era (1950s to 1980s) organized research cartels to compel industrial firms to
pool their efforts and avoid the duplication associated with patent races. Once
a piece of technology had been developed it was then made available for all
firms in the cartel to utilize in productive competition with each other.
Of particular relevance for developing countries is the argument that IPRs
will stimulate the transfer of technology from developed countries. MNCs may
be more likely to bring with them new technologies if they can be reasonably
assured they will not be freely copied by domestic firms. The first criticism is
that IPRs are in many cases not likely to generate technological change rele-
vant to developing countries. The pharmaceutical industry, one of the most
vociferous advocates of tightened IPR protection, provides some striking
examples (see Chapter 5). Around 50 per cent of total health research is
conducted by the private sector, which is motivated to research diseases for
which there exist markets and profits. There are distinct differences in the
disease profile faced by developed and developing countries. Various diseases,
such as Chagas, dengue, malaria, trypanosomiasis and onchocerciasis (river
blindness) among others, are almost entirely confined to developing countries
(Kremer, 2002:71). This has led to what is known as ‘the 10/90 problem’ where
90 per cent of R&D is focused on health issues predominantly relevant to the
richest 10 per cent of the world’s population (Chataway and Smith, 2006:16).
Despite the tightening of patent protection under the WTO in the mid-1990s
there is little indication that medical research of relevance for developing
countries increased. In the early 1990s the number of patent applications for
malaria,leishmaniasis and chagas declined and leprosy showed no change
(Lanjouw and Cockburn, 2001:273).
Another set of arguments revolves around the distinction between innova-
tion and the diffusion of technology. While studies have found that stricter
protection of IPRs has increased technology transfer by MNCs to China (Wu,
2000) this has come at a cost. Increased protection of IPRs reduces the ability
of domestic firms in less developed countries (LDCs) to imitate and adapt
advanced technology for domestic use through reverse engineering (Lai,
1998). Approximately 97 per cent of all patents and the vast majority of copy-
rights and trademarks are held by rich countries, so strengthening of IPRs
means that acquiring knowledge has become more expensive for developing
countries. The World Bank estimated that following TRIPs an increase in tech-
nology licence payments cost developing countries an extra $45 billion a year.
There are added costs to developing countries in the form of creating and
running the legal infrastructure of an IPR system (Chang, 2007). Patent protec-
tion may have generated an incentive to invest in developing new AIDS/HIV
drugs but the cost of such treatments by the mid-2000s were approximately
$10,000–12,000 per patient per year. This represented 30 to 40 times the aver-
age annual income of a person in Tanzania and Uganda, while copies could be
imported from India and Thailand for $300–500 or 2–5 per cent of the real
thing (Chang, 2007). The constraints on technology diffusion are a very rele-
vant concern for developing countries, as observed by Alice Amsden:
Institutions 221