Order Code RL34292
Intellectual Property Rights and
International Trade
December 20, 2007Updated July 23, 2008
Shayerah Ilias
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Ian F. Fergusson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Intellectual Property Rights and International Trade
Summary
This report provides background on intellectual property rights (IPR) and
discusses the role of U.S. international trade policy in enhancing IPR protection and
enforcement abroad. IPR are legal rights granted by governments to encourage
innovation and creative output by ensuring that creators reap the benefits of their
inventions or works and they may take the form of patents, trade secrets, copyrights,
trademarks, or geographical indications. U.S. industries that rely on IPR contribute
significantly to U.S. economic growth, employment, and trade with other countries.
Counterfeiting and piracy in other countries may result in the loss of billions of
dollars of revenue for U.S. firms as well as the loss of jobs. Responsibility for
developing IPR policy, engaging in IPR-related international negotiations, and
enforcing IPR laws cuts across several different U.S. Government agencies. The
main structures for coordinating interagency efforts are the National Intellectual
Property Law Enforcement Coordinating Council (NIPLECC) and the Strategy
Targeting Organized Piracy (STOP!).
Promoting the enforcement of IPR is an important component of U.S.
international trade policy. Since the 1995 Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) at the World Trade Organization (WTO), trade
policy has been used to enforce IPR abroad. The United States and several trading
partners recently announced plans to pursue a multilateral anti-counterfeiting
agreement that would surpass TRIPS Agreement commitments.
The United States also pursues international IPR support through regional and
bilateral free trade agreements (FTAs), which often include IPR commitments by
U.S. partners exceeding their TRIPS Agreement obligations. However, for the Peru,
Panama, and Colombia FTAs, the Administration agreed to scale back some IPR
requirements to bolster bipartisan support for the FTAs. Other trade policy tools also
are available for U.S. efforts to advance international IPR . Pursuant to Section 182
of the Trade Act of 1974 as amended (P.L. 93-618), the Office of the U.S. Trade
Representative (USTR) identifies countries providing inadequate IPR protection in
its annual “Special 301” report. Section 337 of the amended Tariff Act of 1930
authorizes the U.S. International Trade Commission (ITC) to prohibit U.S. imports
of infringing products. Additionally, under the Generalized System of Preferences
(GSP), the United States may consider a developing country’s IPR policies and
practices as a basis for offering preferential duty-free entry to certain products from
the country, and can suspend GSP benefits if IPR protection is lacking.
IPR protection and enforcement bring up several key issues for Congress. A
central issue is the appropriateness of FTAs as a vehicle for promoting IPR.
Congress also faces the challenge of balancing the need for IPR protection and
enforcement with the goals of the Doha Declaration on Public Health. Additionally,
there has been concern about the effectiveness of the current U.S. IPR enforcement
structure. In the 110th Congress, legislation was introduced calling for a new
structure to coordinate federal IPR enforcement activities and to increase U.S.
international IPR enforcement efforts. This report will be updated as warranted by
events.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Intellectual Property Rights Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Types of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Infringement of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Piracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Counterfeiting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Intellectual Property Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Contribution of Intellectual Property to U.S. Economy . . . . . . . . . . . . . . . . . . . . . 6
Prevalence and Economic Consequences of IPR Infringement . . . . . . . . . . 7. 8
Seizures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sectoral Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910
Motion Picture Piracy Losses: A Closer Look at the Numbers . . . . . . . . . . 1213
The Organization Structure of IPR Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . 1415
Multilateral IPR System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1415
World Trade Organization (WTO) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1415
Declaration on TRIPS Agreement and Public Health . . . . . . . . . . . . . 1617
Intellectual Property Protection and Development . . . . . . . . . . . . . . . . . . . 1819
World Intellectual Property Organization (WIPO) . . . . . . . . . . . . . . . 1819
Free Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2425
Trade Promotion Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2425
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2526
Biodiversity and Traditional Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 2829
Copyright . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2829
U.S. Trade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3536
Special 301 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3536
Special 301 Country Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3536
Special 301 Report for 20072008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3638
Country Identification Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3638
Section 337 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3739
Generalized System of Preferences
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3840
U.S. Agency Functions . . . . . . . . . . . . . . . .and Funding for IPR . . . . . . . . . . . . . . . . . . . . . . . . 3941
Department of Commerce (Commerce) . . . . . . . . . . . . . . . . . . . . . . . . 3941
Department of Justice (DOJ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4042
Department of Homeland Security (DHS) . . . . . . . . . . . . . . . . . . . . . . 4143
Food and Drug Administration (FDA) . . . . . . . . . . . . . . . . . . . . . . . . . 4144
Copyright Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4244
Department of State (State) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4244
United States Trade Representative (USTR) . . . . . . . . . . . . . . . . . . . . 4345
United States International Trade Commission (ITC) . . . . . . . . . . . . . 4346
National Intellectual Property Law Enforcement Coordinating Council
(NIPLECC) . . .
Council (NIPLECC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4346
Strategy Targeting Organized Piracy (STOP!) . . . . . . . . . . . . . . . . . . 4446
Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4547
U.S. Efforts to Promote IPR Through Trade Policy . . . . . . . . . . . . . . . . . . 4547
Effectiveness of the U.S. IPR Organizational Structure . . . . . . . . . . . . . . . 4649
List of Figures
Figure 1. 20062007 Border Seizures of Counterfeit and Pirated Goods . . . . . . . . . . . . 910
List of Tables
Table 1. 2006 Global Intellectual Property Filings Through PCT . . . . . . . .the PCT, 2006-2007 . . . . . 56
Table 2. Estimated U.S. Trade Losses Due to Copyright Piracy . . . . . . . . . . . . ., 2006-2007 . . . 1011
Table 3. 2006 Software Piracy Rates and Losses to U.S. Business Software
Software Companies From Selected Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112
Table 4. Estimated Damages for PhRMA Member Companies From Data
Exclusivity and Patent Protection Violations . . . . . . . . . . . . . . . . . . . . . . . 1315
Table 5. Summary of WIPO-Administered IPR Treaties . . . . . . . . . . . . . . . . . . 2021
Table 6. Patent and Copyright Provisions in the TRIPS Agreement and
Council U.S. FTAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3031
Table 7. FY2007 IPR Protection and Enforcement Budgets for U.S. Government
Agencies . . . . . . . . . . . . .Dedicated Funding for
U.S. Government Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4547
Intellectual Property Rights and International
Trade
Introduction
Intellectual property rights (IPR) traditionally have been matters of national
concern. Individual nation states have developed IPR regimes reflecting their
national needs and priorities. Over time, intellectual property protection and
enforcement have come to the forefront as a key international trade issue for the
United States, figuring prominently in the multilateral trade policy arena and in
regional and bilateral U.S. free trade agreements (FTAs).
The protection and enforcement of IPR in the United States and abroad is of key
interest to Congress. Intellectual property is an increasingly critical component of the
U.S. economy. Industries that rely on intellectual property protection in the United
States claim to lose billions of dollars each year due to overseas IPR infringement.
There is also concern about the potential health and safety consequences of
counterfeit pharmaceutical drugs and other products, as well as the link between
terrorist groups and traffic in counterfeit and pirated goods. The role of Congress in
addressing IPR and trade-related issues stems from the U.S. Constitution, which
provides Congress with the power to regulate international trade. While authority to
negotiate trade agreements has been delegated periodically to the President,
Congressional action is needed to bring the agreements into force.
In promoting IPR through international trade policy, Congress may choose to
consider whether or not FTAs are an appropriate vehicle for boosting intellectual
property protection and enforcement. Congress may also balance IPR protection and
enforcement with other public policy goals such as access to medicine in poor or
developing countries. Another issue that is before Congress is the effectiveness of
the current U.S. coordinating structure for promoting international IPR support. In
the 110th Congress, legislation was introduced calling for the creation of a new entity
to coordinate federal government interagency intellectual property activities.
Legislation also was proposed calling for greater U.S. international IPR enforcement
efforts and increased prioritization of resources devoted to such activities.
This report discusses the different kinds of IPR; forms of IPR infringement;
importance of IPR to the U.S. economy; estimated losses associated with IPR
infringement; organizational structure of IPR protection in multilateral, regional,
bilateral; U.S. government agencies involved with IPR and trade; and issues for
Congress regarding IPR and international trade. This report will be updated as events
warrant.
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Intellectual Property Rights Basics
This section provides definitions of the various kinds of intellectual property
rights (patents, trade secrets, copyrights, trademarks, and geographical indications)
and intellectual property rights misappropriation (infringement, piracy, and
counterfeiting).
Types of Intellectual Property
IPR are legal rights granted by governments to encourage innovation and
creative output. They ensure that creators reap the benefits of their inventions or
works and may take the form of patents, trade secrets, copyrights, trademarks, or
geographical indications. Through IPR, governments grant a temporary legal
monopoly to innovators by giving them the right to limit or control the use of their
creations by others. IPR may be traded or licensed to others, usually in return for fees
and or royalty payments. Although the World Trade Organization’s (WTO)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
provides minimum standards for IPR protections, such rights are granted on a
national basis and are, in general, enforceable only in the country in which they are
granted. However, countries are obliged to abide by WTO rules and their IPR
enforcement practices can be challenged by other countries at the WTO.
Patents. The Patent Act (35 U.S.C. 101 et seq) governs the issuance and use
of patents in the United States. Patents are granted for inventions of new products,
processes, or organisms (known as utility patents). Patents may also be granted for
designs and plants. For an invention to be patentable, it must be new, “non-obvious”
(involving an inventive step), and have a potential industrial or commercial
application. The patent provides the holder with the exclusive right to sell the
invention for a period of 20 years, or to prevent the incorporation of the invention
into other products without the permission of the rights-holder. The patent right is
based on the proposition that inventors must be granted a temporary monopoly over
their invention in order to encourage innovation and to promote the expenditure of
money on research and development. The patentholder recoups his up-front costs
through a temporary monopoly over sale of the invention. In return for this economic
rent, the patentholder must disclose the content of the patent along with test data and
other information concerning the invention. This is meant to spur further creativity
by those seeking to build on the patent after its expiration. Domestically, patents are
granted by the Patent and Trademark Office (PTO) of the Department of Commerce.
Trade Secrets. A trade secret is any type of valuable information, including
a “formula, pattern, compilation, program device, method, technique, or process,”
that derives independent economic value from not being generally known or readily
ascertainable and is subject to reasonable efforts by the owner to maintain its
secrecy.1 Examples of trade secrets include blueprints, customer lists, and pricing
information. While protection of patents and copyright is a matter of federal law,
1
Uniform Trade Secret Act, §1(4).
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trade secret protection is found also in state law. However, most states subscribe to
the Uniform Trade Secret Act (UTSA).
There are important differences between trade secrets and patents. Individuals
do not have to apply for trade secret protection as they would do with patents.
Protection of trade secrets originates immediately with the creation of the trade
secret; there is no process for applying for or registering trade secrets. Trade secret
protection does not expire unless the trade secret becomes known. In contrast, patent
applicants must disclose information about their innovation to the PTO in order to
acquire a patent. Patents offer rights holders stronger protection but for a limited
period of time. While applying for a patent can be a costly and lengthy process,
patents are valuable if the confidentiality of the innovation is fragile or if the area of
research is highly competitive.
Copyright. Protection of copyrights in the United States is based on the
Copyright Act (17 U.S.C. 101, et seq). Copyrights protect original expressions of
authorship. Such protections include literary or artistic works such as books, music,
sound recordings, movies, paintings, architectural works, and computer software and
databases (though not individual bits of data). Traditionally, copyrights differed from
patents in that there was no claim to industrial applicability or novelty of the idea.
The expression of the idea, not the underlying idea, was being copyrighted. While
some of the criteria for copyrights differ from those of patents, the objective is the
same; investments of time, money, and effort to create work of cultural, social and
economic significance should be protected to encourage further creativity. U.S. law
protects authorship for life plus 70 years for personal works, or 120 years from
creation (or 95 years from publication) for corporate works. Copyrights may be
registered by the Copyright Office of the Library of Congress, or acquired through
creating and fixation of the work of authorship.
Trademarks. Trademark protection in the United States is governed jointly
by state and federal law. The main federal statute is the Lanham Act of 1946 (15
U.S.C. 1051, et seq). Also known as service marks, trademarks permit the seller to
use a distinctive name, mark, or symbol to identify and market a product, service, or
company. The trademark allows quick identification of the seller’s product, and for
good or ill, can become an indicator of a product’s quality. If for good, the trademark
can be valuable in the introduction of new products by conveying an instant
assurance of quality. The trademark is designed to prevent other companies with
similar merchandise from free-riding on the association of quality with the
trademarked item. Thus, a trademarked good may command a premium in the
marketplace because of its reputation. For trademarks, distinctiveness is at a
premium because a trademark must capture the consumer’s imagination to be
effective as generic names of commodities cannot be trademarked. Trademark rights
are acquired through use or through registration with the PTO.
A related concept to trademarks is the geographic indication, which is also
protected by the Lanham Act. The geographic indication acts to protect the quality
and reputation of a distinctive product originating in a certain region; however, the
benefit does not accrue to a sole producer, but rather the producers of a region.
Geographic indications are generally sought for agricultural products, or wines and
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spirits. Protection for geographical indications is acquired in the United States by
registration with the PTO, through a process similar to trademark registration.2
Infringement of Intellectual Property
In the case of patents, infringement of a patent owner’s exclusive rights (as
afforded by patent laws) involves a third party’s unauthorized use of the patented
device. As relates to international trade, the greatest challenge to the patent right is
infringement in foreign countries, or non-observance by WTO member states to the
minimal standards of the TRIPS Agreement. Copyright infringement occurs when
a third party engages in one of the acts requiring the copyright owner’s permission
without his consent, including reproducing, performing, making sound or visual
recordings of, and broadcasting the copyrighted work.
Piracy. The term “piracy” has applications to both copyrights and trademarks.
The major challenge facing copyright protection is piracy, either through physical
duplication of the work, illegal dissemination of copyrighted material (such as
computer software, music, or movies) over the Internet, and/or participation in
commercial transactions of copyrighted materials without the consent of the
copyright owner. With respect to trademarks, piracy involves the registration or use
of a famous foreign trademark that is not registered in the country or is invalid
because the trademark has not been used.
Counterfeiting. An imitation of a product is referred to as a “counterfeit” or
a “fake.” Counterfeit products are manufactured, marketed, and distributed with the
appearance of being the genuine good and originating from the genuine
manufacturer.3 The purpose of counterfeit goods is to deceive consumers about their
origin and nature. Counterfeiting and copying of original goods is a major challenge
for trademarked products. The counterfeited product can be sold for a premium
because of its association of the original item, while reducing the sales of the original
items. Furthermore, consumer experience with a counterfeited good of inferior
quality, can damage the reputation of the trademark product. Popular examples of
counterfeit products in fake fashionwear, such as Louis Vuitton bags or Rolex
watches, or fake pharmaceutical products, such as popular brand-name prescription
medicines.
A related issue is the imitation of labels and packaging of trademarked goods.
In this situation, the imitator uses a trademark that is confusingly similar to a wellknown trademark in order to benefit from the reputation of the product with which
he is competing.
2
For information on geographical indications and international trade negotiations, see CRS
Report RS21569, Geographic Indications and WTO Negotiations, by Charles E. Hanrahan.
3
Counterfeit goods should be distinguished from generic goods, i.e., in the case of generic
forms of pharmaceutical medicines.
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Global Intellectual Property Holdings
Intellectual property holdings that are protected by international agreements are
concentrated in firms headquartered in the United States and other developed
economies. Developing countries tend to be net importers of intellectual property.
For example, half of the approximately 5.6 million patents in force in 2005 were
owned by U.S. or Japanese companies.from companies or inventors in Japan (28% of total) or the United States (21% of
total).4 Through the Patent Cooperation Treaty
(PCT), an international patent filing
system administered by the World Intellectual
Property Organization (WIPO), the United States and Japan representedthese
two countries continued to represent a little over
half of all international patent filings in 2006
in 2006 and 2007, with Germany in third place (see Table 1).
In comparison, although
developing countries account for 106 of the 136 countries who are accounted for the majority of
signatories to the
PCT, they represented only 8% of all PCT international patent
filings in the same year.4
2006.5 However, patent filings levels are not uniform among developing
countries. The
In 2006, the industrializing developing economies of Korea, China, India,
Singapore, South
Africa, Brazil, and Mexico represented over 96% of all patent
filings from
developing countries in 2006. These countries largely contributed to the dramatic
increase (28%) in patent filings from developing countries in 2006, with. Korea and
China China
particularly fueling this increase in patent filings.5
Table 1. 2006 Global Intellectual Property Filings Through PCT
Country
Estimated number of filings
Percent of total filings
United States
49,555
34.1
Japan
26,906
18.5
Germany
16,929
11.7
Republic of Korea
5,935
4.1
France
5,902
4.1
United Kingdom
5,045
3.5
Netherlands
4,393
3.0
China
3,910
2.7
Switzerland
3,403
2.3
Sweden
3,123
2.1
20,199
13.9
145,300
100.0
All other countries
Total
Source: WIPO
4fueled this increase in patent filings.6
In 2007, Korea and China continued to be among the top fifteen countries of
origin for PCT international applications in 2007. China experienced double-digit
growth in patent filings from 2006 to 2007, the highest rate among any country.
Other developing countries from which the largest number of applications came were
India, South Africa, Brazil, Mexico, Malaysia, Egypt, Saudi Arabia, and Colombia.7
4
The most recently available year of data from WIPO for patents in force by country of
origin is 2005.
5
WIPO, “Record Year for International Patent Filings with Significant Growth from
Northeast Asia,” press release, February 8, 2007. Statistics on patent applications filed and patents
patents granted by country office are available on the WIPO website, [http://www.wipo.org].
5
Ibid.
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6
7
Ibid.
WIPO, “Unprecedented Number of International Patent Filings in 2007,” press release,
February 21, 2008.
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Table 1. Global Intellectual Property Filings Through the PCT,
2006-2007
Country
2006
2007
Estimated
%
Change
United States
50,941
52,280
33.5%
2.6%
Japan
27,033
27,731
17.8%
2.6%
Germany
16,732
18,134
11.6%
8.4%
Korea
5,944
7,061
4.5%
18.8%
France
6,242
6,370
4.1%
2.1%
United Kingdom
5,090
5,553
3.6%
9.1%
China
3,951
5,456
3.5%
38.1%
Netherlands
4,529
4,186
2.7%
-7.6%
Switzerland
3,577
3,674
2.4%
2.7%
Sweden
3,316
3,533
2.3%
6.5%
Italy
2,716
2,927
1.9%
7.8%
Canada
2,566
2,707
1.7%
5.5%
Australia
2,001
2,054
1.3%
2.6%
Finland
1,845
1,952
1.3%
5.8%
Israel
1,589
1,683
1.1%
5.9%
11,084
10,800
6.9%
-2.6%
149,156
156,101
100.0%
4.7%
All Others
Totals
Source: WIPO
Contribution of Intellectual Property to U.S.
Economy
Intellectual property is an important source of comparative advantage for the
United States. Numerous industries in the United States rely on intellectual property
for their businesses. Among the industries that are dependant on patent protection
are the aerospace, automotive, computer, consumer electronics, pharmaceutical, and
semiconductor industries. Copyright-based industries include the software, data
processing, motion pictures, publishing, and recording industries. Other industries
that indirectly benefit from IPR protection include retailers, traders, and
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transportation businesses, which support the distribution of goods and services
derived from intellectual property.68
According to a 2004 study, U.S. industries that rely on intellectual property
accounted for close to 40% of total growth achieved by the U.S. private sector in
2003. These industries comprised about 20% of the private sector’s contribution to
the U.S. gross domestic product (GDP) that same year. With almost 18 million
workers, the intellectual property industries are one of the largest source of jobs in
the United States; employees receive notably higher wages than individuals in other
sectors.79 More broadly, IPR-intensive industries also contribute positively to the
U.S.
economy through productivity gains and other spillover effects.
The intellectual property industries contribute positively to the overall U.S. trade
balance through royalties and licensing fees. Rights-holders may authorize the use
of technologies, trademarks, and entertainment products that they own to entities in
foreign countries, resulting in revenues through royalties and license fees.810 In 2006,
U.S. receipts from cross-border trade in royalties and license fees (relating to patent,
trademark, copyright, and other intangible rights) amounted to $63.4 billion and
payments totaled $26.4 billion. This resulted in a surplus of $37.0 billion, a 6%
percent increase from the previous of year.911
Industry-specific figures also demonstrate the importance of the intellectual
property to the U.S. economy. For example, the business and entertainment software,
motion pictures, recording, and publishing industries, which rely on copyright
protection, was estimated to constitute about $819 billion or about 7% of U.S. GDP
in 2005. These industries accounted for nearly 13% of U.S. economic growth and
6
4% of U.S. employment (5.4 million workers) in 2005. Foreign sales and exports
from these industries amounted to $110.8 billion in 2005.12
The pharmaceutical industry, which is dependent on patents, provides another
illustration of intellectual property contributions to the U.S. economy. Domestic
sales by research-based pharmaceutical companies that are members of
Pharmaceutical Researchers and Manufacturers of America (PhRMA) were an
estimated $189.6 billion in 2007, a 6.7% increase from the previous year ($177.7
8
Stephen E. Siwek, “Engines of Growth: Economic Contributions of the US Intellectual
Property Industries,” commissioned by NBC Universal, 2005, p. 2.
79
Ibid., p. 3.
810
Amanda Horan, Christopher Johnson, and Heather Sykes, “Foreign Infringement of
Intellectual Property Rights: Implications for Selected U.S. Industries,” Office of Industries
Working Paper, U.S. International Trade Commission, October 2005, p. 4.
9
11
Jennifer Koncz, Michael Mann, and Erin Nephew, “U.S. International Services,” Survey
of Current Business, U.S. Bureau of Economic Analysis (BEA), October 2007, pp. 53-54.
This measure of cross-border trade in royalties and license fees by U.S. companies include
transactions with both affiliated and unaffiliated foreign companies.
CRS-7
4% of U.S. employment (5.4 million workers) in 2005. Foreign sales and exports
from these industries amounted to $110.8 billion in 2005.10
The pharmaceutical industry, which is dependent on patents, provides another
illustration of intellectual property contributions to the U.S. economy. Domestic
sales by research-based pharmaceutical companies that are members of
Pharmaceutical Researchers and Manufacturers of America (PhRMA) were $174.7
billion in 2006, a 5% increase from the previous year, while sales abroad increased
by 2% to $71.1 billion for 2006.11 The U.S. pharmaceutical industry maintains a
strong
12
Stephen E. Siwek, “Copyright Industries in the U.S. Economy: The 2006 Report,”
prepared for the International Intellectual Property Alliance (IIPA), November 2006,
[http://www.iipa.com], pp. 3-5.
CRS-8
billion). PhRMA company sales abroad increased by 10.0% from $76.8 billion in
2006 to $81.9 billion in 2007.13 The U.S. pharmaceutical industry maintains a strong
global position, accounting for over 30% of value added in the global
pharmaceutical market place.12 pharmaceutical
market place in 2005.14
Prevalence and Economic Consequences of IPR Infringement
Several factors contribute to the growing problem of IPR infringement. While
the costs and time for research and development are high, IPR infringement is
associated with relatively low costs and risks and a high profit margin. For instance,
based on a survey of ten pharmaceutical companies, the Tufts Center for the Study
of Drug Development estimated that the cost for developing a new drug cost was
over $800 million on average.1315 According to PhRMA, it takes about 10 to 15 years
of research and development to create a new drug. Pharmaceutical companies
collectively spent an estimated $55.2 billion for research and development in 2006.1416
In contrast, drug counterfeiters can lower production costs by using inexpensive, and
perhaps dangerous or ineffective, ingredient substitutes. The development of
technologies and products which can be easily duplicated, such as recorded or digital
media, has led to an increase in counterfeiting and piracy. Increasing Internet usage
also has contributed to the distribution of counterfeit and pirated products.
Additionally, civil and criminal penalties often are not sufficient deterrents for piracy
and counterfeiting. The United States is especially concerned with foreign IPR
infringement of U.S. intellectual property. Compared to foreign countries, IPR
infringements levels in the United States are estimated to be relatively low.
10
Stephen E. Siwek, “Copyright Industries in the U.S. Economy: The 2006 Report,”
prepared for the International Intellectual Property Alliance (IIPA), November 2006,
[http://www.iipa.com], pp. 3-5.
11
PhRMA, “Pharmaceutical Industry Profile 2007,” March 2007, [http://www.phrma.org],
p. 47.
12
National Science Foundation (NSF), “Science and Engineering Indicators 2006,” Chapter
6: Industry, Technology, and the Global Marketplace, 2006,
[http://www.nsf.gov/statistics/seind06/], pp. 5 and 15.
13
Seizures. Because of the secretive, illicit nature of IPR infringement, it is
difficult to estimate the magnitude of its impact on U.S. producers and exporters.
However, data on seizures of counterfeit and pirated goods can be obtained from
customs authorities. One study by the Organization for Economic Cooperation and
Development (OECD) indirectly extrapolated available customs data on seizures to
conclude that worldwide trade in counterfeit and pirated goods may have amounted
to $200 billion in 2005. In particular, the study used the customs information to
estimate the probability that imports of particular goods from particular countries
would be pirated or counterfeit. The OECD estimate does not include the counterfeit
and pirated goods produced and consumed within a country and does not include
13
PhRMA, “Pharmaceutical Industry Profile 2008,” March 2008, [http://www.phrma.org],
p. 58.
14
National Science Foundation (NSF), “Science and Engineering Indicators 2008,” Chapter
6: Industry, Technology, and the Global Marketplace, 2008, [http://www.nsf.gov/
statistics/seind06/], p. 21.
15
J.A. DiMasi, “Tufts Center for the Study of Drug Development Pegs Cost of a New
Prescription Medicine at $802 Million,” press release, November 30, 2001. The study is
available at [http://csdd.tufts.edu/]. Some contend that the study overestimates actual
research and development costs for creating a new drug; Public Citizen offers a critique,
accessible at [http://www.publiccitizen.org].
1416
PhRMA, “Pharmaceutical Industry Profile 2007,” March 2007, [http://www.phrma.org],
pp. 2 and 6.
CRS-92 and 6.
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Seizures. Because of the secretive, illicit nature of IPR infringement, it is
difficult to estimate the magnitude of its impact on U.S. producers and exporters.
However, data on seizures of counterfeit and pirated goods can be obtained from
customs authorities. One study by the Organization for Economic Cooperation and
Development (OECD) indirectly extrapolated available customs data on seizures to
conclude that worldwide trade in counterfeit and pirated goods may have amounted
to $200 billion in 2005. In particular, the study used the customs information to
estimate the probability that imports of particular goods from particular countries
would be pirated or counterfeit. The OECD estimate does not include the counterfeit
and pirated goods produced and consumed within a country and does not include
infringing goods distributed over the Internet. If these figures were included, the
trade estimate undoubtedly would be higher.1517
Data on pirated and counterfeit seizures at the U.S. border, provided by the U.S.
Department of Homeland Security (DHS), shed light on U.S. trade in IPR
infringement problem within the United States. In 2006, the Customs and Border
Protection (CBP) and Immigration and Customs Enforcement (ICE) agencies of the
DHS made 14,675 seizures, nearly double the 8,022 seizures made in 2005. The
domestic value of seizures totaled $155 million in domestic value in 2006, a nearly
70% increase from
2005 ($93 million). Of the 2006 seizures, counterfeit footwear
represented $63.4 million (41% of the total). Other popular items included wearing
apparel ($23.3 million in value, 16%); handbags, wallets, and backpacks ($14.8
million, 9%); computer and hardware ($14.3 million, 9%); and consumer electronics
($7.1 million, 5%) (see Figure 1). Goods from China accounted for the majority of
seizures in 2006 (81%), representing $125.6 million in value.
15
OECD, “The Economic Impact of Counterfeiting and Piracy,”Executive Summary, 2007,
p. 4.
CRS-9
Figure 1. 2006 Border Seizures of Counterfeit and Pirated
Goods
Other Goods
19%
Pharmaceuticals
1%
Footwear
41%
Consumer
Electronics
5%
Computer and
Hardware
9%
Handbags,
Wallets, and
Backpacks
9%
Clothing Apparel
16%
Sources: CBP and L.A. Strategic Trade Center
Sectoral Infringement. U.S. industries that rely on IPR protection claim to
lose billions of dollars in revenue annually due to piracy and counterfeiting. While
the economic consequences of IPR infringement are perceived to be serious, there are
no comprehensive estimates of the total losses associated with all types of IPR
infringement. Two sectors that have calculated the extent of infringement in their
industries and related costs are copyrights and pharmaceuticalsCompared to 2006, the total number of seizures in 2007 was
lower at 13,657, but the domestic value of the seizures rose nearly a third to $197
million. In 2007, a top priority for the CBP was seizing counterfeit imports that
endanger the health and safety of consumers, such as fake healthcare products,
pharmaceutical products, and consumer electronics.18
DHS provides data on counterfeit goods seized by category. Of the goods
intercepted in 2007, counterfeit footwear represented $77.8 million (40% of the
total). Other popular items included wearing apparel ($27.0 million in value, 14%);
consumer electronics ($16.0 million, 8%); handbags, wallets, and backpacks ($14.2
million, 7%); and watches and parts ($13.3 million, 7%). Seizures of counterfeit
pharmaceuticals increased significantly, from $2.3 million in 2006 (1% of total) to
$11.1 million in 2007 (6%) (see Figure 1).
17
OECD, “The Economic Impact of Counterfeiting and Piracy, ”Executive Summary, 2007,
p. 4.
18
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” January 2008, pp. 74.
CRS-10
Figure 1. 2007 Border Seizures of Counterfeit and Pirated Goods
Sunglasses and Parts
2%
Computer and
Hardw are
5%
Headw ear
1%
Media
4%
All Other Goods
7%
Footw ear
40%
Pharmaceuticals
6%
Watches and Parts
7%
Handbags, Wallets,
and Backpacks
7%
Wearing Apparel
14%
Consumer Electronics
8%
Sources: CBP and L.A. Strategic Trade Center.
Of all U.S. trading partners, China continues to account for the majority of
counterfeits intercepted at the U.S. border. In 2007, seizures of goods originating
from China represented 80% of all seizures and $158.1 million in value. Other top
trading partners from which IPR-infringing goods were seized are Hong Kong,
Taiwan, Pakistan, the United Kingdom, Egypt, Korea, India, Canada, and Colombia.
Sectoral Infringement. U.S. industries that rely on IPR protection claim to
lose billions of dollars in revenue annually due to piracy and counterfeiting. In 2002,
the CBP estimated that counterfeit goods cost U.S. companies and industries about
$200 billion in revenue loss and 750,000 in job loss each year.19 Also in 2002, the
U.S. Federal Bureau of Investigation (FBI) estimated that counterfeiting and piracy
resulted in U.S. business revenue losses between $200 million and $250 million
annually.20 Give the above estimates, the Coalition Against Counterfeiting and
Piracy (CACP) asserts that a conservative estimate for U.S. businesses’ annual
19
CBP Press Release, “U.S. Customs Announces International Counterfeit Case Involving
Caterpillar Heavy Equipment,” May 29, 2002. Cited by LECG, LLC, “Economic Analysis
of the Proposed CACP Anti-Counterfeiting and Piracy Initiative,” November 27, 2007.
20
FBI Press Release, July 17, 2002, [http://www.fbi.gov/pressrel/pressrel02/o
utreach071702.htm], Cited by LECG, LLC, “Economic Analysis of the Proposed CACP
Anti-Counterfeiting and Piracy Initiative,” November 27, 2007.
CRS-11
revenue loss due to counterfeiting and piracy is about $225 billion.21 More recent
comprehensive estimates of the total losses experienced by U.S. businesses due to all
types of IPR infringement are not available. However, two intellectual propertybased sectors that have calculated the extent of infringement in their industries and
related costs are copyrights and pharmaceuticals. A discussion of estimated losses
from these two sectors follows.
Copyright Industry. The International Intellectual Property Alliance (IIPA),
a coalition of seven member associations representing over 1,300 U.S. copyrightbased companies, provides annual estimates of U.S. trade loss associated with
copyright infringements in selected countries.1622 For 20062007, the IIPA claimed that
copyright infringements in 6143 countries resulted in an estimated $15.3 billion in trade
losses for the United States, a 9% decrease from the previous year (see Table 2).
16
The IIPA member associations are: Association of American Publishers (AAP), Business
Software Alliance (BSA), Entertainment Software Alliance (ESA), Independent Film and
Television Alliance (I.F.T.A.), Motion Picture Association of America (MPAA), and
Recording Industry Association of America (RIAA).
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China and Russia were the leading culprits in terms of trade losses due to copyright
piracy, each contributing to at least $2 billion in trade losses in 2006.17
Table 2. Estimated Trade Losses Due to Copyright Piracy
Copyright Industry
(Millions of U.S. dollars)
2005
2006
Business software
8,684.4
10,345.0
Records and music
2,456.3
2,374.4
Motion pictures
2,913.0
Not available
Entertainment software
2,652.8
1,951.0
Books
600.5
582.5
Totals
17,307.0
15,252.9
Source: IIPA18.3 billion in trade
losses for the United States (see Table 2). China was the leading culprit in terms of
trade losses due to copyright piracy, contributing to at least $3.5 billion in trade
losses in 2007. Russia was the second largest source of trade losses, totaling nearly
$2.6 billion that year.23
Table 2. Estimated U.S. Trade Losses Due to Copyright Piracy,
2006-2007
Copyright Industry
(Millions of U.S. dollars)
2006
2007
Business software
9,141.0
13,004.0
Records and music
2,293.3
2,182.5
Not available
Not available
1,891.3
2,578.0
Books
548.5
525.0
Totals
13,873.6
18,289.5
Motion pictures
Entertainment software
Source: IIPA “Special 301” Report
IIPA predicts that U.S. trade losses due to copyright infringement may be higher
than reported because its estimates do not account for Internet piracy, which IIPA
contends is an important contributor to copyright piracy.18 There is a possibility that24 There is a possibility that
21
LECG, LLC, “Economic Analysis of the Proposed CACP Anti-Counterfeiting and Piracy
Initiative,” November 27, 2007.
22
The IIPA member associations are: Association of American Publishers (AAP), Business
Software Alliance (BSA), Entertainment Software Alliance (ESA), Independent Film and
Television Alliance (I.F.T.A.), Motion Picture Association of America (MPAA), and
Recording Industry Association of America (RIAA).
23
IIPA, “2008 ‘Special 301 USTR Decisions: IIPA’s 2006 and 2007 Estimated Trade Losses
Due to Copyright Piracy (in millions of U.S. dollars) and 2006-2007 Estimated Levels of
Copyright Piracy,” June 17, 2008, [http://www.iipa.com].
24
“The Copyright Industries in the International Intellectual Property Alliance (IIPA)
(continued...)
CRS-12
such IPR infringement loss estimates actually may overestimate the extent to which
sales of pirated and counterfeit goods displace legitimate sales. The basic economic
model employed in such estimates assumes that there is perfect substitutability
between pirated and legitimate goods, which would equate sales of pirated goods to
revenue losses of legitimate U.S. copyright businesses. Some analysts suggest that
legitimate firms face a competition threat only if the individuals purchasing
counterfeit products would be able and willing to purchase the legitimate product at
the price offered when piracy is not present.1925 For consumers in poor developing
countries, especially, this assumption may not be tenable.
There is not always a direct relationship between IPR infringement rates and the
costs to U.S. firms. The size of a country’s market and U.S. industries’ access to the
market affect the extent to which infringement rates translate into costs to U.S. IPRbased industries. For instance, the United States had the lowest software piracy rate
in the world in 2006 (21%). However, the United States was also the largest
contributor to piracy losses for the U.S. business software industry because of the
significant size of the domestic computer software market. Losses to the software
industry from U.S.-based piracy totaled $7.3 billion in 2006. By contrast, countries
17
IIPA, “IIPA 2007 ‘Special 301’ Report,” Appendix A: Estimated Trade Losses Due to
Piracy and Piracy Levels (2005-2006) for IIPA’s 2007 Special 301 Recommendations,
February 12, 2007, [http://www.iipa.com], p. 2.
18
“The Copyright Industries in the International Intellectual Property Alliance (IIPA)
Submit to USTR their 2007 Report on Piracy in 60 Countries/Territories,” press release,
February 12, 2007, [http://www.iipa.com].
19
Robert G. Picard, “A Note on Economic Losses Due to Theft, Infringement, and Piracy
of Protected Works,” Journal of Media Economics, 17(3), 207-217, 2004.
CRS-11
with higher software piracy rates, nevertheless, had lower infringement costs to U.S.
software firms (see Table 3). The smaller sizes of the markets in these countries
contributed to lower piracy-related absolute losses stemming from these countries.
The worldwide software piracy rate was 35%, with global piracy amounting to $39.6
billion in losses for the U.S. business software industry.2026
Table 3. 2006 Software Piracy Rates and Losses to U.S.
Business Software Companies From Selected Countries
Country
Piracy Rate
Piracy Loss
(millions of U.S. dollars)
Zimbabwe
91%
$2
Vietnam
88%
$96
Pakistan
86%
$143
China
82%
$5,429
Russia
80%
$2,197
Canada
34%
$784
Denmark
25%
$183
United States
21%
$7,289
United States
Source: BSA.
2024
(...continued)
Submit to USTR their 2007 Report on Piracy in 60 Countries/Territories,” press release,
February 12, 2007, [http://www.iipa.com].
25
Robert G. Picard, “A Note on Economic Losses Due to Theft, Infringement, and Piracy
of Protected Works,” Journal of Media Economics, 17(3), 207-217, 2004.
26
BSA, “Fourth Annual BSA and IDC Global Software Piracy Study,” May 2006,
[http://www.bsa.org/globalstudy/], pp. 10-11.
CRS-1213
Motion Picture Piracy Losses: A Closer Look at the Numbers
Recent studies have focused on the economic damages sustained by specific
copyright industries. A study conducted by LEK Consulting for the MPAA asserted
that the direct economic losses to major U.S. movie companies due to motion picture
piracy was approximately $6.1 billion in 2005.a Conversely, this figure can be viewed
as an estimate of the future gains that the could be obtained if piracy was reduced
substantially.
The study found that 80% of U.S. motion picture studio losses resulted from
piracy overseas, while 20% resulted from piracy in the United States. China had the
greatest motion picture piracy rate, with an estimated 90% of the motion picture
market considered to be illegitimate. U.S. film companies lost an estimated $244
million in revenue from piracy in China. At 80%, Russia and Thailand had the second
highest motion picture piracy rates, with losses totaling $266 million and $149 million
respectively. In terms of dollars losses, however, the leading sources of potential
dollar losses for U.S. businesses were Mexico ($483 million), the United Kingdom
($406 million), and France ($322 million), which had significantly lower rates of
piracy than the former countries.b
A subsequent study found that in addition to the direct losses faced by the
motion picture industry, there are also losses sustained by “downstream” industries,
such as motion picture theatrical exhibitors or the home-video industry. Accounting
for these losses, the motion picture industry experiences $20.5 billion annually in lost
output. Using economic multipliers, the study estimated that 141,030 jobs would have
been created in the United States annually if motion picture piracy did not occur. This
translates into $2.7 billion in lost earnings each year by U.S. workers. The federal,
state, and local governments would lose at least $422 million in tax revenues annually
from lost personal income, corporate income, and production taxes. This analysis is
based on a Regional Input-Output Modeling System (RIMS), which is maintained by
the U.S. Bureau of Economic Analysis (BEA).c The study appears to be based on the
assumption that the extra revenue that would be obtained absent piracy would be
directed toward increased film production.
a. “The Cost of Movie Piracy,”analysis prepared by LEK for the MPAA, obtained via
electronic request from MPAA, [http://www.mpaa.org], p. 5.
b. Ibid., pp. 6-7.
c. Stephen E. Siwek, “The True Cost of Motion Picture Piracy to the U.S.
Economy,”Institute for Policy Innovation: Policy Report #186, September 2006,
[http://www.ipi.org], pp. 4-6, 8-9.
Pharmaceutical Industry. The World Health Organization (WHO)
estimates that many countries in Africa, Asia, and Latin America have areas where
between 10% and 30% of medicines sold are counterfeit.2127 The U.S. FDA also
estimates that at least 10% of drugs worldwide are counterfeit.2228 In the United States
and many other developed countries, with relatively strong regulatory systems, the
21
27
WHO, “Counterfeit Medicines,” fact sheet, revised November 14, 2006,
[http://www.who.int/mediacentre/factsheets/fs275/en/index.html].
2228
U.S. FDA, “Counterfeit Drugs Question and Answers,” July 2003,
[http://www.fda.gov/oc/initiatives/counterfeit/default.htm].
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(continued...)
CRS-14
and many other developed countries, with relatively strong regulatory systems, the
prevalence of counterfeit drugs is low. According to U.S. customs data,
pharmaceuticals accounted for only 1% of all goods seized in 2006, with a domestic
value of $2.2 million.2329 Still, there is growing concern about the vulnerability of the
U.S. medicine supply and distribution chain, especially in light of recent high-profile
cases about counterfeit drugs entering the United States.
PhRMA provides annual estimates of U.S. pharmaceutical industry losses from
foreign violations of data exclusivity and patent protection.2430 In its 2007 Special 301
submission to the USTR (covering the period of October 2005 to September 2006),
PhRMA contended that its member companies sustained damages totaling an
estimated $21.7 million from data exclusivity and patent violations in 24 countries
(see Table 4).2531 Damages reported in the 2007 submission were nearly double those
reported in the prior year’s submission (covering October 2005 to September 2005).
While the total loss associated with IPR infringement grew, damages as a percentage
of sales declined from the 2006 submission to the 2007 submission.26
Table 4. Estimated Damages for PhRMA Member Companies
From Data Exclusivity and Patent Protection Violations
Oct. 2004 - Sept. 2005
Oct. 2005 - Sept. 2006
Total Damages
$13.9 million
$21.7 million
Total Sales
$74.6 million
$172.1 million
19%
13%
Damages as a Percentage of Sales
Source: PhRMA 2006 and 2007 Special 301 Submissions.
2332 At the time of
reporting for 2008 Special 301 submissions, PhRMA was not able to provide damage
estimates due to trade barriers associated with intellectual property protection and
market access.33
28
(...continued)
oc/initiatives/counterfeit/default.htm].
29
U.S. CBP and L.A. Strategic Trade Center, “FY2006 Top IPR Commodities
Seized,”
November 7, 2006, [http://www.cbp.gov]. Because of the costs and resources
required to
conduct physical inspections, many counterfeit products escape inspection,
making it
difficult to determine the fraction of pirated goods caught. As a result, seizure
statistics statistics
from the DHS agencies do not reflect on the overall size of the counterfeit market
and total
losses.
24
30
PhRMA’s calculations of damage due to violations of data exclusivity are based on a
five-year fiveyear data protection period; any sales not made by the patent holder within the data
exclusivity period were regarded as data exclusivity damages. For damages from patent
protection violations, PhRMA used a ten-year patent protection period and considered any
sales not made by the patent holder within that period to be damages. For some countries,
PhRMA did not report damages because data was not available at the time.
2531
Economic losses in PhRMA’s annual Special 301 submission are not reported on
calendar-year basis because fourth quarter economic data is not available at the time the
report is issued.
2632
PhRMA, “Special 301 Submission for 2007,” Appendix: Damage Estimate Methodology,
p. v.
CRS-14
33
PhRMA, “Special 301 Submissions for 2008.”
CRS-15
Table 4. Estimated Damages for PhRMA Member Companies
From Data Exclusivity and Patent Protection Violations
Oct. 2004 - Sept. 2005
Oct. 2005 - Sept. 2006
Total Damages
$13.9 million
$21.7 million
Total Sales
$74.6 million
$172.1 million
19%
13%
Damages as a Percentage of Sales
Source: PhRMA 2006 and 2007 Special 301 Submissions.
The Organization Structure of IPR Protection
Given the importance of intellectual property to the U.S. economy and the
economic losses associated with counterfeiting and piracy, the United States is a
leading advocate of strong global IPR standards and enforcement. Increasingly, the
United States has integrated IPR policy in its international trade policy activities,
pursuing enhanced IPR laws and enforcement through the WTO, regional and
bilateral trade agreements, and national trade laws.
Multilateral IPR System
World Trade Organization (WTO). At the center of the present multilateral
trading system is the World Trade Organization (WTO), an international organization
established in 1995 as the successor to the General Agreements on Tariffs and Trade
(GATT). The WTO was established as the result of the Uruguay Round of trade
negotiations (1986-1994), which resulted in numerous agreements on trade in goods,
services, investment and other non-tariff barriers to trade. One of the Uruguay
Round agreements was the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). The TRIPS Agreement sets minimum standards on
intellectual property rights protection and enforcement with which all WTO member
states must comply. The United States, the European countries, and the IPR business
community were instrumental in including IPR on the Uruguay Round agenda. Many
developing countries were wary of including IPR in trade negotiations, preferring to
discuss them under the World Intellectual Property Organization (WIPO) (see below)
instead. However, developing countries acceded, after being granted delayed
compliance periods, and after achieving negotiating goals on other issues such as
textiles and clothing, and savoring the prospect of operating under a rules-based
trading system.
While previous international agreements on intellectual property rights continue
to exist (see Table 4), the TRIPS Agreement was the first time that intellectual
property rules were incorporated into the multilateral trading system. Two basic
tenets of the TRIPS Agreement are national treatment (signatories must treat parties
of other WTO members no less favorably in terms of IPR protection than the party’s
own nationals) and most-favored-nation treatment (any advantage in IPR protection
granted to the party of another WTO member shall be granted to nationals of all other
WTO member states).
CRS-16
Much of the TRIPS Agreement sets out the extent of the agreement’s coverage
of the various types of intellectual property: copyrights, trademarks, geographical
indications, industrial designs, patents, layout of circuitry design, trade secrets, and
test data. The TRIPS Agreement provisions build on several existing IPR treaties
administered by the WIPO (discussed below). Another part provides standards of
enforcement for IPR covered by the agreement. It enumerates standards for civil and
administrative procedures and remedies, the application of border measures, and
criminal procedures. A Council for the TRIPS Agreement was established to
monitor the implementation of the agreement and transition arrangements were
devised for developing countries. Finally, the agreement provides for the resolution
of disputes under the Uruguay Round Agreement’s Dispute Settlement
CRS-15
Understanding (DSU). The binding nature of the DSU, with the possibility of the
withdrawal of trade concessions (usually the reimposition of tariffs) for noncompliance, sets this agreement apart from previous IPR treaties that did not have
effective dispute settlement mechanisms. In April 2007, the United States filed two
WTO dispute settlement cases against China, alleging inadequacies in China’s IPR
laws and its barriers to market access for U.S. copyright businesses.2734 China has
called on the United States to withdraw its complaints, asserting that it has made
progress in address its IPR shortcomings.35
The TRIPS Agreement also seeks a balance of rights and obligations between
the private right, enumerated above, and the obligation “to secure social and cultural
development that benefits all.”2836 Article 7 declares that:
... the protection and enforcement of IPR should contribute to the promotion of
technological innovation and to the transfer and dissemination of technology, to
the mutual advantage of producers and users of technological knowledge and in
a manner conducive to social and economic welfare and to a balance of rights
and obligations.
This paragraph attempts to link the protection of IPR with greater technology
transfer, including technology covered by IPR protection, to the developing world.
The language itself has been interpreted in various ways. Developed countries have
tended to consider this language exhortatory, but developing countries have tried,
without much success, to make technology transfer a meaningful obligation within
the TRIPS Agreement system. Article 66.2 of the agreement requires developed
country members to provide incentives to their enterprises and institutions to promote
technology transfer to least-developed countries to assist them in establishing a viable
technology base. Developed countries report annually on their efforts to encourage
technology transfer (LDCs).
34
USTR, “United States Files WTO Cases Against China Over Deficiencies in China’s
Intellectual Property Rights Laws and Market Access Barriers to Copyright-Based
Industries,” press release, April 9, 2007, [http://www.ustr.gov]. See also CRS Report
RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
35
Liza Porteus Viana, “Industry Losing Faith in WIPO: Debates US WTO Cases Against
China,” Intellectual Property Watch, March 28, 2008.
36
Pascal Lamy, “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later,”
Journal of World Trade, October 2004, p. 925.
CRS-17
Complying with international IPR standards may impose greater burdens on
developing countries than developed countries. Developing countries generally have
to engage in greater efforts to bring their laws, judicial processes, and enforcement
mechanism into compliance with the TRIPS Agreement. Consequently, developing
countries were given an extended period of time in which to bring their laws and
enforcement mechanisms into compliance with the TRIPS Agreement. Developing
countries and post-Soviet states were given an additional four years from the entry
into force of the agreement (January 1, 1995). For products that were not covered by
a country’s patent system (such as pharmaceuticals in many cases), an additional five
years was granted to bring such products under coverage. For developing countries,
all provisions of the TRIPS agreement should now be in force. For the least
27
USTR, “United States Files WTO Cases Against China Over Deficiencies in China’s
Intellectual Property Rights Laws and Market Access Barriers to Copyright-Based
Industries,” press release, April 9, 2007, [http://www.ustr.gov]. See also CRS Report
RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
28
Pascal Lamy, “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later,”
Journal of World Trade, October 2004, p. 925.
CRS-16
developed countries (LDCs), the phase-in period was set at 10 years (January 1,
2006), and for pharmaceuticals, the compliance period was later extended to 2016.2937
Declaration on TRIPS Agreement and Public Health.3038 In agreeing to
launch the Doha Round of WTO trade negotiations, trade ministers adopted a
“Declaration on the TRIPS Agreement and Public Health” on November 14, 2001.3139
The Declaration sought to alleviate developing country dissatisfaction with aspects
of the TRIPS regime. It delayed the implementation of patent system provisions for
pharmaceutical products for least developed countries (LDCs) until 2016. The
declaration committed member states to interpret and implement the agreement to
support public health and to promote access to medicines for all. The Declaration
recognized certain “flexibilities” in the TRIPS agreement to allow each member to
grant compulsory licenses for pharmaceuticals and to determine what constitutes a
national emergency, expressly including public health emergencies such as
HIV/AIDS, malaria, and tuberculosis or other epidemics.
Paragraph 6 of the Declaration directed the WTO members to formulate a
solution to a corollary concern, the use of compulsory licensing by countries with
insufficient or inadequate manufacturing capability. Compulsory licenses are issued
by governments to authorize the use or production of a patented item by a domestic
party other than a patent holder. They are authorized by Article 31 of TRIPS, which
places certain limitations on their use, scope, duration. A provision that
predominantly restricted production authorized by compulsory license to the
domestic market became the focal point of the negotiations because it, in effect,
conveys the right of compulsory licensing only to countries with the capability to
manufacture a given product. Countries without a domestic manufacturing capability
were essentially precluded from using this flexibility of the TRIPS agreement.
37
“Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for
Least-Developed Country Members for Certain Obligations with Respect to Pharmaceutical
Products,” WTO Document IP/C/25, July 1, 2002.
38
See also CRS Report RL33750, The WTO, Intellectual Property Rights, and the Access
to Medicines Controversy, by Ian F. Fergusson.
39
Declaration on the TRIPS Agreement and Public Health, (WT/MIN(01)/DEC/2),
November 14, 2001, available at [http://www.wto.org/english/thewto_e/minist_e/min01_e/
mindecl_trips_e.htm].
CRS-18
On the eve of the Cancun Ministerial in August 2003, WTO members agreed
on a Decision32Decision40 to waive the domestic market provision of the TRIPS article on
compulsory licensing (Article 31(f)) for exports of pharmaceutical products for
“HIV/AIDS, malaria, tuberculosis and other epidemics” to least developed countries
(LDCs) and countries with insufficient manufacturing capacity. This Decision was
incorporated as an amendment to the TRIPS agreement at the Hong Kong Ministerial
in December 2005. The amendment must be ratified by 2/3 of the member states, of
which only 11, including the United States, have ratified to date. Until then, the 2003
29
“Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for
Least-Developed Country Members for Certain Obligations with Respect to Pharmaceutical
Products”, WTO Document IP/C/25, July 1, 2002.
30
See also CRS Report RL33750, The WTO, Intellectual Property Rights, and the Access
to Medicines Controversy, by Ian F. Fergusson.
31
Declaration on the TRIPS Agreement and Public Health, (WT/MIN(01)/DEC/2),
November 14, 2001, available at [http://www.wto.org/english/thewto_e/minist_e/min01_e/
mindecl_trips_e.htm].
32
“Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
Public Health,” IP/C/W/405, August 30, 2003, and accompanying Chairman’s statement
available at [http://www.wto.org/english/news_e/pres03_e/pr350_e.htm].
CRS-17
waiver continues in force. The system established by the WTO allows LDC and
countries without sufficient manufacturing capacity to issue a compulsory license to
a company in a country that can produce such a product. After a matching
compulsory license is issued by the producer country, the drug can be manufacturing
and exported subject to various notification requirements, quantity and safeguard
restrictions. While several exporting countries have established laws and procedures
for implementing this system, only Rwanda has availed itself to use the system to
import HIV/AIDS medicines from a generic manufacturer in Canada.33
33two-thirds of the 152 WTO
member states. Until then, the 2003 waiver continues in force. To date, 43 countries
(the United States, Switzerland, El Salvador, South Korea, Norway, India, the
Philippines, Israel, Japan, Australia, Singapore, Hong Kong, China, Mauritius, Egypt,
Mexico, and the 27 countries of the European Union) have ratified the amendment.41
The system established by the WTO allows LDC and countries without sufficient
manufacturing capacity to issue a compulsory license to a company in a country that
can produce such a product. After a matching compulsory license is issued by the
producer country, the drug can be manufacturing and exported subject to various
notification requirements, quantity and safeguard restrictions. While several
exporting countries have established laws and procedures for implementing this
system, only Rwanda has availed itself to use the system to import HIV/AIDS
medicines from a generic manufacturer in Canada.42
40
“Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
Public Health,” IP/C/W/405, August 30, 2003, and accompanying Chairman’s statement,
available at [http://www.wto.org/english/news_e/pres03_e/pr350_e.htm].
41
“Members accepting amendment of the TRIPS Agreement,” [http://www.wto.org/
english/tratop_e/trips_e/amendment_e.htm].
42
“Canada Issues Compulsory License For HIV/AIDS Drug Export To Rwanda, In First
Test Of WTO Procedure,” Bridges Weekly Trade News Digest, September 26, 2007,
[http://www.ictsd.org/weekly/07-09-26/story2.htm].
CRS-1819
Intellectual Property Protection and Development
The controversy over the relationship between IPR and development was
engaged by the advent of the TRIPS Agreement, which for the first time placed IPR
obligations on developing countries. Some hold that expansion of IPR is an obstacle
to growth and development in less advanced countries, while others, with a
diametrically opposing view, maintain that IPR are beneficial to both developed and
developing countries.
Some IPR critics believe that a strong IPR regime may reduce developing
countries’ access to technology from advanced countries by imposing higher fees for
technology licenses and production right, limiting their innovation and economic
growth and development. For instance, Japan, Singapore, Taiwan, and South Korea
enhanced their technological abilities and developed their economies through “reverse
engineering” of foreign technologies.
Others claim that IPR promote technology transfer through increased trade,
foreign investment, and licensing in the long-run by making a country more attractive
to foreign partners. A 2002 OECD study concluded that stronger IPR laws,
particularly enhanced patent standards, may be associated with increased foreign
direct investment (FDI) and trade for developing countries over time, with variation
by industries and level of development.a For instance, India experienced an increase
in foreign investment and technology transfer once it expanded its patent protection.
China offers a counterexample of a country with a weak IPR regime but high FDI and
trade levels.
There is also evidence that IPR’s impact on developing countries may vary by
the level of development. One study suggests that IPR protection may offer more
benefits for the more industrialized developing countries, such as Brazil and India,
compared to other developing countries. Such industrializing economies could
experience economic growth of as much as 0.5% annually through increased trade,
FDI, and licensing.b Another study finds that rapid economic growth is associated
with weak intellectual property regimes, but that developing countries with higher
levels of per capita income may benefit economically from stronger IPR regimes.c
There is also concern that strengthened patent protection may drive up prices for
medicines or delay the entry of generic drugs into the market, reducing access to
HIV/AIDS treatments and other drugs. IPR supporters argue that strong IPR is critical
to creating incentives for pharmaceutical innovations and suggest that reduced prices
are no guarantee that needed goods will make it into the hands of individuals in
developing countries due to political corruption, poverty, and poor social
infrastructure.
a. OECD, “The Impact of Trade-Related Intellectual Property Rights on Trade and
Foreign Direct Investment in Developing Countries,” May 28, 2003,
[http://www.oecd.org], p. 21.
b. Keith E. Maskus, Intellectual Property Rights in the Global Economy, Institute for
International Economics, Washington, DC, August 2000.
c. Commission on Intellectual Property Rights (CIPR), Integrating Intellectual
Property Rights and Development Policy, September 2002.
World Intellectual Property Organization (WIPO). In addition to the
WTO, the other main multilateral venue for addressing IPR issues is WIPO, a United
Nations agency. Established in 1967, WIPO is charged with fostering the effective
CRS-1920
use and protection of intellectual property globally. WIPO’s mandate focuses
exclusively on intellectual property, in contrast to the WTO’s broader international
trade mandate. WIPO’s antecedents are the 1883 Paris Convention for the Protection
of Industry Property and the 1886 Berne Convention for the Protection of Literary
and Artistic Work. Most of the substantive provisions of these two treaties are
incorporated in the WTO’s TRIPS Agreement. WIPO’s primary function is to
administer a group of IPR treaties which put forth minimum standards for member
states (shown in Table 5). All international IPR treaties, save TRIPS, are
administered by WIPO.
In order to address digital technology issues not dealt with in the TRIPS
Agreement, WIPO established the WIPO Copyright Treaty (WCT) and WIPO
Performance and Phonograms Treaty (WPPT) in 1996.3443 Recent WIPO efforts have
focused on patent law. In June 2000, WIPO signatories adopted the Patent Law
Treaty (PLT), which called for harmonization of patent procedures. This agreement
went into force on April 28, 2005. Discussions began in May 2001 for the
Substantive Patent Law Treaty (SPLT), which targets issues specifically related to
patent grants, but stalled in 2006.
WIPO’s other functions include assisting member states through training
programs, legislative information, intellectual property institutional development,
automation and office modernization efforts, and public awareness activities.
WIPO’s enforcement activities are more limited than those of the WTO. Through its
Advisory Committee on Enforcement (ACE), WIPO cooperates with member states
to promote international coordination on enforcement activities.
With the emergence of the TRIPS Agreement, some observers question the
relevance of WIPO. However, others contend that the TRIPS Agreement has given
WIPO a new and stronger role. Through a 1996 agreement between the WTO and
WIPO, the two organizations have agreed to work closely together to ensure the
implementation of the TRIPS Agreement by member states through legal and
technical assistance and technical cooperation.3544 In 1998, WIPO and WTO began a
joint initiative based on the 1996 agreement to enhance their coordination of
technical cooperation activities in order to assist developing countries, in particular,
to fulfill their TRIPS commitments.36
3445
43
These WCT and WPPT frequently are referred to as the WIPO Internet Treaties.
3544
“Agreement between the World Intellectual Property Organization and the World Trade
Organization,” [http://www.wto.org/english/tratop_e/trips_e/wtowip_e.htm].
3645
WIPO, “Intellectual Property Handbook,” [http://www.wipo.org], p. 359.
CRS-2021
Table 5. Summary of WIPO-Administered IPR Treaties
Treaty
Date Concluded
Provisions
Intellectual Property Protection Treaties
Paris Convention for the Protection of Industry Property
(Paris Convention)
1883 (entered into force
1884)
Protects industrial property (includes patents, marks, industrial
designs, utility models, trade names, and geographic indications)
Berne Convention for the Protection of Literary and Artistic
Works (Berne Convention)
1886 (entered into force
1886)
Protects literary and artistic works, providing right to control and
receive payments for use
Madrid Agreement for the Repression of False and
Deceptive Indications of Source on Goods (Madrid
Agreement - Indications of Source)
1891
Requires States to seize imported goods with false/deceptive
indications of source or to prohibit importation of such goods; open
to States party to Paris Convention (1883)
Rome Convention for the Protecting of Performers,
Producers of Phonograms and Broadcasting Organizations
(Rome Convention)
1961
Protects rights of performers against certain acts to which they have
not agreed; protects rights of producers of phonograms, and
broadcasting organizations to authorize/prohibit certain acts; open to
States party to Berne Convention (1886)
Convention for the Protection of Producers of Phonograms
Against Unauthorized Duplication of their Phonograms
(Phonograms Convention)
1971
Protects producers of phonograms against unauthorized reproduction
of their phonograms or importation of duplications for public
distribution
Brussels Convention Relating to the Distribution of
Programme-Carrying Signals Transmitted by Satellite
(Brussels Convention)
1974
Protects against the unauthorized distribution of program-carrying
signals transmitted by satellite
CRS-2122
Treaty
Date Concluded
Provisions
Nairobi Treaty on the Protection of the Olympic Symbol
(Nairobi Treaty)
1981
Protects Olympic symbol against unauthorized commercial uses
Treaty on the International Registration of Audiovisual
Works (Film Register Treaty)
1989
Establishes International Register for Audiovisual Works
Treaty on Intellectual Property in Respect to Integrated
Circuits (Washington Treaty)
1989
Protects layout designs which display electrical components of an
integrated circuit
Trademark Law Treaty (TLT)
1994
Streamlines national and regional trademark registration processes
WIPO Copyright Treaty (WCT)
1996 (entered into force
2002)
Special agreement under Berne Convention; grants exclusive rights
to owners of copyright in computer programs and compilations of
data/other material
WIPO Performances and Phonograms Treaty (WPPT)
1996 (entered into force
2002)
Grants exclusive rights to performers and phonogram producers
Patent Law Treaty (PLT)
2000 (entered into
2005)
Aims to harmonize and streamline national and regional patent
application procedures and patents
Singapore Treaty on the Law of the Trademarks
2006 (not yet in force)
Builds on TLT (1994); aims to harmonize trademark registration
procedures; has wider scope (includes communication technology
developments)
Global Protection System Treaties
CRS-2223
Treaty
Date Concluded
Provisions
Budapest Treaty on the International Recognition of the
Deposit of Microorganisms for the Purposes of Patent
Procedure (Budapest Treaty)
1977 (entered into force
1980)
Special agreement under Paris Convention (1883); requires States to
recognize the deposit of a micoorganism with any “international
depositary authority”
Madrid Agreement Concerning the International
Registration of Marks (Madrid Agreement - Marks)
1891
Requires seizure of imported goods with false/deceptive indication
of source or prohibition of importation of such goods; open to States
party to Paris Convention (1883)
Hague Agreement Concerning the International Registration
of Industrial Designs (Hague Agreement)
1925 (entered into force
1928)
Allows protection of industrial designs in all member states on basis
of single application with WIPO; three acts currently in force: 1934,
1960, and 1999 Acts
Locarno Agreement Establishing an International
Classification for Industrial Designs
1968 (entered into force
1971)
Establishes a classification for industrial designs; open to States
party to Paris Convention (1883)
Patent Cooperation Treaty (PCT)
1970 (entered into force
1978)
Establishes an international patent filing system; allows a single
international patent application to have legal standing in all countries
signatory to PCT; open to States party to Paris Convention (1883)
Protocol Relating to the Madrid Agreement (Madrid
Protocol )
1989 (entered into force
1995)
Relates to Madrid Agreement (1891); seeks to make Madrid system
more amenable to domestic laws of certain who are not yet
signatories to Madrid Agreement; open to States party to Paris
Convention (1883)
CRS-2324
Treaty
Date Concluded
Provisions
Classification Treaties
Nice Agreement Concerning the International Classification
of Goods and Services of the Purposes of the Registration of
Marks (Nice Agreement)
1957 (entered into force
1961)
Establishes a classification of goods and services in order to register
trademarks and service marks; open to States party to Paris
Convention (1883)
Lisbon Agreement for the Protection of Appellations of
Origin and their International Registration (Lisbon
Agreement)
1958
Provides international protection for geographical indications
Strasbourg Agreement Concerning the Industrial Patent
Classification (Strasbourg Agreement)
1971 (entered into force
1975)
Establishes the International Patent Classification (IPC); open to
States party to Paris Convention (1883)
Vienna Agreement Establishing Classification of the
Figurative Elements of Marks (Vienna Agreement)
1973 (entered into force
1985)
Establishes a classification for marks which consist/contain
figurative components; open to States party to Paris Convention
(1883)
Source: WIPO.
CRS-2425
Free Trade Agreements
In recent years, the United States increasingly has focused on free trade
agreements (FTAs) as an instrument to promote stronger IPR regimes by foreign
trading partners. In general, the United States has viewed the TRIPS Agreement and
WIPO-administered treaties as a minimum standard and has pursued higher IPR
protection and enforcement levels through regional and bilateral agreements.
Trade Promotion Authority. Under Trade Promotion Authority (TPA),
Congress delegates its constitutional authority to regulate foreign commerce to the
President to negotiate and enter into certain free trade agreements (FTAs), and to
have their implementing bills considered under expedited legislative procedures (no
amendment, up-or-down vote), provided the President follows the guidelines,
objectives, reporting, and consultation requirements mandated by Congress. IPR
have become important negotiating objectives in grants of trade promotion authority;
the most recent extension of that authority expired on July 1, 2007.
IPR negotiating objectives were first enacted in trade negotiating authority (then
known as fast-track authority) by the Omnibus Trade and Competitiveness Act of
1988 (P.L. 100-418). The act sought enactment and enforcement of adequate IPR
protection from negotiating partners. It also sought to strengthen international rules,
dispute settlement, and enforcement procedures through the GATT and other existing
intellectual property conventions. This negotiating mandate led to the establishment
of the TRIPS Agreement during the Uruguay Round and the IPR provisions in North
American Free Trade Agreement (NAFTA).
FTA negotiations in this century have been conducted under the Trade
Promotion Authority Act of 2002 (P.L. 107-210). In the intervening period since the
1988 Act, the TRIPS agreement came into force and the IPR provisions of NAFTA
became the template for further bilateral or regional FTAs. Thus the focus of IPR
negotiating objectives shifted from creating to strengthening the IPR trade regime.
One broad objective was to apply the existing IPR protection to digital media. The
negotiating objectives contained provisions to extend IPR protection to new and
emerging technologies and to methods of transmission and dissemination. The
language called for standards of enforcement to keep pace with technological change
and to allow rights-holders the legal and technological protections for their works
over the Internet and other new media.
A second broad objective was to negotiate trade agreements in terms of IPR that
“reflect a standard of protection similar to that found in U.S. law.”3746 This phrase
opened the door to the negotiation of provisions that go beyond the level of
protection provided in the TRIPS agreement. Often referred to as “TRIPS-plus”
provisions, these obligations include expanding coverage to new sectors; establishing
more extensive standards of protection; and reducing the flexibility options available
3746
P.L. 107-210, Sec. 2102(b)(4).
CRS-2526
in TRIPS. Some of the new measures also address technological innovations that
have come about since the TRIPS Agreement.3847
With the change of control in the 110th Congress, Democrats called for changes
in the administration’s trade negotiating strategy in return for support of future trade
agreements. In May 2007, the Administration and Congressional leadership
concluded a bipartisan agreement on trade policy that addressed Democratic concerns
about the implications of enhanced IPR on developing countries’ ability to meet
public health needs. In particular, Congressional leadership sought to ensure that
pending FTAs allowed trading partners to have enough flexibility to meet their IPR
obligations and to be able to promote access to life-saving medicines, while
otherwise meeting their international IPR protection and enforcement obligations.
IPR language previously negotiated in the FTAs with the developing countries of
Peru, Panama, and Colombia (discussed below) subsequently were modified to
reflect the agreement. Because Korea is an industrialized country, the United States
did not significantly scale-down the patent protection obligations in the U.S.-Korea
FTA. What follows is a discussion of some of the central patent and copyright
standards sought in FTAs that are currently in force or were modified by the White
House and Congress (see Table 6).3948
Patents. Patent protection is arguably the most contentious area of U.S. FTA
negotiations on IPR issues. While the United States and other developed countries
advocate for strong patent protections in order to promote innovation, there is
concern that such stringent protections may delay developing countries’ access to
generic drugs and increase prices. Many of the FTAs in force include TRIPS-plus
patent provisions, the most prominent of which are patent term length extensions,
linkages between regulatory authority and patent status, data protection, compulsory
licensing and parallel importation. The FTAs with Peru, Panama, and Colombia
respond to the concerns of some Members of Congress over provisions that could
restrict access to medicines in these countries and contain less ambitious standards
for pharmaceutical patents, compared to previously negotiated FTAs.
Pharmaceutical industry advocates express concern that this scale-down in patent
protection in these FTAs may set a precedent for future FTA negotiations.4049
Patent Term Extensions. Many FTAs include provisions for mandatory
patent term length extensions beyond the TRIPS Agreement obligation of patent
protection terms of twenty years from the filing date. These FTAs allow for
extensions in cases of “unreasonable” delays in the issuance of patents due to the
regulatory review or administrative process. Patent holders contend that such
measures enhance the ability of rights-holders to recoup the costs of research and
3847
The European Union also plans to pursue what are considered to be TRIPS-plus
provisions by some in future Economic Partnership Agreements with African, Caribbean,
and Pacific countries.
39
48
For a more detailed discussion of the differences between the TRIPS Agreement and
regional FTAs that are in force, see CRS Report RL33205, Intellectual Property and the
Free Trade Agreements: Innovation Policy Issues, by John R. Thomas.
4049
Inside US Trade, “Brand-Name Industry Alarmed at IPR Precedent of FTA Template,”
May 18, 2007.
CRS-2627
development of new products. However, there is concern that patent terms
extensions may delay the entry of generic drugs into a market. In a scale-down from
TRIPS-plus obligations, FTAs with Peru, Colombia, and Panama state that patent
term restorations for pharmaceutical products are optional.
Patent Linkages. In general, the term “patent linkage” refers to the
attachment of regulatory approval for the marketing of a drug with the status of a
patent. If a patent exists, the FDA and its counterparts in other countries may not
grant marketing approval for a generic version of a drug that is patented in the
country without the permission of the patent holder. Patent linkage is a common
provision in the trade agreements obtained by the United States. This presents a
departure from TRIPS, under which generic drug manufacturers are able to apply for
marketing approval without the patent owner’s permission and prior to the expiration
of the patent; this may reduce the time it takes for generic drugs to enter a market
once the patent expires.4150 In light of developing country concerns about delays in
access to generic versions of drugs, FTAs signed with Peru, Panama, and Colombia
do not tie marketing approval for a generic drug with the patent status of its brand
name drug.
Data Protection. In cases where the patent holders must submit undisclosed
data regarding the safety or effectiveness of new pharmaceutical or agricultural
products in order to market them, the TRIPS Agreement requires members to take
measures to protect such data from disclosure and unfair commercial use. The
TRIPS agreement does not prescribe any time period for this protection. Recent U.S.
FTAs take these standards a step further, generally requiring a five-year period of
marketing exclusivity for the patent holder, which typically begins from the date the
product is approved in the country. Under this TRIPS-plus provision, generic drug
manufacturers who want to market and distribute a generic version of a drug while
the data exclusivity period is in effect must conduct their own clinical trials and
submit their own findings to the national drug regulatory authority; they cannot rely
on the findings submitted by the patent holder. Some critics contend that such
provisions may raise the cost of manufacturing generic versions of patented drugs,
as well as delay access to generic forms of drugs. The FTAs with Peru, Panama, and
Colombia now include provisions that may reduce data exclusivity terms of five
years by a minimum of six months in practice.4251
Compulsory Licensing. A compulsory license is an authorization by a
government for third parties (such as a company or the government itself) for the
manufacture or use of a product under patent without the permission of the rightsholder. The TRIPS Agreement permits signatories to issue compulsory licenses for
4150
While TRIPS does not directly speak to the rights of generic drug manufacturers in
obtaining marketing approval for a generic drug before the expiration of the patented drug,
Article 30 of TRIPS permits exceptions of patent rights for activities such as “research, prior
user rights, and pre-expiration testing.”
42
51
For example, under the Peru FTA, if a company files to market a new drug in Peru after
making an initial filing in another country, such as the United States, and Peru approves the
drug within six months of the filing, the data exclusivity period begins at the time the drug
was approved in the country of the initial filing, not Peru.
CRS-2728
patented devices and provide compensation to the owner of the patent and does not
limit the situations in which such licenses may be issued. The third party must have
attempted to obtain permission from the patent holder, although this requirement is
waived in times of national emergency or other extenuating circumstances. U.S.
FTAs with Australia and Singapore limit attaining compulsory licenses only for
domestic use and to situations of remedying antitrust violations or in situations of
public non-commercial use, national emergency, or other cases of extreme need. Also
under these FTAs, the patent holder is under no obligation to provide test data,
technical know-how or other undisclosed information for the patent subject to
compulsory license. The compulsory license provisions have not been included in
FTAs with developing countries.
Parallel Importing. Parallel imports, also known as grey-market goods, refer
to goods imported into a country without permission of the rights-holder after those
goods were legitimately sold elsewhere. Parallel importation relates to the concept
of territorial exhaustion of IPRs, which governs the extent of IPR after the first sale.
Under a national system of exhaustion practiced in the United States, IPR are
exhausted domestically after the first sale, but not abroad, thus prohibiting trade in
those goods without permission of the rights-holder. Under an international system,
IPR are exhausted at the first sale for any destination, and such goods can be exported
freely. Article 6 of the TRIPS specifically excludes issues arising from exhaustion
of IPR from WTO dispute settlement, allowing each member to adopt different
exhaustion regimes. Thus, TRIPS does not address the issue of parallel imports.
Some developing countries contend that parallel importation is an alternative method
for governments to increase access to medicines in the absence of a compulsory
license.4352 Pharmaceutical companies have voiced concerns that this practice
threatens their ability to engage in price differentiation between different markets.
U.S. FTAs negotiated with Australia, Singapore, and Morocco disallow parallel
importing of patented products. Subsequent U.S. negotiated FTAs have not included
this provision, due to language included in the Science, State, Justice, and
Commerce, and Related Agencies, Appropriations Act of 2006 (P.L. 109-108), which
prohibited the use of such provisions.
4352
GAO Report 07-1198, “U.S. Trade Policy Guidance on WTO Declaration on Access to
Medicines May Need Clarification,” September 2007, p. 19.
CRS-2829
Biodiversity and Traditional Knowledge
International trade negotiations increasingly have focused on the protection of
plant and animal inventions, new plant varieties, traditional knowledge, and folklore.
Some indigenous communities in developing countries and international nongovernmental organizations have expressed concern about the use of patents to
provide private rights for traditional knowledge and genetic material; the commercial
use of such resources by entities other than the indigenous communities or countries
from which such resources are derived; and the distribution of benefits from
commercial use. The United States, other advanced countries, and business groups
favor treating traditional knowledge and genetic material as intellectual property and
protecting these resources through an IPR framework.
Article 27.3(b) of the TRIPS Agreement permits Member states to exempt
“plants and animals other than micro-organisms, and essentially biological processes”
from patentability. TRIPS requires Members to protect plant varieties through patent
protection, some other system (“sui generis”), or a combination of the two. Paragraph
19 of the Doha Declaration added another dimension to the issue by requiring the
TRIPS Council to probe the relationship between the TRIPS Agreement, the UN
Convention on Biological Diversity (CBD), and traditional knowledge and folklore.
These issues also are being discussed in WIPO’s Intergovernmental Committee on
Intellectual Property and Genetic Resources, Traditional Knowledge, and Folklore
(IGC).
India, Brazil, and Peru, among other countries, contend that patent applicants
should be required to disclose the source of genetic materials, including plant life and
traditional knowledge, before obtaining patents. The United States and the European
Union have advocated for national systems in which companies are granted
permission to research genetic materials and are obligated to share benefits from
patents derived from those genetic products.
Some earlier U.S. FTAs have required signatories to provide protection for
plants, animals, and plant varieties. The recent FTAs with Peru, Panama, and
Colombia do not mandate patentability for plants and animals, but state that the
countries should take efforts to expand patent coverage to these areas and to maintain
this protection once it is offered. Side-letters in the three FTAs state the signatories’
recognition of the importance of biodiversity and traditional knowledge and pledge
the countries to work together to address these issues through the IGC.
Copyright. In the area of copyright protection, the United States has pursued
certain TRIPS-plus measures in FTAs, such as extending copyright terms; including
anti-circumvention provisions; and protecting rights-management information in its
FTAs. The TRIPS Agreement does not mention any obligations regarding rightsmanagement information, which is “electronic information that identifies a protected
work, its author, and terms and conditions of use,”4453 perhaps due to the fact these
technologies were not available at the time. In contrast, U.S.-negotiated trade
agreements prohibit the removal or alteration of such information.
4453
CRS Report RL33205, Intellectual Property and the Free Trade Agreements: Innovation
Policy Issues, by John R. Thomas, p. 14.
CRS-2930
While patent protection has experienced policy shifts in the FTAs with Peru,
Panama, and Colombia, copyright protection provisions have remained fairly
consistent through the FTAs. In general, FTA signatories are obligated to provide an
additional twenty years of copyright protection. This brings the minimum copyright
term to seventy years from the death of the author or authorized publication,
compared to fifty under the TRIPS Agreement. Responding to technological
innovations not discussed in the TRIPS Agreement, many of the FTAs require
trading partners to outlaw circumvention of copyrighted works. These provisions
build on the U.S. Digital Millennium Copyright Act (DMCA) of 1998.4554 Also based
on the DMCA, many FTAs contain provisions that regulate the liability of Internet
service providers (ISPs) for copyright infringement that occurs within their
networks.4655 Under the FTAs, ISPs are provided limited immunity from copyright
liability in certain kinds of infringing activities if they comply with regulations. For
instance, ISPs must block access to or remove infringing materials as soon as they
are aware of the infringement. Copyright holders argue that it is necessary for ISPs
to assist in enforcing copyright for copyright laws to be effective. However, critics
claim that these provisions impose excessive burdens on ISPs, reduce the rights of
internet users, and limit the policy flexibility of FTA signatories in determining their
own IPR regimes.
4554
The DMCA (P.L. 105-304) prohibits disabling technological protection measures
designed to protect copyright works through activities such as descrambling or decrypting
copyrighted workers.
4655
For additional information on DMCA provisions, see CRS Report RL32037, “Safe
Harbor Safe Harbor
for Service Providers Under the Digital Millennium Copyright Act,” by Brian T.
Yeh and
Robin Jeweler.
CRS-3031
Table 6. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs
Intellectual
Property Forms
TRIPS Provisions
General TRIPS-Plus Provisions in FTAs
Scale-down of TRIPS-Plus Standards
Patents
Patent term
extensions
No provisions
Mandatory extensions in cases of
unreasonable delays in patent
grants/regulatory approval
Optional extensions in cases of unreasonable
delays in patent grants/regulatory approval
NAFTA (Article 1709.12)
Jordan (Article 4.23.a),
Chile (Article 17.9.6; 17.9.2a), Singapore
(Article 16.7.7; 18.8.4a), Australia (Article
17.9.8; 17.10.4), Morocco (Article 15.9.7;
15.10.3), CAFTA-DR (Article 15.9.6;
15.10.2), Bahrain (Article 14.8.6),Oman
(Article 15.8.6), Korea (Article 18.8.6)
Peru (Article 16.9.6), Panama (Article 16.9.6),
Colombia (Article 16.9.6)
CRS-3132
Market approval
linked to patent
status
National regulatory authorities cannot provide
marketing approval for a generic version of a
patented drug without permission from rightsholder; also requires notification of rightsholder if marketing permitted
Eliminates mandate that regulatory authorities
cannot approve a generic drug for marketing if
patent for drug in place
Chile (Article 17.10.2b), Singapore
(16.8.4c),Australia (Article 17.10.4), Morocco
(Article 15.10.4), CAFTA-DR (Article
15.10.2), Bahrain (Article 14.9.4), Oman
(15.9.4), Korea (Article 18.9.5)
Peru (Article 16.10.4), Panama (Article
15.10.4), Colombia (Article 16.10.4)
Members must protect data from
unfair commercial use (Article
39.3)
Provides for at least five years of data
exclusivity from date of approval in country
for pharmaceuticals that contain new chemical
products
Provides for at least five years of marketing
exclusivity from date of approval in country of
first filing if new drug is granted marketing
approval within six months in country of
second filing
Jordan (Article 4.22)
NAFTA (Article 1711.6), Bahrain (Article
14.9.1), Oman (Article 15.9(1-2), CAFTA-DR
(Article 15.10.1), Singapore (Article 16.8(13)), Australia (Article 17.10.1), Morocco
(Article 15.10.1), Chile (Article 17.10.1),
Korea (Article 18.9(1-2))
No provisions
NAFTA (no mention),
Jordan (no linkage, but patent
owner must be notified if another
entity is seeking marketing
approval for generic version of
patented product, Article 4.23.b)
Protection for
undisclosed test or
other data
Peru (Article 16.10.2), Panama (Article
15.10.4), Colombia (Article 16.10.2)
CRS-3233
Issuance of
compulsory licenses
Some restrictions in issuance of
compulsory licenses;
circumstances under which
licenses can be issued not limited
(Article 13)
Limits issuance of compulsory license to
specific cases: Correcting anti-competitive
practices, public non-commercial contexts,
national emergencies, and other extremely
urgent situations
NAFTA (Article 1709.10),
Jordan (Article 4.20), Singapore (Article
16.7.6), Australia (Article 17.9.7)
Not discussed
Chile (no mention), Morocco (no mention),
CAFTA-DR (no mention), Bahrain (no
mention), Oman (no mention)
Peru (no mention), Panama (no mention),
Colombia (no mention), (no mention)
Parallel importing of
patented products
TRIPS will not be used to discuss
IPR exhaustion (Article 6)
Parallel importation can be restricted or
prohibited
Not discussed
Jordan (no mention), Chile (no
mention), CAFTA-DR (no
mention), Bahrain (no mention),
Oman (no mention)
NAFTA (Article 1709.5, 1709.9), Singapore
(Article 16.7.2), Morocco (Article 15.9.4),
Australia (Article 17.9.4)
Peru (no mention), Panama (no mention),
Colombia (no mention), Korea (no mention)
CRS-3334
Biodiversity and
traditional
knowledge
Members may exclude plants and
animals from patentability (microorganisms and non-biological and
micro-biological processes must
be eligible for patents); must
provide protection of plant
varieties (Article 27.3(b))
NAFTA (Article 1709.3), Bahrain
(Article 14.8.(1-2)), Oman (Article
15.8.2, plants not discussed),
Countries shall make patents available for
plants and animals
Morocco (Article 15.9.2, plants and animals
mentioned, plant varieties are not mentioned)
Jordan, (no mention), Singapore
(no mention), Australia (no
mention), Korea (no mention)
Members may exclude plants and animals from
patentability, but shall take reasonable effort to
provide patent protection for plants or animals
and maintain protection once offered
Chile (Article 17.9.2, mentions plants but not
animals), CAFTA-DR (Article 15.9.2), Peru
(Article 16.9.2), Panama (Article 15.9.2),
Colombia (Article 16.9.2)
COPYRIGHTS
Rights-management
information
Not discussed
Outlaws removal or alternation of information
NAFTA (no mention), Jordan (no
mention)
Chile (Article 17.5.6), Australia (Article 17.4.8), Singapore (Article 16.4.8), Morocco (Article
15.5.9), CAFTA-DR (Article 15.5.8), Bahrain (Article 14.4.8), Oman (Article 15.4.8), Peru
(Article 16.7.5), Panama (Article 15.5.8), Colombia (Article 16.7.5), Korea (Article 18.4.8)
CRS-3435
Term of protection
Circumvention of
copyrighted work
ISP Liability
No less than 50 years from
authorized publication (Article 12)
No less than 70 years from death of author or authorized publication
NAFTA (Article 1705.4)), Jordan
(no mention)
Chile (Article 17.5.4), Singapore (Article 16.4.4), Australia (Article 17.4.4), Morocco (Article
15.5.5), CAFTA-DR (Article 15.5.4), Bahrain (Article 14.4.4), Oman (Article 15.4.4), Peru
(Article 16.5.5), Panama (Article 15.5.4), Colombia (Article 16.5.5), Korea (Article 18.4.4)
Not discussed
Signatories must agree to prohibit circumvention
NAFTA (no mention)
Jordan (Article 4.6), Chile (Article 17.5.5), Singapore (Article 16.4.7), Australia (Article 17.4.7),
Morocco (Article 15.5.8), CAFTA-DR (Article 15.5.7), Bahrain (Article 14.4.7), Oman (Article
15.4.7), Peru (Article 16.7.4), Panama (Article 15.5.7), Colombia (Article 16.7.4), Korea (Article
18.4.7)
Not discussed
ISPs are provided with limited liability in certain situations of copyright infringement on their
servers if they comply with regulations
NAFTA (no mention), Jordan (no
mention)
Chile (Article 17.11.23), Singapore (Article 16.9.22), Australia (Article 17.11.29), Morocco,
CAFTA-DR (Article 15.11.27), Bahrain, Oman (Article 15.10.29), Peru (Article 16.11.29),
Panama (Article 15.11.27), Colombia (Article 16.11.29), Korea (Article 18.10.30)
Note: When there is no mention of an issue in an FTA, the TRIPS standard generally holds.
NAFTA (no mention), Jordan (no
mention)
CRS-36
CRS-35
U.S. Trade Law
Special 301
Section 301 of the Trade Act of 1974 (P.L. 93-618), as amended, is the principle
U.S. statute for identifying foreign trade barriers due to inadequate intellectual
property protection. The 1988 Omnibus Trade and Competitiveness Act (P.L. 100418) strengthened Section 301 by creating “Special 301” provisions, which require
the USTR to conduct an annual review of foreign countries’ intellectual property
policies and practices. By April 30th of each year, the USTR must identify countries
that do not offer “adequate and effective” protection of IPR or “fair and equitable
market access to United States person that rely upon intellectual property rights.”
According to an amendment to the Special 301 provisions by the Uruguay Round
Agreements Act (P.L. 103-465), the USTR can identify a country as denying
sufficient intellectual property protection even if the country is complying with its
TRIPS commitments. These findings are submitted in the USTR’s annual “Special
301” report.
Special 301 Country Lists. Within 30 days of submitting the annual
National Trade Estimates of Foreign Trade Barriers report, the USTR must determine
which of the identified countries are “Priority Foreign Countries.” Countries that
“have the most onerous or egregious acts, policies or practices that deny intellectual
property protection and limit market access to U.S. persons or firms depending on
intellectual property rights protection” and “have the greatest adverse impact (actual
or potential) on the relevant United States products” may be identified as “Priority
Foreign Countries.” These countries may be investigated under section 301
provisions of the Trade Act of 1974. The USTR cannot identify countries as Priority
Foreign Countries if they have entered into good faith negotiations or have made
significant progress in improving their intellectual property protection record.4756
If a country is named as a “Priority Foreign Country”,,” the USTR must launch
an investigation into that country’s IPR practices. This investigation is conducted in
a manner similar to a “Section 301” investigation; the USTR must determine a course
of action within six months (9 months if a determination of complex circumstances
is made). The USTR may suspend trade concessions and impose import restrictions
or duties, or enter into a binding agreement with the priority country that would
eliminate the act, policy, or practice that is the subject of the action to be taken. Since
the advent of the WTO and its recourse to dispute settlement, the use of the first
option may lead to the initiation of dispute settlement proceedings at the WTO for
member countries, rather than unilateral retaliation. For countries outside the WTO,
the possibility of trade sanctions remain.
The USTR also has created several administrative categories for country
identification in the Special 301 Report. “Priority Watch List” countries are those
whose acts, policies, and practices warrant concern, but do not meet all of the criteria
4756
For the Special 301 provisions, see 19 U.S.C. §2242; Trade Act of 1974, as amended,
(P.L. 93-618), §182.
CRS-3637
for identification as a Priority Foreign Country. The USTR may place a country on
the Priority Watch List when the country lacks proper intellectual property protection
and has a market of significant U.S. interest. “Watch List” countries have intellectual
property protection inadequacies that are less severe than those on the Priority Watch
List, but still attract U.S. attention. Just being on one of the Special 301 lists may
induce countries to improve their IPR protection. Finally, countries identified for
“Section 306” are monitored for compliance with bilateral intellectual property
agreements used to resolve investigations under Section 301. Additionally, the
USTR launches out-of-cycle reviews on countries to monitor their progress on
intellectual property issues. Out-of-cycle reviews are conducted on countries that
USTR considers to require further review and may result in status changes for the
following year’s Special 301 report.
CRS-38
Special 301 Report for 20072008
For its 20072008 Special 301 Report, the USTR reviewed the IPR policies and
practices of 7078 countries. The report states that China and Russia are, despite some improvements, China
and Russia remain top concerns for
the Administration because ofdue to their inadequate IPR
protection and enforcement. China
China and Russia, along with tenseven other countries (Argentina, Chile, Egypt, India, Israel,
Lebanon, Thailand, Turkey, Ukraine, India,
Israel, Pakistan, Thailand, and Venezuela), were placed on the Priority
Watch List for 2007
2008. The USTR placed another thirty36 countries on its Watch List. No
countries were
designated as Priority Foreign Countries. China and Paraguay both
continued to be subject to section 306 monitoring. Additionally, the USTR
announced out-of-cycle reviews for Russia, Brazil, the Czech Republic, and Pakistan.
The Special 301 Report also noted progress made by trading partners. Brazil was
downgraded from the Priority Watch List to the Watch List, while the Bahamas,
Bulgaria, Croatia, the European Union, and Latvia were removed from the Special 301
listings completely.a
a. The USTR Special 301 Report for 2007The 2008 Special 301 Report also noted
progress made by trading partners. Egypt, Lebanon, Turkey, and Ukraine were
downgraded from the Priority Watch List to the Watch List, while Belize and
Lithuania were removed from the Special 301 listings completely for 2008. In the
previous year, the USTR downgraded Brazil from the Priority Watch List to the
Watch List, where it remains, and removed the Bahamas, Bulgaria, Croatia, the
European Union, and Latvia from the Special 301 listings altogether.
China and Paraguay both continue to be subject to section 306 monitoring. In
addition, in the 2008 report, the USTR announced out-of-cycle reviews for Taiwan
and Israel. In the 2007 report, the USTR declared out-of-cycle reviews for Russia,
Brazil, the Czech Republic, and Pakistan.a
a. The USTR Special 301 Report 2008 is available on the USTR website,
[http://www.ustr.gov].
Country Identification Factors. Identification of countries for the “Special
301” lists is a lengthy process of information gathering and analysis based on the
USTR’s annual trade barriers report and consultations with a wide variety of sources,
including government agencies, industry groups, other private sector representatives,
Congressional leaders, and foreign governments. The Special 301 statute is the
overall guideline for identifying countries for the various lists. However, placements
are country-specific and, according to a USTR official, take into consideration a host
of factors, several of which are mentioned in the Special 301 report.4857 These include
the level and scope of the country’s IPR infringement and their impact on the U.S.
economy. Other considerations include the strength of the country’s IPR laws and
enforcement of IPR laws. The USTR also evaluates progress made by the country in
improving IPR protection and enforcement in the past year. However, even
significant progress oftentimes does not change the position or inclusion of a country
on the lists. For instance, the USTR may decide not to upgrade a country from the
Priority Watch List to the Watch List so that it can continue monitoring the country’s
intellectual property practices. Also, the USTR may note significant progress made
by a country but not remove the country from the Special 301 list in order to continue
48
Conversation with USTR official, July 2006.
CRS-37
highlighting concerns about the country’s practices and limit backsliding. Another
consideration for the USTR is the sincerity of the country’s commitment to
multilateral and bilateral trade agreements. There is no weighting criteria for the
factors or a formula to determine the placement of a country on the watch list.
57
Conversation with USTR official, July 2006.
CRS-39
Furthermore, no particular threshold exists for determining when a country should
be upgraded or downgraded on the list.
Some observers speculate that the Special 301 rankings are subject to external
influences. The lack of a specific framework for placing countries, aside from the
general directives from the Special 301 statute, has raised concerns that foreign
policy considerations affect the process. For example, an IIPA representative
suggested that USTR placement of countries is influenced by geopolitical reasons.4958
This source cites Russia as an example of a country with high IPR infringement that
could be named as a Priority Foreign Country but is not due to unrelated foreign
policy considerations. Other observers of U.S. trade policy suggest that
pharmaceutical companies have a stronghold on policy direction. Oxfam
International, a confederation of poverty-alleviation organizations, contends that the
U.S. government’s policy on patents “is still largely influenced by the narrow
commercial interests of the giant pharmaceutical companies.”5059 A USTR official
stated that the interests of pharmaceutical companies do not override concerns by
other interest groups in evaluating country placement for the Special 301 report. The
official emphasized that all industry group submissions are given fair and due
consideration.5160
Section 337
Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), as amended, prohibits
unfair methods of competition or other unfair acts in the importation of products into
the United States . It also prohibits the importation of articles that infringe valid U.S.
patents, copyrights, processes, trademarks, semiconductor products produced by
infringing a protected mask work, or protected design rights. While the statute has
been utilized to counter imports of products judged to be produced by unfair
competition, monopolistic, or anti-competitive practices, it has become increasingly
used for its IPR enforcement functions in recent years. Under the statute, the import
or sale of an infringing product is illegal only if a U.S. industry is producing an
article covered by the relevant IPR exists or is in the process of being established.
However, unlike other trade remedies such as antidumping or countervailing duty
actions, no showing of injury due to the import is required.
The U.S. International Trade Commission (ITC) administers Section 337
proceedings. USITC must investigate complaints either brought to it or ones
commenced under its own initiative. An administrative law judge (ALJ) provides an
initial determination (ID) to the ITC which can accept the ID or order a further
49
Telephone conversation with PhRMA representative, July 2006.
50
Oxfam International, “US bullying on drug patents: one year after Doha,” Oxfam Briefing
Paper 33, [http://www.oxfam.org], p. 8.
51
Telephone conversation with USTR official, July 2006.
CRS-38
review of it in whole or in part. If the ITC finds a violation, it may issue two types
of remedies: exclusion orders or cease and desist orders. The ITC may issue either
a limited or general exclusion order enforced by U.S. Customs. A general exclusion
order directs U.S. Customs to keep out all infringing articles regardless of the source.
58
Telephone conversation with PhRMA representative, July 2006.
59
Oxfam International, “US bullying on drug patents: One year after Doha,” Oxfam Briefing
Paper 33, [http://www.oxfam.org].
60
Telephone conversation with USTR official, July 2006.
CRS-40
More commonly, a limited exclusion order is employed to exclude infringing articles
from the firm subject to the ITC’s investigation. Alternatively, the ITC may enforce
a cease and desist order to stop the sale of the infringing product in the United States.
However, the ITC may consider several public interest criteria and decline to issue
a remedy. Also, the President may disapprove a remedial order during a 60 day
period for “policy reasons,” which has been interpreted to mean national security
reasons.61
During 2006, the ITC reported the initiation of 38 new and ancillary 337
investigations. Of these, 34 concerned patent infringement and 4 were allegations
of trademark infringement. The ITC completed a total of 28 investigations and
ancillary proceedings under section 337 in 2006, which resulted in 7 exclusion orders
and one cease-and-desist order. According to the ITC, Section 337 cases increasingly
involve advanced technologies in the computer, telecommunications, automotive,
and pharmaceutical sectors. 5262
Generalized System of Preferences
The Generalized System of Preferences (GSP) is a program that provides
preferential duty-free entry to certain products from designated developing countries.
The purpose of the program is to foster economic growth in developing countries by
increasing their export markets. The Trade Act of 1974 authorized the GSP for a tenyear time frame, and the program has been renewed from time to time. Most
recently, in 2006, Congress extended GSP through 2008.5363 The GSP program
currently offers preferential access for close toabout 5,000 products from 143132 countries and
territories.5464
Although the GSP is non-reciprocal, it can be used to promote stronger
intellectual property protection and enforcement abroad. Under the GSP statute, the
President must consider a set of mandatory criteria that a country must fulfill in order
to be designated as a GSP beneficiary. Additionally, the President may evaluate a
country on the basis of certain discretionary criteria, including the country’s
provision of IPR protection.5565
The GSP program undergoes an annual review by the GSP Subcommittee of the
Trade Policy Staff Committee (TPSC), which is headed by the USTR. As part of its
evaluation, the TPSC addresses concerns about specific country practices (such as
intellectual property protection) and makes recommendations to the President. The
52USTR currently is reviewing a petition by the IIPA to remove Brazil from GSP
61
For more information on the Section 337 investigation and enforcement process, see CRS
Report RS22880, Intellectual Property Rights Protection and Enforcement: Section 337 of
the Tariff Act of 1930, by Shayerah Ilias.
62
“The Year in Trade 2006,” USITC Publication #3927, July 2007, pp. 2-12.
5363
For a more thorough discussion of GSP, see CRS Report RL33663, “Generalized System
of Preferences: Background and Renewal Debate,” by Vivian C. Jones.
54
5564
65
USTR, “U.S. Generalized System of Preferences Guidebook,” February 2007.
91 USC 2462(b)(2)
CRS-39
USTR currently is reviewing a petition by the IIPA to remove Brazil from GSP41
benefits because of its alleged insufficient IPR protection. In 2006, the USTR
concluded a review of Pakistan’s IPR policies and practices in response to a petition
also by IIPA for copyright evaluations. The review found that Pakistan has taken
steps to reduce IPR optical disc piracy. Consequently, Pakistan remains a GSP
beneficiary.5666 For 2007, the USTR is scheduled to evaluate IPR continue evaluating IPR
protection in Russia,
Lebanon, and Uzbekistan on the basis of IIPA petitions for
ongoing GSP reviews.5767
U.S. Agency Functions and Funding for IPR
The United States has a complex apparatus for supporting intellectual property
rights, with responsibilities cutting across many different federal government
agencies. Protection activities include developing IPR policy, informing and
advising Congress about IPR-related issues, participating in international trade
negotiations to promote IPR, and providing IPR training and technical assistance in
other countries. Enforcement activities involve the conduct of criminal
investigations in the United States and abroad, interdiction of pirated and counterfeit
goods, and monitoring of compliance with trade agreements. Enforcement also
involves capacity-building activities to foster stronger IPR law enforcement in other
countries.
It is difficult to obtain a complete picture of the magnitude of federal budget
devoted to intellectual property laws. Some of these agencies perform their IPR
related activities within existing budget parameters, and do not differentiate specific
sums devoted to IPR-related activities. Based on a review of agency funding by
Congress, it appears that the U.S. government provided at least $1.8192 billion for IPR
protection and enforcement for FY2008, a slight increase from at least $1.81 billion
for FY2007 (see Table 7). The total is likely to be
higher since the amount of
funding devoted toward IPR activities was not determined
for all agencies. What
follows is a discussion of the various IPR functions of U.S.
agencies.
Department of Commerce (Commerce). Two agencies within the
Department of Commerce, the Patent and Trademark Office (PTO) and the
International Trade Administration (ITA) address IPR issues. Additionally, the
National Intellectual Property Law Enforcement Coordinating Council (NIPLECC),
an interagency coordinating body, is housed within Commerce.5868
United States Patent and Trademark Office (PTO). The PTO
administers the U.S. laws pertaining to patents and trademarks. The agency
processes patent and trademark applications, issues patents and registers trademarks,
and circulates patent and trademark information. The PTO develops IPR protection
and enforcement policy and collaborates with other agencies to develop intellectual
5666
USTR, “USTR Ends Review of Pakistan’s Protection of Intellectual Property Rights.,”
January 24, 2006.
57
58
67
68
USTR, “GSP 20062007 Annual Review Lists.”
General information about the Department of Commerce is available at
[http://www.doc.gov].
CRS-4042
property provisions in FTAs and other international agreements. Additionally, the
PTO offers training, technical assistance, and trade capacity building programs to
assist in promoting strong IPR regimes in foreign countries.5969 The PTO does not
have jurisdiction over determining patent and trademark infringements; such
determinations and remedies are made at the U.S. federal district court level or
through the U.S. International Trade Commission’s Section 337 proceedings
(discussed above).6070 The PTO is fully funded through fees generated from patent
and and
trademark applications. For FY2007, the Revised Continuing Appropriations
Resolution (P.L. 110-5) provided the PTO with budgetary authority to spend $1.8
billion. The Consolidated Appropriations Act for FY2008 (P.L. 110-161) provided
the PTO with budgetary authority to spend $1.9 billion. According to the PTO
. According to the PTO Congressional Liaison, funding for efforts such as the
Strategy Targeting Organized
Piracy (STOP), NIPLECC activities, and IPR technical
and training programs come comes
from this account.
International Trade Administration (ITA). The ITA administers many of
the international trade programs of the Department of Commerce, include aspects
involving IPR. The ITA monitors foreign countries’ progress in implementing
intellectual property agreements; reviews Generalized System of Preferences (GSP)
petitions submitted by industry and coordinates the Commerce Department’s
response to these petitions; represents the Commerce Department at the WTO
TRIPS Council; meets with trading partners to advance U.S. intellectual property
interests abroad; and works with U.S. businesses and industry groups to make sure
that IPR-related trade concerns are addressed.6171 Based on the Revised Continuing
Appropriations Resolution for 2007 (P.L. 110-5), ITA funding was enacted at $395.6
million, identical to the agency’s 2006 budget. IPR funding is not distinguished in
the budget, but an ITA official estimated that FY2007 spending on IPR specifically
was $9.6 million.6272 For FY2008, P.L. 110-161 provides ITA with $413.2 million in
enacted funds (including both direct appropriation and anticipated receipts from
fees).
Department of Justice (DOJ). The DOJ enforces criminal laws that protect
IPR in the United States and internationally through the prosecution of intellectual
property cases. The Civil Division’s Office of Consumer Litigation specializes in
intellectual property cases involving public health and safety. The Federal Bureau of
Investigation (FBI) has an intellectual property enforcement program focusing on
those intellectual property crimes that have the most bearing on national and
economic security, such as trade secret theft, Internet piracy, and counterfeit good
trafficking.6373 In addition to enforcement activities, the DOJ also works with
Congress to develop laws that increase protection of IPR and provides training and
technical assistance programs on IPR enforcement through its Criminal Division.
5969
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Property
Enforcement and Protection,” September 2006, pp. 47-49.
6070
Conversation with PTO official, November 26, 2007.
6171
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Property
Enforcement and Protection,” September 2006, pp. 67-69.
62
6372
Conversation with ITA official, October 17, 2007.
73
Department of Justice, “Progress Report of the Department of Justice’s Task Force on
Intellectual Property,” June 2006, [http://www.usdoj.gov/opa/documents/ipreport61906.pdf]
pp. 17-24.
CRS-41
The FY2007 SSJC Conference Report (H.Rept. 109-520) provided DOJ with $2.2
million for intellectual property investigations and prosecution(continued...)
CRS-43
Congress to develop laws that increase protection of IPR and provides training and
technical assistance programs on IPR enforcement through its Criminal Division.
The FY2007 SSJC Conference Report (H.Rept. 109-520) provided DOJ with $2.2
million for intellectual property investigations and prosecution. The FY2008 Senate
CJS Conference Report (S.Rept. 110-124) substantially increased IPR funding,
providing $13.1 million for domestic and international intellectual property
investigations and prosecution, as well as the creation of a FBI operational unit
dedicated wholly to working with the DOJ’s Computer Crime and Intellectual
Property Section on criminal intellectual property cases.
Department of Homeland Security (DHS). The DHS, through its Customs
and Border Protection (CPB) unit and Immigration and Customs Enforcement (ICE)
unit, conducts intellectual property rights enforcement activities. Neither DHS unit
has a line item for IPR enforcement. The ICE and the FBI jointly run the National
Intellectual Property Rights Coordination Center that coordinates U.S. Government
domestic and international law enforcement activities.6474
Customs and Border Protection (CBP). Taking the lead in day-to-day
IPR enforcement activities at the U.S. border, the CBP is responsible for detecting
and seizing counterfeit and pirated goods entering the United States and determining
penalties for infringement.6575 CBP has the authority to determine whether or not
imports infringe federally registered trademarks and copyrights and to detain or seize
such infringing goods. Owners of copyrights and trademarks are able to record
information about their rights in the CBP’s electronic IPR database. InAs noted earlier,
in contrast to
trademarks and copyrights, CBP does not have the jurisdiction to make
determinations about patent infringements. However, it is able to block imports
determined by the ITC to infringe a U.S. patent by a Section 337 investigation (see
above).6676 H.Rept. 109-476 noted the gravity of the IPR infringement problem and
requested CBP to provide information on the resources devoted to preventing IPR
infringement for 2004-2007 (projected).
Immigration and Customs Enforcement (ICE). ICE is charged with
investigating violations of U.S. law that are connected with U.S. borders. ICE
“identifies, investigates, apprehends, and removes” international criminal groups and
other criminals. ICE conducts inquiries into the importation and distribution of
counterfeit goods. ICE activities are closely linked with those of CBP. For instance,
when CBP identifies and seizes counterfeit goods, the issue is referred to ICE for
73
(...continued)
Intellectual Property,” June
ipreport61906.pdf], pp. 17-24.
2006,
[http://www.usdoj.gov/opa/documents/
74
Information about the DHS is available at [http://www.dhs.gov].
75
Certain customs-related IPR policy-making resides within in the Treasury.
76
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” September 2006, pp. 143-145. Additional information about
CBP is available at [http://www.cbp.gov].
CRS-44
criminal investigation. Likewise, information obtained from ICE activities that is
relevant to identifying and apprehending counterfeit shipments is provided to CBP.6777
Food and Drug Administration (FDA). The FDA, which is an agency of
the Department of Health and Human Services (DHHS), is responsible for protecting
public health by ensuring the safety and effectiveness of medicines, food, and other
products. As part of its activities, the FDA works to protect consumers against
counterfeit medicines. To combat the entry of foreign counterfeit drugs into the U.S.
drug supply, the FDA works in conjunction with the CBP to conduct border
inspections of FDA-regulated products. The FDA also engages in foreign inspections
to ensure that foreign manufacturers meet FDA quality and labeling requirements.
64
Information about the DHS is available at [http://www.dhs.gov].
65
Certain customs-related IPR policy-making resides within in the Treasury.
66
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Enforcement and Protection,” September 2006, pp. 143-145. Additional
information about CBP is available at [http://www.cbp.gov].
67
Ibid. Also refer to the ICE website, [http://www.ice.gov].
CRS-42
Funding for preventing counterfeits from entering the United States is part of overall
FDA import safety efforts.6878
Copyright Office. The Copyright Office of the Library of Congress
administers U.S. copyright law by registering claims to copyright and related
documents, including “assignments or transfers of rights” and maintains information
on registrations, recordations, compulsory licenses, and other copyright-related
actions. Additionally, the Copyright Office provides legal and technical expertise on
national and international copyright issues to the U.S. government. The Copyright
Office also works with other federal agencies to provide assistance and advice in
negotiations for international intellectual property agreements, as well as technical
assistance to foreign countries crafting their own copyright laws.6979 For FY2007, the
Copyright Office was provided $22.7 million (P.L. 110-5). The FY2007 Legislative
Branch Appropriations Act (H.R. 5521) provided that not more than $100,000 be
available for the International Copyright Institute in the Copyright Office of the
Library of Congress to train nationals of developing countries in intellectual property
laws and policies.not including authority to spend
receipts) (P.L. 110-5). The FY2008 Consolidated Appropriations Act provides the
Copyright Office with $5.3 million in new budgetary authority (not including
authority to spend $44.2 million in receipts).
Copyright Office appropriations also specify funding for IPR-related activities
in developing countries. The FY2007 Legislative Branch Appropriations Act (H.R.
5521) provided that not more than $100,000 be available for the International
Copyright Institute in the Copyright Office of the Library of Congress to train
nationals of developing countries in intellectual property laws and policies. For
FY2008, the Consolidated Appropriations Act (P.L. 110-161) also provided
$100,000 for the International Copyright Institute for such activities.
Department of State (State). State represents U.S. views in both bilateral
and multilateral arenas. State works to build international consensus for intellectual
property rights enforcement. Information from State’s foreign postings informs the
USTR Special 301 review. In particular, the Bureau of International Narcotics
Control and Law Enforcement (INCLE) works to combat intellectual property piracy,
77
Ibid. Also refer to the ICE website, [http://www.ice.gov].
78
Conversation with FDA official, November 26, 2007. Additional information is available
on the FDA website, [http://www.fda.gov].
79
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” September 2006, pp. 97-98. Also see Copyright Office
website, [http://www.copyright.gov/].
CRS-45
while the Bureau of Energy, Economics and Business Affairs supports stronger
international IPR standards to fight global piracy and counterfeiting.7080 While the
FY2007 SSJC Conference Report (H.Rept. 109-520) did not dedicate any funding
for IPR enforcement, it called for embassies in major U.S. markets, such as China,
Russia, and Brazil, to develop surveys to measure levels of piracy and counterfeiting
and to increase dialogue with officials in Chinese provinces to encourage
implementation of China’s IPR obligations. The FY2007 Foreign Operations
Conference Report (H.Rept. 109-486) recommended $5 million for programs to fight
intellectual property piracy under the INCLE Account.
U.S. Agency for International Development (AID). AID funds training
and technical assistance to improve the compliance with the TRIPS Agreement and
bilateral trade agreements with the United States. Funding for these projects
generally have been undertaken by regional or country missions; there is no separate
budgetary line item for IPR enforcement and training. According to the AID Trade
Capacity Building (TCB) database, AID projects for TCB for compliance with the
68
Conversation with FDA official, November 26, 2007. Additional information is available
on the FDA website, [http://www.fda.gov].
69
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Enforcement and Protection,” September 2006, pp. 97-98. Also see Copyright
Office website, [http://www.copyright.gov/].
70
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Enforcement and Protection,” September 2006, pp. 81-84. Additional information
about the State Department is available at [http://www.state.gov].
CRS-43
TRIPS Agreement totaled $2.1 million in 2006, down from a peak of $6.9 million in
2003.71 The Consolidated
Appropriations Act for 2008 (P.L. 110-161) provides $5 million from the INCLE
Account for combating piracy (Section 688). The act notes that the funds should be
used in countries that are not members of the Organization for Economic
Cooperation and Development (OECD) and specifies some of the activities for
which the funds may be used, including providing equipment and training for law
enforcement; training judges and prosecutors; and providing assistance in complying
with international IPR treaties and agreements.
U.S. Agency for International Development (AID). AID funds training
and technical assistance to improve the compliance with the TRIPS Agreement and
bilateral trade agreements with the United States. Funding for these projects
generally have been undertaken by regional or country missions; there is no separate
budgetary line item for IPR enforcement and training. According to the AID Trade
Capacity Building (TCB) database, AID projects for TCB for compliance with the
TRIPS Agreement totaled $2.1 million in 2006 and $2.9 million in 2007, down from
a peak of $6.9 million in 2003.81
United States Trade Representative (USTR). The USTR is the lead trade
agency of the United States government. Through its annual Special 301 report,
USTR is charged with monitoring the adequacy and effectiveness of IPR protection
of our trading partners as well as their compliance with bilateral and multilateral
trade agreements, to identify countries not in compliance with such agreements, and
to negotiate with those countries better compliance. USTR also advances greater
protection and enforcement of IPR in its negotiations of U.S. free trade agreements.
Additionally, USTR works to implement the Administration’s STOP! Initiative,
which draws together the major federal government agencies, private sector groups,
and trading partners to take targeted action in fighting piracy and counterfeiting.7282
The FY2007 funding level for USTR was $44.2 million, provided under the Revised
Continuing Appropriations Resolution (P.L.110-5). USTR does not differentiate
sums for its various negotiating activities, and Congress has not designated specific
Revised Continuing Appropriations Resolution (P.L.110-5). The FY2008 funding
level for USTR was $44.1 million, under the Consolidated Appropriations Act (P.L.
80
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” September 2006, pp. 81-84. Additional information about the
State Department is available at [http://www.state.gov].
81
Trade Capacity Database and general AID information is accessible at
[http://www.usaid.gov].
82
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” September 2006, pp. 91-96. Also see USTR website,
[http://www.ustr.gov].
CRS-46
110-161). In the House SSJC Committee Report (H.Rept. 110-240), the USTR was
provided with $48.4 million for FY2008, $4 million more than requested, to reflect
increased USTR focus on international IPR protection and enforcement, among other
activities. USTR does not differentiate sums for its various negotiating activities,
and Congress has not designated specific funds to IPR activities within USTR.
United States International Trade Commission (ITC). The ITC is a
quasi-judicial federal government agency responsible for investigating and arbitrating
complaints of unfair trade practices. The ITC adjudicates allegations of imported
products that infringe U.S. patents, trademarks, and copyrights through its Section
337 proceedings (see above). The primary remedy employed by the ITC is to order
the CBP to stop imports from entering the border. Additionally, the ITC may issue
“cease and desist” orders against individuals determined to be IPR violators.
Damages for IPR infringement cannot be received through ITC court proceedings;
rights-holders seeking damages must file action with the U.S. federal district court.7383
For FY2008, ITC was provided with $68.4 million in P.L. 110-161.
National Intellectual Property Law Enforcement Coordinating
Council (NIPLECC). Created by Congress in 1999, NIPLECC coordinates U.S.
activities to protect and enforce IPR domestically and abroad. NIPLECC draws
together major federal agencies that help to enforce IPR. Members include USTR
Commerce, DHS, DOJ, and State, as well as and their subagencies. The Copyright
Office participates in the Council in an advisory role. The U.S. Coordinator for
International Intellectual Property Enforcement heads NIPLECC’s interagency
coordination efforts.7484 In the SSJC Conference Report (H.Rept. 109-520) for
FY2007, NIPLECC is provided with $900,000 in dedicated funding under the
Department of Commerce heading.
71
Trade Capacity Database
[http://www.usaid.gov].
and
general
AID information
accessible
at
72
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Enforcement and Protection,” September 2006, pp. 91-96. Also see USTR website,
[http://www.ustr.gov].
73
74
United States International Trade Commission website, [http://www.usitcs.gov].
NIPLECC, “Report to the President and Congress on Coordination of Intellectual
Property Enforcement and Protection,” September 2006, pp. 12-15
CRS-44 For FY2008, P.L. 110-161 allows for $1 million
to be transferred from the PTO for activities associated with NIPLECC. In addition,
the House SSJC Committee Report (H.Rept. 110-240) called for the FBI to increase
the number of agents dedicated to IPR infringement investigations in NIPLECC.
Strategy Targeting Organized Piracy (STOP!). In 2006, NIPLECC
adopted the Administration’s STOP! as its plan of action for protecting intellectual
property rights abroad. The Administration established STOP! in 2004 to crack
down on criminal networks in pirated and counterfeit goods trafficking. This
initiative expresses the Administration’s commitment to intellectual property
protection and enforcement. STOP! is similar to NIPLECC in that it is a
coordinating structure to enhance U.S. IPR protection and enforcement and works
with many of the same agencies as NIPLECC, such as Commerce, DOJ, DHS, State,
and USTR. The FDA is not a part of NIPLECC, but is a participant in STOP!.75 The
budget for STOP! comes from Department of Commerce funding.76 The FY2007
SSJC Conference Report (H.Rept. 109-520) expressed support for the STOP!
initiative, but did not specify any funding for initiative.
75
Office of the U.S. IPR Coordinator, “Strategy for Targeting Organized Piracy:
Accomplishments and Achievements,” September 2007.
76
GAO-07-710T, Intellectual Property: National Enforcement Strategy Needs Stronger
Leadership and More Accountability, p. 6.
CRS-45
Table 7. FY2007 IPR Protection and Enforcement Budgets for
U.S. Government Agencies
Government
Agency
IPR Dedicated
Funding
Activities
PTO
$1.8 billion
Administering patent and trademark
applications; policy guidance; training
and technical assistance
NIPLECC
$900,000
Interagency IPR enforcement
coordination
Department of
Justice
$2.2 million
Intellectual property investigations and
prosecutions
Copyright Office
$100,000
International Copyright Institute activities
Department of State
$5 million
Combat intellectual property piracy under
International Narcotics Control and Law
Enforcement Account
USAID
$2.1 million (for
2006)
Trade capacity building for TRIPS and
IPR compliance
Total
$1.81 billion
U.S. government IPR activities
85 The
83
United States International Trade Commission website, [http://www.usitcs.gov].
84
NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property
Enforcement and Protection,” September 2006, pp. 12-15
85
Office of the U.S. IPR Coordinator, “Strategy for Targeting Organized Piracy:
Accomplishments and Achievements,” September 2007.
CRS-47
budget for STOP! comes from Department of Commerce funding.86 The FY2007
SSJC Conference Report (H.Rept. 109-520) expressed support for the STOP!
initiative, but did not specify any funding for initiative.
Table 7. FY2007 IPR Protection and Enforcement Dedicated
Funding for U.S. Government Agencies
Government Agency
FY2008
Dedicated
Funding
FY2008
Activities
FY2007
Dedicated
Funding
PTO
$1.9 billion
Administering patent and
trademark applications;
policy guidance; training and
technical assistance
$1.8 billion
NIPLECC
$1 million
Interagency IPR
enforcement coordination
$900,000
Department of Justice
$13.1 million
Intellectual property
investigations and
prosecutions; NIPLECC
support
$2.2 million
Copyright Office
$100,000
International Copyright
Institute activities
$100,000
Department of State
$5 million
Combat intellectual property
piracy under International
Narcotics Control and Law
Enforcement Account
$5 million
USAID
$2.9 million (for
2007)
Trade capacity building for
TRIPS and IPR compliance
$2.1 million (for
2006)
Total
$1.92 billion
U.S. government IPR
activities
$1.81 billion
Note: While all of PTO’s activities are dedicated toward IPR support, it is difficult to
determine exactly how much is directed toward international IPR promotion efforts.
Issues for Congress
U.S. Efforts to Promote IPR Through Trade Policy
Since the inclusion of IPR provisions in the TRIPS Agreement, there has been
an ongoing debate about the appropriateness of including IPR as a component of U.S.
trade policy. Some argue that IPR, which grant legal temporary monopolies to rightsholders for their creations, are actually barriers to trade and have no place in trade
liberalization negotiations. Others contend that IPR promote trade through
86
GAO-07-710T, Intellectual Property: National Enforcement Strategy Needs Stronger
Leadership and More Accountability, p. 6.
CRS-48
innovation, economic growth, and technology transfer from advanced to developing
countries.
In addition to this broader discussion about the role of IPR in trade policy,
concerns have been voiced about the trade policy channels used by the United States
to promote international IPR protection and enforcement. The Bush Administration
has pursued strengthened international IPR through multilateral, regional, and
bilateral venues. However, some question the appropriateness of using regional and
bilateral FTAs for this purpose, contending that such actions take away from the
effectiveness of multilateral IPR promotion efforts. Periodically, members of
Congress have expressed concern over U.S attempts to expand the IPR obligations
of foreign countries through trade agreements. In 2002, the TPA legislation was
amended to state that the United States recognized the Doha Declaration on the
TRIPS Agreement and Public Health in the context of negotiating FTAs. In the 110th
CRS-46
Congress, Congressional Democrats and the Administration agreed to modifications
of the patent provisions in the Peru FTA as a result of the May 2007 bipartisan trade
agreement. Still, a new Government Accountability Office (GAO) report suggests
that USTR should offer clearer policy guidance to align FTA negotiating activities
with the WTO Doha Declaration.7787 Additionally, there is concern by some that the
ratchet of IPR commitments pursued through regional and bilateral FTAs may be too
stringent for developing countries and may limit innovation and creativity by stifling
the exchange of ideas.
Further expansion of IPR provisions may be affected by the language of any
future TPA. In discussions about renewal of TPA, Congress may choose to consider
possible reiteration or expansion on its IPR goals related to global health from the
2002 TPA. At issue for Congress is whether or not to follow the template provided
by the Peru, Panama, and Colombia FTAs in future trade negotiations.
Without renewal of the TPA, the Administration may be prompted to seek
stronger IPR through plurilateral venues. For example, the United States and several
key foreign trading partners (Canada, the 27 member states of the European Union,
Japan, Mexico, New
Zealand, South Korea, Switzerland, and Australiaand Switzerland) recently
announced their intention to begin
negotiating a new anti-counterfeiting trade agreement negotiating an Anti-Counterfeiting Trade
Agreement (ACTA). The countries have pledged
to go beyond the TRIPS Agreement
by promoting international cooperation,
developing “best practices” for enforcement,
and establishing a strong legal
framework for enforcement.7888 ACTA would provide
IPR enforcement tools where the TRIPS Agreement and other international treaties
fall short.89 Copyright-based businesses and anti-piracy advocates voice strong
support for the ACTA. Some observers express concern that ACTA is being
87
GAO-07-1198, U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines
May Need Clarification, September 2007.
88
“Peru IPR Text Reflects FTA Template, Shows Reduced PhRMA Sway,” Inside US
Trade, July 6, 2007.
89
Liza Porteus Viana, “USTR Plans Another Year of Elevating IP Protection With Trading
Partners,” Intellectual Property Watch, April 4, 2008.
CRS-49
negotiated outside of the WTO TRIPS Agreement and that publicly available
information about the negotiations is limited.90
Effectiveness of the U.S. IPR Organizational Structure
There are concerns on the part of some lawmakers about whether or not the
present U.S. IPR organizational structure is doing enough to enforce foreign
countries’ IPR obligations, as well as concerns about whether or not the structure is
capable of doing more.
Some members of Congress have criticized the U.S. organizational response to
international IPR protection and enforcement, particularly that of the National
Intellectual Property Law Enforcement Coordinating Council (NIPLECC). Recent
GAO testimony points out some of the problems associated with NIPLECC,
including an absence of mission, dearth of activities, and poor image among
businesses.7991 The FY2007 CJS Committee Report (S. Rept. 109-280) expressed
concern about the lack of information on NIPLECC’s progress and evidence of
success.
77
GAO-07-1198, U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines
May Need Clarification, September 2007.
78
“Peru IPR Text Reflects FTA Template, Shows Reduced PhRMA Sway,” Inside US
Trade, July 6, 2007.
79
GAO-07-710T, National Enforcement Strategy Needs Stronger Leadership and More
Accountability, April 12, 2007, [http://www.gao.gov/new.items/d07710t.pdf], pp. 8-10.
CRS-47
In the first session of the 110th Congress, the “Intellectual Property Rights
Enforcement Act” was introduced in the Senate (Bayh, S. 522) and subsequently in
the House (Sherman, H.R. 3578) to repeal the mandate for NIPLECC and create a
new body called the Intellectual Property Enforcement Network (IPEN) in its place.
The bill was referred to the Committees on the Judiciary, Foreign Affairs, and Ways
and Means. Under the legislation, IPEN would take on the same role as NIPLECC
as a interagency coordinating body. GAO notes that a key difference between IPEN
and NIPLECC would be that the head of IPEN would come from the Office of
Management and Budget (OMB).
The “Prioritizing Resources and Organization for Intellectual Property Act of
2007” (Conyers, H.R. 4279) also was introduced in the first session of the110ththe 110th
Congress. H.R. 4279 calls for the creation of an Office of the U.S. Intellectual
Property Enforcement Representative, which, among its various responsibilities,
would have the lead in coordinating U.S. government agency IPR enforcement
actions and would provide assistance to the USTR in conducting trade negotiations
relating to IPR enforcement abroad. Like the “Intellectual Property Rights
Enforcement Act,” H.R. 4279 proposes the creation of a new entity to coordinate
interagency IPR enforcement efforts. However, it does not specify what the
establishment of a new interagency body would imply for the status of NIPLECC.
In contrast to NIPLECC, GAO interviews with agency officials suggest that
STOP! is viewed positively for its role in enhancing IPR enforcement as a priority
among federal agencies, the private sector, and internationally. As a presidential
initiative, STOP! does not derive from statutory authority. According to the GAO,
90
“ACTA Treaty Lauded by Rights Owners, Criticized by Others as Secretive, Restrictive,”
International Trade Daily, June 9, 2008.
91
GAO-07-710T, National Enforcement Strategy Needs Stronger Leadership and More
Accountability, April 12, 2007, at [http://www.gao.gov/new.items/d07710t.pdf], pp. 8-10.
CRS-50
STOP! does not fully meet the characteristics associated with being an “effective
national strategy.” GAO has expressed concern that STOP! does not discuss risk
management or the costs, investments, and processes needed to balance the threats
associated with counterfeit products with the resources that are available.8092 In
testimony before the Senate Banking, Housing, and Urban Affairs Committee,
foreign policy observer Moises Naim stated that governments must be selective in
setting their priorities, adding, “It is unrealistic to expect governments to combat
every aspect of counterfeiting... This approach will further burden already overstretched governments and greatly reduce their effectiveness.”8193 One question
inferred from the foregoing is whether the United States can or should devote equal
resources to prevent the importation of fake Gucci bags and counterfeit medicines.
H.R. 4279 would also attempt to prioritize U.S. international IPR enforcement
activities. The bill calls for the establishment of ten “intellectual property attachés”
in the Department of Commerce to serve in U.S. embassies or other diplomatic
missions. Among other responsibilities, the attachés would encourage cooperation
with foreign governments in enforcement of IPR laws; assist Americans rightsholders in combating foreign IPR infringement of their products; and facilitate
80
81
Ibid, p. 11.
Testimony before the Security and International Trade and Finance Subcommittee of the
U.S. Senate Committee on Banking, Housing, and Urban Affairs. “Pirating the American
Dream: Intellectual Property Theft’s Impact on America’s Place in the Global Economy and
Strategies for Improving Enforcement” by Moises Naim, April 12, 2007.
CRS-48
training and technical assistance programs targeted toward improving foreign
enforcement of IPR laws. The bill also calls for the deployment of five Intellectual
Property Law Enforcement Coordinators under the Department of Justice to serve as
liaisons with foreign law enforcement agencies in IPR criminal issues, engage in
foreign enforcement capacity-building outreach and training activities, and coordinate
U.S. law enforcement activities against IPR-related crimes in the foreign countries.
Both the Commerce and Justice missions would be sent to the areas where their
efforts would be most effective and beneficial in reducing counterfeiting and piracy.
While protection and enforcement of IPR is a stated priority for the United
States, it is difficult to get a sense of the magnitude of funding and resources devoted
toward IPR support, as there is no one line item in the federal budget for IPR
protection. Our analysis suggests that the United States spent at least $1.819 billion
to to
support IPR in FY2007. FY2008. The proposed budget for FY2009 by the President suggests
that intellectual property enforcement is a top priority. The President’s funding
requests for FY2008 for IPR-related agencies were greater than for FY2008.94
Additionally, there is limited information on the
economic and other impacts of
piracy and counterfeiting on the United States. For
example, in its Special 301
Report, USTR uses industry figures that are not
independently confirmed. This
complicates the ability of lawmakers to weigh the
threat of IPR infringement against
the federal resources available for IPR and other
government priorities government priorities.
92
Ibid., p. 11.
93
Testimony before the Security and International Trade and Finance Subcommittee of the
U.S. Senate Committee on Banking, Housing, and Urban Affairs. “Pirating the American
Dream: Intellectual Property Theft’s Impact on America’s Place in the Global Economy and
Strategies for Improving Enforcement,” by Moises Naim, April 12, 2007.
94
Liza Porteus Viana, “US Fiscal 2009 Proposed Budget Shows IP Enforcement a Priority,”
Intellectual Property Watch, February 6, 2008.