John S. Gardner, a Senior Director of the White House Writers Group in Washington, D.C., and former General Counsel of USAID, is representing the Federalist Society this week at the Forty-third Assemblies of the Member States of the World Intellectual Property Organization, which is meeting from September 24 to October 3 in Geneva. The meetings are expected to be dominated by the proposed adoption of the "Development Agenda" of WIPO , a proposal from the US and Japan to reduce fees paid by WIPO customers under the Patent Cooperation Treaty, and continuing controversy over the tenure of WIPO Director General Idris (for a summary of this, please see Claudia Rosett's article on National Review Online from September 23). For further background on WIPO's development agenda, please click here. Please note that any quotations here are based on notes from the simultaneous translations provided by WIPO and do not represent a particular nation's official text except where indicated.

Forty-third Assemblies of the Member States of WIPO
September 24 - October 3, 2007

The morning session of the Assemblies was largely occupied with internal housekeeping matters, the most important of which was a debate on the “desk-to-desk” report on the human resources and financial needs of WIPO.  This had been prepared by PricewaterhouseCoopers (PwC) on a suggestion from the UN system’s Joint Assessment Unit. 

The study showed that between January 1997 and June 2003, total WIPO staff had increased from 759 to 1417, primarily because of “substantial new and increased activity, particularly in the areas of Development Cooperation and Information Technology, and the rapid expansion of registration activities in the PCT system.”  By December 2006, this figure had been reduced to 1249 (890 full-time staff and 359 temporary).  (All figures here are from the document WO/GA/34/14, at 3.)

The report was somewhat controversial, especially its occasionally sharp comments on WIPO’s culture and its proposal to consider outsourcing of functions such as translation.   Developed countries such as the U.S., Australia, Japan, Canada, and Switzerland largely welcomed both it and the Secretariat’s resolve to embrace and implement the recommendations of the report, commit to a program of management improvement, end the “culture of entitlement,” and increase transparency, particularly in the selection of managers.  The United Kingdom called for a meeting of interested member states to discuss these issues, and Russia noted that there were steps which could be taken immediately while increasing staff focused on regional activities.

In contrast, developing countries were critical of the report.  Brazil noted the need, with the adoption of the Development Agenda, to hire development economists and others specializing in development.  It further stated that it believed PwC did not understand WIPO’s status as an international organization rather than a private company and that the report’s conclusion of a lack of pride in the organization seemed to be contradicted by low staff turnover (other observers noted that low staff turnover could also be explained in part by generous benefits for staff.)  Brazil thought that the political and intergovernmental nature of WIPO explained PwC’s conclusion that WIPO does not have a performance-oriented culture.  While noting that the report was a useful tool which deserved study, Algeria broadly supported the Brazilian arguments, declaring that WIPO is “not a multinational enterprise, it is a multilateral enterprise”  and criticizing “even the notion of desk-to-desk” because in a multilateral organization, all elements are interactive rather than separate (however, it is important to remember that WIPO is sharply different from other UN organizations in that it is almost entirely (94%) funded by users, primarily from private industry; surely this should influence the culture and work habits of the organization.)  Nigeria explicitly criticized the idea that outsourcing could be “used to undermine the work of the permanent staff,” and China was concerned about outsourcing of language services.  Argentina also raised the concern about the impact on the implementation of the Development Agenda

For her part, the President of the WIPO Staff Council noted that the organization “need[s] a change in organizational culture, a change that needs to begin as soon as possible” – including “open competition for all managerial posts” selecting the right people.  She noted that “the level of absenteeism [highlighted in the PwC report] in our organization is regrettably an indication of the low morale of our staff” and said that “we need to restore a sense of integrity” in WIPO. 

In the end, the proposal was adopted; now the task shifts to the Secretariat for implementation, which developed countries in particular should follow closely.

In the afternoon, attention turned to another funding issue:  the proposal from the United States and Japan for a 15% reduction in filing and handling fees for filings under the PCT and Brazil’s counter-proposal for a reduction of 37.5% for nationals of developing countries.  By a very large margin, the U.S. and Japan are the two largest users of the Patent Cooperation Treaty system; together, they account for more than five times the number of patents as the next largest user of the system, Germany.  The U.S. and Japanese Patent offices also account for over half of the patents sent to them as receiving offices under the PCT. 

In the current biennium (2006-2007), there will be a surplus of 30.4 million Swiss francs (SFr) from PCT activities, while in the 2008-2009 biennium, the surplus is expected to grow to SFr 57.2 million.  In the opinion of the U.S. and Japan, this surplus far exceeds any legitimate cross-subsidization of other WIPO activities by the PCT process.  Currently 80% of WIPO’s funding comes from the PCT system, and 65% of these funds go to activities other than PCT work, including development cooperation.

The U.S. intervention pointed out that a reduction in fees could help attract more small and medium enterprises (SMEs) to use the PCT process.  It stated that WIPO’s budget should be based not only on available funds but on general good management practices; in this context, it is significant that WIPO’s budget had increased fivefold in 20 years and a fourfold increase in its staff.  The PwC study showed that 200 positions in the Secretariat were redundant and might not be necessary at all. Further, charts prepared by the Secretariat regarding the proposed reduction of fees were inaccurate because they assumed that all proposed spending would in fact occur, which was not the case.  Japan stated that it was time for WIPO to “respond to users’ voices” and reduce the fees.

In response, Brazil focused on the potential impact on developing countries.  It noted that WIPO was “about to commit at the highest level . . . to the adoption of the 45 recommendations on the WIPO Development Agenda to be implemented in a cross-cutting fashion” and thus had to be very careful about the budgetary impact of any fee reduction.  It stated that its proposal was necessary to benefit developing countries and address the current 9/1 gap between applications from developed and developing countries (which include China and Korea).  Further, the International Bureau of WIPO had informed Brazil that the benefits to users of any fee reduction would be “minimal”  – no more than 1% of total costs incurred by users seeking to obtain protection outside their jurisdiction (once one includes legal and other costs).

Algeria (representing the African Group) relied on a Secretariat estimate (which is challenged by the United States) that a fee reduction with implementation of the program budget would generate a deficit of 52 million SFr in the next biennium and call into question funding for a range of projects including supplementary funding for the WIPO Development Agenda, developing a new information technology platform for the Madrid system, and other activities.  This position was broadly supported by Colombia, China, Belize, Nigeria (whose delegate termed PCT fees an “effective weapon in terms of increasing resources for WIPO”), Cuba, Indonesia, Ecuador, and Kenya.

Poland and Ukraine supported a small reduction in fees but did not explicitly endorse the US/Japanese proposal; Portugal (representing the EU) stated that this issue merits an in-depth analysis from all Member States to look for a consensus.  In the meantime, EU Member States could consider a limited PCT fee reduction.  Switzerland, supported by Congo, favored a reduction of fees in principle but doubted that this was the time to make the reductions under either proposal, noting the implementation of the new International Public Sector Accounting Standards.

Barbados and Belize suggested that the current 75% reduction in fees for countries with a per capital income of less than $3000 should be expanded to other developing countries as well given the difficulties of achieving economies of scale and the higher production costs in these countries.

Deputy Director General Francis Gurry noted some questions about how the resolution of Brazil would work in practice.  What class of country would qualify for fee reduction?  As it is written, 39 countries would no longer qualify for the 75% reduction under the Brazilian proposal.  He also noted that patent holders may seek protection not only through the PCT process but through the Paris Union, so the reduction in the total costs to patent holders could be an important consideration.

The assembly agreed that there should be informal consultations to consider the resolutions and the additional proposal that fee reductions should be studied and postponed for now.  In response, Brazil announced that it is amending its resolution to provide for a 90% fee reduction instead of the current 75% and was intended to benefit all developing countries.

In short, this debate is another example of how the Development Agenda will change WIPO fundamentally.  In practice, this means that industry in the developed world – which provides the bulk of the fees under the PCT and therefore for WIPO – will pay for the implementation of the Development Agenda.  Of course, these users will still get the tremendous benefits of the PCT system, but not at levels that reflect anything like the actual costs or even the traditional share of WIPO’s budget that they have underwritten.  In the extreme case, industry users could even pay for activities that effectively undermine the current intellectual property system.

On a lighter note, Hong Kong, China has set up an exhibition in the WIPO building highlighting both “HK creativity” and the efforts the Special Administrative Region is making to combat piracy.  One screen in the exhibit shows a video, sponsored by Hong Kong and the State of California, showing both the actor Jackie Chan and the “Governator” Arnold Schwarzenegger riding motorcycles in action film fashion while delivering an anti-piracy message.  The car crash scene is good enough to tempt any IP pirates.