Abstract: The majority of people in the developed world have the luxury of never having to address food shortages and malnutrition. In developing countries, however, ensuring food security presents greater challenges. Agricultural biotechnology has the potential to alleviate many of the food crises occurring in developing countries. Unlike private sector corporations, public sector entities are creating genetically modified ("GM") crops to ensure food security. However, the intellectual property rights ("IPRs") to the many technologies required to create a single GM crop are often fragmented across the private and public sectors. Fragmentation of IPRs creates a "patent thicket" that increases the challenges of developing GM crops that are not restrained by freedom to operate complications.
China has a successful agricultural biotechnology industry that is almost entirely public sector. Recently, China strengthened its intellectual property ("IP") laws as a result of its accession to the World Trade Organization ("WTO"). Despite the beneficial effects of harmonizing IP laws among WTO member states, there exists a negative consequence of IP globalization as it pertains to China's public sector-driven agricultural biotechnology industry. Stronger IP laws and enforcement will create an environment more favorable to the interests of foreign private sector entities. Any subsequent introduction of technologies used to create GM crops will result in the protection of such technologies under Chinese law, but without open availability under most circumstances. To reduce the potential frustration of its public sector, China should declare potential food shortages a national emergency. In doing so, China may require compulsory licensing of the technologies necessary to create GM crops essential for food security without violating its WTO obligations. Because the compulsory licenses would be granted only for selected technologies used to create GM crops, such licensing would reduce the negative effects of IPRs fragmentation without raising substantial concerns of compromised innovation resulting from parallel importation.
The developing world has over 800 million undernourished people.1 Nearly eleven million children die each year, with more than half of these deaths resulting from hunger and malnutrition.2 The vast majority of deaths attributable to hunger and malnutrition occur in developing countries.3 Unfortunately, although there is currently enough food to feed the world, it is unequally distributed, as 650 million of the poorest people live where agricultural potential is substandard.4 Additional methods of ensuring food security to prevent hunger and malnutrition beyond the access to food paradigm must, therefore, be considered.5 Food security "exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life."6
Agricultural biotechnology is one promising device heralded to be valuable in ensuring food security.7 Agricultural biotechnology research intended to enhance food security in developing countries includes creating GM crops that reduce the use of pesticides, improve stress tolerance, and provide better product quality and increased nutritional value.8
The use of agricultural biotechnology to create GM crops is a contentious issue. Opponents of this technology claim that GM crops are "inherently dangerous,"9 and that the scientific understanding of the impact that GM crops have on the environment and human health is inadequate.10 Some of these concerns are legitimate. For example, in September 2000, trace amounts of a transgenically expressed protein known as Cry9C, which is approved for animal but not human use, was found in Kraft Taco shells in the United States.11 These concerns are especially important in developing countries that are beginning to approve and commercialize GM crops but do not yet have comprehensive regulatory provisions in place.12
Despite such criticisms, proponents of agricultural biotechnology argue that its benefits far outweigh its potential risks, and that the risks that do exist are not inherent properties of the technology. According to the Declaration of Support for Agricultural Biotechnology, signed by over 3400 international scientists, including twenty-five Nobel Prize Laureates,13 the technologies utilized to create GM crops can safely and substantially enhance efforts to ensure food security.14 Dr. Patrick Moore, a co-founder and former leader of Greenpeace who has since signed the Declaration, stated that "the campaign of fear now being waged against genetic modification is based largely on fantasy and a complete lack of respect for science and logic."15
Critics further assert that agricultural biotechnology corporations exploit the hungry in developing countries for "commercial opportunity," some going as far as labeling this activity as criminal.16 This claim, however, fails to acknowledge that while the private sector focuses mostly on crops with large markets, the nonprofit public sector provides the developing world with subsistence crops to ensure food security, despite their lack of high commercial value.17
China provides a model for public sector success with respect to agricultural biotechnology, with almost all research and development in this field being conducted by the public sector.18 What makes China unique in comparision to other developing countries' public sectors is its strong scientific infrastructure.19 This infrastructure allows Chinese scientists involved in agricultural research to successfully generate "an impressive array of new technologies."20 Furthermore, China's agricultural biotechnology industry focuses on providing food security, as "the foods being modified [in China] reflect the concern that current food production will not fill the hungry mouths of its future population."21
Agricultural biotechnology research poses unique IP issues that are particularly pronounced for the public sector.22 These IP issues lie not with the GM crops themselves, but with the technologies required to create them.23 Developing a single GM crop requires numerous technologies.24 Innovators usually protect these technologies via IPRs, most notably patents,25 which are often held by dissimilar owners.26 IPRs fragmentation develops when no single IPRs owner has complete ownership of all the technologies required to create a GM crop.27 In such a situation, all that is required to hinder the development of an important GM crop is for a single IPRs holder to refuse to license the technology.28 However, as agricultural biotechnology research and development in China is driven by the public sector, fragmentation of EPRs among the public and private sectors has been largely nonexistent.
On December 11, 2001, China became the 143rd member of the WTO.29 As a result, China has been strengthening its intellectual property laws as mandated by the Trade Related Aspects of Intellectual Property Rights ('TRIPS") agreement,30 applicable to all WTO members.31 The main objectives of TRIPS are to improve and harmonize IP protection and to introduce compulsion through enforceable sanctions.32 Although the advantages of IPRs harmonization might outweigh the disadvantages, this comment will address a unique and potentially negative effect resulting from the strengthening of DPRs in China.
The strengthening of IPRs in China will help to create an environment more favorable to the interests of the private sector's agricultural biotechnology interests. Consequently, the private sector's presence will likely increase in China. This will lead to the fragmentation of IPRs between China's public sector and the private sector entities interested in protecting their technologies for commercial purposes. Such a divide will frustrate China's efforts to ensure adequate food security.
This comment argues that, to prevent IPRs fragmentation, China should exercise its right under TRIPS to mandate compulsory licensing for protected technologies essential for food security. As compulsory licensing for pharmaceuticals is controversial due to concerns of parallel importing, those licenses should only be granted under exceptional circumstances. However, similar parallel importing concerns would be less substantial for agricultural biotechnologies in China because the same technologies may be used for other GM crops with significantly higher commercial value. As a result, compulsory licenses are more appropriate for agricultural biotechnologies important to the public sector than for pharmaceutical products. Part II of this comment describes the issues surrounding the public sector's efforts to develop GM crops for purposes of food security, as well as the current agricultural biotechnology environment in China. Part ÐÉ discusses the recent strengthening of Chinese D? laws and enforcement. Part IV predicts the likelihood and subsequent consequences of an increased presence of foreign agricultural biotechnology companies in China. Finally, Part V argues that compulsory licensing of technologies essential for food security can proceed without violating TRIPS or compromising overall innovation within the agricultural biotechnology industry.
II. FRAGMENTED IPRs CREATE CHALLENGES FOR AGRICULTURAL BIOTECHNOLOGY' s PUBLIC secTOR
In developing countries such as China, the public sector focuses its research on basic food staples important to local economies.33 When the creation of a single GM crop requires multiple technologies, freedom to operate complications will result if the IPRs holders of such technologies prevent access to their technologies.
A. The Public Sector in Developing Countries Anticipates Using Agricultural Biotechnology to Ensure Food Security
Beginning in the 1960s, agricultural research aimed at increasing the overall food production in order to meet the demands of a rapidly growing population resulted in higher yielding varieties of rice, wheat, and maize.34 Known as the Green Revolution, this campaign to increase food security helped reduce the total number of hungry persons by more than half.35 Today however, over 800 million people are still undernourished,36 and "the gains in food production provided by the Green Revolution have reached their ceiling while the world population continues to rise."37 By the year 2048, the world population will grow from six to nine billion.38 Furthermore, global warming, deforestation, pollution, overgrazing, soil erosion, and urbanization will challenge the assurance of adequate food security.39
Although the guarantee of food security will ultimately require multiple approaches, agricultural biotechnology provides a promising tool to combat hunger and malnutrition.40 The proportion of the global area of GM crops grown in developing countries increased every year during the period from 1996 to 2005.41 Furthermore, the governments of developing countries in Asia appear to vigorously support agricultural biotechnology.42 Therefore, this comment will assume that agricultural biotechnology will continue to be a potential avenue for food security in developing Asian countries. The primary focus of this comment is not to discuss the benefits and risks of agricultural biotechnology, as exhaustive debates on this subject may be found elsewhere. Instead, this comment will focus on the IP-related issues complicating the efforts of China's public sector to create GM crops aimed at reducing hunger and malnutrition.
B. China 's Thriving Agricultural Biotechnology Industry is Public Sector and Focuses on Food Security
China conducts more research on plant biotechnologies than any other country outside of North America43 and accounts for over ten percent of all public sector expenditures on agricultural biotechnology research worldwide.44 By acreage, China is the fifth largest producer of agricultural biotechnology crops in the world.45 Furthermore, China's public sector is committed to developing GM crops that the developed world has largely ignored.46 This contrasts sharply with the objectives of private sector entities that fail to focus on "crops that are important to the world's poor farmer."47 Although China has limited commercial ambitions with respect to its agricultural biotechnology industry, the industry's primary focus lacks the commercial ambitions of other Asian countries. For example, Thailand has recently launched an aggressive agricultural biotechnology campaign in hopes that it will become known as "[t]he kitchen of the world."48 This campaign exists as an effort to increase its export revenue.49
The incentive to increase food security in China is profound, as approximately 142 million (eleven percent) of China's population is undernourished.50 Although China has less than ten percent of the world's arable land, it feeds more than twenty percent of the world's population.51 With the predicted population increases, China will need to increase its food grain production by almost forty-five percent by 2020 to maintain its current food supply.52 To reach this goal, China has been increasing its publicly funded research investments in agricultural biotechnology.53 During the second half of the last decade, investment in agricultural biotechnology increased thirty percent per year,54 and in 2004, China spent $200 million on agricultural biotechnology research.55
The success of China's agricultural biotechnology research efforts comes not only from the financial expenditures put forth by public investment, but also to its strong scientific infrastructure.56 China employs over two thousand employees in agricultural biotechnology research alone.57 As of 2001, China had close to 150 laboratories located in more than fifty research institutes and universities working on agricultural biotechnology.58 The Chinese Academy of Sciences, the Chinese Academy of Agricultural Sciences, provincial academies of agricultural sciences, and general and agricultural universities carry out China's agricultural research.59 Furthermore, the percentage of agricultural biotechnology scientists having Ph.D.s is expected to increase as the ability to conduct Ph.D. educational programs in biotechnology continues to strengthen.60 These efforts have led to China's Ministry of Agriculture's approval of 585 GM plant experiments, including 154 environmental releases, as of 2003.61 China's identification of over 120 functional genes used in agricultural biotechnology research and development exemplifies the fruits of its strong scientific infrastructure.62
C. Fragmentation of IPRs Creates Obstacles for Public sector Entities Engaged in Agricultural Biotechnology Research
The fragmentation of DPRs among multiple owners of the technologies used to create GM crops complicates public sector agricultural biotechnology research.63 The creation of a single GM crop requires incremental improvements upon previously derived processes.64 Many of the incremental improvements pertain to "enabling technologies," processes that can be used to create a variety of different GM crops.65 A process that improves the transfer of an exogenously expressed gene into a host plant is an example of such an enabling technology.66 When commercial interests are at stake, however, proprietary owners of one or more of the enabling technologies required to develop a GM crop may be reluctant to provide access to the protected technologies.67
Golden Rice, a GM crop, best exemplifies the complexity of the "patent thicket" created by IPRs fragmentation. Golden Rice is genetically modified to contain significantly elevated levels of vitamin A as a result of the transgenic expression of beta-carotene, a vitamin A precursor.68 Chronic vitamin A deficiency affects between one and two hundred million children, resulting in permanent blindness for about 500,000 of these children each year.69 Additionally, between one and three million children die annually of infections, which would have been preventable had the children acquired sufficient amounts of vitamin A.70
Golden Rice exemplifies the benefits of GM crops that can compensate for nutritional deficiencies.71 The potential impact of Golden Rice, which is predicted to save almost 40,000 lives annually in the developing world, is astounding.72 The development of Golden Rice, however, required seventy patent-protected technologies belonging to over thirty public and private sector entities.73 Remarkably, every owner of the IPRs required to create Golden Rice provided free licenses so that the product would be available to small farmers in developing countries.74 It is difficult to determine whether the biotechnology companies that provided the free licenses did so as a show of humanitarianism or anticipated that such a gesture would garner larger acceptance of agricultural biotechnology.75 No matter their motivation, those interested in creating nonprofit GM crops for purposes of food security may not necessarily find themselves in the same fortuitous situation that led to the complete and free licenses of Golden Rice.
An advantage of China's public sector-driven agricultural biotechnology industry is a lack of fragmentation among private sector entities. It is difficult to determine whether the absence of IPRs fragmentation has contributed, in parallel with a strong scientific infrastructure, to China's success in the industry. Regardless, private sector entities that refuse to license enabling technologies required for the development of GM crops currently do not hinder Chinese efforts of food security.
III. CHINA' s MEMBERSHIP IN THE WTO ENCOURAGED THE STRENGTHENING OF IPRs IN CHINA
TRIPS has applied to China since it became a member of the WTO in 2001.76 The application of TRIPS has subsequently resulted in the strengthening and harmonization of Chinese IP laws and enforcement as mandated by the agreement.77
A. TRIPS Requires WTO Member States to Have Strong IPRs
The main objective of TRIPS is to harmonize intellectual property laws, which emerged from the realization that IPRs are territorially restricted to national boundaries and have little or no protection in foreign countries that do not have similar protections.78 With little to no protection in other countries, minimal incentive to invest or spread innovation into those countries exists.79 Although acceptance of TRIPS is mandatory for any country now interested in joining the WTO, during negotiations of the agreement in the 1990s, developing countries were politically encouraged to accept TRIPS as a WTO requirement. This occurred mainly as a result of threats of unilateral sanctions, by the United States and the European Union, against those countries that were infringing upon their IPRs.80 Despite the ostensible lack of options presented to developing countries during the TRIPS negotiations, some benefits were provided. For example, trade restrictions were liberalized for agricultural and textile imports from developed countries to the developing countries that accepted TRIPS.81
Requiring developing countries to agree to TRIPS, and IP globalization in general, is an extremely complex and much debated topic. Opponents of IP globalization view it as an imposition of control by countries that own the majority of IPRs.82 However, supporters of EP globalization believe that a recipient country will benefit as a result of increased foreign investment and technology transfer,83 resulting in greater economic growth.84
The TRIPS agreement provides enforcement mechanisms in addition to compliance mechanisms in order to harmonize the member states' laws.85 Two enforcement provisions exist under TRIPS.86 The first relates to domestic enforcement, and requires member states to provide effective and expeditious remedies to prevent infringements.87 The second provides for a dispute settlement mechanism between two member states through the WTO itself.88
With respect to biotechnology, the TRIPS agreement contains important provisions necessary for the promulgation of advancements in agricultural biotechnology. Agricultural biotechnology management further poses IP-related issues. Innovations can be easily duplicated, as "seed[s] can be replanted, genes can be cloned based on sequence information, [and] methods can be copied following established protocols."89 This creates the demand for increased international IPRs protection for biotechnology innovations.90 One such provision of TRIPS is the requirement that all WTO member states protect GM microorganisms.91 This provision parallels United States patent law interpreted by the landmark United States Supreme Court case in Diamond v. Chakrabarty, which held that bioengineered microorganisms are patentable.92 Diamond arguably provided a judicial basis upon which the biotechnology industry flourished.93 Furthermore, TRIPS stipulates that plant varieties must be protected "either by patents or by an effective sui generis system or by any combination thereof." 4 Still to be resolved however, is whether TRIPS should require mandatory protection of biotechnology innovations above the level of the microorganism.95
B. Chinese Patent Law Is Conducive To Biotechnological Innovation
China actively engages in patenting both domestic and foreign innovations, including those essential for the progression of agricultural biotechnology. In 2005, the State Intellectual Property Office of China ("SIPO") granted 171,000 patents to Chinese citizens, and 42,000 to foreigners.96 Between 1985 and 1999, Chinese herbal medicines, foodstuffs, and pharmaceuticals had the largest number of patent applications.97 China amended its patent law as recently as 2001 and remains consistent with the requirements of TRIPS.98 One noticeable difference between U.S. and Chinese patent law is the way in which subject matter is determined. Although the United States does not specifically bar specific subject matter,99 a list of specifically excluded subject matter exists in Chinese patent law.100
With respect to claim language, products can be either a compound, a composition, or product defined by a process.101 Because genetic materials are chemical structures, DNA, RNA, and chromosomes are patentable as chemical substances under Chinese patent law.102 However, such genetic materials must be isolated or purified from their natural environment and cannot be mere discoveries.103 In addition, Chinese patent law does not allow for the patenting of plant varieties. However, methods of breeding the plant varieties are allowed.104
C. Enforcement of IPRs in China is Improving
Although China's IP laws are consistent with the requirements of TRIPS, international concerns exist regarding the enforcement of these laws. With respect to IP protection and enforcement, China is of the highest priority for the United States.105 The United States considers China to have the greatest occurrence of counterfeiting in the world.106 Ninety percent of all protected goods in China are counterfeits.107 To promote strong IP protection in China, the United States plans to continue to engage in bilateral discussions to encourage effective use of trade tools.108 Further efforts will include the expansion of law enforcement cooperation, education and capacity building, and private sector cooperation.109 Recently, the United States has been more assertive, using "high-level meetings to strongly urge China to take immediate and substantial steps to put it on the path toward compliance with its critical TRIPS Agreement obligation to make available effective enforcement mechanisms."110 The United States has also been considering WTO dispute settlement options.111
Although a significant percentage of IP violations in China are copyright and trademark issues, biotechnology continues to be a problem, as ninety seven percent of small molecule pharmaceuticals in China are copies.112 Pharmaceutical (and presumably agricultural biotechnology) counterfeits are particularly worrisome with respect to safety concerns resulting from the lack of regulatory approval.113 Specific to IP violations of agricultural biotechnology innovations, the only foreign product to be commercialized in China thus far, Monsanto's Bt cotton,114 has suffered economic setbacks resulting from counterfeiting.115
The improvement of IP enforcement is a focus of Chinese intellectual property policy. Currently, China's IP laws and regulations provide for IP enforcement through administrative authorities, criminal prosecutions, and civil action.116 At the Joint Commission of Commerce and Trade meeting with the United States in 2004, China committed itself to increasing IP enforcement and agreed to move forward with legislative and judicial measures to improve its protection of IPRs.117 Furthermore, the National IPR[s] Protection Working Group Office formulated "China's Action Plan on IPRfs] Protection 2006" to "better protect  EPR[s], resolutely punish and combat various infringement and other illegal activities."11 The plan focuses mainly on improving IP enforcement.119 With respect to patents, the plan aims to both standardize the conduct of patent agents and to revise and issue a guide on patent review.120
China is further attempting to strengthen enforcement of its IPRs through litigation. The number of Chinese patent litigation cases has been increasing, indicating that "awareness of the exploitation and enforcement of intellectual property is building, and that the Chinese economy is becoming more technology-intensive."121 Lawsuits in China related to IPRs are grouped into two types of categories: patent administrative lawsuits that are similar to criminal cases between SIPO and a private party, and patent civil lawsuits.122 In 2005, Chinese courts tried 3529 patent administrative lawsuits involving IPRs violations, a twenty-eight percent increase from the previous year.123 Additionally, 13,393 civil cases were tried for IPRs violations in 2005, which was a thirty-eight percent increase from the previous year.124 The increases in EPRs-related litigation appear to be part of a larger trend, as Chinese courts adjudicated a total of 23,636 IP-related cases for the entire four year period between 1998 and 2002, a forty percentage increase from the previous four year period.125
In spite of the efforts of the United States and China, sufficient enforcement of IPRs in China continues to be a challenging undertaking. This can be attributed to a complexity of factors, including the lack of government coordination, local corruption, high thresholds for criminal prosecution, and lack of resources and training.126 Nonetheless, China's strengthening of its IP laws and enforcement are creating a setting more favorable to the interests of foreign agricultural biotechnology companies.
IV. STRONGER EP ENFORCEMENT IN CHINA WILL LIKELY RESULT IN EPRs FRAGMENTATION AMONG PRIVATE AND PUBLIC SECTOR ENTITIES
While the harmonization of EP laws among WTO member states has had beneficial effects, the strengthening of Chinese EP laws and enforcement is likely to have negative consequences on China's agricultural biotechnology industry. With the increase in private sector EPRs protection, the introduction of fragmentation of EPRs among the private and public sector will occur. This will further increase the challenges China faces with respect to its efforts to ensure food security.
A. Foreign Agricultural Biotechnology Companies Have Historically Been Reluctant to Invest in China
Weak IP protection may be a factor in the public sector domination of China's agricultural biotechnology. Strong IP protection in developing countries is theorized to encourage innovation while providing the economic confidence needed to attract foreign investment.127 Foreign direct investment, which is the result of the establishment of production subsidiaries by a foreign enterprise, can be a source of capital and technology transfer.128 Technology transfer is "the application of technologies in new geographic or product areas ... "129 Subsequently, this increase in foreign investment and technology transfer will ultimately "translate into faster rates of economic growth."130
Although maximum IP protection may not necessarily lead to the greatest amount of foreign investment,131 "various authors have found lack of enforcement to be a deterrent for foreign direct investment."132 This is more true with agricultural biotechnology than with other industries in China that do not have weak foreign direct investment, as the cost of developing a GM crop may be over $150 million.133 Without strong IPRs, the industry would not be able to bear the substantial investment risk associated with agricultural biotechnology.134 As described previously, the only private sector GM crop from abroad to have been previously adopted to a substantial degree in China was a cotton variety made by Monsanto.135 However, because of China's weak IPRs at the time, Monsanto exposed itself to "significant local piracy" of its seeds, resulting in a loss of investment income.136
In addition to the reluctance of foreign companies to invest in agricultural biotechnology due to investment risk, foreign agricultural biotechnology companies may be reluctant to invest in China because of protectionist measures taken by the Chinese government. One form of protectionism is based on restrictions on foreign agricultural biotechnology firms, which may be keeping many foreign agricultural biotech firms from entering the Chinese market.137 These restrictions may have occurred "to frustrate the commercial ambitions of Western [agricultural biotechnology] firms."138 This apparent protectionism is possibly attributed to the desire of China's public sector-dominated agricultural biotechnology industry to catch up to the advances made by foreign entities.139
Protectionism in China's biotechnology industries may eventually ease as China develops a stronger IP regime. In agricultural biotechnology's sister industry, pharmaceuticals, recent attempts at protectionism have been unsuccessful. In 2004, the Chinese Patent Office invalidated Pfizer's Viagra patent because of insufficient disclosure.140 This decision caused immediate polarization among the Chinese and United States governments and caused the U.S. Embassy in Beijing to issue a warning that this decision may deter foreign investment due to insufficient IPRs protection.141 However, others commented that the decision of the Chinese Patent Office was not indicative of protectionism, but actually an indication of stronger IP protection resulting from more stringent analyses of patent applications.142 In June 2006, a Chinese court revoked the invalidation of the patent, essentially giving Pfizer patent protection for Viagra in China.1 Whether this particular case was indicative of China's commitment to stronger IPRs or a weakening of protectionism due to political pressures is difficult to determine. In either case, it may be viewed as yet another suggestion of confidence for the biotechnology private sector in expanding their commercial interests to China.
B. Increased Interest in Agricultural Biotechnology from Foreign Companies Would Bring with It Increased IPRs Fragmentation
Two factors are likely to increase the presence of the private sector from abroad in China: the strengthening of IPRs and the weakening of protectionism. In 2004, Roche Pharmaceuticals announced the creation of a research and development center in China.144 A major factor in convincing Roche to establish the center in China was the recent strengthening of IPRs.145 It is difficult to conclusively determine whether private sector agricultural biotechnology companies from abroad will also begin to seriously invest in the Chinese market. Nonetheless, an environment conducive to private sector interests has become more favorable in recent years.
As a result of such a setting in which foreign private sector entities will no longer hesitate to invest, China will likely see an increase in foreign agricultural biotechnology companies wishing to expand the protection of their enabling technologies under Chinese law. Such technologies will unquestionably include processes that can be used to create GM crops that the public sector believes necessary to ensure food security. Consequently, emergence of the private sector will lead to issues of IPRs fragmentation among the private and public sectors as seen in other developing countries.146 Accordingly, China must protect the interests of its public sector from this highly probable occurrence.
V. REQUIRING COMPULSORY LICENSING OF CRITICAL IPRs WILL FACILITATE CHINA'S OBJECTIVE OF ENSURING FOOD secURITY
China's stronger IP laws and improvements in enforcement will likely result in IPRs fragmentation between foreign private sector agricultural biotechnology companies and China's public sector. However, the implementation of a compulsory licensing scheme could function to prevent encumbrances of advances made towards food security. Because compulsory licenses would be granted for selected enabling technologies used to create GM crops, and not the product itself, such licensing would not raise substantial concerns of parallel importing. As a result, concerns of compromised innovation would be minimal.
A. TRIPS and Chinese Patent Law Permit Compulsory Licensing
Compulsory licenses can be utilized to force an IPRs owner to share its protected technology. A compulsory license is a type of nonexclusive license resulting from governmental action.147 It allows one party to produce a protected product or process without the consent of another party that owns the rights to the intellectual property.148 The policy behind compulsory licensing is to adjust "the balance between public interests and the private interests of patent holders by providing an exception to the exclusive rights normally provided by [an intellectual property right]."149
While TRIPS doesn't explicitly use the phrase "compulsory licensing," the phrase "other use without authorization of the right holder" found in Article 31 implies that it permits WTO member states to include a compulsory licensing provision in their IP laws.150 However, compulsory licensing "can only be done under a number of conditions aimed at protecting the legitimate interests of the patent holder."151 The constraints must meet at least one of five "broadly defined public purposes: (1) to ameliorate a refusal to deal (essentially a failure to work the patent); (2) to address a health or other emergency of extreme urgency; (3) to resolve anticompetitive practices; (4) for noncommercial use; and (5) for dependent patents."152
Chinese patent law permits compulsory licensing under requisite conditions.153 However, a compulsory license has never been granted against a non-Chinese corporation's protected property.154 Apart from this fact, China is not prohibited from licensing a foreign corporation's technology that is protected under Chinese patent law, as long as Article 31 of TRIPS is not violated.
B. Compulsory Licensing Is Controversial Due to Concerns that Such Licenses May Deter Innovation
Proponents of compulsory licensing claim that public interest matters of public health and welfare outweigh the exclusive rights of an IPRs owner.155 The idea of using compulsory licenses is most common with respect to providing readily available drugs in the developed world to developing countries; most notably for HIV drugs in Africa.56 However, proposals that suggest the use of compulsory licensing for technologies related to food security have been comparatively minimal.157
Compulsory licensing is not free from criticism. Because strong IPRs are necessary to drive innovation, an argument against compulsory licensing is that investment in potential inventions would be "less secure and less attractive" to the innovator.158 As director of the National Institutes of Health, Harold Varmus stated with respect to nonexclusive licenses in general, "[i]t is well documented that technologies with potential as therapeutics are rarely developed into products without some form of exclusivity, given the large development costs associated with bringing the product to the market."15 Thus, at least with respect to the pharmaceutical industry, compulsory licenses should only be granted under exceptional circumstances.
The loss of incentive to innovate specifically associated with compulsory licensing occurs mainly because such licenses encourage parallel importing.160 Parallel importing, otherwise known as the gray market, takes place when a product that is provided inexpensively to one country is sold to another country where a lucrative market exists, but without permission from the IPRs holder.161 With respect to pharmaceuticals, it is argued that compulsory licensing schemes will actually decrease the access to life-saving drugs by reducing the innovative incentive to research and develop the original drug.162 This would result because the generic drug manufacturers would never have the opportunity to copy the original compound.163
Various royalty arrangements have been proposed to deal with the issue of lost incentive resulting from forced licenses.164 Such schemes could create incentive by either providing an upfront fee to the IPRs holder that was forced to give up his or her rights, or provide payments as the commercial value is determined.165 Thus, it has been argued that reasonable royalties resulting from compulsory licensing would not significantly discourage the investment required to innovate.166 However, whether a royalty scheme is even appropriate for a compulsory license provided to a public sector entity for technologies leading to a product with low commercial value is questionable.167
C. China Should Take Advantage of the Flexibility of TRIPS to Utilize Compulsory Licenses for Technologies Critical to Food security
China should utilize the emergency language168 of the compulsory licensing provisions of TRIPS to allow compulsory licensing of technologies critical for food security.169 In response to concerns that TRIPS might hinder efforts to control diseases of public health importance such as HIV, tuberculosis, and malaria, WTO members adopted a special Ministerial Declaration on November 14, 2001 at the WTO Ministerial Conference in Doha.170 The conference resulted in the further adoption of the Doha Declaration on the TRIPS Agreement and Public Health ("Doha Declaration on TRIPS"),171 which reaffirmed flexibility for TRIPS member states in circumventing IPRs for sufficient access to essential medicine.172 This Declaration not only reaffirms the right to grant compulsory licenses and to determine the grounds upon which such licenses are granted, but allows each member state to determine what constitutes a "national emergency or other circumstancef] of extreme urgency .. . "173
In 2003, the WTO implemented a provision that permits WTO member states to make drugs for an overseas market if they receive notice from a country with inadequate manufacturing capacity of its own.174 As a result, China's IP implemented the 2003 WTO decision through Order 37, an administrative order further interpreting Chinese Patent Law.175 China's Order 37 substantiates the willingness of China to implement WTO declaratory provisions pertaining to compulsory licensing.
TRIPS does not prohibit the use of compulsory licenses for technologies relevant to food security. This is exemplified by the fact that the Doha Declaration on TRIPS did not clarify the term "national emergency" as it relates to when such licenses may be granted.176 As a result, this flexibility in interpreting TRIPS will actually benefit China's public sector. China could, therefore, declare food shortages a national emergency, which would subsequently authorize the use of compulsory licenses for technologies required to create relevant GM crops. For these reasons, China should issue an administrative order similar to Order 37 that would implement the Doha Declaration on TRIPS and interpret significant hunger or malnutrition as a national emergency to reserve the right to grant compulsory licenses for such purposes.
Proposals to grant compulsory licenses to address issues of food security have only considered whether such licenses would be feasible if granted by the United States.177 More specifically, these arguments discussed the ways in which the United States has failed to address how "the compulsory license provisions in Article 31 [of TRIPS] would apply to allow access to the tools of biotechnology for developing-country food security purposes."178 This comment proposes, in broad terms, that developing countries that are WTO member states should utilize their ability to grant compulsory licenses if necessary to ensure food security. In narrower terms, this comment argues that compulsory licenses for issues of food security would be most advantageous to China as a result of its already successful agricultural biotechnology industry. Accordingly, China could use these measures to protect its interests in ensuring food security without violating its WTO obligations under TRIPS.
D. China Should Not Refrain from Granting Compulsory Licenses Due to Concerns that Doing So Might Interfere with Innovation
Compulsory licensing of IPRs for technologies critical to food security in China will not deter innovation. The scenario in which compulsory licenses would be utilized in China will result after the introduction of a commercialized GM crop into the Chinese market by a foreign agricultural biotechnology company. The foreign company will likely anticipate being granted some sort of IP protection under Chinese law for the essential enabling technologies used to create the GM crop.
The demand for a compulsory license may occur in one of two ways if the Chinese public sector develops its own GM crop essential for food security. First, the Chinese entity could autonomously develop a similar technology that falls within the scope of the protection provided to the private sector entity. Conversely, the Chinese entity might simply recognize the technology as being necessary to develop a particularly vital GM crop and wish to adapt it to its own research and development. In either scenario, a compulsory license may be granted to create the GM crop necessary for food security if China were to interpret significant hunger or malnutrition as a national emergency as permitted by the Doha Declaration on TRIPS.179
Incentive to innovate on the side of the private sector company will not be compromised if the Chinese government grants compulsory licenses in the requisite scenario. This results from the fact that the license will only be enforceable in China and will be used solely by China's public sector for noncommercial purposes. More importantly, issues of parallel importing with respect to GM crops will not be as significant as with pharmaceuticals. With pharmaceuticals, concerns of compromised innovation occur when a patented product, the drug itself, experiences parallel importing. In contrast, because the compulsory licenses that this comment suggests would only be granted by the Chinese government for selected enabling technologies, and not for the GM crop as a whole, parallel importing would be less of a concern.
Even if parallel importation of GM crops does occur, most of the GM crops currently created by China's public sector do not have significant commercial value. As a result, the same technologies could still be used to create additional GM crops with high commercial value in the same country where the GM crops might be parallel imported to. This would allow the IPRs owner to retain his or her investment interest. This comment, therefore, suggests that with respect to agricultural biotechnology, concerns of lost innovation resulting from a gray market should be decoupled from similar concerns that are omnipresent within the pharmaceutical industry. Hence, granting compulsory licenses for noncommercial crops that will be utilized only in China would not be grounds for foreign companies to lose their incentive to innovate these technologies for additional markets that are more favorable to financial recovery.
Notwithstanding the fact this comment argues that a compulsory licensing scheme geared towards ensuring food security will not compromise innovation, China should nonetheless be sensitive to how the private sector might perceive such licenses. This results from the likelihood that the introduction of foreign technology could actually benefit China's future efforts of ensuring food security, in spite of IPRs fragmentation. One must only look at the promise of Golden Rice,180 despite the fact that the creation of most GM crops will not experience similar cooperation among the private sector.181 As a result, China should not hesitate to exercise its ability to grant compulsory licenses for fear that doing so might discourage any humanitarian effort provided for by the private sector, no matter how unlikely such effort might seem.
GM crops have the potential to alleviate chronic malnutrition and hunger, to make more efficient use of farmland, and to further reduce soil erosion and the use of pesticides.182 Agricultural biotechnology is not a panacea that will solve world hunger,183 but it is one promising way in which the problem can be addressed.14 As a result of continued population growth, global warming, and other environmental factors that are contributing to the challenges of food security,185 it may be argued that it is unethical not to recognize agricultural biotechnology's potential with respect to the world's hungry.
China is likely to see an increase in the presence of agricultural biotechnology companies from abroad, possibly utilizing China's stronger IP laws and enforcement as a way to protect their investments. Because of the significant financial investment required to create a GM crop, agricultural biotechnology companies have been more hesitant to invest in China than have other industries. In addition to strong IP protection, other factors such as protectionism and the difficulties associated with GM crop management,186 may determine whether the private sector will attempt to import their technologies into China. All the same, the probability that the private sector will begin to seek protection under Chinese law of their enabling technologies used to create GM crops in the near future is becoming more likely.
China must, therefore, prepare for the consequences that will arise as a result of the strengthening of its IP laws. Because the broad language of TRIPS does not prohibit the declaration of a food shortage as a national emergency, China should not hesitate to grant compulsory licenses against foreign agricultural biotechnology companies. Such licenses would not raise considerable concerns of parallel importing and, therefore, the incentive to innovate would not be defeated. The result would provide for protection against the limitations on the availability of technologies critical for food security that may result from the recent strengthening of China's IP laws and enforcement.
Gregory C. Ellis[dagger]
[dagger] The author would like to thank Professor Sean O'Connor at the University of Washington, School of Law for his extremely helpful discussions on the topic, the editorial staff at the Pacific Rim Law & Policy Journal, and his friends and family.…