Some business owners and government officials have doubts regarding whether current intellectual property rights are adequately protected or enforced once granted.
The USAID Transform WASH team interviewed more than twenty key informants, business owners and government officials, in Ethiopia and the East Africa region to identify the main challenges facing WASH market development in Ethiopia. Based on the findings of this study, this is the third of a series of eight articles that explore the primary challenges that businesses face introducing or expanding their range of WASH products and services in the country. We will also highlight a set of recommended regulatory and policy actions to overcome these challenges. This post covers challenges related to protection of intellectual property rights, a significant area of concern among the key informants.
According to the UNICEF/WHO Joint Monitoring Programme, only about seven percent of Ethiopians have access to basic sanitation services, and more than one-fifth of the population practices open defecation (JMP, 2019). Achieving universal, sustainable access to basic WASH services in Ethiopia will require expanded involvement and development of the country’s private sector. The Government of Ethiopia recognizes the importance of the private sector at all levels and leads a country-wide effort to strengthen businesses that offer WASH products and services. The Ministry of Health recently updated its market-based sanitation strategy, which aims to generate demand and expand access to supply of basic sanitation and related products.
To learn more, follow this link to the Learning Note.
Intellectual property (IP) rights are granted to persons or companies for creating a unique design, invention, process, or work of art or music. IP rights are awarded through a legal process and generally give the owner exclusive rights to use their creation for a specified period of time. Patents, copyrights, and trademarks are examples of legal mechanisms that codify IP rights.
If business owners do not earn recognition or financial benefit from what they invent, they will feel unprotected, discouraged and may even decline to work in the business. Putting in place robust intellectual property rights fosters an environment in which innovation and productivity can flourish. Therefore, intellectual property rights are fundamental to business investment and growth. According to many stakeholders in Ethiopia, intellectual property regulations needs reconsideration to ensure adequate protections for inventors and businesses. Foreign investors feel the annual intellectual property right renewal process as a risk. In joint ventures the local partner is also obtaining the patent right, some foreign business owners are questionable that it will risk their intellectual property protection. There is also uncertainty about the adequate protection or enforcement of intellectual property rights once granted.
Ethiopia's intellectual property rights and protection
IP rights for industrial designs enable companies to earn recognition and/or benefit financially from their inventions or creations. The Ethiopian Intellectual Property Office registers intellectual property protections under the Patent Act. (Proclamation Concerning Inventions, Minor Inventions, Industrial Design No. 123/1995).
Two types of IP protection are most common with respect to WASH products:
- Patent of Invention: This patent applies to the first registration of a piece of intellectual property invented in Ethiopia or for IP that is registered in Ethiopia within 12 months from successful first registration in another country. A patent of invention is granted an initial period of protection of 15 years and can be extended for another five years.
- Patent of Introduction: This is used for protected inventions from abroad that will be introduced to Ethiopia. A patent of introduction is valid for a maximum of 10 years. However, patent owners must file to extend this protection every year - after the third year - and pay relevant maintenance fees. For some patent owners, the annual renewal process may be perceived as a risk and threat to their IP protection. For example, in the United States, depending on the patent, protection is granted for 14 to 20 years (with periodic fees) (STOPfakes.gov, 2016).
Most locally registered businesses interviewed for this study found the application process for patents to be relatively easy and straightforward. The application process requires a certificate of incorporation, suggesting it is advantageous to be a locally registered business or joint venture (a foreign business with a local counterpart).
For a joint venture, the local partner also acquires patent rights. Some patent owners have said the risks of this increase to their IP protection.
There also were concerns raised by respondents regarding whether current IP rights are adequately protected or enforced once granted. Businesses that have invested extensively in design innovations and their “brand” need to be able to protect those designs and brand names and will continue to rely upon patents and royalty payments to maintain their ability to operate competitively in the market.
Use of patents in licensed production
Licensed production is the authorized production (in Ethiopia) of a product using technology developed elsewhere. This involves obtaining permission from a company (licensor) to manufacture and sell its products. The company in Ethiopia that obtains these rights (the licensee) usually agrees to pay royalty fees to the owner or licensor (Haile, 2018).
For example, a plastics manufacturer established licensed manufacturing and distribution contracts with local manufacturers in the East Africa region, including in Kenya and Tanzania. IP rights (patent protection) played a crucial role by protecting the licensor’s technology, and they also gave the licensee (local manufacturer) a market advantage.
In Ethiopia, the same company experienced challenges licensing a local manufacturing company for production of their sanitation product. If a licensor does not have a valid Ethiopian manufacturing license, Ethiopian law does not permit the licensor to import and own a mold. Injection molds are the main capital investment required to start manufacturing plastic products. Therefore, a manufacturing licensee would purchase and import the mold and would then fully own the intellectual property. Such a transaction would be permanent; in effect, it would not allow the licensor subsequently to change the local manufacturer by giving the mold to a new licensee, if they felt that this was required. This limits flexibility among participants of the market and generally leads to increased costs of doing business, which are passed on to the consumer.
These licensing challenges could be avoided if an enterprise could obtain an Ethiopian manufacturing license. Other options include establishing a joint venture with a local manufacturing company, possibly with specific contractual arrangements between the licensor and licensee, to mitigate the risks discussed above. However, the financial and administrative hurdles associated with these approaches may be perceived as deterrents by potential investors, adding to the risk factors that inhibit companies from exploring local manufacturing of new WASH products in Ethiopia.
Stronger IP protection, as well as longer protection periods, could help encourage certain investors to introduce and/or invent new WASH products and services in Ethiopia. This type of reform also would encourage local manufacturing of essential WASH products. USAID Transform WASH recommends:
- A review of trademark and patent protection systems and implementation of any needed reforms to ensure they are competitive both regionally and globally. Reforms might include issuing multi-year protections, ensuring joint-venture partners can retain certain IP protections, lengthening overall protection periods, and adequately enforcing current laws.
- A review (and reform, if needed) of importation policies for manufacturing equipment to simplify licensed production of WASH products in Ethiopia.