WIPO Faces Persistent Complaints, Allegations Of Mismanagement
by William New 
July 6, 2005
Intellectual Property Watch
Original Source: http://www.ip-watch.org/weblog/index.php?p=63&res=1024&print=0

The World Intellectual Property Organisation is said to be different from many U.N. bodies in that it has long been seen as more of a technical body than the domain of career diplomats who are expert at political wrangling. But in recent months, the organisation has been called upon to address a series of questions about the organisation’s financial and management practices that have come under scrutiny along with the United Nations at large. In addition, complaints have arisen about the way meetings of WIPO’s members are conducted and policies are developed. 
In addition to being asked to tighten its spending, the WIPO secretariat is being asked, at least informally, to account for several possible financial irregularities, one of which may be the least substantial but which reaches the highest level – Director General Kamil Idris. 
So far, the secretariat has held to the position that there is no proof of wrongdoing at WIPO. A WIPO official noted to IP-Watch Tuesday that “neither WIPO, nor any WIPO official, is under investigation.” 
The Swiss newspaper Le Temps on Thursday reported on the involvement of the WIPO building director in the construction of a personal swimming pool for Idris. According to sources cited in the story, the swimming pool was purchased in France in 2003 and paid for in cash by the building director, who worked frequently on the project site in his personal capacity sometimes during office hours. 
This report rekindled speculation among the Geneva diplomatic community as to why the director general has not called for an investigation into the allegations that have arisen about the organisation, according to diplomatic sources who were interviewed for this story. Some governments support a deeper investigation and stronger response to reports from WIPO. But a U.S. official in April denied that his government has used the potential financial scandal as leverage to push WIPO for gains on the policy front, such as moving a patent law harmonisation agenda. 
In late April, the international press reported on an investigation by a Geneva-based judge, Jean-Bernard Schmid, into possible bribery charges involving a roughly $50 million contract for renovation at WIPO’s headquarters. 
According to the New York Times and Financial Times, the Swiss investigation looked at whether Michael Wilson, a businessman from Ghana, bribed Khamis Suedi, WIPO assistant director general and special counsel to Idris, to get the WIPO renovation contract. The Swiss investigation has determined that Wilson was paid $3 to 4 million by BPS, a consortium of three Geneva companies, related to their winning of the WIPO contract. Wilson transferred nearly $300,000 to Suedi, but WIPO officials have denied that the transfer was related to the renovation contract. The renovation costs grew from roughly $30 million to nearly $50 million by the end, approved by the member states. 
Suedi and four other WIPO officials were called to testify, and none have been charged with wrongdoing, according to reports. 
WIPO Legal Counsel Edward Kwakwa said this week that Idris has looked into the issue. “The director general has taken the necessary steps to ensure WIPO procurement procedures were strictly followed in awarding the contract to BPS.” 
According to one source, Idris conducted his own investigation, and also had an internal committee do an evaluation of the whole procurement process. 
A WIPO official added that Idris suspended a regulation allowing staff to do business outside WIPO under three conditions: that it did not involve intellectual property, was not WIPO-related, and had authorization of the DG. Idris also has overseen the introduction of an internal audit charter and implementation of recommendations by the U.N. Joint Inspection Unit, the official said. 
U.N. Inspectors Find Fault With WIPO Budget
WIPO’s management and administration is under review by the Joint Inspection Unit (JIU). The JIU is the only external U.N. system-wide oversight body, with 11 inspectors. The first part of the JIU review was presented at the WIPO Program and Budget Committee meeting this spring, with a second part to follow at “a later date.” 
The inspectors stated in the first report that they did not review issues related to the remodeling of an old building nor the construction of the new one, but rather reviewed a paper prepared by the WIPO secretariat and submitted to member states on 13 January 2005. The JIU did, however, recommend that WIPO proceed “without delay” with a construction project for a new building at a cost of 139 million Swiss francs using a bank loan of 113.6 million Swiss francs. The cost of the loan is lower than the current cost of renting space, they said. Plus WIPO owns the land, which is adjacent to the current headquarters, and all staff could be relocated to one site. 
In its preliminary comments on the JIU report, first released in February, the WIPO secretariat noted that the JIU may have derogated from its formal process and that WIPO was given less than the normal length of time to comply with the review. The secretariat also said it is difficult to grasp the complexity of an organisation like WIPO in such a short time. It also noted that a number of WIPO’s areas of competency were not included in the review. 
The first JIU report focused on the budget and financial issues, personnel practices and oversight activities. The inspectors recommended the director general hire independent external expertise using existing funding to perform a comprehensive “desk-to-desk” needs assessment of the human and financial resources of the organisation, which is a way of determining if all of the employees are necessary. 
In its preliminary comments, WIPO responded that a desk-to-desk assessment may have very high cost implications. 
The second recommendation was that the WIPO General Assembly, which meets in the fall, should approve an initial 2006-2007 budget at the revised 2004-2005 budget level, depending on the outcome of the needs assessment. The recommendation was made “in light of current financial concerns of the organisation.” Unbudgeted, new activities should await the study outcome, it said. 
The WIPO secretariat agreed to this recommendation as long as recognized flexibilities are taken into account, though it disagreed with the inspectors’ financial analysis. The Program and Budget Committee agreed to recommend the proposed budget to the General Assembly without changes for the first time in two biennia, according to an official. The budget would increase slightly from about US$420 million to about $526 million. 
Third, the director general was urged to complete, “on an urgent basis,” consultations with other relevant organisations, such as the European Patent Office, and submit to the General Assembly a proposed methodology to determine the cost of processing Patent Cooperation Treaty (PCT) applications. The treaty helps reduce paperwork for patent-holders seeking recognition for their patent in other countries. 
The secretariat replied that it had already begun work on establishing a methodology for determining the cost of processing PCT applications and that it should be conducted in consultation with all stakeholders. But it added that the current financial situation is the result of three things: the rapid reduction of fees between 1997 and 2003, the simultaneous progressive depletion of the reserves (decided by the member states), and a slowdown in the growth of demand for PCT services. 
For years, WIPO had a healthy financial situation with significant growth in income due to the high numbers of applications received under the PCT. Unused resources placed in the reserve account reached a peak of 353 million Swiss francs in 1998. The lowering of PCT fees in 1998 led to a gap between the projected and actual income until the director general requested approval to raise the PCT fees as of January 2005 to address the problem. 
The JIU suggested that WIPO, which has obtains much of its funding from patent fees, should set fees weighing desired expenditures with the cost of requirements. The organisation attempt to raise fees last year met with strong resistance from developed countries that pay most of the fees, according to government and non-governmental sources. 
WIPO’s deficit in 2004-2005 is estimated at US$23 million, with a total budget of $528.8 million, according to the JIU report. But the inspectors counseled against using the emergency reserves to address the gap when “further economies” could reduce the deficit instead. Not drawing upon the reserves before September is in contradiction to decisions taken the member states of the PCT last year, WIPO said. In addition, WIPO cited a regulation stating that financial reserves are established precisely to cover cash flow and budget deficit. 
PCT fees represent about three-quarters of WIPO’s income, so projections of PCT applications are essential for accurate planning. The inspectors said there is no study on the relation between workload increases and costs of services, no methodology to determine the cost of processing PCT applications, and that clients are charged approximately 1400 Swiss francs (roughly US$1100) “without either the client or the secretariat knowing what the amount represents.” 
At several points, WIPO contended with the JIU’s analysis, and commented that it is “impossible” to understand the level of resources needed by the organisation based on the limited number of interviews the JIU carried out in two months. 
Also recommended was to limit transfers between programs to five percent of the smaller of their two biennial appropriations rather than five percent of the total budget, which can distort program objectives and “render meaningless” the program priorities and budgeting. The JIU said it is not aware of any other organisations with that authority. 
WIPO said this could “reduce the flexibility which has been built into the budget system for more than two decades.” 
Recommendations for tightening up the PCT process included that users of WIPO services pay in Swiss francs, that PCT fees be paid to WIPO upon filing, and that clients be able to pay online. WIPO agreed with this recommendation, acknowledging that exchange rate fluctuations may have an impact on the level of income in the PCT. 
Another recommendation was that the General Assembly institutionalize the decision of the current director general not to accept extra remuneration for his duties relating to International Union for the Protection of New Varieties of Plants, a Geneva-based body providing a system of protecting plant varieties in order to encourage the development of new varieties. The JIU said this will ensure the WIPO director general’s salary remains in line with his peers in the U.N. system. 
WIPO said the current director general is “personally sympathetic” with the recommendation, but said the issue cannot be dealt with the WIPO General Assembly as UPOV is not part of the United Nations system. 
Personnel Practices Criticized
On personnel issues, the inspectors found a number of problems in the absence of a comprehensive human resources strategy. Between 1997 and 2002, approved posts increased by 50 percent, and another 24 percent of the workforce were hired as consultants or on short-term contracts, they said. 
In its reply, WIPO basically agreed with all of the JIU recommendations on personnel issues, and noted that some were already being implemented or conveyed to the competent governing bodies. But it said the increase in workforce reflects the increase in demand for WIPO’s services, and that approved posts are not the same as the actual number of staff. 
The inspectors criticized a practice of direct recruitment at WIPO, originally set up in 1976 for hiring of professional urgently needed for limited periods has grown into a pathway for confirmation into regular WIPO posts. In the last three years, 99 percent of direct recruits became permanent, despite a rule that they cannot serve more than three years and may not be converted into permanent appointments. The inspectors were told by WIPO that the recruits competed for vacancies. During 2002-2003, 43 percent, or 38 out of 88, of all professional staff recruited were direct hires. 
WIPO countered that direct recruitment “has served the organisation well, and has been very positively evaluated by independent external experts” and others.
The inspectors also raised concerns about a practice of transferring staff from program to program within WIPO, leaving no vacancy behind, and called for the practice to be discontinued. 
WIPO argued back that this practice was applied only in certain instances and that the majority of cases involved transfers to vacant posts or swapping of posts between programs. 
Furthermore, the system of personal promotions at WIPO “has been significantly eroded” to where it almost exclusively relies on seniority and not on criteria set up in 1984 that was based on merit. The JIU called for an end to the personal promotion scheme at WIPO because it is not based on merit, deviates from common practices, has significant financial implications and may have a negative effect on staff morale. About 45 percent of a high-level category of staff are on personal grades, and the promotions are granted just prior to retirement, they said. 
Some officials in the Geneva diplomatic community consistently assert that WIPO has undemocratically selected or promoted officials who advance the WIPO agenda in meetings and represent the geographic region of the director general. As the Idris is from Africa but WIPO is seen as generally favoring developed country industry views, this leads to developing country representatives in meetings who act as “ventriloquists” for the secretariat, they charged. 
The WIPO official denied this, stating, “Any delegation that takes the floor to speak at a WIPO meeting does so in its capacity as official representative of its government.” In the formal reply, WIPO said the report does not capture the increase in geographical and gender diversity from 1997 to 2004. 
The JIU found that the director general does not have the ability he should have to appoint high-level staff without seeking WIPO coordination committee advice. The JIU recommended dropping the requirement for advice as it “ties the director general’s hands unnecessarily and is inefficient for the effective running and management of the organisation.” 
The JIU suggested the adoption of a comprehensive human resources strategy that includes policies on career development, gender balance, geographical distribution and administration of justice. 
As to auditing of WIPO, the JIU said the Federal Audit Office of the Swiss Confederation, which has always been WIPO’s external auditor, performs “excellent financial audits that are well-received by member states,” but cited a need for management audits. 
The inspectors also found fault with WIPO’s Internal Audit and Oversight Division, which has never done an audit or made audit plans. None of the division’s staff has an audit background, amounting to staffing that is “very inadequate and needs strengthening.” The division itself has raised this concern to the director general, they noted. 
The internal audit function was created in 2000; the evaluation function in 1998. But few program evaluations have been undertaken – four in six years, plus two done by external consultants, the inspectors found. Likewise, only seven internal audits have been conducted, all done by an external consultant, a former member of WIPO’s finance staff. There is no annual reporting mechanism to member states and no procedure to follow up on the recommendations of the Audit and Oversight Division, they added. 
Along these lines, the Program and Budget Committee set up a working group on an audit committee that in late May recommended the committee consider the creation of an audit committee. That recommendation will be addressed later this year. 
Member Complaints About Inclusion, Meeting Procedure
Among the complaints from some member countries is that the budget was formed without inclusion, with only one regional meeting for developing countries and copies of the proposed budget for them only shortly prior to the Program and Budget Committee meeting, while developed countries get to be consulted in the process all along. 
But the WIPO official countered, “The budgetary process was inclusive. According to established practice, any regional group that requests a special briefing is given one.”
The official said that prior to any program and budget meeting, member states are given an “equal opportunity” to request through their group coordinators a briefing on program and budget proposals. In addition, an informal session of the Program and Budget Committee was held in February and was open to all member states, the official said. “The WIPO secretariat is at the disposal of all member states to provide detailed briefings on draft proposals at any time upon request,” she said. 
Another complaint is that some meetings are not being handled precisely to WIPO procedures, with decisions favorable to WIPO or WIPO’s biggest contributing constituents being pushed through. In at least two key meetings, one last November and one in April, the chairmen attempted to impose a decision of the meeting without the agreement of all members present, according to officials. This was said to be the case the Standing Committee on Copyright and Related Rights (SCCR) meeting last November and the Program and Budget Committee meeting in April. 
WIPO rules require that a decision may only be reached if all committee members agree. The traditional practice in WIPO has been to conduct meetings based on the principle of consensus. According to one government official, where a consensus is not possible in arriving at final outcomes, WIPO’s General Rules of Procedure provide for the possibility of formal voting and spell out the procedure for doing so. Under WIPO rules, without consensus, no decision can be taken unless there is a vote, but WIPO’s meetings rarely resort to formal voting, the official said. Instead, the consensus-based approach to negotiations has generally been followed. 
A WIPO official argued, “While the rules do not explicitly require consensus, it has been a long-standing policy of WIPO to build consensus on international intellectual property issues.” 
But in the notion of consensus appears to be blurring, and in the two meetings cited, the chairman acted in a manner that constituted “a stark deviation from standard practice, as well as a violation of WIPO’s Rules of Procedure,” the official said. In both cases, the chairmen announced actionable decisions without consensus or a formal vote, but rather on the basis of a “near-consensus.”
In the SCCR, the chairman called for an informal “show of hands,” and determined that a near-consensus was reached, which is not consistent with procedure. WIPO clarified afterward that the outcome of the meeting was the “chair’s conclusions” and not a formal decision by the committee. But the complaint is that the chair’s conclusions should therefore not be “actionable” and yet they are being taken forward by the secretariat. The same is the case for the PBC, the official said. 
“In both cases mentioned above, the chairmen used non-procedural, and therefore illegal, means in order to openly confront and isolate some important developing countries in discussions and to impose decisions on which there was no consensus,” the official said. “These developments, therefore, point to a trend towards the abandonment in WIPO of the norms of neutrality and impartiality that all chairmen, everywhere, are expected to follow.” 
Yet another concern was that the WIPO secretariat was lobbying prior to the 1-2 June Standing Committee on Patents meeting to get support for the outcome of an informal consultation held by Director General Idris in Casablanca, Morocco in February, despite that outcome having been generated outside the formal and inclusive SCP meeting process.
The WIPO official said the General Assembly had given the director general a mandate to conduct informal consultations, which is what he did in Casablanca. The results of these informal consultations was a recommendation on the future work of WIPO adopted by the participants and submitted to the director general who presented it for discussion at the SCP, she said. 
“If you follow WIPO closely, you will know that the secretariat is committed to inclusive dialogue and consensus building,” the official said. “WIPO will continue to ensure that the international patent system evolves in a balanced, user-friendly, and efficient way that serves the interests of all member states and users.” 

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