Brian Fallow: US trade demands a real sore point

Aspirin could be patented again if the Americans have their way. Photo / Glenn Jeffrey

What the United States is seeking on intellectual property in the transpacific trade talks has been leaked. Some of it looks downright sinister.

A balance has to be struck between on the one hand fostering innovation and creativity, by protecting the fruits of such labours, and on the other stifling progress, by making it too difficult and costly to access and build on the discoveries of others.

In the context of trade negotiations, countries' views will naturally depend very much on whether they are net exporters or net importers of goods and services with a high intellectual property content.

That said, it is hard not to choke on this provision in the leaked US draft of an intellectual property rights chapter for a Transpacific Partnership Agreement:

"Each party shall make patents available for inventions for the following:

(a) plants and animals, and

(b) diagnostic, therapeutic and surgical methods for the treatment of humans or animals."

Professor Susy Frankel, who teaches intellectual property law at Victoria University, says that under New Zealand law, patents are not available for those things.

It is judge-made law at the moment but legislation before Parliament, and already reported back from select committee, would put that exception into statute.

Clause (b) would also completely reverse a provision in the existing free trade agreement between Australia and the US.

Also, the US NGO Knowledge Ecology International says that under US law, surgeons who perform patented surgical methods are not liable for patent infringement. Which raises the question of what was the point of granting a patent in the first place?

Indeed one might wonder about the idea that a method of doing something should be patentable. Where would that end? Should the Duke of Windsor have derived an income from his invention of the Windsor knot?

Frankel says the draft text would extend the patent protection for new uses of existing products like pharmaceuticals, even if the "advances" are very incremental.

Take aspirin, long out of patent for its original use of pain relief.

It was discovered that it had blood-thinning properties. A new patent could be granted for a particular dosage for that new use.

But suppose it was discovered that the dosage should be higher?

"This is about trying to get a patent for that third thing as well," Frankel said. "It's ludicrous and all it does is push up the cost."

Our law allows the parallel importing of copyright (but not patented) goods.

These are not pirated or counterfeit goods. They have been produced legitimately for another market, where they are for sale at lower prices than the right-holders want to charge here.

The draft US text wants to stomp on that, too.

The US also seeks to extend the term of copyright from the life of the author plus 50 years to life plus 70 years. A recent study by the Australian Productivity Commission said conceding that would cost Australia between $70 million ($95 million) and $240 million.

Rick Shera, IP partner with the Auckland law firm Lowndes Jordan, said the draft text reopened the vexed issue of the role of internet service providers in policing intellectual property rights.

As ISPs are the conduits for infringing material, the film and music industries have targeted them around the world as the best place to throttle it.

"We thought we had almost got to the end of of it with the Copyright (Infringing File Sharing) Amendment Bill due to be passed in the next couple of months," Shera said.

"Imagine you are an ISP who has had to bear the cost of gearing up for that regime, only to be told that it is groundhog day and we are all going back to the section 92A debacle."

The issues around how to deal with creativity in the digital age have been debated and consulted on for 10 years.

Fine balances have been achieved and endorsed by legislators, Shera said, but the US agenda in the secretive TPP process would drive a coach and horses through much of that.

It is not hard to understand where the US is coming from.

Lobbyists for its IP-intensive industries claim they account for about 60 per cent of US exports, spend about US$150 billion ($198 billion) a year on R&D and employ 18 million Americans at salaries significantly higher than workers in non-IP-intensive industries.

"As the most innovative and creative economy in the world the United States has the most to lose from weak IP standards," said the IP Taskforce of the US Business Coalition for TPP.

"To retain high-quality knowledge-based jobs in the United States and for the US to further develop its comparative advantage in the global trading arena it is imperative that the US Government ensure the TPP IPR provisions reflect the highest standards."

The New Zealand position, which has also found its way into the public domain, is rather different.

It opposes a one-size-fits-all IP regime for a group of countries as diverse as the TPP partners (Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam).

It argues that the World Trade Organisation's TRIPS agreement strikes the right balance between protection and flexibility and there is no need to go further.

TRIPS includes flexibilities which are "designed to allow technology-importing countries to make the same transitions that technology-exporting countries made to become knowledge-rich countries".

Particularly in the digital environment many innovations occur in a rapid and sequential manner, by one innovator moving quickly to build on the work of another, the New Zealand paper says. Overly strong intellectual property rights could inhibit rather than promote innovation.

It also notes a tendency in many countries for intellectual property rights to become easier to obtain and rapidly increase in number - without any evidence of a concomitant rise in innovative or creative activity.

"Rather, what has occurred is a significant rise in disputed rights, litigation and backlogs, raising the costs of IP rights for both users and innovators."

The bottom line is clear. The Government should beware of rolling over to US protectionism on intellectual property in the hope, probably vain, of making inroads on US protectionism in the dairy industry.