The Winners and the Losers: The Agreement on Trade-Related Aspects of Intellectual Property Rights and Its Effects on Developing Countries

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These are changing times in the global economy. With the opening of the international market and the increased ease with which goods, capital, and ideas flow around the world, new opportunities for industrialization and economic growth have emerged for developing countries.(1) However, these rapid economic changes have not come without problems. The competitiveness of firms in developed countries(2) is largely determined by the ability to develop, commercialize, and, most importantly, to capture the economic benefits from technological innovations.(3) In recent years, these industries have experienced an increase in the number of infringement cases regarding protected corporate technology.(4) These industries have pushed for the strengthening of global protection on intellectual property rights because violations of protected intellectual property rights cost manufacturers and companies billions of dollars in lost revenue each year. For instance, the value of pirated goods in China was $2.3 billion in 1996 and $2.8 billion in 1997.(5) Governments have not only strengthened their own national laws protecting intellectual property rights, but they have also entered into international agreements in an attempt to create an international system of protection for intellectual property rights. In 1994, as part of the Uruguay Round of negotiations and agreements, the Trade-Related Aspects of Intellectual Property Rights ("TRIPs Agreement") was adopted in Marrakesh, Morocco.(6) This comprehensive law governing the global protection of intellectual property rights provides the protection that industries and developed countries have been seeking. However, the TRIPs Agreement simultaneously narrows the developing countries' access to technology, discouraging the rapid diffusion of new technology needed for economic growth.

The goal of this comment is to explore the effects of the TRIPs Agreement on the industrialization and economic growth of developing countries. Part II of this comment provides an overview on the development of intellectual property rights in the world. In addition, this section will discuss international agreements on the protection of intellectual property rights, including past conventions and the TRIPs Agreement. In Part III, this comment studies the current economic situation in developing countries and explores policy tools for economic growth. This section, moreover, outlines the conflicting arguments surrounding the effects of the TRIPs Agreement on developing countries. Part IV analyzes the empirical evidence surrounding the effects of the TRIPs Agreement on foreign direct investment and international trade in developing countries.


A. Overview of Intellectual Property Rights

1. Definition of Intellectual Property Rights

Intellectual property rights are defined as governmental protection of private innovations and creativity.(7) Intellectual property law protects "original ideas, creative forms of expression, new discoveries, inventions, and trade secrets."(8) The basic forms of intellectual property rights generally include patents, copyrights, trademarks, and trade secrets.(9) Each form of intellectual property has its own standards and procedures, which establish the subject matters protected, the application process involved in achieving protection, the duration of protection, and the remedies for infringement.(10) However, the fundamental feature of these various forms of intellectual property rights is the exclusive right to exclude others from certain activities.(11)

Traditionally, laws governing the protection of intellectual property rights extend only to the national boundaries of the nation where the inventor has fried for protection.(12) Recently, nations have attempted to expand the protection of intellectual property rights for their own nationals beyond the boundaries of the nation and into the international markets on a global scale. …