The Characteristics of the Activity Involved
According to the comprehensive model of compliance, the characteristics of the activity involved may also affect whether compliance with the international accord can be achieved. There are four elements of the activity which need to be considered: the number of actors involved; the effect of economic incentives; the role of MNCs in the activity; and the concentration of the activity in major countries. These elements will now be considered for the specific activity with which the TRIPS Agreement is concerned to resolve, namely intellectual property infringements. The first element of intellectual property infringements that may be influential in ensuring compliance with the TRIPS Agreement is the number of actors involved in the activity. Clearly, in the case of piracy and counterfeiting, large numbers of actors are involved worldwide. However, it is equally clear that it is difficult to estimate clearly the number of actors involved due to the opaque nature of the activity. Furthermore, intellectual property infringements are a problem worldwide and are not just restricted to a few developing countries. Thus, the number of actors involved in the activity is large and this may act against compliance. As a large number of actors are involved in counterfeiting and piracy, dealing with this activity is clearly not straightforward as it follows the “conventional wisdom that the smaller the number of actors involved in the activity, the easier it is to regulate it” (Jacobson and Brown Weiss 1998, p. 521).
The second element of intellectual property infringements which needs to be considered is the possible effect of economic incentives. In this case, the effect of economic incentives on the levels of intellectual property infringements needs to be considered. Undoubtedly, economic incentives are highly relevant to the specific activity of IP infringements, as economic considerations are the primary factor behind a great deal of the existing global infringements. Clearly, economic incentives may play a large role in intellectual property infringements in general; for an individual company, infringing activities offer easy profits in the short term which may seem more attractive than unknown long-term benefits from complying with intellectual property accords. The economic benefits of TRIPS compliance may be easier to appreciate on a macroeconomic level, where stronger intellectual property protection may encourage greater innovation (Maskus 2002, p. 7).
The third element of intellectual property infringements that may be important to the likelihood or otherwise of compliance with the TRIPS Agreement is the role of MNCs in the activity. The companies actually committing the majority of intellectual property infringements do not tend to be MNCs, but rather smaller, less visible enterprises. In the context of intellectual property rights, MNCs do have a strong role to play, as there is a growing recognition of the value of intangible assets to a company. However, it is only in the past couple of decades that this recognition has been widespread amongst MNCs.
Therefore, the role MNCs played in intellectual property protection was limited until the 1980s. Once MNCs did begin to seek to protect their rights, they swiftly formed a powerful lobby group, in order to pressurise governments globally to seek stronger international IP standards. This is clearly evidenced in the Uruguay Round of GATT negotiations, when, for the first time, the influence of the MNCs was notable.6 However, this pressure from the MNCs may not necessarily be seen as a positive force; on the contrary, MNCs are sometimes perceived as just seeking to protect their own interests with little or no regard to the economic development of the developing countries. Hence, the role of MNCs in the field of intellectual property is a significant driver towards stronger protection, but may not be a wholly positive factor in encouraging compliance amongst smaller developing WTO members as vocal MNCs can cause local hostility.
The final element of the specific activity that should be taken into account as an influence on potential TRIPS compliance is the concentration of the activity in major countries. This factor is important because it could affect the concentration of pressure to comply; if the activity is limited geographically, pressure to comply is less likely to be universal. In the case of intellectual property infringements, the activity is certainly not only limited to a handful of countries. On the contrary, infringements are a global phenomenon, although rates of IP infringements do vary from country to country. For example, the Global Software Piracy Study conducted annually by the Business Software Alliance shows marked variation in levels of software piracy worldwide (Business Software Alliance 2014). The highest rate of unlicensed PC software installations observed was in the Asia-Pacific region at an average of 62%, while the lowest was in North America where only 19% of software was unlicensed. China had an overall rate of 74% which whilst high, represented a modest drop of 3% from the previous survey in 2011 (Business Software Alliance 2014, p. 7). Therefore, it is obvious that even the most developed countries suffer from intellectual property infringements and this activity is not solely concentrated in a few developing countries. However, the worst rates of infringements are to be found in the developing countries, predominantly in the Asia-Pacific region.
In addition to the overall number of countries involved in infringing activities, it is also relevant to consider the extent of the activity in one country as a proportion of the total. In other words, it may be more efficient to focus on one country which is responsible for a large proportion of the overall activity rather than several smaller countries each responsible for a small proportion of the total. In fact, this may explain why China is so consistently the focus of scrutiny regarding its intellectual property protection; as China’s contribution to total IP infringements is so large, if compliance in China can be achieved, this would make a significant contribution towards decreasing the total amount of infringing activity. Conversely, this constant pressure on China may contribute to China’s perception of unequal treatment and actually discourage greater compliance with TRIPS obligations. Overall, the location of an infringing activity may be of relevance to compliance for two reasons. Firstly, as infringements are not limited to just a few countries, the problem is more difficult to tackle. Secondly, certain countries may be responsible for a larger proportion of the infringing activity overall and thus more attention may be devoted to those countries, although this attention may create resentment.
In general, the characteristics of the activity involved in the TRIPS Agreement, intellectual property infringements, may play a part in affecting the implementation of and compliance with the Agreement. The most significant of these is the economic incentives involved in infringing activities and the discouraging effect that they may have on compliance with TRIPS obligations by offering individuals and private companies easy profits in the short term. MNCs also play a role in lobbying for stronger intellectual property protection. Although they played a large part in the negotiations regarding the drafting of the TRIPS Agreement, their role in the IP field today is not entirely welcome. In fact, pressure from MNCs may discourage implementation of and compliance with TRIPS obligations in some developing countries. Finally, both the number of actors and the number of countries involved in intellectual property infringements may also discourage compliance with the TRIPS Agreement. As both a large number of actors and a large number of countries are involved, it may be difficult to assess compliance reliably and there may be scope for individual enterprises and countries to not do as much as they should.