Malaysia should not accede to the four WIPO Treaties until we have a National IP Policy and fullest consultation with civil society and stakeholders

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Speech

on the Patents Amendment Bill 2006

by Lim Kit Siang  
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(Parliament, Thursday) : Deputy Minister for Domestic Trade and Consumer Affairs, Datuk S. Veerasingam, said in introducing the Patents Act (Amendment) Bill said that this was the result of the recent  Cabinet decision that Malaysia accede to the Patent Co-operation Treaty(PCT) and to accommodate the necessary changes to  the patent law in the country.

That the amendment bill before the House was because of the PCT was never mentioned in the Bill or in its explanatory statement � which is being less than honest with MPs and the public.

I want to highlight an important  issue of principle.  Parliament�s approval  was never sought or even  informed about the Cabinet decision about Malaysia�s accession to the PCT. In the era of globalization, the country is involved in bilateral, multilateral and now plurilateral negotiations and relations affecting the rights and interests of the people and nation as well as future generations.

Malaysia has signed a Free Trade Agreement (FTA) with Japan but Parliament has not been give a proper report or accounting. We have entered into FTA negotiations with Australia, New Zealand and the United States � and again Parliament has been kept in the dark.

I call on the Prime Minister, Datuk Seri Abdullah Ahmad Badawi to give this issue his serious attention, for how can we ever have  a First-World Parliament when it is  treated so  shabbily by the Executive which neither seeks nor informs Parliament about the various international treaties and agreements entered into by Malaysia.

We must clarify this important aspect of good governance, that Parliament must be involved in every case of international negotiations or agreements � whether through the whole House or a parliamentary Select Committee on international treaties and agreements.

Coming back to the bill before the House, the amendments to the Patents Act 1983 are to implement the Patent Cooperation Treaty (PCT) that Malaysia will accede to this year. 

There have also been announcements by the Minister of Domestic Trade and Consumer Affairs that Malaysia will be acceding to three additional treaties of the World Intellectual Property Organisation (WIPO) in addition to the PCT, i.e. the WIPO Copyright Treaty (WCT), the WIPO Performances and Phonograms Treaty (WPPT) and the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure (the Budapest Treaty).

These are four  of the treaties that the United States insists on including in bilateral free trade agreements.  In addition, where copyright is concerned, the United  States  wants even more than that,  i.e. the extension of the term of protection from 50 years to 75 years (in the case of the US-Oman FTA, it is 90 years).

While there has been some discussion within the Government on Malaysia joining these treaties, it is not clear on what basis any of the decisions have been made. There may have been lobbying by industry organisations, demands by some developed countries� governments, as well as capacity building exercises by the WIPO Secretariat that encourage countries like Malaysia to assume more legal obligations.  In any event, bilateral FTA talks even at the �informal� stage in the last 12 months have focused on these WIPO treaties.

It is essential that Malaysia does not accede to any WIPO treaties yet, and that a comprehensive assessment of the impact of these treaties on the country�s economy and public interests (such as access to medicines, access to educational materials, ICT development, biodiversity protection, upscaling of technology and industrial capacity) be conducted first with public participation.

Even if our laws already contain some of the provisions of the WCT and WPPT we can review them and amend as necessary. But if we accede to the treaties, and also lock them into an FTA with the US, we will not be able to make unilateral changes and worse, we could be open to the dispute settlement system under the FTA for violation of the FTA.

Since the IP Division of the Ministry of Domestic Trade and Consumer Affairs has been corporatised  there is no National IP Policy despite a number of years of work on it. what is guiding the Government in deciding on IP issues, especially in relation to the accession to WIPO treaties and in negotiating FTAs? Malaysia should not accede to any of the WIPO treaties until we have enunciated our National IP Policy and the fullest public consultation with the civil society and the stakeholders.

Treaties under the World Intellectual Property Organisation (WIPO)

From WIPO to WTO-TRIPS to WIPO

Treaties under WIPO are open to countries to accede to on a unilateral basis.  Failure in the 1980s to get developing countries to negotiate and adopt stricter and more wide-ranging legally binding treaties in WIPO led developed countries� industries to lobby for the inclusion of intellectual property during the Uruguay Round resulting in the TRIPS (Trade Related aspects of intellectual property rights) Agreement.

After the adoption of the TRIPS Agreement which Members of WTO have to accept without any choice, standards of IP protection increased dramatically in developing countries resulting in more expensive medicines, educational materials and more payments for the use of technologies most of which are held by enterprises from developed countries. An estimated USD60 billion a year was estimated as the cost that developing countries would have to bear to implement TRIPS, according to a World Bank study.

Nevertheless there were still flexibilities retained in TRIPS that countries could use.  While TRIPS set �minimum� standards largely reflecting those of developed countries, the implementation and enforcement of those standards remain within national jurisdiction.  In the case of patents, the basic rule and practice is that applications are made to national patent or IP offices (or regional offices e.g. in the EU where there is a regional patent treaty with one patent office), and these offices will then examine and decide whether a patent can be granted, in accordance with the criteria of novelty, inventive step and industrial applicability of the invention.    

Not to be left out, the WIPO Secretariat continued to work on more treaties, and in the last few years, major developed countries have stepped up efforts in WIPO to get what was not obtained in TRIPS. The growing cooperation among many developing countries in the TRIPS Council and their resistance to burdensome IPRs is another reason for the shifting of the forum to WIPO.  In particular, work on new copyright and related rights norms in the WIPO committees was intensified and in 1996 the WIPO Diplomatic  Conference on Certain Copyright and Related Rights Questions adopted two treaties, the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT).

The WCT essentially provides a wider scope of protection than the Berne Convention for the Protection of Literary and Artistic Works (Malaysia is a Party to the Berne Convention), targeting digital technology especially the internet related technology. The WCT deals with the rights  applicable to the storage and transmission of works in digital systems, the limitations on and  exceptions to rights in a digital environment, technological measures of protection and rights  management information.  The right of distribution in respect of transmissions in digital networks (with an even broader scope) and the right of rental have also entered the picture.  There are currently 58 Parties.

The WPPT deals with intellectual property rights of two kinds of beneficiaries: 

(i) performers (actors, singers, musicians, etc.), and 

(ii) producers of phonograms (the persons or legal entities who or which deal with the fixation of the sounds). 

They are dealt with in the same instrument because most of the rights granted by the WPPT to performers are rights connected with their fixed, purely aural performances (which are the subject matter of phonograms).

The WPPT grants performers and producers of phonograms four kinds of economic rights in their performances fixed in phonograms (not in audiovisual fixations, such as motion pictures): 

(i) the right of reproduction, 

(ii) the right of distribution, 

(iii) the right of rental, and 

(iv) the right of making available. 

Each of them is an exclusive right, subject to certain limitations and exceptions.

There are currently 57 Parties to the WPPT.

In reality, the recording companies (producers of phonograms), especially those from the US are the major players. Not surprising, they are a powerful lobby for expanding such IPRs (intellectual property rights) across the world, and they are the major beneficiaries.

Patents

Currently, there is no single international patent system. Developed countries and their industries have always wanted an international patent system with two  pillars: one to set legally binding norms and another to provide a procedural framework to examine and grant patents.

Although there are international treaties on intellectual property, including on patents, that set the norms and standards, their implementation and enforcement are matters for national jurisdiction. International treaties that create substantive rights and obligations (or norms and standards) on patents are: the Paris Convention for the Protection of Industrial Property which is an early WIPO treaty (Malaysia is a Party) and the WTO TRIPS Agreement (Malaysia is a Party). Despite these international treaties, there is considerable room for different national patent laws to reflect a country�s development level and priorities.

Thus ongoing work in WIPO on a Substantive Patent Law Treaty to �harmonise� patent laws and create a comprehensive set of legally binding norms are currently mired in controversy and disagreement because the proposed text goes well beyond existing international treaties and would severely curtail the flexibilities available to developing countries.  This is the substantive pillar that is not in place.

The procedural pillar is the Patent Cooperation Treaty (PCT) which is already in place but countries are free to join or not.  As a result, there has been continuing efforts to �persuade� developing countries to be Parties so that eventually all patent applications will effectively be processed under a common system.  The lack of capacity to examine patent applications is a problem in all countries � in the developing countries, expertise and experience is lacking, while in developed countries, especially the three biggest offices (the US, EU and Japan), backlog of pending applications has become a crisis.

Patent Cooperation Treaty (PCT)

The PCT is designed to enable a natural or legal person to apply for a patent in multiple countries more easily. It does this by standardizing the application procedures and requiring Parties to the PCT to accept the standarised procedure.

Instead of an applicant going to each individual country, he files one international application (indicating the countries in which he seeks to have a patent). An international search is then conducted. The following Offices have been appointed to act as International Searching Authorities:   the Australian Patent Office, the Austrian Patent Office, the Chinese Patent Office, the European  Patent Office, the Japanese Patent Office, the Russian Patent Office, the Spanish Patent and  Trademark Office, the Swedish Patent Office and the United States Patent and Trademark Office.

The purported main objectives of the PCT, according to WIPO, are �to reduce the workload of the national Patent Offices� and �to facilitate and accelerate access by industry and other interested sectors to technical information related to inventions and to assist developing  countries in gaining access to technology�.  The reality may be the opposite.

Countries that are Members of the PCT can still do their own substantive examination of the patent application to see if it should be patented, in addition to the international search that is done. However, in practice this is unlikely,  

The reality is that the PCT is more beneficial for countries with inventors who wish to apply for patents in other countries. There are only three net intellectual property exporters in the world: the USA, European Union (there is a regional patent system in place for EU members; but within the EU even Germany is not a net exporter) and Switzerland. Since the overwhelming majority of countries are net intellectual property importers, it is not in their interests to join the PCT as they do not have enough inventors to benefit from it.

A provisional estimate by WIPO of the top countries/region using the PCT in 2005 shows that the top users of the international patent system remained unchanged, namely: European Patent Convention Member States (46,446 applications or 34.6% of 2005 total), US (45,111 applications or 33.6% of 2005 total), Japan (25,145 applications or 18.8% of 2005 total), Germany (15,870 or 11.8%), France (5,522 or 4.1%) and the United Kingdom (5,115 or 3.8%).

It is not surprising that PCT membership is a requirement of an FTA with the US.

With 80-90% of the World Intellectual Property Organization�s budget in a given year coming from PCT filing fees it is not surprising that their bias in towards the rights holders. This is reflected in the capacity building and technical assistance that is given to developing countries, including the training of patent officers and judges.

The ability to examine increasingly complex applications is also confronting developed countries� patent offices (these complexities are sometimes technical but often legal, as broader and broader claims are made thus blurring the lines between inventions and discoveries or between inventions and minor changes to an old product).  Therefore the �procedural ease� offered by proponents of the PCT is attractive to many national patent offices, and its implications are often unappreciated.  One worying result is that regardless of the substantive law that may lead to an application being accepted in one country but rejected in another, the international preliminary examination (considered to be insufficient) may inevitably become the only examination as most countries are not able to conduct proper examination.  Malaysian patent examiners would be no different in their lack of adequate examination capacity.

Can the Minister furnish to Parliament  detailed information on the capacity and practice of the Malaysian IP Corporation?

The Malaysian Patent Situation

Malaysia is a Party to two  WIPO treaties: the Paris Convention for the Protection of Industrial Property (implemented by the Patents Act 1983) and the Berne Convention for the Protection of Literary and Artistic Works (implemented by the Copyright Act 1987).

Until now Malaysia had chosen not to undertake stricter and wider obligations under WIPO treaties, while fully complying with the TRIPS Agreement (in fact, Malaysia has not even fully used all the TRIPS flexibilities).

Let me focus  on patents.

The following information on  patent applications received and patent granted between 2000 and January 2006 (since Malaysia implemented the TRIPS Agreement), according to local and foreign applicants/holders, are sourced from the Malaysian IP Corporation website:

In 2000, there were 206 local and 6021 foreign applications, of which 24 and 381 respectively were granted. In 2005, there were 522 local and 5753 foreign applications, of which 37 and 2471 respectively were granted. The total applications between 2000 and January 2006 was 34,741 of which 2308 (6.64%) were local and 32,433 (93.36%) foreign.  Of the total of 10,150 patents granted from those applications, 173 (1.7%) were locally-owned and 9977 (98.3%) were foreign-owned. http://www.mipc.gov.my/index.php?option=com_content&task=view&id=3&Itemid=10

The categories of patents are difficult to fathom and need more detailed breakdown: (A) Human necessities, (B) Performing operations; transporting; (C) Chemistry; Metallurgy, (D) Textiles; paper, (E) Fixed constructions, (F) Mechanical engineering; lighting; heating; weapons, (G) Physics, (H) Electricity.

Implications of joining the PCT

1.  More will be patented

a.  Increase in applications

There is incomplete data available for the number of patent applications per country. WIPO is the body responsible for administering the PCT so it can be expected to have the best data. According to WIPO�s own data, for all countries except one, joining the PCT caused a significant increase in patent applications. For example China�s patent applications increased five-fold, Iceland�s increased 12-fold and Vietnam�s increased 15-fold.

b.  If proportion of applications granted stays the same then more patents will be granted

Assuming the Malaysian Intellectual Property Office is not overwhelmed by a 15-fold increase in patent applications and it continues to grant patents to the same proportion of applications, then judging by other ASEAN Member�s experience, 15 times more patents could be granted in Malaysia. This will have a significant effect on Malaysia�s medicine prices, ability to move up the manufacturing value chain and other 9^th Malaysia Plan objectives.

2.  International search and international preliminary examination cannot be relied on

One argument used to encourage developing countries to join the PCT is that they will benefit from the preliminary international search and examination carried out as part of the PCT application procedure which will supposedly reduce their workload.  However this preliminary search and examination appears to only search written documents. This is not in developing countries� interests.

TRIPS allows countries to check oral sources of information as well to see if an invention is really new or whether it has been done somewhere already. Oral sources of information are particularly important when applications relate to biological resources and/or traditional knowledge. 

Professor Carlos Correa, the pre-eminent lawyer and economist on these issues and TRIPS negotiator for Argentina during the Uruguay Round, has recommended that developing countries only grant patents after checking oral and written sources of information so as to only grant patents to really new inventions. This is because net intellectual property importing countries (ie all countries except the three developed countries mentioned above) should grant as few patents as they can (given the minimum requirements of the WTO�s TRIPS agreement). This is because the more patents they grant, the more royalties they have to pay to foreigners. For example, in Vietnam, 97% of medicine patents are held by foreigners.

3.  Effect on the 9^th Malaysia Plan

a.  Health/quality of life

The 9^th Malaysia Plan emphasizes the importance of improving quality of life. As a greater proportion of medicines in Malaysia will be patented if it signs the PCT, this means Malaysians will have to pay the higher monopoly price for all these patented medicines. It has been found that patented medicines can be 1044% more expensive than their generic versions in Malaysia.

A World Health Organization funded study found that for a family of 3 with some minor health problems, it would take the lowest level Malaysian government official 2 months of salary to afford one month of medicines if generics were not available.

b. Moving up the value chain

According to the 9^th Malaysia Plan, Malaysia should move up the value chain. However in higher technology industries, the inputs are also technology. If a greater proportion of machinery etc is patented in Malaysia because it joins the PCT, this will increase the cost of inputs (as more royalties will have to be paid) and make it harder for Malaysia to move up the value chain. (This would be exacerbated under a USFTA which, based on existing USFTAs, would require all Malaysia�s tariffs to be bound at 0% making it very difficult to start new industries higher up the value chain as they are exposed to competition from imports from day one).

c. Biotechnology

As already explained, to foster a biotechnology industry in Malaysia, Malaysia actually needs to grant as few patents as possible in Malaysia. The main thing is that patents continue to be granted to Malaysians in the main markets for the products of a Malaysian biotechnology industry, ie the USA and European Union.  Given the low level of research and innovation at the moment, it is doubtful that Malaysians will break into the US patent market. But by making it easier to patent in Malaysia, the country�s biological resources are in danger of being expropriated.

Not all countries are members of the PCT

61 countries  are still not PCT members, despite pressure from US branded pharmaceutical manufacturers. The US Government has also been pressuring countries to join the PCT, for example via its free trade agreements. All recent US Free Trade Agreements have required the countries signing them to join the PCT.

Some of the countries that are not yet PCT Members are fellow ASEAN members (Brunei, Cambodia, Myanmar and Thailand), and/or are countries that have higher incomes per capita than Malaysia (such as Saudi Arabia, Kuwait, Lebanon and Malta) and presumably they have decided it is not in their best interests to join.

Conclusion

The World Trade Organization's agreement on intellectual property (TRIPS)
has already cost us money because it raised the level of intellectual property protection.

The former chief of trade policy research in the World Bank, Michael Finger
(Finger, J.M. (2002).  �The Doha Agenda and Development: A View from the
Uruguay Round�. Asian Development Bank, Manila), estimates that the
obligations on developing countries to implement TRIPS will result in
increased payments by them of US$60 billion a year. A report by the World
Bank (2002) estimates that the net annual increase in patent rents resulting
from TRIPS for the top six developed countries in this field will be US$41
billion  (with the top beneficiaries being the US with $19 billion, Germany
$6.8 billion, Japan $5.7 billion, France $3.3 billion, UK $3 billion and
Switzerland $2 billion).  Developing countries that will incur major annual
net losses include South Korea ($15.3 billion), China ($5.1 billion), Mexico
($2.6 billion), India ($903 million) and Brazil ($530 million).

Is the Minister able give comparative figures as to the costs to Malaysia?

Let us look at other  good examples of how unaffordable branded/patented
medicines in Malaysia already are:

1) difference between price of branded version of the antibiotic Amoxycillin
Oral Suspension 125mg/5ml and generic version is 1044% according to �TRIPS,
Patents, Technology Transfer, Foreign Direct Investment and the
Pharmaceutical Industry in Malaysia�, Ida Madieha Azmi and Rokiah Alavi,
Journal of World Intellectual Property, Vol 4 No. 6, November 2001. This
article was written by two Malaysian academics (law and economics
respectively) based on their research on the Malaysian pharmaceutical
industry.

2) A survey of medicine prices in Malaysia carried out in collaboration with
the World Health Organization shows how unaffordable the non-generic
medicines are for ordinary Malaysians. It gave an example of a hypothetical family: lowest level government worker with a wife and child where the husband has depression and a peptic ulcer, the wife has a viral infection and the son has asthma. It would take nearly 2 month�s salary to buy 1 month of medicines for this family if non-generic medicines had to be purchased.

Patented antiretrovirals to treat AIDS used to be US$15,000 per patient per
year. The generic versions (just as safe and effective) are US$150 per
patient per year.

USFTA provisions on intellectual property are almost identical in all
USFTAs. Therefore it is easy to get an idea of what patent etc provisions
Malaysia will have to agree to if it wants a USFTA.

The Peruvian Ministry of Health estimated the impact of the standard USFTA
provisions on the price of medicines in Peru. Peru's population is 27
million. The impact of data exclusivity alone (one of the seven  ways USFTAs
raise medicine prices) would mean an extra US$34million would have to be
spent to buy the same medicines. In 2003, the total spending by the Peruvian
Ministry of Health on medicines was US$35million. Other studies by the World
Health Organization and other Latin American governments signing USFTAs have
found similar results.

Have we got such studies as to the costs to Malaysia?

This fortify my submission that before signing the PCT or amending Malaysia�s laws to implement the PCT, Malaysia should do a thorough cost benefit analysis of the impact of such a move on all Malaysians, both intellectual property owners as well as consumers in the light of the 9^th Malaysia Plan objectives.

(10/05/2006)