Intellectual Property Rights and International
Trade
Shayerah Ilias
Analyst in International Trade and Finance
Ian F. Fergusson
Specialist in International Trade and Finance
February 17, 2011
Congressional Research Service
7-5700
www.crs.gov
RL34292
CRS Report for Congress
P
repared for Members and Committees of Congress
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 U.S. jobs. Responsibility for developing IPR policy, engaging
in IPR-related international negotiations, and enforcing IPR laws cuts across several different
U.S. government 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
Agreement) at the World Trade Organization (WTO), trade policy has been used to promote
enforcement of IPR abroad. The United States and several trading partners have been negotiating
the Anti-Counterfeiting Trade Agreement (ACTA), which 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, the May 10, 2007 bipartisan trade agreement led to a
scale-back of some of the IPR requirements in the Peru, Panama and Colombia FTAs, in an effort
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 or suspending preferential duty-free entry to certain products from the country.
IPR protection and enforcement has been a focal point of legislative activity in recent sessions of
Congress. In the 110th Congress, legislation was enacted to establish a new entity to coordinate
intellectual property activities within the federal government (P.L. 110-403). In the 111th
Congress, legislation was introduced calling for greater U.S. international IPR enforcement
efforts and increased prioritization of resources devoted to such activities (H.R. 496 and related
bill S. 1466; H.R. 2410 and H.R. 2475).
Given the role of IPR in the U.S. economy and its contribution to U.S. employment and trade,
IPR issues related to international trade policy may figure prominently in the 112th congressional
agenda. 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. In addition, Congress may examine the effectiveness of the current U.S.
coordinating structure for promoting international IPR support.
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Contents
Introduction ................................................................................................................................ 6
Intellectual Property Rights Basics .............................................................................................. 6
Types of IPR ......................................................................................................................... 6
Patents ............................................................................................................................ 6
Trade Secrets .................................................................................................................. 7
Copyright........................................................................................................................ 7
Trademarks .....................................................................................................................8
Infringement of IPR .............................................................................................................. 8
Piracy ............................................................................................................................. 8
Counterfeiting................................................................................................................. 9
Global Intellectual Property Holdings.......................................................................................... 9
Contribution of Intellectual Property to U.S. Economy .............................................................. 10
Prevalence and Economic Consequences of IPR Infringement............................................. 12
Seizures ........................................................................................................................ 12
Sectoral Infringement.................................................................................................... 14
Limitations on Data Estimating IPR Infringement Costs...................................................... 16
The Organization Structure of IPR Protection............................................................................ 17
Multilateral IPR System ...................................................................................................... 17
World Trade Organization (WTO) ................................................................................. 17
Declaration on TRIPS Agreement and Public Health .................................................... 19
World Intellectual Property Organization (WIPO) ......................................................... 21
Free Trade Agreements ....................................................................................................... 24
Trade Promotion Authority and Negotiating Objectives ................................................. 24
Current IPR-Related U.S. FTA Activity ......................................................................... 25
Central IPR Standards in U.S. FTAs .............................................................................. 26
U.S. Trade Law ......................................................................................................................... 31
Special 301 ......................................................................................................................... 31
Special 301 Country Lists ............................................................................................. 32
Country Identification Factors....................................................................................... 33
Section 337 ......................................................................................................................... 34
Generalized System of Preferences...................................................................................... 35
U.S. Agency Functions and Funding for IPR ....................................................................... 35
Department of Commerce (Commerce) ......................................................................... 36
Department of Justice (DOJ) ......................................................................................... 37
Department of Homeland Security (DHS) ..................................................................... 37
Food and Drug Administration (FDA) ........................................................................... 38
Copyright Office ........................................................................................................... 38
Department of State (State) ........................................................................................... 38
U.S. Agency for International Development (AID) ........................................................ 39
United States Trade Representative (USTR) .................................................................. 39
United States International Trade Commission (ITC)..................................................... 39
Intellectual Property Enforcement Coordinator (IPEC) .................................................. 40
Issues for Congress ................................................................................................................... 40
U.S. Efforts to Promote IPR Through Trade Policy.............................................................. 41
Effectiveness of the U.S. IPR Organizational Structure........................................................ 42
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Figures
Figure 1. Border Seizures of Counterfeit and Pirated Goods: FY2009........................................ 13
Figure 2. Estimated Software Piracy Rates in Selected Countries and Estimated Related
Software Piracy Losses to U.S. Businesses ............................................................................. 15
Tables
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2009 .................................. 9
Table 2. Estimated Damages for PhRMA Member Companies From Data Exclusivity and
Patent Protection Violations ................................................................................................... 16
Table 3. Summary of WIPO-Administered IPR Treaties ............................................................ 22
Table 4. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs .................... 29
Contacts
Author Contact Information ...................................................................................................... 43
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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 domestic needs and priorities. Over
time, intellectual property protection and enforcement have come to the forefront as a key
international trade issue for the United States, figuring prominently in the multilateral trade policy
arena and in regional and bilateral U.S. free trade agreements (FTAs).
The protection and enforcement of IPR in the United States and abroad is of key interest to
Congress. Intellectual property is an increasingly critical component of the U.S. economy.
Industries that rely on intellectual property protection in the United States claim to lose billions of
dollars each year due to overseas IPR infringement. In light of the recent international financial
crisis and global economic downturn, congressional interest has grown in the role of IPR in
advancing U.S. industrial competitiveness and contributing to U.S. economic recovery following
the recent international crisis. Members of Congress also have expressed 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.
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.
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 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
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 (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
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utility patents). Patents also may 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 patent holder recoups these up-front costs through a temporary monopoly over sale of the
invention. In return for this economic rent, the patent 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.1 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 for patents. Protection of trade secrets originates
immediately with the creation of the trade secret; there is no process for applying for or
registering trade secrets. Trade secret protection does not expire unless the trade secret becomes
known. In contrast, patent applicants must disclose information about their innovation to the PTO
in order to acquire a patent. Patents offer rights holders stronger protection but for a limited
period of time. While applying for a patent can be a costly and lengthy process, patents are
valuable if the confidentiality of the innovation is fragile or if the area of research is highly
competitive.
Copyright
Protection of copyrights in the United States is based on the Copyright Act (17 U.S.C. 101, et
seq). Copyrights protect original expressions of authorship. Such protections include literary or
artistic works such as books, music, sound recordings, movies, paintings, architectural works, and
computer software and databases (though not individual bits of data). Traditionally, copyrights
differed from patents in that there was no claim to industrial applicability or novelty of the idea.
The expression of the idea, not the underlying idea, was being copyrighted. While some of the
criteria for copyrights differ from those of patents, the objective is the same: investments of time,
money, and effort to create work of cultural, social and economic significance should be protected
to encourage further creativity. U.S. law protects authorship for life plus 70 years for personal
works, or 120 years from creation (or 95 years from publication) for corporate works. Copyrights
1 Uniform Trade Secret Act, §1(4).
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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 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 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 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.
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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Counterfeiting
An imitation of a product is referred to as a “counterfeit” or a “fake.” Counterfeit products are
manufactured, marketed, and distributed with the appearance of being the genuine good and
originating from the genuine manufacturer.3 The purpose of counterfeit goods is to deceive
consumers about their origin and nature. Counterfeiting and copying of original goods are major
challenges for trademarked products. The counterfeited product can be sold for a premium
because of its association with the original item, while reducing the sales of the original items.
Furthermore, consumer experience with a counterfeited good of inferior quality, can damage the
reputation of the trademark product. Popular examples of counterfeit products in fake
fashionwear, such as Louis Vuitton bags or Rolex watches, or fake pharmaceutical products, such
as popular brand-name prescription medicines.
A related issue is the imitation of labels and packaging of trademarked goods. In this situation, the
imitator uses a trademark that is confusingly similar to a well-known trademark in order to
benefit from the reputation of the product with which he is competing.
Global Intellectual Property Holdings
The total number of patent filing applications received under the Patent Cooperation Treaty
(PCT), an international patent filing system administered by the World Intellectual Property
Organization (WIPO), has grown in recent years. After peaking in 2008, international patent
filings under the PCT fell by 4.5% in 2009, reflecting the international financial crisis. The
contraction of the global economy has been associated with a decline in investment and spending
on research and development.4 In 2010, international patent filings grew by 4.8% to 162,900—
nearly 2008 levels (see Table 1).5
Intellectual property holdings that are protected by international agreements are highly
concentrated in certain countries. The United States continues to be the source of the world’s
largest number of patent filing applications under the PCT, accounting for nearly one-third of
such filings in 2010. However, the U.S. growth rate of patent filings has been negative in recent
years. The United States, along with Germany and Japan, accounted for about 60% of all patent
applications filed in 2010 under the PCT. China ranked as the fourth largest source of
international patent filings under the PCT in 2010, representing about 8% of global filings. China
had the highest growth rate in such filings, at about 56% in that year.
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2009
Country 2008
2009
2010
Filings Filings
Filings
Percent of Growth
from
3 Counterfeit goods should be distinguished from generic goods, i.e., in the case of generic forms of pharmaceutical
medicines.
4 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.
5 WIPO, "International Patent Filings Recover in 2010," press release, February 9, 2011,
http://www.wipo.int/pressroom/en/articles/2011/article_0004.html.
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Country 2008
2009
2010
Total
Previous Years
United States
51,637
45,618
44,855
27.5%
-1.7%
Japan 28,760
29,802
32,156
19.7%
7.9%
Germany 18,855
16,797
17,171
10.5%
2.2%
China 6,120
7,900
12,337
7.6%
56.2%
South Korea
7,899
8,035
9,686
5.9%
20.5%
France 7,072
7,237
7,193
4.4%
-0.6%
United Kingdom
5,466
5,044
4,857
3.0%
-3.7%
Netherlands 4,363
4,462
4,097
2.5%
-8.2%
Switzerland 3,799
3,671
3,611
2.2%
-1.6%
Sweden 4,137
3,567
3,152
1.9%
-11.6%
Canada 2,976
2,527
2,707
1.7%
7.1%
Italy 2,883
2,652
2,632
1.6%
-0.8%
Finland 2,214
2,123
2,076
1.3%
-2.2%
Australia 1,938
1,740
1,736
1.1%
-0.2%
Spain 1,390
1,564
1,725
1.1%
10.3%
Al Others
13,725
12,659
12,909
7.9%
2.0%
Total 163,234
155,398
162,900
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.
Nearly every industry depends on IPR for its businesses. Among the industries that are dependent
on patent protection are the aerospace, automotive, computer, consumer electronics,
pharmaceutical, and semiconductor industries. Copyright-based industries include the software,
data processing, motion picture, 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.6
The role of IPR in the U.S. economy has been longstanding. Some evidence suggests that factors
linked to innovation account for about three-fourths of the United States’ post-World War II
growth rate.7 In recent years, the role of IPR in the U.S. economy has grown. Various studies
6 Stephen E. Siwek, “Engines of Growth: Economic Contributions of the US Intellectual Property Industries,”
commissioned by NBC Universal, 2005, p. 2.
7 Arti Rai, Stuart Graham, and Mark Doms, Patent Reform: Unleashing Innovation, Promoting Economic Growth &
Producing High-Paying Jobs, Department of Commerce, A White Paper from the U.S. Department of Commerce,
(continued...)
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suggest that IP-related industries are one of the largest source of jobs in the United States. One
study using data from 2000-2007 found that, among tradable industries, IP-intensive industries
surpass non-IP-intensive industries on a range of economic measures, including job creation,
wages, output and sales per employee, and exports. During this time period, according to the
study, IP-intensive industries paid both their low- and highly skilled employees close to 60%
more than non-IP-intensive industries. The report also found that IP-intensive industries
represented nearly 60% of total U.S. exports during 2000-2007.8 More broadly, IPR-intensive
industries may contribute positively to the U.S. economy through productivity gains and other
spillover effects.
Industry-specific figures may further demonstrate the importance of IP to the U.S. economy. For
example, in 2007, the business and entertainment software, motion picture, recording, and
publishing industries, which rely on copyright protection, were estimated to 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
about 13% 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 2006.9
The pharmaceutical industry, which is patent-intensive, provides another illustration of
intellectual property contributions to the U.S. economy. In 2009, domestic sales by research-
based pharmaceutical companies that are members of Pharmaceutical Researchers and
Manufacturers of America (PhRMA) reached an estimated $183 billion, while sales abroad by
PhRMA member companies totaled about $103 billion.10
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.11 In 2009, U.S. receipts from cross-border trade in royalties
and license fees (relating to patent, trademark, copyright, and other intangible rights) totaled
$89.8 billion, down from $93.9 billion in the previous year. Also in 2009, U.S. payments of
royalties and license fees to foreign countries amounted to $25.2 billion, down from $25.8 billion
in the year before. Industrial processes, computer software, and trademarks accounted for the bulk
of U.S. international trade in intangible assets.12
(...continued)
April 13, 2010.
8 Nam D. Pham, The Impact of Innovation and the Role of Intellectual Property Rights on U.S. Productivity,
Competitiveness, Jobs, Wages, and Exports, NDP Consulting Group, April 2010.
9 Stephen E. Siwek, Copyright Industries in the U.S. Economy: The 2003-2007 Report, prepared for the International
Intellectual Property Alliance (IIPA), http://www.iipa.com, pp. 3-7.
10 PhRMA, Pharmaceutical Industry Profile 2010, Washington, D.C., March 2010, http://www.phrma.org, p. 50.
11 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.
12 Jennifer Koncz and Anne Flatness, “U.S. International Services,” Survey of Current Business, U.S. Bureau of
Economic Analysis (BEA), October 2010. This measure of cross-border trade in royalties and license fees by U.S.
companies include transactions with both affiliated and unaffiliated foreign companies.
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Some advocates of civil liberties assert that empirical analysis on the role of IPR in the U.S.
economy may not be fully evaluating the economic and commercial benefits of lawful exceptions
and limitations to exclusive rights. For example, by one estimate, businesses that rely on “fair
use” exceptions to U.S. copyright law contribute $2.2 trillion to the U.S. economy. The “fair use”
doctrine permits limitations and exceptions to the exclusive right afforded by copyright law. It
permits limited use of copyrighted works without requiring permission from the right holder in
certain cases, examples of which may include news reporting, research, teaching, and library
use.13
Prevalence and Economic Consequences of IPR Infringement
Advances in information and technology and declining costs of transportation and
communication, spurred by globalization, have fundamentally changed information and trade
flows. Such changes have created new markets for U.S. exporters, but at the same time, have
been associated with the proliferation of counterfeiting and piracy on a global scale.
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. According to PhRMA, it takes a pharmaceutical company
about 10 to 15 years of research and development to create a new drug. PhRMA member
companies collectively spent an estimated $46 billion for research and development (domestic
and abroad) in 2009.14 In contrast, drug counterfeiters can lower production costs by using
inexpensive, and perhaps dangerous or ineffective, ingredient substitutes.
The development of technologies and products that can be easily duplicated, such as recorded or
digital media, also has led to an increase in counterfeiting and piracy. Increasing Internet usage
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, customs data on seizures of
counterfeit and pirated goods may offer some idea of the magnitudes involved. One study by the
Organization for Economic Cooperation and Development (OECD) indirectly extrapolated
available customs data on seizures to conclude that world trade in counterfeit and pirated goods
may have amounted to about $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
13 Thomas Rogers and Andrew Zamosszegi, Fair Use in the U.S. Economy:Economic Contribution of Industries
Relying on Fair Use, Prepared for the Computer & Communications Industry Association (CCIA), 2010. CCIA, "Fair
Use Doctrine Vital for All of Us," press release, November 18, 2009,
http://www.ccianet.org/index.asp?sid=5&artid=125&evtflg=False. See also CRS Report RL33631, Copyright
Licensing in Music Distribution, Reproduction, and Public Performance, by Brian T. Yeh.
14 Ibid., p. 2.
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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 likely would be higher.15
Updated estimates from the OECD suggest that trade in IPR-infringing goods may have totaled
up to $250 billion in 2007. During that same time period, the share of counterfeiting and pirated
goods in world trade also is estimated to have increased—from 1.85% in 2000 to 1.95% in
2007.16
Data on pirated and counterfeit seizures of imports at the U.S. border shed light of the magnitude
of the issue in the U.S. context (see Figure 1). In FY2009, the Customs and Border Protection
(CBP) and Immigration and Customs Enforcement (ICE) agencies of the Department of
Homeland Security (DHS) made 14,841 IPR-related seizures, more than double the FY2005 level
of 8,022. Between FY2005-FY2008, the domestic value of IPR-related seizures grew by more
than 25% each year. The domestic value of seizures peaked at $272 million in FY2008 and then
dropped by 4% to about $261 million in FY2009.17
Figure 1. Border Seizures of Counterfeit and Pirated Goods: FY2009
Toys and
All Others
Electronic Games
8%
2%
Jewelry
4%
Pharmaceuticals
Footwear
4%
39%
Media
4%
Computer and
Hardware
Consumer
5%
Electronics
Handbags,
12%
W atches and
Wallets, and
Parts
Backpacks
6%
W earing Apparel
8%
8%
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 FY2009, seizures of goods originating from China represented
15 OECD, The Economic Impact of Counterfeiting and Piracy, 2007, p. 4,
http://www.oecd.org/dataoecd/13/12/38707619.pdf.
16 Organization for Economic Cooperation and Development (OECD), The Economic Impact of Counterfeiting and
Piracy, 2007. OECD, Magnitude of Counterfeiting and Piracy of Tangible Products: An Update, November 2009.
17 U.S CBP and U.S. ICE, Intellectual Property Rights Seizure Statistics: FY2009, October 2010.
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79% of all seizures and $205 million in value. Other top trading partners from which IPR-
infringing goods were seized include Hong Kong, India, Taiwan, and Korea. 18
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.
The total value of IPR-related seizures of commodities that represent potential safety and security
risks was $32 million in FY2009. Pharmaceutical goods were the top commodity posing safe and
security risks, accounting for 34% ($11 million in domestic value) of such commodities
intercepted at U.S. borders. Imports from China represented 62% of IPR-related goods that were
intercepted at U.S. borders and identified as presenting safety and security risks, followed by such
imports from India at 9%.19
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 addition, beyond the direct losses faced by U.S. intellectual
property-based firms, the U.S. economy may face additional “downstream” losses from IPR
infringement. According to this view, counterfeiting and piracy losses to U.S. firms, for example,
also result in the loss of jobs that would have been created if the infringement did not occur,
which translates into lost earnings by U.S. workers. This, in turn, translates into lost tax revenues
for federal, state, and local governments from lost personal income, corporate income, and
production taxes.20
Attempts have been made in some economic sectors to quantify the IPR infringement levels and
related losses to legitimate U.S. businesses. Two intellectual 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.21 For 2009, IIPA estimated that
copyright piracy in 43 countries resulted in $14.3 billion in U.S. business software losses and
$1.4 billion in U.S. records and music losses. China was the leading culprit in terms of trade
losses due to copyright piracy, contributing to $3.4 billion in business software losses and $466
million in records and music losses to U.S. businesses.22
18 Ibid.
19 Ibid.
20 There may be limitations on data estimating the impact of counterfeiting and piracy on the U.S. economy. Some
critics point out that many of the estimates for losses associated with IPR infringement are generated by industry
groups that may have self-interested motivations and hence, the negative effects may be exaggerated.
21 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).
22 IIPA, IIPA 2009 “Special 301” USTR Decisions, issued June 30, 2009.
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There is not always a direct relationship between IPR infringement rates and the costs to U.S.
firms (see Figure 2). 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.
Thus, estimated losses from IPR infringement may be lower in a country with high piracy rates
but a small market for the United States, compared to a country with lower piracy rates but a
bigger market for United States.
Figure 2. Estimated Software Piracy Rates in Selected Countries and Estimated
Related Software Piracy Losses to U.S. Businesses
Source: Business Software Alliance.
Notes: The countries listed were identified as Priority Watch List countries in the 2010 “Special 301” report
released by the Office of the U.S. Trade Representative.
Pharmaceutical Industry
In previous years, PhRMA has provided annual estimates of U.S. pharmaceutical industry losses
from foreign violations of data exclusivity and patent protection.23 In its 2007 Special 301
submission to the USTR, PhRMA contended that its member companies sustained damages
totaling an estimated $21.7 million from data exclusivity and patent violations in 24 countries
(see Table 2).24 Damages reported in the 2007 submission were nearly double those reported in
the prior year’s submission. While the total loss associated with IPR infringement grew, damages
23 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.
24 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.
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as a percentage of sales declined from the 2006 submission to the 2007 submission.25 At the time
of reporting for submissions for subsequent years, PhRMA was not able to provide estimates of
damages resulting from trade barriers associated with intellectual property protection and market
access.26
Table 2. Estimated Damages for PhRMA Member Companies From Data Exclusivity
and Patent Protection Violations
2006
Submission
2007 Submission
(Oct. 2004 - Sept. 2005)
(Oct. 2005 - Sept. 2006)
Total Damages
$13.9 million
$21.7 million
Total Sales
$74.6 million
$172.1 million
Damages as a Percentage of Sales
19%
13%
Source: PhRMA 2006 and 2007 Special 301 Submissions.
Limitations on Data Estimating IPR Infringement Costs
There may be limitations to data estimating the impact of counterfeiting and piracy on the U.S.
economy. According to a study conducted by the U.S. Government Accountability Office (GAO),
the U.S. government does not systematically collect data or analyze the impacts of counterfeiting
and piracy on the U.S. economy. In many cases, the federal government relies on estimates
conducted by industry groups. However, industry associations may not always release their
proprietary data sources and methods, complicating efforts to verify such estimates.27 Some
critics point out that many of the estimates for losses associated with IPR infringement are
generated by industry groups that may have self-interested motivations.28
There is a possibility that such IPR infringement loss estimates may overestimate the extent to
which sales of pirated and counterfeit goods displace legitimate sales. Methods for calculating
data on counterfeiting and piracy often involve certain assumptions. Estimates of losses from IPR
infringement can be highly sensitive to how these assumptions are derived and weighted. Some
analysts question the proposition that sales of pirated goods translate directly into revenue losses
for legitimate firms. 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.29 For consumers in poor developing countries, especially, this assumption may not be
tenable. Others also question the statistical techniques used to develop these estimates. 30
25 PhRMA, Special 301 Submission for 2007. See Appendix: Damage Estimate Methodology, p. v.
26 PhRMA, Special 301 Submission 2008.
27 U.S. Government Accountability Office, Intellectual Property: Observations on Efforts to Quantify the Economic
Effects of Counterfeit and Pirated Goods, GAO-10-423, April 2010.
28 Monika Ermert, "Speculation Persists on ACTA as First Official Meeting Concludes," Intellectual Property Watch,
June 5, 2008. Robin Gross, IP Justice White Paper on the Proposed Anti-Counterfeiting Trade Agreement (ACTA), IP
Justice, March 25, 2008, p. 6.
29 Robert G. Picard, “A Note on Economic Losses Due to Theft, Infringement, and Piracy of Protected Works,” Journal
(continued...)
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At the same time, there is a possibility that some IPR infringement loss estimates may
underestimate the losses to U.S. businesses. For example, U.S. trade losses due to copyright
infringement may be higher than reported because estimates oftentimes do not account for all
forms of piracy, such as Internet piracy, which is an increasingly significant contributor to
copyright piracy.31 One study estimates that nearly 24% of global internet traffic infringes upon
copyright.32
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
multilateral, 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 Agreement), which
sets minimum standards on intellectual property rights protection and enforcement with which all
WTO member states must comply. The United States, the European countries, and the IPR
business community were instrumental in including IPR on the Uruguay Round agenda. Many
developing countries were wary of including IPR in trade negotiations, preferring to discuss them
under the World Intellectual Property Organization (WIPO) (see below) instead. However,
developing countries acceded, after being granted delayed compliance periods, and after
achieving negotiating goals on other issues such as textiles and clothing, and savoring the
prospect of operating under a rules-based trading system.
While previous international agreements on intellectual property rights continue to exist (see
Table 2), 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
(...continued)
of Media Economics, 17(3), 207-217, 2004.
30 U.S. Government Accountability Office, Intellectual Property: Observations on Efforts to Quantify the Economic
Effects of Counterfeit and Pirated Goods, GAO-10-423, April 2010.
31 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.
32 Envisional, Technical Report: An Estimate of Infringing Use of the Internet, January 2011.
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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 re-imposition of
tariffs) for non-compliance, sets this agreement apart from previous IPR treaties that did not have
effective dispute settlement mechanisms.
U.S. WTO Cases Against China on IPR
In April 2007, the United States filed two WTO dispute settlement cases against China, alleging inadequacies in
China’s enforcement of IPR laws and its barriers to market access for U.S. copyright businesses.33
• In January 2009, the DSU issued its final ruling on the case centering on IPR enforcement issues. The WTO panel
ruled in the United States’ favor that China’s denial of copyright protection to works without censorship
approval is inconsistent with the TRIPS Agreement. The panel also agreed with the United States that it is
impermissible for China to publicly auction IPR-infringing goods seized at the border, with the only requirement
being that fake brands and trademarks be removed from the goods. 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. China agreed to implement the WTO ruling. 34
• In August 2009, a WTO panel ruled that a number of China’s restrictions on trading rights and distribution of
IPR-related products were inconsistent with WTO rules. However, the WTO panel did not address whether
China’s censorship policies or import limitations on foreign films violate WTO rules. China agreed to implement
the WTO ruling.35
The TRIPS Agreement also seeks a balance of rights and obligations between the private right,
enumerated above, and the obligation “to secure social and cultural development that benefits
all.”36 Article 7 declares that:
... the protection and enforcement of IPR should contribute to the promotion of technological
innovation and to the transfer and dissemination of technology, to the mutual advantage of
33 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.
34 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.
35 For more information on U.S-China IPR and other trade issues, see CRS Report RL33536, China-U.S. Trade Issues,
by Wayne M. Morrison.
36 Pascal Lamy, “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later,” Journal of World Trade,
October 2004, p. 925.
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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 2016.37
Declaration on TRIPS Agreement and Public Health 38
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, 2001.39 The
Declaration sought to alleviate developing country dissatisfaction with aspects of the TRIPS
regime. It delayed the implementation of patent system provisions for pharmaceutical products
for least developed countries (LDCs) until 2016. The declaration committed member states to
interpret and implement the agreement to support public health and to promote access to
medicines for all. The Declaration recognized certain “flexibilities” in the TRIPS agreement to
allow each member to grant compulsory licenses for pharmaceuticals and to determine what
constitutes a national emergency, expressly including public health emergencies such as
HIV/AIDS, malaria, and tuberculosis or other epidemics.
Paragraph 6 of the Declaration directed the WTO members to formulate a solution to a corollary
concern, the use of compulsory licensing by countries with insufficient or inadequate
manufacturing capability. Compulsory licenses are issued by governments to authorize the use or
37 “Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for Least-Developed Country
Members for Certain Obligations with Respect to Pharmaceutical Products,” WTO Document IP/C/25, July 1, 2002.
38 See CRS Report R40607, Intellectual Property Rights and Access to Medicines: International Trade Issues, by
Shayerah Ilias.
39 Declaration on the TRIPS Agreement and Public Health, (WT/MIN(01)/DEC/2), November 14, 2001, available at
http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm.
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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 Decision40 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. The deadline for
ratification has been extended to December 30, 2011. Until then, the 2003 waiver continues in
force. To date, the following WTO members have ratified the amendment: 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, Zambia,
Nicaragua, Pakistan, the Former Yugoslav Republic of Macedonia, Uganda, Mongolia, Croatia,
and Senegal.41
The system established by the WTO allows LDC and countries without sufficient manufacturing
capacity to issue a compulsory license to a company in a country that can produce such a product.
After a matching compulsory license is issued by the producer country, the drug can be
manufacturing and exported subject to various notification requirements, quantity and safeguard
restrictions. While several exporting countries have established laws and procedures for
implementing this system, only Rwanda has availed itself to use the system to import HIV/AIDS
medicines from a generic manufacturer in Canada.42
40 “Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health,” IP/C/W/405,
August 30, 2003, and accompanying Chairman’s statement, available at http://www.wto.org/english/news_e/pres03_e/
pr350_e.htm.
41 “Members accepting amendment of the TRIPS Agreement,” http://www.wto.org/english/tratop_e/trips_e/
amendment_e.htm.
42 “Canada Issues Compulsory License For HIV/AIDS Drug Export To Rwanda, In First Test Of WTO Procedure,”
Bridges Weekly Trade News Digest, September 26, 2007, http://www.ictsd.org/weekly/07-09-26/story2.htm.
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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.43 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% annual y through increased trade, FDI, and licensing.44 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 economical y from stronger IPR regimes.45
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 the World
Intellectual Property Organization (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 3). 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 1996.46 Recent WIPO efforts have focused on patent law. In June 2000, WIPO
43 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.
44 Keith E. Maskus, Intellectual Property Rights in the Global Economy, Institute for International Economics (IIE),
Washington, D.C., August 2000.
45 Commission on Intellectual Property Rights (CIPR), Integrating Intellectual Property Rights and Development
Policy, September 2002.
46 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.47
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.48 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.49
Table 3. Summary of WIPO-Administered IPR Treaties
Treaty Date Provisions
Concluded
Intellectual Property Protection Treaties
Paris Convention for the Protection of Industrial
1883
Protects industrial property (includes patents,
Property (Paris Convention)
(entered
marks, industrial designs, utility models, trade
into force
names, and geographic indications)
1884)
Berne Convention for the Protection of Literary
1886
Protects literary and artistic works, providing
and Artistic Works (Berne Convention)
(entered
right to control and receive payments for use
into force
1886)
Madrid Agreement for the Repression of False
1891
Requires States to seize imported goods with
and Deceptive Indications of Source on Goods
false/deceptive indications of source or to
(Madrid Agreement - Indications of Source)
prohibit importation of such goods; open to
States party to Paris Convention (1883)
Rome Convention for the Protection of
1961
Protects rights of performers against certain acts
Performers, Producers of Phonograms and
to which they have not agreed; protects rights of
Broadcasting Organizations (Rome Convention)
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
1971
Protects producers of phonograms against
47 Monika Ermert, "G8 Governments Want ACTA Finalised This Year, SPLT Talks Accelerated ," Intellectual
Property Watch, July 9, 2008.
48 “Agreement between the World Intellectual Property Organization and the World Trade Organization,”
http://www.wto.org/english/tratop_e/trips_e/wtowip_e.htm.
49 WIPO, Intellectual Property Handbook, http://www.wipo.org, p. 359.
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Treaty Date Provisions
Concluded
Phonograms Against Unauthorized Duplication of
unauthorized reproduction of their phonograms
their Phonograms (Phonograms Convention)
or importation of duplications for public
distribution
Brussels Convention Relating to the Distribution
1974
Protects against the unauthorized distribution of
of Programme-Carrying Signals Transmitted by
program-carrying signals transmitted by satellite
Satellite (Brussels Convention)
Nairobi Treaty on the Protection of the Olympic 1981
Protects Olympic symbol against unauthorized
Symbol (Nairobi Treaty)
commercial uses
Treaty on the International Registration of
1989
Establishes International Register for Audiovisual
Audiovisual Works (Film Register Treaty)
Works
Treaty on Intellectual Property in Respect to
1989
Protects layout designs which display electrical
Integrated Circuits (Washington Treaty)
components of an integrated circuit
Trademark Law Treaty (TLT)
1994
Streamlines national and regional trademark
registration processes
WIPO Copyright Treaty (WCT)
1996
Special agreement under Berne Convention;
(entered
grants exclusive rights to owners of copyright in
into force
computer programs and compilations of
2002)
data/other material
WIPO Performances and Phonograms Treaty
1996
Grants exclusive rights to performers and
(WPPT)
(entered
phonogram producers
into force
2002)
Patent Law Treaty (PLT)
2000
Aims to harmonize and streamline national and
(entered
regional patent application procedures and
into 2005)
patents
Singapore Treaty on the Law of the Trademarks
2006 (not
Builds on TLT (1994); aims to harmonize
yet in force)
trademark registration procedures; has wider
scope (includes communication technology
developments)
Global Protection System Treaties
Budapest Treaty on the International Recognition 1977
Special agreement under Paris Convention (1883);
of the Deposit of Microorganisms for the
(entered
requires States to recognize the deposit of a
Purposes of Patent Procedure (Budapest Treaty)
into force
microorganism with any “international depositary
1980)
authority”
Madrid Agreement Concerning the International
1891
Requires seizure of imported goods with
Registration of Marks (Madrid Agreement -
false/deceptive indication of source or prohibition
Marks)
of importation of such goods; open to States
party to Paris Convention (1883)
Hague Agreement Concerning the International
1925
Allows protection of industrial designs in all
Registration of Industrial Designs (Hague
(entered
member states on basis of single application with
Agreement)
into force
WIPO; three acts currently in force: 1934, 1960,
1928)
and 1999 Acts
Lisbon Agreement for the Protection of
1958
Provides international protection for geographical
Appellations of Origin and their International
indications
Registration (Lisbon Agreement)
Patent Cooperation Treaty (PCT)
1970
Establishes an international patent filing system;
(entered
allows a single international patent application to
into force
have legal standing in all countries signatory to
1978)
PCT; open to States party to Paris Convention
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Treaty Date Provisions
Concluded
(1883)
Protocol Relating to the Madrid Agreement
1989
Relates to Madrid Agreement (1891); seeks to
(Madrid Protocol )
(entered
make Madrid system more amenable to domestic
into force
laws of certain who are not yet signatories to
1995)
Madrid Agreement; open to States party to Paris
Convention (1883)
Classification Treaties
Nice Agreement Concerning the International
1957
Establishes a classification of goods and services in
Classification of Goods and Services of the
(entered
order to register trademarks and service marks;
Purposes of the Registration of Marks (Nice
into force
open to States party to Paris Convention (1883)
Agreement)
1961)
Locarno Agreement Establishing an International
1968
Establishes a classification for industrial designs;
Classification for Industrial Designs
(entered
open to States party to Paris Convention (1883)
into force
1971)
Strasbourg Agreement Concerning the Industrial
1971
Establishes the International Patent Classification
Patent Classification (Strasbourg Agreement)
(entered
(IPC); open to States party to Paris Convention
into force
(1883)
1975)
Vienna Agreement Establishing Classification of
1973
Establishes a classification for marks which
the Figurative Elements of Marks (Vienna
(entered
consist/contain figurative components; open to
Agreement)
into force
States party to Paris Convention (1883)
1985)
Source: WIPO.
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 and Negotiating Objectives
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 for FTAs were first enacted in trade promotion authority (then known
as fast-track authority) by the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418).
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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 the North American Free Trade Agreement (NAFTA). In the intervening period
since the 1988 Act, the TRIPS agreement came into force and the IPR provisions of NAFTA
became the template for future bilateral or regional FTAs. Thus, the focus of IPR negotiating
objectives shifted from creating to strengthening the IPR trade regime.
More recent FTA negotiations have been conducted under the Trade Promotion Authority Act of
2002 (P.L. 107-210), which included two broad IPR negotiating objectives. 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 of the Trade Promotion Authority Act of 2002 was to negotiate trade
agreements in terms of IPR that “reflect a standard of protection similar to that found in U.S.
law.”50 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.
In May 2007, the Bush Administration and Congress concluded a bipartisan agreement on trade
policy that addressed some Members’ concerns about the implications of enhanced IPR on
developing countries’ ability to meet public health needs.51 In particular, congressional leadership
sought to ensure that pending FTAs allowed trading partners to have enough flexibility to meet
their IPR obligations and to be able to promote access to life-saving medicines, while otherwise
meeting their international IPR protection and enforcement obligations. IPR language previously
negotiated in the FTAs with the developing countries of Peru, Panama, and Colombia
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.
Current IPR-Related U.S. FTA Activity
In 2011, the Obama Administration may ask Congress to approve a free trade agreement (FTA)
with South Korea, as well as FTAs with Colombia and Panama. These three FTAs were
negotiated by the Bush Administration, but have not been implemented.
Meanwhile, the Obama Administration has entered into negotiations with participants in the
Trans-Pacific Partnership (TPP) Agreement—Australia, Brunei, Chile, New Zealand, Peru,
Malaysia, Singapore, and Vietnam. The objective is to build on U.S. trade ties in the region
50 P.L. 107-210, Sec. 2102(b)(4).
51 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.
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already established in FTAs with Australia, Chile, and Singapore and to provide a high-standard
framework for expanded free trade in the region.20 IPR, particularly in the area of
pharmaceuticals, may prove to be a contentious issue in the negotiation of the TPP.
In addition, the Obama Administration has been conducting negotiations on the Anti-
Counterfeiting Trade Agreement (ACTA), a proposed agreement being negotiated by Australia,
Canada, the 27 member states of the European Union, Japan, South Korea, Mexico, Morocco,
New Zealand, Singapore, Switzerland, and the United States. Negotiations on the ACTA
Agreement began under the Bush Administration. The ACTA would build on the minimum
standards for IPR protection and enforcement set forth by the TRIPS Agreement. It is being
crafted independent of any existing international organization or agreement. The eleventh and
final round of negotiations concluded on October 2, 2010, and the ACTA participants released to
the public a draft text of the agreement. ACTA participants are working to resolve outstanding
issues in the agreement.52
Central IPR Standards in U.S. FTAs
What follows is a discussion of some of the central patent and copyright standards sought in
FTAs that are currently in force or have been signed by the United States (see Table 4).53
Patents
Patent protection is arguably the most contentious area of U.S. FTA negotiations on IPR issues.
While the United States and other developed countries advocate for strong patent protections in
order to promote innovation, there is concern that such stringent protections may delay
developing countries’ access to generic drugs and increase prices. Many of the FTAs in force
include TRIPS-plus patent provisions, the most prominent of which are patent term length
extensions, linkages between regulatory authority and patent status, data protection, compulsory
licensing and parallel importation. The FTAs with Peru, Panama, and Colombia respond to the
concerns of some Members of Congress over provisions that could restrict access to medicines in
these countries and contain less ambitious standards for pharmaceutical patents, compared to
previously negotiated FTAs. Pharmaceutical industry advocates express concern that this scale-
down in patent protection in these FTAs may set a precedent for future FTA negotiations.54
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
52 For more information, see CRS Report R41107, The Proposed Anti-Counterfeiting Trade Agreement: Background
and Key Issues, by Shayerah Ilias.
53 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.
54 "Brand-Name Industry Alarmed at IPR Precedent of FTA Template," Inside US Trade, May 18, 2007.
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Peru, Colombia, and Panama state that patent term restorations for pharmaceutical products are
optional.
Patent Linkages: In general, the term “patent linkage” refers to the attachment of regulatory
approval for the marketing of a drug with the status of a patent. If a patent exists, the FDA and its
counterparts in other countries may not grant marketing approval for a generic version of a drug
that is patented in the country without the permission of the patent holder. Patent linkage is a
common provision in the trade agreements obtained by the United States. This presents a
departure from TRIPS, under which generic drug manufacturers are able to apply for marketing
approval without the patent owner’s permission and prior to the expiration of the patent; this may
reduce the time it takes for generic drugs to enter a market once the patent expires.55 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.56
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 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.
55 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.”
56 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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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
IPR, 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.57 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.
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 intel ectual property and protecting these resources through an IPR framework.
Article 27.3(b) of the TRIPS Agreement permits Member states to exempt “plants and animals other than micro-
organisms, and essentially biological processes” from patentability. TRIPS requires Members to protect plant varieties
through patent protection, some other system (“sui generis”), or a combination of the two. Paragraph 19 of the Doha
Declaration added another dimension to the issue by requiring the TRIPS Council to probe the relationship between
the TRIPS Agreement, the UN Convention on Biological Diversity (CBD), and traditional knowledge and folklore.
These issues also are being discussed in WIPO’s Intergovernmental Committee on Intellectual Property and Genetic
Resources, Traditional Knowledge, and Folklore (IGC).
India, Brazil, and Peru, among other countries, contend that patent applicants should be required to disclose the
source of genetic materials, including plant life and traditional knowledge, before obtaining patents. The United States
and the European Union have advocated for national systems in which companies are granted permission to research
genetic materials and are obligated to share benefits from patents derived from those genetic products.
Some earlier U.S. FTAs have required signatories to provide protection for plants, animals, and plant varieties. The
recent FTAs with Peru, Panama, and Colombia do not mandate patentability for plants and animals, but state that the
countries should take efforts to expand patent coverage to these areas and to maintain this protection once it is
offered. Side-letters in the three FTAs state the signatories’ recognition of the importance of biodiversity and
traditional knowledge and pledge the countries to work together to address these issues through the IGC.
Copyright
In the area of copyright protection, the United States has pursued certain TRIPS-plus measures in
FTAs, such as extending copyright terms; including anti-circumvention provisions; and protecting
rights-management information in its FTAs. The TRIPS Agreement does not mention any
57 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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obligations regarding rights-management information, which is “electronic information that
identifies a protected work, its author, and terms and conditions of use,”58 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 1998.59 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
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.
Table 4. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs
Intellectual
TRIPS Provisions
General TRIPS-Plus
Scale-down of TRIPS-Plus
Property
Provisions in FTAs
Standards
Forms
Patents
Patent term
No provisions
Mandatory extensions in cases
Optional extensions in cases
extensions
of unreasonable delays in patent of unreasonable delays in
grants/regulatory approval
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;
Peru (Article 16.9.6), Panama
18.8.4a), Australia (Article 17.9.8;
(Article 16.9.6), Colombia
17.10.4), Morocco (Article 15.9.7;
(Article 16.9.6)
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)
Market approval
No provisions
National regulatory authorities
Eliminates mandate that
linked to patent
cannot provide marketing
regulatory authorities cannot
status
NAFTA (no mention),
approval for a generic version of approve a generic drug for
Jordan (no linkage, but patent
a patented drug without
marketing if patent for drug
58 CRS Report RL33205, Intellectual Property and the Free Trade Agreements: Innovation Policy Issues, by John R.
Thomas.
59 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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Intellectual
TRIPS Provisions
General TRIPS-Plus
Scale-down of TRIPS-Plus
Property
Provisions in FTAs
Standards
Forms
owner must be notified if
permission from rights-holder;
in place
another entity is seeking
also requires notification of
marketing approval for generic
rights-holder if marketing
Peru (Article 16.10.4), Panama
version of patented product,
permitted
(Article 15.10.4), Colombia
Article 4.23.b)
(Article 16.10.4)
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)
Protection for
Members must protect data
Provides for at least five years
Provides for at least five
undisclosed test
from unfair commercial use
of data exclusivity from date of
years of marketing exclusivity
or other data
(Article 39.3)
approval in country for
from date of approval in
pharmaceuticals that contain
country of first filing if new
Jordan (Article 4.22)
new chemical products
drug is granted marketing
approval within six months in
NAFTA (Article 1711.6), Bahrain
country of second filing
(Article 14.9.1), Oman (Article
15.9(1-2), CAFTA-DR (Article
Peru (Article 16.10.2), Panama
15.10.1), Singapore (Article
(Article 15.10.4), Colombia
16.8(1-3)), Australia (Article
(Article 16.10.2)
17.10.1), Morocco (Article
15.10.1), Chile (Article 17.10.1),
Korea (Article 18.9(1-2))
Issuance of
Some restrictions in issuance Limits issuance of compulsory
Not discussed
compulsory
of compulsory licenses;
license to specific cases:
licenses
circumstances under which
Correcting anti-competitive
Chile (no mention), Morocco
licenses can be issued not
practices, public non-
(no mention), CAFTA-DR (no
limited (Article 13)
commercial contexts, national
mention), Bahrain (no mention),
emergencies, and other
Oman (no mention)
NAFTA (Article 1709.10),
extremely urgent situations
Peru (no mention), Panama (no
Jordan (Article 4.20), Singapore
mention), Colombia (no
(Article 16.7.6), Australia (Article
mention), (no mention)
17.9.7)
Parallel
TRIPS will not be used to
Parallel importation can be
Not discussed
importing of
discuss IPR exhaustion
restricted or prohibited
patented
(Article 6)
Peru (no mention), Panama (no
products
NAFTA (Article 1709.5, 1709.9),
mention), Colombia (no
Jordan (no mention), Chile (no
Singapore (Article 16.7.2),
mention), Korea (no mention)
mention), CAFTA-DR (no
Morocco (Article 15.9.4), Australia
mention), Bahrain (no
(Article 17.9.4)
mention), Oman (no mention)
Biodiversity and
Members may exclude plants Countries shal make patents
Members may exclude plants
traditional
and animals from
available for plants and animals
and animals from
knowledge
patentability (micro-
patentability, but shall take
organisms and non-biological Morocco (Article 15.9.2, plants
reasonable effort to provide
and micro-biological
and animals mentioned, plant
patent protection for plants
processes must be eligible
varieties are not mentioned)
or animals and maintain
for patents); must provide
protection once offered
protection of plant varieties
(Article 27.3(b))
Chile (Article 17.9.2, mentions
plants but not animals), CAFTA-
NAFTA (Article 1709.3),
DR (Article 15.9.2), Peru
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Intellectual
TRIPS Provisions
General TRIPS-Plus
Scale-down of TRIPS-Plus
Property
Provisions in FTAs
Standards
Forms
Bahrain (Article 14.8.(1-2)),
(Article 16.9.2), Panama (Article
Oman (Article 15.8.2, plants
15.9.2), Colombia (Article
not discussed),
16.9.2)
Jordan, (no mention),
Singapore (no mention),
Australia (no mention), Korea
(no mention)
Copyrights
Rights-
Not discussed
Outlaws removal or alternation of information
management
information
NAFTA (no mention), Jordan
Chile (Article 17.5.6), Australia (Article 17.4.8), Singapore (Article
(no mention)
16.4.8), Morocco (Article 15.5.9), CAFTA-DR (Article 15.5.8), Bahrain
(Article 14.4.8), Oman (Article 15.4.8), Peru (Article 16.7.5), Panama
(Article 15.5.8), Colombia (Article 16.7.5), Korea (Article 18.4.8)
Term of
No less than 50 years from
No less than 70 years from death of author or authorized
protection
authorized publication
publication
(Article 12)
Chile (Article 17.5.4), Singapore (Article 16.4.4), Australia (Article
NAFTA (Article 1705.4), Jordan 17.4.4), Morocco (Article 15.5.5), CAFTA-DR (Article 15.5.4), Bahrain
(no mention)
(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
Not discussed
Signatories must agree to prohibit circumvention
of copyrighted
work
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
NAFTA (no mention), Jordan
regulations
(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 general y holds.
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
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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.60
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”
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 (OCRs)
on countries to monitor their progress on intellectual property issues. OCRs 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.
60 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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Special 301 Report for 2010
For the 2010 Special 301 Report, the USTR reviewed the IPR policies and practices of 77 countries. 61
• Despite some improvements, China and Russia remain top concerns for the Administration due to their
inadequate IPR regimes.
• The USTR placed eleven countries on the Priority Watch List: Algeria, Argentina, Canada, Chile, China, India,
Indonesia, Pakistan, Russia, Thailand, and Venezuela.
• The USTR placed another 29 countries were placed on the Watch List.
• No countries were designated as Priority Foreign Countries. Paraguay was identified for Section 306 monitoring.
• The USTR announced that it would conduct OCRs for the Philippines and Thailand to monitor these nations’
progress on IPR and to evaluate their Special 301 status.
• Israel’s status in the Special 301 Report is pending, following the conclusion of an OCR and an understanding
reached by the United States and Israel on several issues in Israel’s IPR regime for pharmaceutical products.62
• The USTR removed the Czech Republic, Hungary, and Poland from the Special 301Watch List for significant
improvement in their protection and enforcement of IPR. Following an OCR on Saudi Arabia, the USTR decided
to remove Saudi Arabia from the Watch List on the basis of improvements in IPR enforcement, prosecution, and
transparency issues.
Country Identification Factors
Identification of countries for the “Special 301” lists is a lengthy process of information gathering
and analysis based on the USTR’s annual trade barriers report and consultations with a wide
variety of sources, including government agencies, industry groups, other private sector
representatives, Congressional leaders, and foreign governments. The Special 301 statute is the
overall guideline for identifying countries for the various lists. However, placements are country-
specific and, according to a USTR official, take into consideration a host of factors, several of
which are mentioned in the Special 301 report.63 These include the level and scope of the
country’s IPR infringement and their impact on the U.S. economy. Other considerations include
the strength of the country’s IPR laws and enforcement of IPR laws. The USTR also evaluates
progress made by the country in improving IPR protection and enforcement in the past year.
However, even significant progress oftentimes does not change the position or inclusion of a
country on the lists. For instance, the USTR may decide not to upgrade a country from the
Priority Watch List to the Watch List so that it can continue monitoring the country’s intellectual
property practices. Also, the USTR may note significant progress made by a country but not
remove the country from the Special 301 list in order to continue 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.
61 The USTR Special 301 Report 2010 is available on the USTR website, http://www.ustr.gov.
62 Letter from Ambassador Ron Kirk, U.S. Trade Representative, to The Honorable Benyamin Ben-Eliezer, Ministry of
Industry, Trade and Labor, February 18, 2010.
63 Conversation with USTR official, July 2006.
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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.64 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.”65
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.66
Section 337
Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), as amended, prohibits unfair methods of
competition or other unfair acts in the importation of products into the United States. It also
prohibits the importation of articles that infringe valid U.S. patents, copyrights, processes,
trademarks, semiconductor products produced by infringing a protected mask work, or protected
design rights. While the statute has been utilized to counter imports of products judged to be
produced by unfair competition, monopolistic, or anti-competitive practices, it has become
increasingly used for its IPR enforcement functions in recent years. Under the statute, the import
or sale of an infringing product is illegal only if a U.S. industry is producing an article covered by
the relevant IPR exists or is in the process of being established. However, unlike other trade
remedies such as antidumping or countervailing duty actions, no showing of injury due to the
import is required.
The U.S. International Trade Commission (ITC) administers section 337 proceedings. USITC
must investigate complaints either brought to it or ones commenced under its own initiative. An
administrative law judge (ALJ) provides an initial determination (ID) to the ITC which can accept
the ID or order a further 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.67
64 Telephone conversation with PhRMA representative, July 2006.
65 Oxfam International, US bullying on drug patents: One year after Doha, Briefing Paper 33.
66 Telephone conversation with USTR official, July 2006.
67 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.
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During FY2009, the ITC reported a total of 85 active section 337 investigations and ancillary
proceedings, comparable to the FY2008 level. Of the 85 active investigations in FY2009, 29
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, such as integrated circuit, computer, telecommunications,
and other electronic technologies. Over 60% of the new section 337 investigations that were
active in FY2009 involved cases of alleged patent infringement. In FY2009, the ITC issued three
general exclusion orders, eight limited exclusion orders, and 23 cease-and-desist orders.68
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 December 31, 2010.69
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.70
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. For 2009, the USTR continued to evaluate IPR
protection in Lebanon, Russia, and Uzbekistan on the basis of IIPA petitions for ongoing GSP
reviews.71
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.
68 U.S. International Trade Commission, Year in Review: Fiscal Year 2009, USITC Publication 4167, p. 14.
69 For a more thorough discussion of GSP, see CRS Report RL33663, Generalized System of Preferences: Background
and Renewal Debate, by Vivian C. Jones.
70 91 USC 2462(b)(2)
71 USTR, GSP: 2009 Annual Review, http://www.ustr.gov.
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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. 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.72
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.73 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).74 The PTO is fully
funded through fees generated from patent and trademark applications. The Consolidated
Appropriations Act, 2010 (P.L. 111-117) provided $1.89 billion in budgetary authority to the PTO
for FY2010, down from $2.01 billion provided for FY2009 (P.L. 111-8).
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.75 For FY2010, the
Consolidated Appropriations Act, 2010 (P.L. 111-117) provided the ITA with $456.20 million
(including both direct appropriation and anticipated receipts from fees), up from $429.9 million
provided in FY2009 (P.L. 111-8).
72 General information about the Department of Commerce is available at http://www.doc.gov.
73 NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 21.
74 Conversation with PTO official, November 26, 2007.
75 NIPLECC, Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection, January 2008, p. 21.
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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.76 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. The Consolidated Appropriations Act, 2010 (P.L. 111-117) provided $7.66 billion to the
FBI for FY2010, up from the FY2009 level of $7.07 billion (P.L. 111-8).
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.77
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.78 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.79 For FY2010, the Consolidated Appropriations Act, 2010
provided $8.07 billion in budget authority to CBP, up from $7.60 billion in FY2009.
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
76 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.
77 Information about the DHS is available at http://www.dhs.gov.
78 Certain customs-related IPR policy-making resides within the Treasury.
79 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.
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obtained from ICE activities that is relevant to identifying and apprehending counterfeit
shipments is provided to CBP.80 For FY2010, the Consolidated Appropriations Act, 2010
provided $5.34 billion in budget authority to ICE, up from $4.93 billion in FY2009.
Food and Drug Administration (FDA)
The FDA, which is an agency of the Department of Health and Human Services (DHHS), is
responsible for protecting public health by ensuring the safety and effectiveness of medicines,
food, and other products. As part of its activities, the FDA works to protect consumers against
counterfeit medicines. To combat the entry of foreign counterfeit drugs into the U.S. drug supply,
the FDA works in conjunction with the CBP to conduct border inspections of FDA-regulated
products. The FDA also engages in foreign inspections to ensure that foreign manufacturers meet
FDA quality and labeling requirements. Funding for preventing counterfeits from entering the
United States is part of overall FDA import safety efforts.81 The enacted FY2010 Agricultural
appropriation, P.L. 111-80, contained $2.36 billion in budget authority for the FDA, up from
$2.05 billion for FY2009.
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 copyright-
related actions. Additionally, the Copyright Office provides legal and technical expertise on
national and international copyright issues to the U.S. government. The Copyright Office also
works with other federal agencies to provide assistance and advice in negotiations for
international intellectual property agreements, as well as technical assistance to foreign countries
crafting their own copyright laws.82 The enacted FY2010 Legislative appropriation, P.L. 111-68,
contained $20.9 million in new budget authority (not including authority to spend $33.3 million
in receipts) for the Copyright Office, up from $18.3 million in new budget authority in FY2009
(not including authority to spend $33.3 million receipts).
Copyright Office appropriations also specify funding for IPR-related activities in developing
countries. As in previous years, the FY2010 appropriations act provided $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
80 Ibid. Also refer to the ICE website, http://www.ice.gov.
81 Conversation with FDA official, November 26, 2007. Additional information is available on the FDA website,
http://www.fda.gov.
82 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.
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standards to fight global piracy and counterfeiting.83 As in previous years, the Consolidated
Appropriations Act, 2010 (P.L. 111-117) provided $5 million from the INCLE Account for
combating copyright piracy (Section 688).
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.84
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.85 The FY2010 funding level for USTR was $47.83 million, under the
Consolidated Appropriations Act, 2010 (P.L. 111-117), up from the FY2009 funding level of
$47.3 million. Explanatory language in H.Rept. 111-149, accompanying P.L. 111-117, encouraged
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.86 For FY2010, the Consolidated Appropriations Act, 2010 (P.L. 111-
117) provided the ITC with $81.86 million in budget authority, up from the FY2009 level of
$75.1 million.
83 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.
84 Trade Capacity Database and general AID information is accessible at http://www.usaid.gov.
85 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.
86 U.S. ITC website, http://www.usitc.gov.
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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.87
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.
In 2009, President Obama nominated and the Senate confirmed Victoria A. Espinel as the IPEC.
In June 2010, IPEC Espinel released the 2010 Joint Strategic Plan on Intellectual Property
Enforcement. The plan identifies 33 “enforcement strategy action items,” categorized under six
major areas of focus: (1) leading by example; (2) increasing transparency; (3) ensuring efficiency
and coordination; (4) enforcing U.S. rights internationally; (5) securing the supply chain; and (6)
building a data-driven government.88
The House Conference Report (H.Rept. 111-366 to H.R. 3288) provided for a transfer of
$176,000 from the White House to the OMB, to reflect the Administration’s decision to locate the
new IPEC in the OMB rather than the White House.
Issues for Congress
The role of Congress in addressing IPR and trade-related issues stems from the U.S. Constitution,
which provides Congress with the power “To promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the exclusive Right to their respective
87 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. NIPLECC,
Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection, January
2008, pp. 3-4.
88 Executive Office of the President, 2010 Joint Strategic Plan on Intellectual Property Enforcement, June 2010,
http://www.whitehouse.gov/sites/default/files/omb/assets/intellectualproperty/intellectualproperty_strategic_plan.pdf.
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Writings and Discoveries” and “To regulate Commerce with foreign Nations.”89 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. However,
congressional action is needed to bring the trade agreements into force.
From a policy perspective, congressional consideration of IPR may take place in the context of
the National Export Initiative (NEI), an Obama Administration plan introduced in early 2010 to
double U.S. exports in five years to create two million U.S. jobs.90 A report submitted by the
President’s Export Promotion Cabinet on implementing the NEI discussed the relationship
between strengthening IPR regimes internationally and promoting U.S. exports.91 In December
2010, the President’s Export Council sent a letter to President Obama highlighting the importance
of addressing inadequate protection and enforcement of IPR as a means for “boosting exports and
foreign sales, and promoting the sustained growth of well compensated U.S. jobs.” The
President’s Export Council expressed support for making “efforts to combat weak and ineffective
intellectual property regimes abroad an integral and essential part of the National Export
Initiative.” 92
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.
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
effectiveness of multilateral IPR promotion efforts. Periodically, Members of Congress have
expressed concern over U.S attempts to expand the IPR obligations of foreign countries through
trade agreements. In 2002, the 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
89 U.S. Constitution, Article 1, Section 8.
90 “National Export Initiative,” Executive Order 13534 of March 11, 2010, 75 Federal Registrar 12433, March 16,
2010.
91 Export Promotion Cabinet, Report to the President on the National Export Initiative: The Export Promotion
Cabinet's Plan for Doubling U.S. Exports in Five Years, Washington, D.C., September 2010. The President’s Export
Promotion Cabinet is a high-level body comprised of the Secretaries or Directors of key federal agencies involved in
U.S. export promotion efforts.
92 Letter from Jim McNerney, The President's Export Council, to President Obama, December 9, 2010,
http://trade.gov/pec/docs/PEC_IPR_Letter_120910.pdf. The President’s Export Council is a private sector national
advisory committee on international trade.
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with the WTO Doha Declaration.93 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, such as negotiations on the Trans-Pacific Partnership
Agreement.
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.
Prior 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). 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.94 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) was
signed by President Bush on October 13, 2008. The act, among other provisions, replaced
NIPLECC with an IPEC. 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.
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.95
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
93 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.
94 U.S. Government Accountability Office, National Enforcement Strategy Needs Stronger Leadership and More
Accountability, GAO-07-710T, April 12, 2007, pp. 8-10.
95 Liza Porteus Viana, “US Fiscal 2009 Proposed Budget Shows IP Enforcement a Priority,” Intellectual Property
Watch, February 6, 2008.
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weigh the threat of IPR infringement against the federal resources available for IPR and other
government priorities.
Legislation was introduced in the 111th Congress to advance U.S. IPR protection and enforcement
efforts as part of U.S. trade policy. The Trade Enforcement Act of 2009 (H.R. 496, S. 1466)
would have created 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; increased IPR resources, staff, funding, and training for
CBP and ICE; required the development of a strategy for IPR enforcement; and created a
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. Foreign relations appropriations legislation for FY2010 ( H.R. 2410, H.R. 2475) would
have required the Secretary of State to appoint ten intellectual property attachés to serve in U.S.
missions overseas and would have directed 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
Ian F. Fergusson
Analyst in International Trade and Finance
Specialist in International Trade and Finance
silias@crs.loc.gov, 7-9253
ifergusson@crs.loc.gov, 7-4997
Congressional Research Service
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