Excessive IP restrictions lock up innovation in the name of protecting it, and can only harm a small economy such as New Zealand, argues Victoria University of Wellington’s Professor Susy Frankel.

New Zealand’s intellectual property (IP) alignment with large developed economies can be self-defeating for supporting local innovation as the many demands of the pharmaceutical industry leave the country a victim of “the patent paradox of locking up innovation in the name of protecting it”, says new Royal Society Te Apārangi Fellow Professor Susy Frankel.

Frankel is Chair in Intellectual Property and International Trade in the School of Law at Victoria University of Wellington and was speaking during a Royal Society afternoon of New Fellows’ Seminars.

Instead of agreeing to the excessive IP restrictions in patent agreements led by large developed economies, New Zealand needs a more nuanced approach, said Frankel.

“This stance of alignment with the large developed economies of the world is often problematic, as we end up progressively limiting our options,” she said.

“Nuanced policy acknowledges that alignment with both the developed and developing world is important. It recognises that as a small developed country we share interests not only with the developed world but with the developing one. Particularly around access to technology and innovation potential.

“Reflecting nuanced policy in the law requires in-depth research and strategy to achieve much better access to innovation and better local innovation.

“In my view and in my research, supporting nuance can achieve much, much more. In pharmaceuticals alone, we need to ask questions about why we don’t have incentives for the generics industry. Particularly with the biotechnology and gene editing potential in this country. There are questions around why we don’t parallel import pharmaceutical products to. Singapore does. Why do we not do so?”

However, said Frankel, IP licensing is important and overall New Zealand is not very good at it. “Recently, I heard a discussion about whether you should bother patenting at all because wouldn’t it be better to share it? IP doesn’t mean you have to charge high prices. It means you protect your IP for the ability to share it how you choose.”

Patent law, she said, is fundamentally premised on the notion that exclusivity over invention uses is necessary to incentivise innovation.

“It is well known that some industries claim the need for patents more voraciously than others. The pharmaceutical industry is very much built on and commands the role of patents.”

Meanwhile, in other industries, such as computing, many groups eschew patents and disclose inventions freely to the public.

In the guise of incentivising innovation and being necessary to recoup investment, patents “remain quite a naked Faustian bargain”, said Frankel.

“Increasingly, more patents are granted for incremental developments. Patent law sometimes characterises this as incremental innovation, but perhaps it is a term that is self-defining, hence why I choose ‘incremental development’.

“Pharmaceutical patents exist for novel chemical compounds and for biologics, a very important growing area of pharmaceuticals. Patents can also be granted for the first use of those substances, for second uses and subsequent uses, for new dosage regimes and new patient groups.

“This is effectively getting a patent for aspirin for its analgesic qualities and then another for manufacturing the same thing but for blood thinning; then another patent for finding out that a lower dose may be more effective in some heart patients; and then another still for changing the patient group that might benefit from the lower dose.”

International patent law is enshrined in the World Trade Organisation’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which came into effect in 1995.

The agreement “arose primarily from the United States and European Union desire to protect their comparative advantage in IP goods at a time when they had lost comparative advantage in manufacturing some of those goods and many goods overall and were more likely to have their IP copied in foreign markets”, said Frankel.

“For developed countries, TRIPS solved part of their export problem and it goes some way towards limiting copying in foreign markets, but for developing countries it created another series of problems.

“Broadly, the products developing counties sell – raw commodities and manufactured goods – are price competitively and therefore often earn rather scant returns, while the ‘knowledge products’ developing countries must buy, mostly from the developed world – pharmaceuticals, manufacturing equipment, research equipment, educational materials and even infant formula – are frequently priced above marginal cost because they are patented, copyrighted and trade-marked in various ways.

“Intellectual obligations to impose high standards of IP protection can therefore cause considerable injustice, for these rights redirect funds from poorer countries to rich ones.

“At the same time, proponents of raising world standards point to the post-TRIPS success for countries – right now that would be China in particular – and suggest that strong protection will benefit other developing countries as well.

“The innovation incentive premise can be very strong, IP laws can create powerful inducements to domestic innovators; furthermore, IP laws should promote technology transfer, help establish local creative industries and motivate governments to prioritise activities that move their research and industries to the innovation frontier.

“However, these outcomes are not just driven by IP and neither are they linear or indeed guaranteed. The framing of the IP debate neither takes into account the role of small market economies such as New Zealand nor addresses effectively that innovation can take place and often does in value networks that cross borders.”

For pharmaceutical companies, said Frankel, “TRIPS was never enough anyway and that is why many of the protections of secondary and third uses and so on continued through free trade agreements”.

Although the Comprehensive and Progressive Trans-Pacific Partnership suspended many of the patent-related provisions in its predecessor, the Trans-Pacific Partnership, those provisions have appeared again in the ongoing negotiations for a Regional Comprehensive Economic Partnership, which would cover roughly half the world’s population, including New Zealand.

The same provisions have also been “reborn on steroids” in the United States-Mexico-Canada Agreement.

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