1. Christoph Spennemann, Legal Expert
The Interface between IPRs, Foreign Investment and Technology Transfer Development Dimensions of Intellectual Property Rights Hanoi Foreign Trade University, 15 & 16 December 2008
Christoph Spennemann, Legal Expert
Intellectual Property Team
Division on Investment and Enterprise
UNCTAD

2. Overview of presentation
Transfer of technology (TOT) and investment are IP-related
The role of IP in the transfer and dissemination of foreign technology
The role of IP in the attraction of foreign investment
Conclusions

3. TOT and investment are IP-related
Article 7 TRIPS: “Transfer and dissemination of technology” as one objective of IP protection
Article 66.2 TRIPS: Obligation on developed WTO Members to “provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer” to LDCs
All modern bilateral investment treaties (BITs) have a broad definition of « investment » that encompasses IPRs

4. The role of IP in the transfer of foreign technology (1)
Traditional assumption: higher levels of IP protection are conducive to investors’ willingness to transfer technologies
through licensing agreements
through foreign direct investment (FDI)
Technology is disclosed in patent application, may be studied & applied

5. The role of IP in the transfer of foreign technology (2)
Developing country (DC) reality check:
Limited financial means to license technologies
Lack of absorptive capacity  inability to use foreign technologies or to understand patent applications
Need for technological learning through imitation and reverse engineering: more difficult under IPRs
FDI alone will not transfer technology if local workers lack know-how: UNCTAD study of Thai electronics industry
UNCTAD, « A Case Study of the Electronics Industry in Thailand » Transfer of Technology for Successful Integration into the Global Economy Series, New York and Geneva, 2005.

6. The role of IP in the transfer of foreign technology (3)
UNCTAD-ICTSD research on Korean experience (Professor Linsu Kim)
At early stage of technological development, when technological learning takes place through imitation & reverse engineering, strong IPRs will hinder rather than facilitate TOT
IP protection becomes important element in TOT only after countries have reached sufficient level of domestic expertise to engage in creative imitation & adaptation
UNCTAD-ICTSD, « Technology Transfer & Intellectual Property Rights. The Korean Experience », Issue Paper No. 2, by Linsu Kim, Geneva, 2003.

7. The role of IP in the transfer of foreign technology (4)
The Indian experience: development of a domestic pharmaceutical industry
1970 – 2005: no patent protection for pharmaceutical products in India
This enabled reverse engineering of foreign pharmaceutical products (difference product patents vs process patent)
Today, India is home to large generic drug producers, who engage in considerable patenting activities in OECD markets

8. The role of IP in the transfer of foreign technology (5)
The European experience: exclusion of pharmaceutical product patents
France until 1960
Germany until 1968
Japan until 1976
Switzerland until 1977
Italy & Sweden until 1978
Spain until 1992

9. The role of IP in the transfer of foreign technology (6)
Lesson from DC and OECD experience: in order to promote TOT, domestic IP system needs to be adapted to a country’s level of development
TRIPS contains flexibilities allowing such adaptations (next sessions on copyright and patents)
Core importance: public domain as source of information for technological learning

10. The multilateral debate on IP & technology transfer
Concerns expressed by DCs and especially LDCs about low acquisition of new technologies despite TRIPS compliance
WTO Working Group on Trade & Transfer of Technology ineffective
2007 WIPO Development Agenda recommends WIPO to promote DCs’ understanding of use of IP policies & TRIPS flexibilities to foster TOT  ongoing work
2008 WHO Resolution on Global Strategy & Plan of Action on Public Health, Innovation and Intellectual Property recommends WHO and Members States to promote public health-related TOT to DCs, in particular to encourage local production of pharmaceuticals  initiation of work

11. The role of IP in the attraction of foreign investment (1)
Traditional assumption: higher levels of IP protection are likely to attract foreign investment into DCs
US – Vietnam Trade and Investment Framework Agreement (TIFA), 2007, recognizes importance of adequate & effective protection & enforcement of IPRs

12. The role of IP in the attraction of foreign investment (2)
DC reality check (2005 study by Professor Keith Maskus)
Foreign investors attach much importance to IP protection in research & development (R&D)-intensive technologies that are expensive to develop & easy to copy (e.g. pharmaceuticals, chemicals, but also R&D activities in low-tech areas, e.g. transport equipment)
IP is relatively unimportant in R&D-poor activities, (e.g. sales & distribution, even in chemicals sector)
Keith E. Maskus, « The Role of Intellectual Property Rights in Encouraging Foreign Direct Investment and Technology Transfer » in : Intellectual Property and Development. Lessons from Recent Economic Research (editors C. Fink and K.E. Maskus), The World Bank, 2005, pp (57, 60).

13. The role of IP in the attraction of foreign investment (3)
UNCTAD research and DC stakeholder feedback: despite relevance of IP protection in some areas, investment decisions are mainly based on non-IP factors, such as
Financial incentives
Market size
Supply structure
Infrastructure
Political & macro-economic stability
Government transparency
UNCTAD-ICTSD, « Intellectual Property Rights: Implications for Development », Policy Discussion Paper, Geneva, 2003, p. 89.

14. The role of IP in the attraction of foreign investment (4)
Depending on the investor, higher IP protection may even be an investment disincentive
E.g. generic pharmaceutical producers prefer limited IPRs environment (example: CIPLA investment in Uganda)
Overall, recent economic research & evidence recommend that
Countries with low technological know-how maintain IP protection limited (IP alone will not attract investors)
Moving up « technology ladder », higher IP protection (in conjunction with improved technology environment) is likely to attract foreign investment & technologies
This shows linkage between IP, TOT and investment
Maskus, p. 60.

15. Conclusions IP, TOT and investment are closely interrelated
Domestic IP regimes need to reflect level of technological development to enable technological learning
Promotion of domestic absorptive capacity is at least as important as promotion of foreign investment
As countries move up the « technology ladder », stronger IPRs become more important to attract R&D-intensive technologies. Important to control IP abuses and to prevent restrictive technology licensing
IP only one among many factors in investment decisions

16. Contact Christoph Spennemann Legal Expert Intellectual Property Team
Division on Investment and Enterprise (DIAE)
UNCTAD
Tel: ++41 (0)
Fax: ++41 (0)