Emergency Committee For American Trade - Publications

ECAT 2008 AGENDA

SECTION III.4: INTELLECTUAL PROPERTY RIGHTS

Intellectual property is a major contributor to U.S. economic growth, employment and success in the global economy. The protection of intellectual property rights is, therefore, a vital component of U.S. trade and investment policy that is necessary to support continued U.S. competitiveness worldwide. ECAT strongly supports the negotiation, implementation and enforcement of strong protections for intellectual property rights worldwide.

Importance of Strong Intellectual-Property Protections Globally

Strong Intellectual-Property Protections Are Vital to U.S. Economic Growth and Innovation

Intellectual property (IP) has exploded in importance in the U.S. economy over the last 50 years. Intellectual property encompasses creations of the mind, from technological and medical inventions and literary, musical and other artistic works to symbols, names, images, and designs used in commerce.

A wide cross-section of U.S. industries relies on IP rights – such as patents, copyrights, trademarks, test data and trade secrets – as an integral part of its business both domestically and globally. Such industries span the agricultural, manufacturing and service sectors of the U.S. economy, including:

Aerospace
Agriculture
Biotechnology
Chemical
Computer
Electrical Equipment
Electronics Machinery
Medical
Motion pictures
Nutritional
Pharmaceutical
Publishing
Recording Retailers
Scientific
Semiconductor
Software
Telecommunications
Transportation

Study-after-study has demonstrated the important role that IP-dependent industries play in promoting U.S. economic growth and innovation and creating new economic opportunities for Americans. These industries are at the forefront of innovating and producing new technology that has played a major role in spurring U.S. productivity and economic growth over the last decade. These industries show above-average growth in job creation, provide higher than average salaries for millions of U.S. workers and are major contributors to U.S. competitiveness in the global economy. These industries improve the quality and availability of products and services, helping to spur higher standards of living. See the box below detailing the enormous benefits IP-based industries provide to the United States.

It is not coincidental that the United States is both the world’s leading innovator and developer of IP and its leading protector. The time, effort, costs and risks of developing IP products and services are extremely high. By adopting and enforcing strong rules to protect IP, therefore, the United States has created very strong incentives for inventors, artists, researchers and others to invest their time, effort and money to produce IP as diverse as motion pictures, information technology, music, innovative medicines, software and many other products and services. Without such strong protections, the United States simply could not be at the forefront of innovation, new technologies and new products.

Snapshot of How Intellectual Property Rights Contribute to the U.S. Economy and U.S. Competitiveness Globally

Over 50 percent of U.S. exports now depend on some form of IP right, compared to less than 10 percent 50 years ago.
The United States led the world in filing patents, filing an estimated 34 percent of worldwide patents.
IP industries represent one of the largest sources of U.S. jobs, employing about 18 million workers.
IP industries show above-average job growth.
IP industries pay their workers on average 40 percent higher wages than other industries.
U.S. industries dependent on strong IP rights comprise over 20 percent of private sector GDP and have contributed substantially to U.S. economic growth and productivity over the last decade.

Sources: Shayerah Ilias & Ian Fergusson, Intellectual Property Rights and International Trade, Congressional Research Service (Dec. 20, 2007); WIPO Patent Report: Statistics on Worldwide Patent Activity (2007 ed.); Stephen E. Siwek (Economists Inc.), Engines of Growth: Economic Contributions of the U.S. Intellectual Property Industries (Nov. 2005); Amanda Horan, Christopher Johnson & Heather Sykes, Foreign Infringement of Intellectual Property Rights: Implications for Selected Industries, U.S. International Trade Commission Office of Industries Working Paper (Oct. 2005); Dr. Mathew Slaughter, Mainstay IV: Technology, Trade and Investment: The Public Opinion Disconnect (2003).

Intellectual-Property Protection Is Also Important for Developing Countries

While sometimes overlooked, strong intellectual property protection is also an important tool to alleviate poverty and promote wealth creation in developing countries. Protecting the IP rights of Ethiopian coffee and Ghanaian chocolate, for example, has provided very concrete benefits to the workers and producers in Ethiopia and Ghana. Numerous other industries in developing countries are increasingly benefiting from such protections. As well, the adoption and enforcement of strong IP rules have been shown to be important catalysts for increasing foreign investment flows in productive industries in developing countries. As discussed below, the G-8 Heiligendamm Process can play an important role in explaining that relationship.

Strong Intellectual-Property Protections and Enforcement Globally Are Critical for America’s Competitive Advantage

IP-dependent U.S. industries are among the most competitive in the world and represent a key component of U.S. success in the global economy. Their competitiveness, however, is increasingly being undermined by the infringement of intellectual property in developed and developing countries throughout the world. In particular, inadequate standards of protection and lax enforcement of intellectual property rights internationally undermine the ability of America’s leading industries to compete fairly in the global marketplace and have resulted in the annual loss of tens of billions of dollars to American firms and their workers.

The protection of IP is, therefore, a core component in policies that will strengthen the United States position in the global economy. U.S. trade and investment policy should seek to ensure that strong international and foreign rules on IP protection are adopted and fully enforced. As discussed below, there are a number of different tools that the United States is using to promote strong IP protection worldwide. ECAT supports these efforts and their strengthening where appropriate.

Intellectual Property Protections in Free Trade Agreements

Protection of IP rights was added as a principal trade-negotiating objective by Congress in the Omnibus Trade and Competitiveness Act of 1988. Subsequent free trade agreements (FTAs) and multilateral agreements (particularly the Uruguay Round Agreements which created the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), discussed below and in Part II, section 1) incorporated increasingly strong protections for IP through 2006.

In 2007, however, the Congressional-Administration trade deal made changes to key IP protections, undermining several core protections for U.S. pharmaceutical products in the Peru, Panama, and Colombia trade agreements and delaying one key provision in the Korea agreement.

Model FTA Intellectual-Property Protections

U.S. FTAs with Chile, Singapore, Australia, Morocco, Bahrain, and Central America and the Dominican Republic include strong IP commitments 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 of and trade in devices (and their components) primarily designed to circumvent effective technological protection measures.
Establish that governments will only use legitimate computer software and other copyrighted materials.
Create legal incentives for Internet Service Providers (ISPs) to cooperate with copyright owners against illegal downloads, and limit liability for ISPs copyright infringement, consistent with the Digital Millennium Copyright Act.
Protect encrypted program-carrying satellite signals from unauthorized reception or distribution. (A strengthened signal piracy provision is new to the Korea-US FTA which clarifies that the authorized decryption but unauthorized retransmission of a signal is prohibited and should become part of the model intellectual property chapter for all FTAs).
Make illegal the camcording of films in cinemas, a significant source of pirated products. (This provision is new to the Korea-U.S. FTA and should become part of the model intellectual property chapter for all FTAs.)

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.
Extend patent term for unreasonable administrative and regulatory delays in approval (including marketing approval).
Limit use of patented subject matter to support an application for marketing approval of non-patented pharmaceutical products.
Limit 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

Establish 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.
Align marketing approval and patent protection systems to prevent, among other actions, granting marketing approval to patent-infringing products without the authorization of the patent holder.

Trademarks

Apply first-in-time, first-in-right principle for geographic indications.
Adopt domain-name management requirements with dispute-resolution procedure to prevent cyber-squatting.
Establish protection for sound- and scent-based trademarks.

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 and provide for the destruction of the pirated or counterfeit goods.
Require ex parte orders to be acted upon in a timely manner.
Authorize 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.

2007 Congressional-Administration Trade Deal and Pending Trade Agreements

The Congressional-Administration trade deal announced on May 10, 2007, included reductions in IP protections for innovative pharmaceutical products that were subsequently incorporated into the Peru, Panama, and Colombia trade agreements. In particular, the following key changes were made to those three agreements.

Patent-Term Restoration. Agreements no longer require that the term of pharmaceutical patents is extended when there are delays in marketing or patent-approval processes. Patent-term extension provisions continue to be required for non-pharmaceutical patents. Without such patent-term extension provisions, it is possible that the generic product will be on the market at or soon after the time when the patented product finally gets approval, effectively negating any meaningful patent protection. These provisions apply to all pharmaceutical products, not just those required for emergency situations.
Patent Linkage. Agreements no longer require linkage between patent approval and market approval for pharmaceutical products. As a result, there is no prohibition in the agreements against foreign governments granting marketing approval to other companies to sell pharmaceutical products that infringe valid patented products made by U.S. producers. Countries are required to set up administrative or judicial procedures and remedies, such as preliminary injunctions, for the expeditious adjudication of disputes concerning the validity or infringement of a patent. Countries must also provide a transparent system to provide notice to a patent holder that another person is seeking marketing approval for the patented product and provide sufficient time and opportunity for the patent holder to seek available remedies, prior to the marketing of an allegedly infringing product.
Data Protection. Agreements no longer require protection of clinical test data for pharmaceutical products for five years from approval in the other country, allowing instead reduced protection based on the date of approval of the drug in the United States and based on the country’s assessment of the difficulty and cost involved in obtaining such data. The Peru, Colombia and Panama agreements also provide a number of exceptions to the protection of clinical test data that apply to all pharmaceutical products.
Public Health Exceptions. Agreements create an exception to IP protection for pharmaceutical products where a Party takes measures to protect public health in accordance with the Declaration on the TRIPS Agreement and Public Health, waivers of TRIPS granted by WTO members, and any amendment to TRIPS to implement the Public Health Declaration, once it has entered into force.

In the case of Korea, the only two major changes incorporated on IP related to (1) patent linkage, whereby the United States and Korea agreed that neither Party would bring a package-linkage case to dispute settlement for 18 months after the agreement’s entry-into-force, and (2) the exceptions for measures to protect public health as described above.

ECAT strongly supports efforts to promote effective solutions to address the HIV-AIDS and other disease emergencies in Africa and elsewhere. ECAT is concerned, however, that too much emphasis is being placed on weakening intellectual-property rights protections as the primary solution to a problem that is much more complicated, particularly when it is precisely intellectual-property rights protections that foster the development of the pharmaceuticals necessary to treat and, one day, cure and prevent these diseases. Furthermore, the scope of these changes goes far beyond public-health emergencies in several areas, notably patent-term extension, patent linkage, and data protection. In these areas, one of the United States’ most competitive industries is unfairly being undermined. ECAT urges both Congress and the Administration to rethink these changes and adopt standards going forward that are in the interest of innovative U.S. industries and their workers, as well as those throughout the world that rely on the innovative medicines a strong IP system promotes.

WTO Agreement on Trade-Related Aspects of Intellectual Property Rights

One of the agreements negotiated as part of the Uruguay Round, the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), creates a single set of international rules providing a basic minimum standard of protection for the main types of intellectual property, from patents, trademarks and copyrights to industrial designs, integrated-circuit layouts and trade secrets, and requires each WTO Member’s compliance with the two key IP conventions: The Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literacy and Artistic Works. TRIPS also requires the enforcement of these basic protections and prohibits WTO members from discrimination against other trade partners through national treatment and most-favored nation obligations.

Developed countries were required to implement the agreement by January 1, l996; developing countries had to implement by January 1, 2000, and least-developed countries had to implement by January 1, 2006, now extended to July 2013 for many TRIPS provisions and to January 1, 2016 for pharmaceutical patents. TRIPS also provides exceptions from the basic requirements to protect intellectual property, such as in the case of compulsory licensing as discussed below.

While relatively comprehensive, the TRIPS’ obligations fall short of the very high level of protection for IP rights found in the United States. It is important, therefore, that the United States continue to oppose the reopening of the TRIPS agreement, which is being suggested by those who would seek to weaken, not strengthen the 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. As discussed in section II.3, the United States negotiated IPR action items for Russia to undertake on a specific timetable, as part of the U.S.-Russia bilateral negotiations for Russia’s accession. These action items should be implemented before Russia’s accession is finalized.

WTO Dispute Settlement

The United States has brought 15 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 in a manner consistent with the TRIPS agreement. Argentina also agreed to amend its patent law. Several issues remain, including data protection.

In April 2007, the United States formally requested WTO consultations with China on several IP issues, including the lack of adequate penalties for the unauthorized reproduction and distribution of copyrighted works, the release back into commerce of confiscated infringing products and the denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings and performances that have not been authorized for publication or distribution within China. A WTO panel is currently reviewing this complaint.

Compulsory Licensing

Compulsory licensing, whereby a government allows someone other than the patent holder to produce a patented product or process without the patent holder’s consent, represents an exception to the general rule that all patents are protected. Recognizing that certain circumstances may require compulsory licensing, Article 31 of TRIPS authorizes compulsory licensing when certain specified conditions exist, including:

That the non-patent holder first seek permission from the patent holder for use of the patented product on reasonable terms, although this requirement may be waived in cases of national emergency, circumstances of extreme urgency or in cases of public non-commercial use;
The scope and duration of the license shall be limited to the purpose for which it was authorized;
The use shall be authorized predominately for the supply of the domestic market;
The right holder shall be paid adequate remuneration; and
The authorization shall be terminated if the original circumstances change.

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) (which requires that the use shall be predominately for the supply of the domestic market) to allow countries producing generic medicines under compulsory licenses to export the medicines to eligible countries that cannot produce such medicines themselves. The accompanying statement makes clear that the provision should be used in good faith for health-policy reasons, not commercial or industrial policy. As discussed in section III.10, Thailand’s use of compulsory licenses goes beyond the purpose and objective of this understanding.

Anti-Counterfeiting Trade Agreement

Recognizing the increasing and adverse impact of counterfeiting and piracy, the United States announced a new initiative on October 23, 2007, to negotiate an Anti-Counterfeiting Trade Agreement with several key trading partners, including Canada, the European Union (with its 27 Member States), Japan, Korea, Mexico, New Zealand, and Switzerland. The United States seeks to conclude an agreement that will establish among countries committed to strong IPR enforcement a common standard for IPR enforcement to combat international IP infringements, particularly to address counterfeiting and piracy.

The ultimate agreement will address three primary areas:

Cooperation, emphasizing sharing of information, cooperation among law-enforcement agencies, and capacity-building and technical assistance.
Best practices for strong IPR enforcement, which could include public/private advisory groups, development of specialized IPR expertise within law-enforcement agencies, and measures to raise public awareness of negative impact of IPR infringement.
Strengthening the legal framework for IPR enforcement, including through provisions on criminal and civil enforcement, border measures, optical disc piracy, and Internet distribution and information technology.
The agreement is being negotiated separately from any international organization and is not intended to modify the TRIPS agreement. Rather, it is intended to set a higher benchmark for enforcement for countries that want to join on a voluntary basis. ECAT strongly urges that the negotiations promote high standards that are fully enforceable.
Heiligendamm Process
At the G-8 Summit in Heiligendamm, Germany in June 2007, the G-8 initiated the so-called Heiligendamm Process to establish a dialogue on key challenges in the global economy with several important emerging economies -- Brazil, China, India, Mexico and South Africa. The G-8 seeks to improve cooperation and seek tangible results toward joint solutions within two years on four key issues, including “promoting and protecting innovation.”
The G-8 chose the Organization for Economic Cooperation and Development (OECD) as the platform for this new dialogue, and the first meeting was held in October 2007. A progress report will be presented at the 2008 G-8 Summit in Japan, and the final report will be presented at the G8 Summit in Italy in 2009.
This process represents an important opportunity to explore and enhance the important benefits that innovation and IP protections contribute to economic development.
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; and
- Working with like-minded countries and updating U.S. legal assistance and extradition treaties.
The Administration initially focused on several countries, including China, Korea, Mexico, Russia and Taiwan, but enlarged its focus to countries in Asia, Central Europe and Latin America.
The Administration is also working multilaterally with the Asia Pacific Economic Cooperation (APEC) forum, the European Union and others. With strong support from the United States APEC created the Anti-Counterfeiting and Piracy Initiative in 2005 and has adopted a total of five guidelines setting forth high standards for IPR protection and enforcement among APEC countries.
Following the 2005 U.S.-European Union (EU) Summit in which the Leaders expressed their commitment to combating piracy and counterfeiting, the United States and EU adopted an Action Strategy for the Enforcement of IPR Rights in June 2006. The U.S.-EU Working Group seeks to implement that strategy in a number of ways to promote customs cooperation, provide technical assistance to third countries, and address concerns in key countries, such as China and Russia, through closer policy coordination and information exchanges. In February 2007, the IPR Working Group agreed to focus more attention on transshipment points in Latin America, the Middle East, and Southeast Asia.
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 30th reporting 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. (USTR’s 2008 Special 301 Report will be issued on April 30, 2008 after the publication of the ECAT 2008 Agenda.)
In its 2007 Special 301 Report, released on April 30, 2007, the United States did not identify any country as a Priority Foreign Country, but indicated both China and Russia were among the Administration’s top priorities for seeking improved intellectual property protection. The 2007 Report 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. The 2007 report identified four countries for out-of-cycle reviews: Russia, Brazil, Czech Republic and Pakistan to monitor IPR developments and determine if a change is status is required before the next Special 301 Report in April 2008.
The 2007 Special 301 Report identified 12 countries on the “Priority Watch List,” signifying that the United States will monitor their efforts to improve their intellectual property rights protection: Argentina, Chile, China, Egypt, India, Israel, Lebanon, Russia, Thailand, Turkey, Ukraine, and Venezuela. Thailand was elevated to the Priority Watch List as a result of significant deterioration of its protection of patents and copyrights.
A total of 30 countries were placed on the “Watch List” in the 2007 Report: Belarus, Belize, Bolivia, Brazil, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Hungary, Indonesia, Italy, Jamaica, Korea, Kuwait, Lithuania, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Saudi Arabia, Taiwan, Tajikistan, Turkmenistan, Uzbekistan, and Vietnam.
Notably, Brazil was moved to the Watch List (from the Priority Watch List) as a result of significant improvements in copyright enforcement. USTR will conduct an out-of-cycle review to evaluate the sustainability of that progress and to encourage progress on other outstanding IPR concerns. Five trading partners – Bahamas, Bulgaria, Croatia, the EU, and Latvia – were being removed from the Special 301 listing altogether given progress each made in 2006-2007.
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. While China has made some progress in the past year, including by joining the two WIPO Internet treaties, working to implement its commitment to require the installation in government computers with appropriately licensed operating software, and continuing intensive dialogues with the United States through the U.S.-China Joint Commission on Commerce and Trade (JCCT) and the Strategic Economic Dialogue (SED), much more progress is needed. Despite China’s increased enforcement activities, however, copyright piracy remains unacceptably high, including of optical discs, movies, books, journals, and end-user software. Retail and wholesale counterfeiting is also a major problem. While there has been some increased retail enforcement, that effort has been lacking in the wholesale area where more enforcement and deterrence penalties are required. In December 2007, as part of the JCCT and SED, China agreed to intensify efforts, including with respect to counterfeit pharmaceutical products; pirated optical disks; and film, music and software piracy.
Continuing and more rigorous high-level attention is required for China to make needed progress with respect to IP protection and enforcement. The Administration should establish evaluation criteria that provide an objective and verifiable mechanism to measure the adequacy of IPR enforcement leading to a reduction in piracy. At a minimum, these criteria should include an evaluation of 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 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, particularly university communities.
IPR reforms will do little to increase market access if other barriers are imposed. For example, China’s proposal to favor domestic software over U.S. or other foreign software in government procurements would have effectively nullified China’s commitment that government agencies use only legal software (discussed in section III.3). Similarly, China’s continued refusal to allow publishers to print and distribute their materials freely in China increases the likelihood of infringements and piracy by artificially raising the prices foreign-owned publishing houses must charge to recoup transportation and customs costs. Similarly, China’s 20-film cap fosters piracy by preventing access by Chinese consumers to legitimate films. In these cases, China’s commitment to improve its IPR regime must also be accompanied by agreement to increase market access and not to impose discriminatory government procurement regulations or other industrial policies that exclude or significantly restrict U.S. products from the Chinese market.
With regard to Russia, the United States remains concerned in a number of areas from optical disc production and piracy and Internet piracy, to Russia’s revisions to Part IV of its Civil Code that would weaken existing IPR protection laws. As discussed in section II.3, the United States and Russia entered into a separate agreement in November 2006 regarding IPR protection with specific commitments by Russia to take certain actions as part of Russia’s accession to the WTO. Russia has yet to implement fully those commitments.
Online and Optical-Media Piracy
The copyright industry in particular is increasingly faced with multiple challenges to the protection of its intellectual property, both online and with respect to optical media (including compact discs (CDs), video CDs, CD-Recordables (CD-Rs), digital versatile disks (DVDs), DVD-Recordables (DVD-Rs), universal-media discs (UMD) and new formats, such as Blue-ray.
- Online Piracy. The growth in information technologies and the Internet has also provided a means for an explosion of online piracy. The scope of this problem is huge and, as reported by the International Intellectual Property Alliance, includes an estimated 20 billion songs that were illegally downloaded through file-sharing services in ten of the biggest markets in 2006 alone and as many as 10,000 to 20,000 copies of the most popular videogames are successfully downloaded each week. Online piracy results in billions of dollars in lost revenue for globally competitive U.S. copyright industries and their workers.
- Optical-Media Piracy. The growth in the capacity for producing and reproducing optical-media products, including relatively low-cost operations using CD-Rs and DVD-Rs, has also continued to drive optical-media piracy. Much of the world’s 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). Such piracy 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 2007 Special 301 report, USTR noted progress made by Brazil, Indonesia, Malaysia, Nigeria, Pakistan the Philippines, and Ukraine, in implementing controls on optical-media production. The 2007 Special 301 Report, however, cited continuing concerns in Bangladesh, India, Russia and Thailand with optical disc production.
Efforts to combat online and optical-media piracy should continue to be an Administration priority. While the U.S. government should continue to pursue the elimination of online and optical-media piracy through traditional intellectual property-right enforcement mechanisms, because of the ease of production and distribution of pirated optical-media products and the ease of distribution of online pirated products, these enforcement methods may be insufficient. It is, therefore, vital 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 material inputs in order to establish an effective system to deter piracy. While taking steps to have these countries address production, the Administration must also increasingly look to foreign governments to attack the open sale of pirated materials and Internet sites from which such materials can be downloaded. The Administration should also support efforts to encourage ISPs to cooperate with right holders in the protection of copyright online and the deterrence of online infringement, including through the establishment of a mechanism to terminate the Internet access of repeat offenders.
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 adoption of the WIPO treaties represents a necessary and significant step toward the protection of copyrighted materials on the Internet and fostering the growth of electronic commerce. To date, they have been ratified by 62 (WCT) and 60 (WPPT) countries, with the anticipated joint ratification of EU member states expected to bring the total to above 80.
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 ongoing efforts of the U.S. Patent and Trademark Office (PTO) 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 recognizes the vital role that innovation and intellectual property play in enhancing the strength of the U.S. economy through creating economic opportunities and jobs for Americans. It is critical, therefore, that the United States seek the inclusion of strong intellectual-property commitments in free trade and other international agreements. ECAT is disappointed by the reduction of strong intellectual-property protections for pharmaceutical products in the Peru, Panama and Colombia trade agreements and urges both Congress and the Administration to consider the highly negative impact such a reduction has on some of America’s most competitive industries and to seek stronger protections in future agreements.
ECAT 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 supports efforts to conclude a high-standard Anti-Counterfeiting Trade Agreement and the work of the G-8 Heiligendamm Process to promote innovation and intellectual property protection in key emerging markets. ECAT also supports the work of APEC and the U.S.-EU Action Strategy to improve intellectual property protection. 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 efforts to promote increased cooperation and harmonization among patent offices.

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