How does intellectual property impact on consumers’ lives?

Consumers International World Congress - side event

29th October 2007 :Sydney

Michelle Childs , Head of European Affairs

Knowledge Ecology International

Some definitions: What is IP? An umbrella term to cover a collection of ‘rights’. Key differences between them

but generally are: legal rights which people (and now corporations) have over the things they

create or invent. They enable the owners to limit who may access and use their property and to protect it from unauthorized reproduction. Time limited monopoly allows owner to set price without fear of competition. However all have ‘balancing’ exceptions or limitations for users.

Main focus has been on: Copyrights: protects creative or artistic works e.g literature, art, educational

materials, software, music films and broadcasts.. Patents: Protects inventions, how things are works what they do, how they do it

what they are made of and how they are made. E.g medical treatments, seeds, (sometimes software, life forms genes).

Trademark: protects any sign or symbol that allows consumers to tell companies apart e.g brand name , logo, slogan, domain name, shape colour or sound.

What is intellectual property 2?

but also:

Trade secrets ,Broadcaster right, webcaster right, rights of publicity, plant breeder right, sui generis database protection, rights in pharmaceutical test data, Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), orphan drug exclusivity, pediatric testing exclusivity, boat hull protections, publication rights, DRM/TPM measures, contractual protections of non-copyrighted materials, protection of traditional knowledge, folklore, access to genetic resources, material transfer agreements, etc., etc.

Why is it an issue now?

Fear: of countries (BRIC) and companies. New business models v old. Knowledge Economy v access to knowledge (monopoly v competition)

Change: technology ‘Internet a copying machine’.Copying v control balance between right holders and users.

Pandemics- HIV/AIDS - innovation v access Lead to: Expansion:new types of subject matter, increase in terms of protection,

scope of protection removal or limitations and restrictions on owners. Harmonization of laws: for right holders v fragmentation of users rights Increased concern from civil society initially lead by access to medicines

activists.

Strength of IP protection

Dominant view of IP rules

innovation

IP expansion :PRESSURE POINTS

TRIPS Agreement : minimum standards - one size fits all

few developing countries were involved in negotiations Gave in because of market access in agriculture no country really understood implications

Written with and for Northern right holders- US and EU main proponents of TRIPS and TRIPS + provisions

World Intellectual Property Organization (WIPO) standard setting exercises

Bilateral Free Trade Agreements & other bilateral pressure

Role of consumers: innovation+Access Consumers interested in both sides of the debate- want

innovation, creativity and fair rewards and Access

Availability

Choice

Competition

Fair contract terms

Strength of IP protection

LOSSGAIN

OPTIMAL

Reality of continued strengthening of IP rules

innovation

Source: Peter Drahos

Copyright : Consumer concerns

Focus on right holders and protecting content rather than innovation to meet consumers needs.

Stronger copyrights laws driven by entertainment and software industries but affect cultural and education materials

Relevant to consumers in North and South:

Excessive Pricing: Cost of knowledge raised especially in South e.g South Africa Nelson Mandela’s Long Walk to Freedom $16.30 average income 10 x lower than in UK if adjust for income practical cost is equivalent to UK consumer paying $ 230 (source South African a2k project). In US minimal yearly changes to academic textbooks stop second hand market

Unavailability: Publishers don’t market in some countries, stop parallel imports

Unsuitability : Translation into indigenous languages not economic

The loaded dice?-TPM problems

Main focus for many consumer groups in the North

Barriers to Digital content relevant for South:Even with poor availability and high costs of infrastructure still feasible to extend access to educational, scientific and cultural works. Parity possible with Northern Institutions

Issue: New powers to enclose content- Technological Protection Measures (TPMs). (music

players,cd’s Ebooks, DTV)

Poor at preventing commercial copying, good at restricting consumer use.

Consumers face ‘triple lock’ : Copyright protection Technological restriction Legal protection of the technological restriction ( anti- circumvention provisions)

The loaded dice?-TPM problems 2 Exclude permitted uses under copyright (e.g private

copying ,lending, excerpting, resale and donation) Restrict expected consumer usage (e.g ‘format shifting’ , ‘space

shifting; and ‘time shifting’. EU DVB standards group ‘authorized domain’ define when, where and who can use content’

Split consumer usage so can exploit different pricing models –pay for normal functionality v wider choice.

Block assistive technologies used by people with disabilities (e.g block conversion into Braille)

Privacy- monitors usage e.g political, religious or philosophical beliefs. Builds personal profiles without knowledge or accountability.

Source: TACD resolution on DRM (www.tacd.org)

The loaded dice?-TPM problems 3 Undermine Security- e.g Sony ‘rootkit’ Lack of Interoperability- DRM’s lock consumers into one platform e.g

iTunes

Anti-competitive behaviour- e.g price discrimination and market segmentation.g regional encoding of DVDs .Lock out competitors or shut out or control complementary products. Threaten product diversity and choice for consumers

Transparency and Contract Terms- no notice of usage restrictions, terms alter after purchase without knowledge or consent. ‘Shrink wrap’ license terms which waiver rights.

Redress- shifts burden of protection of rights from holders to consumers- reluctant litigants.

Patents on seeds and life forms Companies are being granted patents for products, technologies that make use of the

TK, plants that have been identified, developed and used by local communities and indigenous people mainly in countries from the South

…..companies make huge profits but the local communities are unrewarded….and face the threat of having to buy these products in the future

Issue: patenting of plants, seeds and the sui generis plant variety protection leading to corporate control over food supply

Corporate mergers and broad patenting rights has led ……to top 10 seeds companies controlling 30% of the world’s commercial seed market.

Traditional farming practices of exchanging, reusing, selling seeds are threatened and farmers are being sued

Future of medicines 20 % of human genes have been patented in US, primarily by private firms and

universities c/f Human Genome project. Patents on diagnostic testing e.g BRAC 1 breast cancer gene

Patents on seeds: 2 An Action Aid study (1999) lists in two tables patents that have been claimed for

naturally occurring compounds, genes or gene sequences with a variety of functions. They include

62 patents on genes or natural compounds from plants which are traditional grown in developing countries. The plants include rice (34 patents), cocoa (7), cassava (2), millet (1), sorghum (1), sweet potato (2), jojoba (3)

132 patents on genes in staple food crops which originated in developing countries but which are now grown globally. The crops include maize (68 patents), potato (17 ) soybean (25) and wheat (22)

Basel based biotechnology giant Syngenta claims that it invented more than 30 000 gene sequences of rice…..more than 99.5% of the rice genome and is seeking global patents over thousands of genes in rice. “……..the multinational giant is all set to “own” rice, the world’s most important staple food crop

(Sharma (2005), Third World Resurgence)

Patents on medicines- rationale

Patents drive the financing of drug development

This create incentives for innovation of new treatments

Many patents attached to each drug on market (ingredients/shape/process/coating, etc.)

Consequences of exclusive marketing rights to finance R&D on Access and Availability

Medicines: Unavailable , unsuitable, unaffordable• Unavailable. Certain diseases ‘neglected’ few or no drugs

exist or are being developed. patent system relies on high prices to fund R&D if no market no incentive= no drugs

• Unsuitable- not adapted for needs of developing countries e.g heat stable, child formulations , diagnostic tools

Unaffordable -treatments do exist but too expensive for individuals and mass government treatment. Increasing an issue in Northern Countries e.g rationing of new drugs.

BMS/Sanofi prices for clopidogrel bisulfate (Plavix)

According to the Thai Ministry of Health, BMS/Sanofi prices for the heart drug Plavix were unaffordable for 80 percent of patients

The BMS/Sanofi price was more than eleven times the price of an imported generic

4.2

2

0.17

US/BMS Thai/BMS ThaiGeneric

Novartis at the World Bank in 2004 We consider India to be a market of 50

million

Some experts believe the current system of market monopolies for drug sales increased 2006 drug prices by $400 to $480 billion

Enforcement- the new battleground Enforcement key focus of US and EU future work- domestic and

international Rightholders should have a level of protection and consumers protected

against dangerous goods but..

Enforcement provisions do not distinguish between consumer use and commercial scale counterfeiting- same criminal and civil sanctions applied to both

Overboard definitions of ‘piracy’ can catch lawful use by consumers. Can be used anticompetitively.

Costs and benefits to different stakeholders not evenly counted. Costs to rights holders based on questionable assumptions, access costs to consumers not counted.

Opportunities for change: why now? Fear - Access- ‘coalition of the worried’ scientists, librarians,

health activists , consumers, companies. Costs outweigh benefits.

Change- More assertive Govts pro access,new business models and alterative incentive schemes

Pandemics :HIV/Aids- new patents- SARS/ Avian Flu- access ,speed, co operation, Southern power.

Economics

Are the current systems providing appropriate incentives?

Copyright: does longer = more creativity? Period of protection continually expanded

now last lifetime of creator + decades after death (e.g in EU life +70 years for authors) Push for more e.g sound recordings

But:

Most companies business models and end of year reports suggest actual time frame for calculating economic return is relatively short e.g films measured over months or years but not decades

Industry “anti piracy campaigns focuses on ‘new releases Cost to public domain and creativity

Problems of patent system for medicines Exclusive rights lead to pricing abuses and high prices are barriers

to access. Companies invest too much in non-innovative “me-too” products

and too little in truly innovative medicines.

Low levels of investment in products that provide incremental health care benefits

Low levels of investment in treatments for the poor (neglected, global infectious, orphan diseases)

Massive expenditures on marketing of products consume too many resources with very little if any net social benefits. Aim to gain bigger market share among duplicative products

Marketing

Financials for U.S. Corporations Marketing the Top 50 Drugs for Seniors, 2001

Percent of Revenue Allocated to:Mark., Adv, & Adm. R&D Profit

Merck $47,716 13% 5% 15%Pfizer $32,259 35% 15% 24%Bristol-Myers Squibb $19,423 27% 12% 27%Abbott $16,285 23% 10% 10%Wyeth $14,129 37% 13% 16%Pharmacia $13,837 44% 16% 11%Eli Lilly $11,543 30% 19% 24%Schering Plough $9,802 36% 13% 20%Allergan $1,685 42% 15% 13%Total $166,678 27% 11% 18%

Company Revenue

Source: Families USA, 2002

According to the market research firm IMS, global sales for pharmaceutical products were $602 billion in 2005, or 1.35 percent of global GDP.

The International Federation of Pharmaceutical Manufacturers Associations (IFPMA) claims global private sector investments in R&D were about $51 billion -- less than 9 percent of global sales.

3%3%8%

2%

84%Manufacturing, efficentdistributionR&D, not new

R&D, new, not better

R&D new, better

Marketing, profits, etc

About 13% of global pharma sales are reinvested in R&D

•Most R&D (11 of 13 percent) is invested in older products (3%) or “me too” products (8%)

•Approximately 2 percent is invested in products the US FDA considers significantly better than existing treatments

Source: Consumer Project on Technology, 2005

New paradigms for knowledge goods

Free software/open source software Open access publishing of scholarly research P2P sharing of music (with or without

remuneration to authors and performers)

Medical Innovation Prize Fund Prizes instead of high Prices. Basis idea: De-

couple incentive (funding for R&D) from price of product

Advantages: pay only for successful performance and generic competition from day 1.

Low prices plus pay for R&D = innovation + access

Opportunities for Consumers’ voices to be heard International: WIPO - Implementation of Development Agenda, Committees on

Copyright and patents WHO: Intergovernmental Working Group on IP innovation and

public health- Innovation+Access WTO?:Anti Counterfeiting Treaty? FTA’s and EPA’s Local: National reviews of IP/enforcement legislation Both:Targeted campaigns against anti consumer company

practice :A2M and A2K issues. CI campaign?!

Reasons to be cheerful…. but Governments: Some using flexibilities ,reviewing existing

laws….but not all, and some laws maybe worse. Industry splits: e.g Patents: software v Pharma.Copyrights and related rights:

tech companies v broadcasters.. But allies become opponents Creators and consumer blurring, working together e.g mash ups,

Radiohead … but will this last New business models: E.g flat fees, advertising for copyright,.. but fight back from old

model beneficiaries New approaches: free software open access publishing, prize

funds

The future?

Re- establish a fair balance between rights holders and consumers through explicit provisions on fair use,patent flexibilities and public access rights

The consumer interest and experiences to be taken into account

New solutions to provide a fair return for creative people and inventors and fair access

Critically examine claims for the need for increased IP protection

Enforcement- assess impact on consumers, distinguish between consumers and commercial counterfeiters.

More Information: Knowledge Ecology International

www.keionline.orgwww.cptech.org

Subscribe to: A2K and/orIP-health Mailing listshttp://lists.essential.org/mailman/listinfo/ip-health

Michelle Childsmichelle.childs@keionline.org