TTIP update: A Liberal in charge, and a new investor dispute proposal

Container Ship tradeYou can catch up with my previous pieces on TTIP here:

A new face at the negotiating table

It’s a few months since I last wrote here about the Transatlantic Trade and Investment Partnership (TTIP), a proposed trade and investment agreement currently being negotiated between the European Union and United States. It is Liberal Democrat party policy to support TTIP, so it is worth keeping up with developments in the negotiations.

Since my first post in July 2014, one of the most significant changes has been the replacement in November 2014 of Karel De Gucht as European Commissioner for Trade by Cecilia Malmström.

Malmström is a Swedish Liberal, who served as a member of the European Parliament between 1999 and 2006, and as Swedish Minister for European Affairs between 2006 and 2010. Chris Davies, the former MEP for the North West of England who served with her in the European Parliament, said of her recently: “She’s a mate, a damn good Liberal by British standards, and I trust her.”

In a recent speech in New York on Liberalism and free trade (which is well worth reading in full), Malmström had this to say about her view on the modern debate on trade:

Over recent decades, trade has changed. It’s not just about finished products any more. Trade and investment are part of the production process itself. And the most successful economies are those that connect to the global value chains that result from that. In this paradigm, the task of trade policy cannot be to maximise exports and minimise imports.

On top of this, the economic content of cross-border flows is changing. In the past, goods were far and away the most significant component. They are still vital today.

But services – from transport, to finance, to technical support – are increasingly important. The investments embodied in financial flows are also clearly crucial to the way countries interact with one another. The dramatic rise of the digital economy means that data flows also clearly need to be part of the equation. And we cannot forget that trade today also involves people moving across borders to provide services or support sales of goods. Are trade agreements adapted to this new reality? Not enough, I believe.

The second major challenge to trade policy is about legitimacy.

Despite the economic gains from trade, many people all over the world are concerned about it. In parts of Europe debates have grown particularly intense, but we are not alone.

These concerns are partly based on traditional protectionist fear of international competition. We do need to find better ways to support those who lose out from trade. But that cannot mean holding back benefits from society as a whole.

But today’s debates also reflect some new realities.

Trade negotiations today involve a much broader range of issues than taxes on imports at the border.

We live in societies governed by complex regulation to protect things like the environment, public health or consumer safety. These policies are vital. But they do have an impact on trade flows.

So to be effective, today’s trade deals must look at ways to make public policies like these more compatible with each other. That, however, creates a concern that standards may end up being lowered.

Beyond this, the global village means that we are all more aware of poor conditions for workers and the environmental footprint of exports. Consumers are rightly paying more attention to these issues. And they want to make sure that trade policy supports sustainable development and human rights, rather than representing a race to the bottom.

The state of negotiations

As I explained in more detail here, the negotiating teams from both sides of the Atlantic conduct week-long rounds of negotiation alternating between Brussels and the US. Because of delays last year arising out of public concerns about the proposed agreement, only four more rounds of negotiations have been concluded since my piece in July 2014, with the tenth round concluding in Brussels on 17 July (you can see a report from this last round here (pdf)). The 11th round will take place next month, apparently in Miami.

There is no fixed timetable for the conclusion of TTIP, but the parties hope to have a concluded agreement by the end of 2016.

Once the negotiations are concluded, the Commission will publish the text of the proposed agreement, which will then require ratification by each member of the Council of Europe, and the European Parliament. You can get an idea of what the draft will look like from the document published (pdf) after the conclusions of the negotiations on the EU-Canada free trade agreement (which has now been implemented).

Investor-state dispute resolution mechanisms

Opponents of TTIP have picked up in particular the concept of an “investor-state dispute settlement” (ISDS) as a danger of the proposed agreement. In short, such mechanisms allow for the resolution of disputes between private investors and nation states who are signatories to the agreement, for example where a state attempts to expropriate (take into public ownership) assets belonging to a private investor.

This particular opposition has always been somewhat odd, because the UK alone is already a party to over 90 agreements including such provisions, and the recently-concluded EU-Canada agreement mentioned above includes an ISDS mechanism, and met with virtually no public resistance.

A particularly mendacious line of opposition has sought to portray ISDS as a threat to the National Health Service: something I dealt with in detail here.

However, because of public concerns the European Commission have addressed ISDS directly and agreed a new proposal for an international Investment Court System following the European Parliament vote approving a report calling for a rethink of such provisions (the report can be read in full here).

The proposal would see the appointment of a first-instance tribunal made up of 15 judges who would be appointed jointly between the EU and US and include five EU nationals, five US nationals and five nationals from other countries. There is more in this guide:

These judges would be the only ones to hear disputes under TTIP. The judges would have very high technical and legal qualifications, comparable to those required for the members of permanent international courts such as the International Court of Justice and the WTO Appellate Body. Disputes under TTIP would be allocated randomly, so disputing parties would have no influence on which of the three judges will be hearing a particular case.

This is a fundamental change compared to the old ISDS system which operates on an ad hoc basis with arbitrators chosen by the disputing parties.

There would then be a 6-person appeal tribunal to hear appeals from this first-instance tribunal.

You can read a (39-page!) draft of the EU proposal for the new court system here (pdf).

The proposal of the Commission is still out for consultation and has not yet been agreed by the US, but will no doubt feature in the next round of negotiations in October.

There is no doubt that the Commission’s proposal is a significant improvement on previous ISDS mechanisms, bringing with it levels of transparency analogous to national justice systems, and a much more rigorous process for choosing members of the tribunals. It is not likely to satisfy those critics who see any proposal for a transnational dispute resolution mechanism (at least as it pertains to this agreement) as an unconscionable errosion of national sovereignty, but it is likely, I think, to placate the more nuanced concerns that a number of the EU members states had.

Transparency

One of the other consistent criticisms of TTIP is over a purported lack of transparency. Again this is an odd objection when set against the complete absence of outrage over any of the numerous other agreements that the EU has negotiated, and the fact that by any measure the TTIP negotiations have been the most transparent in history. I have already linked to numerous documents in this piece, and there are hundreds more on the websites of both the European Commission and the Office of the United States Trade Representative.

Here is what Cecilia Malmström had to say on the issue in her recent New York speech:

On regulatory issues in particular we need to be as transparent as possible to show that we have no intention of lowering standards. We need to explain what we are trying to do.That’s why the EU has published all our TTIP text proposals on these issues online. And why we may soon decide to extend that initiative more widely. TTIP is already the most transparent trade negotiation in history.

Transparency allows us to show that new economic opportunities don’t have to be at the expense of high quality regulation.

The best example is in pharmaceuticals. EU and US rules on the right way to manufacture medicines are the same. But we have separate systems to check whether companies follow them. As a result teams of inspectors spend days flying across the Atlantic and checking up on factories for no extra safety. It’s not lowering standards to get rid of waste like this.

What’s next?

The negotiating teams come together again in the United States next month for the 11th round of talks. Documents, press releases, details of events and speeches are posted on the Commission’s site regularly here. It will be particularly interesting to see how the talks develop over the Commission’s proposed new Investment Court System. It will also be worth watching out for the potential impact of the emerging VW emissions scandal on the talks.

* Nick Thornsby is a day editor at Lib Dem Voice.

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39 Comments

  • Simon McGrath 28th Sep '15 - 5:10pm

    Great to see Lib Dems spreading the truth on this as opposed to the extraordinary lies from 38 degrees and others

  • Doesn’t the anti TTIP campaign seem to have gone quiet post-election? It is almost as if it was just done to stir up FUD for the election.

  • Sad thing is many will not believe what is written here unless someone from another party / organisation posts it. I know out of all my left leaning friends that ttip is just another way for big business to dictate our laws.

    Not sure how we can get it published for what it is and seen by many from across the spectrum.

  • eccelente!

  • A most informative piece with good links. It is indeed a shame that there is so much ill-informed scare monger inf stuff out in cyberspace.
    Conspiracy theories are “sexier” than painstaking detailed negotiations conducted transparently in the best interests of the populations of all countries.
    How does the message get out without hysterical over reaction? Mainstream media seems rather quiet

  • Toby Matthews 28th Sep '15 - 9:04pm

    Good piece, but lacking coverage in a crucial area.

    As liberals, we can all agree that free trade is “a good thing”. But if the EU-Canada treaty is anything to go by (http://ec.europa.eu/trade/policy/in-focus/ceta/), there will be curbs on free trade. Specifically through the extension and strengthening of artificial property rights (IP). Intellectual Property rights thwart competition and are a government-bestowed privilege.

    Of course, many will accept that IP fetters trade and business, but agree it can be tolerated if it allows investment in research and the publication of technology. But most might say the pendulum has swung far too much in favour of IP, to the detriment of trade and citizens. For example, IP is the reason footballers are multi-millionaires and Bill Gates is a billionaire with an unassailable market position.

    It’s likely that most liberals would like weaker IP, and some may imagine a future without it. So an article on TTIP on LDV ought to address this issue, and the implications it has for slowing or stopping any liberalisation of IP to the benefit of the British citizen.

  • Eddie Sammon 28th Sep '15 - 9:55pm

    Toby Matthews says some liberals may imagine a future without Intellectual Property, which includes copyrights and patents.

    This would destroy the software industry for starters, the videogame industry, movie industry, severely damage the music industry and authors too.

    No IP whatsoever is not a liberal position, but a libertarian or anarchist one. Having said that, we do need to be sure that such rights are not too strong. The fine that the authors of Blurred Lines received recently for copying some of Marvin Gaye’s work seemed too big to me.

    Getting onto TTIP: it sounds good that there’s been some reforms. Initially even I was worried about its effects on democracy and I am generally pro business.

  • Little Jackie Paper 28th Sep '15 - 10:07pm

    ‘It is not likely to satisfy those critics who see any proposal for a transnational dispute resolution mechanism (at least as it pertains to this agreement) as an unconscionable errosion of national sovereignty’

    Well…national sovereignty wasn’t the issue per se really. At least not in my mind. The problem with TTIP is more or less the problem with lots of these international agreements. These are open-ended and look ripe for some creative lawyering and expansionism. It’s not about sovereignty, it’s about a near total lack of control over where these things end up. One of the better arguments against the EU is the open-ended nature of it has meant that what we have now is rather different to what we had. The more cynical term is policy laundering.

  • Toby Matthews 28th Sep '15 - 10:17pm

    Eddie Salmon: Thanks for your comment, but:
    “No IP whatsoever is not a liberal position, but a libertarian or anarchist one.”

    I assure you it is. Here is the Economist on the matter (which wanted patents abolished in the liberal 19th century): No IP whatsoever is not a liberal position, but a libertarian or anarchist one.

    Thanks for agreeing that it is an issue though.

  • Eddie Sammon 28th Sep '15 - 10:30pm

    No worries Toby. I’m less sure about patents, but copyrights particularly seem fair to me. Patents are probably necessary though, otherwise people will just keep their inventions internal. Anyway, worth listening to an expert discussion at some point.

  • Excessive intellectual property protection impedes creativity. Software patents are the best example of this, as they help sustain Micro$oft’s monopoly, and have led to the rise of that scourge of innovation, the patent troll.

    Excessive copyright protection is also a problem: a lot of modern copyright law is about sustaining the business model of the present legacy entertainment companies, rather than genuinely supporting artistic creativity. It should not be illegal to override DVD region codes, for example. The desired position of some in the entertainment industry, that every instance of a copyrighted recording should be tracked and accounted for, is neither achievable nor desirable: early drafts of the EU copyright directive would have outlawed web browsing. Unfortunately, while the European Parliament is starting to push back on excessive IP law, the Commission may be laundering it through trade negotiations, like it tried to do with ACTA.

  • Toby Matthews 28th Sep '15 - 11:00pm

    Oops,

    Apologies Eddie – I messed that comment up. I got your name and failed to link to the article:
    http://www.economist.com/node/21660559

  • Eddie Sammon: Excessive use of patents have become a serious problem recently. They are particularly inappropriate for software, where innovation is driven by competition not by patents, and copyright on the specific code is sufficient protection. We do not want a situation where software patents are smuggled into the EU via a trade agreement, either explicitly or via investor protection.

    Patent protection in traditional industries can also be problematic. One issue is “evergreening” of patents, where a company obtains continued protection on a product by making a minor modification and applying a new patent on this. Some countries have safeguards against this, but investor-protection clauses in trade agreements can be used to undermine such protection (there is a current case in Canada involving this).

    Another problem is the seizure of drugs in transit in the EU, between countries where the drugs are out of patent but where patent protection still applies in the EU. Under some interpretations of current EU law, they can be seized and confiscated even though they are not intended for the EU market. While this can (perhaps) be challenged under WTO rules, having it written into a trade agreement makes such challenges much more complicated, especially if ISDS tribunals are not sufficiently accountable.

  • Toby Matthews 28th Sep '15 - 11:03pm

    I’m having a nightmare tonight. I got your name *wrong*, for which I apologise. Would be nice to have an edit function here!

  • Conor McGovern 29th Sep '15 - 12:05am

    What’s liberal about letting global corporations dominate the world economy and concentrate power (preamble anyone?) in the name of free trade? What’s democratic about these corporations punishing governments for not pursuing policies in their interests? TTIP is not in our interests as a party, particularly as a party seeking to be the liberal voice for Britain, nor is it in the interest of the people in general. You can push as many TTIP articles as you like Mr Thornsby, but it can’t change the facts.

  • Conor McGovern 29th Sep '15 - 12:09am

    Free trade requires open, competitive markets and a strategic, reforming, regulatory state. How many of these are provided with TTIP?

  • Name things what they are: IP rights are monopoly rights. It may be possible to defend them under certain circumstances, for limited uses and limited times. But to elevate indefinite monopolies to a moral imperative is hardly liberal. Liberalism requires a sensible weighing of private rights and the public good; there are many cases where unlimited IP monopolies not only fail to reward creativity and innovation, but actively militate against those very principles.

  • Nick – You say that support of TTIP is Liberal Democrat Party policy. I seem to have missed this. Please can you provide a few more details about when and how this was adopted?

    Also, are we in favour of TTIP, no matter the terms and conditions in which it ends up? I don´t think I am.

  • I’m also interested to hear it is party policy to support TTIP – I don’t think this is true, as I wouldn’t want to support OR oppose something that hasn’t been formed yet. A quick google gives:

    http://www.libdems.org.uk/nick-clegg-ttip
    https://home.38degrees.org.uk/2014/05/21/where-uk-political-parties-stand-on-issues-important-to-38-degrees/

    The main concern I have over TTIP is the fact ISDS aren’t bi-directional: as I understand it, the private entity can sue the state, but the reverse isn’t true. Is this still the case does anyone know?

  • It is only because of pressure from campaign groups that the Commission was forced to rethink the ISDS mechanism in TTIP. It may all come to nought anyway if CETA is ratified with ISDS as originally written, as it just means that any US company that wants to challenge any EU law could just create a Canadian subsidiary. Simon McGrath seems to think that the negotiations should have been beyond public scrutiny, in which case TTIP would also contain an unreconstructed ISDS.

    Incidentally, the Canadian patent case I mentioned above is this one:
    http://infojustice.org/archives/30694
    A Canadian court invalidated two drug patents on grounds of lack of invention. Essentially, the patents are “evergreening” patents on drugs that should be out of patent. Now the US pharmaceuticals corporation that filed the patents is using NAFTA to challenge this court ruling, which was made under Canada’s existing patent law, This is the sort of thing we do not want happening.

  • Nick T Nick Thornsby 29th Sep '15 - 1:06pm

    Lib Dem policy calls on the government to:

    “Increase trading opportunities by working in the EU to ensure that the success of the Transatlantic Trade and Investment Partnership, doing everything possible to revive the World Trade Organisation led Doha Development Round and further integrating the EU services market.”

    From here (page 38) http://d3n8a8pro7vhmx.cloudfront.net/libdems/pages/2017/attachments/original/1393946061/2013_Glasgow_Conference_Report.pdf?1393946061

  • “to ensure that the success of the Transatlantic Trade and Investment Partnership”

    So the LibDem policy is to support a process that will arrive at a document, that currently does not have a definitive content. Given from press reports how many of the EU treaties were signed but who’s substantive detail was only added later, this would seem par for the course…

  • ” Excessive use of patents have become a serious problem recently. They are particularly inappropriate for software, where innovation is driven by competition not by patents, and copyright on the specific code is sufficient protection. We do not want a situation where software patents are smuggled into the EU via a trade agreement, either explicitly or via investor protection.”

    The real issue we are seeing with “software method” patents, is that firstly the USPTO isn’t doing sufficient due diligence, largely leaving this up to the courts. So we have seen companies making patent infringement claims, in which it has generally been cheaper for the ‘victim’ to come to a licencing agreement or close the business than to challenge the patent. So many “software patents” remain unchallenged, even though there is either evidence of prior art or the patent isn’t for an invention but for an idea. TTIP enables US companies to use advantage the USPTO’s practises givens them and extend the their predatory practises oversea’s, specifically to the EU where we operate a much higher bar for “software method” patents…

  • Philip Walker 29th Sep '15 - 2:07pm

    > The main concern I have over TTIP is the fact ISDS aren’t bi-directional: as I understand it, the private entity can sue the state, but the reverse isn’t true. Is this still the case does anyone know?

    It is considerably easier for a state to obtain a ruling against a firm in its domestic courts than it is for a firm to obtain a ruling against the state in those same courts, not least because the state has the option of changing the law retrospectively. Of course, this would breach the principle of the rule of law: and it is against such breaches that the ISDS is designed. Are you suggesting that the UK should see it as being in its interests to suspend the rule of law?

  • From Cecilia Malmström’s speech quoted in the article.

    “The best example is in pharmaceuticals. EU and US rules on the right way to manufacture medicines are the same. But we have separate systems to check whether companies follow them. As a result teams of inspectors spend days flying across the Atlantic and checking up on factories for no extra safety. It’s not lowering standards to get rid of waste like this.”

    The VW ‘defeat devices’ would NOT have been caught on that basis. ‘Regulatory capture’ is regrettably prevalent (it’s human nature) so relying on a single system in a distant country is highly risky; it comes with the obvious danger of concert parties comprising companies, government and regulators to promote well-connected local interests. Thus, in the VW case it is widely alleged that multiple governments knew about it but chose not to say anything. Thank heavens for that California regulator who did his job when so many didn’t.

    If differences in the EU and US approaches to manufacturing medicines are indeed a problem then by all means set up a working party to identify best practice and both adopt that. Going down the TTIP route is using a sledgehammer to crack a bowlful of very different nuts.

  • Stephen Hesketh 29th Sep '15 - 5:36pm

    “The 11th round will take place next month, apparently in Miami. There is no fixed timetable for the conclusion of TTIP, but the parties hope to have a concluded agreement by the end of 2016.”

    Amazing they can find so much to discuss in a treaty so clearly designed to benefit ordinary people.

  • Rob Parsons 29th Sep '15 - 5:38pm

    “today’s trade deals must look at ways to make public policies like these more compatible with each other. That, however, creates a concern that standards may end up being lowered.” I notice that she offer no solution to that concern, which is real and soundly based.

    You say again, as you’ve said before, that the UK has never suffered from ISDS. that is largely becasue UK government has been so blindly favourable to corporate interests in the last thirty years that it has not been necessary. How else do we keep awrding contracts to G4S and Serco despite their persistent incompetence and cheating. ISDS has been used many times to challenge changes in government policy, such as Philip Morris’s case against the Australian government. If UK government policy changes against the interests of corporations like G4S and Serco, they will use it like a shot. (And the new version is not much better, despite the heavy trailing of it.)

    This will, despite your assertions, cause difficulties for the NHS. Any move that threatens to take business away from the private sector will be challenged. And you nowhere deal with the chilling effect of the possibility of litigation on decision making. So please don’t say the legitimate and soundly based concerns are mendacious – it is not good to say that people are liars simply because they disagree with you.

    Health services are part of the field of agreement, partly because the EU is keen to get into American markets. there will be a quid pro qo – American companies getting into EU heatlh markets. We have had a lot of bland assurances but logic suggests that those assurances will be undermined somewhere along the way.

    As you have done before, you make a virtue of the transparency of these talks. Such transparency as exists has only been won grudgingly and with immense difficulty by massive and persistent campaigning from citizens’ organisations (of which the LibDems ought to be one, but you’d clearly rather we weren’t). if it really is transparent, I have no doubt that you will be able to point me to the unredacted minutes of all the meetings that have been held between EU representatives and corporate lobbyists. Can you?

  • In her speech Cecilia Malmström says,

    “Over recent decades, trade has changed. It’s not just about finished products any more. Trade and investment are part of the production process itself.” (P2), and later, giving a list of reasons people are made better off by trade, says “We are better off because companies can use imported components to become more efficient – meaning they can creating more jobs at home over time.” (P3)

    She’s partly right. Much of the huge growth in international trade of recent decades is indeed between subsidiaries of multinationals making components in one country then shipping them to another or final assembly. But when she says that makes them more “efficient” what she means is that it can lower short-run costs if energy or labour or other important factor of production is lower overseas. So, the usual effect is a direct loss of jobs which are offshored. Then there is an indirect effect as wages are forced down and a further macroeconomic effect as the economy loses spending power and welfare costs rise. The winners are of course big company directors and senior supervisory staff – as profits increase they can award themselves fat bonuses – hence in part increasing inequality and also a very vociferous lobby that loves this approach.

    In the longer-run it’s not so profitable. Much innovation depends on complex supply chains (Vince Cable emphasised this while at BISS) plus intimate knowledge of manufacturing so it tends to falter. For instance, just a few years we were being promised that the future would be us designing stuff which the Chinese would make cheaply. Now we are talking about buying their high speed trains and reactors because we can’t make them. They have both the technology and the jobs and it’s not clear how we can pay for all their goodies.

  • Rob Parsons – I think you will look in vain for transparency. The report from the last round of the negotiations (linked above by Nick Thornsby) says nothing of substance over a meagre 1,508 words – considerably shorter than this article which runs to 1, 625 words. (BTW – does this represent a new length guideline for LDV that I missed?)

    As for unredacted contacts with corporate lobbyists, dream on.

    http://corporateeurope.org/international-trade/2015/08/black-out-tobaccos-access-eu-trade-talks-eerie-indication-ttip-threat

  • John Farrand-Rogers 29th Sep '15 - 11:00pm

    Thanks, Nick, for the reference to two lines of party policy. However, when the Glasgow resolution calls on the Coañition Government to ““Increase trading opportunities by working in the EU to ensure that the success of the Transatlantic Trade and Investment Partnership”, it is a bit unclear about what constitutes “success”.

    If it stands up for ordinary people against the bullying of large Aerican corporations, that is one thing. If it meekly caves in to them, that is quite another.

    It seems to me that our support fo the TTIP is similar to our support for Remain in the EU Referendum. We need to see the details before we make up our minds.

  • Tsar Nicholas 29th Sep '15 - 11:54pm

    When are we going to be allowed to see the full text of the proposed treaty? Surely if they have nothing to hide, they have nothing to fear.

  • In her speech Cecilia Malmström approvingly name-checks David Ricardo whose theory of ‘Comparative Advantage’ is often taken to establish the superiority of free trade. Yet it is only theory and, strangely, she doesn’t cite any work examining the actual outcomes of the dozens of free trade agreements concluded in recent decades. Evidence-led policy anyone?

    Ricardo’s theory was published in 1817, almost two centuries ago and more than a decade before Stephenson’s Rocket was built. Since then it been exposed as a myth, one that suited the vested interests of Victorian Britain to be sure, but a myth nevertheless. It is an economic version of creationism.

    http://economyincrisis.org/content/ten-problems-free-trade

    As for actual studies, they DO exist; under the linked report calling for a rethink on ISDS provisions after a long list of “having regard to …” there is this under item I:

    “it is difficult to assess the real impact of TTIP on both the EU and US economies and to predict while negotiations are ongoing and studies show contradictory results

    Translation: ‘studies show contradictory results’ mean that they don’t support the case for TTIP and ‘difficult … to predict while negotiations are ongoing’ means they are flying blind.

    Perhaps I can help. The studies the EU has quoted mostly (all?) track back to work by the CEPR who used a ‘computable general equilibrium’ model of the economy. To put that in context that means the 1,700 people about to be made redundant from the Redcar steelworks (+ others locally who will lose their jobs) will all be instantly retrained as programmers, engineers, teachers etc. and start new jobs on Monday in the thriving local economy. Despite such rosy assumptions CEPR only found benefits on the scale of a rounding error.

    A model incorporating more sensible assumption yields very different results. Any gains in EU-US trade will be at the expense of intra-EU trade; across Europe there will be big losses in exports, GDP and government revenues but inequality would increase. In Britain workers would lose Euros 4,200 each.

    http://deutsche-wirtschafts-nachrichten.de/wp-content/uploads/2014/11/TTIP-Studie-Tufts.pdf

    No wonder they’re not keen on transparency.

  • Laurence Cox 30th Sep '15 - 2:24pm

    I suspect that people posting here who are anti-patents do not really understand the reason for them. Before patents, all innovations were trade secrets. This had two possible consequences, firstly the originator might die before passing on the innovation, with the result that the innovation was lost; secondly if someone else either independently or by stealing information could reproduce the innovation, then the originator had no recourse. The idea of the patent was to provide the originator with a monopoly for a limited period (which is 20 years these days), in return for making the details of the innovation public. Thus the patent avoided both of these possible consequences and this was understood even as early as the 17th Century (1618).

    Now if we look at patents in the present day, we can see that their existence protects both individual inventors (as originally conceived by the patents legislation) and small and medium sized companies against large, particularly multi-national, companies. I have personal experience of this being a co-inventor of a novel scientific instrument while working for an SME and as we were just bringing it to market we were faced with a multi-national company threatening to sell their instrument in competition. Without patent protection we would have been wiped out, but because of it we were able to fight them off. So, get rid of patents and SMEs and individual inventors will have no protection against predatory multi-nationals and so will have no incentive to innovate. The patent, incidentally, expired some years ago and the principle behind it is now being used by a number of companies as a feature of their instruments.

    ‘Evergreening’ is something that should be dealt with by modification of patent law through international conventions, not by throwing out patent protection altogether.

  • Laurence Cox 30th Sep '15 - 2:26pm

    Having had my original comment thrown out by LDV (for being too long!) here is the rest of what I wrote:
    Now copyright, although lumped together with patents and design rights in the term intellectual property, is really a different case. Here the usual terms for literary works are the lifetime of the author plus 50 or 70 years, and countries have different rules for literary works, photographs, films, etc. This is a real mess that needs to be cleared up and there is no good reason for anything other than a fixed term from publication, say 20 years as for patents. Were J K Rowling to die tomorrow, her heirs would still be entitled to income from ‘Harry Potter’ in the year 2085. A fixed term still means that the author benefits from their work, but limits the length of time for which this benefit applies.

  • Can people refrain from insulting G4S on here please. The public back corporations like G4S who provide a good cost effective and popular service.

    When people insult G4S, they insult the British public who want value for money and private sector efficiency, rather than hard left unionised state run public services.

  • Alex Macfie 30th Sep '15 - 4:07pm

    @Laurence Cox: No-one was arguing against patents per se; certainly not me. What I did say was that there are problems with the system as it currently works. The issue of “evergreening” came up because a Canadian court overturned a couple of patents on minor modifications of a drug, which were filed to “evergreen” the original patent protection. Consequently, the drug company that filed the patents is suing Canada under the ISDS terms of NAFTA, even though the court interpreted Canadian patent law, which has safeguards against evergreening, in a non-discriminatory way.

    I also wrote that patents are inappropriate for software. I am reluctant to go off on a tangent about this, as it is easy to do, so suffice it to say that the reason is that as a software developer, you don’t really “invent” in the way someone invents a new machine. The hard work is not coming up with ideas for software, it is putting them into practice in computer code, in which one person’s solution will look completely different from another’s. In other words, independent invention is a normal part of the process of software development. The specific code is sufficiently protected by copyright. The big threat in software development to small companies is not in bigger companies “stealing” your ideas (they still have to write their own code, and the original company also has first-mover advantage), but multinationals stockpiling patents on obvious software ideas then threatening to sue smaller companies over them (I say “threaten” because usually they don’t have to carry out their threats, as these are sufficient to force companies to settle, even over dubious patents). This link is an example of how this works:
    http://www.forbes.com/asap/2002/0624/044.html
    In that case it was IBM, but Microsoft does this as well.
    Or, if it isn’t one of the established tech companies, it’s a patent troll: a company that produces nothing except patents and whose sole business is filing lawsuits. This is what happens when it is too easy to file patents.

  • Rob Parsons 30th Sep '15 - 6:02pm

    Stimpson, it’s hard to tell if you’re being serious, but just in case you are, G4S – the company that completely botched its contract to provide security for the Olympics in 2012, and in 2014 reimbursed the government to the tune of £109 million because of overcharging on its offender tagging programme. To name but two incidents. Value for money? Efficiency? You’re having a laugh.

  • Stimpson, stop winding us all up, pl-e-e-a-s-e.

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