International Coercion and the Diffusion of Regulatory Data Protection

• Author: Gabriel J. Michael
• Published date: 01 March 2016
• DOI: http://doi.org/10.1111/jwip.12051
• Date: 01 March 2016

International Coercion and the Diffusion of

Regulatory Data Protection

Gabriel J. Michael

Information Society Project, Yale Law School

Prior to 1990, regulatory da ta protection existed onl y in 14 highly developed count ries. Since then, 60 addition al

countries have adopted reg ulatory data protection. New a dopters include a large number of countries with no

domestic pharmaceutical in dustry. These countries wil l face higher pharmaceutical prices as a result of offering

regulatory data protectio n. Why would countries that stand to lose from of fering regulatory data protection choose

to do so? The author argues that the global diffusion of re gulatory data protection can b e directly traced to

international coercion from the United States and the Eur opean Union (EU). The US coerces wea ker trading

partners into adopting regu latory data protection by requi ring such protection as a condit ion of concluding trade

agreements or bilateral int ellectual property agreements. Meanwhile, th e EU coerces applicants by demanding that

they adopt such rights during EU acce ssion negotiations, on average four years prior to accession. H et ested these

claims using a multi-method research design that combines event history an alysis with evidence from lea ked US

diplomatic cables and public EU accession documents. His findings demonstr ate that coercive diffusion ca n take

place by means of threats, and th at countries often actively opp ose adopting intellectual pr operty rights, but

nevertheless adopt them du e to international coercion.

Keywords TRIPS; bilateralism; pharmaceuticals; intellectual property

Over the past two decades, scores of countries around the world have adopted new and unusual intellectual

property rights. Separate from the traditional areas of copyright, patent and trademark, new sui generis

rights protect exotic subject matter, such as databases, plant varieties or the layout of integrated circuits.

Often the countries adopting these new protections have no clear reason to do so. They have no domestic

industries that stand to benefit from new protections, and domestic policymakers often oppose their

introduction. This is especially true of the intellectual property rights protecting the clinical trial data that

pharmaceutical firms submit to regulatory authorities (hereafter regulatory data protection). These data

document the safety and efficacy of pharmaceutical products. Adopting intellectual property rights that

restrict access to these data allows pharmaceutical firms to delay competition from generic manufacturers,

increasing the price of medicine and further burdening public health systems throughout the world.

Prior to 1990, regulatory data protection existed only in 14 highly developed countries. Since then, 60

additional countries have adopted regulatory data protection. The large number of countries adopting this

new intellectual property right poses a puzzle. The new adopters include a large number of countries with

no domestic pharmaceutical industry whatsoever, and these countries will face higher pharmaceutical

prices as a result of offering regulatory data protection. Why would countries that stand to lose from

offering regulatory data protection choose to do so?

This article argues that the global diffusion of regulatory data protection can be directly traced to

international coercion from the United States and the European Union. Although regulatory data

protection increases pharmaceutical prices and harms public health, it benefits large pharmaceutical firms

based in the United States and EU member states (El-Said and El-Said, 2007; Malpani, 2009; Shaffer and

Brenner, 2009). The United States coerces weaker trading partners into adopting regulatory data protection

by requiring such protection as a condition of concluding trade or bilateral intellectual property

2©2016 John Wiley & Sons Ltd

The Journal of World Intellectual Property (2016) Vol. 19, no. 1–2, pp. 2–27

doi: 10.1111/jwip.12051

agreements. Meanwhile, the EU coerces applicants by demanding that they adopt such rights during EU

accession negotiations, on average four years prior to accession.

I test these claims using a multi-method research design that combines event history analysis with

detailed evidence gleaned from leaked US diplomatic cables and public EU accession documents. The

statistical analysis finds strong correlations between the decision of a country to sign a trade agreement

with the United States or apply for EU membership and an increased likelihood of adopting regulatory data

protection. These correlations persist even when controlling for a number of key political and economic

variables. Furthermore, I find no support for explanations of diffusion pointing to the role of international

organizations, learning or mimicry. Leaked diplomatic cables confirm that countries negotiating trade

agreements with the United States actively opposed adopting regulatory data protection but ultimately

caved to US pressure. Likewise, EU accession documents indicate that newly acceding members sought to

delay adopting regulatory data protection as long as possible.

My findings have significance for at least two literatures. First, my research demonstrates that coercive

diffusion can take place by means of threats. Powerful states can threaten to withhold or delay promised

benefits or remove existing benefits, unless a target state adopts a desired policy. This can happen in a

variety of negotiations, such as bilateral trade agreement negotiations, EU accession negotiations, and the

WTO accession process. Over the past few decades, international economic negotiations have experienced

a dramatic shift from the multilateral forum of the GATT/WTO to a plethora of regional, plurilateral and

bilateral agreements (Mansfield and Pevehouse, 2013; Menon, 2007). Yet within the diffusion literature,

the focus has been on accounting for the diffusion of the agreements themselves, rather than asking

whether trade agreements and other rapidly proliferating types of agreements might serve as new conduits

for coercion.

1

While the sanctions literature has come to view threats as a frequent and effective form of coercion in

the service of foreign policy goals, the diffusion literature largely focuses on other forms of coercion.

2

These other forms of coercion include conditionality imposed by international financial institutions and

federal governments; hierarchical coercion imposed by supranational or national governments on lower

governments; “soft coercion”in the form of go-it-alone power, first-mover advantages or successful

policies serving as templates for second-comers; and constructivist forms of power exerted through

persuasion, hegemonic ideas or the ability of normative leaders to shape states’behavior.

3

Some scholars

go so far as to downplay the importance of coercion as a mechanism of diffusion, claiming that coercion is

“out of step with our world,”(Simmons et al., 2008, pp. 358–359). In contrast, my findings show that

powerful states possess the ability to dictate the terms of law and policy to weaker states by threatening to

withhold benefits during various types of negotiations.

Second, the results show that when countries adopt new intellectual property rights like regulatory

data protection, they often do so for reasons other than those commonly suggested by the economic or

international political economy literature. The traditional economic justification for creating intellectual

property rights points to the necessity of such rights to solve market failures that result from the non-rival

and -excludable nature of intangible goods (Landes and Posner, 2003). Countries may also adopt

intellectual property rights in order to benefit from their presumed indirect effects, such as fostering

economic development, attracting foreign investment or sending signals about a business-friendly

environment (Braga et al., 2000; Fink and Maskus, 2005; Javorcik, 2004). In contrast to these economic

explanations, my findings show that countries often actively oppose adopting intellectual property rights,

but nevertheless adopt them due to international coercion. As a result, the so-called harmonization of

intellectual property law does not reflect a growing international consensus or the benefits of

standardization, but rather the effects of coercion (Dutfield and Suthersanen, 2005).

The remainder of the article proceeds as follows: first, I explain what regulatory data protection is, and

how and why regulatory data came to be protected as intellectual property. I also discuss the negative

International Coercion and Data Protection Gabriel J. Michael

©2016 John Wiley & Sons Ltd

The Journal of World Intellectual Property (2016) Vol. 19, no. 1–2 3