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Intellectual Property Rights and International
Trade
Shayerah Ilias
Analyst in International Trade and Finance
Ian F. Fergusson
Specialist in International Trade and Finance
June 3October 21, 2009
Congressional Research Service
7-5700
www.crs.gov
RL34292
CRS Report for Congress
Prepared for Members and Committees of Congress
c11173008
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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.
Governmentgovernment agencies.
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 promote enforcement of IPR
abroad. The
United States and several trading partners recently announced plans to pursue a
multilateral anticounterfeitinganti-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 Bush
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 centralOne 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 (P.L. 110-403) was enacted to
establish a new structure to coordinate federal IPR enforcement activities. In the 111th Congress,
legislation has been introduced to increase U.S. international IPR enforcement efforts and to
increase prioritization of resources devoted to such activities.
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Contents
Introduction ................................................................................................................................1
Intellectual Property Rights Basics ..............................................................................................1
Types of Intellectual PropertyIPR .............................................................................................................1............2
Patents ............................................................................................................................2
Trade Secrets ..................................................................................................................2
Copyright........................................................................................................................3
Trademarks .....................................................................................................................3
Infringement of Intellectual PropertyIPR ..................................................................................................3............4
Piracy .............................................................................................................................4
Counterfeiting.................................................................................................................4
Global Intellectual Property Holdings..........................................................................................4
Contribution of Intellectual Property to U.S. Economy ................................................................6
Prevalence and Economic Consequences of IPR Infringement...............................................7
Seizures ..........................................................................................................................8
Sectoral Infringement......................................................................................................9
The Organization Structure of IPR Protection............................................................................ 13
Multilateral IPR System ...................................................................................................... 13
World Trade Organization (WTO) ................................................................................. 13
Declaration on TRIPS Agreement and Public Health .................................................... 15
World Intellectual Property Organization (WIPO) ......................................................... 17
Free Trade Agreements ....................................................................................................... 21
Trade Promotion Authority............................................................................................ 21
Patents .......................................................................................................................... 22
Copyright...................................................................................................................... 25
U.S. Trade Law ......................................................................................................................... 29
Special 301 ......................................................................................................................... 29
Special 301 Country Lists ............................................................................................. 29
Country Identification Factors....................................................................................... 30
Section 337 ......................................................................................................................... 31
Generalized System of Preferences...................................................................................... 32
U.S. Agency Functions and Funding for IPR ....................................................................... 33
Department of Commerce (Commerce) ............................................................................... 33
Department of Justice (DOJ) ......................................................................................... 34
Department of Homeland Security (DHS) ..................................................................... 35
Food and Drug Administration (FDA) ........................................................................... 35
Copyright Office ........................................................................................................... 36
Department of State (State) ........................................................................................... 36
U.S. Agency for International Development (AID) ........................................................ 37
United States Trade Representative (USTR) .................................................................. 37
United States International Trade Commission (ITC)..................................................... 37
National Intellectual Property Law Enforcement Coordinating Council
(NIPLECC) and the Intellectual Property Enforcement Coordinator (IPEC) ............... 38
Strategy Targeting Organized Piracy (STOP!Intellectual Property Enforcement Coordinator (IPEC) .................................................. 38
National Intellectual Property Law Enforcement Coordinating Council
(NIPLECC)................................................................ 38
Issues for Congress ................................................... 38
Strategy Targeting Organized Piracy (STOP!)................................................................ 39
U.S. Efforts to Promote IPR Through Trade PolicyIssues for Congress .............................................................. 39
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Effectiveness of the U.S. IPR Organizational Structure........................................................... 41
IPR and Import Safety 40
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U.S. Efforts to Promote IPR Through Trade Policy............................................................... 40
Effectiveness of the U.S. IPR Organizational Structure........................................................ 4342
Figures
Figure 1. 2008 Border Seizures of Counterfeit and Pirated Goods................................................9
Tables
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2008..................................5
Table 2. Estimated U.S. Trade Losses Due to Copyright Piracy, 2006-2008 ............................... 10
Table 3. 2008 Software Piracy Rates and Losses to U.S. Business Software Companies
From Selected Countries ........................................................................................................ 11
Table 4. Estimated Damages for PhRMA Member Companies From Data Exclusivity and
Patent Protection Violations ................................................................................................... 13
Table 5. Summary of WIPO-Administered IPR Treaties ............................................................ 19
Table 6. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs .................... 27
Table 7. FY2007-FY2009 IPR Protection and Enforcement Dedicated Funding for U.S.
Government Agencies ............................................................................................................ 3940
Contacts
Author Contact Information ...................................................................................................... 44
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Introduction
Intellectual property rights (IPR) traditionally have been matters of national concern. Individual
nation states have developed IPR regimes reflecting their nationaldomestic needs and priorities. Over
time,
intellectual property protection and enforcement have come to the forefront as a key international
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 possible 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
“to promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the exclusive Right to their respective
Writings and Discoveries” and “to regulate Commerce with foreign Nations.”1 While the U.S.
Constitution provides Congress with the power to regulate international trade, the authority to
negotiate trade agreements has been delegated periodically to the President, Congressional. However,
congressional action is needed
to bring the trade 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 also may 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 enacted to establish a new entity to coordinate intellectual
property activities within the federal government. In the 111th Congress, legislation has been
introduced 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; and 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 arenas; 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.
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 Property1
U.S. Constitution, Article 1, Section 8.
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Types of IPR
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
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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 patentholderpatent holder recoups histhese up-front costs through a temporary monopoly over sale of the
invention. In return for this economic rent, the patentholderpatent holder 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.12 Examples of trade secrets include blueprints, customer lists, and
pricing information. While protection of patents and copyright is a matter of federal law, 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 withfor patents. Protection of trade secrets
originates 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
2
Uniform Trade Secret Act, §1(4).
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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.
1
Uniform Trade Secret Act, §1(4).
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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 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, 3
3
For information on geographical indications and international trade negotiations, see CRS Report RS21569,
Geographical Indications and WTO Negotiations, by Charles E. Hanrahan.
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Infringement of IPR
IPR infringement is the misappropriation or violation of the IPR. 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 nonobservance by WTO non-observance by WTO
member states to the minimal standards of the TRIPS Agreement. Copyright
infringement occurs
when a third party engages in reproducing, performing, making sound or
2
For information on geographical indications and international trade negotiations, see CRS Report RS21569,
Geographical Indications and WTO Negotiations, by Charles E. Hanrahan.
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visual recordings of, or
broadcasting a copyrighted work without the consent of the copyright
owner.
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.34 The purpose of counterfeit goods is to deceive
consumers about their origin and nature. Counterfeiting and copying of original goods is aare major
challengechallenges for trademarked products. The counterfeited product can be sold for a premium because
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 brandnamebrand-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 well-known trademark in order to
benefit from the reputation of the product with which he is competing.
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. The United States
continues to be the source of the world’s largest number of patent filing applications under the
Patent Cooperation Treaty (PCT), an international patent filing system administered by the World
4
Counterfeit goods should be distinguished from generic goods, i.e., in the case of generic forms of pharmaceutical
medicines.
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Intellectual Property Organization (WIPO). The United States, along with Germany and Japan,
accounted for about 60% of all patent applications filed in 2008 under the PCT (see Table 1).
In comparison, developing countries tend to be net importers of intellectual property and
represented only 8% of all PCT international patent filings in 2006.4 Given that developing
3
Counterfeit goods should be distinguished from generic goods, i.e., in the case of generic forms of pharmaceutical
medicines.
4
WIPO, “Record Year for International Patent Filings with Significant Growth from Northeast Asia,” press release,
February 8, 2007, http://www.wipo.int/pressroom/en/articles/2007/article_0008.html. Statistics on patent applications
filed and patents granted by country office are available on the WIPO website, http://www.wipo.org.
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5 Given that developing
countries accounted for about 78% of signatories to the PCT, WIPO has engaged in efforts to
ensure that developing countries also are able to take advantage of intellectual property. However,
patent filings levels are not uniform among developing countries. In 2008, Korea and China
continued to be among the top fifteen countries of origin for PCT international applications. Both
countries had double-digit growth rates in patent filings from the previous year. Korea and China,
along with India, Brazil, South Africa, Turkey, Mexico, and Malaysia, represented the majority of
all patent filings from developing countries.
The total number of patent filings received by the PCT in 2008 represented the highest number in
a single year. However, international growth in patent filings slowed to 2.4% in 2008, compared
to an average growth rate of 9.3% for the previous three years. Some observers express concern
that the slowdown in filings is associated with the global economic downturn, which may be
affecting investment and spending on research and development.5
6
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2008
Country
2006
2007
Filings
Filings
2008
Filings
% of Total
% Change
from 2007
United States
50,941
54,086
53,521
32.7
-1.0
Japan
27,033
27,744
28,744
17.5
3.6
Germany
16,732
17,818
18,428
11.3
3.4
Korea
5,944
7,061
7,908
4.8
12.0
5,944
7,061
7,908
4.8
12.0
Korea
5
WIPO, "Global Economic Slowdown Impacts 2008 International Patent Filings," press release, January 27, 2009,
http://www.wipo.int/pressroom/en/articles/2009/article_0002.html.
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Country
2006
2007
Filings
Filings
2008
Filings
% of Total
% Change
from 2007
France
6,242
6,568
6,867
4.2
4.6
China
3,951
5,441
6,089
3.7
11.9
United Kingdom
5,090
5,539
5,517
3.4
-0.4
Netherlands
4,529
4,355
4,349
2.7
-0.1
Sweden
3,316
3,657
4,114
2.5
12.5
Switzerland
3,577
3,778
3,832
2.3
1.4
Canada
2,566
2,847
2,966
1.8
4.2
Italy
2,716
2,946
2,939
1.8
-0.2
Finland
1,845
1,995
2,119
1.3
6.2
Australia
2,001
2,053
2,028
1.2
-1.2
Israel5
WIPO, “Record Year for International Patent Filings with Significant Growth from Northeast Asia,” press release,
February 8, 2007, http://www.wipo.int/pressroom/en/articles/2007/article_0008.html. Statistics on patent applications
filed and patents granted by country office are available on the WIPO website, http://www.wipo.org.
6
WIPO, "Global Economic Slowdown Impacts 2008 International Patent Filings," press release, January 27, 2009,
http://www.wipo.int/pressroom/en/articles/2009/article_0002.html.
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Country
2006
2007
Filings
Filings
Israel
Filings
% of Total
% Change
from 2007
1,589
1,746
1,882
1.1
7.8
11,084
12,252
12,947
7.6
2.0
149,156
159,886
163,800
---
2.4
All Others
Totals
2008
Source: World Intellectual Property Organization.
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 transportation
businesses, which support the distribution of goods and services derived from intellectual
property. 67
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.78 More broadly, IPR-intensive industries also contribute positively to
the U.S. economy through productivity gains and other spillover effects.
6
Stephen E. Siwek, “Engines of Growth: Economic Contributions of the US Intellectual Property Industries,”
commissioned by NBC Universal, 2005, p. 2.
7
Ibid., p. 3.
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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. 89 In 20072008, U.S. receipts from cross-border trade in royalties and
license fees (relating to patent, trademark, copyright, and other intangible rights) totaled $8291.6
billion, up 14about 9% from 2006.2007 ($83.8 billion). Also in 2008, U.S. payments of royalties and license fees amounted to $25.0 billion,
a 5% increase from 2006. 9
license fees to foreign countries amounted to $26.6 billion, an increase of about 8% from 2007
($24.7 billion). Industrial processes, computer software, and trademarks accounted for the bulk of
U.S. international trade in intangible assets.10
7
Stephen E. Siwek, “Engines of Growth: Economic Contributions of the US Intellectual Property Industries,”
commissioned by NBC Universal, 2005, p. 2.
8
Ibid., p. 3.
9
Amanda Horan, Christopher Johnson, and Heather Sykes, Foreign Infringement of Intellectual Property Rights:
Implications for Selected U.S. Industries, U.S. International Trade Commission, Office of Industries Working Paper,
October 2005, p. 4.
10
Jennifer Koncz, Michael Mann, and Erin Nephew, “U.S. International Services,” Survey of Current Business, U.S.
(continued...)
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Industry-specific figures also demonstrate the importance of the intellectual property to the U.S.
economy. For example, in 2007, the business and entertainment software, motion pictures,
recording, and
publishing industries, which rely on copyright protection, waswere 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 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
contribute about $889 billion to the U.S. economy (“value-added” to current GDP), or about
6.44% of the U.S. economy. This was an increase from 2006, during which the value-added of
these copyright industries to the U.S. GDP totaled $837 billion, or 6.35% of the U.S. economy.
These copyright industries also accounted for nearly 23% of real U.S. annual economic growth in
2007, up from 13.4% in 2006. In terms of U.S. employment, the copyright industries represented
4% of U.S. workers (5.6 million workers) in 2007, similar to the prior year. Foreign sales and
exports from these industries amounted to $126 billion in 2007, up from $116 billion in 2006.11
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 $189.63 billion in 2007, a 6.72008, a 2.2% increase from the previous
year ($177.7185.2 billion). PhRMA company sales abroadSales abroad by PhRMA companies increased by 10.0% from $76.8 billion in
2006 to $81.9 billion in 2007.115.4% from $88.2 billion
in 2007 to $99.0 billion in 2008.12 The U.S. pharmaceutical industry maintains a strong global
position, accountingaccounted for over 30% of
value added in the global pharmaceutical market place in
2005.1213
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. 1314 According to PhRMA, it takes
about 10 to 15 years of research and development to create a new drug. PharmaceuticalPhRMA member
companies collectively spent an estimated $44.5 billion for research and development in 2007.14
8
Amanda Horan, Christopher Johnson, and Heather Sykes, Foreign Infringement of Intellectual Property Rights:
Implications for Selected U.S. Industries, U.S. International Trade Commission, Office of Industries Working Paper,
October 2005, p. 4.
9
Jennifer Koncz, Michael Mann, and Erin Nephew, “U.S. International Services,” Survey of Current Business, U.S.
Bureau of Economic Analysis (BEA), October 2008, pp. 24-26. This measure of cross-border trade in royalties and
50.2 billion for research and development (domestic
and abroad) in 2008, nearly 5% more than in 2007.15 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
(...continued)
Bureau of Economic Analysis (BEA), October 2009, pp. 8-10, 40-41. This measure of cross-border trade in royalties
and license fees by U.S. companies include transactions with both affiliated and unaffiliated foreign companies.
1011
Stephen E. Siwek, Copyright Industries in the U.S. Economy: The 20062003-2007 Report, prepared for the International
Intellectual Property Alliance (IIPA), November 2006, http://www.iipa.com, pp. 3-5.
117.
12
PhRMA, Pharmaceutical Industry Profile 20082009, Washington, D.C., March 2008April 2009, http://www.phrma.org, p. 56.
13.
12
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.
1314
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.
1415
PhRMA, Pharmaceutical Industry Profile 20082009, Washington, D.C., March 2008April 2009, http://www.phrma.org.
(continued...), p. 50.
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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.
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.1516
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 (see Figure 1). In 2008, the Customs and Border Protection (CBP) and Immigration
and Customs Enforcement (ICE) agencies of the DHS made 14,992 IPR-related seizures, a nearly
10% increase from 2007. The domestic value of seizures totaled $272.7 million in 2008, a
roughly 40% increase from 2007 ($196.7 million). 1617
A top priority for the CBP is seizing counterfeit imports that endanger the health and safety of
consumers, such as fake healthcare products, pharmaceutical products, and consumer
electronics.1718 IPR-related seizures of commodities that represent potential safety and security
risks increased from $27.8 million in 2007 to $62.5 million in 2008. Pharmaceutical goods
accounted for the majority of goods posing health and safety risks. 1819
DHS provides data on counterfeit goods seized by category. Counterfeit footwear ranked as the
top commodity seized, representing $102.3 million in domestic value. Other popular items by
(...continued)
15
domestic value included handbags, wallets, and backpacks ($29.6 million); pharmaceuticals
($28.1 million); wearing apparel ($25.1 million); and consumer electronics ($22.9 million). 20
16
OECD, The Economic Impact of Counterfeiting and Piracy, 2007, p. 4,
http://www.oecd.org/dataoecd/13/12/38707619.pdf.
1617
U.S CBP and U.S. ICE, Intellectual Property Rights Seizure Statistics: FY2008, January 2009.
17
18
NIPLECC, “ NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement
and Protection, January 2008, p. 74.
1819
U.S Customs and Border Protection and U.S. Immigration and Customs Enforcement, Intellectual Property Rights
Seizure Statistics: FY2008, January 2009.
20
Ibid.
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domestic value included handbags, wallets, and backpacks ($29.6 million); pharmaceuticals
($28.1 million); wearing apparel ($25.1 million); and consumer electronics ($22.9 million). 19
Figure 1. 2008 Border Seizures of Counterfeit and Pirated Goods
Footwear
38%
All Other Goods
24%
Consumer
Electronics
8%
Wearing Apparel
9%
Pharmaceuticals
10%
Handbags,
Wallets, and
Backpacks
11%
Sources: U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement.
Of all U.S. trading partners, China continues to account for the majority of counterfeits
intercepted at the U.S. border. In 2008, seizures of goods originating from China represented 81%
of all seizures and $221.6 million in value. Other top trading partners from which IPR-infringing
goods were seized include India, Hong Kong, Taiwan, and Korea. 2021
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.2122
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 billion and $250 billion annually. 2223
Given the above estimates, the Coalition Against Counterfeiting and Piracy (CACP) asserts that a
conservative estimate for U.S. businesses’ annual revenue loss due to counterfeiting and piracy is
about $225 billion. 2324 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
19
20
Ibid.
Ibid.
21
property-based 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.
21
Ibid.
22
CBP, "U.S. Customs Announces International Counterfeit Case Involving Caterpillar Heavy Equipment," press
release, May 29, 2002. Cited by LECG, LLC, Economic Analysis of the Proposed CACP Anti-Counterfeiting and
Piracy Initiative, November 27, 2007.
2223
FBI, press release, July 17, 2002, http://www.fbi.gov/pressrel/pressrel02/outreach071702.htm. Cited by LECG, LLC,
Economic Analysis of the Proposed CACP Anti-Counterfeiting and Piracy Initiative, November 27, 2007.
2324
LECG, LLC, Economic Analysis of the Proposed CACP Anti-Counterfeiting and Piracy Initiative, November 27,
2007.
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property-based 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 1,900 U.S. copyright-based companies, provides annual estimates of U.S. trade
loss associated with copyright infringements in selected countries.2425 For 2008, the IIPA claimed
that copyright infringements in 4847 countries resulted in an estimated $17.19 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 2008. Russia was the
second largest source of trade losses, totaling nearly $2.86 billion that year.2526
Table 2. Estimated U.S.Trade Losses Due to Copyright Piracy, 2006-2008
(Millions of U.S. dollars)
Copyright Industry
2006
2007
Business software
10,721
12,597
14,15813,318
14,709
Records and music
2,228
2,180
1,965
Not available
Not available
Not available
1,951
1,913
Not available
Books
569
465
Not available
Totals
15,469
16,123
17,13417,876
16,674
Motion pictures
Entertainment software
2008
Source: IIPA “Special 301” reports, various years.
IIPA predicts that U.S. trade losses due to copyright infringement may be higher than reported
because its estimates do not account for all forms of piracy, such as Internet piracy, which IIPA
contends is an important contributor to copyright piracy.2627 There is a possibility that 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.2728 For consumers in poor developing
countries, especially, this assumption may not be tenable.
24
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. IPR-based industries. For instance, the
25
The IIPA member associations are: Association of American Publishers (AAP), Business Software Alliance (BSA),
Entertainment Software Alliance (ESA), Independent Film & Television Alliance (I.F.T.A.), Motion Picture
Association of America (MPAA), National Music Publishers’ Association (NMPA), and Recording Industry
Association of America (RIAA).
2526
IIPA, IIPA 2009 “Special 301” USTR Decisions, issued June 30, 2009.
27
IIPA, “IIPA’s 2009 Special 301 Report on Copyright Protection and Enforcement,” submitted to the U.S. Trade
Representative by IIPA on February 17, 2009, http://www.iipa.com.
28
Special 309 Report, February 17, 2009. Data updated April 30, 2009.
26
IIPA, “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.
27
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.
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Intellectual Property Rights and International Trade
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. IPR-based industries. For instance, the
United States had the lowest software piracy rate in the world in 2008 (20%). 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 $9.1 billion in 2008. By contrast, countries 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 piracyrelated absolute losses stemming from these countries. The worldwide software piracy rate was
41%, with global piracy amounting to $53 billion in losses for the U.S. business software
industry.2829
Table 3. 2008 Software Piracy Rates and Losses to U.S. Business Software
Companies From Selected Countries
Country
Piracy Rate
Piracy Loss
(millions of U.S. dollars)
Georgia
95%
$59
Zimbabwe
92%
$4
Vietnam
85%
$257
Pakistan
86%
$159
China
80%
$6,677
Russia
68%
$4,215
India
68%
$2,768
Canada
32%
$1,222
Denmark
25%
$215
Japan
21%
$1,495
United States
20%
$9,143
Source: Business Software Alliance.
2829
BSA, Sixth Annual BSA-IDC Global Software 08 Piracy Study, May 2009, http://www.bsa.org/globalstudy/, pp. 1213.
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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 2005.2930 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.
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).3031 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.
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.3132 In the
United States and many other developed countries, with relatively strong regulatory systems, the
prevalence of counterfeit drugs is low. According to U.S. customs data, in FY2008,
pharmaceuticals accounted for 45% ($28 million in domestic value) of all commodities seized at
U.S. borders that posed potential safety and security hazards.3233 There continues to be 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.3334 In its 2007 Special 301 submission to the USTR
(covering the period of October 2005 to September 2006), PhRMA contended that its member
29,
PhRMA contended that its member companies sustained damages totaling an estimated $21.7
30
Analysis prepared by LEK, The Cost of Movie Piracy, MPAA, p. 5, http://www.mpaa.org.
Stephen E. Siwek, The True Cost of Motion Picture Piracy to the U.S. Economy, Institute for Policy Innovation,
Policy Report #186, September 2006, pp. 4-6, 8-9, http://www.ipi.org.
30
3131
32
WHO, “Counterfeit Medicines,” fact sheet, revised November 14, 2006, http://www.who.int/mediacentre/factsheets/
fs275/en/index.html.
3233
U.S CBP and U.S. ICE, Intellectual Property Rights Seizure Statistics: FY2008, January 2009. 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 from the DHS agencies do not reflect on
the overall size of the counterfeit market and total losses.
3334
PhRMA’s calculations of damage due to violations of data exclusivity are based on a five-year 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.
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companies sustained damages totaling an estimated $21.7 million from data exclusivity and
patent violations in 24 countries (see Table 4).3435 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 sales
declined from the 2006 submission to the 2007 submission.3536 At the time of reporting for
2008 Special 301 submissionssubmissions for subsequent years, PhRMA was not able to provide estimates of damages sustained in
2007 due toresulting
from trade barriers associated with intellectual property protection and market access.3637
Table 4. Estimated Damages for PhRMA Member Companies From Data Exclusivity
and Patent Protection Violations
2006 Submission
(Oct. 2004 - Sept. 2005
)
2007 Submission
(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.
3435
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.
3536
PhRMA, Special 301 Submission for 2007. See Appendix: Damage Estimate Methodology, p. v.
3637
PhRMA, Special 301 Submission 2008.
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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).
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 Understanding (DSU). The binding nature of
the DSU, with the possibility of the withdrawal of trade concessions (usually the reimpositionre-imposition of
tariffs) for non-compliance, 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.37 38 In January 2009, the DSU publicly issued its final
ruling on the copyright case. The
WTO panel ruled in the United States’ favor that China’s denial
of copyright protection to works
that do not have censorship approval is inconsistent with the
TRIPS Agreement. The WTO panel
also agreed with the United States that it is impermissible for
China to publicly auction IPR-infringingIPRinfringing goods seized at the border, with the only requirement
being that fake brands and
trademarks be removed from the goods. However, the WTO panel
ruled that more evidence was
needed before deciding whether or not China’s threshold values for
prosecuting counterfeiting
and piracy permit commercial scale IPR infringement.3839
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.”3940 Article 7 declares that:
37
38
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.
3839
WTO, “WTO issues panel report on U.S.-China dispute over intellectual property rights,” press release, January 26,
2009. USTR, “United States Wins WTO Dispute Over Deficiencies in China's Intellectual Property Rights Law,” press
release, January 26, 2009. Daniel Pruzin, "WTO Publishes Final Ruling in U.S. Complaint Against Chinese IPR
Enforcement Measures," International Trade Daily, January 27, 2009.
3940
Pascal Lamy, “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later,” Journal of World Trade,
October 2004, p. 925.
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... 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).
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 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 2016.4041
Declaration on TRIPS Agreement and Public Health 4142
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, 2001.4243 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.
4041
“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.
4142
See also CRS Report RL33750, The WTOR40607, Intellectual Property Rights, and the Access to Medicines Controversy, by
Ian F. Fergusson.
42: International Trade Issues , by
Shayerah Ilias.
43
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.
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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.
On the eve of the Cancun Ministerial in August 2003, WTO members agreed on a Decision43Decision44 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 two-thirds of the 153
WTO member states. Until then, the 2003 waiver continues in force. To date, 47 countries (the
52 WTO members
(the United States, Switzerland, El Salvador, South Korea, Norway, India, the Philippines, Israel,
Japan, Australia, Singapore, Hong Kong, China, the 27 countries of the European Union,
Mauritius, Egypt, Mexico, Jordan, Brazil, Morocco, Albania, Macau, Canada, Bahrain, Colombia,
and Zambiaand Albania) have ratified the amendment.44
45 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.45
4346
44
“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.
4445
“Members accepting amendment of the TRIPS Agreement,” http://www.wto.org/english/tratop_e/trips_e/
amendment_e.htm.
4546
“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.
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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.4647 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.4748 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.4849
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.
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 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 1996.4950 Recent WIPO efforts have focused on patent law. In June 2000, WIPO
4647
OECD, The Impact of Trade-Related Intellectual Property Rights on Trade and Foreign Direct Investment in
Developing Countries, May 28, 2003, p. 21, http://www.oecd.org.
4748
Keith E. Maskus, Intellectual Property Rights in the Global Economy, Institute for International Economics (IIE),
Washington, D.C., August 2000.
4849
Commission on Intellectual Property Rights (CIPR), Integrating Intellectual Property Rights and Development
Policy, September 2002.
4950
These WCT and WPPT frequently are referred to as the WIPO Internet Treaties.
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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. Government leaders participating in the Group of 8 (G8) meeting in
July 2008 called for “accelerated discussions” of the SPLT.51
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. 5052 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.51
5053
51
Monika Ermert, "G8 Governments Want ACTA Finalised This Year, SPLT Talks Accelerated ," Intellectual
Property Watch, July 9, 2008.
52
“Agreement between the World Intellectual Property Organization and the World Trade Organization,”
http://www.wto.org/english/tratop_e/trips_e/wtowip_e.htm.
5153
WIPO, Intellectual Property Handbook, http://www.wipo.org, p. 359.
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Table 5. Summary of WIPO-Administered IPR Treaties
Treaty
Date Concluded
Provisions
Intellectual Property Protection Treaties
Paris Convention for the Protection of IndustryIndustrial 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 ProtectingProtection 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
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)
CRS-19
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Treaty
Date Concluded
Provisions
Global Protection System Treaties
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 microorganism 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
Lisbon Agreement for the Protection of Appellations of Origin and their
International Registration (Lisbon Agreement)
1958
Provides international protection for geographical indications
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)
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)
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)
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)
Classification Treaties
Source: WIPO.
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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 fasttrack 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.”5254 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 in TRIPS. Some of the new measures also address technological innovations
that have come about since the TRIPS Agreement.
5254
P.L. 107-210, Sec. 2102(b)(4).
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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 leadershipCongress concluded a bipartisan agreement on
trade policy
that addressed Democratic concerns about the implications of enhanced IPR on
developing developing
countries’ ability to meet public health needs.5355 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 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).5456
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 scaledown in patent protection in these FTAs may set a precedent for future FTA negotiations. 5557
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 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.
5355
The May 10, 2007 bipartisan trade agreement is available online at:
http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2007/asset_upload_file127_11319.pdf.
5456
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.
5557
"Brand-Name Industry Alarmed at IPR Precedent of FTA Template," Inside US Trade, May 18, 2007.
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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.5658 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.5759
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 rights- holder. The TRIPS Agreement permits signatories to issue compulsory
licenses for 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
5658
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.”
5759
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.
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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 Importation
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 IPRsIPR, 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. 5860 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.
5860
U.S. Government Accountability Office, U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines
May Need Clarification, GAO-97-1198, September 2007, p. 19.
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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
non-governmental 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 microorganisms, 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 rights-management information, which is “electronic information that
identifies a protected work, its author, and terms and conditions of use,”5961 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.
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 1998.6062 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. Under the FTAs, ISPs are provided
5961
CRS Report RL33205, Intellectual Property and the Free Trade Agreements: Innovation Policy Issues, by John R.
Thomas.
6062
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.
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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.
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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
Market approval
linked to patent
status
No provisions
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
Issuance of
compulsory licenses
Members must protect data from unfair
commercial use (Article 39.3)
Jordan (Article 4.22)
Some restrictions in issuance of compulsory
licenses; circumstances under which licenses can
be issued not limited (Article 13)
NAFTA (Article 1709.10),
CRS-27
Mandatory extensions in cases of unreasonable
delays in patent grants/regulatory approval
Optional extensions in cases of unreasonable
delays in patent grants/regulatory approval
Jordan (Article 4.23.a),
NAFTA (Article 1709.12)
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)
National regulatory authorities cannot provide
marketing approval for a generic version of a
patented drug without permission from rightsholder; also requires notification of rights-holder 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)
Provides for at least five years of data exclusivity
from date of approval in country for
pharmaceuticals that contain new chemical products
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(1-3)), Australia (Article 17.10.1),
Morocco (Article 15.10.1), Chile (Article 17.10.1), Korea
(Article 18.9(1-2))
Limits issuance of compulsory license to specific
cases: Correcting anti-competitive practices, public
non-commercial contexts, national emergencies, and
other extremely urgent situations
Jordan (Article 4.20), Singapore (Article 16.7.6),
Australia (Article 17.9.7)
Peru (Article 16.10.4), Panama (Article 15.10.4),
Colombia (Article 16.10.4)
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
Peru (Article 16.10.2), Panama (Article 15.10.4),
Colombia (Article 16.10.2)
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)
.
Intellectual
Property Forms
TRIPS Provisions
General TRIPS-Plus Provisions in FTAs
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
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)
Biodiversity and
traditional
knowledge
Members may exclude plants and animals from
patentability (micro-organisms and nonbiological and micro-biological processes must
be eligible for patents); must provide protection
of plant varieties (Article 27.3(b))
Countries shall make patents available for plants and
animals
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
Jordan (no mention), Chile (no mention), CAFTA-DR
(no mention), Bahrain (no mention), Oman (no
mention)
Morocco (Article 15.9.2, plants and animals mentioned,
plant varieties are not mentioned)
NAFTA (Article 1709.3), Bahrain (Article 14.8.(1-2)),
Oman (Article 15.8.2, plants not discussed),
Scale-down of TRIPS-Plus Standards
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)
Jordan, (no mention), Singapore (no mention),
Australia (no mention), Korea (no mention)
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), CAFTADR (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)
Term of protection
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), CAFTADR (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)
Circumvention of
copyrighted work
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)
ISP Liability
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.
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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. 100-418) 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. 6163
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 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”
6163
For the Special 301 provisions, see 19 U.S.C. §2242; Trade Act of 1974, as amended, (P.L. 93-618), §182.
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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.
Special 301 Report for 2009
For its 2009 Special 301 Report, the USTR reviewed the IPR policies and practices of 77 countries, of which 46 were
designated under the USTR’s administrative categories. The report states that, despite some improvements, China
and Russia remain top concerns for the Administration due to their inadequate IPR protection and enforcement.
China and Russia, along with ten other countries (Algeria, Argentina, Canada, Chile, India, Indonesia, Israel, Pakistan,
Thailand, and Venezuela) were placed on the Priority Watch List for 2009. Canada was elevated to the Priority
Watch List after being on the Watch List from 1995 to 2008. The USTR cited ongoing issues with Canada’s copyright
reform and border enforcement efforts for combating trade in IPR-infringing products. Canada has raised concern
about the Special 301 process in its bilateral discussions with the United States, claiming that the process is industrydriven and not objective. Some Canadian industry groups maintain that USTR’s identification of Canada on its Special
301 list is a genuine signal of the inadequacies of Canada’s IPR regime, while others argue that Canada’s piracy rates
are significantly lower than those of other countries cited on the Priority Watch List. Algeria and Indonesia also were
elevated to the Priority Watch List from the Watch List.
The USTR placed another 33 countries on its Watch List. No countries were designated as Priority Foreign
Countries.
The 2009 Special 301 Report also noted progress made by trading partners. Citing improvements in the Korean
government’s IPR policy direction, the USTR removed Korea from the Watch List, marking the first time that Korea
has not been listed in the Special 301 report. The USTR will continue to monitor Korea’s efforts in protecting and
promoting IPR.
On January 16, 2009, the USTR removed Taiwan from the Special 301 Watch List, following the out-of-cycle review,
due to IPR improvements, including the creation of a specialized IPR court in July 2008, progress in combating
Internet and university piracy, and legislation that provides liability limitations to Internet Service Providers that
specify actions for addressing infringing activities. USTR will continue to monitor Taiwan’s progress in improving its
IPR protection and enforcement.6264
Paraguay continues to be subject to section 306 monitoring. In addition, in the 2009 report, the USTR announced
out-of-cycle reviews for Fiji, Israel, Philippines, Poland, and Saudi Arabia.
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 countryspecific and, according to a USTR official, take into consideration a host of factors, several of
which are mentioned in the Special 301 report.6365 These include the level and scope of the
country’s IPR infringement and their impact on the U.S. economy. Other considerations include
6264
Amy Tsui, "Bush Administration Removes Taiwan From Watch List of Nations Failing in IPR," International Trade
Daily, January 21, 2009.
6365
Conversation with USTR official, July 2006.
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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 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.
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. 6466 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.”6567
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.6668
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
6466
Telephone conversation with PhRMA representative, July 2006.
Oxfam International, US bullying on drug patents: One year after Doha, Briefing Paper 33.
6668
Telephone conversation with USTR official, July 2006.
6567
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the ID or order a further 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. 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.6769
During FY2007FY2008, the ITC reported a total of 7788 active section 337 investigations and ancillary
proceedings, of which 39 were instituted in 2007. All of the new section 337 investigations
involved patent infringement. The ITC completed a total of 34 investigations and ancillary
proceedings in 2007, which resulted in 8 exclusion orders and 26 cease-and-desist orders.
According to the ITC, section 337 cases increasingly involve advanced technologies in the
computer, telecommunications, automotive, and pharmaceutical sectors. 68up from 73 in FY2007. Of the 88 active investigations in FY2008, 43 constituted of
new section 337 investigations and 7 were new ancillary proceedings stemming from previously
concluded section 337 investigations. The section 337 investigations frequently involved
advanced technology areas, covering products and processes ranging from integrated circuits,
computer components, consumer electronic products, and chemical compositions. Over 90% of
the new section 337 investigations that were active in FY2008 involved cases of alleged patent
infringement. In FY2008, the ITC issued two general exclusion orders, five limited exclusion
orders, and 14 cease-and-desist orders.70
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 ten-year time frame, and the program has been renewed from
time to time. Most recently, in 2006, Congress extended GSP through 2008.6971 The GSP program
currently offers preferential access for about 5,000 products from 132 countries and territories. 7072
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.7173
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 USTR currently is reviewing a petition by the IIPA
to remove Brazil from GSP 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
67
69
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.
6870
U.S. International Trade Commission, The Year in Trade 2007, USITC Publication 4026, Washington, D.C., July
2008, http://hotdocs.usitc.gov/docs/pubs/332/pub4026.pdf.
69Year in Review: Fiscal Year 2008, USITC Publication 4093, p. 14.
71
For a more thorough discussion of GSP, see CRS Report RL33663, Generalized System of Preferences: Background
and Renewal Debate, by Vivian C. Jones.
7072
USTR, U.S. Generalized System of Preferences Guidebook, February 2007.
7173
91 USC 2462(b)(2)
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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.7274 For 2008, the USTR
was scheduled to continuecontinued evaluating IPR protection in Russia, Lebanon, and Uzbekistan on the
basis of IIPA
petitions for ongoing GSP reviews.73 75
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 $2.0 billion for IPR protection and enforcement for FY2009, up from $1.92
billion in FY2008 and $1.81 billion in FY2007 (see Table 7). The total may 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.7476
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 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.7577 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). 76 The PTO is fully
7274
USTR, “USTR Ends Review of Pakistan’s Protection of Intellectual Property Rights,” press release, January 24,
2006.
7375
USTR, GSP: 20072008 Annual Review, http://www.ustr.gov.
7476
General information about the Department of Commerce is available at http://www.doc.gov.
75
77
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 21.
76
Conversation with PTO official, November 26, 2007.
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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). 78 The PTO is fully
funded through fees generated from patent and trademark applications. 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 Congressional Liaison, funding for efforts such as the
Strategy Targeting Organized Piracy (STOP), activities associated with the National Intellectual
now-repealed National
Intellectual Property Law Enforcement Coordinating Council (NIPLECC, discussed below), and IPR
IPR technical and training programs comes from this account. The Omnibus Appropriations Act for
for FY2009 (P.L. 111-8) increasesincreased the PTO’s budgetary authority to $2.01 billion.
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. 7779 For FY2008, the
Consolidated Appropriations Act (P.L. 110-161) provided the ITA with $413.2 million in enacted
funds (including both direct appropriation and anticipated receipts from fees). For FY2009, the
Omnibus Appropriations Act (P.L. 111-8) providesprovided the ITA with $429.9 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.7880 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. 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 for 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. Explanatory language accompanying the FY2009 Omnibus
Appropriations Act (P.L. 111-8) increasesincreased funding for IPR enforcement; it providesprovided $9.4 million
for additional agents dedicated solely to investigating criminal IPR violations.
7778
Conversation with PTO official, November 26, 2007.
79
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 21.
7880
DOJ, 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.
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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.7981
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.8082 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. As 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).8183 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 criminal investigation. Likewise, information
obtained from ICE activities that is relevant to identifying and apprehending counterfeit
shipments is provided to CBP.8284 For FY2009, according to S.Rept. 110-396, the Senate-reported
S. 3181 would have fully funded the President’s budget request for an increase of $5 million for
additional ICE positions to combat crimes such as trafficking of counterfeit merchandise and
pharmaceuticals.
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
79
8081
82
Information about the DHS is available at http://www.dhs.gov.
Certain customs-related IPR policy-making resides within in the Treasury.
8183
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, pp. 15-16. Additional information about CBP is available at http://www.cbp.gov.
8284
Ibid. Also refer to the ICE website, http://www.ice.gov.
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products. The FDA also engages in foreign inspections to ensure that foreign manufacturers meet
FDA quality and labeling requirements. Funding for preventing counterfeits from entering the
United States is part of overall FDA import safety efforts.8385
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, recordings, compulsory licenses, and other copyrightrelated 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.8486 The FY2008 Consolidated Appropriations Act (P.L. 110-161)
provided the Copyright Office with $5.3 million in new budgetary authority (not including
authority to spend $44.2 million in receipts). The FY2009 Omnibus Appropriations Act (P.L. 1118) providesprovided the Copyright Office with $18.3 million in new budgetary authority (not including
authority to spend $33.3 million receipts).
Copyright Office appropriations also specify funding for IPR-related activities in developing
countries. For FY2008, the Consolidated Appropriations Act provided $100,000 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. The FY2009
Omnibus Appropriations Act also providesprovided $100,000 to 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,
while the Bureau of Energy, Economics and Business Affairs supports stronger international IPR
standards to fight global piracy and counterfeiting. 8587
The Consolidated Appropriations Act for 2008 (P.L. 110-161) provided $5 million from the
INCLE Account for combating copyright piracy (Section 688). The act noted that the funds
should be used in countries that are not members of the Organization for Economic Cooperation
and Development (OECD) and specified 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. For
8385
Conversation with FDA official, November 26, 2007. Additional information is available on the FDA website,
http://www.fda.gov.
8486
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 18. Also see Copyright Office website, http://www.copyright.gov.
8587
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, pp. 17-18. Additional information about the State Department is available at
http://www.state.gov.
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FY2009, the Omnibus Appropriations Act (P.L. 111-8) also providesprovided $5 million from the INCLE
Account for combating copyright piracy.
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 that promote compliance with the TRIPS Agreement totaled $3.2
million in 2007 and $1.0 million in 2008, down from a peak of $6.9 million in 2003.8688
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.8789
The FY2008 funding level for USTR was $44.1 million, under the Consolidated Appropriations
Act (P.L. 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. For 2009,
under the Omnibus Appropriations Act (P.L. 111-8), the funding level for USTR is $47.3 million.
Explanatory language accompanying P.L. 111-8 encouragesencouraged the USTR to continue prioritizing
IPR issues with China, Russia, and Canada in bilateral and multilateral trade negotiations.
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.8890 For FY2008, ITC was provided with $68.4 million through the
Consolidated Appropriations Act (P.L. 110-161). The FY2009 Omnibus Appropriations Act (P.L.
8688
Trade Capacity Database and general AID information is accessible at http://www.usaid.gov.
8789
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 25. Also see USTR website, http://www.ustr.gov.
8890
U.S. ITC website, http://www.usitc.gov.
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111-8) raisesraised ITC’s funding to $75.1 million, $1.5 million above the budget request.
Accompanying explanatory language stated that the ITC’s increasing section 337 IPR
investigations workload is exceeding current resources, and that the additional funding willwould,
among other activities, allow the ITC to hire an additional administrative law judge.
National Intellectual Property Law Enforcement Coordinating Council
(NIPLECC) and the Intellectual Property Enforcement Coordinator (IPEC)
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.89
In October 2008, the authorities creating NIPLECC were repealed by the “Prioritizing Resources
and Organization for Intellectual Property Act of 2008” (P.L. 110-403), which created an
Intellectual Property Enforcement Coordinator (IPEC) located in the Executive Office of the
President (see section “Effectiveness of the U.S. IPR Organizational Structure,” below). Under
P.L. 110-403, the IPEC is to chair a Advisory Committee that will be similar to NIPLECC but
will include a broader range of agencies involved in IP enforcement.Intellectual Property Enforcement Coordinator (IPEC)
In October 2008, Congress created an Intellectual Property Enforcement Coordinator (IPEC),
through the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (P.L.
110-403). The IPEC, located in the Executive Office of the President – specifically in the Office
of Management and Budget – and subject to Senate confirmation, is charged with coordinating
U.S. government agency IPR enforcement actions and with providing assistance to the USTR in
conducting trade negotiations relating to IPR enforcement abroad.
Under P.L. 110-403, the IPEC is to chair a Advisory Committee composed of representatives
from the Office of Management and Budget, the Departments of Justice, Commerce, State,
Homeland Security, Agriculture, the Food and Drug Administration, the Agency for International
Development, and the Register of Copyrights.
The IPEC, assisted by its Advisory Committee, also is charged with developing a “Joint Strategic
Plan” for combating counterfeiting and piracy. Legislation requires the Joint Strategic Plan to
include in its objectives: reducing counterfeiting and infringing goods in the domestic and
international supply chain, identifying and addressing barriers to effective enforcement
domestically, ensuring that information is shared among the relevant departments and agencies,
eliminating domestic and international counterfeiting and infringement networks, strengthening
the capacity of foreign countries to protect and enforce IPR, and cooperating with other countries
to establish international standards and policies to enforce IPR.
National Intellectual Property Law Enforcement Coordinating Council
(NIPLECC)
In creating the IPEC, P.L. 110-403 repealed the authorities creating the National Intellectual
Property Law Enforcement Coordination Council (NIPLECC). Established by Congress in 1999,
NIPLECC coordinated U.S. activities to protect and enforce IPR domestically and abroad,
drawing together the major federal agencies the help to enforce IPR. The Copyright Office
participated in the Council in an advisory role. The U.S. Coordinator for International Intellectual
Property Enforcement headed NIPLECC’s interagency coordination efforts.91
For FY2008, the Consolidated Appropriations Act (P.L. 110-161) allowed 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. For FY2009, the Omnibus
Appropriations Act (P.L. 111-8) providesprovided for $750,000 to be transferred from the PTO for
activities associated with NIPLECC. Explanatory language accompanying the FY2009 Omnibus
Appropriations Act states
91
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, pp. 3-4.
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Appropriations Act stated that, in future years, it is expected that such funds will be requested
through the Executive Office of the PresidentEOP.
Strategy Targeting Organized Piracy (STOP!)
In 2006, NIPLECC adopted the Bush Administration’s STOP! as its plan of action for protecting
intellectual property rights abroad. The Bush Administration established STOP! in 2004 to crack down
down on criminal networks in pirated and counterfeit goods trafficking. This initiative expresses the
expressed
the Bush 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
and enforcement and works with many of the same agencies as NIPLECC, such as Commerce,
DOJ,
DHS, State, and USTR. The FDA iswas not a part of NIPLECC, but is a participant in
STOP!.9092 The
budget for STOP! comes from Department of Commerce funding.91 The FY2007 SSJC
89
NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, pp. 3-4.
90 93 The FY2007
SSJC Conference Report (H.Rept. 109-520) expressed support for the STOP! initiative, but did
not specify any funding for initiative. The Prioritizing Resources and Organization of Intellectual
Property Act of 2008 (P.L. 110-403) made the STOP! initiative permanent, broadly reflecting the
principles of the STOP! initiative. 94
92
Office of the U.S. IPR Coordinator, Strategy for Targeting Organized Piracy: Accomplishments and Achievements,
September 2007.
9193
U.S. Government Accountability Office, Intellectual Property: National Enforcement Strategy Needs Stronger
Leadership and More Accountability, GAO-07-710T, p. 6.
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Conference Report (H.Rept. 109-520) expressed support for the STOP! initiative, but did not
specify any funding for initiative.
94
The White House President George W. Bush, Office of the Press Secretary, "Fact Sheet: Protecting American
Innovation," press release, October 13, 2008.
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Table 7. FY2007-FY2009 IPR Protection and Enforcement Dedicated Funding for
U.S. Government Agencies
Government
Agency
FY2007
Dedicated
Funding
FY2008
Dedicated
Funding
FY2009
Dedicated
Funding
FY2009 Activities
PTO
$1.8 billion
$1.9 billion
$2.0 billion
Administering patent
and trademark
applications; policy
guidance; training and
technical assistance
NIPLECC
$900,000
$1 million
$750,000
Interagency IPR
enforcement
coordination
Department
of Justice
$2.2 million
$13.1
million
$9.4 million
Criminal IPR
investigations
Copyright
Office
$100,000
$100,000
$100,000
International Copyright
Institute activities
Department
of State
$5 million
$5 million
$5 million
Combat piracy of U.S.
copyrighted materials
under the International
Narcotics and Law
Enforcement Account
USAID
$2.1 million
(for 2006)
$2.9 million
(for 2007)
$1.0 million
(for 2008)
Trade capacity building
for TRIPS and IPR
compliance
Total
$1.81
billion
$1.92
billion
$2.02
billion
U.S. Government
IPR Activities
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 rights-holders for their creations, are actually
barriers to trade and have no place in trade liberalization negotiations. Others contend that IPR
promote trade through innovation, economic growth, and technology transfer from advanced to
developing countries. The Obama Administration currently is reviewing pending trade initiatives.
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. Some question the appropriateness of using regional and bilateral
FTAs for this pursuing stronger IPR, contending that such actions take away from the
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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
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trade agreements. In 2002, the Trade Promotion Authority (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 Congress, congressional leaders and the
Bush Administration agreed to modifications of the patent provisions in the Peru FTA as a result
of the May 2007 bipartisan trade agreement. Still, a Government Accountability Office (GAO)
report suggests that USTR should offer clearer policy guidance to align FTA negotiating activities
with the WTO Doha Declaration.9295 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. Congress also may choose
to consider 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 Obama Administration may be prompted to seek stronger IPR
through plurilateral venues. In October 2007, the United States and several key foreign trading
partners (Australia, Canada, member states of the European Union, Japan, Mexico, Morocco,
New Zealand, Singapore, South Korea, Switzerland) announced their intention to begin
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.9396 ACTA
would provide IPR enforcement tools where the TRIPS Agreement and other international treaties
fall short.9497 Copyright-based businesses and anti-piracy advocates voice strong support for the
ACTA. However, some observers have been concerned with the extent to which U.S. ‘fair use’
practices would be maintained under an agreement. Other parties have expressed concern with
what they consider the secrecy with which ACTA is being negotiated. On September 17, 2008,
numerous consumer groups led by the Electronic Frontier Foundation sued USTR under the
Freedom Of Information Act to obtain the negotiating text of the agreement. USTR has responded
that negotiations are still at the conceptual phase, and that ‘understandings of confidentiality’ are
routine in negotiating trade agreements.9598 Nonetheless, certain issues have been discussed as
potential components of an agreement, including:
•
the role of internet service providers (ISP) in enforcing IPR laws online and the
potential liability of ISPs for infringements over their networks.
•
the ability of customs officials to enforce IPR laws at the border through seizure
of infringing products without being prompted by the rights-holder.
9295
U.S. Government Accountability Office, U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines
May Need Clarification, GAO-07-1198, September 2007.
9396
USTR, “Anti-Counterfeiting Trade Agreement,” fact sheet, August 4, 2008.
9497
Liza Porteus Viana, “USTR Plans Another Year of Elevating IP Protection With Trading Partners,” Intellectual
Property Watch, April 4, 2008.
9598
“USTR Official Cites Confidentiality ‘Understandings’ in ACTA Negotiations,” International Trade Reporter,
September 25, 2008.
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•
the scope of criminal penalties for ‘willful’ violations of ‘commercial scale’
trademark and copyright infringement, including mandatory imprisonment,
monetary fines, and the seizure and destruction of infringing goods. 96
In the latest ACTA meeting99
Participants to the ACTA have held a series of talks discussing the ACTA. In the fourth
round of ACTA discussions, held in mid-December 2008 in Paris, participants affirmed the
the importance of transparency and on engaging in future discussions about sharing
additional information regarding the ACTA negotiations with the public. 97100 The fifth
round of talks was held in July 2009 in Rabat, Morocco and reportedly focused on
international cooperation, enforcement practices, and institutional issues, as well as
transparency issues.101 The sixth round of talks, scheduled for November 2009 in Korea,
reportedly will focus on enforcement procedures in the digital environment, criminal
procedures to address counterfeiting and piracy, and transparency issues.102
On May 20, 2009, the Congressional International Anti-Piracy Caucus (IAPC) released
its “2009 International Piracy Watch List,” which identifies countries with serious
copyright problems. The Congressional IAPC was formed in 2003 and is comprised of
over 70 Members of Congress. Among other activities, it works with House and Senate
committees of jurisdiction on hearings and legislation related to combating copyright
piracy. For this year, the IAPC identified five countries for its watch list: China, Russia,
Canada, Spain, and Mexico. 98103
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 ofPrior to the establishment of the Intellectual Property Enforcement Coordinator (IPEC), the U.S.
IPR organizational structure was coordinated by the National Intellectual Property Law
Enforcement Coordinating Council (NIPLECC). Recent GAO testimony points out some of the
Some Members of Congress were critical of
NIPLECC’s organizational response to international IPR protection and enforcement. Recent
GAO testimony pointed out some of the problems associated with NIPLECC, including an
absence of mission, dearth of activities, and
poor image among businesses.99 104 The FY2007 CJS
Committee Report (S.Rept. 109-280)
expressed concern about the lack of information on
NIPLECC’s progress and evidence of
success.
In the 110th Congress, several bills were introduced to repeal and replace NIPLECC. The
Prioritizing Resources and Organization for Intellectual Property Act of 2008 (P.L. 110-403) (S.
3325, Leahy) was signed by President Bush on October 13, 2008. The act, among other
provisions, replaces NIPLECC with an Intellectual Property Enforcement Coordinator (IPEC).
The IPEC, located in the Executive Office of the President and subject to Senate confirmation, is
charged with coordinating U.S. government agency IPR enforcement actions and with providing
assistance to the USTR in conducting trade negotiations relating to IPR enforcement abroad. The
IPEC will also oversee an intellectual property enforcement advisory committee composed of
representatives from the Office of Management and Budget, the Departments of Justice,
Commerce, State, Homeland Security, Agriculture, the Food and Drug Administration, the
Agency for International Development, and the Register of Copyrights. This committee will assist
the IPEC in the development of a joint strategic plan to combat counterfeiting and infringement.
96
“U.S. Seeks Police Powers, Stiffer IPR Penalties at ACTA Meeting in Tokyo,” Inside U.S. Trade, October 17, 2008.
Amy Tsui, "ACTA Negotiating Members Meet in Paris For Fourth Time Dec. 15-18 With EU Hosting,"
International Trade Daily, December 22, 2008.
98
The Congressional International Anti-Piracy Caucus, 2009 Country Watch List.
99
U.S. Government Accountability Office, National Enforcement Strategy Needs Stronger Leadership and More
Accountability, GAO-07-710T, April 12, 2007, pp. 8-10.
97
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was
99
“U.S. Seeks Police Powers, Stiffer IPR Penalties at ACTA Meeting in Tokyo,” Inside U.S. Trade, October 17, 2008.
100
Amy Tsui, "ACTA Negotiating Members Meet in Paris For Fourth Time Dec. 15-18 With EU Hosting,"
International Trade Daily, December 22, 2008.
101
“Fifth Round of Talks on ACTA Agreement Take Place With United States in Morocco,” International Trade
Daily, July 20, 2009.
102
"USTR Says Sixth Round of ACTA Talks to Include Digital Environment Enforcement," International Trade
Daily, October 13, 2009.
103
The Congressional International Anti-Piracy Caucus, 2009 Country Watch List.
104
U.S. Government Accountability Office, National Enforcement Strategy Needs Stronger Leadership and More
Accountability, GAO-07-710T, April 12, 2007, pp. 8-10.
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signed by President Bush on October 13, 2008. The act, among other provisions, replaced
NIPLECC with an IPEC. Located in the Executive Office of the President (EOP) and subject to
Senate confirmation, the IPEC is charged with coordinating U.S. government agency IPR
enforcement actions, with providing assistance to the USTR in conducting trade negotiations
relating to IPR enforcement abroad, and developing a joint strategy against counterfeiting and
piracy. Elevating the IPEC’s profile by placing it in the EOP, some lawmakers hope, will promote
more effective coordination of the organizational structure’s response to international IPR
protection and enforcement issues. Others argue that the effectiveness of the IPEC will depend on
what resources are allocated for its activities.
In contrast to NIPLECC, GAO interviews with agency officials suggest that the Strategy
Targeting Organized Piracy (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,
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.100105 In testimony before the Senate Banking, Housing, and
Urban Affairs Committee, a foreign policy observer 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 over-stretched governments and
greatly reduce their effectiveness.”101106 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.
While protection and enforcement of IPR is a stated trade policy priority for the United States, it
is difficult to get a sense of the magnitude of funding and resources devoted toward IPR support.
Some agencies do not have a separate budgetary line item for IPR-related activities, and Congress
does not always designate specific funds for IPR activities in its appropriations for agencies.102107
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 may complicate the ability of lawmakers to
weigh the threat of IPR infringement against the federal resources available for IPR and other
government priorities.
Legislation has been introduced in the 111th Congress to advance U.S. IPR protection and
enforcement efforts as part of U.S. trade policy. H.R. 496, the Trade Enforcement Act of 2009,
would create new IPR coordinator positions in the Department of the Treasury and the
Department of Homeland Security’s Customs and Border Protection (CBP) and Immigration and
Customs Enforcement (ICE) agencies; would increase IPR resources, staff, funding, and training
for CBP and ICE; would require the development of a strategy for IPR enforcement; and would
create an Advisory Committee on Import Safety and Intellectual Property Rights Enforcement,
among other provisions.
Some lawmakers also support increasing the priority that IPR is given as part of U.S. foreign
policy. H.R. 2410, the Foreign Relations Authorization Act for FY2010, would require the
Secretary of State to appoint ten intellectual property attachés to serve in U.S. missions overseas.
Among other provisions, H.R. 2410 also directs the Secretary of State to consider assigning such
attachés to missions in countries which have been identified under Section 182 of the Trade Act
of 1974.
100105
Ibid., p. 11.
101106
U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Security and
International Trade and Finance, Pirating the American Dream: Intellectual Property Theft’s Impact on America’s
Place in the Global Economy and Strategies for Improving Enforcement, prepared by Moises Naim, 110th Cong., 2nd
sess., April 12, 2007.
102107
Liza Porteus Viana, “US Fiscal 2009 Proposed Budget Shows IP Enforcement a Priority,” Intellectual Property
Watch, February 6, 2008.
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Some may support efforts to promote IPR as a part of U.S. trade, foreign, or other forms of
policy. Others may raise concerns about how the promotion of IPR may affect U.S. efforts to
advance other policy goals. In addition, while some support efforts to increase resources
dedicated to IPR protection and enforcement, others question what implications such increased
resources might have for U.S. coordination of IPR protection and enforcement activities.
IPR and Import Safety
There has been increasing focus on the relationship between trade in counterfeit and pirated
goods and the health and safety of U.S. imports. While the effects of IPR infringement on the
U.S. economy and trade are well noted, there is limited quantitative evidence of the extent to
which fake imports may affect the health and safety of U.S. consumers. Anecdotal evidence
suggests that the health and safety repercussions may be serious.103
Many foreign countries do not have adequate frameworks to regulate product safety, increasing
the possibility of trade in counterfeit and pirated goods, which may be substandard or hazardous.
Imports from China, in particular, have been an ongoing focus area. For instance, among the
various Food and Drug Administration recalls of imports from China in 2007, certain toothpaste
products with poisonous chemicals were found to be counterfeit goods. 104 In addition, active
pharmaceutical ingredients (APIs) found in many drugs are imported from China. With high IPRinfringement rates in China, there is concern about the health and safety risks of fake APIs
entering into the U.S. supply and distribution chain.
During the 110th Congress, a number of bills were proposed and hearings were held that focused
on boosting the import safety of food and products such as pharmaceutical drugs, toothpaste, and
toys. On August 14, 2008, then President Bush signed into law the Consumer Product Safety
Improvement Act of 2008 (P.L. 110-314).
In the 111th Congress, legislation has been introduced to promote import safety and to combat
trade in counterfeit merchandise, including pharmaceuticals. Proposals include H.R. 496, the
Trade Enforcement Act of 2009; H.R. 759, the Food and Drug Global Act of 2009; H.R. 1450, the
Counterfeit Drug Prevention Act of 2009; and H.R. 1298, the Pharmaceutical Market Access and
Drug Safety Act of 2009, and the Senate version, S. 525. While some support increased scrutiny
of imports from sending countries and at the U.S. border, others express concern that the scope of
the proposals may impede trade flows and impose burdensome costs on businesses. 105
103
Michele Forzley, Counterfeit Goods and the Public’s Health and Safety, International Intellectual Property Institute,
July 2003.
104
For more information, see CRS Report RS22713, Health and Safety Concerns Over U.S. Imports of Chinese
Products: An Overview, by Wayne M. Morrison
105
Annie Johnson, "Draft of Food Safety Bill Released by House Panel," Congressional Quarterly, May 28, 2009.
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create an Advisory Committee on Import Safety and Intellectual Property Rights Enforcement,
among other provisions.
Some lawmakers also support increasing the priority that IPR is given as part of U.S. foreign
policy. H.R. 2410, the Foreign Relations Authorization Act for FY2010, would require the
Secretary of State to appoint ten intellectual property attachés to serve in U.S. missions overseas.
Among other provisions, H.R. 2410 also directs the Secretary of State to consider assigning such
attachés to missions in countries which have been identified under Section 182 of the Trade Act
of 1974.
Some may support efforts to promote IPR as a part of U.S. trade, foreign, or other forms of
policy. Others may raise concerns about how the promotion of IPR may affect U.S. efforts to
advance other policy goals. In addition, while some support efforts to increase resources
dedicated to IPR protection and enforcement, others question what implications such increased
resources might have for U.S. coordination of IPR protection and enforcement activities.
Author Contact Information
Shayerah Ilias
Analyst in International Trade and Finance
silias@crs.loc.gov, 7-9253
Congressional Research Service
Ian F. Fergusson
Specialist in International Trade and Finance
ifergusson@crs.loc.gov, 7-4997
44