Are stronger intellectual property rights an obstacle or a condition for international technology transfer? - An analysis on the effects of the TRIPS Agreement

Abstract: This thesis analyses whether intellectual property rights promote or restrain technology transfer to developing countries and what effect the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement have on technology transfer to developing countries. Technology transfer is traditionally used as a means to increase the technological knowledge of countries, and there have been many attempts to establish a functional instrument for technology transfer to developing countries. The implementation of the TRIPS Agreement will result in that the international intellectual property rights system will be strengthened. Developing countries have expressed concern that this global strengthening could result in a reduction of technology transfer. These concerns are justified since it could be more difficult to use certain channels of technology transfer, such as imitation and compulsory licensing. The developed countries have further not effectively used art 66.2 of the agreement which stipulates that countries shall provide incentives to national enterprises and institutions for the purpose of promoting technology transfer to least-developed countries. The developed countries asserted during the negotiations of the TRIPS Agreement that stronger intellectual property rights would have a positive effect on technology transfer to developing countries because companies would be more willing to transfer technology to a country which offers effective intellectual property rights protection. However, there is no empirical evidence that completely support this statement. Studies on the issue have shown that intellectual property rights are especially important for investment decisions by chemical and pharmaceutical companies, but there are also industries which consider intellectual property rights to be of less importance. That companies consider the effectiveness of intellectual property rights of the recipient countries is understandable&semic they naturally want a reward for their research work. However, the availability of intellectual property is not the only factor which is important for companies' investment decisions. Companies also pay attention to other factors of the recipient country, for instance the infrastructure, the availability of skilled workforce and the capacity of the buyer to absorb technology. Nevertheless, stronger intellectual property rights will undoubtedly enhance the technology owners' control, and they can accordingly deny access to their technologies, charge higher prices or impose conditions for the technology transfer. It can be asserted that intellectual property rights do not become an important factor for technology transfer until the country has developed a technological base. Since developing countries often lack the possibility to buy expensive technologies, they use technology transfer channels such as copying and reverse engineering to get access to technology. Therefore it seems that weak intellectual property rights are more related to development for countries with limited assets and a weak technological base than strong intellectual property rights. The availability of intellectual property rights restricts technology transfer in the beginning of the industrialization process when a country uses imitation. Stronger intellectual property rights can thus in this situation be an obstacle for technology transfer.