Some business owners and government officials are concerned about whether intellectual property rights are adequately protected in Ethiopia
Published on: 11/05/2021
Updated and revised on 13/01/2022
In a series of posts, we will present the main challenges that businesses face when expanding the range of WASH products and services available to households in Ethiopia. After describing these challenges, we will recommend specific regulatory and/or policy actions to address those issues, and which also are intended to improve the overall business climate in the country – so that enterprises can more easily start up, grow, and serve their communities sustainably.
This third of eight planned articles addresses issues related to the protection of intellectual property rights for WASH-related businesses in Ethiopia.
Currently, only nine percent of Ethiopians have access to basic sanitation services – a serious situation that affects public health, education, and many other aspects of the country's economic and social well-being (JMP, 2020). Achieving universal access to basic WASH facilities cannot be done by government or NGOs alone; it will require a strong contribution from the country's private sector. The Government of Ethiopia recognizes this and is working to strengthen private sector businesses that offer WASH products and services (including household sanitation) as key element of its greater focus on hygiene and environmental health (FMoH, 2016). These measures are necessary because the current market can only meet a small fraction of the country's enormous needs.
To gain insight into how these challenges can be addressed, and to do so in a manner that ensures the solutions are affordable to all, the USAID Transform WASH team spoke with a wide range of experts – including business owners, government officials, and technical specialists in Ethiopia and other East African countries – to get their advice and recommendations on how to develop and expand Ethiopia's WASH market. The post that follows is largely based on these experts' reflections.
To explore this topic in more depth, follow this link to the full 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.
Without adequate IP protection, businesses, inventors, and artists may not be recognized for, or receive adequate financial benefit from, their creations. Robust intellectual property rights foster an environment in which innovation and productivity can flourish and are a key mechanism to stimulate economic investment and growth.
According to a number of stakeholders interviewed, the country's IP regulations should be reviewed and strengthened to ensure adequate protection.
There were also concerns raised regarding whether IP rights are adequately protected or enforced, once granted.
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 IP protections under Proclamation No. 123/1995 Concerning Inventions, Minor Inventions, and Industrial Design (also known as the "Patent Act").
The types of IP protection commonly sought with respect to WASH products include:
Most locally-registered businesses interviewed for this study found the application process for patents to be relatively straightforward. The application 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). However, in foreign-domestic joint ventures, both the foreign patent owner and its local partner are listed on the patent registration documents, implying that the local partner also acquires the patent rights. Some patent owners cited this as a significant risk. Foreign patent-holders also identified the annual IP renewal process as another risk.
There also were concerns raised regarding whether IP rights are adequately protected or enforced, once granted. Businesses that have invested in design innovations and brand recognition continue to rely upon patent protections and royalty payments to protect their designs and brand names, and to operate competitively in the market.
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 foreign plastics manufacturer established licensed manufacturing and distribution contracts with local manufacturing partners in the East Africa region, including Kenya and Tanzania. IP rights (through patent protection) played a crucial role by protecting the licensor's technology, and they also gave the licensees (local manufacturers) a market advantage.
In Ethiopia, the same company (as a licensor) experienced difficulties identifying a suitable local manufacturing partner (licensee) for production. Since the licensor did not have an Ethiopian manufacturing license, they were not permitted to import and own the molds required to produce their product. If the local licensee were to purchase and import the molds, Ethiopian law would grant the licensee permanent rights over those molds. Such a transaction would in effect be permanent and would not allow the licensor to change its local manufacturing partner in the future, if they felt the situation required it. This limits flexibility and increases the cost of doing business, which is then passed on to the consumer.
Such licensing challenges could be avoided if foreign enterprises could obtain Ethiopian manufacturing licenses. Other options include establishing a joint venture with a local manufacturing company, but with specific contractual arrangements between the parties that would mitigate the risks discussed above. However, the financial and administrative hurdles associated with these approaches are perceived as risks by potential investors, which deter them from undertaking local manufacturing of WASH and other products in Ethiopia.
A stronger IP regulatory environment would help encourage investors to introduce new WASH products and services in Ethiopia. This type of reform also would encourage more local manufacturing of essential WASH products. USAID Transform WASH recommends the following actions:
About Transform WASH
USAID Transform WASH aims to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing market access to and sustained use of a broader spectrum of affordable WASH products and services, with a substantial focus on sanitation.
Transform WASH achieves this by transforming the market for low-cost quality WASH products and services: stimulating demand at the community level, strengthening supply chains, and improving the enabling environment for a vibrant private market.
USAID Transform WASH is a USAID-funded activity implemented by PSI in collaboration with SNV, Plan International, and IRC WASH. The consortium is working closely with government agencies, including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the One WASH National Program, and regional and sub-regional governments.