THE EFFECTS OF BIOPIRACY ON THE NATURAL PLANT PRODUCT MARKET: A PERUVIAN CASE STUDY. A Thesis. Presented to the. Faculty of

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1 THE EFFECTS OF BIOPIRACY ON THE NATURAL PLANT PRODUCT MARKET: A PERUVIAN CASE STUDY A Thesis Presented to the Faculty of San Diego State University In Partial Fulfillment of the Requirements for the Degrees Master of Business Administration and Master of Arts in Latin American Studies by Ashley Lynn Smallwood Summer 2011

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3 iii Copyright 2011 by Ashley Lynn Smallwood All Rights Reserved

4 iv ABSTRACT OF THE THESIS The Effects of Biopiracy on the Natural Plant Product Market: A Peruvian Case Study by Ashley Lynn Smallwood Master of Business Administration and Master of Arts in Latin American Studies San Diego State University, 2011 This work is a study of the effects of biopiracy on those participating in the natural plant product market. Many supporters of intellectual property would contend that the ability to have protection over a value added process or invention is essential. This study seeks to understand how biopiracy, or the mis-appropriation of basic biological resources or the traditional knowledge of those biological resources, and its effects are conceptualized by those who are working in the field of natural plant products. All data was collected through in depth interviews where a series of open ended questions were asked about the function of the participant s business and their perception of biopiracy. There were fourteen interviews conducted in total, ten of whom were natural plant product exporters residing in Lima, Peru. Three of the participants interviewed were public servants actively working to combat biopiracy, and the last participant was a non-peruvian businessman exporting natural plant products to their home country. The findings of this study emphasize that the meaning of biopiracy is subjective and in some cases takes on several meanings. The inconsistency of the term does not indicate that the term is being used incorrectly, but rather it is being conceptualized by those in the field in different ways, each of which have implications associated with it.

5 v TABLE OF CONTENTS PAGE ABSTRACT... iv LIST OF TABLES... vii LIST OF FIGURES... viii ACKNOWLEDGMENTS... ix CHAPTER 1 INTRODUCTION LITERATURE REVIEW...4 Background and History of Intellectual Property...6 Intellectual Property in the United States...7 Intellectual Property in Europe...8 International Treaties and Organizations Supporting Intellectual Property...9 Theory of Intellectual Property...15 Historical Intellectual Property Theory...15 Industrial Perspective on Intellectual Property...16 Counter-Industrial Views on Intellectual Property...20 Biopiracy...22 Cases of Biopiracy...26 Statement of the Problem METHODS THEMES FROM RESEARCH...43 Peruvian Case Studies...43

6 vi Factors that Affect the Natural Plant Product Market in Peru...49 Informal Competition...50 Supply Chain Issues...61 Perceptions of Biopiracy...73 Bio-Security...73 Contraband...78 Trademark Infringement...83 Informality as Biopiracy...84 Traditional Notions of Biopiracy...86 Naturex Maca Patent...91 Cultural Aspects of Biopiracy DISCUSSION OF THEMES An Outsider s Perspective on the Ways Biopiracy Can Occur Informality Supply Chain Issues Effects of Biopiracy IMPLICATIONS OF STUDY REFERENCES APPENDIX A GREENTECH PATENT APPLICATION INFORMATION B SPANISH GREENTECH PATENT APPLICATION INFORMATION...122

7 vii LIST OF TABLES PAGE Table 1. Summary of Participants...39 Table 2. Case Study of Biopiracy with Company Table 3. Quotations on Informality...52 Table 4. Supply Chain Issues...62 Table 5. Bio-security as Biopiracy...73 Table 6. Contraband Issues...79 Table 7. Biopiracy in the Traditional Sense as Conceptualized by Company Table 8. Traditional Views of Biopiracy by Company Table 9. Traditional Views of Biopiracy by Company Table 10. Knowing or Unknowing Accomplice?...107

8 viii LIST OF FIGURES PAGE Figure 1. Supply chain of natural plant products Figure 2. Interview questions....42

9 ix ACKNOWLEDGMENTS I would first like to thank all participants for donating their time to be a part of this study. Muchisimas gracias a todos los participantes, por recibirme con sonrisas y por apoyar a este proyecto que sin ustedes no hubiese podido capturar la perspectiva que más vale. This thesis would not have been possible without first thinking of a topic. I would like to thank my advisor Dr. James Gerber for sparking my interest on the topic of biopiracy, connecting me with the possibility to do research in Peru, and pushing me toward excellence throughout the process that followed. Dr. Douglas Sharon has been an invaluable member of my thesis committee, not only being present in the field to aid me in my thought process, but also for his scrutinous eye in copy-editing the entirety of this thesis. Dr. Chamu Sundaramurthy and Dr. David Ely also both gave me valuable advice as to how best to construct this work. I also would like to thank Dr. Ramona Perez for introducing me to Chantal Morgan D'Apuzzo, a practicing patent attorney, who made intellectual property rights a little less intimidating. I would also like to thank my colleagues for giving me valuable advice on my thought process while constructing this thesis, and never ending support when I wanted to discuss details about my work that were less than pertinent to their own lives. Mirian Mamani, a geologist by trade, was crucial for my mental health while conducting interviews in Lima. Gracias Mirian. A special thanks to Cynthia Rodriguez for being there every step of the way and for acting as a volunteer proofreader. I would also like to thank my French translators, Damien Caumient and Lisa Wright, without whom, this thesis would be missing an important perspective. And lastly, a special thank you to my brother, Blaze Smallwood, who came

10 x through, as he always has, and dedicated long hours (without compensation) to formatting this thesis. Blaze, I will never be able to thank you enough.

11 1 CHAPTER 1 INTRODUCTION In its simplest definition, biopiracy is the appropriation of biological resources by an inventor who claims to have added value to this natural resource, when in reality the medicinal or useful properties of that resource are based in traditional knowledge. The appropriation of the resource happens when an inventor applies for and is granted intellectual property protection over a novel, non-obvious and commercially applicable invention. Biopiracy has its roots in intellectual property, the convention for individual ownership of the plant resource or the traditional knowledge of that resource. This study attempts to explore the perceptions of the term biopiracy and the perceived effects from it. The molecular structures of plants will not be discussed, nor the specifics of patent law at neither national or universal level; nor will there be an in-depth discussion on the various governing bodies of intellectual property. The intention is to discuss the phenomenon of biopiracy in an interdisciplinary way which does not require one to be a patent attorney or a biologist to understand the topic. In order to better understand biopiracy, one must first understand the history of intellectual property and theories about the phenomenon of property ownership in general, as well as theories of intellectual property itself. One must also understand how the modern intellectual property system functions, and how various international organizations work together to promote intellectual property. To make the idea of biopiracy more tangible, various biopiracy cases from around the world will be presented.

12 2 Although biopiracy has been occurring for centuries, beginning with the exploitation of natural resources during the colonial period, biopiracy is a relatively new subject and does not have a plethora of literature associated with it. International trade became linked with international intellectual property rights in the late 1970s and early 1980s in the United States (Sell, 2003). In the 1990s, innovation became the focus of businesses that were looking to set themselves apart from the competition and create a competitive advantage for their firm (Dent, Fenwick, & Newitt, 2010). In the late 1980s, many life science firms developed a special interest in using traditional knowledge as their base for innovative pharmaceuticals. This phenomenon was demonstrated through the increasing bioprospecting contracts signed by indigenous groups in that time period (Hayden, 2003). Biopiracy is thus a somewhat new phenomenon that has resulted from a revitalized interest in basing new and inventive medicines on the traditional knowledge of indigenous groups. The researcher travelled to Lima, Peru to try and understand how exporters of natural plant products have been affected, if at all, by the phenomenon of biopiracy. In-depth interviews were conducted with ten exporters of natural plant products, in order to discover if their businesses are affected by biopiracy. The attempt was then made to discover how the exporters choose to understand the question of biopiracy, how their business may be affected, and how they understand and utilize the term biopiracy. Along with exporters of natural plant products, I also interviewed government affiliated workers who are actively fighting biopiracy to find out what process they use to protect Peru as a nation state from the phenomenon. In the chapters to come, the reader will share the researcher s journey in learning about biopiracy, how it functions and how it is appropriated and defended against in Peru.

13 3 This study is meant to describe the current flaws in the patent system to policy makers, so they may take action to prevent future cases of biopiracy. Intellectual property and biopiracy are illustrated in a way that assumes the reader has no background in the subject, so that future policy makers may become cognizant of the subject matter.

14 4 CHAPTER 2 LITERATURE REVIEW In the United States there are four main types of protection for intellectual property: copyright law, trademark law, trade secret law and patent law. Attorney Richard Stim (2007) makes clear that copyrights are granted to creative tangible and original works, such as books or films. Copyright protects the owner from unauthorized use of a work, such as the distribution or sale thereof, but does not protect the ideas that are expressed within that work. Trademarks are protection for a distinctive word, phrase, logo, [or] graphic symbol, but can also include other nonfunctional but distinctive aspects of a product or service that tend to promote and distinguish it in the marketplace, such as shapes, letters, numbers, sounds, smells or colors (Stim, 2007, p. 344). Trademarks are typically used by businesses so that what distinguishes them or their products is not used by a business in a similar trade, thereby preventing a competitor from using a business highly recognizable logo, graphic symbol, or one of the other aforementioned trademarkable expressions to sell their own products. Information that has commercial value and has been kept undisclosed from competitors is considered a trade secret. Material which often qualifies as trade secrets are: unpatented inventions, customer lists, and processes and techniques used within a business (Stim, 2007, p. 486). The United States Patent and Trademark Office (USPTO), founded in 1802, grants a patent to an inventor and ensures a monopoly for a limited amount of time, depending on the type of patent granted. Utility patents are granted for a process, a machine, a manufacture, a

15 5 composition of matter, or an improvement of an existing idea (Stim, 2007, p.14), and its duration is seventeen to eighteen years. Design patents are new and original designs that do not serve or improve the functionality of the product and last for fourteen years. Plant patents allow the owner twenty years of protection of their asexually or sexually reproducible plants (Stim, 2007), and are based on the US Plant Patent Act of 1930, prior to which plants and other organisms were regarded as common property (Tupper, 2009). The European Patent Office (EPO) established in 1977, does not allow for genetically modified plant varieties, but article 53(b), does allow for plants to be patented as long as the specific variety is not individually claimed (as cited in Rajotte & Tansey, 2008, p. 39). Sangeeta Udgaonkar explains in her work The Recording of Traditional Knowledge: Will it Prevent Bio-piracy, (2002) that three fundamental conditions need to be met in order for a patent to be granted in most jurisdictions around the world: novelty, nonobviousness and utility. In order to prove that the invention is novel, the inventor must disclose prior work done in the field or prior art to show that the invention does not already exist. Udgaonkar (2002) highlights that only a small change in the existing prior art could constitute the novelty of an invention. The invention must also be non-obvious, which is tested by showing that the invention under scrutiny is something that a person working in the field would not have ordinarily done. The third condition that must be satisfied is utility, or demonstrating that the invention has an industrial use (Udgaonkar, 2002, p. 414). The philosophy behind the industrial sector s need to claim individual ownership of an intangible property will be discussed later in this chapter. First, however, it is necessary to understand the modern concept of what constitutes intellectual property and how nations interact internationally to coordinate this concept.

16 6 BACKGROUND AND HISTORY OF INTELLECTUAL PROPERTY The idea of intellectual property is a Western concept originating in Florence, Italy in Filippo Brunelleschi was granted exclusive rights to the Badalone, a sea vessel coated with iron which was intended to transport marble across Lake Arno. Brunelleschi would not allow the disclosure of the process of the invention for his vessel unless he was granted the exclusive right to commercialize it in the city of Florence. The city did grant Brunelleschi the exclusive right to commercialize his invention, even though the vessel failed and sank to the bottom of Lake Arno. From Florence, the patent system moved to Venice where a patent statute was granted on March 19, This statute gave protection to all inventions for a ten-year duration. The Venetian patent system also established punishment for violations of protected intellectual property, as well as a registry of patents granted by the city (Mgbeoji, 2006, p. 16). Although Venice had the first patent statute, England is credited with giving birth to the first copyright protection with the Act of Anne of 1709 (Drahos, 1996). While the notion of intellectual property is often deemed Western because of the concept of individual ownership of an intangible process or idea, or the copying of a work of art, there is evidence in Robert Lowie s anthropological work that property rights for intangible property were highly developed amongst the Andaman Islanders, the Kai, the Koryak and the Plains Indians. The distinction of intellectual property for Westerners is that these indigenous groups were more concerned about the transfer of rights rather than individual ownership (Drahos, 1996).

17 7 Intellectual Property in the United States As mentioned earlier, the USPTO was formed in 1802, nearly three hundred and thirty years after the first Venetian patent statute, but only a short period after the United States Constitution was ratified in 1788 (Malone, 2002). Graham Dutfield explains that the phenomenon of the intellectual property of seed did not become widespread in the United States until after westward expansion. Dutfield notes that, for almost all of human history, farming and crop improvement were carried out by the same people and in the same places, by farmers and indigenous peoples on their own land (as cited in Rajotte & Tansey, 2008, p. 27). Farmers would breed their own seed for a variety of reasons, which probably included higher yields, extreme weather resistance, or disease resistance. To encourage settlement in western lands, the USPTO and the US Department of Agriculture (USDA) supplied farmers with free seed packets for experimentation. Farmers used the seed provided for them along with seed brought to the United States by recent immigrants to create new breeds (as cited in Rajotte & Tansey, 2008, p. 29). Dutfield goes on to explain that by 1890, 596 US firms were commercially producing seed. Around the same time, a business association was formed by these commercial seed producers called the American Seed Trade Association (ASTA) that discouraged the US government from continuing to supply free seed to farmers. The US government responded by only donating common variety seed in the first two decades of the twentieth century, sending the more exotic varieties to government experimental programs and universities. Farmer involvement in plant breeding ceased shortly after the First World War when the US Secretary of Agriculture made the decision that the USDA would begin supporting research for the development of hybrids (as cited in Rajotte & Tansey, 2008, p. 30). Cary Fowler

18 8 (1994) asserts that because most farmers were no longer improving seeds themselves, the attraction of selecting and replanting was declining even before scientifically bred varieties became available (as cited in Rajotte & Tansey, 2008, p. 30). Thus, the production of food and seed was specialized and separated into the commercial farming industry and the commercial seed production industry. Intellectual Property in Europe European farmers, however, were not encouraged by their governments to create new seed varieties because farmers had already been developing seed to satisfy local needs and conditions for centuries. Formal experimentation with seed varieties occurred first by wealthy landowners and then by small family owned seed businesses in the second half of the nineteenth century. As in the United States, universities and public research institutions were breeding plant varieties in the early twentieth century. Great Britain and France focused their seed breeding in their tropical colonial territories, but as their territories became independent, Britain and France began to shift their efforts back to their respective motherlands. France subsequently became the second largest private sector for seed production in the world (as cited in Rajotte & Tansey, 2008, p. 31). The International Union for the Protection of New Varieties of Plants (UPOV) was created in Paris in 1961 with the intention of providing plant variety protection, a form of intellectual property (as cited in Rajotte & Tansey, 2008, p. 32). The UPOV Convention was ratified by three countries: the Netherlands, the United Kingdom and West Germany. The UPOV Convention was initiated by plant breeders to protect their intellectual property rights regarding the seeds that they produce. The UPOV Convention was meant to provide an alternative to the patent system, and as Dutfield explains, its workable IP (intellectual

19 9 property) protection would require a relaxation of the novelty and inventive step requirements so that varieties reflecting incremental improvements on existing ones (plant varieties) and [those] that were already known about could be nonetheless protected (as cited in Rajotte & Tansey, 2008, p. 33). Dutfield illustrates that the patent system and the UPOV Convention differ in that with UPOV plant variety protection, breeders are allowed to use protected varieties as an initial source of variation for the creation of new varieties and are able to then sell that new variety without permission of the original breeder. Plant variety protection (PVP) under the UPOV also does not require disclosures for prior art as with patents. The patent application process and its administration is more complex than that of PVP, and Dutfield relays that the complex patent process is undesirable for many smaller companies that do not have the financial resources to maintain the legal jurisdiction of their patents (as cited in Rajotte & Tansey, 2008). INTERNATIONAL TREATIES AND ORGANIZATIONS SUPPORTING INTELLECTUAL PROPERTY The Paris Convention of 1883 attempted to diminish discrimination against noncitizens applying for patents outside of their home country, to give priority filing to allow the inventor time to apply for patents in various countries while honoring the original date filed in the original member state and make the stipulation that a patent could not be revoked because the goods produced under the patent were imported from a second country (Kranakis, 2007, p. 672). Ed Kranakis (2007) illustrates that the Paris Convention of 1883 did not seek to establish criteria for novelty and inventiveness of an international patent

20 10 system, nor did it address territorial areas (i.e., nation states) where patents would be available. The Patent Cooperation Treaty (PCT) of 1978 seems to mirror the function of the Paris Convention of Members of the PCT are essentially given a priority filing grace period in all member countries, based on the date the original patent was filed (Pike, 2005). The principal differences are the amount of time the grace period allotted and the number of participating member countries. The initial participating countries of the Paris Convention of 1883 were Belgium, France, Italy, the Netherlands, Portugal, Serbia, Spain, Switzerland and, surprisingly, Brazil, Guatemala and El Salvador, with the priority deadline for first filing in any one of the aforementioned countries being six months (Kranakis, 2007). The PCT currently has 142 members (WIPO, 2011), with an eighteen-month grace period to file in the national patent offices of member states (Tustin, 2006). Under the PCT, members are required to submit applications in each desired country, while following the host countries rules for patentability as well as paying separate application fees for each country where the inventor chooses to submit an application (Pike, 2005). Paul Oldham (2006) notes that patents filed through the PCT, in theory, are meant to result in patent protection in all one hundred and forty-two member states, but that in practice, patent protection in all contracting states is extremely rare. The European Patent Convention (EPC) was largely motivated because of the approval of the PCT in 1970, and the recognition of the need to ease the burden of the overworked individual patent offices throughout Europe (Kranakis, 2007). The work of patent agents in European countries was being duplicated, because inventors were filing applications for the same invention in multiple countries. Individual European patent offices

21 11 saw the need to harmonize the prior art searches necessary to grant or deny a patent application. After much deliberation about which countries would be member states and how the EPC would function, it was signed in The patent system among the EPC member states would be Europeanized, meaning that the search and examination system for prior art would be standardized among member states. The Europeanized search system was modeled on Germany s strict examination and research method. As with the PCT, those seeking to apply for patents in several European countries would be required to pay the application fees as well as approval within each preferred European country and their respective patent office (Kranakis, 2007). Maria Julia Olivia explains the significance and function of the World Intellectual Property Organization (WIPO) in her article Promoting and Extending the Reach of Intellectual Property: The World Intellectual Property Organization (WIPO) (as cited in Rajotte & Tansey, 2008). WIPO, which is a UN Special Agency, connects back to the Paris Convention for the Protection of Industrial Property of 1883 and the Berne Convention for the Protection of Literary and Artistic Works of 1886, the first international attempts to protect IP. WIPO, founded in 1970, replaced the United International Bureau for the Protection of Intellectual Property (BIRIPI), which was created in 1893 to be the administrative body of the Paris and Berne conventions (as cited in Rajotte & Tansey, 2008). WIPO s various functions are to essentially harmonize IP on the international level. Functions that WIPO provides to reach this goal include but are not limited to: publishing information and studies on intellectual property rights (IPR) for any interested parties, administering international treaties, and providing assistance to governments in the area of IP implementation. Seventy-five percent of WIPO s funding is from the Patent Coopertaion

22 12 Treaty (PCT) and fifteen percent is generated from other private IPR systems. Proposed harmonizing rules on IPR are discussed within issue-specific WIPO sub-committees, while the actual governing body through which WIPO decisions are made is the WIPO General Assembly (as cited in Rajotte & Tansey, 2008). While the WIPO serves as a forum for discussion of IP and promotes international IP treaties between regions and countries, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which was passed as part of the Uruguay Round of the General Agreement on Trade and Tariffs (GATT), holds member countries accountable for providing IPR. Pedro Roffe reveals in his work, Bringing Minimum Global Intellectual Property Standards into Agriculture: The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), that IPR at the time of the 1883 Paris Convention and the 1886 Berne Convention was not tied to international trade (as cited in Rajotte & Tansey, 2008). Roffe goes on to clarify that it was not until the 1970s that developing countries, such as Africa and Asia, began to question the system of IPR under the Berne and Paris Conventions, including its relevance in developing countries for the dissemination of knowledge, access to advanced technologies and control of abuses of intellectual property by right holders (as cited in Rajotte & Tansey, 2008, p. 49). Roffe also notes that the general director of WIPO initiated a negotiating process from 1984 to 1991 for a patent law treaty under a committee of experts (as cited in Rajotte & Tansey, 2008). This international accordance treaty of IPR was proposed to its members at a diplomatic conference held in The Hague in Because of developing country opposition, the treaty was unsuccessful. A later, all-inclusive version of the IPR treaty was proposed to members of the World Trade Organization (WTO) during the Uruguay Round negotiation of

23 13 TRIPS. Roffe explains that the reason for the TRIPS agreement s success was because it was an all-inclusive agreement that forced members into ratification even if they were not in accord with all of its elements (as cited in Rajotte & Tansey, 2008, p. 50). Developed countries, such as the United States, saw a need to include IP sanctions in the General Agreement on Tarriffs and Trade (GATT), which was placed under the umbrella of the WTO in 1995, because from their perspective, intellectual property has a direct affect on trade. Developing countries took issue with this, however. Roffe writes that Brazil and India advocated for the developing countries; by arguing that the protection of IPRs was a non-gatt issue and that consequently it was outside the realm of trade negotiations and therefore had no place in the deliberations of the Preparatory Committee of the Ministerial Conference (as cited in Rajotte & Tansey, 2008, p. 50). The developing countries succeeded in their resistance to the inclusion of broader protection of IP standards by offering concessions to developing countries in areas such as agriculture and textiles as well as through threats of trade sanctions (as cited in Rajotte & Tansey, 2008). The difference between the TRIPS agreement and WIPO seems to be that where WIPO provides technical assistance and serves as a forum to promote international treaties and IPR, the TRIPS agreement enforces IPR through its sanctions and by tying those sanctions to trade. Under the TRIPS agreement, members are required to provide a minimum standard of IPR within their respective nation states. Member countries must have a system of enforcing the minimum IPR that they establish within their countries. The minimum IP requirements as outlined in the TRIPS agreement must provide that patents shall be available for products and processes, and patents rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or

24 locally produced (as cited in Rajotte & Tansey, 2008, p ), as well as providing IPR for a duration of no less than twenty years. If member countries do not provide the minimum requirement of IPR as well as its enforcement, as outlined in the TRIPS agreement, they are subjected to commercial retaliation in the form of trade sanctions by vested member states (as cited by Rajotte & Tansey, 2008). The most controversial article within the TRIPS agreement, as illustrated by Roffe, is Article 27.3(b). This controversy stems from the contradiction between allowing member states to exclude from patentability plants and animals if they so choose, while at the same time requiring that member states provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof (as cited in Rajotte & Tansey, 2008, p ). Susan Bragdon, Kathryn Garforth and John E. Haapala Jr. explain the opposition of developing countries to imposed IPR as manifest in The Convention on Biological Diversity (CBD) (as cited in Rajotte & Tansey, 2008). Bragdon et al. make known that the CBD was born after an ad hoc group of legal and technical experts within the United Nations Environment Programme (UNEP) met seven times negotiating what would result in the CBD. During the 1996 Earth Summit, the CBD was presented and signed by 156 countries (excluding the United States). The Convention contains three objectives as stated in Article 1: The conservation of biological diversity, the sustainable use of its components, and the fair and equitable sharing of the benefits arising out of the utilization of genetic resources, including by appropriate access to genetic resources and by appropriate transfer of relevant technologies, taking into account all rights over those resources and to technologies and by appropriate funding (as cited in Rajotte & Tansey, 2008, p. 85). 14

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