Emergency Committee For American Trade - Publications

SECTION 11: INTELLECTUAL PROPERTY

ECAT strongly supports the negotiation, implementation and enforcement of strong protections for intellectual property rights build upon and strengthen existing protections and commitments. Such provisions are critical in order to promote innovation and new research in the information technology, pharmaceutical and chemical sectors, to name just a few, and to stimulate a rich and diverse marketplace for the development and publishing of business information and literary, musical and other artistic and creative works.

Intellectual Property Protections in Chile and Singapore Free Trade Agreements

Both the U.S.-Chile and U.S.-Singapore Free Trade Agreements (concluded in 2002 and 2003 respectively) include important new commitments in the area of intellectual property that should be included in future agreements. Among the most notable provisions are the following commitments:

General Provisions

Ratify or accede to other international agreements protecting intellectual property, including WIPO treaties discussed below and the International Convention for the Protection of New Varieties of Plants.
Provide national treatment, with no exception for digital products.

Copyright

Rights of reproduction include temporary copies.
Adopt right of communication and other rights unique to digital media to ensure copyright holders, including record companies, and their designees have exclusive rights to make their works available online.
Longer terms of copyright protection for works and phonograms consistent with U.S. law.
Strong anti-circumvention requirements.
Governments agree to use only legitimate computer software.
Limited liability for Internet Service Providers consistent with U.S. law.
Protection for encrypted program-carrying satellite signals.

Patents

Extension of patent term for unreasonable administrative and regulatory delays in approval (including marketing approval).
Limiting use of patented subject matter to support an application for marketing approval of pharmaceutical products.
Limiting grounds for revocation of a patent to those that would justify a refusal to grant a patent.

Trade Secrets

Data exclusivity requirements that protect test data submitted for marketing approval against "unfair commercial use" (five years for pharmaceuticals; ten years for agricultural chemicals).
Alignment of marketing approval and patent protection systems to prevent, among other actions, granting marketing approval to patent-infringing products.

Trademarks

Apply first-in-time first-in-right principle for geographic indications.
Adopt domain name management requirements with dispute resolution procedure to prevent cyber-piracy.

Enforcement

Authorize award of actual damages, including compensation for harm suffered, based on the value of the legitimate goods and the infringer's profits.
Authorize statutory damages where insufficient data.
Authorize seizure and forfeiture of pirated and counterfeit goods, the equipment used to make or distribute them and related documentation.
Authorizes ex-officio action with respect to border measures, criminal enforcement and goods in transit.
Authorize criminalization of end-user piracy.

These provisions represent an important strengthening of intellectual property rights as reflected in international agreements and should be used as a model in future free trade agreements.

As discussed in section 3, the Chile and Singapore agreements are currently being prepared for signing no earlier than the end of April 2003. Following signing, each of the countries, including the United States, will need to approve the respective agreements and enact implementing legislation.

WTO Agreement on Trade-Related Aspects of Intellectual Property Rights

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs Agreement) came into force on January 1, l995, with a phase-in of some obligations under the agreement, based on a country's level of development. Developed countries were required to implement the agreement by January 1, l996; developing countries had to implement by January 1, 2000, and the least-developed countries must implement by January 1, 2006.

In December 1999, USTR announced that it would conduct a special out-of-cycle Special 301 review in order to assess the progress made by developing countries in meeting their TRIPs obligations. USTR found that while "substantial progress" was made by developing countries, there are a number of countries that are still in the process of implementing legislation and others that are much farther from implementation. USTR is continuing to work with these developing countries to assist them in implementing fully their TRIPS commitments.

From 1999 onward, a number of WTO member countries asked the WTO General Council to grant them a blanket extension of implementation deadlines for a number of WTO agreements, including the TRIPs agreement. The United States and other countries refused to support a blanket extension of the implementation of the TRIPs Agreement, preferring to review the issue on a case-by-case basis. Efforts to provide for greater flexibility in the TRIPs and WTO agreements continued throughout 2000 and 2001.

As discussed in section 2, this issue was discussed as one of the implementation issues, as part of the WTO's Fourth Ministerial Conference in Doha, Qatar, but was not resolved. WTO members did reject the U.S. push for the ability to bring nullification and impairment cases under TRIPs. The final implementation decision directs the TRIPs Council to review this issue for the Fifth WTO Ministerial Conference in Cancun in September 2003. Until then, WTO Members have agreed not to file nullification or so-called "non-violation" cases under TRIPs. The implementation decision also required the WTO to "put into place a mechanism for ensuring the monitoring and full implementation" of the requirement that developed countries provide incentives to encourage technology transfer to developing countries. As discussed in Section 3, WTO Members did agree to a declaration on the ability of member countries to use compulsory licensing and other measures in the event of public health emergencies, although how that provision is defined remains controversial.

It is important that the United States continue to oppose the reopening of the TRIPs agreement. The WTO built-in agenda already provides an active program for review of the TRIPs agreement. The agenda includes (1) the ongoing review, mandated by TRIPs article 27.3(b), of the exclusions from patentability for certain plants and animals, and (2) the review by the TRIPs Council, mandated by Article 71.1, of TRIPs implementation. In keeping with this built-in agenda, the focus must remain on achieving full implementation of the TRIPs Agreement. It is also important that the voluntary "moratorium" on nullification and impairment cases not be extended beyond the 5th WTO Ministerial Conference.

In WTO accession negotiations, the United States should insist that acceding countries be required to implement the TRIPs agreement immediately upon accession without transition.

WTO Dispute Settlement

The United States has brought 14 intellectual property rights cases before the WTO since 1996. It has been successful in a number of cases in compelling WTO contracting parties, such as India, Portugal, Sweden, Turkey, Ireland, Denmark, Greece, Ireland, and the EU, to move toward compliance with their obligations under the WTO TRIPs agreement. Sweden and Ireland have passed legislation to strengthen enforcement of their intellectual property laws, and Greece has enacted legislation to prevent copyright infringement by television stations.

In April 2002, the United States reached a partial settlement of its ongoing WTO case against Argentina. The United States originally challenged Argentina's failure to provide a system of exclusive marketing rights for pharmaceutical products and expanded this claim to include concerns over Argentina's failure to protect confidential test data; its denial of exclusive rights for patents; its failure to provide provisional measures, such as preliminary injunctions, to prevent infringements of patent rights; and its exclusion of certain subject matter from patentability. In the settlement, Argentina agreed to clarify several aspects of its IPR regime and to impose its rules consistent with the TRIPs agreement. Argentina also agreed to amend its patent law. Several issues remain, including data protection.

Special 301

Under the Special 301 provisions contained in the Omnibus Trade and Competitiveness Act of 1988, as amended in the Uruguay Round Agreements Act of 1994, USTR is required to identify those countries that deny adequate and effective protection for intellectual property rights or deny fair and equitable market access to persons that rely on intellectual property protection. The Special 301 provisions require that countries that have the most egregious practices with the greatest adverse impact on U.S. trade must be designated as a "Priority Foreign Country." USTR is then required to initiate a Section 301 investigation of the intellectual property practices of such countries within 30 days of the annual April 30 deadline. USTR created two additional country classifications, referred to as "Priority Watch List" and "Watch List" countries, to allow the flexibility to encourage countries to improve intellectual property rights protection without having to designate a country as a "Priority Foreign Country" and initiate a Special 301 investigation.

The 2002 Special 301 Review identified 51 countries that deny adequate or effective protection of intellectual property rights or deny fair and equitable market access to U.S. artists and industries that rely on intellectual property.

The United States maintained its sanctions on Ukraine following the 2001 identification of Ukraine as a Priority Foreign Country. The United States suspended duty-free status under the Generalized System of Preferences program for imports from Ukraine in January 2003 as a result of Ukraine's "persistent failure to curb unauthorized production of optical media products." U.S. companies estimate that this piracy has caused over $200 million in annual damages. The United States has urged Ukraine to take measures to stop piracy since the 2000 U.S.-Ukraine Joint Action Plan to Combat Optical Media Piracy.

Paraguay and China were once again designated for special monitoring under Section 306 of the Trade Act of 1974, which authorizes USTR to impose trade sanctions if the commitments of a bilateral agreement are breached. With regard to Paraguay, the United States remains concerned about its copyright enforcement and the enactment of a TRIPs-consistent patent law.

The 2002 Special 301 Review placed 15 countries on the "Priority Watch List," signifying that the United States will monitor their efforts to improve their intellectual property rights protection: Argentina, Brazil, Colombia, the Dominican Republic, Egypt, the European Union, Hungary, India, Indonesia, Israel, Lebanon, the Philippines, Russia, Taiwan and Uruguay.

A total of 33 countries and/or customs territories were placed on the "Watch List" in April 2002: Armenia, Azerbaijan, Bahamas, Belarus, Bolivia, Brazil, Canada, Chile, Colombia, Greece, Guatemala, Italy, Jamaica, Kazakhstan, Kuwait, Latvia, Lithuania, Macao, New Zealand, Pakistan, Peru, Poland, Romania, Saudi Arabia, Slovakia, Tajikistan, Thailand, Turkey, Turkmenistan, United Arab Emirates, Uzbekistan, Venezuela, and Vietnam.

USTR also announced out-of-cycle reviews for Priority Watch List countries Indonesia, Israel and the Philippines and for Watch List countries the Bahamas, Costa Rica, Poland and Thailand. USTR also announced an out-of-cycle review for Mexico.

Optical Media Products Piracy, Organized Crime and End-User Piracy of Software

The copyright industry is increasingly using a common set of media to distribute their products worldwide, including compact disc (CD), video CD, CD-ROM, and Digital Versatile Disk (DVD), known collectively as "optical media." There has been rapid growth in the capacity for producing optical media products. Much of the world excess production capacity (with capacity now estimated at twice world demand) is being used to produce pirated optical media products, such as films, music and sound recordings, and computer software (both business and entertainment) on CDs and CD-ROMs. Such pirating poses a serious threat to every sector of the U.S. copyright industry. Piracy of computer software alone is estimated to cost the U.S. computer software industry over $11 billion per year in sales, and total worldwide piracy is estimated to cause between $20 and $22 billion in losses to U.S. copyright-based companies annually. In its 2002 Special 301 report, USTR noted progress made by Malaysia and Taiwan in committing to implementing strong optical media laws and urged Ukraine, Thailand, Indonesia, Pakistan, the Philippines and Russia to take similar steps forward. The Administration also expressed concern about recent reports of piracy in Bulgaria.

Efforts to combat optical media piracy should remain an Administration priority this year. While the U.S. government should continue to pursue the elimination of optical media piracy through traditional intellectual property right enforcement mechanisms, because of the ease of production and distribution of pirated optical media products, these enforcement methods may be insufficient to prevent the spread of digital piracy. It is, therefore, important that the U.S. government continue to urge that countries of concern undertake to create a regulatory framework for licensing optical media production and tracking raw materials inputs in order to establish an effective system to deter piracy. While taking steps to address production, the Administration must also increasingly look to foreign governments to attack the open sale of pirate materials. CD-R piracy is growing rapidly, and addressing it will require an attack against consumption (offer for sale) as well as production and distribution.

The Administration should also sustain its efforts to combat end-user piracy of computer software, which is the greatest single source of software piracy. In many countries, government entities are the major users of software, both legal and illegal. It is imperative that foreign governments make the issue of legal use of software a priority. Countries and/or customs territories that have issued decrees requiring governmental use of legal software include China, Colombia, Ireland, Jordan, Paraguay, Thailand, France, the United Kingdom, Greece, Hungary, Hong Kong, Macao, Lebanon, Taiwan, Israel, Spain, and the Philippines.

Implementation of World Intellectual Property Organization Treaties

Strong intellectual property protections are essential to the promotion of further growth in the Internet and digital trade. To that end, the World Intellectual Property Organization (WIPO) adopted the Patent Cooperation Treaty (PCT) in 1970 (and amended and modified it in 1979, 1984, and 2001) and the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonogram Treaty (WPPT) in 1996.

The PCT permits individuals and companies to seek patent protection for an invention simultaneously in each of the contracting states by filing an "international" patent application and establishes rules and procedures for such applications. The United States ratified the PCT in 1978, and there are currently 118 contracting states.

The WCT and WPPT provide a basic framework for minimum standards of copyright protection for the online distribution of copyrighted works. The WCT came into force on March 5, 2002 and the WPPT came into force on May 20, 2002. The United States implemented the two WIPO treaties under Title I of the Digital Millennium Copyright Act of 1998 and ratified them in September 1999. The 1998 Act prohibits the circumvention of technological measures that control the access to copyrighted works and their unauthorized reproduction, as well as the importation, manufacture, or sale of devices used to circumvent such technological protections. The 1998 Act also prohibits the removal or alteration of copyright management information used to identify a work or various categories of information about. Civil and criminal remedies enforce these provisions, with certain exceptions for libraries, educational institutions, and other carefully delineated categories of users.

Digital piracy is a serious threat to global electronic commerce. The WIPO treaties are a significant step toward guaranteeing the protection of copyrighted materials on the Internet and fostering the growth of electronic commerce.

ECAT POSITION: ECAT supports the strong intellectual property commitments included in the U.S.-Chile and U.S.-Singapore Free Trade Agreements and supports their full implementation later this year. ECAT also supports the negotiation of similar protections in future free trade agreements. ECAT also supports U.S. efforts to secure full implementation of the TRIPs Agreement by insisting on adherence to existing transition deadlines, opposing any moratorium on dispute settlement cases, and making aggressive use of WTO dispute settlement procedures to enforce the agreement. ECAT urges the Administration to make every effort to encourage additional countries to ratify and implement fully the WIPO Patent Cooperation Treaty and the WIPO internet treaties and to continue to promote strong intellectual property protection for digitized trade. ECAT supports efforts to combat piracy of optical-media products through effective enforcement and regulation, and to combat end-user software piracy, particularly by foreign governments.