GUSTAVO GHIDINI

«EQUITABLE SHARING» OF BENEFITS

OF BIODIVERSITY-RELATED  INNOVATION

GUSTAVO GHIDINI
Professor of Intellectual Property and Competition Law
Luiss Guido Carli University, Rome, Italy 

1. It is well known that much innovation in the pharmaceutical sector, as well as in the agricultural field (concerning seeds, in particular) is based on germplasm provided by plant and animal genetic resources: a «wealth» often referred to as «biodiversity», and which - while rarely and exceptionally surviving in Western industrialized countries (IC), has been fundamentally preserved by farmers of Developing Countries (DC) - «for cultural reasons which may escape those of us who equate wisdom to economic calculus»[1].

Now, the innovation I am referring to stems typically from a «collaboration» between industrial countries and developing countries (DC). The former possess the technology which enables to develop new products for mass consumption (more advanced and efficient drugs and healthier and more resistant and/or abundant food) from the germplasm preserved, and provided, by the latter.

And, of course, such innovation can be patented by its developers. In particular, it is well known the patenting of «an invention based on biological material of plant or animal origin» is expressly granted by European Directive No. 98/44.

Thus, even thanks to patent protection, the biodiversity-related innovation can yeld  potentially very high benefits both in strictly economic terms (return from sales and/or royalties in exclusive règime) as well as in techno-scientific progress (further impulse  to R&D activities) and industrial and commercial advancement. 

2. I will here examine, under a legal viewpoint, the problem of the «equitable sharing» of benefits accrued by biodiversity related innovation - chiefly in the pharmaceutical and food industry.

This problem, as you know, is addressed by the Rio de Janeiro 1992 Convention on Biodiversity. Said Convention aims, on one hand, to grant the States sovereign rights to exploit their biological and  genetic resources (see Artt. 3 and 2), and therefore dictates that said States shall have the «authority to determine access to their genetic resources» (Art.15). On the other hand, the Convention sets as another fundamental goal of its «the fair and equitable sharing of the benefits arising out the utilization of genetic resources» (Art. 1). And to this end, it furtherly provides, i.a., that  «Each Contracting Party (emphasis added) shall take legislative, administrative or policy measures, as appropriate, and in accordance with Articles 16 and 19, with the aim of sharing in a fair and equitable way the results of research and development and the benefits arising from the commercial and other utilization of genetic resources with the Contracting party providing such resources. Such sharing shall be upon mutually agreed terms.»  

3. Accordingly, the «cooperation» between industrial and developing countries has been based on contractual relationships - directly with local rural communities, sometimes with the Governments, usually in form of a licence for exploitation of biological material granted by a rural community of a DC to a firm of an IC. Some, maybe most of such agreements usually attribute to the provider country a simple financial return, be it a lump sum and/or a royalty, from commercial exploitation of the new biodiversity based drug or food produce. Other agreements are more generous, in that they place a duty on the «industrial party», license of the biodiversity material and developer and owner of the patent on the new drug or seed, to «grant back» to the «provider» licensor (DC) a non-exclusive license «for research  use» (see e.g. Art. 6.03 of the  Agreement  between the Peruvian Aguaruna and Huambisa Communities and G. D. Searle & Company (Monsanto) - text provided by Professor Charles McManis of Washington University, Mo., USA, and published in ATRIP's 1999 Annual Papers, 71).

But please note:

a) such license is «not for any commercial use» (ibidem) - and thus it could not be conferred to, and shared with, a locally operating industry; 

b) it is expressly foreseen  that, whereas the indigenous people are free  to continue to make and sell their traditional products, by no means the new drugs developed and patented by the industrial licensor can be deemed as an expression of «indigenous knowledge», and thus, obviously;

c)  there is no provision of co-ownership of the patents and/or know-how developed.

As a result, the biodiversity-related innovation, be it patented or not, will not pertain, even in part, to the indigenous people provider of the biodiversity (see. Art. 6.05). 

4. In my opinion, such kind of agreements reflect and consolidate a substantial disproportion of contractual and economic power in that they do not grant a really «fair and equitable sharing» of «the results of research and development and the benefits arising from the commercial and other utilization of genetic resources», and thus also do not comply with the Rio Convention principles.

I expressly leave aside the question of the intrinsic «fairness» of the entity of financial return usually granted to DC. What I assume here is that the concept of «fair and equitable sharing» should embrace the provider country's chance to participate in the industrial and commercial exploitation of biodiversity-related innovation (and thus, particularly, of related patents and know-how).

Indeed, the Rio Convention's concept (as well as the commonsense concept) of «the results of research and development and the benefits arising from the commercial and other utilization of genetic resources», to which the principle of «fair and equitable sharing» applies, seems to me wide enough as to embrace that «spread» of scientific knowledge and  (applied) know-how, and that development of new industrial and commercial activities, which embody the main social benefits related with actual exploitation of the achieved innovation. (Benefits which, always in my opinion, cannot be substituted by simple «abstract» knowledge, and thus simply by the grant of a sort of «fair use» right, such as the one foreseen in the Searle-Aguarunas Agreement I referred to above).

Thus, I assume that a fully equitable sharing of benefits stemming from biodiversity - related innovation would be achieved only if the provider country could be given also the chance to «host» a direct exploitation - directly by the patent owner or, at its choice, through local licensees (even direct production in situ by the foreign - based firm does help the growth of a local, domestic «industrial know-how acquisition» (let aside employment-related benefits) of the innovation developed thanks also to its essential contribution. Thus the biodiversity providing country would be put in condition to progressively «grow» to R&D own capacity and develop (even in view of the time when the patent will be elapsed) a domestic industry and a domestic trade of new goods which it has helped to create.

Should the patent owner refuse either to produce or to appoint a license of its choice, an ad hoc measure of the provider country could foresee a compulsory license, which, according to TRIPs rules should be non-exclusive, non-discriminatory, based on fair terms (here taking into consideration the provider country's essential contribution to the developed innovation), and fundamentally focused to the supply of that very domestic market - thus not, if not marginally, to export (see TRIPs rules).

This proposal seems consistent, even as far as IP is concerned, with Rio Convention. As recalled, same Convention empowers «Each Contracting Party» (emphasis added) to adopt legislative, administrative or policy measures aimed to achieve the fair sharing of results of R&D and the benefits arising from the commercial and other utilization of genetic resources (Art.1). Such adoption must be (see same Art.1) «in accordance» with Articles 16 and 19 of  the Convention. Now, the former engages the parties to the Convention - thus including provider (DC) and recipient (IC) countries - to cooperate, subject to national legislation and international law, in order to ensure that patents and other IPRs «are supportive and do not run counter to its objectives. The latter, Art.19, provides that all parties to the Convention «shall take all practical measures to promote and advance priority access on a fair and equitable basis by Contracting parties, especially developing countries, to the results and benefits arising from biotechnologies based upon genetic resources provided by those Contracting parties» (emphasis added).   

5. Nevertheless, the aforesaid proposal may seem unviable in legally positive terms - and thus, merely utopian - in view of the fact that the «universal IP law» of the WTO countries, i.e. the TRIPs agreement, 1996 (thence followed by national patent laws) has rejected (doesn't matter, here, under whose pressures) the long-time widely established principle of the so called «working requirements» of patent protection at national level, that is the duty to produce the patented goods in the country where patent protection is sought (see Art.27.1 ).

This rejection, one might well argue, empowers the companies belonging to IC, recipient of the biodiversity, to sell exclusively everywhere - including the biodiversity providing country - the patented biodiversity - originated products, while retaining manufacture, hence actual capability to implement the relevant know-how, in their own homeland or in any other country where they find most convenient to set up production - thus, if they so wish, excluding the biodiversity providing country. In other words, TRIPs would allow that the provider country be  «reduced» to a mere import country, thus just be enabled to receive a monetary compensation (royalty), without any participation to the industrial development of the innovative products realized thanks - and first of all - to the biodiversity it preserved and provided.

Should such interpretation be confirmed, the practical result would be bitter indeed. It would validate a commercial format that strongly reminds the good old typical colonial trade - off: the developing country «exporting» its «raw materials», and the industrialized countries «returning» their finished goods. A trade-off, of course, that - aside any other considerations, such as the ones referring to the traditionally strong price imbalance between DC «raw materials» and IC «finished products» - substantially delays the spreading and acquisition of industrial know-how amongst developing countries, and thus keeps same in a long term condition of economic and technical dependence. 

6. Dura lex, sed lex? Shall we give up that proposal, at least under positive law? I don't think so. I do not share the view that Art. 27.1 of TRIPs constitutes an absolute bar to that proposal.

Indeed, TRIPs' rejection of the «working requirements» expresses a general principle, whereas same Agreement allows, although exceptionally, and for reasons of public interest, the very imposition of compulsory licences on IPR's holders. See in particular Art. 31, providing for exceptional imposition of compulsory licenses («Other Use Without Authorization of the Right Holder») in connection with Art. 8.1, which states that «Members may, in formulating or amending their laws and regulations, adopt measures necessary to promote the public interest in sectors of vital importance to their socio - economic and technological development». (Please note that the compulsory license would be issued, as recalled, «predominantly for the supply of the domestic market», therefore basically not for export: see TRIPs Art. 31, f).

Thus, should the biodiversity providing countries «take profit», so to say, of aforesaid rules (in connection with the powers they are granted under afore quoted norms of Rio Convention), the rejection of the working requirements would be respected in principle, i.e. in general perspective - vis-à-vis all other countries. The exception would accrue to the sole benefit of the biodiversity providing country, thus enabled to participate to the industrial and commercial utilization of the biodiversity - related innovation it has decisively helped to realize. 

Thus, the proposal I outlined can be accepted, I believe, under existing legal regime. Its accomplishment, and no less, will achieve a truly «fair and equitable» sharing of the benefits - of all kinds - arising from the innovation the DC contributed to create.