Future Scenarios, IP Tax Evasion, Informal Sector, And Patents In Africa

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CAPE TOWN, SOUTH AFRICA – A conference here on intellectual property, innovation and the public interest included a look at different possible futures for Africa, global IP tax evasion schemes, a discussion of the strong informal sector, and some views on the relative weakness of patent quality on the continent.

The Open African Innovation Research (Open A.I.R.) conference and the Global Congress on IP & the Public Interest is taking place in Cape Town from 9-13 December.

Scenarios came up earlier in the week in a discussion of a new book, Knowledge & Innovation in Africa: Scenarios for the Future, which arose from the Open African Innovation Research and Training Project (Open A.I.R. for short). The three-year project was funded by Canada’s International Development Research Centre (IDRC), and Germany’s Gesellschaft für Internationale Zusammenarbeit (GIZ).

Three possible future scenarios were imagined, called wireless engagement, informal – the new normal, and sincerely Africa.

The scenarios were intended to tie together insights and analysis from the project and provide a tool for people to challenge themselves, asking for each scenario what is valuable, what do innovation systems look like, and what is knowledge governance in each.

University of Ottawa law Prof. Jeremy de Beer, a project leader, said knowledge should be globally transferrable, with opportunities to tie in to global platforms.

In a world of wireless engagement, innovation systems will be based on technologies, large corporations will be drivers, and there is “almost certain” to be tension between open and proprietary systems, he said, noting open does not necessarily mean openness. IP rights are likely to be important.

In a world of informal economy, a different kind of knowledge system exists, innovation is driven by entrepreneurs, and solutions are small scale and improvised. But it is not unsophisticated, just the opposite, he said, and locally oriented. Knowledge is driven by users and only open if you have trusted networks, based on interpersonal factors where trade secrecy matters most. Moral rights would be enforceable, he said.

In a “sincerely Africa” scenario, communities focus on traditional knowledge systems and sustainable development. This scenario is focused on ethnocentric cooperation, not corporations, and sees gradual innovation. Knowledge governance is based on what is sacred or traditional, and international legal systems are only valued if they fit the existing systems.

Participants in the conference were led through lively role plays with actors in the scenario workshop, led by scenario architect Shirin Elahi.

A Sobering Scenario of Energy and Patent Tax Evasion

Australian academic and trend-setting thinker Peter Drahos presented a view of the future that went beyond IP rights and painted a serious portrait of what’s coming – in energy and finance. He said a reliable supply of energy is necessary and there is poverty where it is lacking, killing many more people than the lack of access to medicines, for instance. He noted that sub-Saharan Africa has an abundance of sunlight so that as the cost of photovoltaic technology comes down, it could create export opportunities for the region.

On finance, he recalled that the 2007-2009 financial crisis started in the United States but spread beyond, and yet the reforms that followed to prevent such things happening again have not been enough to change it for the future.

For instance, he said that even after the reform at the International Monetary Fund, the US still holds 16 percent of the vote, and it requires 85 percent of the vote to pass any reforms there – giving the US a veto. Meanwhile, the BRIC countries (Brazil, Russia, India, China) are in the top 10 of the world’s economy but they do not have even 10 percent of IMF voting power. He said there is a case for “strategic disengagement” from global institutions.

Furthermore, reforms have not really freed populations from “Ponzi-style” capitalism, he said. BRIC countries have been talking about creating a rival IMF, which might be on the right track. “If you don’t think big, you will be subjected to hegemony,” he said.

Drahos tied IP and finance together by pointing to a form of massive tax evasion, in which many multinational companies appear to be engaging by moving their valuable IP assets to low tax jurisdictions and costing states billions in lost revenue.

Pointing to an example of Microsoft moving half of its US$21 billion portfolio to Puerto Rico, he said, “Oddly, it’s a case where the United States was a loser in IP.”

What must happen is the creation of institutions that think and respond, and regulations must be changed, he said, in order to address this “deeply, deeply iniquitous situation.”

A particular irony is pharmaceutical companies that convince governments to let them charge the highest prices for pharmaceuticals by obtaining patents, and then using that same patent system to move the profits out of the country.

Patent offices should not grant patents, he said, any more than banks should not increase the money supply by printing money. Rather, they should see themselves intervening in a system in a way that improves society. If a patent office grants twice as many patents from one year to the next, something is wrong with that patent office.

To address the “tax evasion game,” he said ideally, the tax office would learn from the patent office what kinds of patents are being granted, and the patent office would use its enforcement mechanism to call in these companies – in a friendly way at first.

Current Issues: Informal Sector

There were a variety of discussions arising from another book launched this week, called Innovaiton & Intellectual Property: Collaborative Dynamics in Africa.

In a discussion about the informal sector in Africa during the week, de Beer said there is a difference between innovation and invention, and in this sector often innovation is new to that person, industry or region, but is not patentable. He also noted that trade secrets do not produce a measurable output.

On the informal sector, Erika Kraemer-Mbula, senior lecturer and research fellow at the Institute for Economic Research at Tshwane University of Technology (South Africa), said it must be looked at in a bigger context, as informal manufacturers do not operate by themselves but rather in value chains, and that often innovations are often reactive.

She also said that in their study under the Open A.I.R. project they found that the informal sector often is seen as associated with criminal activity, but actually is full of entrepreneurs and other legitimate traders. And often they experiment to develop new products, but may not see it as their knowledge.

Low Commercialisation of Publicly Funded Research

A discussion also was held on the South African IP regime and publicly funded research, which refers to a chapter in the book. Caroline Ncube, associate professor and deputy director of the IP Unit at the University of Cape Town law school, characterised the discussion afterward as identifying that since Africa’s IP commercialisation law (like the US Bayh-Dole Act encouraging patenting by universities) went into effect in 2008, some $2.3 million South African rand in revenue has been generated from commercialisation.

“This is really appalling,” she said, as ten times that amount has been spent. The National IP Management Office (NIPMO), which oversees the IP commercialisation, argued that it is still early going.

Questions from the audience asked whether the South African IP law engages with social issues. Also, NIPMO said it wants to set up offices within universities. But an audience member noted that a student protest arose at Yale University over a Yale-owned patent.

Africa the Patent-Granting Highway?

In a short debate, two speakers took sides over patenting in Africa. Ikechi Mgbeoji, associate professor at Osgoode Hall Law School, York University, Toronto, presented the view, which he said is not his own, that the patent system works better if patent offices grant too many patents rather than too few. That’s because if the patent should not have been granted, it will most likely be caught in the courts.

He noted that this is the approach taken by the biggest patent offices in the world. “Even the best patent offices mess things up quite often, such as the United States, he said. Researchers say that is not necessarily a bad thing because of time efficiency for the patent office. Poor quality patents will likely lose in court, which will take care of some of these “silly” patents, he said.

Mgbeoji noted that over 90 percent of patents in Africa come from overseas. Patent offices can take the revenues from patent applications and let the court resolve the problem, he posited. His chapter in the book surveyed patent stakeholders from 44 countries and found deficiencies in patent examination and weaknesses in the offices that could hamper technology transfer and domestic industrialisation on the continent.

Bassem Awad, a judge at the Appeal Court of Egypt and an adjunct faculty member at Western Law School, University of Western Ontario, Canada, took the opposite view in the debate, arguing that “the patent system in Africa is a highway to approval,” and that a focus on patent quality is sorely needed. South Africa for one is considering a proposal to establish a patent examination office next year.

It was noted from the audience that ARIPO has capacity and can help with assessments for countries. A representative of the African Regional IP Office (ARIPO) said the purpose of a patent office is to evaluate patent applications and grant them if they are found worthy. The second purpose is to encourage the use of that knowledge.

The ARIPO official, in later remarks, said the administration of intellectual property is “very critical,” and that future research endeavours such as this one should try to incorporate in the administration.

“We have a process of looking at policies enacted to see what worked or not,” he said. As to the commons, he asked, “what does this mean?” He recommended caution so as not to add to the already existing problems.

Ruth Okediji, a law professor at the University of Minnesota, suggested caution in generalising about Africans, or about innovation by Africans, whether on the continent or outside of it – noting that many Africans hold patents at the US Patent and Trademark Office, for example.

Finding ways to harness knowledge on the continent is about recognising where innovation takes place and making sure institutions are responsive to Africans, she said.

William New may be reached at wnew@ip-watch.ch.

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