The Importance of Innovation

We live in a world of ever accelerating change, driven by the creativity of individuals and groups. In this context, it is useful to reflect on the role of innovation as a stimulus for creativity. We focus our attention here on innovation, and specifically on how innovation is being interpreted to be “at the heart” of the policies, services, information and cooperation of the World Intellectual Property Organization (WIPO). Our interest is primarily directed to reflecting on how the trends reported by WIPO in measuring innovation and intellectual property are symptomatic of – and possibly even contributing to – the dramatic shifts in the geopolitical landscape. These shifts are having significant spill over effects beyond WIPO and especially, in these remaining days of 2017, at the World Trade Organization but also, if one looks to the opening days of 2018, at the World Health Organization.

  • WIPO and Reports on IP and Innovation

First, we should note that we are quoting the WIPO Director-General Francis Gurry, who described innovation as lying “at the heart of the mission of intellectual property” in his opening speech to the 57th Session of the WIPO General Assemblies in October 2017. The “accelerating speed” with which innovation is occurring, he continued, “is producing a number of challenges for institutional and governance frameworks throughout the world”. He described the growing importance of judicial interpretations of intellectual property where the legal framework has not kept pace with the changes. We find this to be an interesting evolution in the Director-General’s messages from the 2015 and 2016 Assemblies. In 2015, we noted his reference to the absence of a normative consensus on the various treaty-making initiatives of WIPO bodies; and in 2016, the message was the “multi-speed and multi-layered complexity” of change. We recall, too, that there were references to normative governance of the Internet. In 2017, we heard about the potential for tentative engagement in knowing how the promotion and diffusion of innovation through the IP system is affected by big data, the Internet of things and artificial intelligence. Rapid changes, indeed!

Two recent reports from WIPO are especially illuminating. One is a new look at how “intangibles” (in comparison to tangible goods and labour) are becoming an increasingly significant proportion of the value and income derived from manufactured goods. Some 50 per cent of the income generated by this “intangible capital” is attributable to the manufacturing global value chains only three product groups – food products, motor vehicles and textiles. The overall message of this report on Intangible Capital in Global Value Chains, which was released on 20 November 2017, is that even in manufactured goods the protection of intellectual property is where firms need to be concentrating their attention. See the press release describing this report here.

The other report is the latest version of WIPO’s annual reporting on trends in patent applications, trademark applications and registration of industrial designs. The numbers in all three cases have continued to grow. For patents, the global number exceeded 3 million for the year 2016, or an 8.3 per cent increase over 2015. For trademarks, the increase came in at 16.4 per cent for a total of close to 7 million. And for industrial designs, the increase was 10.4 per cent for a total close to 1 million. Patents are mostly technology-driven – inventions in electrical engineering, instruments, chemistry and mechanical engineering. Common trademarks are in advertising and business management, computers, software and instruments, education and entertainment and clothing. Industrial designs are typically in furnishings, clothing, packages and containers.

What was especially striking in this report was the statistic that 98 per cent of the increased number of patent applications in 2016 compared to 2015 occurred in only one country – China! This was also the country with the largest number of patent applications in total, although not yet in total per unit of GDP. Here, China came in 6th – but also rising. The others in the rankings, of course, are Germany, Japan, Republic of Korea and USA. Total numbers of patents, whether new in 2016 or existing, came to 11.8 million. The US still has the largest number (2.8 million) as opposed to 2 million in Japan and 1.8 million in China. And the US also seems to be the home country of the largest number of patent applicants in other jurisdictions. So it is still a mixed picture. Nonetheless, we are most impressed by the accelerating pace of change in China’s direction in this report. Perhaps this was most striking in the area of patent applications, but China also came out on top for both trademarks and industrial designs as well.

  • The Global Innovation Index

Lest one were to worry about the Chinese behemoth in these IP numbers, one should take a step away from the purely IP context to the broader measure of innovation. We revert back to an earlier annual publication from WIPO – this one on the “Global Innovation Index”. We have been impressed with this annual WIPO collaboration with two academic institutions (Cornell University and INSEAD) and additional collaborations with a different set of business groups based on the thematic focus of each annual report. The 2017 report did come out on 15 June 2017, and we reported on it then. We bring it back up here because we want to reiterate our interest in the linkage between IP and innovation. Yes, innovation lies at the heart of the mission of IP, but we also appreciate the WIPO role in publicizing the broader set of indicators to measure innovation globally. This particular collaboration with Cornell and INSEAD has been going on for 10 years now, and it does have a useful measure for comparative purposes.

The group of experts who have put together the GII are mostly academics. For the GII, their latest index has 81 “indicators”. Five clusters describe “input” measures of innovation, while two clusters are oriented to “output” measures. The patent, trademark and industrial design measures are incorporated into these output clusters – on knowledge and technology outputs and on creative outputs. We recognize that the input clusters are more determinative of the ingredients for facilitating innovation to happen – institutions (political, regulatory and business-friendly), human capital (education, research and development), infrastructure (ICT, general and ecological), market “sophistication” (credit, investment, trade, competitive market scale), and business “sophistication” (knowledge workers, innovation linkages, knowledge absorption). We rather like this approach, even though we also recognize that there are other ways of classifying innovation (e.g. process or social innovation as well as product innovation).

What this boils down to is that there are lots of value-laden measures of innovation even where there is hard data to back up the values. The bias is in favour of highly developed economies. The GII does explore other variations to take levels of development into account to recognize that countries like India, Vietnam and Kenya stand out as having policies supporting innovation. A country like China makes it to the top 25 here but not the top five or ten. The GII gives the top ranking almost consistently to Switzerland (not the US), but we do see Sweden, Netherlands, US and UK regularly in the top five or so.

  • China Cultivating Supporters in the WTO

This may have little to do with China’s growing embrace of innovation and intellectual property, but it is indicative of the visibility of a growing Chinese role in the WTO. We found it quite striking that one of the main events in Buenos Aires just prior to the opening of the 11th WTO Ministerial there was something described as the “Sixth China Roundtable”. How very odd that this should be held in Buenos Aires – something that was established in a Memorandum of Understanding between the WTO and China in 2011 as part of the Aid for Trade initiative. That is to say, every year since 2011 there has been a “roundtable” to celebrate the “China Programme” in support of helping less developed countries in their accessions processes to join the WTO.

With appropriate fanfare, the Chinese Minister of Commerce Zhong Shan was joined by the Argentinian host Minister of Trade Susanna Malcorra and the WTO Director-General Roberto Azevêdo to open whit latest China Programme Roundtable on “Strengthening the Rules-Based Multilateral Trading System and Building a Network to Promote Accessions” on 9 December 2017 in Buenos Aires. The event reminded participants of the Chinese support for internships, roundtables capacity development for LDC participation, South-South dialogue and workshops, and the new Chinese contribution of US 1 million to the Trade Facilitation Agreement Facility (TFAF) Trust Fund. The event also witnessed the launch of a new “Accession Negotiators Network”, thanks to the Chinese.

It would appear that China is cultivating an alignment with LDCs to play a leadership role in WTO affairs, even as the US is engaging in a very anti-multilateral strategy here. We note that the US has unilaterally initiated trade-related investigations against China on several products within the purview of US trade law and is challenging the Chinese effort to establish itself as a “market economy” at the WTO itself. We also note that a major US complaint about doing business with China relates to allegations of Chinese companies violating US intellectual property rights and stealing US-sourced intellectual property. So we see this IP tensions very much a part of the multi-layered complexity of the global IP system.

  • Patents and Health Spilling Over to the WHO (and the WTO)

 The Standing Committee on the Law of Patents is wrapping up the calendar year at WIPO with its final meeting this week, from 11 to 15 December 2017. On the agenda, as usual, is the issue of “Patents and Health”, with both a “sharing session” and an “information exchange session” on access to medicines – one on the issue itself and the other on a review of “publicly accessible databases” on patents relating to medicines and vaccines. This latter may well include the latest collaboration agreement between WIPO and the pharmaceutical industry’s association, IFPMA. Patents and health is certainly a field where WIPO has initiated partnering initiatives under its Global Challenges Division.

Over the years, we have followed the three-way collaboration between WIPO, WTO and WHO on “TRIPS flexibilities”. This has to do with the WTO’s role in addressing trade-related intellectual property interests, mostly involving access and availability of patented medicines and thereby involving both WIPO and WHO in the fracas. Although the WTO’s TRIPS Council has been the setting for much of the debate on compulsory licensing versus voluntary licensing for cost-effective access to essential medicines, the current momentum on the access issue is more directed to the deliberations at WIPO and WHO.

The latest vehicle for stirring debate on this has been the UN Secretary-General’s High-Level Panel on Access to Medicines, which issued its final report on September 2016. So this means that even the UN itself got involved in the debate (albeit through the former Secretary-General Ban Ki-moon and not necessarily his successor). Its recommendations include calls for a global agreement on research and development for medical products and even the delinkage of development costs from the pricing of medical products.

The US has been vocal in criticizing this report, but its supporters have continued to push its recommendations in multiple forums, including at the WHO and now at WIPO. Most recently, they convened the “First World Conference on Access to Medical Products and International Laws for Trade and Health, in the Context of the 2030 Agenda for Sustainable Development” in New Delhi on 21 to 23 November 2017. See the Conference website here. Needless to say, India is very much in the forefront of this “like-minded coalition”.

The SCP meeting this week is being challenged to take on a more substantive work program on the IP system and health relative to the costs of and access to medicines. The Asia Pacific Group, represented at the WIPO SCP meeting by Indonesia, has urged the Committee to “initiate exploratory discussions” on the report itself. See a report of this intervention here. Meanwhile, there is already another proposal before the SCP from Canada and supported by Switzerland for a broader review of the relationship between patents and other related issues and the affordability and availability of medical products. One can anticipate a continuing WIPO role, then, in this matter.

At the WHO, too, the report from the High-Level Panel on Access to Medicines is finally being integrated into an agenda item on “the global shortage of, and access to, medicines and vaccines” at the WHO Executive Board meeting on 22 to 27 January 2018. See the annotated agenda here. India has been the most vocal proponent there for a debate on the report’s recommendations – trying to get it added to the agenda of both the WHO Executive Board in January 2017 and again at the World Health Assembly in May 2017. A report in support of this agenda item has not yet been issued, but there is a report already available on a related agenda item on (the Global Strategy and Plan of Action on Public Health, Innovation and IP) that includes many of the High-Level Panel’s recommendations. So the multi-faceted debate is a prime example of the multi-layered complexity of IP and innovation issues today.

From the CMMD Geneva Observer 11 December 2017

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