Introduction
The Arab world is made up of 22 countries with different economic and political systems and their own unique histories. But they are united by shared language and religion and correspondent similarities in social and cultural traits. Another feature that they have in common is that they are all developing countries. They are distinguished not by the desire to stay ahead, nor to keep up, but to catch up. The means to doing so is to acquire the necessary technological base and capacity to produce more complex value-added products and services that can raise people’s standard of living.
Only 40 years ago, there was virtually no Arab industry of which to speak. In the past decades, oil wealth has funded a remarkable transformation of the Arab Gulf region that has impacted not only the Gulf but the entire region. Other Arab countries such as: Jordan, Egypt, Lebanon and Palestine have served as labor pools for the Gulf oil economies fuelling economic development in those countries as well.
Despite the great degree of change and development, the Arab countries have nonetheless remained locked into the “developing countries” classification.
Economic indicators for the region point out that the Arab developing countries have not kept pace with their peer nations in South America and Asia. Infact, the Arab countries are, in terms of economic and human development indexes, among the most marginalized regions of the world. Gulf economies still remain heavily dependent on oil financed consumer imports; while some, such as Saudi Arabia have worked hard to develop local industry to supply consumers with goods. Such factories, for the most part, remain unable to compete internationally and depend on government intervention through tariffs and non-tariff intervention to maintain their viability.
In other Arab countries, massive state investment has produced large industries but with mixed results. While the Arab countries are far from the “basket case” situation that one finds in some least developed countries, it is nonetheless a region that has not lived up to its potential. There are numerous reasons for this, some are historical, some are economic, and some are political, but clearly the inability to acquire the right technologies, to develop these and to become not only a consumer but a producer of technology is a significant part of the reason why the Arab countries are still lacking in attainment of their economic and social objectives.
Reasons for Arab Difficulties in Technology Transfer
There are many reasons why Arab countries have had difficulties in acquiring appropriate technologies. Intellectual Property Laws have been weak or lacking. Courts and legal systems often suffer from ineffective administration and/or the appearance or existence of bias. Police and other enforcement agencies have suffered weaknesses in funding, training, motivation, and overall success in enforcement operations in IPR issues, related to licensing and technology issues, although corrective measures have been introduced in many countries in recent years.
Investment laws often place serious restrictions on entry of foreign firms, which are often the means through which companies are likely to transfer the most cutting-edge technologies. Even if such transfer tends to be of a proprietary intra-company nature, its technological and financial impact is significant, and it does become generalized while supporting human capacity development. This leads us to the first and foremost challenge that Arab countries face while acquiring and selling appropriate technologies and that is the issue of human capacity.
Arab investors often have limited experience in international systems of technology exchange; they have little familiarity with licensing issues.
Furthermore, the necessary professional support which they require to make decisions and operate is not also available. In the West, businesses rely heavily on specialized support from attorneys, regarding the complex issues involved in domestic and international transactions, both in regard to technology transfer and intellectual property rights (IPRs) and in general.
In the Arab world, few attorneys are familiar with these issues, and those that are face a challenge in explaining such concepts to business and government sectors and who have only recently become familiar with elementary intellectual property concepts. There is very little understanding by Arab businessmen and attorneys, even those who are specialized in intellectual property, of the complexities and subtleties of licensing arrangements. While there is a general understanding of the basics of patents and trademarks, the mechanisms for licensing and assigning such rights are not well known.
In the last few years, several Arab countries have acceded to the WTO and thus have had to comply with WTO rules on intellectual property as laid down in the TRIPs Agreement. The process of updating national laws for WTO members, or of accession for those who have not yet joined, has greatly expanded discussion and general familiarity of intellectual property rights (lPRs) in the Arab world.
However the situation in many of the Arab countries was very poor in the area of lPRs until very recently. Patent protection as such was not enforced in Kuwait among others. Lebanon had virtually no protection of copyrights, pirating of software and other products was rampant across the region (and still remains a significant issue). In general, intellectual property rights were considered mostly a foreign concept conceived for foreign benefit. But new legislation and new enforcement efforts have changed the situation drastically in most Arab countries.
We now face a climate in which intellectual property is becoming a widely known and discussed concept in the Arab region. And thanks to basic minimum standards established by TRIPs, the legal environment is becoming somewhat harmonized.
Arab attorneys are becoming increasingly familiar with the basics of patents, trademarks and copyrights. There are an increasing number of Arab attorneys with specialized knowledge of IPRs. But because this is a recent development, the knowledge base is shallow. In fact, even among IPR attorneys there are very few that are familiar with the frill range of standard licensing issues found in international business. This is not altogether their fault, as Arab counties do not generally have special legislation regarding licensing. To the extent that there may be particular licensing laws, they normally regard registration of the license agreement or mandatory licensing provisions for patents. So, there is little basis in local laws or legal tradition to provide the necessary knowledge and skills that would enable the Arab lawyers to be aware of all the concepts involved in a routine license agreement. Because intellectual property laws have only recently been passed, updated, or begun to be strictly enforced, the result is that licensing is somewhat of a new issue for the Arab world.
Naturally this is not to say that various types of licensing agreements have not been made over the course of the years, but the participants have not necessarily seen them as IPR licensing agreements, but more often as simple agency agreements or commercial transactions. And because there are not really specialized laws on licensing, it falls generally under the area of standard contract or civil law, in most countries.
The business possibilities afforded to an international licensor are sometimes as good or better than those under their own nation’s law, but sometimes are not fully understood due to miscommunication or misunderstanding. For example, sometimes foreign lawyers may come to believe that they are unable to enact a licensing agreement that fully protects them or satisfies their goals, when in fact they can. In some cases, foreign businessmen or attorneys have mistakenly believed they could not legally protect their interest, because of an absence of certain legislation familiar to them, where actually they could do so by drafting of comprehensive contracts, enforceable under contract law.
Another problem that occurs is that foreign partners may have certain expectations or understandings from their own experience and sometimes from their own attorneys, but they may neglect formalities or other details in laws in the licensee’s country that may result in forfeiture of some or all of their rights. This happens when a foreign company relies heavily on its home country attorneys, and fails to consider the different legal situation in the licensee’s country.
Licensing is very poorly understood in the Arab world. Even many specialized Arab intellectual property attorneys may not fully comprehend when confronted with a foreign licensor’s questions regarding licensing stipulations that may or may not be permitted under local law. In many cases there is no clear legal precedent or parallel for answering such questions. And one weakness of the Arab attorney is that they are less likely to acknowledge when they do not know something. As often as not, an Arab attorney will do his best to answer a question, though coming from a different legal tradition there may only be the appearance of mutual understanding, but not the reality.
It is not an uncommon story that a foreign firm enters into a licensing agreement only to discover later that their licensee is not complying with the terms of the agreement, and that there is little they can do to solve the problem. Another common problem is that Arab businessmen may sign an agreement that they didn’t fully understand, nor which did their attorneys, and then find themselves legally liable for significant costs that they had not anticipated and which may result in losses. There are many unhappy stories from both sides. The end result is that we must focus on two key lessons, both of which involve a joint appreciation for the value of mutual communication.
1. When a foreign firm seeks to enter into a licensing agreement with an Arab firm, the standard advice around the world still applies. Seek local counsel, and be flexible.
2. Secondly, it is important to realize that licensing is not a well-understood practice. Intellectual property laws and practice have only recently been established, and questions regarding licensing must be posed to prospective partners with the expectation that they may not necessarily be familiar with the concepts.
Arab businessmen have a long history as merchants at a global crossroads. They are clever and wily. It is not difficult for them to understand these concepts that may be new to them. The problem arises through miscommunication, when both sides have misunderstandings. Both foreign firms and local partners have suffered disappointment and loss from lack of mutual understanding.
The foreign companies’ usually lose on the basis of bureaucratic rules or processes that they never understood or considered. The local firms usually lose from not understanding the lengthy contracts, which they are presented with from international partners.
In the West, and particularly in common law countries, the contract has evolved to an amazing extent, with a large body of law to support its interpretation. Arab businesses and lawyers are generally not as familiar with this and tend to see the law as much more “cut and dry” and simple than Westerners do. The custom drafting and negotiating of complex contracts jointly by corporate business and legal teams is not familiar to most Arab attorneys. They generally expect more of the legal implications to be resolved by statutory principle.
In general then, the most serious impediments in the Arab world to acquiring appropriate technologies are:
• Lack of Arab personnel familiar with licensing and technology transfer.
• Perception that intellectual property laws are weak (despite major
improvements).
• Past mistakes by international companies in their approach to business in the region, which continue to affect foreign perceptions.
• Insufficiently developed science & technology infrastructure.
Of all these issues, the most significant is in relation to the lack of familiarity with international systems of technology documentation and transfer. In order to acquire a technology, you must first know of it and find it, or the opposite, which is to find it and then know it. In other words, to find something you want or to look until you find something you want.
The Arab world has a poorly developed science and technology infrastructure and so, although businessmen and government leaders always aspire to acquire the most impressive cutting-edge technologies, there is just as much to be gained from many older technologies.
With the Internet, these technologies can be identified and located with greater ease than ever before. So, a principal way in which to facilitate technology acquisition in the Arab world is to train its business leaders and scientists to utilize the massive global resources regarding technical information, such as patent databases, technical exchanges, etc.
Arab businessmen are beginning to work on these important issues. Licensing Executives Society-Arab Countries (LES-AC) was only formed 2 years ago, but is already making a major contribution to awareness of these issues in Arab countries. By developing our professional people we develop our countries. The technologies are acquired and developed by people, so it is people that we must first concentrate on.
Whenever you speak to an Arab businessperson you will find a tremendous interest in what technologies and products are available around the world, but too often finding an answer to this question has been ‘hit or miss’ for the Arab participant. Now with information technologies like the Internet, and professional development associations like LES-AC, the situation is changing.
For foreign entities, interested in licensing technology to the Arab region, it is advisable to utilize LES-AC as a focal point in the search for licensees or for professionals such as business agents or attorneys. This is mutually beneficial because it provides the foreign entity with access to the Arab world’s small body of licensing professionals and it supports the work of LES-AC and the process of interesting other Arab professionals in developing the Arab licensing field.
Ultimately, the best interest of both licensors and licensees is to negotiate a win-win agreement based on full and mutual understanding of the terms and implications thereof. In order to make this possible on a wide scale, a greater deal needs to be done, particularly in human capacity building, for which professional associations are such an appropriate resource.
As this human groundwork is built, the science & technology infrastructure will be subsequently developed, increasingly allowing a higher level of technology acquisition.
Although the focus here is on the human aspect, it is important to refer once more to the legal background of the situation. In the past, insufficient intellectual property laws and serious restrictions on foreign investment prevented businesses in the Arab region from transferring technologies. While some restrictions remain, the situation is markedly improved from the past, with even 100% foreign ownership allowed in some countries. Meanwhile, as noted already, the intellectual property laws have improved remarkably from the influence of the WTO and TRIPs.
Thus the Arab countries are in a situation where many of the factors necessary for progress have been aligned and there seems no reason not to expect significant progress in the next few years. The efforts of organizations building human capacity in professional fields, information technology, Internet, science and education in general will be crucial to the long- term successful development of the Arab science & technology infrastructure.