INTERNA TION AL PATENT-LEGISLATION

AND DEVELOPING COUNTRIES

 INTERNATIONAL
PATENT-LEGISLATION AND
DEVELOPING COUNTRIES

by

ULF ANDERFEL T

II
MARTINUS NI]HOFF I THE HAGUE I 1971
© I97I by Martinus Nijhoff, The Hague, Netherlands
All rights reserved, including the right to translate or to
reproduce this book or parts thereof in any form

ISBN 978-94-011-8492-2 ISBN 978-94-011-9218-7 (eBook)

DOl 10.1007/978-94-011-9218-7
"To Hilda and to my parents"
 TABLE OF CONTENTS

INTRODUCTION

PART 1.
THE EVOLUTION OF PATENT LEGISLATION AND PRACTICES
UNDER PATENT RIGHTS, NATIONALLY AN INTERNATIONALLY I

Chapter 1. Society and the Inventor 3

A. Early Origins of Patents for Inventions 3
B. The Statute of Monopolies 162 3 7
C. The Patent Doctrine at the end of the Eighteenth Century: The
Patent Laws of the United States and France 10
D. The Different Theories on Patent Rights and the Evolution of the
Private Property Doctrine 17
I. Natural Law Doctrine - inherent rights in inventions 17
2. The advent of the collectivist doctrine - the social utility of
patents 20

Chapter II. The Role of Patents Today 26

A. Society and the Inventor Today 29
I. Who is doing the research? 30
2. Who is supplying the financial means? 31
3. Who is using the results? 31
4. Characteristics of inventive activity 32
5. The inventor and the innovator 34
B. Validity of Traditional Considerations for Patent Grants 35
I. Utility of disclosure to society 36
2. Incentive to inventive activity 37
3. Just compensation to the inventor 41
4. The inventor's right to his creation 45
C. Later Justifications for the Patent Institution 46
I. Invention and innovation 47
2. Means to support costly research 48
3. Means to support individuals and small enterprise 49
VIII TABLE OF CONTENTS

D. Criticism of the Patent Institution 50

I. The legal foundations 51
2. The economic foundations 55
E. Alternatives to the Present Patent System 58
I. A system of general licenses 60
2. A general reward system 62
3. Substitution of general for special awards or abolishment 63

Chapter III. The Development of an International Patent Sys-

~ ~
A. The Climate Ripe for an International Order 65
I. The Vienna Exhibition of 1873 66
3. The Paris Exhibition of 1878 67
3. The Paris Conference 1880 68
B. The Paris Convention for the International Protection of Indus-
trial Property 69
I. The basic rules of procedure 70
2. The basic substantive rules of the Convention 70
3. Other original rules of the Convention concerning patents 71
C. Revision Conferences 72
I. The revision conference of Brussels, 1897-1900 73
2. The revision conference of Washington 1911 75
3. The revision conference of the Hague 19 2 5 77
4. The revision conference of London 1934 84
5. The revision conference of Lisbon 1958 87
D. Some Characteristics of the Evolution of the Paris Union 92
I. Influence wielded by new members 92
2. Social vs. private interests 99
3. Legal vs. economic motives 100
E. Other International Patent Agreements 102
I. Patent cooperation among American States 102
2. European patent cooperation 104
3. African patent cooperation 105
Annex: Original text and revisions of rules concerning working
obligations 106

PART II.

THE EFFECTS OF THE INTERNATIONAL PATENT SYSTEM ON DE-

VELOPING COUNTRIES AND POSSIBLE CHANGES OF THE SyS-
TEM FOR THEIR BENEFIT 109

Chapter I. The Status of Developing Countries in Patent Matters II3

A. Countries Without a National Patent Law 114
B. Countries with National Patent Laws, Non-Members of the Union 114
C. Countries Members of the Union 115
 TABLE OF CONTENTS IX

I. Working requirements and sanctions for non-working 116

2. The position of dependent territories 118
3. Ratification of later texts 120

Chapter II. The Direct Effects of the International Patent Sys-

tem on Developing Countries 125
A. Significance of the Convention in Terms of Traditional Criteria 127
1. Economic considerations: the costs and benefits resulting
from international patent protection 127
2. Legal considerations 132
3. National vs. individual interests 133
B. Significance of the Convention According to Special Considera-
tions 135
I. Transfer of technology 135
2. Incentive to foreign investments 139
C. The Effectiveness of the International Patent System as a Vehicle
for the Transfer of Technology to Developing Countries 142
I. Allocation of patent exploitation according to the traditional
theory and the objectives of policies for economic development 142
2. "Spontaneous" local exploitation 145
3. 'Vorking obligations and sanctions for non-working 146
D. The Application of the Convention to Countries of Fundamentally
Different Strength 150

Chapter III. Indirect Effects of the International Patent Sys-

tem 153
A. International Cartels 153
I. International cartels in general 153
2. International cartels based on patent agreements 157
3· Contemporary prevalence of industrial cartels 159
B. How Cartels Affect Developing Countries in Particular 160
I. Restrictions on international trade 161
2. Restrictions on investments 162
3· Restrictions on the spread of technology 165
4· Restrictions on the use and development of future technology 168
C. Possible Remedial Actions 169

Chapter IV. The Positions of various International Organiza-

tions 171
A. The United Nations 172
I. The "Brazilian Resolution" 172
2. Interim report by the Secretary General 175
3. The Final Report 175
4. Further treatment of the question of patents and the transfer
of technology 183
x TABLE OF CONTENTS

B. The Activities of BIRPI 198

1. BIRPI's influence on the work of various United Nations
bodies 198
2. BIRPI's activities for the benefit of developing countries 200
C. The Activities of the International Chamber of Commerce 210
D. The Activities of the International Association for the Protection
of Industrial Property 216

Chapter V. The scope for Remedies within the existing System 219
A. Possible Remedies Under the Present Substantive Rules 220
I. The possibility to exclude or limit the application of the patent
system for certain products and/or processes 221
2. Remedies against non-working and other abuses of patents 222
B. Remedies Through Changing the Rules of the Convention 227

Chapter VI. Possible Remedies Outside the Present System 229

A. Cooperation among Developing Countries Themselves 229
B. Basis and Justification for Preferential Treatment 231
C. The Case for a Universal Patent Convention and the Present Domi-
nant Position of the Paris Union 239
D. The Case of the Universal Copyright Convention 244
1. The Berne Union for the Protection of Literary and Artistic
VVorks 245
2. The Universal Copywright Convention 247
3. The response of the Berne Union 250
E. The VVorld Intellectual Property Organization 258
F. A Preferential Status for Developing Countries 265
1. A new international convention sponsored by the United
Nations 265
2. A special status for developing countries within the Paris
Union 266
3. Possible preferential rules 267
G. Complementary Actions to Increase the Flow of Technology -
Patented and Unpatented 271

CONCLUSIONS 277

A bbreviations used in the Bibliography 279

BIBLIOGRAPHY 280
 INTRODUCTION

THE INTERNATIONAL PATENT-LEGISLATION

AND DEVELOPING COUNTRIES

A major concern today in many fields of international cooperation is

the development of the nonindustrialized part of the world. This was
not always so. Until fairly recently contacts among States were basi-
cally limited to diplomatic intercourse. The concept of State sovereign-
ty naturally led to the application of the principle of legal reciprocity
between States. In the few areas outside diplomatic relations where
international cooperation developed during the last century the same
principle of legal reciprocity was applied. The cooperation that did take
place was mostly among a limited number of Western States. In case
countries outside this group wished to participate they were free to do
so on accepting the traditional standards for such cooperation. Though
a few countries, which today would have been or are known as develop-
ing countries, did join in various schemes of international cooperation,
the majority of them remained outside. Moreover, a large number of
States, which today are known as developing, did not exist as sovereign
States at the time.
One of the areas in which a system of international cooperation was
set up in the latter part of the nineteenth century was that of patent
protection. The major objectives of this study are (1) to examine the
extent to which certain existing rules of international patent protec-
tion can usefully serve the industrialization of developing countries,
(2) to identify the principal obstacles against desirable changes, and
(3) to suggest some modifications of existing rules which may favora-
bly influence the industrialization of developing countries.

The Problem.
The one facet of the development process, which today receives
the most attention, is the industrialization of less developed coun-
tries. A major requirement in this respect is the supply of techno-
XII INTRODUCTION

logical knowledge. It is often held that one advantage of countries

developing later than others is their possibility to draw on the accumu-
lated experience and knowledge of already developed countries. If this
wealth of knowledge, technical and other, is to be put to efficient use,
appropriate channels have to be furnished for its flow. A large part of
technological knowledge is free in the sense that its transfer is "merely"
a problem of documentation and adaptation. This is usually so for the
technological knowledge required for very simple industrial activities
and for branches of industry based on a more or less static type of tech-
nology. It is with the so-called growth industries, relying on a continu-
ouslyevolving dynamic type of technology for their efficient operation,
that special problems related to patent protection may arise.
The principles, upon which present international patent cooperation
is based, are those originally established in the latter part of the nine-
teenth century. Can these principles be advantageously applied today
to the relations between industrialized countries and those that are
not, either because the same considerations for participation in inter-
national patent cooperation apply to all countries, or because specific
considerations of developing countries still favor the application of the
established rules? Or do the special conditions and requirements of
developing countries suggest modifications of the present system?
These are some of the questions to which answers will be sought.

Organization 01 Study
The study is divided into two parts. Its first part, The Evolution 01
Patent Legislation and Practices under Patent Rights, Nationally and
Internationally, will examine three aspects of the patent institution, the
understanding of which are essential in dealing with the problems
facing developing countries in the field of international patent protec-
tion today.
Chapter I, Society and the Inventor, will contain a brief review of the
origins and the evolution of the patent institution. Its objective is to
clarify the rationale of patent protection, as seen through the different
theories on patent rights, which are connected with their appearance
in different countries and at different times. The two main theories -
the one that holds that patent protection is extended in the interest of
society, and the other that holds that such protection is mainly granted
by society in recognition of a pre-existing "natural right" of the in-
ventor - are often contradictory. The knowledge of the origin of patent
protection and its evolution will make it possible to evaluate certain
 INTRODUCTION XIII

recurring propositions concerning the historical role of the patent in-

stitution and its relevance today for developing countries.
Chapter II, The Role of Patents Today, will contain an analysis of
some aspects of the working of the patent institution today. Do con-
temporary conditions of inventive activity invalidate the original
reasons given for the granting of patent rights? Have modem conditions
surrounding the process of invention and innovation given rise to new
motivations for granting such rights? The answers to these questions,
together with an examination of some principal criticism of the patent
institution, will show that the patent system today is functioning in a
way, which is often far removed from the idealistic terms in which it is
sometimes described. This finding will make it easier for an objective
study of the requirements of developing countries, without the burden
of a preconceived idea, that the patent system in general is ideally
suited for its contemporary setting.
Chapter III, The Development of an International Patent Legislation,
will serve as an introduction to the present international patent system
as it operates within the Paris Union for the International Protection
of Industrial Property. Attention will focus on the various conferences
for the revision of the original convention, and in particular on instan-
ces where disagreements among countries have appeared as a conse-
quence of their different stages of economic and industrial develop-
ment. Other international agreements concerning patent cooperation
will be mentioned.

The second part of the study, Effects of the International Patent Legis-
lation on Developing Countries and Possible Remedies to Disadvantages
due to Their Underdevelopment, will analyse certain aspects of the in-
fluence of the international patent system on the transfer of technolo-
gy to developing countries and suggest some measures, that would in-
crease the net benefits to these countries from the operation of that
system.
Chapter I, The Status of Developing Countries in Patent Matters, will
show the position of developing countries with regard to both national
and international patent legislation. For the latter case, the emphasis
will be on the States that are members of the Paris Union and the ex-
tent to which non-members apply similar rules to those prescribed by
the Convention.
Chapter II, Direct Effects of the International Patent System, will
examine the effects that derive from obligations stipulated by the Con-
XVI INTRODUCTION

vention. The relevance of arguments advanced concerning the benefits

of joining the international system, with emphasis on the arguments
that are specifically directed at developing countries, will be analyzed
in the light of certain disadvantages suffered by these countries.
Chapter III, Indirect Ettects of the International Patent System, will
call attention to the effects of certain practices, which, while not direct-
ly the results of obligations imposed by the international patent sys-
tem, often rely on the existence of that system for their exercise. In
this case there is, for all practical purposes, little difference between
members and non-members of the Paris Union.
Chapter IV, The Activities of Various International Organizations,
will examine the positions taken by and within some international or-
ganizations on the question of developing countries and international
patent protection. Besides the activities of various United Nations
organs and those of the Secretariat of the Paris Union, the positions and
opinions of two non-governmental organizations will be treated.
Chapter V, Possible Remedies within the Existing System, will examine
the extent to which certain disadvantageous effects may be remedied
under the present substantive rules of the Convention, and the extent
to which developing countries, in practice, could hope to obtain more
favorable rules.
Chapter VI, Remedies outside the Existing System, finally, will suggest
the justification for changes, favorable to developing countries, in dero-
gation to the basic principles of the present international patent
system. Special emphasis will be put on the fact that developing coun-
tries today have been given a special status within certain areas of in-
ternational cooperation. The evolution in the field of international
copyright protection will be shown as constituting a possible precedent.
It will also be observed that a change in patent legislation alone will
not be sufficient to remove the gap separating industrialized and devel-
oping countries in the field of industrial technology.

Definitions and Limitations

Developing countries. Since the present study is concerned with the
principles of the effects of the international patent legislation, rather
than with a quantitative measurement of such effects, it has been found
convenient to use the classification of developing countries adopted by
the United Nations Statistical Office, i.e., all Sovereign States of
Economic Class II.
 INTRODUCTION xv
International Patent legislation. When not otherwise specified, this
expression refers to the rules of the Paris Convention subscribed to by
the Member States of the Paris Union. This expression is used inter-
changeably with the International Patent System.

Working or Exploitation 01 Patented Inventions. The Paris Convention

and often other international agreements on industrial property rights
regulate a wide range of aspects on patent rights and other industrial
property rights. The present study will deal exclusively with problems
concerning the working or exploitation requirements of patented in-
ventions.

Previous Studies.
There exists a vast literature on the subjects of national and interna-
tional patent legislation. With few exceptions, the authors have been
lawyers treating the subjects almost exclusively from a legal point of
view. The following studies analyzing the economics of patent protec-
tion in general represent some notable exceptions: A. Plant, The Eco-
nomic Theory Concerning Patents lor Inventions; L. LeGrand, Etude
economique de la propriete industrielle, londement et lonction de cette
"propriete"; M. Borlin, Die volkswirtschaltliche Problematik der Patent-
gesetzgebung unter besonderer Berucksichtigung der Schweizerischen Ver-
hiiltnisse; Institut de Science Economique Appliquee (I.S.E.A.) Les
brevets d'invention dans l' economie: Caracteres institutionelles et probte-
matique economique.
As far as the international patent system is concerned, only one
treatise on the economics of international patent protection has ap-
peared: E. T. Penrose, The Economics 01 the International Patent
System.
The existing literature is even smaller on the particular problems
encountered by developing countries in connection with patent protec-
tion. Though a number of articles on industrial property and develop-
ing countries have appeared during the last decade, with few exceptions
they can hardly be considered adequate for the present purpose, since
they rarely even question the adequacy of the existing system for the
particular needs and requirements of developing countries. A notable
exception is S. Pretnar, The International Protection 01 Industrial Proper-
ty and the Different Stages 01 Economic Development 01 the States. The
only substantial treatment of the subject from the point of view of a
XVI INTRODUCTION

developing country appears to be a report prepared for the Indian

Government by R. Ayyangar, Report on the Revision 01 the Patents
Law.*

• The material underlying this work has been updated to include developments up to
January Ist, I969.