Intellectual Property Rights – where to South Africa?

The 2015 Index on Intellectual Property Rights compiled by the Global Intellectual Property Center (GIPC) will be launched next Wednesday in Washington, DC. The Index will rank 30 economies comprising nearly 80 per cent of global GDP. The Index provides not only a picture of the global state of IP but also snap-shots of the IP rights environment in individual countries. South Africa’s inclusion in the index will provide an important indicator as to what change of direction may be occurring in this country, something that potential investors will no doubt be watching keenly.

South Africa’s total overall score in the GIPC 2014 index was 11.6 out of 30, ranking South Africa 18th out of the 25 countries in the sample. In the key area of patents and related rights, South Africa tied with India for last place behind countries renowned for their weak intellectual property rights protections, such as China (17), Ukraine (16) and Russia (13). South Africa’s weakening position on intellectual property rights is also to be seen in the 2012 Pugatch Consilium Biopharmaceutical Competitiveness and Investment Survey where a score of 64.92 out of a possible 100 placed it in the category of ‘limited ability to compete’.

In September 2013, the DTI published The Draft National Policy on Intellectual Property (Draft Policy) proposing amendments to South Africa’s existing legislation. The DTI focusses inordinate attention on intellectual property governing pharmaceutical products. The amendments the DTI proposes will make it more difficult to obtain patents on pharmaceutical products and easier to ‘break’ them when granted. If these amendments are enacted, it will be disastrous not only for every sector that relies on the robust protection of intellectual property rights, but especially on the pharmaceutical sector and the millions of patients who depend on innovative new drugs.

This year will be a critical one for intellectual property policy in South Africa. According to Meir Pugatch, a professor of intellectual property, innovation and entrepreneurship at the University of Maastricht and lead author of the GIPC International IP Index, “South Africa is changing its intellectual property laws, a move that experts from research firm Pugatch Consilium argue will narrow access to medical treatments and harm the country's investment attractiveness in the pharmaceuticals sphere”.

The Organisation for Economic Co-operation and Development, and others, find a positive relationship between increased intellectual property protection and Foreign Direct Investment (FDI). In particular, a 1% increase in the protection of intellectual property rights, measured by the Patent Rights Index, is associated with a 2.8% increase in the influx of FDI. Studies also demonstrate that any government wishing to see its economy grow must take the direction of change in their intellectual property policy protection seriously. A trend towards stronger intellectual property protection results in increased investment while the reverse trend reduces investment. The consequences may not be immediately apparent but they are no less certain.

Health activists argue that a stronger intellectual property regime results in decreased access to medicines. International experience, however, demonstrates the contrary. In countries with the strongest intellectual property laws, citizens enjoy greater access to medicines.

Intellectual property laws are only one factor among several that foster innovation and development. Successful implementation of intellectual property rights depends on complementary factors such as the quality of legal institutions, markets and infrastructure. Simply put, the efficacy of intellectual property reform is ultimately subject to the environment in which intellectual property rights operate. National prosperity is achieved when countries implement a policy paradigm – of which intellectual property rights are an important component.

Countries characterised as ‘winners’ have strong intellectual property rights. To lower South Africa’s intellectual property rights standards would be tantamount to relegating its citizens to the levels that characterise ‘loser’ countries. If we stop respecting the intellectual property rights of international investors, they will simply take their money and expertise elsewhere. To them, South Africa is not a special case.

Ultimately, it is economic development that will be the major driving factor behind increased access to medicines. South Africa needs to follow the example set by the rest of the world. It needs to adopt policies that characterise rich nations which include respect for the rule of law and a sound property rights regime. History has repeatedly demonstrated – wealthier nations are healthier nations.

Author: Jasson Urbach is an Economist and director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the FMF.

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE