Can the “Third Way” Foster Technology Transfer to Fight COVID-19 Globally?
In October 2020, India and South Africa had made a joint proposal to the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO) seeking a temporary waiver of the obligations of Members to implement or apply four forms of intellectual property rights (IPRs) for the prevention, containment, or treatment of COVID-19.
The ostensible rationale behind the proposal was to free COVID-related medicines, vaccines, and medical products from the encumbrances of IPRs, which would allow these critical products to be made available to humanity at affordable prices. In other words, the primary objective of the “waiver proposal” was to ensure that these products are treated as global public goods.
The proposal has already been supported by about two-thirds of the members, including two major country groupings, namely, the African Group and the group of Least Developed Countries.
However, the proposal seems to have not found the favour of Dr. Ngozi Okonjo-Iweala, newly appointed WTO Director-General, as she set her priorities even before she assumed office (WTO. 2021). Reflecting on the need to broaden access to “promising new vaccines, therapeutics, and diagnostics”, Dr. Okonjo-Iweala suggested that there “should be a “third way” to broaden access through facilitating technology transfer within the framework of multilateral rules” (emphasis added). WTO DG argued that her “third way” would “encourage research and innovation while at the same time allowing licensing agreements that help scale up manufacturing of medical products” (Okonjo-Iweala. 2021).
Interestingly, Dr. Okonjo-Iweala seems to be favouring a six-decade-old demand of the developing countries that “access to knowledge and experience in the field of applied science and technology is essential to accelerate the economic development of under-developed countries and to enlarge the over-all productivity of their economies” (UNGA 1962). Technology transfer requires successful licensing of proprietary technology and also on terms that the recipients of technology, namely, the developing countries, can afford. However, later evidence showed a wide variety of problems confronted the developing countries, in particular, acquiring access to technology on fair and reasonable terms (UNCTAD 1975).
The adoption of the International Development Strategy for the Second United Nations Development Decade led to a number of initiatives for addressing the vexed issue of technology transfer. The overall context in this regard was provided in 1974 through the United Nations General Assembly Resolution, “Declaration on the Establishment of a New International Economic Order”, which was based on the proposals made by a number of developing countries. But in operational terms, the most significant decision of the UNGA was to convene negotiations for the adoption of an international code of conduct on the transfer of technology in 1977. The code negotiations were initiated a year later and were upstaged by the Uruguay Round negotiations for strengthening the norms and standards on IPRs. And, just as the TRIPS Agreement was being operationalised in 1995, the UNCTAD Secretary-General declared that Code negotiations could not be completed.
Developing countries resurrected the discussions on technology transfer in the WTO after a proposal by a group of 12 countries led to the establishment of the Working Group on Trade and Technology Transfer (WGTOT) as a part of the Doha Development Agenda. As with all the previous initiatives on this issue, the WGTOT has been a non-starter.
This paper provides an overview of the six decades of deliberations on the issue of technology transfer during the past six decades have shown that technology licensing has been one of those issues that has reinforced the North-South divide. It may, in fact, be argued that this issue has become even more contentious as the North has been able to ratchet-up the norms and standards of intellectual property protection following the adoption of the Agreement on TRIPS and has continued to push for a TRIPS-plus agenda on intellectual property protection.
When technology transfer to developing countries, which has remained an unimplementable issue as the developed countries never supported fair and equitable technology licensing, it is not difficult to see the vacuousness of Dr. Okonjo-Iweala’s suggestion, namely, the “third way”.
I. Technology Transfer: Identifying the Problems
A Brazilian submission in 1961 led to the unanimous adoption of a UN General Assembly Resolution, “The Role of Patents in the Transfer of Technology to Under-Developed Countries” (UNGA 1961). The Resolution recognised that “access to knowledge and experience in the field of applied science and technology is essential to accelerate the economic development of under-developed countries and to enlarge the over-all productivity of their economies”. In view of this, the UN Secretary-General was requested to conduct a study in “consultation with appropriate international and national institutions, and with the concurrence of the Governments concerned” with the following primary objectives: (i) a study of the effects of patents on the economy of under-developed countries, and (ii) an analysis of the characteristics of the patent legislation of under-developed countries in the light of economic development objectives, taking into account the need for the rapid absorption of new products and technology, and the rise in the productivity level of their economies.
The study submitted in 1964 made several critical observations regards the economic effects of patents, some of which seem more appropriate six decades later. These include:
- The handicaps and possible abuses from which underdeveloped countries may thus suffer in connexion with patent licensing, are basically due to the monopoly of technical knowledge, management knowledge, capital resources, and marketing access enjoyed by the firms and economies of the more advanced countries, rather than to the existence of patents as such.
- The basic problem to tackle for the international community is the one-sided relationship under which the possession of know-how and capital resources are so unequally distributed (UN 1965: 2).
In its conclusions, the report made a key observation that summed up the constraints faced by the prospective technology recipients: “Governments of under-developed countries have a legitimate interest in preventing excessive exploitation of their one-sided technological and financial dependence”, which they could address by “screening and control of license agreements, and avoidance of unduly restrictive features” (UN 1965: 50). The key recommendation of the report was that the “world community and the Governments of more developed countries can assist by inducing patentees not to be unduly restrictive in the conditions and terms on which they are willing to spread technology into under-developed countries. The study suggested that a variety of policy measures ranging from domestic compensation of patentees, provision of international funds for this purpose, equivalent investment guarantees and legislation against restrictive practices applying to business operations abroad, could be used for this purpose” (UN 1965: 7).
Almost simultaneously, in the Final Act establishing the United Nations Conference on Trade and Development (UNCTAD), the following recommendation was made on transfer of technology: “Developed countries should encourage the holders of patented and non-patented technology to facilitate the transfer of licences, know-how, technical documentation and new technology in general to developing countries, including the financing of the procurement of licences and related technology on favourable terms” (UN 1964: 219).
The transfer of technology emerged as a major issue in the 1970s. The trigger for the mainstreaming of this issue was provided by the “International Development Strategy for the Second United Nations Development Decade”, a United Nations General Assembly (UNGA) Resolution adopted in 1970 (UNGA 1970). On transfer of technology, the Resolution said as follows: “The Developed and developing countries and competent international organizations will draw up and implement a programme for promoting the transfer of technology to developing countries, which will include, inter alia, the review of international conventions on patents, the identification and reduction of obstacles to the transfer of technology to developing countries, facilitating access to patented and non-patented technology for developing countries under fair and reasonable terms and conditions, facilitating the utilization of technology transferred to developing countries in such a manner as to assist these countries in attaining their trade and development objectives, the development of a technology suited to the productive structures of developing countries and measures to accelerate the development of indigenous technology”.
In 1974, the UNGA recognised the growing inequities between developed and developing counties and called for the adoption of the New International Economic Order to bridge the development gaps. The Resolution raised the issue of the gulf between the two groups of countries and spoke of the importance of transfer of technology: “Giving to the developing countries access to the achievements of modern science and technology, and promoting the transfer of technology and the creation of indigenous technology for the benefit of the developing countries in forms and in accordance with procedures which are suited to their economies” (UNGA 1974). But in operational terms, the most significant decision of the UNGA was to convene negotiations for the adoption of an international code of conduct on the transfer of technology (UNGA 1977).
This decision to initiate the Code negotiations was facilitated by telling evidence provided several reports produced by the UNCTAD. A 1975 report titled, “Role of the Patent System in the Transfer of Technology to Developing Countries” found that “agreements, entered into by developing countries, concerning the use of patents through foreign investments or licensing arrangements 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 embodied in the contractual agreements or implicitly followed by subsidiaries and affiliates of transnational corporations, which impose heavy indirect or “hidden” costs through overcharging for imported inputs” (UN 1975a: paragraph 403). Another study conducted on the basis of inputs obtained from 26 technology receiving countries provided evidence that “a wide variety of problems confronting the developing countries in acquiring access to technology on fair and reasonable terms” (UN 1975b: 1).
II. Negotiations for an International Code of Conduct for the Transfer of Technology
In 1977, the UNGA decided to “convene a United Nations conference to negotiate and to take all decisions necessary for the adoption of an international code of conduct on the transfer of technology under the auspices of United Nations Conference on Trade and Development …” (UNCTAD 1978).
The negotiations for developing an International Code of Conduct on the Transfer of Technology (henceforth, “Code”) were, therefore, aimed at making technologies available to the developing countries. The Code was intended to facilitate an adequate transfer and development of technology so as to strengthen the scientific and technological capabilities of developing countries. The developing countries presented the following as their main arguments in support of the Code: (i) to establish general equitable rules for the international transfer of technology, taking into consideration particularly the need of developing countries and the legitimate interests of technology suppliers and technology recipients; (ii) to facilitate and increase the international flow of proprietary and non-proprietary technology under fair and reasonable terms and conditions to all countries particularly to and from the developing countries, and (iii) to increase the contributions of technology to the identification and solution of specific problems of all countries, particularly the special problems of developing countries. These arguments have remained as the basis for the subsequent interventions by the developing countries in support of the transfer of technology (UNCTAD 1978).
The negotiations produced a Draft Code in 1985, which had key features, which are critical to a proper understanding of what constitutes “technology”, together with what “technology transfer to developing countries” must constitute. Thus, the draft Code defined technology transfer as the transfer of systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service· and does not extend to transactions involving the mere sale or mere lease of goods. The draft code specified that transfer of technology transactions include:
- assignment, sale, and licensing of all forms of industrial property, except for trademarks, service marks, and trade names when they are not part of the transfer of technology transactions,
- provision of know-how and technical expertise in the form of feasibility studies, plans, diagrams, models, instructions, guides, formulae, basic or detailed engineering designs, specifications and equipment for training, services involving technical advisory and managerial personnel, and personnel training,
- provision of technological knowledge necessary for the installation, operation and functioning of plant and equipment, and turnkey projects, and
- provision of technological knowledge necessary to acquire, install and use machinery, equipment, intermediate goods and/or raw materials which have been acquired by purchase, lease or other means (UNCTAD 2001: 262-63).
However, formal negotiations on the Code ended thereafter (Roffe and Tesfachew 2002: 7) with the major groups, namely the developing countries (Group of 77) and the developed countries (Group B), failing to agree on several operational issues, for example, on the definition of “international” transfer of technology (UNGA 1985: 11). However, the major areas of contention were centered on dealing with the treatment of restrictive practices in the transfer of technology transactions (Chapter 4 of the Draft Code). The negotiating groups had differences on the conceptual approach with the treatment of restrictive practices in transfer of technology transactions, whether to adopt the so-called “competition test” or the “development test”. The approach adopted by the developing countries was that technology transfer should be treated as an instrument to meet their development imperatives, which was the approach since they had raised this issue in 1961. On the other hand, developed countries argued that restrictive practices in technology transfer should solely be determined on the basis of abuse of a dominant position of market power within the relevant market (Roffe 1985). The provisions in the TRIPS Agreement clearly adopt the “competition test”, thus putting an end to the developing country arguments.
Not surprisingly, the standstill in the Code negotiations almost coincides with the commencement of the Uruguay Round negotiations under the General Agreement on Tariffs and Trade (GATT) that brought on to the GATT negotiating table the issue of IPRs. “Technology” not only found a new forum, but also a new agenda: the focus on “technology transfer” in the UNCTAD gave way to the agenda for strengthening the regime for the protection of IPRs, culminating in the Agreement on TRIPS laying down the rules. And, finally, the code negotiations were all but abandoned just as the TRIPS Agreement became operational in 1995. The Secretary-General of the UNCTAD conceding “that the conditions do not currently exist to reach full agreement on all outstanding issues in the draft code of conduct” (UNCTAD 1995).
III. Technology Transfer in WTO
Four Articles of the TRIPS Agreement (out of a total of 73) include references to “technology transfer”: Articles 7 and 8, on the “Objectives” and “Principles”, Article 40.1 on “anti-competitive practices” in licensing contracts and Article 66.2 on “encouraging technology transfer to least-developed country Members”. These provisions are no more than “best endeavours” commitments, lacking in enforceability (WTO 2002: 1).
Developing countries made one final attempt to resurrect the issue of technology transfer, and on this occasion, in the WTO. In the run-up to the Doha Ministerial Conference in 2001, a group of 12 developing countries made a “Proposal for the Establishment of a Working Group for the Study of the Inter-relationship between Trade and Transfer of Technology. The argued that the “international trading system … should effectively address the issue of transfer of technology to developing countries to ensure that they become equal partners in the global efforts for world prosperity” (WTO 2001a: 1). The Ministers agreed to establish a Working Group on Trade and Transfer of Technology (WGTOT) that was mandated to examine “the relationship between trade and transfer of technology, and of any possible recommendations on steps that might be taken within the mandate of the WTO to increase flows of technology to developing countries” (WTO: 2001b: paragraph 37). After nearly two decades since the WGTOT began deliberating on the transfer of technology, expectedly, no progress has been made. But what is surprising is that the WTO does not seem to recognise the ongoing work in WGTOT: “trade and transfer of technology” is not included in the list of “Trade Topics” that find a mention on the Organization’s website. This should be seen as a reflection of the credibility that “transfer of technology” receives as a topic in the WTO.
The six-decade-long deliberations on the issue of technology transfer show that technology licensing has been one of those issues that has continuously reinforced the North-South divide. It may, in fact, be argued that this issue has become even more contentious as the North has been able to ratchet-up the norms and standards of intellectual property protection following the adoption of the Agreement on TRIPS and has continued to push for a TRIPS-plus agenda on intellectual property protection.
When technology transfer to developing countries, which has remained an unimplementable issue as the developed countries never supported fair and equitable technology licensing, Dr. Okonjo-Iweala will have to convince the membership why she expects her “third way” to succeed.
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Biswajit Dhar is a Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.
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