Keep substantive patent law harmonisation away from Free Trade Agreements

Substantive patent law harmonisation does not belong into Free Trade Agreements. Patents may be a barrier to international trade when they discriminate foreign applicants. But the trade mechanism is unsuitable to pursue all other policies than mutual reduction of tariff and non-tariff trade barriers. Not only do FTA imply forum shopping but undermine parliamentary deliberations and national sovereinity.

Jagdish Bhagwati, In Defense of globalization, ceides the TRIPs agreement:

TRIPS, by contrast, were like the introduction of cancer cells into a healthy body. For virtually the first time the corporate lobbies in pharmaceuticals and software has distorted and deformed an important multilateral institution, turning it away from its trade mission and rational and turning it into a royalty collection society.

Why did TRIPs make a free trade advocate so angry? You don't find Noble laureates ranting all the time. It is easy to explain why patent law is an alien element in Trade Instruments: Trade negotiations are all about the mutual beneficial reductions of barriers to international trade. These consist of tariffs (custom fees and import and export quota) and other discriminatory practices (non-tariff trade barriers). Foreign trade economist made up various models that demonstrate why that deescalation process is in most of the cases beneficial for both sides. Reduction of trade barriers was the success story behind the GATT agreement.

In the Uruguay round of GATT the Marrekech agreement, accepted under strong pressure by the United States, added another protocol that can be seen a cuckoo egg of internal trade: TRIPs (Trade Related Aspects of Intellectual Property Rights) introduced a general policy matter into trade talks. Unlike other policy instruments trade talks are very much one-sided: they always aim for the reduction of trade barriers. Trade Talks do not include any political balancing process. This is powerful. When you would insert a losely trade related aspect a - say labour standards - negotiations would focus in the next 30 years on raising lower standards whether it makes sense in economic terms or not.

Despite its name "Trade Related Aspects of Intellectual Property Rights" the agreement introduced substantive provisions of patent law which defined for which subject matters patents should be made available. They are often referred to as 'minimum standards' because nations are free to go beyond. TRIPs 27 specifies:

1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.

Provisions like these belong into substantive patent law treaties as the WIPO SPLT. With TRIPS 'minimum standards' for substantive patent law beeing entered the dangerous escalation process now applies to patent laws as well.

It is true that Patents can be barriers to international trade when national patent laws discriminate foreign applicants. But statutory laws patent laws are to be governed by national legislative procedures and follow a "territorial principle". TRIPs was a tool to impose patent laws on all WTO members and is worded as to create a slippery slope to go beyond. Thus Europe and India were put under pressure to introduce software patents although software is not considered to be a 'field of technology' within the meaning of patent law or TRIPs, and with respect to the European Patent Convention 52.2 software is not even considered as an 'invention'. Also TRIPs is often mistaken for an executive treaty while it is governed by trade procedures. National courts cannot base their decisions on TRIPs provisions.

Economist Fritz Machlup warned in the conclusion of his famous review of the patent system for the US Congress against an one-size-fits-all approach.

If one does not know whether a system "as a whole" (in contrast to certain features of it) is good or bad, the safest "policy conclusion" is to "muddle throughn-either with it, if one has long lived with it, or without it, if one has lived without it. If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knwoledge, to recommend abolishing it. This last statement refers to a country such as the United States of America-not to a small country and not a predominantly nonindustrial country, where a different weight of argument might well suggest another conclusion.

To the great surprise of most persons his conclusions are still generally accepted by contemporary economists although the expansion of the patent system to fields as software and business methods without proper economic evidence raise much greater objections as the threshold of starting software development is low and some consider it a cultural technique. Notably, business method patenting substantially retrains the freedom of action as the core principle of a market economy. With the diffusion of software in all fields of our every day lives the same applies to software patenting. In the 19 century it were these restrictions against which the liberal economic movement rallied and called for both free trade and freedom of markets, most of them strongly advocated for patent system abolishment. It is a counter-intuitive to see free trade instruments instrumentalized to restrict market freedom. MEP Daniel Cohn-Bendit, a leader of the Greens group in the European Parliament and a 68' protests celebrity in France, noticed that at a software patent hearing and was very surprised by that notion as it collided with his Weltanschauung of the free market movement.

Bruce Lehman, a father of the Us software patenting under Clinton, admitted that TRIPs was no good deal for the US and acknowledged an inclusion of labour and environmental standards would have been better to save the US manufacturing sector. Thus, his underlying conception still holds to divert the trade process to promote general policy matters abroad.

It is recommendable for policy makers in the international trade system to go back to the rationale of free trade. This implies to keep substantive patent law harmonisation away from trade instruments.

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