweak.6
Takentogether,the provisionsin Article
5A containa numberof obstaclesimpeding
the working of patents particularly in
developingcountries.The presenttextpro-
tects the patenteein a numberof ways:
i) A compulsorylicencemaynotbeapplied
on the groundof failureto workor in-
sufficientworkingbeforetheexpiration
of fouryearsfromthe date of filing of
the patent application, or three years
from the date of grantof the patent;
ii) A compulsorylicenceshallbe refusedif
the patentee justifies his inaction by
legitimatereasons;
iii) Such compulsory licence shall be
non-exclusive;
iv) Revocationof the patentcould not take
placeexceptin caseswherethe grantof
compulsorylicencecould not havebeen
sufficientto preventthe abuse; and
v) No proceedingsfor the revocationof a
patent may be instituted before the
expirationof two yearsfrom the grant
of the first compulsory licence.
Process patents
Anotherelementof theimportmonopoly
aspectof the Paris Conventionis givenby
Article5quaterwhich "providesthat-when
a productis importedinto a member-state
wherethereexistsa patentprotectinga pro-
cess for the manufactureof that particular
product,thepatenteehasall therights,with
regardto the importedproduct,thatwould
be accordedto himby the law of the coun-
try of importation on the basis of the
process patent, with respect to products
manufacturedin that country".
TheexistingprovisioncontainedinArticle
5quater refers essentially to the issue of
whethera country which, accordingto its
law,grantsprocesspatents(with an exten-
sion of the protection to the products
manufactured by such process) should
regardthesaleof theproductmanufactured
bysuchprocessas illegalonly whenthepro-
ductis manufacturedin that country,or if
sucha sale would also be illegal if the pro-
duct has been manufacturedabroad and
subsequentlyimported.
Article 5quaterwas introducedinto the
Paris Convention at the Lisbon Revision
Conferenceof 1958 and is, therefore,the
youngestof the principalprovisions.
REVISION OF PARIS CONVENTION
The Paris Convention has been revised
fromtimetotime afterits signaturein 1883.
Six RevisionConferences,startingwiththe
Brussels Conference ended up with the
adoptionof a revisedActof the ParisCon-
vention.Thereareseveralinterestingfeatures
abouttheincreaseof thenumberof develop-
ingcountriesin themembershipof thePaiis
Convention.At the first revision in 1900
therewereonly threedevelopingcountri,es.
The numberrose to 14at the fifth revision
in 1958whenalmostallthedevelopedcoun-
tries(26of them)hadjoined (Table2). The
threedevelopedcountrieswhichjoinedafter
1958wereIcelandandtheHoly SeeapdSan
Marino.
Between 1900 and 1958, when the de-
velopedcountrieshadanabsolutemajority,
significantrevisionsof the basic provisions
of theconventionhavetendedto strengthen
thepositionof thepatenteeandweaken-the
rightsand privilegesof the patentgranting
country.A historicalcompromise,originally
embodied in Article 5, has been steadily
diluted, strengtheningthe interest of in-
dividual patentees and correspondingly
weakeningthe defenceof the interestof the
national economy. As alreadymentioned,
thepriorityperiodunderArticle4 hasbeen
doubledas comparedwiththe originalpro-
visions.Theintroductionof Article5quater
in 1958added a furtherconstrainton na-
tionalflexibilityto legislateon theextension
of the rightsof thepatentee.Afterthe revi-
sion in 1958,the ParisConventiontook its
presentform. Upto 1958,the participation
of the developingcountries in shaping as
wellas in theoperationof the international
patent system has remainedminimal.
At the sixthrevisionin 1967,the number
of developing countries had risen to 43;
twenty-sixAfricancountries,whichregained
theirindependence,joined the ParisUnion
between1958and 1967.In spiteof the fact
that developingcountriesconstituted ma-
jority in 1967, the Stockholm revisiondid
not reflectthe urgentneeds of these coun-
tries.Itis also relevantto note thatsomeof
the largest developingcountries have not
joined the Convention. Thqse include:
Afghanistan, Bangladesh, Burma, Chile,
Colombia, Ethiopia, India, Malaysia,
Pakistan, Peru, Thailand and Venezuela
(Annexure6). The Soviet Union joined in
1965and China in 1985.
BACKGROUND TO ONGOING REVISION OF
PARIS CONVENTION
Initiativesfor the seventhrevisionof the
Paris Convention were started after the
Declaration of the New International
EconomicOrderwasadoptedin May 1974
by the Sixth Special Session of the UN
GeneralAssembly.ThisDeclarationaimsat
correctinginequialities and redressingex-
istinginjusticesbetweenthe developedand
developingcountries.The principlesupon
which the New International Economic
Orderis to be foundedhaveat theircentre
theneedforrestructuringthe existinginter-
nationalagreementsamongcountries.Such
restructuringis to worktowardsfulfillingthe
developmentobjectivesof developingcoun-
tries.Thisparticularrequirementwouldhave
to be the guiding consideration in the
revisionof the ParisConvention.
AtitsSeventhSpecialSession,theGeneral
Assembly adopted Resolution 3362 on
Developmentand InternationalCo-opera-
tion. A section of this Resolutionprovides
"Internationalconventionson patentsand
trademarksshould be reviewedand revised
to meet, in particular,the special needsof
thedevelopingcountries,inorderthatthese
Conventionsmaybecomemoresatisfactory
instrumentsfor aidingdevelopingcountries
in the transfer and development of
technology."
In December1975the Ad Hoc Groupof
GovernmentalExpertsof the Revisionof the
ParisConvention,setupbyWIPOadopted
a Declaration of Objectivesof the Paris
Convention.This Declarationof Objectives
comprised inter alia the following objectives
to be achievedby the revision:
(a) Togive full recognitionto the needs
for economic and social developmentof
countriesandto ensurea properbalancebet-
weentheseneedsandthe rightsgrantedby
patents;
(b) To promote the actual working of
inventionsin each country;
(c) To facilitate the development of
technologyby developingcountriesand to
improvethe conditions for the transferof
technologyunderfairandreasonableterms;
(d) To encourage inventive activity in
developingcountries;
(e) To increasethe potential in develop-
ingcountriesin judgingtherealvalueof in-
ventionsfor which protectionis requested,
TABLE 2: MEMBERSHIP WITH NATIONAL PATENT LAWS ATTIME OF REVISION OF PARIS CONVENTION
Place and Year of Group of Countries Socialist Countries of
Revision Developed Countries Developing Countries Eastern Europe, Asia
and China
NMembership No with Membership No with Membership No with
of Paris National of Paris National of Paris National
Union Patent Laws Union Patent Laws Union Patent Laws
Brussels 1900 13 20 3 24 Nil 3
Washington 1911 16 22 5 28 3 4
The Hague 1925 22 24 9 42 6 7
London 1934 24 26 9 44 6 7
Lisbon 1958 26 27 14 59 6 8
Stockholm 1967 29 27 43 82 7 8
Geneva 1980-1987 29 27 60 85 8 8
(Ongoing Revision)
Source: Annexure 6.
AN-105

Annual Number May 1987 ECONOMIC AND POLITICAL WEEKLY
ih screeningand controllinglicbnsingcon-
tractsandinimprovinginformationforlocal
industry;
(f) Toensurethat all forms of industrial
propertybe designedto facilitateeconomic
developmentandto ensureco-operationbet-
weencountrieshavingdifferentsystemsof
industrialpropertyprotection.
TheDeclarationof Objectivesalso stated
thatas farasthe Revisionof theParisCon-
ventionwasconcerned,considerationshould
be given to certaindefined cases in which
exceptionsand/or correctivesto the prin-
ciplesof nationaltreatment,independence
of patents and preferentialtreatmentfor
developingcountriesshould be allowed.
The Third Ministerial Meeting of the
Groupof 77 in Manila(January/February
1976)stressedin theManilaDeclarationand
Programmeof Action that 'the economic,
trade and development interests of the
developing countries should be fully
reflectedinthe revisionof the international
systemof industrialpropertyand, in par-
ticular,in the revisedParis Convention'.
ONGOING REVISION OF PARIS
CONVENTION
An Ad Hoc Groupof GovernmentalEx-
pertsof the Revisionof the ParisConven-
tionwassetupbyWIPOin 1975.TheGroup
held threesessions betweenFebruary1975
and June 1976. All member States of the
ParisUnionandmembersof WIPOwerein-
vitedto thefirstandsecondsessionsandall
statemembersof theUnitedNationsor any
otherspecialisedagencyof the UN werefur-
therinvitedto the thirdsession. Duringthe
sessions of the Group of Experts and
throughoutthe processof preparatorywork
forthe Revisionof the Convention,groups
of countrieshadinformalconsultations.The
threemaingroupsof countriesthatactedin
thisprocesswerethe Groupof 77 andother
developingcountries,GroupB (whichis the
group of industrialised market economy
countries) and Group D (comprising the
socialist countries of Eastern Europe).
Onthebasisof a recommendationbythe
Group of Experts, the PreparatoryInter-
governmentalCommitteeon theRevisionof
the Paris Convention was established in
1977.ThePreparatoryCommitteeheldfive
sessionsin GenevabetweenNovember1976
andDecember1978.Tothese sessionswere
invitedallstatemembersof theParisUnioni,
of theUN anditsspecialisedagenciesaswell
as a certainnumberof intergovernmental
and non-governmentalorganisations.The
PreparatoryIntergovernmentalCommittee
submitted its draft proposals to the
Diplomatic Conference. These contained
amendmentsto articlesalreadyexistingin
theStockholmAct of the ParisConvention
or proposalsfor new articles.
The proposedamendmentswhichareof
great relevanceto the developmentof the
pharmaceuticalsectorin the thirdworldare
those in relation to Articles 1, 5A and
5quater.
The proposed new text of Article 1 in-
troduces as the main change in the current
text of the Convention, the recognition of
inventors' certificate as a title of industrial
property to be accepted on the same footing
as patents for inventions. The proposed text
includes definitions of inventors' certificates
and patents for inventions in order to assert
a parallellism and balance between both
titles.
The new text of Article 1 also contains
alternatives with respect to the question
whether the recognition of inventors' cer-
tificates should in all cases depend on a free
choice between a patent and an inventor's
certificate or whether exceptions from the
"free choice principle" could be permitted.
The revision of Article 5A constitutes the
most important aspect of the present revi-
sion process. From the point of view of
developing countries the main objective of
the revision of these Articles has been the
promotion of the working of patents in the
country granting the patent. As described
earlier the present texts contain a number
of obstacles impeding the working of patents
and enable patent holders-the TNCs-to
obtain import monopoly for their products.
The proposed new text of Article 5A con-
tains provisions authorising national laws to
take certain measures under three types of
cases, namely: where the patent rights are
abused; where the patented invention is not,
or not sufficiently, worked in the country
where the patent was granted; and where the
public interest is involved. In each case, the
laws and competent authorities in the coun-
tries of the Union would be able to apply
severalmeasures, according to the situations
referred to previously, within certain limita-
tions. For the case of failure to work or in-
sufficient working, it would be possible for
any country to provide for the grant of non-
voluntary licences to work the patented in-
vention. Other measures inc-lude, in par-
ticular, forfeiture and revocation of the
patent in the case of abuse of the patent
rights, and-as a subsidiary measure-
foreiture and revocation also for the case of
non-working or insufficient working of the
patented invention. Finally, where the public
interest requires exploitation of the inven-
tion, it is proposed to allow national laws
to provide for the grant of authorisation to
exploit or work the invention by the state or
by any person designated by the competent
national authorities.
It is ar important feature of the draft new
text of Article 5A that some of its provisions
have been specifically intended for develop-
ing countries. For these countries, shorter
periods and easier requirements have been
submitted, in order that they may regulate
more freely the grant of non-voluntary
licences and the application of sanctions and
other measures to deal with failure to work
and abuse of patent rights.
The basic proposal submitted to the
Diplomatic Conference with respect of
Article 5quater is that it be omitted entirely
from the Convention, or at least that the
developing countries be exempted from the
obligation to apply this Article.
First Session of Diplomatic Conference
The First Session took place in Geneva
from February4 to March 4, 1980. The Con-
ference initially ran into some difficulties in
approving the Rules of Procedure according
to which the Conference would have to func-
tion. There was a strong controversy on the
rule dealing with the number of votes which
would be required to adopt the revised Act
of the Convention.
The Group of Developing Countries sup-
ported by the Group of Socialist Countries,
submitted that the new Act should be
adopted by the Conference (meeting in
plenary) by a qualified majority of two-
thirds of the votes cast. The Group of
Developed Countries (Group B) wanted the
new Act to be adopted by unanimity arguing
that all the previous decisions of the Paris
Convention had been adopted by unanimity.
During further negotiations Group B
gradually yielded from their original posi-
tion requiring unanimity and accepted a
compromise that the revised Act would be
adopted by a qualified majority of unanimi-
ty minus 12 votes against. However, when
the compromise was adopted, the delegation
of the United States of America stated that
it could not accept the compromise and that
the adoption of this rule would have required
unanimity.
Second Session of Diplomatic Conference
The Second Session was held in Nairobi
(Kenya) from September 28 to October 24,
1981.This session dealt with mainly Article
5A. A new text of Article 5A was provi-
sionally agreed upon by the three regional
Groups (developing, developed and socialist
countries), the United States of America,
however, opposing some of the provisions
contained in the agreed text of this Article.
In addition to Article 5A, Article 1 was
also discussed without reaching a conclu-
sion. At this meeting, Australia, Canada,
New Zealand, Portugal, Spain and Thrkey
supported the position of the developing
countries. These six countries stated that
they being net technology importers, were
being h'armed by the present international
patent system.
ThirdSession,of Diplomatic Conference
The Third Session was held in Geneva
from October 4 to 30, 1982 and from
November 23 to 27, 1982. While the Main
Committee examined other Articles, negoti-
ations on Article 5A continued in an infor-
mal body. Delegations from the three re-
gional Groups participatedin these unofficial
meetings but no consensus was reached.
Several proposals on Article 1 were submit-
ted to the Main Committee but no decisions
were taken.
AN-106

ECONOMICAND POLITICALWEEKLY Annual Number May 1987
FourthSession of Diplomatic Conference
The Fourth Session was held in Geneva
from February 27 to March 24, 1984. The
Main Committee continued its debates on
Article 5A. Certain ideas were put forwa,rd
by the Group of Developing Countries for
consideration by other groups but no new
proposals for amendment were presented
and no agreement could be reached.
The Main Committee also discussed two
new documents containing proposals con-
cerning the definition of patents and inven-
tors' certificates. None of the proposals were
rejected or adopted.
SPREADOF NATIONALPATENTLAWS
Table 2 summarises the changes in the
number of countires having national patent
laws between 1900 and 1987. The dates have
been chosen to reflect the years when the
Paris Convention was revised. This table
illustrates the the following:
Twenty-five developing countries which
are not members of the Paris Union have
established their own national patent laws.
These are based essentially on the provisions
contained in the Paris Convention (for eg see
TABLE3: PATENT-LEGISLATIONIN
15 DEVELOPINGASIAN COUNTRIES
Country Patents Legislation
Afghanistan No legislation
Bangladesh Patents and Designs Act, 1911
Burma Burma Patents and Designs
(Emergency Provision) Act,
1946
Hong Kong UK Patents Ordinance, 1932
India Patents Act, 1970
Indonesia Provisional Patent
Regulation,
1953 (Patent Law under
preparation)
Malaysia Act No 291 of 1983.
Introduced on October 1,
1986
Maldives No legislation
Nepal Patent, Design and TM Act,
1985
Pakistan Patents and Designs Act,
1911
as amended upto 1961
Philippines Act No 165 of 1947 as
amended upto 1968
Republic of Patents Act, 1961 amended
Korea upto 1980
Singapore Registration of UK Patents
Ordinance 1937-55. Patents
(Compulsory Licensing) Act,
1968 (studying various option
for a national patent law)
Sri Lanka Code of Intellectual Property
Act, 1979
Thailand Patents Act, 1979
Source: A survey of the Industrial Property
Situation in the Developing Countries
of Asia and the Pacific-document
preparedby the International Bureau
of WIPO (SPAC/83/9) p-5.
Annexures 1-5).
By the end of the 19th century the
establishment of national patent laws in
nearly all what are now the developed
market economy countries was completed.
(The seven countries which had not yet in-
troduced patent laws were Australia, Greece,
Iceland, Ireland, Leichtenstein, Monaco and
South Africa. The Holy See and San Marino
are members of the ~ParisUnion but have no
patent laws.)
On the other hand only 24 developing
countries had established their patent laws
by 1900. At present 85 of them have their
own patent laws. The rise in numbers is
mainly explained by the fact that former col-
onies whose legal codes included some form
of patent system during dependence, came
to be shown later as independent countries
with national legal codes.
Majority of the developed countries have
legislated new laws, many of them within the
last 25 years. Among the developing coun-
tries the position varies from region to region
(see Annexure 6).
In Africa the first patent law still prevails
in all the countries and in 13 of them the
law dates from before 1950, i e, when they
were under foreign domination. There is
more evidence of change in Latin America;
however 13 of the 25 countries have never
brought in fresh patent laws. Asia presents
a different picture. Many countries do not
have patent laws. In half the number of
countries with laws the current legislation
is prior to 1950, i e, when they were under
colonial rule.
II
Major Provisions of National
Legislation on Patents
Table 3 gives the existing patent legisla-
tion in 15developing Asian countries. Twelve
of these countries have national legislations
giving legal protection to invention by means
of patents. Afghanistan and the Republic of
Maldives have no. patent legislation.
Indonesia has a law known as the Provi-
sional Patent Regulation, 1953. Under thiso
law,patent applications are received, examin-
ed as to form and given a filing date.
However, no patents are granted and none
will be granted until a patent law has been
enacted. The government of Indonesia has
been in the process of finalising a draft
patent law.
Of the countries listed in table 3, only
four, Indonesia, the Republic of Korea,
Philippines and Sii Lanka are signatories to
the Paris Convention. The eight non-
member countries, however, have enacted
their national legislation on patents based
essentially on the Provisions of the Paris
Convention. Copies of the national patent
legislations of China, Pakistan, Sri Lanka,
Thailand and Vietnam listing the major pro-
visions are given in Annexures 1-5 to com-
parethe legislationsin memberstatesand
non-memberstates of the Paris Union.
APPLICATION, EXAMINATION AND
GRANTING OF PROTECTION
Under the provisions in the national
legislation,the applicantfiles his applica-
tionwiththecompetentadministration.The
applicationis examinedby or on behalfof
thecompetentadministration.Theexamina-
tion consists of:
1) Examinationas to form; and
2) Examinationas to substance.
Examination as toform: In this procedure
compliancewiththeminimumrequirements
suchas completenameand address-ofap-
plicant,presenceof thenecessarydocuments
and information and the payment of a
prescribedfee are checked.
Examination as to substance: This pro-
cedurerequiresthe patent office to search
the stateof the art(or requiresa reporton
this fromtheapplicant)andto examinethe
inventionclaimedin the applicationin the
light of that art and thereby determines
whethertheinventionfulfils certaincriteria
of patentability(differingfrom countryto
country),the most commonly acceptedof
whicharetheinventivvstep,noveltyandin-
dustrialapplicability.Afterthe examination
andanyopposition,thecompetentadminist-
rationdecideswhetherto granta patentof
invention.
In Burmaand Nepal patentsaregranted
afterthe examinationas to form only.7 In
Sri Lanka, under the existing legislation
which was introducedin 1979, patent ap-
plications are examinedas to form only,
whereasfrom 1925they were examinedas
to substancealso. Nowdisputesconcerning
whetheror not the inventionrepresentsa
meaningfultechnologicaladvanceandother
groundsof invalidation,aremattersforthe
courts to decide.
InBangladesh,India,Malaysia,Pakistan,
Philippines,Republicof KoreaandThailand,
the patentoffices examinepatent applica-
tionsas to formandsubstancebeforedeter-
miningwhethera patentforaninventioncan
be granted.
Singaporedoes not examineany patent
applicationsbeforegrantinga patentbuthas
a re-registrationschemeunderwhich,patent
protectionis grantedto United Kingdom
patenteeswho applyfortheirpatentsto be
re-registeredwithinthreeyearsof thegrant
of the patents by the UK patent office.
NATURE OF TITLES GRANTED
The two main forms of protection of
inventionsare patents and inventors'cer-
tificates.In practicaltermsand as a means
of stimulatingtechnical progress,patents
and inventors' certificates have much in
common. The main difference is that
whereastheownerof a patenthastheright
to excludeothersfromusingthepatentedin-
ventionup to a limitedperiod of time,the
AN-10~

ECONOMICAND POLITICALWEEKLY Annual NumberMay 1987
ownerof an investors'certificatetransfers
theexclusiverightsto thestate,hastheright
to receiveremunerationwhen savings are
madethroughthe use of the inventionand
thisrightis not limitedin time.Anotherdif-
ferenceis that a patenteehas to pay a fee
to have his invention examined and pto-
tected;no paymentof fees is requiredfor
inventors'certificates.
Inventors'certificateis not mentionedin
any of the laws of the countries listed in
table 3. All socialist countriesgrantinven-
tors'certificates.Mexicointroducedit in its
Lawof Inventionsand Marksin 1981and
amendedin 1982.
Inventors' certificates are particulary
useful for developing countries. In the
ongoing revision of the Paris Convention
whichattemptsto introduceintheConven-
tionforthefirsttimespecialprovisionsthat
will respond to the particular needs of
developingcountries, one of the amend-
ments to the existing text proposes the
recognitionof inventors'certificateas a title
of industrialpropertyto beacceptedon the
same footing as patents for inventions.
NON-PATENTABLESUBJECTMATTER
A centralfeatureof anypatentlawmust
be the specificationof those itemsthat are
eligible to be patentedor the exclusionof
those that are not. However,a comprehen-
sivedefinitionof thesubjectmatterthatmay
beprotectedby patientshas so farnotbeen
adopted in any national law.
An examinationof the national patent
legislation of various countries show thai
manycountrieshaverecognisedtheneedto
discriminatebetweensectorsin theirpatent
policy.Themainsectorthatis excludedfrom
parentabilityby many countries is that of
pharmaceuticals.The exclusion of pha;-
maceuticalsis based on the consideration
thatthegrantof patentscouldhaveadverse
effectson thegeneralavailabilityortheprice
of thesewhichareof vitalimportanceto the
people of the country. In this sector the
generalprovisionappearsto be thatthepro-
cessesof productionarepatentablebut the
products manufacturedare not: Table 4
showsthat a numberof countriesincluding
many developing countries and a few ad-
vancedindustrialisedcountriesdo not grant
patent protection for pharmaceuticalpro-
ducts. In our region India, Indonesiaand
Thailanddo not grantpatentprotectionto
the pharmaceuticalproducts. Republicof
Koreais introducingchanges in its patent
lawsto includepharmaceuticalproductsas
subjectsfor patentability.
DURATION OF PATENTS
One of the aims of grantinga patentis
to providean inventorwith some returnof
hisinvestment.Itis thereforeessentialto fix
the duration of time during which the
patentee can retain monopoly privileges.
However,inspiteof variouscommentsinthe
patentliteratureon thequestionof duration
of patents, there has been no thorough
economicanalysisto determineanoptimum
duration.The notion of a fair returnis a
highlysubjectiveone andits determination
may vary from country to country, from
sector to sector and from time to time.
The analyticalwork in the literatureon
patentshas failed to examinewhetherop-
timumdurationshouldbe consideredonly
in termsof the privateinterestof theinven-
torratherthanthepublicinterestof society.
The historical precedent and political
compromisewhichdeterminedtheduration
of patent rights are very interesting.The
14-yeartermof the Englishpatentsin 1624
was basedon the idea that two sets of ap-
prenticesshould, in seven years each, be
trainedin the new techniques.8
Table5 gives the durationof patentsin
elevenAsiancountries.Analysisof thedura-
tionof patentsworldwiderevealsthatin ad-
vanced industrialised countries patents are
mainly granted for 16-20 years. The data for
developing countries show a wide range of
patent duration ranging from five to twenty
years. Costa Rica is the only corntry to give
a one-year term for pharmaceutical
patents.9 It would therefore appear that a
developing country could determine the
period of duration of a patent grant in ac-
cordance with its own specific requirements
and policy considerations. An example of a
law under which the appropriate duration
of a patent was subject to determination by
the government in each case was the Chinese
Law of 1950.10
LIMITATIONS OF EXERCISE OF PATENT
RIGHTS IN PUBLIC INTEREST
The patent legislations of most countries
provide for various measures for the limita-
tion, in the public interest, of the exercise
TABLE4: COUNTRIESEXCLUDINGPATENTPROTECTIONTOPHARMACEUTICALPRODUCTS
1974-75 1979-80 1974-75 1979-80
Developing Countries Senegal x x
Argentina x x Syrian Arab Republic x x
Benin x x Thailand xe x
Bolivia x x Togo x x
Brazil xa xa Tinisia x x
Cameroon (United Upper Volta x x
Republic) x x Uruguay x x
Central African Republic x x Venezuela x x
Chad x x Yugoslavia x x
Chile x x Developed market-
Colombia x x economy countries
Congo x x
Ecuador x xa Austrla x x
Egypt x x Greece x x
Gabon x x Italy xa
Ghana x x Japan x
Guyana X X Norway x x
Honduras - x Nra
India
s
x Portugal x x
Indonsia xb xb Spain x xIndonesia x x
Switze-rland xIran x xIran Coast
x x
Turkey x xIraq x x
Ivory Coast x x Socialist Countries of
Korea (Republic of) x x Eastern Europe
Kuwait x x Albania xf xf
Lebanon x x Czechoslovakia xf xf
Libyan Arab Jamahiriya x x German Democratic
Mexico x xc Republic x x
Morrocco x x Hungary x x
Niger x x Poland x x
Paraguay x x Romania xf xf
Peru xd x USSR xf xf
Sources: "The Role of the Patent System in the Transferof Technology to Developing Coun-
tries" (United Nations publication, Sales No E 75 II D 6), table 14, and "Patents
throughout the World",TradeActivities Inc (New York:ed, Anne Marie Green,.2nd
edition, 1980).
Notes x Products are excluded from protection; - Products are granted protection; a Phar-
maceutical processes are also excluded from patentability, b There is no patent law in
Indonesia; c Processes are not patentable, but they may be protected under inventor's
certificates;d Beforethe introductionof Decision 85, the PeruvianPatentOffice refused
product patents on the grounds that a patent is to be granted "siempreque sea de in-
teres social" (as long as it is in the public interest) (article 46, legislation Decree No
18350, of 1970);.e Patents were introduced in Thailand in 1979; f Only inventor'scer-
tificates are granted for inventions relating to medicines.
AN-1091

of theexclusiverightsconferredbythegrant
of a patent.IntheIndianPatentActof 1970,
boththeapplicablemeasuresto limittheex-
erciseof the patentrightsand the grounds
upon which the application of such
measuresarebasedhavebeenincreasedand
diversified.
FAILURE TO WORK OR INSUFFICIENT
WORKING
Oneof themajorpurposesof a patentlaw
is to encourageworkingof inventionsin a
country.TheParis Conventiongivesfailure
to work as an exampleof an abuse which
mightresultfromtheexerciseof theexclusive
rights conferredby a patent. However,no
attemptis madein theConventionto define
'working'. The definition will therefore
depend on the relevantnational law. The
tendencyin recentpatentlaws is to specify
a clearrequirementformanufactureso that
importationor saledo not amountto work-
ing of the patentedinvention.
An exampleis the patent law of Israel,
which providesthat the exerciseof patent
rightsis regardedas abuse if the product,
the subjectof the patent, is not manufac-
turedin Israel."
USE AND EXPROPRIATION BY THE STATE
Mostnationallawsprovideforeitheruse
of patentedinventions by the state or ex-
propriationof patentsbythestate.Compen-
sation is normally payableto the patentee
in eitherevent;the basis of the assessment
of compensationandthe legal or administ-
rativeproceduresrequiredareprovidedfor
in the nationallaws. Recentchangesin na-
tionallawsindicatea generaltrendtowards
conferringupon the state more extensive
TABLE5: DURATIONOFPATENTPROTECTION
IN11 ASIANCOUNTRIES
Country Duration in Years
Hong Kong' 20
India2 5-7, 14
Republic of Korea 12
Malaysia 15
Nepal3 15
Pakistan4 16
Philippines 17
Singaporel 20
Sri Lanka 15
Thailand 15
Notes: 1Patentsin UK re-registeredand expire
when the UK patent expires.
2 Process patent for pharmaceuticals
and food aregiven 5-7 years.Patents
in other sectors are protected for 14
years.
3 May be extended for a further term
twice.
4 May be extended for a further term
of five years or in exceptional cases
for 10 years.
Source: Pedro Roffe-Technology Division,
UNCTAD, Geneva, Personal
Communication.
powerswithregardto useof patentedinven-
tions and expropriationof patents.
Thepatentlawof Indiafor examplecon-
tains provisionswhichgiveto the statethe
rightto bothusethepatentedinventionsand
to acquire patents in the public interest,
subjectto paymentof a compensation.
The need to apply punitive measures
similarto the threereferredto abovedoes
not arisewhenaninventionis coveredbyan
inventor'scertificatein whichcasetherights
in the inventionarevestedin the stateor a
state enterprise.Thereforewhen such pro-
visions are found in the laws of countries
whereinventors'certificates are available,
theyrelateto patentsonly.In suchcountries,
where both patents and inventors' certi-
ficates are issued, the number of patents
grantedis muchs'mallerthanthenumberof
inventors'certificatesgranted.Forexample,
in the Soviet Union 2,516 patents were
granted and 38,632 inventors'certificates
issued in 1972.12
III
Impact of Patent Protection on
Economic, Commercial and
Technological Development of
Pharmaceutical Sector in
Developing Asian Countries
Incontrastto theextensivedataavailable
on foreign trade, national income and
numerousother economicvariables,infor-
mationon patentsis limited.The firstfully
fledged patent statute was introducedin
Venicein 1474.Thenextlegislationwasthe
English Statute of Monopolies of 1623.
However,it was not untilthe adventof the
IndustrialRevolutionthat national patent
laws becamewidespreadin Europe.There
wasa temporarysetback.The liberalisation
of internationaltradewhich wasgathering
momentumunderthebannerof 'freetrade'
inthemid-nineteenthcenturyprovokedcon-
siderable criticism of patent laws. Some
criticsassertedthatnationalpatentlaws,by
grantingtemporarymonopolies,actedin the
samewayas prohibitivetariffs.IntwoEuro-
peancountries,discussionled to therepeal
(in the Netherlands) and rejection'(in
Switzerland)of national patent laws. The
majorityof the membersof theparliament
in the Netherlands, citing as authority
classicaleconomists, acceptedthat a 'good
law of patents is an impossibility'and in
1869the existingpatentlaw was repealed.
However, following the signing of the
Paris Convention and during the first
quarterof the twentiethcentury,whenthe
so-called'advancedindustrialisedcountries'
acquiredeconomic andpoliticalcontrolof
the third world, national patents laws
becamefirmlyestablishedintheindustrialis-
ed countries and the internationalpatent
system controlled international trade in
technology.Patentlawyersandbusinessmen
offered various arguments to justify the
patent system in both its national and in-
ternational aspects. It was after 1970 that
studies by Firestone,13 Vaitsos,14 Katz,'5 and
the United Nations'6 appeared which ex-
amined the impact of the patent system on
the economic development of the developing
countries and the sectors most affected by
patent legislation.
The United Nations report referred to
above, analysed the empirical data collected
from member countries and found that in-
stead of being used in production, an over-
whelming majority of patents granted to
foreigners through national laws of develop-
ing countries have been used to secure im-
port monopolies. It would therefore seem
that patent practices of developing countries,
following international standards, have
legalised this peculiar situation which has
come to act as a reversesystem of preferences
granted to foreign patent holders in the
markets of developing countries. A suvery
of 22,736 patents registered in Mexico as of
February 1980 that were supposed to be
worked, revealed that only 1,951 or 8.6 per
cent were industrially exploited.'7
The small number of foreign patents
which are used in production processes in
developing countries does represent a
transfer of technology but at a very high
price. Examination of the agreements,
entered into by developing countries, con-
cerning use of patents through foreign in-
vestments or licensing arrangements reveals
that these agreements frequently contain not
only high royalty payments and charges for
technical services raising the direct costs of
obtaining the technology, but also restrictive
practices and in some instances abuses of
patent monopolies, either explicitly em-
bodied in the contractual agreements or im-
plicitly followed by subsidiaries and affiliates
of transnational corporations, which impose
heavy indirect or 'hidden' costs through
overcharging for imported inputs. The
foreign exchange burden of these costs-
much larger than direct costs-applies to all
developing countries regardless of whether
they have national patent laws, or whether
they are members of the Paris Union.
PHARMACEUTICALS AND PATENT SYSTEM
The role of the national and international
patent sytem is of great significance in the
pharmaceutical industry which is now
perhaps the only major industry which
depends on patent generated monopoly to
protect its innovation. By far the greatest
concentration of patents in developing coun-
tries is in the pharmaceutical sector. For ex-
ample, out of a total of 3,513 patented pro-
cesses or products registered in Colombia in
1970, 72 per cent of them belonged to the
pharmaceutical industry and of these only
10 or 0.3 per cent were actually used in the
production process.'8
Pharmaceutical patents are a source of
monopoly power not only because they give
the patentee the exclusive right to exploit his
AN-1h0

innovationcommerciallyfora certainlength
of time but also, of much more adverse
effect on developingcountries,theycan be
usedto preventthe importationof cheaper
productsandto preventa localmanufacturer
fromstartingthe productionof similarpro-
ducts,evenif the patenteedoes not set up
production facilities in that country. An
illustrativeexample was the Andean ex-
periencein the earlyseventies.TheAndean
group of countries (Bolivia, Colombia,
Ecuador,Peru and Venezuela)wished to
establisha regionalplant for the manufac-
tureof certainantibiotics.The patentsfor
these antibiotics were registeredin each
countryof theAndeangroupbuttheycould
not proceedwithlocalmanufacturebecause
the patentholder,a transnationalcorpora-
tion, figuredthat it wasmore profitableto
export drugs than to give a licence and
thereforerefuseda licence.
Realisingthat the national legislationin
their countries on industrial property
preventedtheirtechnologicaldevelopment,
theAndeangroupintroducednewlaws.An
exampleof thisis Decision85 of theAndean
commission which dealt specifically with
patents,trademarksandindustrialdesigns.
The basicprincipleestablishedin Decisiop
85 was that the interests of the society
prevailedover the privateprivilegesof the
patentholder.Article28 of the Regulations
of theAndeangroupcompletelyeliminated
import monopoly from among the rights
conferredbya patent-a rightenshrinedin
theParisConventionandfullyexploitedby
all transnationaldrug companies.
Whena subsidiaryof a TNC undertakes
productionof a patentprotecteddrugin a
developingcountry,thereareusuallysome
importsfromeithertheparentcompanyor
any of its branchesin some othercountry.
The pricesrecordedfor these importsmay
differ drastically from prices for similar
productselsewherein the world and such
'transfer-pricing',can lead to substantial
outflows of foreigncurrency.
In his pioneering study of this subject
Vaitsoshasshownthatpharmaceuticalcom-
paniesexaminedin Colombia charged,on
the average,pricessome 155percentin ex-
cessof theworldaverage.He estimatedthat
if the samefigureheldtruefor all firmsin
thepharmaceuticalindustry,thebalanceof
paymentscost incurredin 1968wouldhave
been in excess of $ 20 million-in other
worlds,over-pricingin the pharmaceutical
industryalone was of the same order of
magnitudeas all knownandexplicitannual
paymentsforindustrialtechnologymadeby
the whole economy of Colombia.19
Anotherillustrativeexamplewasthelevel
of overchargingbya TNC in its salesto the
BritishNationalHealthServiceof itsbrand-
edproductsof diazepam(valium)andchior-
diazepoxide (librium). The much weaker
technologicalstatusof developingcountries
mightrenderthem still morevulnerableto
foreignexchangecosts of this kind.
TheBritishgovernment,followingthead-
viceof its MonopliesCommission,ordered
RocheProducts,a Britishsubsidiaryof the
world'sleadingdrugcompany,Hoffman-La
RocheAg of Basel, to cut its sellingprices
forthetranquillisersby60to 75percentand
to refund$ 27.5 million for overcharging.
The Monopolies Commission found that
RocheProductswaspayingthe parentcom-
pany $ 925 per kg for one substancethat
couldbeboughtinItaly(weretheseproducts
werenot underpatentprotection)for$ 22.5
per kg and $ 2,305 per kg for another
substancewhichcouldbe procuredin Italy
for$ 50perkg. Theoverchargingamounted
to 41timesthe cost of alternativesupplyin
the formerinstance,andto 46 times in the
latter.Officialinvestigationswerealsotaking
placeinAustralia,Belgium,FederalRepublic
of Germany,Greece,theNetherlands,,New
Zealand,SouthAfrica,Sweden,andbefore
the EEC Commission. In self-defence,
Hoffman-La Roche has cited Eastman
Kodak,Kellog,andProcterand Gambleas
beingopen to attackon similargrounds.20
Table6 gives importpricesof ampicillin
andtetracyclinebyPhilippinesimportersin
1975 and 1976. The import prices in this
tableshowtheextentof transferpricing.The
priceof ampicillinrangedfrom US,$ 81to
$ 251 per kg and tetracyclinefrom $ 19to
$ 130.
OWNERSHIP OF PATENTS IN SELECTED
ASIAN COUNTRIES
Table7 gives the number of patent ap-
plicationsfiled andpatentsgrantedbynine
Asian countries to residents and non-
residentsfrom outside Asia in 1980.Non-
residentsownedthevastmajorityofthe total
patentsgrantedandvariedfrom77percent
in Indiato 99.8percentin Singapore.These
figuresaresimilarto thosereportedforother
developingcountries.21
Thistablealso showsthat 25 percent of
TABLE 6: IMPORT PRICES OF SELECTED ANTIBIOTIC DRUGS FOR TRANSNATIONAL CORPORATION AND LOCAL FIRMS
Philippine Importer Mechanism of Transfer Date of Import Source of Import Quantity Import Prices
of Technology Kgs (US dollars
Per kg)
I Ampicillin
Bristol/Mead Johnsona direct investment. 1976 January parent company abroad 115 CIF 177.47
1976 March parent company abroad 50 CIF 189.28
1976 April parent company abroad 100 CIF 242.99
Beechama direct investment 1975 December parent company abroad 393 FOB 200.00
1076 February parent company abroad 362 FOB 251.00
Zodiacb through voluntary licensing 1976 April Beecham, the foreign licensor 25 CIF 115.00
United Laboratoriesb through voluntary licensing 1976 June Beecham, the foreign licenser 1,600 CIF 141.00
Doctors Pharmaceuticalb through compulsory .1976January from international market 50 FOB 81.38
licensing by open-tender
1.976May from international market 100 CIF 91.40
by open tender
2 Tetracycline HCI
Bristol direct investment 1976 February Bristol (Cristobal) 50 CIF 130.51
Squibba direct investment 1975 January Linson (Ireland) 133 CIF 75.30
(TNC subsidiary)
Winthropa direct investment 1975 March Belsman (Hamburg) 150 CIF 38.13
(TNC subsidiary)
Cyanamida direct investment 1975 August (New York) 35 CIF 117.00
(TNC subsidiary)
United Laboratories through volunta,ry 1975 September Biochemico (Genoa 1,200 CIF 21.76
licensing Pharma (Rotterdam) 1,000 CIF 18.80
Notes: a TNC subsidiary.
b
Filipino-owned firm.
Source: Technology Resource Centre, Philippines.
AN-lll

the application filed by residents were
grantedpatentscomparedto 47 percentfor
non-residents.Thegrandtotal of patentsin
forcein December1980variedfrom657 in
Sri Lankato over 12,000each in Indiaand
the Philippines.
The following information on these
patentsarenot availablebut will be useful
for an analysis of the impact of pharma-
ceutical patents in the economy of these
countries.
i) Of thegrandtotalof patents,thenumber
grantedfor pharmaceuticals:
a) for pharmaceuticalproducts,
b) for pharmaceuticalprocesses:
ii) Of the total pharmaceutical patents
granted,the numberput into effective
use in the country;
iii)Thetotalnumberof licensingagreements
for manufacturing pharmaceuticals
enteredinto betweennationalmanufac-
turersand foreign drug firms and the
numberof licensingagreementsamong
these which involveda patent;
iv) Namesand addressesof those corpora-
tions which own the pharmaceutical
patents.
REGIONAL TRADE IN PATENTED
TECHNOLOGY
Table8 givesthe numberof patentsfiled
by and grantedto residentsof sevenAsian
countriesintheothersix.Itis seenthatthere
is verylittleintra-regionaltradein patented
technology among the seven countries.
LndianandKoreanresidentswho filedover
12,000patentapplicationsintheirowncoun-
trieshaveonly filed one and eight applica-
tions respectivelywithinthe region.It is of
coursepossiblethattheyhadfiledpatentap-
plications in countries outside the region.
Singaporeresidentson theotherhandfiled
only two in theirown countryand eight-in
the region.
Twopossiblereasonscouldbegivento ex-
plain this phenomenon:
i) Thedefinitionof whatconstitutea resi-
dent,whetherphysicalor juridical,usually
depends on some kind of consideration
relatingto the residenceof an individualor
to theplaceof legalestablishmentof a cor-
poration. It is well knownthat a corpora-
tion that is effectively in the control of
foreigngroupsmay,undersuch legislation
be treatedfor legal purposesas a national
corporation.Thus for example,a corpora-
tion which is establishedin one of these
Asian countriesmay havethe majorityof
sharesowned by foreigninterests,yet it is
regarded,for legal purposes,as a national
entity.Underthesecircumstancesthepatents
grantedto that corporationwill be treated
as a patent grantedto a resident. If this
happens,that particularcorporationneed
notfileanapplicationintheregionsincethe
foreigninterestswhichcontrolthiscorpora-
tion wouldalso havesimilarestablishments
in the other countriesof the region.
ii) A second explanationis that the ma-
jority of patents granted to nationals in
developing countries are owned by indi-
vidualswhereasforeignpatentsarealmost
always owned by corporations. Patents
ownedby individualsareseldom exploited
industrially.Manyof these patentsmaybe
obtainedmore for intellectualsatisfaction
than forcommercialexploitation.Detailed
informationas to theownershipof national
patentsmaythrowlighton whythereislittle
intra-regionaltradein Asia.
ADVERSE EFFECTS OF PATENT
PROTECTION
Thepharmaceuticalmarketin theregion
ischaracterisedbythedominanceof foreign
TNCs. Given the oligopolistic structurtin
this industry with its concentration of
R and D activities and active component
manufactureby a small number of these
rNCs,theextentof theprotectionof patents
in pharmaceuticalsin the countriesof the
regionmayfurthercontributeto reinforcing
such features.
The impact of patents in a country
dependson the extentof protectionandthe
degreeof industrialdevelopmentreachedor
desired.Of the countriesin the regionIndia
is the only one wherethe local industryis
advancedandimportationof dosageformu-
lations or finishedproductsis minimal.In
all othercountries,local manufacturedoes
notmeetthetotalrequirements,andvarying
amounts of finished products have to be
imported in addition to almost all raw
materialsand active ingredientsfor local
manufactureof dosageforms.Inthesecoun-
triesthe crucialproblemwill be the mono-
poly of importationeitheron the basis of
productpatentsorprocesspatentswhichex-
tend the protectionto productsmanufac-
turedby patentedprocess.
Theexclusiverightof thepatenteeto inf-
port can be used to preventcheaperalter-
nativesfrom being marketedin a country
where product patents are protected. A
cheapergenericalternativecan thereforebe
marketedina countryonlyif thereis no pro-
duct patentlaw in that country.Forexam-
ple, generic cimetidine is available in
Thailandat US $ 0.34forone day'stherapy
compared to 'Tagamet',the innovator's
brandat US $ 1.68for one day'stherapy.22
This is possiblebecauseThailanddoes not
grantpatent protectionto pharmaceutical
products.
All the countries in the region, except
India, manufacture dosage formulations
fromimportedrawmaterials.Existenceof
a patentgrantedin respectof a productis
likely to deter or drastically hinder the
developmentof the industryin thesecoun-
triesin spiteof the factthatthereis freeac-
TABLE 8: PATENTS FILED BY AND GRANTED TO
RESIDENTS OF SEVEN ASIAN COUNTRIES
IN OTHER SIX IN 1980
Country Field Granted
Indonesia 1 Nil
India 1 Nil
Malaysia 32 5*
Philippines 2 Nil
Republic of Korea 8 1**
Singapore 8 Nil
Sri Lanka 4 Nil
Total for the seven
countries 56 6
Notes: * Patents granted 3 in Singapore and
2 in Sri Lanka.
** Patent granted in Philippines.
Source: WIPO, op cit, Annexure 4.
TABLE 7: PATENT APPLICATIONS FILED IN AND PATENTS GRANTED BY NINE ASIAN COUNTRIES
IN 1980 TO THEIR RESIDENTS AND NON-RESIDENTS FROM COUNTRIES OUTSIDE ASIA
Country Residents Non-Residents
No of No of No of No of No of No of Total Grand
Patents Patents Patents Patents Patents Patents Patents Total of
Applied Granted Granted Applied Granted Granted Granted Patents in
for in 1980 as a Per- for in 1980 as a Per- in 1980 force on
in 1980 centage in 1980 centage 31-12-80
of Total of Total
Granted Granted
in 1980 in 1980
Bangladesh 34 7 7 102 94 94 101 1071
India 1207 349 23 1817 1152 77 1501 12627
Indonesia 5 Nil - 475 Nil - Nil na
Pakistan 37 14 4 369 335 96 349 8081
Philippines 119 93 10 1454 811 90 904 12539
Republic of
Korea 1241 186 11 3829 1446 89 1632 9073
Singapore 2 1 2 631 548 99.8 549 7511
Sri Lanka 13 11 14 607 67 86 78 657
Thailand 18 Nil - 184 Nil - - na
Total 2676 661 13 9468 4453 87 5114
Note: na = data not available.
Source: World IntellectualProperty Organisation, document No SPAC/83/9, dated May 1983,
Annex 3.
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ECONOMIC AND POLITICAL WEEKLY Annual Number May 1987
cess to regular supplies of good quality raw
materials in cQjntries like Italy, Scandina-
vian and socialist countries. The growtXfand
development of national firis in the Latin
Amerihan countries, despite lack of gdvern-
ment support policies, was due to the fact
that national firms enjoyed one essential
legal condition; in these countries patent
protection was not granted for products and
process patents in general did not preventthe
freeimportation'of raw materials and active
ingredients.23 Process patents may become
a hindrance to the local manufacture of raw
materials and actit,:' ingredients. It is for this
reason that the tnaulonaldrug industry in
India and Latin America have been arguing
for the abolition of pharmaceutical patents.
Perhaps the best argument that a patent
free environment is essential for the develop-
ment of the pharmaceutical industry is given
by changes-in the national patent legislation
of five advanced industrialised countries-
France, Federal Republic of Germany, Italy,
Japan and Switzerland, home for some of
the big drug TNCs. All these five countries
introduced product patents only after their
domestic pharmaceutical industries had at-
tained a considerable level of development.
France introduced product protection in
1958 and Federal Republic of Germany in
1968. As table 4 indicates, Italy, Japan and
Switzerland had no product protection in
their national laws as late as 1974-75.
PATENT POLICY AS COMPONENT OF AN
INTEGRATED RATIONAL DRUG POLICY
It must be emphasised that a rational
policy on drug patents by itself will not lead
to the development of the national industry,
lowerdrug prices and increase the availability
of drugs to all sections of the population.
The absence of pharmaceutical patents by
itself in a country where foreign firms
'dominate the local market and where the
government has not implemented an inte-
grated national drug policy, will hardly
modify'the availability and price of phar-
maceuticals in that country. This can be best
illustrated by comparing the pharmaceutical
supply systems in Sri Lanka and Thailand
in the early seventies.
Sri Lanka in 1972 introduced pharma-
ceutical reforms. A rational drug policy was
adopted. The national patent laws contained
provisions for both product and process
patents for pharmaceuticals. However, in
spite of the patent protection, an innovative
procurement policy which was one of the
major components of the new drug policy
led to the rationalisation of the phar-
maceutical sector. The national formulary
contained about 600 dosage forms. All im-
ports'were channelled through a state cor-
poration; imports were restricted to drugs in
the national formulary. Drug prices were
much lower than during the previous
years.24 The World Health Organisation
recommended the Sri Lankan model to other
countries.25
Thailandon theother hand, in the early
seventiesdidnot grantproductpatents.This
policy alone, in the absence of the other
componentsof a drugpolicy,wasnot ade-
quate to rationalise the pharmaceutical
supply system.An in-depthstud 26 of the
pharmaceuticalindustryin Thailandcon-
cluded, among otherthings:
i) "Theconsumptionof drugsin Thailand
seems to have lost relation with actual
requirements,to be gettitngout of con-
trolevolvingin a wastefulmanner,allof
whichcalls fora gystematicmeasure..
ii) "Comparisonof consumption and re-
quirement figures shows that health
prioritiesaredrugwisedisregarded.Only
tiny proportions of the patients are
treated.Huge amountsof resourcesare
divertedto non-essentialdrugs".
These examplesunderscorethe fact that
patentreformsalone arenot sufficientbut
should be an integratedcomponent of an
overallrationaldrug policy.
IV
Review of Recent Changes to Patent
Legislation in Developing
Countries27
A numberof developingcountrieshave
introducedsignificantchangesin theirna-
tionallegislationon patents.Thesereforms
followed the concern expressed by these
countries that the patent system should
strikea fair balance betweenthe need for
economic and social developmentand'the
rights granted by patents. These changes
weremadeto the followingprovisionsinthe
patentlegislation:
i) [Non-patentablesubjectmatter;
ii) Importmonopoly;
iii)Non-voluntarylicencesunrelatedto non-
workingof patents;
iv) Definitionof exploitationorworkingof
the patent;
v) Importationand workingof patents;
vi) Grounds for legal exemption from
workingof the patent;
vii) Duration of patentprotection.
Between1970and 1975,five developing
countriesintroducedchangesin theirpatent
legislations.Indiaand Peruin 1970,Brazil
and Colombiain 1971,andthe Republicof
Koreain 1973.SinceDecember1975atleast
nine developingcountries,of which three
(Mexico, Philippines and Sri Lanka) are
membersof theParisUnion,haveintroduced
substantivechangesin their legislation.In
two cases (Costa Rica and Honduras),the
reform was basically related to specific
industrialsectors,mainlypharmaceuticals.
Thailandestablisheditsfirstlawon thesub-
ject.InColombiaEcuadorandPeruchanges
emergedas a consequenceof theincorpora-
tion intotheirnationallegalsystemof Deci-
sion85of theCommissionof theCartagena
Agreement (Andean Group). -Further,in
Argentina, the interpretationof the 1864
patentlawby the courtshas reaffirmedthe
exclusion of import monopolies based on
process patents, and the enforcement of the
sanction provided for by the national law in
order to avoid non-working of registered
patents. The changes in all these countries
have, in general, followed a similar pattern,
particularly as regards the emiphasis given
to working obligations on patentees. Signifi-
cant steps have been taken towards adapting
the patent system to the needs of economic
development.
Nor-patentable subject matter: In 1970
India excluded the patentability of drugs,
other chemical products and food. Colombia,
Ecuador and Peru are members of the
Cartagena Agreement (Andean Pact) and
adopted Decision 85 on industrial property
in 1977, 1978 and 1979 respectively. This
Decision gave the basic legal framework to
correct problems due to old patent and
trademark laws. In brief Decision 85 pro-
hibits patents for pharmaceutical products,
active therapeutic substances and food.
Ecuador by Decree 951 to 1977 further ex-
cluded pharmaceutical processes from
patent protection. In 1982, Bangladesh
withdrew patent protection for pharma-
ceutical products. Process patent may be
allowed for a limited period of time only if
the basic substance is manufactured within
the country. The new Mexican Law excludes
pharmaceutical products and processes from
patentability; processes however may be pro-
tected by inventors' certificates. The Thai
Law excludes foods, beverages, pharma-
ceutical products and computer programmes
from patentaboility.
Import monopoly: Colombia, Ecuador
and Peru on the basis of Decision 85 and
Mexico have excluded import monopoly
from the rights conferred to the patentee.
This very importart change puts emphasis
on the industrial function of patents and
limits their use as mere instruments for
private regulation of trade.
Non-voluntary licences unrelated to non-
working of patents: Under Decision 85 of
the Andean Group, the patentee enjoys, pro-
vided he-works the patent, the exclusive right
to use the invention during the first five
years. Patents which are worked continue in
force for another five years but during this
second period of five years they are ipso jure
subject to non-exclusive compulsory licences.
Non-voluntary licences, unrelated to non-
working have also been provided for in
Mexico and in the Philippines.
-Definition of exploitation or working of
thepatent: Decision 85 and the Mexican Law
include specifc definition of exploitation.
Decision 85 states "working shall mean the
permanent and regular use of the patented
process or the manufacture of the product
covered by the patent in order to put the end
result in the market under reasonable
marketing conditions, prgvided that such
acts have occurred on the territory of the
member country which granted the patent.
Importation and working of patents: The
AN-113

ECONOMICAND POLITICALWEEKLYAnnual Number May 1987
definition referred to above makes it cleat
that imports are not to be regarded as a form
of working of a patent. The Indian and
Mexican Patent Laws, the Presidential
Decree No 1,263 of the Philippines and the
Brazilian Code of Industrial Property make
it clear that imports are not to be regarded
as a form of working of a patent.
Grounds for legal exemption from work-
ing the patent: According to the Paris Con-
vention the patentee may justify his non-
working of the patent by 'legitimate reasons.
This very wide concept may cover any possi-
ble legal, technical or economic justification
for non-working in a particular country. In
Decision -85the legitimate reason has to be
recognised as such by the competent na-
tional office. In Thailand's Patent Law, the
concept of 'legitimate reasons' has been
adopted.
Remedies against non-working of Patents:
Despite its limited use compuslory licensing
still plays a prominent role as a primary
remedy against non-working. Recent
changes in patent laws have attempted to en-
courage the granting of compulsory licences
in general and to make greater use of
revocation.
The Indian Patent Law of 1970 has pro-
vided that the duration of process of patents
for pharmaceuticals 'is seven years from
filing or five years from granting of the pa-
tent. However, three years'after the granting,
a licence may be applied for if the patented
article is not manufactured in India to an
adequate extent and supplied on reasonable
terms. On the same grounds, and after the
same period, patents may be endorsed with
the words, "licence of right" by which any
person is entitled to a licence upon terms
decided, in the absence of agreements, by
the controller. Two years after the date of
granting a compulsory licence, a patent can
be revoked if the "reasonable requirements
of the public" are not effectively met.
In the Mexican Law compulsory licences
can be granted three years after the registra-
tion of a patent. If within one year after the
end of this period the patentee has not begun
to exploit the patent, or no application for
-ompulsory licences have been made the
patent lapses.
One of the main objectives of Philippines
Patent Law reform of 1978 has been to
broaden the grounds and shorten the term
for obtaining compulsory licences.
In Thailand, a compulsory licence may be
granted when the patented product which is
manufactured is being sold at unreasonably
high prices or does not meet public demand,
without any legitimate reason.
The tArgentina patent reforms came
through decisions in courts of law. In 1972,
the Supreme Court of Argentina established
that a patent was subject to automatic
revocation according to an article in the
patent law when the invention was not ef-
fectively exploited within two years of being
granted. A number of other decisions by
lowercourtsdealt withthe applicabilityof
Article 5A of the Paris Convention(para
16-23).Theydeclaredthe enforceabilityof
the revocationprovidedforby nationallaw
on the groundsthet Article5A of the Con-
ventionwasnot self-executingandthatcom-
pulsorylicenceshad not been regulatedin
the country.This interpretationwas con-
firmedbythe SupremeCourtthusstressing
revocationas a primarysanction against
non-workingof patents.
Durationof PatentProtection:Therehas
beena trendamongdevelopingcountriesto
shortentheperiodof patentprotection.The
Mexicanlaw reducedthe durationof pro-
tectionfrom 15to 10yearsfromthedateof
granting.
Decision85 providesforinitialgrantsfor
fiveyearswhichcanbe extendedfor an ad-
ditionalfive yearsprovidedthat the patent
is adequatelyworked.Beforethe introduc-
tion of thisdecisionpatentscould lastupto
12yearsin EcuadorandColombiaand for
10yearsin Peru.Inthe reformof its patent
lawof 1979,Sri Lankaprovidesprotection
for 15 years. According to the previous
Patents Ordinance,patents lasted for 14
yearsfromthe dataof application,but ex-
tensionscould be grantedfor 7 or 14years,
or a new patent could be granted if the
courtsfoundthat thepatenteehadbeenin-
adequatelyrenumeratedby his patent. In
CostaRica,DecreeNo 6219of 1978provides
forthegrantof pharmaceuticalpatentsfor
one year provided that the products are
made in Costa Rica.
Effects of PatentPolicy Changeson In-
dustrial Development: Brazil abolished
patent protectionfor pharmaceutticalpro-
ducts and processes in 1969. Argentina
grantsprotectionto processpatentsbutnot
to products.An examinationof these two
countriesprovidessomeinformationon the
effect of patent policy on industrial
development.
The abolitionof pharmaceuticalpatents
in Brazilhas not yet shown'significantef-
fects on the structureof the industry.This
is probablydue to the greatdominanceof
the Brazilianpharmaceuticalindustry by
TNCs.Between1971and 1979directforeign
investmentin the pharmaceuticalindustry
rose fromUS $ 11.4million to US $ 646.5
million and 15 national firms weretaken
overtheTNCs.In 1975theTNCscontrolled
almost 88 per cent of the total sales.in the
Brazilianmarket.
It would appear that in Brazil, lack of
patent protectiondid not constitutea dis-
incentivefor foreigninvestment.Available
dataalsoshowthatlackof patentprotection
hadnot preventedforeignsubsidiariesfrom
continuingintrafirmtradeand overpricing
of invoices.This i'sshown by the fact that
whilethevalueof pharmaceuticalsalesrose
by 137percent in theperiod 1972-1977,the
valfieof pharmaceuticalimportsroseby 191
per cent.
In spiteof the subordinateroleto which
national firms have been relegated, a number
of these firms have been able to survive and
grow mainly on the basis of marketing
strategies. The total non-patentability of
pharmaceuticals had eased the access by
Brazilian firms to raw materials and active
ingredients as competitive prices in the in-
ternational market. A comparisorr between
the rate of growth of sales of the ten largest
foreign firms and the ten largest Brazilian
firms in the period 1974-78 revealed that the
Brazilian firms enjoyed a growth rate that
exceeded that of the foreign firms.
In Argentina, domestic firms have
challenged the domination of the local phar-
maceutical market by the TNCs. Their
challenge has consisted of a strategy amied
at: (a) opposing patent protection in order
to permit access to raw materials and active
ingredients from cheaper non-patented
sources and at a further stage to initiate local
production of raw materials; (b) developing
marketing skills in the differentiation of new
products; (c) using licences to enter into
some difficult sub-product markets and
(d) enagaging, to a certain extent, in local
research and development. In 1978, the na-
tional firms controlled 41 per cent of the
total pharmaceutical sales in Argentina.
Intergovernmental Decisions: The recent
changes in the national patent legislation inl-
troduced by developing countries arein con-
formity with the directives taken at the
highest political level.
The fifth summit conference of heads of
state or government of non-aligned countries
held in Colombo, Sri Lanka, August 1976
unanimously adopted a resolution of phar-
maceuticals. This resolution recommended,
among other things, that in the context of
the revision of the industrial property
systems, consideration be given to excluding
pharmaceutical products from the grant of
patent rights-or alternatively the curtailment
of the duration of patents for pharma-
ceuticals (Annexure 7).
The spokesman for-the governmental ex-
perts from the Group of 77, placing the
collective views of the developing countries
before meeting of the group of governmental
experts on the economic, commercial and
development aspects of industrial property
in the transfer of technology to developing
countries, February1982,UNCTAD, Geneva,
recalled the declaration made by his group
in 1975concerning the principles that should
guide the revision of the national patent
system and reiteratedthat (a) patents should
be conceived as instruments of national
economic policy, to be used in conjunction
with other policies relating to incentives to
national inventiveness, the transfer of
technology and foreign investment; (b) that
the patent grant should be governed by the
criteria of public interest and nationl
sovereignty; and (c) that the patent systein
should be geared to promoting the scientific
and technological capabilities of the patent-
granting country and their incorporation ir.
AN-114

the productionprocess,and to facilitating
access to appropriate foreign technology
underfairand reasonabletermsandcondi-
tions. He also referredto the important
changesintroducedin the patentsystemby
a numberof developingcountriesduringthe
last decade,which had tended to reinforce
the exploitation of patents in the host
country.
V
C9nclusions and
Recommendations
Sinceitsadoptionin 1883,theParisCon-
ventionhasbeenrevisedsixtimes.Eachrevi-
sion has extendedthe exclusivemonopoly
powersof the patentholdersandweakened
the bargainingpowersof developingcoun-
tries which have to purchase technology
fromTNCs, who own the vast majorityof
patents.
The ParisConventionhas exercisedsuch
profoundinfluence on national legislation
that, apartfrom differencesin detail,most
nationallegislationshaveincorporatedthe
major provisions in the Paris Convention
regardless of whether the countries are
meinbers of the Paris Union or not. A
criticalexaminationof theexistingnational
andinternationalpatentsystemsrevealsthat
these have had an adverse effect on the
economic, commercial and tech,nological
developmentofthe pharmaceutiealsector
intheAsianandotherdevelopingcountries.
Manyaspectsof thepatentlegislationin-
volve the relationshipbetween the patent
ownersandconsumers.Theserelationships
reflectcertainindividualand socialinterests
andto protectthesocietyandtheconsumer.
Patent legislation providesincentivesto
private parties in the hope of receiving
benefitsto society.All incentivepolicieshave
a socialcost. Patentlegislationis therefore,
a compromisebetweenbenefitsto individuals
(inpharmaceuticalstheseareallTNCs)and
.benfits and costs to societies. Whereas
benefitsto societyareeasilyquantifiable,the
costsarenot. This is one of the weaknesses
of the presentlaws on patents.
Incertainflelds,morepowerfulincentives
maybe needed and, therefore,moreexten-
siverightsmayhaveto be provided.On'the
other hand, highly important areas of
knowledgeproductionandprocessinghave
alwaysbeen excludedfromgrantof patent
protection.It'would,'therefore,appearthat
efficientpatentlawsshouldbe highlyflexi-
ble,tailoring'thetermandotherprovisions
of eachpatentto theparticularneedsof the
society.But this would involveformidable
administrativedifficulties-and costs. An
alternativewill be to haveprovisionsin the
legislation for modifying the rights and
privilegesof the patentee.
Theeconomicandsocialpolicyon patent
legislationshouldbeto secure'themaximum
possiblebenefits in relationto social costs
entailed.Policy formulationshould, there-
fore, start with a careful comparative assess-
ment of the costs and benefits to the society
of all available and relevant devices.
B3eingnet importers of technology, Asiant
and other developing countries will have in-
terests quite different from those countries
which are net exporters of technology and,
therefore, cannot copy the measures which
have proved successful in advanced in-
dustrialised countries. Developing countries
have to learn from one another's experience
and develop solutions suited to their require-
ments. This is one of the major challenges
in every field or sector concerned with the
economic and social development of third
world countries.
Developing.countries may.wish to have an
interest in adhering to an international con-
vention at less than the maximum level of
protection given by other member states.
They may want to retain their freedom to
grant industrial property rights but for a
shorter term, on less extensive basis and to
issue compulsory licences more easily and
more often.
Patent reforms by themselves will not
enable a country to rationalise the phar-
maceutical sector. A rational patent policy
should be one of the components of an in-
tegrated national pharmaceutical policy. The
formulation and implementation of such an
integrated national pharmaceutical policy is
essential for the development of a national
pharmaceutical industry, lowering drug
prices and increasing the availability of phar-
maceuticals to all sections of the people.
A number of developing countries have
introduced significant changes in their na-
tional legislation on patents. These changes
include:
1 Introduction of inventors' certificates;
2 Exclusion of pharmaceutical products and
processes from patentability;
-3 Limitation of the duration of patent
grants;
4 A better balance between monopoly rights
of patent holders and public interest, a
shift in favour of greater recognition of
public interest;
5 Provisions for expediting the procedures
for obtaining a compulsory licensing; and
6 Provisions -for revocation or forfeiture of
the patent.
The recent changes in the national patent
legislation introduced by developing coun-
tries are in conformity with the directives
taken at the highest political level.
Summarising the analytical discussion in
the preceding sections, it seems clear that the
following policy options are open to Asian
and other dgveloping countries regarding
pharmaceutical patents:
1 Exclude both pharmaceutical products
and processes from grant of patents;
2 Provide protection for inventors' cer-
tificates to stimulate technical progress;
3 As a minimum first-step grant process
patents only but not product patents. Pro-
vi'deadequate safeguards aimed at ensur-
ing satisfactory working of the patented
invention. These safeguards will include
the following: (a) Protection granted to a
process is not extended to products so that
'product by process' is not applicable;
(b) Provision that importation does not
constitute working of the patent; (c) A
clear definition of the terms 'exploitation'
or 'working' of the patent; (d) Shorter
duration of patent and use it to ensure
working of the patented invention; (e) An
expeditious system of compulsory licens-
ing; and (f) For'feitureor revocation of the
patent on specific grounds.
These policy options conform to the
resolution on pharmaceuticals adopted by
the fifth summit conference of non-aligned
and other developing countries and to the
recommendations of the spokesman of the
Group of 77 at the meeting of governmen-
tal experts on the economic, commercial and
developmental aspects of industrial property
in the transfer of technology to developing
countries convened by UNCTAD in
February 1982.
Annexure 1
China
Patent Law, text 2-001, page 001-009 and
text 2-002, page 001-013,date of publication,
April 1984.
PATENTABILITY
Non-patentable: Art 25-Scientific
discoveries, rules and methods for mental
activities, methods for the diagnosis or the
treatment of diseases, food, beverages and
flavourings, pharmaceutical products, and
substances obtained by means of a chemical
process, animal and' plant varieties,
substances obtained by means of neuclear
transformation.
For processes used in producing products
such as food, beverages, flavouring and
animal and plant varieties, patent may be
granted.
Art 5-No patent shall be granted for any
invention that is contrary to the laws of the
state or social morality or that is detrimen-
tal to public interest.
PATENTEE'SPRIVILEGES
Art 11-To make, use or sell the patented
product or use the patented process, for pro-
duction or business purposes.
EXPLOITATIONOFTHEINVENTION
Art 51-Compulsory licence for exploita-
tion is granted.
Art 52-(1) when the patentee fails,
without any justified reason, by the expira-
tion of 3 years from the date of grant, to
fulfill to make the patented product or to
use the patented process.
Art 53-(2) where an invention or utility
AN-I15

Annual NumberMay 1987 ECONOMICAND POLITICALWEEKLY
model,forswhichpatentright was granted,
is technicallymore advancedthan another
inventionor utilitymodel for whichpatent
hasbeengrantedearlierandtheexploitation
of the later invention or utility model
dependson the exploitationof the earlier
invention.
Art 57-Licensee, who is granteda com-
pulsorylicenceforexploitationshallpayto
the patenteea reasonableexploitationfee.
EXPROPRIATION/GOVERNMENT
USE/PUBLIC USE
Art 14-Any patent of a Chinese in-
dividual or entity under collective owner-
ship, which is
(1)of greatsignificanceto theinterestsof
the state,
(2)orto the publicinterest,andis in need
of spreading and application, may, after
approval by the state council at the
solititation of its competent department,
be allowed designated entities to exploit.
The exploiting entity shall pay a fee for
the exploitation to the patentee.
DuRATION
Art 45-15 years from the day of filing
the application.
Annexure 2
Pakistan
The Patent and Design Act 1911, text
2-001, page 001-024, date of publication,
February 1985.
PATENTABILITY
Patentable: Art 2-Any means of art, pro-
cess or manner of producing, preparing or
making an article and also any afticle
preparedor producedby manufacture.
Non-patentable:Art 69-Inventions or
design,of whichthe use wouldbe cbntrary
to'law or morality.
PATENTtE'S PRIVILEGES
Art 12-Exclusive privilege of making,
sellingand using the inventionthroughout
Pakistan,andof authorisingothersto do so.
EXPLOITATION OF THE INVENTION
Art22-If by meansof the defaultof the
patenteeto manufactureto an adequateex-
tent and supply on reasonableterms the
patentedarticle,or anypartstherpf,which
arenecessaryfor itsefficientworking,orto
carrylicenceson reasonableterms,anyex-
istingtradeor industryortheestablishment
of anynewtradeor industryin Pakistanis
unfairlyprejudiced;
or
If anytradeor industryin Pakistanis un-
fairlyprejudicedbytheconditionsattached
by the patenteeto the purchase,hireor use
of the patented article or.to the using or
workingof the patentedprocess;
or
Art 23-on the groundthat the patented
articleorprocessis manufacturedorcarried
on exclusivelyor mainlyoutside Pakistan,
Thepatenteecanbe orderedto grantlicences
orif theopinionis thatthedemandwillnot
be adequatelymnetbygrantof licences,the
patent may be revoked.
USE/PUBLIC USE
Art 21-Any departmentat the govern-
mentmayaftergivingnoticetothepatentee,
make,use or exercisethe inventionfor the
serviceof government.Thisshallincludethe
powerto sellanyarticlesmadein pursuance
of suchright,whichareno longerrequired
to, the serviceof the government.
Nothing shall affect the right of the
government to sell, or use any article
forfeitedunderany law for the time being
in force relating.tocustoms or excise.
Art25-A patentshall be deemedto be
revokedif the governmentdeclaresthe pa-
tent or the mode in whichit is exercisedtc)
be mischievous to the state or generall5
prejudicialto the public.
DURATION
Art 14-The termlimitedin everypatenit
for the durationthereof shall be 16 year;
from its date.
Art 15-The termof a patentmaybe ex-
tendeda furtherterm,notexceeding5 years
or in exceptionalcases 10years.The grant
of a new patent may be orderedfor such
term not exceeding10 years.
Annexure 3
Sri Lanka
Code of Intellectual Property Act
No 52/1979, text 1-001,page 001-074and
text1-002,page001-011,dateof publication,
March 1980.
PATENTABILITY
Patentable:Art 59-An invention, that
permitsin practicethesolutionto a specific
problemin the field of technology.
Non-patentable: (1) discoveries, scientific
theoriesand mathematicalmethods,
(2) plant or animal varietiesor essentially
biological processesfor the productionof
plants or animals, other than mnicro-
biological processes and the products of
such processes,
(3) schemes, rules, or methods for doing
business,performingpurelymentalacts or
playinggames,
Annexure 6
Years of Adoption of National Patent Laws and Accession to Paris Convention for
Protection of. Industrial Property
Yearof Adoption of Yearof Yearof Adoption of Year of
Countries First Patent Present Accession Countries First Patent Present Accession
Law Patent Law to Paris Law Patent Law to Paris
Convention Conirention
Developed Countries Japan 1885 1959 1899
Australia 1903 1952 1925 Liechtenstein - 1928 1933
Austria 1810 1970 1909 Luxemb6urg 1886 1880 1922
Belgium 1854 1854a 1884 Monaco 1955a 1956
Canada 1869 1952a 1923 Netherlands 1809b 1963 1884
Denmark 1894 1967 1894 New Zealand 1865 1953 1931
Federal Rep of Germany 1877 1968 1903 Norway 1885 1967 1885
Finland 1898 1967 1921 Portugal 1852 1940 1884
France 1791 1968 1884 San Marino - Nil 1960
Greece 1920 1920 1924 South Africa 1910 1952 1947
Holy See - Nil 1960 Spain 1826 l929a 1884
Iceland - 1923a 1962 Sweden 1819 1967 1885
Ireland 1927 1964a 1925 Switzerland 1889 1954 1884
Italy 1864 1939a 1884 Turkey 1880 1880 'I925
(Contd)
AN-116

ANNEXURE6 (conltd)
Yearof Adoption of Yearof Yearof Adoption of Yearof
Countries First Patent Present Accession Countries First Patent Present Accession
Law Patent Law to Paris Law Patent Law to Paris
Convention Convention
United Kingdom 1852 1949a 1884 Libya 1959 1959 1976
USA 1790 1952a 1887 Madagascar 1963 1963C 1963
Developing CountisMalawi 1957d 1957 .1964
Afghanistan - Nil - Maldyiae -9i
195 -
Algeria 1966 1966 1966 Maldives- 198
Argentina 1864 l864a 1967 Malta 188 1967
Bahamas - 1965 1963 Maurtani 1963 18963 1963
Bahrain - 1955 Maurit.aius96 1875a 19763
Barbados 1903 10 1985 Mexico 182a4 ~ 10
Bangladesh - Nil Mongolia2
194
1985
Benin 1963 1963c 1967 Morgoco 196 l96 1917
Bhutan - Nil Nepalcc
196
1965
191
Bolivia 1858 1916a Nicarau 189 18965 -
Botswana 1920- 1920 - Ncrga19 89
Brazil 1830 1971 1884 Niger 1963 1963c 1964
Burkina Faso 1963 1963a 1967 Nigeria - 1970 1963
Burma - Nil _
Oman -Nil -
a ~~~Pakistan Ild 1911 -
Burundi 1?64 1964. 1977 Pnm
Cameroon 1963 1963a 1963 Paaa1908 1939 -
Central African Rep 1963 1963a 1963 Paraguay 1925 1925 -
Chad 1963 1963a 1963 Peru 1869 1971 -
Chile' 1840 1931 Philippines 13d 1947 1959
Colombia 1869 1971 __ Qatar -- -
Congo 1963 l963a 1963 Republic of Korea - 961a 1980
Costa Rica 1896 1896 __ Republic of Vietnam - 1957 1949
Cuba 1936 1936 1904 Rwanda 1963 1963 1984
Cyprus 15d 1957 1966 Saudi Arabia - Nil -
Democratic Peoples Senegal 1963 1963c 1963
Republic of Korea - Nil 1980 Sierra Leone 194d 1924a -
Democratic Yemen 198d 1945 Singapore 13d 1937a
Dominican Republic 1911 11a 1890 Smla15
Ecuador 1890 1928 -- Sri Lanka 19d 1906a 1952
Egypt 1949 l949a 1951 Sudan 1971 1971 1984
El Salvador 1901 1903 -Swaziland 195575
Equatorial Guinea - - Swzln 95d 15
Ethiopia - - Syria 1924 1946 1924
Fiji 1879 1879 __ Tanzania 1931 1931a 1963
Gabon 1963 l963a 1964 Thailand - 1979-
Gambia 1925d_92_ Togo 1963 1963c 1963
Ghana 1924d 94 1976 Trinidadand Tobago I19d0l0o 1964
Guatemala 1886 1937- Tunisia 1888d 88 1884
Guinea a Nil 1982 Uganda 13d 1939 1965
Guyana 1937d
13 United Arab Emirates - - -
Haiti 1922 1922a 1958 Uruguay 1885 1941 1967
Honduras 1919 1819 -~_ Venezuela 1878 1955 -
Honduras 1919 1897 Yemen - Nil -
Indonesia - Nil 1959 Yugoslavia 1921 1960a 1921
Irain 1930 1931 1959 Zaire '1886a 1886 1975
Iraq 1935 1970 1976 Zimbiabwe7 16
Israel 12f 1967 1950 Zibbe--1980
Ivory Coast 1963 1963c 1963
Jamaica 15d 1857a - Socialist Countries of Eastern Europe
Jordan - 1953 1972 Bulgaria 1921 1968 1921
Kenya 1964 1964 1965 Czechoslovakia 1919 1972 1919
Khymer Republic - - - German Democratic Rep 1877 1950a 1903
Kuwait 1962 1962 -Hungary 1894 1969 1909
Laos - - - Poland 1919 1972 1919
Lebanon 1924 1924 1924 Romania 1906 1967 1920
Lesotho Ild 1919 - Soviet Union 1812 1959&a 1965
Liberia 1864 1864a China 1950 1950 1985
Notes :(a) Presentlawamendedbysubsequentrevisions.(b) In 1869the patentlawwasrepealedandreintroducedin 1912.(c) Memberstate
of the LibrevilleAgreementof September13, 1962for the creationof an AfricanMalagasyIndustrialPropertyOffice (QAMPI).
(d) Lawesistingattimeof independence.(e) Law-ofZanzibar.(f) Lawexistingatthetimeof theextablishmentof thestate.(g) Ecuador,

Annual NumberMay 1987 ECONOMICAND POLITICALWEEKLY
(4)methodsforthetreatmentof thehuman
or animalbody by surgeryor therapy,and
diagnosticmethodspractisedon thehuman
oranimalbody,providedhowever,thatthis
paragraphshall not apply to the products
used in any such methods.
Art 76-The grantof a patent shall not
be refused and a patent shall not be in-
validat.pdon the ground that the perfor-
maace of any act in respectof the claimed
inventionis prohibitedbyanylawor regula-
tion, exceptwherethe performanceof that
act would be contraryto public older.
PATENTEE'S PRIVILEGES
Art81-The exclusiverightsin relationto
the patentto assignor transmitthe patent,
to conclude licence contracts, when the
patenthasbeengrantedin respectof a pro-
ductto make,import,offer for sell anduse
theproduct,stocksuchproductforthepur-
pose of offering for sale, selling or using,
whenthepatenthasbeengrantedin respect
of a process,to usetheprocessordoingany
of the acts referredto above in respectof
a productobtaineddirectlyby meansof the
process.
Art 82-The patentee'sprivilegesextend
onlyto actsdone forindustrialor commer-
cial purposesand in particularnot to acts
done only for scientific research.
Art 166-Import prohibitionconcerning
all goods which, if sold, would be liableto
forfeitureunderthispart,andalsoallgoods
madeor producedbeyond-thelimitsof Sri
Lanka.
EXPLOITATIONOFTHEINVENTION
No regulations concerning this subject.
USE/PUBLIC USE
No regulations concerning this subject.
DURATION
Art 80-The patent shall expire 15 years
after
Annexure 4
Thailand
Patent Act BE 2522, text 1-001, page
001-012and text 1-002,page 001-003,date
of publication, May 1980.
PATENTABILITY
Patentable:Art 8-Inventions thatcanbe
made or used in any kind of industry, in-
cluding handicraft, agriculture and
commerce.
Non-patentableArt9-A patentshallnot
be grantedfor:
(1) for food, beverages,a pltarmaceutical
productor pharmaceuticalingredient,
(2) for any machineparticularlymade for
use in agliculture,
(3) foranyvariety.of animalorplantor any
essentiallybiologicalprocessforthepro-
duction of animalsor plants,
(4) for a scientificor mathematicalruleor
theory,
(5) for a computerprogramme,
(6) for an invention the exploitation or
publicationof whichwouldbe contrary
to public order or morality,or public
health or welfare,
(7) or foranyinventionprescribedin a royal
decree.
PATENTEE'S PRIVILEGES
Art 36-Patentee shall havethe rightto
producethe productor applythe patented
process,sellerhaveinpossessionforsatethe
patentedproductor the productproduced
by the applicationof the patentedprocess.
The provisionsaboveshall not apply to
(1) the use of the patentedproductor ap-
plication of the patented process for the
particularpurpose of study, research,ex-
perimentationior analysis,(2) themanufac-
tureof thepatentedproductor application
of the patentedprocess,providedthat the
Annexure 7
Resolution on Co-operation among Developing Countries in the Production, Procurement and Distribution
of Pharmaceuticals, Adopted at the Fifth Conference of Heads of States or Government of
Non-aligned Countries, Colombo, Sri Lanka August 1976
The Conference
Recallingthe Non-aligned Action Programmefor Economic Co-operationamong developingcountriesadopted at the Conference
of ForeignMinistersof Non-Aligned Countriesin Georgetownin August 1972, and approvedat the FourthSummitheld in Algiers
in September,1973.
RecallingalsotheEconomicDeclarationof thatSummitscallingforthefurtherstrengtheningof economicco-operationamongdevelopinig
countries.
Noting the inclusion of the productionand distributionof medicineand medicalsubstancesin the Lima Programmefor Mutual
Assistance and Solidarity as an additional area of co-operationamong developingcountries.
Bearingin mindthepossibilitiesforjoint actionbydevelopingcountries,identifiedin thestudycommissionedbyUNCTADon major
issues in the transferof technology to the developingcountriesin the pharmaceuticalindustry.
1 Endorsesthe recommendationsof the Group of Expertson Pharmaceuticalswhich met in Georgetownin July 1976and which
proposesamong other things:
(a) The preparationof a list of prioritypharmaceuticalneedsof each developingcountryand the formulationof a basic model list
of such needs as a generalguideline for action by the developingcountries;
(b) The establishmentof a national buying agenicyto undertakethe purchaseand supply of pharmaceuticals;
(c)That, in thecontextof therevisionof the industrialpropertysystems,considerationbe givento excludingpharmaceuticalproducts
from the grantof patent rightsor alternativelythe curtailmentof the durationof patents for pharmaceuticals;
(d) The elimination,whereverpossible, of brandnames,and the adoption of the genericnames for pharmaceuticals;and provision
of informationonly from official sources;
(e) The establishmentby each developingcountry of its own pharmaceuticalindustryas appropriate,beginningwith formulation
and packagingand building up to more complex productionactivities;
(f) The creationof RegionalCo-operativePharmaceuticalProductionand TechnologyCentres(COPPTECs),as proposedby UNC-
TADandUNIDO, in orderto drawup drugslists, to co-ordinateresearchanddevelopment,facilitatethetransferof technology,collect
and disseminateinformation on pharmaceuticaluses and pricesand on the technologicalcapabilitiesamong membercountriesand
alsoto co-ordinatetheproductionandexchangeof drugsbetweendifferentmembercountriesaswellasbetweendifferentregionalcentres;
2 Invitesthe relevantinternationalorganisationssfich as UNCTAD,UNIDO, WHO and UNDP to assist in the achievementof the
objectivesoutlined in operativeparagraph1abovewith particularregardto the establishmentof appropriateNational Pharmaceutical
CentresindevelopingcountriesandRegionalCo-operativePharmaceuticalProductionandTechnologyCentres(COPPTECs)amongthem;
3 DecidesfurtherthattheCo-ordinatorof theIlade, liansport andIndustrysectorof theNon-AlignedActionProgrammeforEconomic
Co-operationamong developingcountriesshould takethe necessaryfollow-upactionto ensureearlyimplementationof the provisions
of this resolution.
AN-118

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