Emergency Committee For American Trade - Publications

SECTION 12: INTELLECTUAL PROPERTY

ECAT strongly supports the negotiation, implementation and enforcement of strong protections for intellectual property rights to 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 Recent Free Trade Agreements

Recent U.S. free trade agreements (FTAs) with Chile, Singapore, Australia, and Morocco, as well as those negotiated with Bahrain and Central America and the Dominican Republic include important 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

Provide right holders with the exclusive right to authorize or prohibit reproduction of their works or phonograms, in any manner or form, permanent or temporary (including temporary storage in electronic form).
Provide right holders with the exclusive right to authorize or prohibit the communication to the public of their works or phonograms, including the making available to the public of their works or phonograms in such a way that members of the public may access those works or phonograms from a place and time individually chosen by them.
Extend terms of copyright protection for works and phonograms consistent with U.S. law.
Make illegal the act of circumventing effective technological protection measures, and the manufacture and trade in devices (and their components) primarily designed to circumvent effective technological protection measures.
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

Make patents available for any invention, whether a product or a process, in all fields of technology, provided that the invention is new, involves an inventive step, and is capable of industrial application.
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.
Permit only limited exceptions to the exclusive rights conferred by a patent.

Trade Secrets

Data exclusivity requirements that protect test data submitted for marketing approval against “unfair commercial use,” including the disclosure and/or reliance on such data by another party without the consent of the party providing such information.
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.
Provide statutory damages, which may be elected by the right holder in lieu of actual damages, in an amount sufficient to constitute a deterrent to future infringements and to compensate fully the right holder.
Authorize seizure and forfeiture of pirated and counterfeit goods, the equipment used to make or distribute them and related documentation.
Require ex parte orders to be acted upon in a timely manner.
Authorizes ex-officio action with respect to border measures, criminal enforcement and goods in transit.
Authorize criminalization of end-user piracy.
Limit liability for Internet Service Providers consistent with U.S. law.

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.

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.

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. Nor was it resolved at the Fifth Ministerial Conference of the WTO in September 2003. As discussed in section 5, on August 30, 2003, the WTO General Council approved the Decision on the “Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health,” along with the text of a statement describing members “shared understanding” of how the Decision should be interpreted. The Decision provides for the waiver of TRIPS Article 31(f) to allow countries producing generic medicines under compulsory licenses to export the medicines to eligible countries. The accompanying statement makes clear that the provision should be used in good faith for health policy reasons, not commercial or industrial policy. As of the end of March 2005, no requests for compulsory licenses have been made.

In its 2004 section 301 report, the United States identified as a key WTO implementation priority countries’ implementation of Article 39.3 of the TRIPS Agreement, which requires members to protect test data submitted by pharmaceutical companies against the governmental disclosure of these data or the ”unfair commercial use” of such data.

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.

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 members, 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 apply its rules consistent with the TRIPS agreement. Argentina also agreed to amend its patent law. Several issues remain, including data protection.

New STOP! Initiative

On October 4, 2004, the United States Trade Representative and the Departments of Commerce, Justice and Homeland Security launched a new government-wide initiative, the Strategy Targeting Organized Piracy (STOP!), to combat global trade in pirated and counterfeit goods. Among the key elements of the STOP initiative are:

Steps to help companies establish their rights at home and abroad;
New procedures and risk assessments to help identify pirated and counterfeit goods at the border and firms that traffic in fake goods;
Steps to increase the costs of intellectual property piracy;
Development of a “No Trade in Fakes” program to eliminate fakes from global supply chains;
Updating and modernizing U.S. intellectual property statues and increasing Justice Department prosecutions;
Working with like-minded countries and updating U.S. legal assistance and extradition treaties.

The Administration has started to visit countries around the world, starting in Asia, but also to include Russia, Central Europe and elsewhere, to discuss this initiative and to urge these countries to adopt similar efforts.

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.

In its 2004 Special 301 Review, the United States redesignated Ukraine as a Priority Foreign Country, which it has done every year since 2001. The United States also decided to maintain its suspension of duty-free status under the Generalized System of Preferences program for imports from Ukraine (first imposed in August 2001) and its imposition of $75 million in sanctions on imports from Ukraine (first imposed in January 2003) as a result of Ukraine’s 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 enact an adequate optical media law and take whatever measures are necessary to stop piracy in this area since the 2000 U.S.-Ukraine Joint Action Plan to Combat Optical Media Piracy.

The 2004 Special 301 Review also once again designated China and Paraguay 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 China, the United States remains very concerned by rampant intellectual property problems in a number of areas, including with respect to trade in pirated and counterfeit products, copyright piracy, and trademark counterfeiting. As discussed in section 11, China agreed in April 2004 as part of the U.S.-China Joint Commission on Commerce and Trade to an intellectual property action plan to reduce significantly infringement levels, increase penalties for violations through greater and more effective criminalization of violations by the end of 2004, crack down on violators, improve protection of electronic data, and legalize software use in the government sector, among other actions. The Administration is currently conducting an out-of-cycle review to monitor China’s implementation of that plan and its protection of intellectual property rights more generally. The Administration is also considering whether a WTO case is appropriate and is reviewing industry input solicited in the fall of 2004 on intellectual property challenges in the market.

The Administration should establish evaluation criteria that provide an objective and verifiable mechanism to measure progress in China and potentially other markets with a persistent pattern of inadequate IPR enforcement. At a minimum, these criteria should evaluate actual gains in (i) criminal, civil and administrative enforcement against all forms of piracy and counterfeiting, requiring both meaningful increases in the number of government-initiated actions as well as the imposition of deterrent penalties in a higher percentage of cases; (ii) end-user compliance with IPR laws, including within all levels of government; and (iii) public education and awareness about the value and importance of IPR laws, requiring an increased commitment by government to sponsor training programs for law enforcement and the judiciary, as well as educational campaigns targeting consumers. These IPR reforms, however, will do little to increase market access if other barriers are imposed. A recent example is China’s proposed new barriers to the use of U.S. or other foreign software that effectively nullify China’s commitment that government agencies use only legal software. In this case, China’s commitment to improve its IPR regime must also be accompanied by an agreement not to impose discriminatory government procurement regulations or other industrial policies that exclude or significantly restrict U.S. software products from the Chinese market.

With regard to Paraguay, the United States remains concerned about its copyright and trademark protection, both internally and at the border. The 1998 Memorandum of Understanding between the United States and Paraguay on intellectual property issues expired in January 2003, but both parties agreed to extend the provisions until its renegotiation.

The 2004 Special 301 Review placed 15 countries (or customs union, in the case of the European Union) on the “Priority Watch List,” signifying that the United States will monitor their efforts to improve their intellectual property rights protection: Argentina, Bahamas, Brazil, Egypt, the European Union, India, Indonesia, Korea, Kuwait, Lebanon, Pakistan, the Philippines, Russia, Taiwan and Turkey.

A total of 34 countries and/or customs territories were placed on the “Watch List” in April 2003: Azerbaijan, Belarus, Belize, Bolivia, Bulgaria, Canada, Chile, Colombia, Costa Rica, Croatia, the Dominican Republic, Ecuador, Guatemala, Hungary, Israel, Italy, Jamaica, Kazakhstan, Latvia, Lithuania, Malaysia, Mexico, Peru, Poland, Romania, Saudi Arabia, the Slovak Republic, Tajikistan, Thailand, Turkmenistan, Uruguay, Uzbekistan, Venezuela, and Vietnam.

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 2004 Special 301 report, USTR noted progress made by Hong Kong, Macau, Malaysia and Taiwan in committing to and implementing strong optical media laws and cited concerns in Ukraine, Argentina, Brazil, India, Indonesia, Kuwait, Lebanon, Pakistan, the Philippines, Russia, Belarus, Bulgaria, Canada, Hungary, Lithuania, Peru, Romania, Saudi Arabia, Slovak Republic, and Thailand.

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 pirated materials. CD-Rom 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 126 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 the work. 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.

Promoting International Patent Harmonization

Greater harmonization between patent offices is critical to ensuring broader access for all inventors across national borders. While discussions on harmonizing patent laws have been ongoing at some level for many years, there is a new urgency to take steps now given the increasing importance of patent protection to inventors around the world. International harmonization requires two things: first, increased collaboration among patent offices, and second, legal reform. As to the former, ECAT welcomes the U.S. Patent and Trademark Office’s (PTO) ongoing efforts to strengthen cooperation and information sharing among national and regional patent offices. For instance, the PTO has been urging cooperation toward building international consensus among patent offices on what constitutes "prior art," which, if successful, substantially increases predictability for inventors and promotes consistency of outcomes across jurisdictions. A parallel goal should be the creation of opportunities for mutual recognition of patent office reviews, at least among the three largest patent offices: the PTO, the European Patent Office, and the Japanese Patent Office.

ECAT POSITION: ECAT supports the strong intellectual property commitments included in recent free trade agreements and 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. ECAT also supports continued effort to promote increased cooperation and harmonization among between patent offices.