[Random-bits] United States-Republic of Korea Free Trade Agreement - CPTech comments

[James Love]

United States-Republic of Korea Free Trade Agreement - CPTech comments
27 March 20006
James Love, CPTech

CPTech provides the following comments regarding the proposal for a
US Korea Free Trade Agreement (US/Kr/FTA).

Our comments address the parts of the agreement that concern
knowledge goods. In particular, we present a new way of thinking
about the topics that have been addressed in previous US/FTAs under
chapters on intellectual property rights, as well as provisions
concerning pricing of pharmaceutical drugs.

As noted in the 2006 Economic Report of the President, intellectual
property rights can play an important role in creating incentives and
rewards for investments in inventive and creative works. However,
intellectual property rights can also be implemented in ways that are
overreaching, anticompetitive, and protectionist, harming both
economic growth and the interests of consumers.

Increasingly, economists, political scientists, business leaders and
consumers are recognizing that intellectual property rights are forms
of government regulation that have both costs and benefits, and which
are also subject to regulatory capture by special interests.

Knowledge is the fuel of the modern economy, and trillions of dollars
are spent on education and the creation and dissemination of
information. We want businesses, consumers and other stakeholders to
be informed, and take advantage of the best technologies and to
manage knowledge resources wisely.

The freedom to use and share knowledge can be seen as the normal case
(the general rule), and intellectual property rights as a limited
exception (the exception to the rule). As noted in the February 2006
Economic Report of the President, it is difficult to find the right
balance between intellectual property rights on the one hand and the
freedom to use and share knowledge on the other hand.

Some level of intellectual property right protection is clearly
necessary to create the incentives and rewards we need to support and
reward creative and inventive individuals and communities. But we
also very much need systems for creating and disseminating
information resources that are not owned or controlled by anyone. The
knowledge economy is a complex ecosystem. To support the discovery
and development of new medicines, we rely upon a plethora of patent
and sui generis methods of intellectual property protection to create
incentives to invest in new medicines, but we also spend
approximately $30 billion per year through the National Institutes of
Health (NIH) on government funded research, much of which freely
enters the global knowledge commons. The US government vigorously
promotes the patent system globally, but it also provides more global
public goods for medical research than any other country. The Human
Genome Project, the HapMap Project, Medline, and other public goods
are as important to the drug discovery system as are patents and high
prices on new medicines.

There are trade related aspects of both issues in this knowledge
ecosystem. The US government has supported the TRIPS and other
multilateral and bilateral trade agreements that seek to address the
issue of ensuring that every country provides minimum levels of
protection for patents, copyrights and other types of intellectual
property protection. These agreements deal with global "free riding"
for investments that rely upon patents, copyrights or other types of
intellectual property protection. But they do not address free riding
issues relating to global public goods, such as costly project like
the Human Genome Project or Medline. Nor do these agreements deal
with another problem =96 the possible anti-competitive and
protectionist nature of intellectual property systems that are overly
restrictive in terms of access to knowledge.

US trade policy lacks balance. It places all of its emphasis on one
issue =96 the possibility of free riding on investments that are
protected by patents, copyrights or other types of intellectual
property. It does nothing to address the free riding on public goods,
and it is also doing nothing to address cases where inappropriate
levels or badly managed intellectual property rights are an
unwarranted encroachment on the public domain. There is simply no
policy justification for this lack of balance. The reasons for a lack
of balance are undoubtedly due to the vast lobbying resources of
intellectual property right-owners, who can command the attention and
attract the favors of political leaders and civil servants who
supervise trade policy. It is also due to a lack of understanding of
the importance of freedom and access to knowledge to the processes of
innovation and economic growth.

Assumptions about the optimal balance between intellectual property
rights and the public domain were shattered when the Internet emerged
as the new platform for the sharing and distribution of knowledge
resources. Everything about the Internet was a surprise. The core
technologies for the Internet were either placed in the public
domain, or freely licensed to everyone. Enormous attention was given
to the benefits of open standards for certain key network and
software technologies. The explosion of publishing on the Internet
vastly increased the amount of information that was available without
charge to anyone. New models for the development of "free software"
were key to overcoming anti-competitive tendencies of some companies,
and attractive as a superior model for designing, maintaining and
enhancing certain services provided by software.

Scientists working on medical or agricultural research, and
publishers of scholarly journals were deeply influenced by the
amazing benefits of these new information technologies, as were
venture capitalists and firms both big and small. New business models
and new forms of collaboration among different communities of
creative and inventive persons emerged overnight to explore and test
these new possibilities. Some of this was strictly non-commercial,
and some was very commercial. The "free" technologies of the Internet
created enormous new private wealth, and vastly enriched the lives of
the public at the same time. It is a dynamic and complex ecosystem
that undoubtedly has done much to promote trade, investment,
innovation, development and growth in other sectors of the economy.

Meanwhile, the rhetoric and policy objectives of US trade policy
seemed firmly rooted in the past =96 and in some cases, hostile to
these new paradigms. The Korean FTA is an opportunity to consider new
thinking about trade policy. One possibility is to consider a new
chapter in the FTA on Access to Knowledge (A2K). The United States is
the largest source of public domain knowledge resources in the world,
and the world benefits from a number of important limitations and
exceptions in US copyright laws. But we also benefit from public
goods provided by our trading partners, and the limitations and
exceptions in foreign patent and copyright laws that guarantee
greater access to their knowledge resources.

The Chapter on A2K should consider including these provisions:

1.  Copyright and related rights.

    a.  Korea should agree to provide for fair use of copyrighted
works that are at least as liberal as US law.

    b.  Korea should agree to forgo copyright of works by federal
employees (the US standard).

    c.  Orphan Works. Korea should agree to adopt measures that
provide publishers greater access to "orphaned" copyrighted works, as
has been proposed by the US Copyright office.

    d. Distance Education. Both countries should agree to adopt
measures for limitations and exceptions to copyright that are
effective in promoting greater access to education through new
distance education tools. This is an important field for public and
private sector organizations in the United States, and will often
involve cross border delivery of services, making it highly
appropriate to address in trade agreements.

    e.  Persons with disabilities. Both countries should agree to
provide effective measures that ensure that persons with disabilities
can access copyrighted works.

    f.  Documentaries. Both countries should jointly study problems
facing filmmakers who seek to make documentaries, to determine if
there is a need for global norms for non-voluntary use of copyrighted
materials (with or without remuneration) for certain works. This
might refer to "special cases where the social, cultural, educational
or other developmental benefit of a use outweigh the costs imposed by
it on private parties."

    g.  Non-original or creative works. Facts and works lacking in
creativity, should not be subject to copyright or copyright like
protections. We note this is a position strongly supported by the US
Chamber of Commerce and leading US database companies in the
Congressional debates over proposals to introduce European style
database protections in the US.

    h.  Search engines and ISPs. Both countries should agree to
minimum copyright limitations and exceptions that ensure that search
engines and ISPs can provide valuable services to the public. We note
the US is the global leader in search engine technologies, and we
have an interest in protecting this sector from restrictive copyright
regimes. The language for search engines could protect "The use of
works in connection with Internet search engines, so long as the
owners of works do not make reasonable measures to prevent access by
Internet search engines, and the Internet search engine service
provides convenient and effective means to remove works from
databases upon request of the right owner."

2.  Patents.

    a. Korea and the US should both agree to ensure that standards
for inventive step for patents are sufficiently high to avoid
unwarranted encroachments of the public domain.

   b. Both countries should share information and cooperate in
efforts to improve the quality of issued patents, and to implement
reforms in both pre and post grant review of patent quality.

3.  Provision of Public Goods.

    a. The US and Korea should consider a provision that requires
federally funded research articles to enter public archives within a
certain amount of time, similar to the proposals in the United States
for research funded by the National Institutes of Health.

    b. Both countries could agree to provide incentives to government
funded research grants to publisher in author/pays open access journals.

    c. Korea and the US should provide commitments to support certain
public goods. These could be provided through collaboration, or by
each country independently. For example, the United States and Korea
could agree to support public domain databases relating to Bird Flu
or SARS, or to support digitalization (and translation) of public
domain books.

    d. Korea and the US could agree to minimum levels of federal
support for servers that provide access to free software resources.

4.  Special issues concerning standards. Open standards are global
public goods, including those that are based upon appropriate
licensing of patented or copyrighted technologies.

    a. Korea and the US should cooperate on the development of
policies relating to disclosures of patents on proposed technical
standards.

    b. Korea and the US should cooperate on procurement policies that
support the development of open standards for document and data
formats, in order to promote competition in software markets and
greater interoperability of devices and software used to manage
knowledge resources.

    c. Copyright and patent laws of both countries should permit the
use of works in connection with legitimate reverse engineering.

In the area of medicines, the United States has promoted ever
increasingly high standards for intellectual protection for
medicines, and measures like the 1999 US/EC/Korea agreements on drug
pricing, which are explicitly designed to raise drug prices in Korea.
These measures are deeply resented in Korea, and have led to
significant problems in access to new expensive medicines, such as
the case so eloquently examined in the film Dying for Drugs (copy
mailed under separate cover), which examines the case of Gleevec in
Korea, a very expensive treatment for certain types of leukemia.

Rather than add to these already unpopular measures with even more
anti-consumer measures that fuel anti-US political sentiment, and
which are contrary to paragraph 4 of the 2001 Doha Declaration on
TRIPS and Public Health, we suggest a different approach. The US
should ask Korea to shoulder higher burdens of supporting publicly
funded medical R&D, including research directed at global health care
priorities, such as new treatments for Bird Flu, SARS, TB, AIDS and
other areas where the the patent system by itself is not a sufficient
mechanism to stimulate R&D.

These efforts could be addressed in a new chapter in the FTA
concerning measures to support essential health care research.

Such a chapter in the FTA could also address other important issues,
such as the global sharing of the costs of clinical trials that
provide evaluation of the safety and efficacy of new drugs, including
head-to-head comparisons of products within the same therapeutic
class. This type of evidence is a global public good, and the chapter
on essential health care research could provide a model for
addressing the global "who should pay" question.

Within this new trade framework, our foreign trading partners would
not be asked to trade access to medicines for access to the US
market. They would be asked to contribute to the global costs of
medical innovation in areas where there is the greatest need, and
where the United States has been providing the most global
leadership, but in ways that are consistent with the protection of
access to medicine and consumer protection. The US could more freely
consider measures to protect our own consumers when appropriate
(benefiting both US taxpayers and the US employers who pay for
medicines), without undermining the entire global system for
supporting new drug development. This is because it would recognize
the importance of both public and private sector investments, and all
of the legitimate mechanisms to support R&D for new medicines.

The US would benefit from this change in several ways. First, US
employers would be more competitive, as foreign trading partners
picked up a greater share of the cost of providing global public
goods in the area of medical R&D. Second, the US would benefit from
the new medicines supported by the foreign R&D, including priority
areas like Bird Flu, AIDS or SARS that are important global problems.
Third, the US would be seen in a much more positive light globally,
at a time when anti-US political sentiment is hurting US businesses
and US political interests. In this regard, we note the growing
international interest in a new global framework to support essential
medical R&D, as evidenced most recently by support for the World
Health Organization's Executive Board proposed resolution EB117.R13,
which will be debated in May 2006 at the World Health Assembly.

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James Love, CPTech / www.cptech.org / mailto:james.love@cptech.org /
tel. +1.202.332.2670 / mobile +1.202.361.3040

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