Oddi InternationalPatentSystem 1987

The International Patent System and Third World Development: Reality or Myth?
Author(s): A. Samuel Oddi

Source: Duke Law Journal , Nov., 1987, Vol. 1987, No. 5 (Nov., 1987), pp. 831-878
Published by: Duke University School of Law
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THE INTERNATIONAL PATENT SYSTEM AND
THIRD WORLD DEVELOPMENT:
REALITY OR MYTH?
A. SAMUEL ODDI*
This article examines the impact on Third World countries of their

membership in the international patent system. Professor Oddi begins
by discussing the traditional rationale for the existence of a patent sys-
tem. He concludes that although this rationale may have some validity
for developed countries, the rationale is not applicable to developing
countries. The institution of a patent system in a developing country
may confer significant social costs on that country; membership in the
international patent system may exacerbate those costs. For those coun-
tries that do belong to the international patent system, Professor Oddi
suggests changes to ameliorate the costs they will bear.
I. INTRODUCTION
The debate over whether a country should have a patent system

probably been going on ever since someone had the ingenious i
the sovereign should grant exclusive rights, if only for a limited t
inventors as an incentive to invent.1 There has been no clear victor in the
debate, and the patent system has prospered and waned with the cyclic
frequency that one would expect of any doctrinaire system.
In the most recent debate over whether the patent system results in
a net benefit or a net cost to a particular society, the general conclusion,
at least of certain economists, appears to be that if a developed industrial-
ized country has a patent system there is insufficient evidence available to
recommend that the patent system be abolished; conversely, neither does
the available evidence suggest the adoption of a patent system if one does
not already exist.2 Such an irresolute conclusion may give us pause; after
* Professor of Law, Northern Illinois University College of Law. The author wishes to ex-
press his appreciation for the research assistance of David Garner, J.D. 1987, Northern Illinois
University College of Law, in the preparation of this article, and also to acknowledge the financial
support extended to Mr. Garner by the Illinois Bar Foundation to provide such assistance.
1. Although the first known patent statute, the Venetian Statute of 1474, was enacted by a
large majority (116 for to 10 against and 3 abstaining), all senators evidently were not convinced of
its merits. See Mandich, Venetian Patents (1450-1550), 30 J. PAT. OFF. SOC'Y 166, 176 (1948)
(translated by F.D. Prager from Mandich, Le Privative Industriali Veneziane (1450-1550), 34
RIVOSTA DI DIRITTO COMMERCIALE 511 (1936)).
2. See STAFF OF SENATE SUBCOMM. ON PATENTS, TRADEMARKS AND COPYRIGHTS, 85TH
CONG., 2D SESS., AN ECONOMIC REVIEW OF THE PATENT SYSTEM, STUDY NO. 15 (Comm. Print
831

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832 DUKE LAW JOURNAL [Vol. 1987:831
all, the patent system has at least a five-hu

been embraced, presumably as sound public
the nations of the world-whatever their
development.3
It is more troubling, perhaps, that many of
national patent system as it relates to deve
cluded that it is economically unsound for
patent system if an overwhelming majority of
eigners.4 Nonetheless, despite the lukewarm
patent systems within developed countries
ment of participation by developing countrie
system, we appear to be in a period of patent
so not only in developed countries,5 but als
1958) (F. Machlup auth.) [hereinafter Machlup]. Machlup's

companying note 52. His conclusion has been reaffirmed in l
Patent Laws be Abolished?, 11 J. CONTEMP. L. 389, 421 n.93
Competitive Policy, 44 N.Y.U. L. REV. 450, 453-55 (1969); c
TRUST LAW 32 (1973) ("But given appropriate standards for
supporting the long-standing legislative judgment that a consum
a patentee the temporary right to exclude others from free
resources are thereby better allocated."); Kitch, The Nature
J.L. & ECON. 265, 275-80 (1977) ("[A] legal system which has
better serve the public welfare than a legal system with o
similar to Machlup's with respect to copyrights, see Breyer, Th
of Copyright in Books, Photocopies, and Computer Program
3. Baxter lists 172 countries that have enacted patent stat
LAW AND PRACTICE xvii-xix (1987).
4. See, e.g., U. ANDERFELT, INTERNATIONAL PATENT
COUNTRIES 137-39 (1971); E. PENROSE, THE ECONOMICS O
TEM 110-17 (1951); Greer, The Case Against Patent Systems
L. & ECON. 223 (1973); Grundmann, Foreign Patent Monopoli
ical Analysis, 12 J. DEVT'L STUD. 186 (1976); Kronstein & Til
Patent Convention, 12 LAW & CONTEMP. PROBS. 765, 766 (1
Function in Developing Countries, 9 J. DEVT'L STUD. 71, 89-
Convention and Less Developed Countries, Discussion Pape
nomic Growth Center, Nov. 1973). Compare this view with th
patent system is advantageous to developing countries. See
MARKS AND RELATED RIGHTS: NATIONAL AND INTERN
Dale & Huntoon, A Cost-Benefit Study of the Domestic and
THE PAT. TRADEMARK & COPYRIGHT J. RES. & EDUC. 351
of the International System of Patent Protection in the Inter
REV. INDUS. PROP. & COPYRIGHT L. 649 (1979); Lall, The
Technology to Less-Developed Countries, 10 J. WORLD TRA
reference to developing countries will be to those generally f
unless otherwise indicated.
5. The United States recently has expanded the scope of pa
ples are the extension of the term of certain patents relating
(1982 & Supp. III 1985), and the extension of the scope of pate
components in or from the United States for an invention to b
U.S.C. ? 271(f) (Supp. III 1985) (overruling Deepsouth Packin

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Vol. 1987:831] INTERNATIONAL PATENT SYSTEM 833
including those with centralized market systems.6

We are also in an era of great imbalances in internationa
special concern is the huge foreign trade deficit of the Uni
compared to the huge trade surpluses of some of our key al
ticular Japan.8 Indeed, some newly emerging industrial nati
the Republic of Korea, are showing large trade surpluses.9 T
ances have increased pressure within the United States to ad
tionist" trade measures, contrary to our announced policy
trade."10 In addition to the traditional form of import restric
(1972)). Further legislation has been proposed to protect United States process-
against competition from imported products made abroad by the patented process.
380, 100th Cong., 1st Sess., 133 CONG. REC. H154 (daily ed. Jan. 7, 1987). At leas
considered during the last session of Congress for extending the term of patents c
drugs and agricultural and industrial chemicals. See 32 Pat. Trademark & Copyrig
793, at 442-43 (Aug. 21, 1986). See also infra note 10 for other proposed legislatio
Court has also expanded protection. See, e.g., Diamond v. Diehr, 450 U.S. 175 (1
controlled process is patentable subject matter); Diamond v. Chakrabarty, 447 U.S.
ing human-made microorganism is patentable subject matter).
It is interesting to note that at least 10 other countries extend patent protection
nisms. See 2A J. BAXTER, supra note 3, app. at 2A-14 to 2A-21. Additionally,
Jordan, Morocco, Pakistan, Syria, Uruguay, and Zimbabwe, all of which are develo
extend patent protection to computer programs. Id. app. at 2A-2 to 2A-9.
6. E.g., Patent Law of the People's Republic of China of Mar. 12, 1984, reprin
lated in 27 Pat. Trademark & Copyright J. (BNA) No. 673, at 530 (Mar. 29, 198
7. The United States had trade deficits of $144.34 billion in 1986, $122.15 bi
$112.51 billion in 1984, $67.08 billion in 1983, $36.45 billion in 1982, and $27.97
INTERNATIONAL MONETARY FUND, 1987 INTERNATIONAL FINANCIAL STATISTIC
8. Japan had trade surpluses of $92.65 billion in 1986, $55.99 billion in 1985, $4
1984, $31.46 billion in 1983, $18.08 billion in 1982, and $19.96 billion in 1981. Id
had trade surpluses of $7.72 billion in 1986, $12.62 billion in 1985, $16.59 billion
billion in 1983, $14.96 billion in 1982, and $6.61 billion in 1981. Id. at 259. The Fede
Germany had trade surpluses of $53.63 billion in 1986, $28.82 billion in 1985, $22.02
$21.48 billion in 1983, $25.03 billion in 1982, and $16.46 billion in 1981. Id. at 3
9. South Korea went from a trade deficit of $19 million in 1985-to an overall t
$4.20 billion in 1986. Id. at 439. South Korea had a $7 billion surplus with respe
States. Burgess, U.S. Protectionism Feared, Wash. Post, Feb. 8, 1987, at HI, col.
10. This policy appears to have bipartisan support. In President Reagan's Stat
address on January 27, 1987, he announced the Administration's intention to prom
ness" by introducing "legal and regulatory reforms and weapons to fight unfair t
President's State of the Union Address, 23 WEEKLY COMP. PRES. Doc. 59, 63 (Fe
message submitted to Congress the same day entitled "A Quest for Excellence,"
included under the heading "Better Protecting Intellectual Property" proposed stat
that would:
Encourage patent owners to engage in newer and more novel ways to license their patents
by limiting the "patent misuse doctrine";
Raise protection for products resulting from patented processes to the same level as that
accorded such products by our major trading partners;
Amend the Clayton Antitrust Act to provide a more flexible standard of review for intel-
lectual property licensing arrangements;
Restore the bargaining power of parties contracting to license technology by codifying and
clarifying the Supreme Court holding in Lear v. Adkins;

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as tarriffs or quotas, we are witnessing an evo

protectionism.""1 For example, the United St
islative and diplomatic action to assure that t
oped within the United States receive rec
other countries.12 If a country fails to pro
Eliminate the current injury requirement from section 337

Trade Commission to exclude imports;
Restore the term of patents covering agricultural chemic
to a maximum of five years to account for the period
premarketing regulatory review and testing.
See President's Message to Congress: A Quest for Excellen
69 (Feb. 2, 1987). On February 19, 1987, the Administration
ment, and Productivity Act of 1987," which includes as Title
Rights Improvement Act of 1987." This Act would impose t
trust actions involving technology licensing (? 3102), permit
process patented in the United States (? 3103), and require a
patent misuse (? 3105). See 52 Antitrust & Trade Reg. Re
1987).
In the House, the Omnibus Trade Bill, H.R. 4800, 99th Cong., 2d Sess., 132 CONG. REC. H3225
(daily ed. May 22, 1986), passed in 1986. The bill was reintroduced by Representative Gephardt as
H.R. 3, 100th Cong., 1st Sess., 133 CONG. REC. H101 (daily ed. Jan. 6, 1987) and passed on April
30, 1987, 133 CONG. REC. H2981 (daily ed. Apr. 30, 1987). This bill would amend section 337 of
the Tariff Act of 1930, 19 U.S.C. ? 1337 (1982 & Supp. III 1985), to make it easier for owners of
U.S. intellectual property to exclude foreign imports. H.R. 3, 100th Cong., 1st Sess. ? 172, 133
CONG. REC. H2898 (daily ed. Apr. 30, 1987). It would also require the U.S. Trade Representative to
identify those countries not providing adequate protection to U.S. intellectual property and to nego-
tiate with those countries to secure such protection and market access to those countries. Id. ? 173,
133 CONG. REC. H2899 (daily ed. Apr. 30, 1987).
In the Senate, Senator Bentsen introduced the Omnibus Trade Bill of 1987, S. 490, 100th Cong.,
1st Sess., 133 CONG. REC. S1851-59 (daily ed. Feb. 5, 1987), which would incorporate S. 468, 100th
Cong., 1st Sess., introduced by Senator Lautenberg, 133 CONG. REC. S1795-97 (daily ed. Feb. 4,
1987). The bill would amend section 337 of the Tariff Act of 1930, 19 U.S.C. ? 1337, and also
provide for monitoring the transfer of technology between the United States and foreign countries
and the scope of intellectual property protection provided by foreign countries. See 33 Pat. Trade-
mark & Copyright J. (BNA) No. 817, at 340-41 (Feb. 12, 1987).
11. See Barton, Coping with Technological Protectionism, HARV. BUS. REV., Nov.-Dec. 1984,
at 91 (Modern mercantilism protects nations' technological bases.) [hereinafter Barton 1984].
12. Current legislation includes the Semiconductor Chip Protection Act of 1984, Pub. L. No.
98-620, 98 Stat. 3347 (codified at 17 U.S.C. ?? 901-914 (Supp. III 1985)). See also infra note 13.
Legislation was proposed in the 99th Congress, and is likely to be reintroduced, on providing protec-
tion for computer software only on a reciprocal basis. The International Computer Software Protec-
tion Act of 1985, S. 339, 99th Cong., 1st Sess., 131 CONG. REC. S883 (daily ed. Jan. 31, 1985).
With respect to semiconductor chips, the Commissioner of the Patent and Trademark Office
reported to Congress on November 7, 1986, that 16 countries were eligible for interim protection
authorized under section 914 of the Semiconductor Chip Protection Act of 1984, because (1) they
made good faith efforts toward providing reciprocal protection to U.S. nationals, (2) their nationals
were not misappropriating U.S.-protected works, and (3) such interim protection would promote
international comity. See 33 Pat. Trademark & Copyright J. (BNA) No. 806, at 51-52 (Nov. 20,
1986).
Diplomatic efforts were also successful in securing agreement that the Republic of Korea would
amend its patent law to include protection for chemical and pharmaceutical products and their new
uses and for microorganisms. In addition, the Korean government agreed to extend increased pro-

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Vol. 1987:831] INTERNATIONAL PA TENT SYSTEM 835
innovations as is provided in the United States, innovations origin

that country will be denied protection in the United States. In
trade sanctions could be imposed on products sought to be import
the United States from that country.13 The general idea of su
ures is to minimize copying of American innovations abroad an
prove the ability of American enterprises to compete in the inter
market. 14
Most Third World countries find themselves facing the same type of
trade imbalance as the United States.15 They also find themselves
strapped by large debts, to the point of default, arising in considerable
measure from such trade imbalances.16 This negative balance of trade is
tection for trademarks and copyrights. See Quigg, American Bar Association Address, 68 J. PAT.
OFF. Soc'Y 351, 372-74 (1986).
13. Legislation has been proposed to impose trade sanctions on countries that do not provide
adequate domestic protection of intellectual property rights originating in the United States or that
deny market access to United States enterprises relying on such rights. Anti-Piracy and Market
Access Act, S. 335, 100th Cong., 1st Sess., 133 CONG. REC. S953-56 (daily ed. Jan. 20, 1987). It is
also likely that legislation corresponding to the Technology Transfer and Intellectual Property Pro-
tection Act, S. 2663, 99th Cong., 2d Sess., 132 CONG. REC. S9389-91 (daily ed. July 21, 1986), will
be introduced, which would impose trade sanctions on countries that condition access by United
States firms to the market of that country on the transfer of those firms' technology.
14. The political rhetoric is much stronger,-for example, Representative Dingell's remarks
before the House Energy and Commerce Subcommittee:
[A]ll the companies and workers of this country ask is a level playing field. Yet, with a few
exceptions, this Administration continues to turn the other cheek when country after coun-
try targets industry after industry. . . . First, the intellectual property of our industry is
stolen. Then our foreign markets are flooded with counterfeits.... Finally, our firms are
driven out of business, or close to it-and, all the while, their markets are insulated from
meaningful competition.
32 Pat. Trademark & Copyright J. (BNA) No. 799, at 609 (Oct. 2, 1986). In introducing the Inter-
national Intellectual Property Protection and Market Access Act of 1986, S. 2435, 99th Cong., 2d
Sess., 132 CONG. REC. 55752-56 (daily ed. May 12, 1986), reintroduced as S. 335, 100th Cong., 1st
Sess., 133 CONG. REC. S953-56 (daily ed. Jan. 20, 1987) (under the title "Anti-Piracy and Market
Access Act"), Senator Wilson remarked:
In the area of intellectual property protection, plainly stated, criminals around the world
are costing American companies billions of dollars by cranking out millions of unauthor-
ized copies of U.S. records and tapes, movies, books, toys, computer programs, as well as
by expropriating patents and process patents, developed at great expense by U.S. compa-
nies, to make bootleg pharmaceuticals and chemicals.
What makes this illegal activity all the more outrageous is that it is often protected by
governments we consider friendly to the United States. Indeed, in many cases we have
provided special trade benefits in order to help them develop their economies.
132 CONG. REC. S5752 (daily ed. May 12, 1986).
15. See Appendix.
16. Id. The importance of a developing country's ability to generate a surplus in international
trade is dramatically illustrated by the decision of Brazil in February 1987 to suspend interest pay-
ments on its commercial loans of $67 billion out of its total debt of $107 billion. Troell & Cohen,
Brazil Debt Action Poses Challenge for Major Banks, Wall St. J., Feb. 23, 1987, at 3, col. 4. This
decision appears to have been precipitated by a drop in Brazil's trade surplus to $129 million in
January 1987 from an average of $1 billion per month during the first three quarters of 1986. The
January figures were the lowest in four years. Langfur, Brazil May Halt Debt Payments, Chicago
Trib., Feb. 20, 1987, ? 3, at 1, col. 2. The Economics Minister of Argentina has stated that the

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exacerbated by the higher prices for imported g

import monopolies enjoyed by foreign enterpris
Participation in the international patent system
suggests that these countries perceive, as a matt
contrary to the views of certain economists, th
lead to an increased level of economic developm
pears to be based on a fundamental assumpti
relationship between a developing country's part
tional patent system and its economic develop
This article addresses the validity of this
traditional rationales and the cost/benefit analy
developed countries are reviewed.17 Next, the ex
tionales and the cost/benefit analysis may be ex
countries is considered.18 This article then ex
nomic consequences of participation by developin
regime of the international patent system19 as
Paris Convention for the Protection of Indus
Based upon the foregoing analysis, this article m
mendations concerning the extent to which deve
continue to participate in the international pa
article gives an indication of the anticipated c
economic growth of Argentina will not be sacrificed to service

Argentina Freezes Wages and Prices, Devalues Currency 7% A
1987, at 27, col. 2. Other Latin American countries (including V
process of trying to restructure their foreign loans. Truell, Venezu
tiations, Wall St. J., Mar. 2, 1987, at 23, col. 4.
17. See infra notes 22-54 and accompanying text.
20. Paris Convention for the Protection of Industrial Propert
T.S. 409. The original Convention has been revised six times: Th
1900, 189 Parry's T.S. 134; The Act of Washington of June 2, 19
the Hague of November 6, 1925, 74 L.N.T.S. 289; The Act o
L.N.T.S. 17; The Act of Lisbon of October 31, 1958, 13 U.S.T.
107; and the Act of Stockholm of July 14, 1967, 21 U.S.T. 15
305 [hereinafter Paris Convention]. For a history of these variou
4, ?? 44-62. The Secretariat for the Paris Convention was the
Convention. This Bureau was united with the Berne Copyrigh
T.S. 185, under the name Bureaux Internationaux Rdunis pour la
tuelle (BIRPI), under the supervision of the Swiss government. S
In 1970, the Secretariat for these two conventions, as well as others
became the World Intellectual Property Organization (WIPO), cr
lishing the World Intellectual Property Organization, 21 U
U.N.T.S. 3, signed in Stockholm on July 14, 1967. This Conventi
1970. 1974 U.N.Y.B. 1032-42, U.N. Sales No. E.76.I.1. On Dec
specialized agency of the United Nations, under G.A. Res. 334
at 71, U.N. Doc. A/9631 (1974). See also 1974 U.N.Y.B. 715-

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the recommendations.21
II. A COST/BENEFIT ANALYSIS OF THE PATENT SYSTEMS IN

DEVELOPED COUNTRIES
The patent system still appears to follow the basic assumptions in

itively applied for the last 500 years-that a state benefits from ne
ventions, that an incentive should be offered for the creation of
inventions and that exclusivity is the best incentive.22 Throughout this
history there has been a continuous tension and an ever-shifting balance
between the public interest in having access to the benefits of inventions
and the private interests of patent owners in fully exploiting the exclusive
rights afforded them. Despite the 500-year history of the patent system,
it is still extremely difficult to ascertain whether a patent system actually
results in a net social benefit to a developed country.23 Nonetheless, the
various costs and benefits associated with the patent system have been
studied.24 A synthesis of the cost/benefit analysis is presented here.
There are two basic assumptions made in evaluating the benefits of a
patent system.25 The first assumption is that society needs more inven-
tions than would be made if society did not offer incentives. The second
assumption is that the best incentive for these needed inventions is the
exclusivity provided by a patent system. If these assumptions are ac-
cepted (and there is no unanimity on this point26), then what social bene-
fits may be attributed to a patent system functioning under such
assumptions?

22. Mandich, supra note 1, at 176-77.
23. See, e.g., F. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE
443-54 (2d ed. 1980) (illustrating difficulties of weighing costs and benefits of a patent system);
Machlup, supra note 2, at 80 (quoted infra in text accompanying note 52); Silverstein, Sharing
United States Energy Technology with Less-Developed Countries: A Model for International Technol-
ogy Transfer, 12 J. INT'L L. & ECON. 363, 369 (1978) (discussing lack of objective standards for
gauging the patent system on the level of inventive activity).
24. See, e.g., F. SCHERER, supra note 23, at 442-54; Dale & Huntoon, supra note 4, at 356-83;
Machlup, supra note 2, at 56-66; Peckham, supra note 2, at 391-400; Turner, supra note 2, at 453-55.
25. Professor Turner succinctly expresses these as follows:
The basic rationale of the patent system can be simply put. The economic case rests upon
two propositions: first, that we should have more invention and innovation than our eco-
nomic system would provide in the absence of special inducement; and second, that the
granting of a statutory monopoly to inventors for a period of years is the best method of
providing such special inducement.
Turner, supra note 2, at 450-51.
26. See, e.g., id. at 451 ("none of these propositions is entirely free from doubt"); see also F.
SCHERER, supra note 23, at 447 ("We find then that business firms may invest in innovation without
patent protection if natural imitation lags are substantial, if there are major competitive differentia-
tion advantages from being first in the market with a new product, and/or if the relevant market is
oligopolistic.").

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If any net benefit is to be attributed to a pa

must be directed only to those inventions that
but for that patent system.27 We must examine
ventions that would not have seen the light of
of a patent system for their protection. There
number of inventions that would fall into the p
For example, those inventions effecting a genui
tion or consumption patterns are thought to
"revolutionary" inventions typically require lar
high risk of failure. This is due to the unexploi
ogy involved and the absence of a developed ma
even if successfully made.29
On the other hand, it is equally evident that
number of inventions that would be made irres
of patent protection. The aphorism that "necess
vention"30 undoubtedly reflects reality. In ad
incentives provided to the inventor outside of a
the potential for secrecy, the competitive advan
market, and the possibility of developing source
uct (product differentiation).31 These nonpatent
vide adequate inducement for many types of
categorized as nonpatent-induced inventions.
Even the concept that a patent incentive is r
ary inventions may be undercut somewhat by w
"learning curve phenomenon."32 This phenom
cation in high technology areas, where one w
inventions to be created. According to Barton
phenomenon "[t]he [high tech] industry that fir
this learning curve has a continuing cost adva
tors," which "suggests that being there first pr
27. As stated by Dean Prosser, "An act or an omission is not

the particular event would have occurred without it." W. KE
OWEN, PROSSER AND KEETON ON THE LAW OF TORTS ? 41 (5t
could not be considered a cause of an invention (an event) if the
without such a patent statute.
28. F. SCHERER, supra note 23, at 448.
29. Id.
30. J. BARTLETT, FAMILIAR QUOTATIONS 134 (15th ed. 1980) (Anonymous: Lati
artium necessitas). But cf id. at 817 (Agatha Christie: "I don't think necessity is the
invention-invention, in my opinion, arises directly from idleness, possibly also from la
save oneself trouble.").
31. See F. SCHERER, supra note 23, at 443-50.
32. See Barton, Technology Trade, 1985 AM. Soc'Y INT'L L. PROC. 77TH ANN. MEE
132 (1983 Proceedings) [hereinafter Barton 1983].

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
tion that is the equivalent of patent protection."33

The point is that many inventions, perhaps even an
number of inventions for society, would be made with a "
cost"34 significantly less than that extracted by the exclusivity
ent. This does not, however, diminish the potentially significan
to society of those inventions that would not be created except
ent system. Indeed, Frederic Scherer concludes that if patent p
could be limited to patent-induced inventions, although there s
be social costs to protecting inventions because of monopolis
society would gain "at the very least from the resources that c
innovations [would] release for alternative uses, less the researc
velopment cost of achieving that saving."35 His overall con
that:
[E]xcept when innovators' profits come largely from cannibalization of

the profits that would otherwise be enjoyed by the producers of substi-
tute products, it is likely that society as a whole (i.e., including both
consumers and producers) gains from inventions and innovations in-
duced or hastened by the grant of patent rights.36
The cost/benefit analysis of a patent system is complicated, how-

ever, by the fact that a system protects all inventions satisfying the re-
quirements of the applicable patent statute. Patent statutes do not
distinguish, and appear incapable of distinguishing, those inventions that
are patent induced from those that are nonpatent induced. Thus, the
social benefits and costs of a patent system must be evaluated on the basis
of protecting all inventions, not just those that are patent induced.37
33. Id. at 132, 136.

34. See Breyer, supra note 2, at 286-313 (In the context of book publishing, production of
books would not fall significantly so long as the publisher is assured of operating profitably.).
35. F. SCHERER, supra note 23, at 442.
36. Id. at 443 (emphasis added); Greer, supra note 4, at 224 ("Nevertheless, it can be formally
demonstrated that the economic benefits of such inventions (in the form of production cost savings
or new product consumption utilities) always exceed those social costs to yield a net social benefit.");
see also Kahn, The Role of Patents, in COMPETITION CARTELS AND THEIR REGULATION 308, 311
(J. Miller ed. 1962) ("So long as the innovation would not have been forthcoming without the patent,
this social cost must always be less than the benefit; but of course the converse is equally true.").
37. Some rudimentary techniques have been suggested for separating patent-induced from non-
patent-induced inventions. These include making the assumption that the patent system is more
important to private inventors and small firms than to large industrial firms, so patents granted to
the first category are presumed to be patent-induced inventions. Greer, supra note 4, at 225. An-
other technique would be to assign "basic" or "fundamental" inventions which provide major tech-
nological innovation to the patent-induced category, while those of a detail or improvement type
would be in the nonpatent-induced category. Id. at 225-26. It is interesting to note that a number of
studies have indicated that only the pharmaceutical industry appears to rely heavily upon the patent
system. See C. TAYLOR & Z. SILBERSTON, THE ECONOMIC IMPACT OF THE PATENT SYSTEM 332-
39 (1973); Peckham, supra note 2, at 403-04.

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Turning then to the question of the net co

protects all inventions meeting the statutory
ner identifies seven cost elements that may b
tem.38 The first is the administrative cost
These costs include separating potentially
nonpatentable ones, procuring patents, eva
fringement by others, enforcing the paten
spect to patents owned by others-the cost of
infringement, and defending against enfor
the governmental patent-granting agency its
cost to society, although user fees may ameli
The second cost element is the underutilization of inventions that
are protected but would have been produced without a patent system.41
What could have been obtained for free must now be paid for in the form
of the price demanded by patent owners who are the sole source of pat-
ented inventions. Even if licensed to others, the royalty-enhanced price
must be paid.
The third cost element is the abuse of the patent monopoly, includ-
ing antitrust violations and patent misuse.42 These include price-restric-
tive licensing, tie-in sales, exclusive grant-backs, and patent pooling, as
well as other misuses.43
The fourth cost element is the research expenditures that competi-

tors will make trying to avoid patent rights owned by others.44 It would
appear that "inventing around" rather than direct investment in solving
previously unsolved problems tends to waste research resources,
38. Turner, supra note 2, at 454-55.

39. Id. at 454.
40. In the United States, for example, "[R]evenues from fees will be available to the Co
sioner of Patents [and Trademarks] to carry out, to the extent provided for in appropriati
the activities of the Patent and Trademark Office." 35 U.S.C. ? 42(c) (1982). The Commis
authorized to adjust the fees every three years in accordance with the Consumer Price In
? 41(f). Prior to increasing the fees in 1982, 25% of the actual costs of processing patent
tions were defrayed by the revenue. Under the increased fee schedule this would increase t
1996. See 24 Pat. Trademark & Copyright J. (BNA) No. 584, at 175 (June 17, 1982) (state
Rep. McClory supporting increasing fees). The appropriation for the Patent and Trademar
for 1983 was $76 million. Id. at 433. The appropriations for fiscal years 1986, 1987 and 198
respectively, $101.6, $110.4 and $111.9 million. Act of Nov. 6, 1986, Pub. L. No. 99-607,
Stat. 3470, 3470.
41. Turner, supra note 2, at 454.
42. Id. at 455.
43. Other abuses include attempting to extend the patent monopoly by dilatory prosecu
patent applications, filing closely related "improvement" patents, and extending royalty p
beyond the term of the patent. For a discussion of these forms of patent abuse, as well a
mentioned in the text, see generally W. BOWMAN, supra note 2, at 53-63; D. CHISUM, PA
? 19.04 (1987); L. SULLIVAN, ANTITRUST ?? 116-191 (1977).

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
although there may be some "fallout" effect by improving o

patent solution.45
A fifth cost element arises when companies invest res
cure patents in a given product area to preclude competit
keting those inventions, while having no intent to mark
inventions themselves.46 These "blocking patents" make it m
for competitors to market within this blocked product area
nying consumers access to competing products.
A sixth cost of a patent system is that it may inhibit in
ity.47 There is little incentive for companies to invest in de
ucts in an area heavily covered by the patents of compet
research activities were directed to this area, the cost of pro
infringing solution would, in all likelihood, be higher.48
The final cost element of a patent system is the apparen
tion of resources to applied research as compared to bas
Because it is more likely that inventions will be made in dev
ucts or methods that have immediate industrial applicati
may forego allocation of resources for basic research in orde
"lottery" for a competition-protected invention.50
These cost elements raise serious doubts about whether a
tem produces a net benefit for a society. Unfortunately, th
ficulties in evaluating a patent system's impact on a devel
economy make it nearly impossible to cast a definitive ju
the worth of a patent system.51 Fritz Machlup, faced with t
inadequate information, concluded his leading study in 19
than-awe-inspiring endorsement of the value of the patent
industrialized countries such as the United States:
If we did not have a patent system, it would be irresponsible, on the
basis of our present knowledge of its economic consequences, to rec-
ommend instituting one. But since we have had a patent system for a
long time, it would be irresponsible on the basis of our present knowl-
45. See F. SCHERER, supra note 23, at 446 ("[T]he pace of advance in petroleum crackin
technology was almost certainly accelerated by the vigorous efforts of companies to invent aroun
rival processes."). Scherer considered Edmund Kitch's different view of the "inventing aroun
problem as "little influenced by any concern for reality." Id. at 447 n.30. Kitch had been critical
Scherer's earlier study, Scherer, Firm Size, Market Structure, Opportunity, and the Output of Pat
ented Inventions, 55 AM. ECON. REV. 1097 (1965), for its failure to take into account the "prospe
function" of patents. Kitch, supra note 2, at 286.
47. Id.
48. Id.
49. Id.
50. See id.
51. See supra note 23 and accompanying text.

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edge, to recommend abolishing it.52

Subsequent studies of the patent system h
sic validity of Machlup's conclusion.53 In sh
isting state of economic analysis, a less-than-
made for the existing patent system in devel
III. EXTRAPOLATION TO THE THIRD WORLD
After concluding that, in essence, the only responsible recomm

tion with respect to a patent system was to maintain the stat
Machlup was quick to confine this conclusion to countries such
United States. In a small and predominantly nonindustrial country,
ferent factors might well suggest another conclusion.55 He probab
in mind Edith Penrose's study,56 published in 1951, which was
critical of the economic justification for developing countries to pa
pate in the international patent system.
Whether Penrose's study (or anyone else's for that matter) has
taken seriously by developing countries seems doubtful at best
thirty-five years following Penrose's study, developing countries i
creasing numbers have become part of the international patent sys
One cannot attribute this to any lack of clarity on the part of Pen
who states in her final conclusions: "In view of the desirability
couraging the development of these countries and the fact that for
patents tend more to restrict than to advance their industrial tech
such countries should be exempt from any international
arrangement.""58
52. Machlup, supra note 2, at 80.

53. See supra note 2.
54. On the other hand, the importance of the patent system cannot be discounted if,
may induce inventions-for example, a cure for a deadly disease-which would not oth
created. As Alfred Kahn concluded:
In sum: government-financed and university research do not depend primarily on patents.
Nor does a great deal of private, commercial innovation, the results of which are often non-
patentable, or more profitably kept secret. But the fact that the patent incentive is unneces-
sary in the public sector of the economy does not demonstrate that it is likewise unneces-
sary in the private. And within the private sector, the fact that certain kinds of inventions
do not require the patent in no way proves that other kinds do not require it either. The
area in which the patent is effective is clearly far narrower than most defenders of the
system seem to say; but there is no basis for concluding it is unimportant.
Kahn, supra note 36, at 323 (footnote omitted).
55. See Machlup, supra note 2, at 80.
56. E. PENROSE, supra note 4.
57. Indeed, of the present 97 member countries, 53 countries have adhered to the Paris Conven-
tion since 1951, the publication date of Penrose's book. Of these, 49 are developing countries, in-
cluding 2 socialist countries. See 25 INDUS. PROP. 6-8 (1986). Perhaps more significantly, 17 of
these developing countries have adhered since 1975. See id.
58. E. PENROSE, supra note 4, at 233.

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The question of why developing countries have disregarded

clusions of economists who have advised against their participat
international patent system is addressed later in this article. Be
question can be answered, however, the social benefits and
international patent system to developing countries must be
the same framework as was utilized with regard to develope
A. Basic Assumptions.
As with developed countries, the two fundamental assum

plicable to developing countries are: (1) that more inventions
in the country than would otherwise be provided without its p
tem, and (2) that the grant of the patent is the most effici
achieving this goal.59 A priori, what developing countries ne
opment. This leads to a third fundamental assumption in t
developing countries: (3) that the grant of patents on invention
development. In contrast to a developed country, a developi
may not need-at its present state-additional inventions th
useful and nonobvious in a developed country's sense of thes
The developmental needs of many developing countries may be
basic: they may lack the capability of assimilating even the sta
art into their industrial base.60 This assumption that patents m
development may be inconsistent with the first two assumptio
rants careful evaluation before it is endorsed.
If the third assumption is set aside for the moment and the first two
assumptions are collapsed into the proposition that a patent incentive
should be provided to induce the creation of needed inventions, attention
can be focused on the realities faced by most developing countries com-
pared with those in developed countries. The first reality is that the over-
whelming majority of patents granted by developing countries are
granted to foreigners.61 In contrast, a significant number (although a
59. See supra text accompanying notes 25-29.

60. U.N. DEP'T OF ECONOMIC & SOCIAL AFFAIRS, THE ROLE OF PATENTS IN THE TRANSFER
OF TECHNOLOGY TO DEVELOPING COUNTRIES at 5, U.N. Doc. E/3861/Rev. 1, U.N. Sales No.
65.II.B.1 (1964) [hereinafter U.N. REPORT] ("[T]he role of patents is limited . . . partly because
much of the technology required by these [developing] countries is not at that latest stage of techno-
logical advance which is covered by patents."); see also 3 S. LADAS, supra note 4, ? 1032.
61. A study by the United Nations Conference on Trade and Development (UNCTAD) in
1974 reports: "An overwhelming majority (84 per cent) of the patents in developing countries i
owned by foreigners, mainly multinational corporations of five developed market-economy coun-
tries," namely: United States, Federal Republic of Germany, Switzerland, United Kingdom and
France. U.N. DEP'T OF ECONOMIC & SOCIAL AFFAIRS, UNCTAD SECRETARIAT AND INT'L BU-
REAU OF THE WIPO, THE ROLE OF THE PATENT SYSTEM IN THE TRANSFER OF TECHNOLOGY TO
DEVELOPING COUNTRIES at 92, U.N. Doc. TD/B/AC.11/19 (1974) [hereinafter UNCTAD
REPORT].

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
majority in only a few countries) of patents

oped country are granted to nationals of that
ity is that very few inventions are made
countries and, as a result, very few dome
granted to them.63
B. Costs of Rewarding Nonpatent-Induced
Faced with this gross imbalance in paten

all inventions meeting the requirement of the
acquires special importance to developing c
analysis. The grant of patents on nonpaten
induced inventions, as previously discussed
net social costs of a patent system.64
In developed countries the ratio of paten
tions is a small, but not insignificant addition
cost/benefit analysis. Presumably, a substan
ventions that are induced are induced either
ent system or in combination with the paten
countries having significant markets for the
Extending such an inducing effect to dev
tenuous because the primary markets of th
own and other developed countries. There a
tions made by foreign enterprises because
system in any particular developing country.
jectural at best to conclude that there are s
tional inventions made because of the
62. For example, in 1984, the following countries granted p

percentage: Japan (16%), United States (43%), Federal
(68%), United Kingdom (76%) and Switzerland (83%). See
ORGANIZATION, INDUSTRIAL PROPERTY STATISTICS at
(Publication B) (1985).
63. The UNCTAD Report concludes:
The nationals of developing countries hold in their own co
of the world stock of patents, and in other countries, no
per cent of foreign-owned patents. These countries have p
the patent system.
UNCTAD REPORT, supra note 61, at 92 (footnote omitted). I
are party to the Paris Convention (see id. at annex I) granted
foreigners. See WORLD INTELLECTUAL PROPERTY ORGANIZ
Burundi, Haiti, Jamaica, Kenya, Malawi, Nicaragua, Sierra
100% of their patents to foreigners.).
64. See supra text accompanying notes 27-31 (discussion of
duced inventions).
65. See E. PENROSE, supra note 4, at 113-14; Greer, supra
tional Patenting and the Less-Developed Countries, 83 ECON.

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
developing countries. A possible exception to this may be d

countries with large populations or special needs. Such count
induce additional investment over that which would be expected
protection were available only in the home country and other
countries.66 Nonetheless, the ratio of patent-induced to total
is likely to be significantly lower in developing countries, parti
those that have relatively small populations or those that are
lesser-developed countries of the Third World.
It would seem to follow that, in general, a developing count
obtain any developmental benefit associated with a particular
without offering any patent incentive, because that benefit
available without such an incentive. The most cost-effective manner for a
developing country to obtain any benefits associated with an invention is,
of course, to be free of any restraints-patent or otherwise. An interest-
ing example of the benefit to developing countries derived by not grant-
ing patents on a particular category of inventions was discussed in a
recent report from the Office of Technology Assessment. SmithKline-
Beckman alleged that in Argentina it lost approximately one-half of the
market for its trademarked "Tagamet" ulcer-treating medication.
SmithKline attributed its loss to the Argentinian patent law that ex-
cluded pharmaceuticals from patent protection. A generic producer in
Argentina copied the unpatented compound and began to market it in
competition with "Tagamet." Overall, SmithKline claimed a "loss" of
$50 million in revenue because of the lack of patent protection on
pharmaceuticals in numerous developing countries.67
The "Tagamet" compound is a classic example of a nonpatent-in-
duced invention, insofar as Argentina and other countries--developing68
and developed69 alike-that do not protect pharmaceuticals are con-
cerned. SmithKline was well aware that these countries did not provide
66. For instance, enterprises in developed countries might be induced to invest in finding a cure
for malaria by the availability of patents in developing countries, particularly those with large popu-
lations suffering from malaria, even though that disease is not a significant domestic problem in
developed countries.
67. See OFFICE OF TECHNOLOGY ASSESSMENT, INTELLECTUAL PROPERTY RIGHTS IN AN
AGE OF ELECTRONICS AND INFORMATION 229-30 (1986).
68. The following developing countries do not protect pharmaceuticals: Argentina, Bangla-
desh, Bolivia, Brazil, Chile, Colombia, Ecuador, Egypt, Ghana, Guatemala, Honduras, India, Iran,
Iraq, Kampuchea, Kuwait, Laos, Lebanon, Libya, Mali, Mexico, Mongolia, Morocco, Pakistan,
Paraguay, Peru, Portugal, South Korea, Syria, Taiwan, Tangier Zone, Thailand, Tunisia, Turkey,
Uruguay, and Venezuela. 2A J. BAXTER, supra note 3, app. 2; see also UNCTAD REPORT, supra
note 61, at 116 table 14.
69. The following developed countries do not protect pharmacueticals: Canada, Finland,
Greece, Monaco, Norway, USSR and Democratic Republic of Germany. 2A J. BAXTER, supra note
3, app. 2; see also UNCTAD REPORT, supra note 61, at 116 table 14.

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such protection and most certainly would n

sources in order to develop the "Tagamet" i
ing able to obtain patents in those countries.
lost revenues presumably resulted in signif
countries not protecting pharmaceuticals, in
tion, development of local enterprises, and co
efits result when generic drugs may be co
developmental costs) and then marketed in co
tor, not only by local manufacturers, but a
tional market.70 Had Argentina and other c
the pharmaceutical "Tagamet," there is little
sumers and the net social cost to the developi
in excess of those actually experienced.
In sum, a fundamental distinction appear
granted in developed countries and those g
tries. In the former the cost/benefit analysis
is likely that there are a significant number
system induces that would not otherwise be a
otherwise add to the net social benefit of those countries. This cannot be
said of developing countries. By protecting inventions-in particular for-
eign inventions that are not patent induced-developing countries signifi-
cantly add to the cost side of the cost/benefit analysis.71
C. Additional Costs to Developing Countries of Granting

Patents to Foreigners.
In addition to the costs associated with overbalance of nonpatent-

induced inventions protected by patents owned by foreigners in develop-
ing countries, a number of the cost elements outlined above72 may have
particular impact in developing countries. It would appear that the ad-
ministrative costs of a patent system in a developing country may require
a significantly higher percentage of the net resources of the country.73 In
addition, there may be an inefficient allocation of trained technical per-
sonnel, probably already in short supply in a developing country, for the
administration of a patent-granting agency.
70. See Vaitsos, supra note 4, at 85-86 (significantly higher prices found for pharmaceuticals
protected by patents in Colombia compared to other countries that provided no such patent protec-
tion); see also Greer, supra note 4, at 235-39 (discussing considerable social costs of granting monop-
olies over "nonpatent-dependent" technologies).
71. See Greer, supra note 4, at 239.
73. The fees charged for services rendered by the patent-granting agency may offset some of the
costs of operating that agency. This does not, however, account for all administrative costs, nor for
the misallocation of resources. See infra text accompanying note 75.

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
Vol. 1987:831] INTERNATIONAL PATENT SYSTEM 847
Perhaps an even more significant cost imposed on a de

country is the underutilization of nonpatent-induced invent
those that local enterprises have the capability of making. T
the patent precludes domestic competition; thus, local enterpri
sell the patented invention within their home country or com
export market, even in countries where the patented invention
tected. The underutilization cost is compounded by the pat
control of the import market for the patent invention, wh
cludes imports from countries where the invention may be
duced. In short, as illustrated by the pharmaceutical indust
the cost to consumers within the developing country that gran
ent is high.74
The grant of patents to foreign enterprises by developing
has, no doubt, contributed to the increased costs associated
abuses. To avoid or minimize such abuses in patent and
transfer transactions, many developing countries have impo
tions requiring the approval and registration of such agreemen
systems, however, are administratively costly and may merely
rather than resolve the problem of abuses, especially if there i
nation among competitors holding patents.
A final cost element that may have a more significant
developing countries than on developed countries is the mis
resources toward creating inventions that may be of little dev
importance to developing countries. Inventions in develope
tend to be, by definition, the newest technology, whereas man
ing countries have a pressing need to assimilate state-of-the-ar
ogy.76 Moreover, the developmental problems of a given
country may be peculiar to it. If patents are granted for a wid
statutory classes of invention, there is no particularized incent
duce inventions needed by that country. The incentive, rather
tain a patent in that country in order to control the mark
goods that create the maximum profit to the foreign patent o
The other cost elements referred to above, relating to
and inhibition of research and to blocking of patents, would n
increase costs significantly in developing countries. An in
quantity of competing research is being performed in deve
74. See Vaitsos, supra note 4, at 85.

75. For a summary of the various approaches taken for the regulation of techn
see UNCTAD, SELECTED PRINCIPAL PROVISIONS IN NATIONAL LAWS, REGULAT
ICY GUIDELINES, U.N. Doc. TD/B/C.6/AC.12/Supp. I/Add. I. (1975).
76. See Greer, supra note 4, at 233 (developed-country inventions appeal to high
sumers and tend to substitute capital for labor).

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
tries by local enterprises or even by foreign co

tries.77 Nonetheless, these types of misalloca
patent-acquiring enterprises are likely to affect
of a particular foreign enterprise and the price
imported into developing countries.
In sum, if the quid pro quo for a developing
ent is the same as that for developed countri
which would not otherwise be available in that
countries, it would seem, fare poorly in the
reasonable likelihood that the net social cost to
grants patents would be in excess of the net soc
considerations for patents would justify their g
question to be examined relates to the third
availability of a patent system in a developing c
inducing a significant number of inventions fo
produce net beneficial results by offering an in
D. Patents as an Incentive for Development.
A number of arguments can be advanced f

the grant of patents by a developing country
may be argued that the grant of patents promo
ventions within the country. In addition, the g
mote development by increasing the amount of
developing country, both by patent owners and
patents may also increase the transfer of techn
trial development. This may include technolog
to the patented inventions.
Whether the existence of a patent system pr
of inventions at a lower cost within a developin
First, it must be remembered that these invent
patent induced and would have been made re
was a patent system in that developing count
consumers within the developing country
purchase a patented invention on the open m
likely to be supplied by the foreign patent owne
refuse to import the invention merely because
77. A survey of 50 developed-country firms (U.S. and Euro

industrial fields of chemicals, electrical products and pharmaceu
nology to firms in Latin American countries, concluded that the
tion to local R & D operation" in Latin America. Greer, supra
SCIENCE POLICY RESEARCH UNIT OF THE UNIVERSITY OF SUSS
OGY TO LATIN AMERICA: SUMMARY 32 (Dep't of Scientific A

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
Vol. 1987:831] INTERNA TIONAL PA TENT SYSTEM 849
protection in the developing country of import, provided a profi

made by selling the invention there. In addition, the inventio
available on the open market from alternate sources, such as
producers of the patented invention or producers in countries
license is required because patent protection has not been granted
invention.
The question of whether the availability of a patent system within a

developing country promotes foreign investment that increases develop-
ment is more difficult. All things being equal, it may be that a potential
foreign investor would elect to choose one particular developing country
over another because of the availability of a patent system within the
former. The investor could thus protect its investment in that country
and assure a useful competitive advantage by controlling the market in
the manufactured invention. On the other hand, considering the dispa-
rate economic and political conditions existing in developing countries in
the various parts of the world, this assumption appears to be a most un-
likely basis for decisionmaking. There are, of course, a great many other
factors beyond the availability of a patent system that enter into a deci-
sion about whether to invest in a particular developing country.78 A pri-
mary, if not controlling factor is the political stability of the country.
The availability of a strong patent system in South Africa, for example,
would hardly seem to induce much foreign investment there at the pres-
ent time. Investment also would not be expected if the necessary materi-
als and labor force are unavailable at competitive costs. Ultimately, the
foreign investor will make the determination based on whether a particu-
lar invention could be made efficiently and profitably within a given de-
veloping country. In addition, if exportation from that country is
contemplated, the foreign investor will also have to take into account the
international as well as the local market.79
In the complex decisionmaking process of whether to invest in a
foreign country, the availability of patent protection seems unlikely to be
a determinative factor. Indeed, the absence of patent protection may
sometimes be a factor leading to foreign investment. For example, for-
eign investment in the manufacture of generic drugs could be induced in
those developing countries that, like Argentina, do not protect
pharmaceuticals.80
78. See U. ANDERFELT, supra note 4, at 136-41; STAFF OF SENATE SUBCOMM. ON PATENTS,
TRADEMARKS AND COPYRIGHTS, 85 CONG., 1ST SESS., THE INTERNATIONAL PATENT SYSTEM
AND FOREIGN POLICY, STUDY NO. 5, at 12, 16-17 (Comm. Print 1957) (Vernon auth.); Penrose,
supra note 65, at 774-75.
79. See Barton 1983, supra note 32, at 137.
80. On a more cynical note, one can only speculate how much of the "counterfeiting" going on
in developing countries is financed by developed country sources.

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
The question of whether patents induce the tr

developing countries is significant because such
portant to their development. Indeed, it is g
purchase of technology by developing countries
acquiring needed technical information as is
ment.81 It would be highly inefficient to reinv
ogy that may be readily purchased at a reaso
of the technology to a developing country woul
cantly its acquisition costs.
But the question is really whether the grant
the increased transfer of technology. Two su
volved. First, does the developing country ne
formation in order to work a particular inve
theory, a patent, wherever granted, must tea
how to use the invention. Because the vast majo
to be patented in developing countries origin
where patents have been obtained, the technical
these patent documents is available to the devel
be so available regardless of whether it grant
information could be of great value to enterpri
country. Indeed, patent documentation has be
source of technical information and has been
developing countries at nominal costs.82 The
"Tagamet" in Argentina was presumably ma
main information, including especially the Smit
granted and published in other countries. The p
depending on the level of industrial sophisticati
country, the patent documentation originating
likely to be inadequate in many, if not most
invention in the developing country.83
81. See Teece, Technology Transfer by Multinational Firms: T

Technological Know-how, 87 ECON. J. 242, 242 (1977).
82. Approximately one million patent documents are publi
year. WIPO provides, through participating industrial property o
art searches upon the request of developing countries. Under th
over 2,500 search requests have been undertaken. See WORLD IN
ZATION, GOVERNING BODIES OF WIPO AND THE UNIONS A
2344 & annex G, WIPO Doc. No. AB/XVI/18 (Sept. 23, 1985
infra notes 95-100 and accompanying text.
83. See U.N. REPORT, supra note 60, at 5, 39. There is also th
disclosures are often inadequate to practice the invention in a de
a strong incentive to keep as much information away from com
note 36, at 317-18.

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
Accordingly, only when (a) the patent-granting agency in a

ing country insists that the necessary, additional information b
in all foreign applications and (b) such additional informat
otherwise available in the public domain, can it be said that
grant increases the net technical information available in th
There is no indication that such requirements are being impo
the agencies of developing countries have even the capability of
Indeed, in the vast majority of cases the patent documentation
developing country is likely to be a translation identical in cont
filed in the developed country of origin.84
This leads to a second question: Would that additional t
information (not provided in the patent document itself) be
able if a patent system did not exist in the developing coun
possessor of this information were willing to transfer it to an
within the developing country at a lower cost than that asso
the exclusivity of a patent in the developed country, then it w
to be a net benefit to the developing country.85
The argument most commonly made is that a patent in
needed to induce the transfer of technology because patent own
otherwise be unwilling to transfer their valuable technology in
of trade secrets due to the relative weakness of trade secret law in devel-
oping countries.86 If a patent were granted, the argument runs, this
would serve as underlying protection should the trade secret technology
be disclosed. The patent granted on the invention thus acts, in a sense, as
a "security interest" for the underlying trade secret. This is purely a
bootstrap argument, however, because the only reason (presumably) that
additional technical information is needed is because the patent docu-
mentation itself does not disclose adequate information to enable those
skilled in that art in the developing country to make the invention.
Hence, in theory, the patent should be invalid for failure to provide an
enabling disclosure. On the other hand, the practical reality of needing
not only the documentation, but also technical assistance in assimilating
84. Indeed, Herbert Stumpf finds the translation into the language of the developing country to
be one of the major advantages to the grant of patents. Stumpf, Interests and Conflicts of Interest in
Technology Transfer-The Role of Patents, 9 INT'L REV. INDUS. PROP. & COPYRIGHT L. 309, 315
(1978).
85. See Greer, supra note 4, at 240-42.
86. See, e.g., 3 S. LADAS, supra note 4, at 1885-86; Silverstein, supra note 23, at 370; Stumpf,
supra note 84, at 316-17. It may also be argued that the patent owner in the developed country
would not be willing to transfer technology to an enterprise in a developing country where no patent
protection exists because this would create another competitor. Yet, if such were the case, would a
patent owner who can obtain a patent in a developing country be any more ready to transfer a patent
license along with the needed additional technology to a competitor within the developing country?

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
the documentation cannot be underestimat

solution than granting patents in the hope th
technology would be to make such transfer
tractive to the possessors of such technology
Indeed, the granting of patents may actua
technology. The foreign patent owner may h
fer technical information related to the paten
deriving significant profits from having an
vention. Moreover, even though sources ot
may be willing to transfer adequate technical
try, domestic enterprises would be foolish
because the patent owner could bar domest
the patent. The existence of the patent there
in technology available from third-party sou
The fear of developing countries, of cou
technology will not be transferred unless a
bly, enterprises will decide either to license pa
ogy on the basis of optimizing their profit. B
of a patent on an invention by a developing c
the patent owner will transfer any technolog
veloping country beyond that contained in
patent owner is certainly under no legal oblig
discussed in the next part of this article, the
places significant restrictions on the ability of
pose compulsory licenses, even under the pate
Despite the economic analysis demonstra
granting patents to foreigners, more and mo
enacted patent statutes and have become fu
Paris Union.88 The apparent belief of develop
system will induce development is partly at
stance taken by the United Nations on the
The leading United Nations report-Th
Transfer of Technology to Developing Cou
concluded that "[t]here is reason to believe
and royalties the underdeveloped countries de
transfer of the patented knowledge."89 Th
87. See Penrose, supra note 65, at 772.

88. See supra note 57; see also UNCTAD REPORT, supra n
patent statute and membership in Paris Union for developin
bership of the Paris Union may be found in 26 INDUS. PROP
89. U.N. REPORT, supra note 60, para. 276 (emphasis add
the difficulty of drawing such cost/benefit conclusions in t

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
reaching this conclusion appear to be that developing coun

not otherwise be able to work the patented invention without
cal assistance of the patentee, and that this so-called "paten
edge" would not otherwise be available unless a patent mono
granted on this particular invention.90 These assumptions notw
ing, the few available studies tend to show that only a small pe
patents owned by foreigners are actually ever worked in the p
ing developing country.91
The ambiguity within the United Nations system has be
perpetuated by the United Nations Conference on Trade an
ment (UNCTAD), generally considered to be the voice of d
countries within the United Nations system on trade and d
issues.92 For example, an UNCTAD report, published a decad
United Nations report, states:
Apart from the possible benefits through receipt of patent f
stimulus to foreign investment, . . . local production on the
patents might generate four advantages for developing coun
These advantages are the domestic value added from producti
revenue accruing to the government, the gains of "learning by d
and the possibility that some of the local production might be ex
and thereby earn foreign exchange which would not have been ea
otherwise.93
Whether the availability of patents in developing coun

much effect on stimulating foreign inventions and whethe
countries should provide such an incentive, as discussed abov
jectural. The advantage of "domestic value added" should
obtainable without patents. Moreover, the argument that gr
ents could result in the exportation of local production is n
indicates that a serious cost burden "relates mainly to those cases where the patent
not in fact transferred." Id.
90. The use of the terminology "patented knowledge" suggests some confusion a
of a patent. Inventions satisfying the requirements of a given patent statute m
"knowledge," as such, may not be. Evidently what the U.N. Report is trying to conv
knowledge would be transferred by means of the patent documentation (i.e., th
supplemental material) and the invention itself, if imported.
91. See, e.g., UNCTAD REPORT, supra note 61, para. 360 (90-95% of foreign-ow
developing countries are not used); Katz, supra note 4, at 67 (surveying 102 patents
tina and reporting that only 15 were being used); Vaitsos, supra note 4, at 78 (Out
relating to the pharmaceutical, textile and chemical industries only 10 were actual
lombia in 1970; in Peru, out of a sample of 4,872 patents granted between 196
industrial areas only 54 were reported as exploited.).
92. On the role of UNCTAD on the United Nations system, see generally U.N
ON TRADE & DEV., THE HISTORY OF UNCTAD 1964-1984, U.N. Doc. UNC
U.N. Sales No. E.85.II.D.6 (1985).
93. UNCTAD REPORT, supra note 61, para. 369.

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cause the existence of patents held by the fo

in other countries would preclude such exp
In 1970, the World Intellectual Propert
was created. It entered into the United Nat
1974 as a specialized agency.96 Its support
system has been unambiguous. The predece
tional Bureau of the Union for the Protection
had, since it came into effect in 1886, serv
Paris Convention. Since its creation, WIPO
working toward achieving the goal of maxim
ing countries in the international patent syst
of programs have been conducted for the edu
tries in industrial property throughout the w
the industrial property offices of developed
sionals from the private sector assist in
message provided to developing countries wit
that participation in the international patent
ment, while nonparticipation will place them
In addition to the stance taken by th
noneconomic reasons may be advanced for
sion of the international patent system am
addition to WIPO, developed countries, throu
cial channels, have been highly successful in
losophy in many developing countries.101
Nations leadership, there appears to have b
95. See supra note 20. There are presently 116 states party
PROP. 3-5 (1987).
96. See supra note 20 for the General Assembly Resoluti
97. See 1 S. LADAS, supra note 4, ? 61.
98. Since its creation on April 26, 1970, 19 states have bec
these, 18 are developing countries, including the People's Re
INDUS. PROP. 6-8 (1987).
99. See, e.g., WORLD INTELLECTUAL PROPERTY ORGANIZ
1984 paras. 1-410, WIPO Doc. No. BIG/282 (Aug. 1985) (lis
industrial property, assistance in revision and modernization
shops in industrial property, licensing, and access to patent
100. See, e.g., id. paras. 247, 258.
101. See id. paras. 8, 11, 247, 275, 280, for a summary of
provided by various developed countries. The "experts" w
development of the WIPO Model Law for Developing Countr
representatives from industry in developed countries. See W
GANIZATION, 1 WIPO MODEL LAW FOR DEVELOPING CO
WIPO Publication No. 840(E) (1979). It is also interesting to
United States would create a "United States Intellectual Prope
would be "to train individuals of developing nations in both m
ing the protection of intellectual property." S. 490, 100th

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competing analyses of the value of the patent system to develo

tries.102 Also, of course, there may be an institutional bias of t
trial property offices within the various developing co
perpetuate their existence. Or it may be as simplistic as conc
"Since nothing else is working, why not give the patent sys
Indeed, the reason may be more symbolic than real, as illust
time ago by Fritz Machlup, when he suggested that the pres
ated with being a part of the international patent system amon
nations may have led them-to their economic detriment-"
honor of paying higher prices for imported products."103
IV. THE IMPACT OF THE PARIS CONVENTION

ON THE THIRD WORLD
The preceding discussion should make it clear that in the face

overwhelming foreign ownership of patents, and the insignificant num
of inventions induced by a patent system, it is not necessarily in the b
interest of a developing country to adopt a patent system. The followin
section examines the role of the statutory framework of the internati
patent system, primarily as expressed in the Paris Convention for
Protection of Industrial Property.104 Does the present structure promo
the interests of developing countries, or does it exacerbate the problem
The directing board of this Institute would include executives of corporations that need dome
and foreign intellectual property protection. Id. ? 415(b)(6).
102. There has been little critical comment on the international patent system in general fo
last decade that has not been supportive of the status quo or moderate revision. See, e.g.,
Revision of the Paris Convention: A Realignment of Private and Public Interests in the Interna
Patent System, 8 BROOKLYN J. INT'L L. 77, 91-100 (1982); Kunz-Hallstein, supra note 4, at 664
Note, The United States Position on Revising the Paris Convention: Quid Pro Quo or Denunciatio
FORDHAM INT'L L.J. 411, 424-32 (1982). Indeed, Kunz-Hallstein had the temerity to say:
paraphrase a well-known statement by Fritz Machlup in his important study on the economic
dations of patent law, it would be irresponsible, based on the current state of our knowledge
suggest any weakening of the international patent system." Kunz-Hallstein, supra note 4,
(emphasis added). Compare this to what Machlup actually said, supra text accompanying no
Kunz-Hallstein also somehow converts Edith Penrose to the side of the status quo. Kunz-Hallst
supra note 4, at 666. Note, however, that Penrose was writing before the proposals for the
Convention were made and concluded:
Since non-industrial countries have very few inventions worth patenting in developed
countries, they cannot expect reciprocal advantages from granting patents to foreigners on
inventions worked in those countries. Hence, the presumption is strong that the less-devel-
oped countries gain little or nothing, and may even lose, from granting patents on inven-
tions developed, published, and primarily worked abroad.
Penrose, supra note 65, at 783.
103. Machlup, Patents, in 11 INTERNATIONAL ENCYCLOPEDIA OF THE SOCIAL SCIENCES 461,
471 (D. Sills ed. 1968). Jorge Katz suggests that developing countries may have political motives in
acceding to the Paris Convention to demonstrate economic stability and respect for property. Katz,
supra note 4, at 27-28.
104. Paris Convention, supra note 20; see 1 S. LADAS, supra note 4, ? 61.

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discussed above? Four fundamental princip

are directly relevant to this inquiry: "nationa
of priority,"106 "independence of patents,"107 and import
monopolization. 08
A. National Treatment.
The principle of national treatment is embodied in article 2(1) of

Paris Convention:
Nationals of any country of the Union shall, as regards the protection
of industrial property, enjoy in all the other countries of the Union the
advantages that their respective laws now grant, or may hereafter
grant, to nationals; all without prejudice to the rights specially pro-
vided for by this Convention.109
The purpose of "national treatment" is to prevent a granting coun-
try from discriminating between nationals and foreign inventors by guar
anteeing that inventors from member states of the Paris Union will
treated similarly to nationals of the granting state. As the statistics mak
abundantly clear, however, inventors (in reality their employing enter-
prises) in developed countries make considerably more use of this right o
national treatment than do those in developing countries.110 The reasons
for this are obvious: most inventions are made in developed countrie
and inventors in developing countries have a great deal of difficulty
competing with the level of invention in most developed countries. B
accepting the prescriptions of article 2, developing countries exchang
the very real right of granting national treatment to foreign enterprise
for the mostly theoretical right of receiving that treatment in develope
countries. In this regard, as Fritz Machlup cautions, foreign-owned pa
ents "cannot be reasonably regarded as parts of the national wealth or as
sources of real national income."1"' But in contrast:
One may regard domestic holdings of foreign patents as claims to fu-
ture royalties and profits earned abroad and, hence, as assets; of
course, foreign holdings of domestic patents establishing foreign rights
to future royalties and profits earned here, would then have to be
counted among the liabilities and, therefore, as deductions from na-
105. Paris Convention, supra note 20, arts. 2, 3.

106. Id. art. 4.
107. Id. art. 4"'.
108. Id. art. 5A.
109. Id. art. 2, para. (1). Paragraph (1) ends with the following provision:
"Consequently, they shall have the same protection as the latter, and the same legal remedy
any infringement of their rights, provided that the conditions and formalities imposed upon na
als are complied with."
111. Machlup, supra note 2, at 54.

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tional wealth.112
A large majority of all patents granted in developing count

foreign enterprises. Because these grants are not counterbalance
grants of foreign patents to developing-country enterprises, th
of wealth significantly favors developed countries.113
National treatment may even disfavor larger developed c
such as the United States. The United States has urged, fro
time, that the guiding principle of the international patent syst
be "reciprocity" rather than national treatment. National treatm
place the United States at a reciprocal disadvantage because t
States provides a broad base of patent protection and does
system of compulsory licenses, whereas many other develope
protect a narrower range of inventions, and impose compulso
with subsequent high maintenance fees.114
On the other hand, small industrially developed countrie
the Scandinavian countries and Switzerland, may obtain signific
fits from national treatment because their countries provide ra
ited markets for countries such as the United States, while thei
obtain patents in the United States provides their enterprises w
nificant exclusive market. Nonetheless, it is not apparent t
system of reciprocity would assist enterprises in developing cou
cause of the small number of inventions created there.
In addition to requiring national treatment, paragraph 2 of article 2
precludes a member of the Paris Union from imposing any requirement
112. Id. at 55.

113. In reference to a particular economic model of international technology transfer,
Silverstein concludes: "This result implies that under a unitary system of proprietary protec
presently established by the 'national treatment' provision of the Paris Convention, a country
optimize its economic well-being by adjusting the level of proprietary protection it chooses to
Silverstein, supra note 23, at 403.
114. The United States made a number of attempts to amend the principle of national trea
in particular at The Hague Convention in 1925. These efforts failed. See 1 S. LADAS, supra n
? 55; E. PENROSE, supra note 4, at 64-67. The extent to which the United States extended in
tual property protection to foreigners during its early history when it would be categorized,
ent terms, as a developing nation is interesting. The first patent act was enacted in 1790
April 10, 1790, ch. 7, 1 Stat. 109. It was not, however, until the 1836 enactment that protect
extended to "any person," deleting any requirement of citizenship or residency. Act of July
ch. 357, ? 6, 5 Stat. 117, 119. See D. CHISUM, 3 PATENTS ? 10.03[3][a], at 10-33 to 10-34
(outlining development of distinction between foreign and domestic activity for purposes of
mining priority and patentability). The history of copyright protection in the United States
protectionism almost into the twentieth century. The first copyright act was also enacted
Act of May 31, 1790, ch. 15, 1 Stat. 124. Yet it was not until 1891 that copyright protect
extended to foreign nations provided their countries extended copyright protection to Unite
citizens on substantially the same basis. Chace Act, ch. 565, ? 13, 26 Stat. 1106, 1110 (189
Chace Act also marked the appearance of the "manufacturing" clause. See R. BROWN & R
ICOLA, COPYRIGHT 636-44 (4th ed. 1985).

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of domicile or establishment of the enterprise

tional treatment.115 Without a requirement of
with the developing country for the grant of p
be even less likelihood that the grant of the
country will lead to development in the sense o
ing, the transfer of technology, or foreign inv
provision would seem to promote the import m
B. Right of Priority.
The second fundamental principle of the P

right of priority, which is set forth in article
Any person who has duly filed an application for
the countries of the Union, or his successor in tit
purposes of filing in the other countries a right
periods hereinafter fixed.117
The right of priority is fixed at twelve mon
an inventor a grace period of one year from the
of the Union countries to proceed with the filin
Once the application for the patent is filed and
an application may not be invalidated in anot
reason of another filing, the publication or exp
or the placing on sale of the invention.119 In es
one country of the Union, that filing date becom
in all the other countries of the Union.
There are several advantages of the right
acquiring enterprises: enterprises are not face
115. "However, no requirement as to domicile or establishment

is claimed may be imposed upon nationals of countries of the Unio
trial property rights." Paris Convention, supra note 17, art. 2,
the member state, at least, to require "the designation of an addre
an agent." Id. art. 2, para. (3).
116. As might be expected, enterprises in developed countries
to transfer technology to subsidiaries and other related compan
Grundmann, supra note 4, at 195.
117. The right of priority is also extended by this provision to
and trademarks. Paris Convention, supra note 20, art. 1, para
118. Id. art. 4, pt. C, para. (1). The priority period for utility
while the period for industrial designs and trademarks is set at
119. See id. art. 4, pt. B, para (1), which provides:
Consequently, any subsequent filing in any of the other coun
expiration of the periods referred to above shall not be inva
accomplished in the interval, in particular, another filing, the p
the invention, the putting on sale of copies of the design, or th
acts cannot give rise to any third-party right or any right o
acquired by third parties before the date of the first application
the right of priority are reserved in accordance with the domes
try of the Union.

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difficulty of filing at the same time in a multiplicity of count

statutory bars occur in the respective countries.120 Moreover,
ity period enables the enterprise to evaluate the commercial
of an invention before committing resources to filing for pate
countries.121 Inventors in developing countries belonging t
Union would, of course, share in this benefit by filing an ap
any Union country, presumably their own. As with nationa
however, there is a great imbalance between the number of
claiming the right of priority filed by enterprises in developin
compared to those filed by enterprises in developed countri
The practical result of the right of priority is to give d
country enterprises a grace period to evaluate whether it is com
desirable to file in a particular developing country. Prudent m
would suggest that filings would occur only in those developin
where the patent would bring economic rewards to the filing
This further buttresses the argument that developed-country
are not induced to invent by the existence of patent systems i
countries; rather, they are provided with an after-the-fact ince
in those countries when and only when it is to their economic
to do so. Moreover, the priority period is granted upon the me
the application. The priority period must still be honored in th
ing country "whatever may be the subsequent fate of the appl
in the original filing country, including abandonment of the a
or refusal of that country to grant the patent. In addition, th
period may not be taken into account in the term of the paten
patents based upon the priority period must have the same
ents granted to local inventors.123
In sum, the right of priority provides enterprises of devel
tries with'a significant incentive to "wait and see" whether it
cally advantageous before filing in a developing country bo
Paris Convention. This incentive appears to belie the unde
sumption for the granting of patents-that the invention
otherwise be created but for the patent system.
120. The administrative difficulty, of course, was more severe prior to the adve
rapid modern communication facilities.
122. Paris Convention, supra note 20, art. 4, pt. A, para. (3) ("By a regular n
meant any filing that is adequate to establish the date on which the application
country concerned, whatever may be the subsequent fate of the application.").
123. Edith Penrose argues that a strong case may be made that the patent in
country should expire at the same date as the corresponding patent in the exporti
rose, supra note 65, at 776 n.1.

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C. Independence of Patents.
The third fundamental principle of the Par

the legal independence of patents wherever gra
4b'is (1): "Patents applied for in the various c
nationals of countries of the Union shall be in
tained for the same invention in other countries
Union or not."124 The rationale for this prov
grants its patents according to its own law and
should depend upon an independent evaluatio
the granting state rather than being dependent
sponding patent in another country. This cer
developed countries, which may have differen
and a significant number of competitors availab
patents. When applied to developing countrie
independence of patents is less cogent. For e
granted in a developed country and subseq
grounds ranging from being obtained by fraud
statute, to failing to meet the novelty, utility
applied in that developed country. A patent g
tion in a developing country bound by the P
entitled, under the principle of independenc
patent until otherwise declared invalid.125 A ser
the availability of knowledge in developing co
patents (even those invalidated on the ground
who is going to challenge that particular pate
124. Paris Convention, supra note 20, art. 4bis(1). Paragraph

graph (2), which provides: "The foregoing provision is to be 6ind
particular, in the sense that patents applied for during the period
regards the grounds for nullity and forfeiture, and as regards
para. (2).
125. The invalidation in 1970 in the United States of the patent covering the drug ampicillin on
the ground of having been obtained by fraud illustrates the economic consequences of this. Corre-
sponding patents on this drug had been obtained in more than 60 other countries. U.N. CONFER-
ENCE ON TRADE & DEVELOPMENT, TRADE & DEVELOPMENT BOARD, COMMITTEE ON TRANSFER
OF TECHNOLOGY, GROUP OF GOVERNMENTAL EXPERTS ON THE ROLE OF THE INTELLECTUAL
PATENTS SYSTEM IN THE TRANFER OF TECHNOLOGY, U.N. Doc. TD/B/C.6/AC.3/2 (1977) [here-
inafter UNCTAD, PARIS REVISION].
126. Various proposals have been made for the exchange of information concerning the ultimate
fate of patent applications or patents in the various countries. See, e.g., Id., para. 72 ("[I]t is neces-
sary for the [Paris] Convention to be amended to include the compulsory exchange of information
among member countries in respect of results of litigation on the validity of a patent."). Such ex-
change of information, however, would involve time delays as well as expense. Even with the receipt
of the information, article 4"' precludes the automatic invalidation of the patent, and any invalida-
tion procedure would again impose delays and expense.

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competition?127 The challenge may never come or it may be

delayed to the economic detriment of the developing countr
nopoly prices may be extracted for the invention imported
patent owner.
D. Import Monopolization.
The fourth fundamental principle of the Paris Conven

in article 5A, which limits the ability of member states t
holders to forfeit their patents and which also limits the gra
pulsory licenses. Paragraph (1) of article 5A precludes a m
Paris Union from causing the forfeiture of a patent on the
patented invention is imported into the country.128 Par
ables members to grant compulsory licenses to prevent abus
ure to work given as an example of an abuse.129 Paragraph (
preclude a member from causing the forfeiture of the paten
grant of a compulsory license would not be sufficient t
abuse. Paragraph (3) would also bar forfeiture proceeding
piration of two years from the grant of the first compulsor
paragraph (4), time limitations are imposed on the member
pulsory license may even be applied for on the grounds of f
or insufficient working. These periods of time are four y
filing date of the patent application or three years from th
the patent, whichever period is longer.131
127. The most likely challenges would come from the patent-granting age
public agency operating in the public interest. The patent statute or other laws
country would have to provide for such a procedure. The United States patent st
requires the clerks of United States courts to notify the Commissioner of Patent
the filing of any patent action and their disposition, 35 U.S.C. ? 290 (1982), but
authorize the Patent and Trademark Office itself to seek invalidation in the pub
128. This paragraph provides:
The importation by the patentee into the country where the patent has bee
articles manufactured in any of the countries of the Union shall not entail forf
patent.
Paris Convention, supra note 20, art. 5, pt. A, para. (1).
Each country of the Union shall have the right to take legislative measures providing for
the grant of compulsory licenses to prevent the abuses which might result from the exercise
of the exclusive rights conferred by the patent, for example, failure to work.
Id. art. 5, pt. A, para. (2).
Forfeiture of the patent shall not be provided for except in cases where the grant of com-
pulsory licenses would not have been sufficient to prevent the said abuses. No proceedings
for the forfeiture or revocation of a patent may be instituted before the expiration of two
years from the grant of the first compulsory license.
Id. art. 5, pt. A, para. (3).

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One may seriously question whether a d

an advantage from being bound by article
the foreign patent owner an import monopol
for at least four years from the date of the fi
country. In reality, the import monopoly
the one-year period of priority. The argum
limitations of article 5A is that this delay per
an opportunity to evaluate further whethe
the invention within the granting country is
however, concerns for whom the limitatio
ing country or the patent owner. Obviously,
only work an invention when and where it
do so. The prudent patent owner will balance
ble to exploit the import monopoly granted
or to initiate local working. The Paris Conv
Nor should it be presumed that local wor
nomic interest of the developing country and
result in such working, that their grant is
course, may not be the case; economies of sca
materials or parts, or unfavorable labor situa
nomical to import the patented invention than to produce it
domestically.134
As illustrated by John Barton, "high-tech" economics favors expor-
tation from developed countries to developing countries in two ways.
First, countries having a relatively large domestic market for certain
goods will tend to export those goods.135 Second, the "learning curve
phenomenon" provides originators with a continuing cost advantage as
they work down the learning curve,136 especially under expanded export-
market opportunities.
Unless it is more economical to produce the patented invention in
the country than to import it, the requirement for local working would
A compulsory license may not be applied for on the ground of failure to work or insuffi-
cient working before the expiration of a period of four years from the date of filing of the
patent application or three years from the date of the grant of the patent, whichever period
expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons.
Such a compulsory license shall be non-exclusive and shall not be transferable, even in the
form of the grant of a sub-license, except with that part of the enterprise or goodwill which
exploits such license.
Id. at art. 5, pt. A, para. (4).
133. This is recognized in U.N. REPORT, supra note 60, paras. 116-20.
134. See Machlup, supra note 2, at 12. See generally E. PENROSE, supra note 4, at 137-61 (dis-
cussing compulsory working of foreign patents).
135. Barton 1983, supra note 32, at 132.
136. Id.

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act much the same as a protective tariff, increasing costs to con

Local working certainly has emotional appeal as it tends to
economic development is progressing. Such economic nationa
ever, may not have positive developmental effects, unless th
market situation of that country affords comparative advantag
local working of the invention.138 In addition, if the invent
high-technology areas, the situation may be irreversible, as con
Barton:
A far more sinister implication of the high-tech theories is that the
situation of the developing nations is much more desperate than it
would seem to be on the basis of the more traditional theories. Under
traditional theories, the developing nations would have a chance to
catch up if only other nations gave their exports a fair chance; under
the high-tech theory, their position of technological inferiority is al-
most irreversible.139
In any event, even if a compulsory license is granted under a for-

eign-owned patent to a local enterprise, there is no assurance that the
invention can or will be efficiently worked. In addition, the local licen-
see, if capable of working the invention, will in all likelihood be faced
with competition from imports by the foreign patent owner who was
forced to grant the compulsory license.140 Tariff restrictions may be
placed upon these imports but, again, the end result is to subsidize the
compulsory licensee, thereby raising local prices. Moreover, the compul-
sory licensee is given a license to practice the patented invention only in
that country. The licensor will be able to block exports by the licensee to
any countries where the licensor has obtained patents.
In an effort to preclude competition with the foreign patent owner,
developing countries, in the most recent negotiations for revision of the
Paris Convention, have proposed preferential treatment to enable devel-
oping countries to grant exclusive compulsory licenses-euphemistically
called "non-voluntary licenses."141 It has also been proposed that the
137. See Machlup, supra note 2, at 12.

138. Given "high-tech" economics, lesser developed countries may never have a comparative
advantage. See Barton 1983, supra note 32, at 133 ("These high-tech theories are in direct contra-
diction to more traditional economic theories. Free-trade logic would have industry distribution
reflect comparative advantage.").
139. Id.
140. It should be noted that any compulsory license granted in accordance with article 5, par
paragraph (4) must be a nonexclusive one, which would permit the patent owner (compulsory lic
sor) still to import the patented inventions as well as other licensees under the patent in that count
Article 5, part A, paragraph (4) is reproduced supra note 131.
141. The various proposals may be found in WORLD INTELLECTUAL PROPERTY ORGANIZ
TION, SYNOPTIC TABLES CONCERNING ARTICLES 1, 5A AND 5"qu"a'r OF THE PARIS CONVENT
FOR THE PROTECTION OF INDUSTRIAL PROPERTY 32-33 table 12, WIPO Doc. No. PR/DC/I
51 (1984). Although the text adopted as forwarded by the Preparatory Committee of the Diplom

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period of time before a compulsory license m

ing country for nonworking be shortened.14
nationalistic and political appeal, but th
problems associated with developing countr
eigners in the first place.143
The period of time that a developing cou
compulsory license may be granted does not
and indeed the developed countries seem to h
ing of the restrictive periods.14" More centr
that compulsory licenses are notoriously un
operation, not only in developing countries
tries.145 Ultimately, the decision of whether
particular country will be decided by market
the effectiveness of the fear of a compulsory
work locally. Indeed, even the compulsory lic
the patent owner, because the patent is no
censed. A reasonable royalty would be due th
likely rewarding the patent owner for an inv
pendently of the patent system of that d
whether a domestic competitor is granted an
license will not automatically make the licens
that particular invention in that particular co
market.
Aside from granting a compulsory lice

should fail to work the patent within the req
oping country could, under its power of emin
patent for the public good.146 Nonetheless, t
Conference would permit exclusive nonvoluntary transfer in

riod, the point has not yet been conceded. Id. at 32-33 tab
142. See id. at 36-37 table 14. The proposals range from tw
143. Other proposals by developing countries are outlined
note 125. See also WORLD INTELLECTUAL PROPERTY ORG
144. The developed countries have conceded the four years
would agree to three years from the grant. WORLD INTELL
supra note 141, at 36-37 table 14.
145. See UNCTAD REPORT, supra note 61, para. 335; see als
Determining Provisions in Compulsory Patent Licenses, 11 J.
use of contributory licenses in developed countries).
146. See U.N. REPORT, supra note 60, paras. 179-204 & a
nations' provisions regarding expropriation of patents in the
Provisions of Patent Legislation in Selected Countries). Prop
makes the expropriation power express. There appears to
proposals of the developing countries and developed countri
ERTY ORGANIZATION, supra note 141, at 30-31 table 11. But
agraph (5) of the draft is one of the most radical departur

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the society to compensate the patent owner because in the absenc

patent the invention could have been imported at the most co
price on the international market, and produced within that c
well as exported to those other countries where the invention
protected by patents.
To summarize, the principles of national treatment, right of p
independence of patents, and import monopolization impose si
obligations and restraints upon the developing countries par
Paris Convention, arguably without providing them with corr
assurances that the grant of patents to foreigners will lead to
economic development. The playing field, already steeply slop
disadvantage of developing countries because of their economi
velopmental disparity, appears to be further tilted in the favor o
oped countries by the legal regime embodying the fundamental p
of the Paris Convention.
V. REAPPRAISAL, RESTRUCTURING AND REPERCUSSIONS
Contrary to the advice freely offered to them by economists over the

past thirty years, developing countries continue to grant patents to for-
eigners within the colonial-era restrictions of the Paris Convention.
Rather than abolishing or abandoning the grant of patents to foreigners,
developing countries have elected to continue in the international patent
system as full, if unequal members with the evident hope that by working
within the system it may be improved to aid their developmental goals.
It should be noted that developing countries have achieved some success
in the regulation of the terms of transfer-of-technology licenses. 47 Such
regulation, when undertaken, is accomplished by particular developing
countries themselves or by their regional groups; the regulation may thus
be fashioned in the perceived self-interest of the regulating country or
group. On the other hand, with respect to the international patent sys-
tem, developing countries as a group have been ineffective in achieving
any meaningful amendment of the Paris Convention.148 Because of the
States, the theory underlying compensation by the government for the infringement of a patent is
that the infringement is a "taking" within the "eminent domain" power. See, e.g., Pitcairn v. United
States, 547 F.2d 1106, 1114 (Ct. Cl. 1976); N. V. Philips' Gloeilampenfabrieken v. Atomic Energy
Comm'n, 316 F.2d 401, 407 (D.C. Cir. 1963).
147. See Armstrong, Political Components and Practical Effects of the Andean Foreign Invest-
ment Code, 27 STAN. L. REV. 1597, 1602 (1975).
148. The proposals made for the revision of the Paris Convention by UNCTAD, and introduced
by developing countries, largely have not been acceded to. Moreover, the proposals themselves pro-
viding limited preferential treatment for developing countries do not directly address the underlying
developed-country bias of the Paris Convention. See supra notes 104-46 and accompanying text. On
preferential treatment, see generally Dorsey, Preferential Treatment: A New Standard for Interna-

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consensus-voting rules on amending the Paris

and intransigence of the developed countries
hope of meaningful amendment of the Paris
advantage of developing countries within t
Whatever the reasons for the continued
countries in ever-increasing numbers to the
the time for reappraisal is ripe. Developin
themselves burdened by horrendous de
world,S1o faced with huge trade deficits,151
expected, let alone desirable, growth rates.
suggestions for reappraisal and restructurin
that may provide at least some short-term
countries.
A. Alternatives to the Developed Country M
1. Narrowed Scope of Protection Within

There are some alternatives that may be ex
from the international patent system and
patents to foreigners. Those developing cou
the Paris Union have full control over their p
mention within the mandatory requiremen
Developing countries can remain full-fled
Union without providing the same scope of p
oped countries traditionally afford because th
Paris Convention that all classes of inventions
tory classes of invention fall within the pu
tional Economic Relations, 18 HARV. INT'L L.J. 109 (1977

Berne Convention, supra note 20 (Paris text of July 24, 1971
limited preferential treatment for developing countries. See
1886, 168 Parry's T.S. 185, app. arts. I-IV. With respect to th
ence to the Berne Convention, see infra note 192. Preferenti
Universal Copyright Convention, opened for signature Sep
No. 3324, 216 U.N.T.S. 133, arts. Vb", V',er Vq.aer., Appendix
United States has been a party since 1954.
149. Four diplomatic conferences on the revision of the Pa
difference in proposals made by various groups can be seen
ORGANIZATION, supra note 141; article 5, part A is discusse
150. See Appendix.
151. Id. Note that even those countries which have a positi
by the greatest foreign debts, e.g., Argentina and Brazil.
152. Id. See also supra note 16.
153. Article 1(3) provides:
Industrial property shall be understood in the broadest se
industry and commerce proper, but likewise to agriculture

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member states. All countries, developing as well as develope

certain classes of inventions from patent protection.154 In p
many countries have specified that pharmaceuticals and food
not patentable subject matter.-55 The excluded classes could,
be extended and patterned to meet the policy demands of a p
developing country. It may not make economic sense in a part
veloping country to grant patents (especially to foreign enter
luxury consumer inventions. On the other hand, the develo
needs of that country may jusitify the grant of patents to invent
ing to a particular industry (e.g., mining technology because of t
ability of a particular natural resource).
Another technique of patterning the patent statute to the ne
developing country would be to grant patents only for a relative
duration, rather than for the traditional periods exceeding ten y
For instance, patents could be granted only for a term of th
The legislation could provide for renewal, if desired, for an a
period, conditioned perhaps upon local working of the patent or
net benefit to the developing country.157
On a more radical plane, there is no explicit requirement in t
Convention that a member state grant patents. Georg Hendr
tian Bodenhausen, the first Director-General of WIPO, ackn
all manufactured or natural products, for example, wines, grain, tobacco leaf, fruit
minerals, mineral waters, beer, flowers, and flour.
Paris Convention, supra note 20, art. 1, para. 3. This understanding, however, does
that all of these classes be protected; they are merely protectable, and such protection
vided within the wisdom of the public policy of the legislating state.
154. For example, the United States limits the grant of patents to a "process, machi
ture, or composition of matter." 35 U.S.C. ? 101 (1982). The Supreme Court discusse
in Diamond v. Diehr: "This Court has undoubtedly recognized limits to ? 101 and ever
is not embraced within the statutory terms. Excluded from such patent protection a
ture, physical phenomena, and abstract ideas." 450 U.S. 175, 185 (1981). The Court
alia, Parker v. Flook, 437 U.S. 584 (1978) (Formula for computing and updating "ala
catalytic conversions is unpatentable subject matter.); Gottschalk v. Benson, 409
(algorithm unpatentable subject matter); Funk Bros. Seed Co. v. Kalo Inoculant Co.
(1948) (product of nature unpatentable subject matter).
155. See, for example, UNCTAD REPORT, supra note 61, at 116 table 14, where it
that pharmaceuticals are denied protection in 46 countries. Of these, 37 are members
Union. Foodstuffs are denied protection in 21 countries. Id. Of these, 15 are member
Union.
156. See UNCTAD REPORT, supra note 61, at 120 table 15. The duration for which the patent
is granted bears upon the incentive provided to inventors and the costs that may arise for the monop-
oly period. Note, however, as Professor Goldstein concludes: "The judicial and legislative judg-
ments produced-conceivably, for example, judgments that to reduce the duration of the patent or
copyright term by half would not diminish technological or artistic incentive one whit-would mark
a worthy return to first principles." Goldstein, The Competitive Mandate: From Sears to Lear, 59
CALIF. L. REV. 873, 904 (1971) (footnote omitted).
157. Significant renewal fees may be envisioned.

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that the Paris Convention does not require

titles of protection set forth in article 1(2
refers to article 25, which obligates a membe
ance with its constitution, the measures nece
tion of this Convention"159 and also re
depositing an instrument of ratification a m
under its domestic law to give effect to th
tion."160 Bodenhausen concludes:
If a State adopts the Convention without providing, in its domestic
law, any type of protection for important subjects of industrial property,
such as patents or trademarks, it will not be in a position to give effect
to substantial parts of the Convention dealing explicitly with the sub-
jects, and will, therefore, probably be considered to have implemented
the Convention insufficiently in its domestic law.161
Although Bodenhausen's conclusion may seem to reflect the spirit of
the Paris Convention and indeed the interests of the Secretariat, there is
no express requirement that either patents or trademarks per se be pro-
tected by the member states. On the contrary, when the drafters of the
Convention desired mandatory protection under the Convention, they
clearly specified it. Industrial designs are a clear example.162
158. G. BODENHAUSEN, GUIDE TO THE APPLICATION OF THE PARIS CONVENTION FOR THE
PROTECTION OF INDUSTRIAL PROPERTY 24 (1969). Article 1, paragraph (2) defines "industrial
property" as follows: "The protection of industrial property has as its object patents, utility models,
industrial designs, trademarks, service marks, trade names, indications of source or appellations of
origin, and the repression of unfair competition." Paris Convention, supra note 20, art. 1, para. (2).
Bodenhausen carries this definition further:
However, this statement has not completely exhausted the question in view of other provi-
sions in the Convention. Protection of several subjects of industrial property has been
expressly prescribed in the Convention, namely, industrial designs (article 5 quinquies),
service marks (article 6 sexies), collective marks (article 7 bis), trade names (articles 8, 9,
10 ter), indications of source (articles 10, 10 ter); and protection against unfair competition
(articles 10 bis and 10 ter) is also mandatory, as well as the temporary protection of certain
subjects exhibited at international exhibitions (article 11). Moreover, attention must be
directed to article 25 of the Convention ....
G. BODENHAUSEN, supra, at 24-25.
159. Paris Convention, supra note 20, art. 25, para. (1).
160. Id. art. 25, para. (2).
161. G. BODENHAUSEN, supra note 158, at 25.
162. Paris Convention, supra note 20, art. 5qiq'"""". See supra note 158 for a listing of other
mandatory provisions of the Paris Convention. The Convention provides for resolution of disputes
among member states over interpretation by the International Court of Justice (ICJ) when negotia-
tions fail or another method of settlement cannot be agreed upon. Paris Convention, supra note 20,
art. 28, para. (1). Paragraph (2) of article 28 permits a state to make a reservation to the jurisdiction
of the ICJ under paragraph (1) "at the time it signs this Act or deposits its instrument of ratification
or accession." Id. art. 28, para. (2). The Convention does not otherwise permit reservations to any
of its provisions, except as provided in article 28, paragraph (2) and article 20, paragraph (1), clause
(b), which would permit a member state of a version prior to the Stockholm text to declare that its
ratification or accession to the Stockholm text would not apply to articles 1 through 12 or 13
through 17. This would enable such a state to reject either the substantive articles (1-12) or the

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Indeed, it appears that Switzerland, in the early history of th

Convention, took advantage of this "shortcoming" of not re
mandatory enactment of patent laws by member states. Switzerla
one of the original signatories of the Paris Convention in 188
hered to the Convention in 1884.163 Switzerland did not enac
statute, however, until 1888.164 Thus, until that time, Swiss
inventors could obtain patents in other member states on the
national treatment while foreign inventors could not obtain p
Switzerland. Even the original Swiss patent act of 1888 provid
ited scope of protection. It required that a "model" of the inv
submitted in order for a patent to be granted, thus barring the
inventions of processes. Under pressure from Germany, which it
pressured by its chemical industry, the Swiss patent law was ame
1907 to drop the "model" requirement.165
In any event, there is nothing in the Convention that pre
member state from limiting the scope of patent protection by pr
only narrow classes of statutory subject matter, imposing high s
of patentability, limiting the duration of patent grants, conditio
renewal of a patent on the economic interests of the developing c
or imposing high filing and maintenance fees. While all of th
niques would make it more difficult for foreign enterprises to o
ents in those countries, it would not preclude them from ob
patents. One would expect prudent enterprises to work with
revised system to optimize profits. With respect to inventors wi
developing country, on the basis of national treatment under
Convention, they would still have full access to the internatio
systems in all other member states, including the right of prior
Some concern may be expressed for the diminished incentive
mestic inventors and enterprises that may result from narro
scope of patent protection granted within a particular develop
try. For example, if patents on a certain class of inventions w
available, the result might be diminished investment in these
administrative articles (13-17) of the Stockholm text and be bound by those, respectiv
previous text to which the reserving state was a party. Id. art. 27, paras. (2)-(3).
163. The original signatories at the International Conference of 1883 in Paris we
Brazil, France, Guatemala, Italy, Netherlands, Portugal, El Salvador, Serbia, Spain and
Acts of accession were filed by Great Britain and Ireland, Tunis and Ecuador prior to
date of the Convention. The United States adhered on May 30, 1887. See 1 S. LADAS, s
?? 48-49.
164. E. PENROSE, supra note 4, at 123-24. It is also interesting to note that the Netherlands did
not have a patent statute at the time it adhered to the Convention. In 1869, it repealed its patent law
originally enacted in 1817 and did not reenact one until 1910. Id. at 15.
165. See id. at 120-24; see also Kronstein & Till, supra note 4, at 778-79, for further background
on the German-Swiss controversy.

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nonprotected classes. Nonetheless, the counte

that resources may be redirected toward cr
matter of public policy, have been identified
trial development of that particular country.
than patents-such as governmental fundin
ment in particular technological areas, invent
tions, and other forms of subsidization by
provided to domestic enterprises as well as
2. Abandonment of the Fiction of Novel

economic development that certain invention
lated into the technological base of the count
may be necessary to grant a monopoly on
ensure their introduction. It should be em
mere granting of a patent on an invention doe
tion will or can be worked in that country
cases, technical information beyond that disc
be required in order to enable a local enterp
The realities of the international patent sy
mind. First, the vast majority of inventions
tries and are patented there upon satisfying
obviousness standards of those countries. Se
are patented in developing countries, they are
ority based upon the original applications
try.166 Such inventions may no longer be
respect to any country bound to grant the ri
original filing, the invention may safely g
disclosure, publication or sale.167 In any even
the invention is published in a patent docume
Indeed, by the time a developing country ma
under the Paris Convention to work the inv
invention has been in the public domain of th
at least three years.168 Thus, the reality is th
invention made in a developed country that o
(i.e., the invention is de facto not novel) is
the right of priority (i.e., it is de jure nove
cede to this legal fiction and give it full effec
166. Paris Convention, supra note 20, art. 4, pt. A. See su

text (discussing of right of priority).
167. Paris Convention, supra note 20, art. 4, pt. B.
168. A compulsory license cannot be granted before four year
from the grant of the patent in that country, whichever is t
(4).

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Because of the need for additional technical information to work a

large number of inventions in developing countries and because such in
ventions lack de facto novelty, perhaps the grant of patents on such in-
ventions ought to be conditioned upon a commitment by the patent
owner to provide the necessary cooperation to ensure the working of that
invention in the granting country. A number of proposals for the adop-
tion by developing countries of specialized types of patents have surfaced
over the last twenty years with the goal of encouraging the introduction
of technology into these countries. These proposals find their historic
base in the so-called patents of "importation" or "confirmation," whic
have been part of the patent legislation of a number of countries, esp
cially Latin American countries, for some time.169
In general, an importation or confirmation patent covering the in
vention claimed in a foreign patent will be granted at any time during it
term, unless the invention has been introduced into the developing coun-
try prior to the application for such patent.170 In essence, such an ar
rangement merely extends the priority period until the invention is mad
or sold in that country. For example, the United International Bureau
for the Protection of Intellectual Property (BIRPI) Model Law for D
veloping Countries of 1965 proposed a system that would require th
owner of such a patent to work the patent inside the country within two
years or forfeit the remainder of the ten-year import monopoly.171 The
proposal would subject the owner of the patent or a licensee to pena
sanctions for importing the invention even during the two-year period.172
Stephen Ladas would add "improved features"173 to the BIRPI proposa
169. See 1 S. LADAS, supra note 4, ? 218. Ladas lists 24 countries offering such patents, includ
ing Spain, 14 Latin American countries, Barbados, Haiti, and Jamaica.
170. Id.
171. UNITED INTERNATIONAL BUREAUX FOR THE PROTECTION OF INTELLECTUAL PROP-
ERTY, MODEL LAW FOR DEVELOPING COUNTRIES ON INVENTIONS annex A, ? IV, para. (1)(d).
BIRPI Publication No. 801(E) (1965).
172. Id. annex A, ? V. This section provides:
Direct or indirect importation by the owner of the patent of introduction or by a licensee
under such a patent of a product, the subject of the patent of introduction, or of a product
obtained directly by means of the process, the subject of the patent of introduction, shall
constitute an offence punishable according to Section 50. Importation of model or proto-
type products shall not constitute such an offence.
173. The improved features are:
(a) It should be available to the owner of a foreign patent provided he applies in the
developing country within five years from the grant of his foreign patent.
(b) If the foreign patentee fails to apply within the said period, then any other person may
so apply on the basis of an outstanding foreign patent.
(c) The first essential requirement for the grant of such patent should be that the subject
matter has not been manufactured in the developing country. Publication alone should not
be a bar.
(d) The application for such a patent should be published and be open to third-party
opposition.

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but would give the foreign patent owner five

introduction; after that the invention wou
anyone could "apply on the basis of an outs
The latest proposal is the so-called "transfe
which is contained in the annex to the WIPO Model Law on Inventions
for Developing Countries, promulgated in 1980.175 Although this pro-
posed title of protection goes much further toward recognizing the needs
of developing countries for the transfer of technology and cooperation in
its assimilation, no country appears to have adopted it.
For the granting of a transfer-of-technology patent, the novelty re-
quirements need not-indeed cannot-be met, because the grant is pre-
mised on the existence of a foreign patent.176 As a condition for the
grant of the transfer-of-technology patent, the foreign patent owner must
conclude a transfer-of-technology licensev7 with a domestic enterprise
that has, or proves that it "will have, an effective and serious industrial
establishment" within that country for the exploitation of that particular
invention. 178 The patent is granted jointly to the foreign and domestic
enterprise,179 thus providing an incentive for the foreign enterprise to co-
operate fully in achieving successful working of the invention by the par-
ties jointly or by the domestic enterprise alone.180 To further ensure
local working, joint importation will result in the lapse of the patent.'81
A "temporary and limited exemption," however, may be granted by the
government if public interest so requires.182 Unauthorized importation
by one of the owners may be enjoined by the others.183 A two-year
"start-up" period is afforded when "serious preparations" are shown to
be necessary for working.184 Thereafter, insufficient working will result
(e) The second essential requirement should be that the invention covered by the Patent
of Introduction must be manufactured in the country within a period of two years from
grant. In the case of unjustified failure of such working, the patent would be forfeited.
(f) Until the invention was actually manufactured in the country, the Patent of Introduc-
tion would not prevent importation of the subject matter.
(g) The Patent of Introduction should endure for the unexpired term of a foreign patent
with a minimum term of ten years.
1 S. LADAS, supra note 4, ? 218.
174. Id.
175. 2 WORLD INTELLECTUAL PROPERTY ORGANIZATION, WIPO MODEL LAW FOR D

OPING COUNTRIES ON INVENTIONS ?? 601-616, at 82-102, WIPO Publication No. 841(E)
176. Id. ? 603(1)(i).
177. Id. ? 604(1)(a)(i).
178. Id. ? 604(1)(a)(ii).
179. Id. ? 604(1)(a).
180. Id. ? 604(2)(i).
181. Id. ? 618(2)(a).
182. Id. ? 618(2)(b).
183. Id. ? 618(3).
184. Id. ? 609(2)(a), (b).

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in the lapse of the patent."85

The rationale underlying the grant of transfer-of-technology
appears to comport more with legal and economic realities fac
veloping countries than does the granting of traditional paten
eigners. If a developing country finds an invention so imperat
development that it is willing to provide its inventor with a m
that country would be well justified in sacrificing the legal requi
novelty under the right of priority for the assurance of rece
needed information and cooperation to practice the invention.
One of the shortcomings of a compulsory license is that it
only a "naked" license to practice the patented invention; th
requirement that the patent owner transfer the needed infor
cooperate in the working of the invention by the licensee. The tr
of-technology patent overcomes this problem by being grante
condition that sufficient information and cooperation are provid
sure the working of the invention. Nonetheless, not all invention
course, be efficiently worked in every developing country,186 no
classes of inventions necessarily fall within the developmental
the country.'87 Only those inventions identified by the developin
try as being critical for its development should be considered elig
the grant of a transfer-of-technology patent.
The transfer-of-technology patent may be an even better veh
development if, in addition to a transfer-of-technology license, its
conditioned on an arrangement for a license from the foreign
the domestic enterprise under patents in other countries on the
vention. This license would enable the joint enterprise workin
vention in the developing country to import the invention
licensed countries, as well as into countries where the invent
protected by patents. The ability of the joint enterprise to partic
the export market for the invention may produce economies of s
badly needed foreign exchange.
B. Potential Repercussions.
In deciding to eliminate or curtail patent protection to foreig

developing country should take into account the probable reactio
veloped countries and their enterprises. There is always the possi
not the probability, that a developing country that eliminates or
its patent protection to foreigners will experience a decrease i
185. Id. ? 609(2)(a), (b), (c).

187. See supra text accompanying notes 81, 153-55.

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investment. Increased pressure no doubt will be

procity of patent protection in countries not p
protection expected by developed countries a
pressure is likely to be brought not merely by t
but also by the governments of developed cou
sure is already being applied. The United Stat
tively applied diplomatic pressure on the go
countries to provide patent and other intellectu
ceptable to itself.188 This policy may be expect
over, the United States is now granting on o
called sui generis type of protection with regar
Protection is granted to foreigners only if their
similar protection to United States firms.190 U
islation, trade sanctions could be imposed on
vide adequate protection for intellectual p
enterprises.191
One may argue that conditioning patent-like
cal treatment runs contrary to the spirit of na
Paris Convention, as well as other internatio
conventions.192 By unilaterally defining a parti
"sui generis, " and therefore outside the scope o
the United States has raised a significant questi
mitment to the principle of national treatment
Balanced against the detriments of political p
and perhaps some diminution in foreign investm
nology, is the assumed net benefit of the elimin

189. Professor Barton cautions industry against furtherance o
in view of high-tech economic theory: "[I]t would be far better if
resources on developing the technologies themselves than on the
nological protectionism." Barton 1984, supra note 11, at 97.
191. See the discussion of The House Omnibus Trade Bill, su
it easier to keep out foreign competition on the basis of Unite
and, in essence, expects reciprocal treatment with respect to su
similar protectionist fashion, the United States has removed prefe
originating in certain developing countries, including Brazil, M
Pine, U.S. Officials Curb Duty-Free Trade Status, Wall St. J., J
192. For example, national treatment is required under both
tion, supra note 148, art. II (effective for United States since 19
note 20, art. 3(1). On June 18, 1986, the Berne Convention w
Reagan for its advice and consent. See 32 Pat. Trademark & C
(July 17, 1986) (text of President's transmittal message). See also
ing Group on U.S. Adherence to the Berne Convention, 10 COLU
ing compatability between basic provisions of United States c
Convention).

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monopoly granted to foreign enterprises. If domestic production

ble, sales also may be expanded in the international market to
where patent protection is either not available or has not been
Illustrative of these benefits is the example of a local firm produ
neric "Tagamet" for the Argentine market.193 One would exp
this firm would be able to export the generic "Tagamet" into tho
tries, particularly developing countries, that do not provide pa
tection on pharmaceuticals, or where the "Tagamet" compound its
not been patented. This may assuage not only the pains, but
pocketbooks; any alleviation in the drain on the foreign exchange
veloping countries for the importation of products can only furt
goals of domestic development.
In sum, a cautious and balanced approach is suggested for
ing countries that participate in the international patent system.
one hand, they should pattern their domestic patent systems
primary domestic goals of industrialization. On the other ha
should be taken not to stray too far from traditional norms of pr
as this may invoke retaliation on the part of developed coun
their enterprises, which control needed resources.194
VI. CONCLUSION
Substantially all Third World countries, many since their eme

from colonialism, have granted patents and are likely to con
grant patents predominately to foreign enterprises. If recent tren
tinue, with pressure being applied by developed countries and rein
by agencies and enterprises within those countries, developing cou
are likely to strengthen their patent systems and become, under
from WIPO, increasingly involved in the international patent syst
The reasons for this continuing and increasing participation in th
national patent system-in the face of strong economic and leg
ions to the contrary-range from formalized efforts toward devel

194. Retaliation by developed countries is, of course, not without risk. Many develop
tries have large foreign debts, and without positive international trade balances and a
growth rate these countries may be unable to repay their foreign debts. As noted previ
suspended interest payment on its foreign debt in February 1987. See supra note 1
without a surplus in trade or the ability to borrow to create a domestic industrial base
countries will be unable to purchase goods produced by developed countries. For e
United States has seen its balance of trade with South American countries fall from a su
billion in 1980 to a $10 billion deficit in 1985. See BUREAU OF THE CENSUS, U.S. DE
MERCE, STATISTICAL ABSTRACT OF THE UNITED STATES 1987, at 792 (107th ed. 1986)
STATISTICAL ABSTRACT].
195. Out of the 39 members of the Patent Cooperation Treaty, 18 are developing coun
are Eastern European countries. See 25 INDUS. PROP. 14 (1986).

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by inducing foreign investment and the transf

haps, yearnings for prestige and self-respect.
Present economic conditions in the develo
the United States, do not present a fertile envir
operation toward, and support for, Third W
huge imbalances in international trade facing
will be increasing pressure for protective tr
ures will retard, rather than advance, free trad
tion, the balance-of-trade deficit of the United States has been
exacerbated by the developing countries' inability to purchase American
manufactured and agricultural products.196 Unless these countries have
the foreign-exchange capability to buy imported products, the existence
of imported monopolies under the international patent system is of di-
minished importance. The interdependence of the prosperity of the Old,
New and Third Worlds is well stated by the late Stephen Ladas, who was
one of the leading supporters of the international patent system:
Failure to extend the benefits of technology and science to large parts
of the world is not only morally wrong, but in the long run it denies to
the total system its ultimate fulfillment. Prosperity like peace is indi-
visible. The accelerated pace of the West's own economic progress
could be nullified by the failure of the rise in the standard of living of
the largest part of the world.197
Whatever impact the participation in the international patent sys-

tem may have on individual developing countries, its cumulative effect in
the Third World may be significant. In this regard, individual develop-
ing countries either not participating or curtailing their participation
may be singled out for retaliatory measures. If, however, there is cooper-
ation by developing countries in the formulation of a unified policy to-
ward industrial property, collectively and individually the developing
countries should be in a better position to withstand retaliatory measures
and pressures exerted by developed countries. In addition to cooperating
among themselves, developing countries may urge responsible agencies
within the United Nations system to direct some attention to restructur-
ing the international patent system in the interests of developing coun-
tries, along with continuing efforts to regulate the detrimental effects of
the present system.
196. For example, exports from the United States to developing countries amounted to about
$60.2 billion in 1985, but imports to the United States from developing countries stood at $93.9
billion. See STATISTICAL ABSTRACT, supra note 194, at 837 table 1467.
197. Ladas, Existing Uniformity of Industrial Property Laws and Revised Patent of Introduction:
Means for Transfer of Technical Information to Less Industrialized Countries, 12 IDEA: THE PAT-
ENT TRADEMARK & COPYRIGHT J. RES. & EDUC. 163, 163 (1968).

52.172.32.150 on Tue, 13 Jun 2023 21:24:42 +00:00
Developing countries, many only in this century, have be

from the political chains of colonialism; nonetheless, in many
economic chains of colonialism still remain. The internationa
system embodied in the Paris Convention is one of the links
chains. The beneficiaries of such a system are not unintentio
system expounds a late eighteenth century natural law property
of inventions, was designed to promote the interests of the indus
world at the end of the nineteenth century, and was am
strengthen those interests throughout the first part of the twent
tury. Now, in the late twentieth century, it continues to perpetu
interests by providing import monopolies in the form of patents
by developing countries to many of the former colonial power
There may be considerable trepidation in breaking or weakeni
link for fear of inhibiting development. Nonetheless, the quest f
opment is far too important for developing and developed countr
to ignore the economic and legal realities of the international pat
tem as we approach the twenty-first century.
APPENDIX
Country198 Trade Balance199 Debt200 Growth Rate201

Algeria 4,223 17,501 -5.3 (82)
Argentina 3,982 (84) 28,671* -4.4
Bahamas -593 (84) 226 3.0
Barbados -259 (84) 397 .3
Benin
Brazil 13,086 66,500* 8.3
Burkina Faso -233 (82) 393 (83) 3.3 (83)
Burundi 587 8.6
Camaroon 524 2,444 7.6 (84)
Cent. African Rep. -25 325 2.7 (84)
Chad - 19 208 --2.7 (84)
Congo 651 1,855 -3.0
Cyprus -703 (84) 926 3.5
Egypt -5,386 (84) 19,925 7.5 (83)
Gabon 1,285 1,084 -2.0
Ghana - 36 1,471 7.6 (84)
Guinea 1,572 1.3 (83)
Haiti --131 (84) 677 1.8 (84)
198. The countries listed are those develo

All figures are in millions of U.S. dollars,
199. INTERNATIONAL MONETARY FUN
are for 1985 unless otherwise indicated.
200. Figures marked with an * are dra
Reports, No. 4 (1986). All other figures ar
1986-1987. All debt figures are public deb
year and publicly guaranteed private debt
Iraq is for unspecified external debt. All
201. The Economist Intelligence Unit,
percentages and for the year 1985 unless

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APPENDIX
Country Trade Balance Debt Growth Rate

Indonesia 5,876 22,880* 6.6 (84)
Iran
Iraq - 8,216
Israel - 2,412 16,140 1.9
Ivory Coast 1,482 5,200 (85)* -2.5 (83)
Jordan -1,721 (84) 2,336* 3.0
Kenya -302 (84) 3,877
Korea (Republic) - 19 24,642*
Lebanon
Libya
Madagascar - 125 (83) 2,134 - 1.5
Malawi 28 (83) 890 (83) 4.3 (84)
Mali -77 (84) 1,390 1.3 (84)
Malta -228 (84) 104* .9 (84)
Mauritania -8 (84) 1,636 3.1
Mauritius - 27 527 4.6 (84)
Mexico 12,799 (84) 69,007* 2.7
Morocco - 1,407 (84) 13,296 4.3
Niger -69 (82) 678* -16.1 (84)
Nigeria 4,353 16,936 6.6 (84)
Philippines -482 11,174 -4.0
Rwanda -55 (84) 453 4.0 (82)
Senegal -257 (84) 2,284 -4.3 (84)
Sri Lanka -657 3,638 (83) 4.1 (84)
Surinam 48 24 -3.0 (84)
Syria - 1,942 (84) 2,453 2.1 (84)
Togo --19 787 (85)* 1.3 (84)
Trinidad 695 1,059 -6.2
Tunisia - 1,111 (84) 3,707* 4.5 (83)
Uganda -49 (81) - -5.5
Tanzania -350 (81) 3,186 2.6 (84)
Uruguay 191 (84) 2,545* .7
Yugoslavia - 1,231 (84) 8,690* 1.5 (84)
Zaire 409 (83) 4,525 2.7 (84)
Zambia 275 3,504 3.4
Zimbabwe 184 (84) 2,150 (83) 1.1 (84)

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Oddi InternationalPatentSystem 1987

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Document Informationclick to expand document informationThe author argues that IPR regimes do not exist to fulfill the interests of the third world countries - they are another tool of exploitation.

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The International Patent System and Third World Development: Reality or Myth?

Author(s): A. Samuel Oddi

Stable URL: https://www.jstor.org/stable/1372691

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This article examines the impact on Third World countries of their

The debate over whether a country should have a patent system

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all, the patent system has at least a five-hu

1958) (F. Machlup auth.) [hereinafter Machlup]. Machlup's

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including those with centralized market systems.6

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as tarriffs or quotas, we are witnessing an evo

Eliminate the current injury requirement from section 337

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innovations as is provided in the United States, innovations origin

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exacerbated by the higher prices for imported g

economic growth of Argentina will not be sacrificed to service

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II. A COST/BENEFIT ANALYSIS OF THE PATENT SYSTEMS IN

The patent system still appears to follow the basic assumptions in

21. See infra notes 147-97 and accompanying text.

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If any net benefit is to be attributed to a pa

27. As stated by Dean Prosser, "An act or an omission is not

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tion that is the equivalent of patent protection."33

[E]xcept when innovators' profits come largely from cannibalization of

The cost/benefit analysis of a patent system is complicated, how-

33. Id. at 132, 136.

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Turning then to the question of the net co

The fourth cost element is the research expenditures that competi-

38. Turner, supra note 2, at 454-55.

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although there may be some "fallout" effect by improving o

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edge, to recommend abolishing it.52

III. EXTRAPOLATION TO THE THIRD WORLD

After concluding that, in essence, the only responsible recomm

52. Machlup, supra note 2, at 80.

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The question of why developing countries have disregarded

As with developed countries, the two fundamental assum

59. See supra text accompanying notes 25-29.

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majority in only a few countries) of patents

B. Costs of Rewarding Nonpatent-Induced

Faced with this gross imbalance in paten

62. For example, in 1984, the following countries granted p

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developing countries. A possible exception to this may be d

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such protection and most certainly would n

C. Additional Costs to Developing Countries of Granting

In addition to the costs associated with overbalance of nonpatent-