Patent Bargains in NICs: The Case of Brazil

Bruno Meyerhof Salama, Fundação Getúlio Vargas School of Law

Abstract

This paper criticizes a well-established assumption within World Trade Organization (WTO) establishment, namely that Intellectual Property Rights (IPRs) positively affect Foreign Direct Investment (FDI) decisions by technology-based companies located in developed countries. As this paper shows, unlike for developing countries, development economics theory consecutively still fall short of fully understanding why there is little consistency between inwards FDI in Newly Industrialized Countries (NICS), and the latter failure to strictly enforce patents laws. As so, for NICs the conventional economical assumption within the TRIPS agreement that a lack of strict patent regime curtails foreign investment and enhanced R&D is possibly a false or at least indefinite proposition. The Brazilian pharmaceutical industry sets a case study.

In the backdrop of TRIPS’ strict regulatory regime flatly adopted by the WTO for all nations, NICs differ. The latter occasionally threaten to issue compulsory licenses which may sway overseas companies into selling drugs with large discounts or granting voluntary licenses domestically. Brazil sets a case study for a country that infrequently resorted to this negotiation strategy. Taking on a neoclassical political economics explanation, this paper explains why such bargains ultimately are an efficient second-best solution for NICs, as Brazil. It ultimately argues why, unlike in the case of developing countries, NICs may potentially benefit from such bargains without significantly curtailing FDI and enhanced R&D. That is, in the backdrop of an altogether weaker patent regime. As a policy consideration, this paper concludes that in times of public health crises the threat to issue compulsory licensing by NICs is not only morally but also economically appealing.