Background of the economic model

For the economic model behind the TRIPS PLUS ULTRA proposal, click here.

For the implications and characteristics of the model, click here.

a. General background of patents from an economic perspective.

“Even though the patent as an incentive system is far from being unanimously consented, there is an agreement on what its main down side is: deadweight loss. ‘Deadweight loss occurs when people are excluded from using the good even though their willingness to pay are higher than the marginal cost’. From an economic point of view there is a net social loss because the sale did not happened (this must be compensated by the appearance of the technology , but there is also an access problem. Stiglitz puts this in a necessary crude social context in regard to medicine: ‘To an economist, this disparity between price and production cost is simply an economic inefficiency; to an individual with AIDS or some other life-threatening disease, it is a matter of life and death'” (Taken from a paper at JIPEL; internal citations omitted).

B. General background of the TRIPS PLUS ULTRA Proposal.

“Weighing the length of the patent so that consumers with higher income on average have longer periods of protection is the proper solution for dealing with deadweight loss, without affecting the current global reward. (It is a proposal with a very heavy status quo bias, which is key to its political pragmatism.) This could be done only if the reward that innovators lose in one country through shorter periods is compensated by a longer period in another country. Under this proposal, limiting the time of the patent in poor countries reduces deadweight loss in those countries, evidently, but it also will increases that loss in the richest countries that will have to give longer periods of protection (the overall positive balance between the deadweight loss spared to the poor country and the one added to the rich shows its efficiency). The first and obvious justification for this is simply to create a global patent system that includes the proportionality principle found in law in general (taxes, for instance, are a classic example, but not the only one)”. (Taken from a paper at JIPEL; internal citations omitted; parenthetical explanations added).